The United States has always maintained, since FDR's New Deal, that it does not condone an explicit industrial policy where government and industry coordinate their efforts to promote certain technologies and industries. Although industrial policy promotes cooperation between government, banks, industry, labor, and education to strengthen the national economy, this type of government involvement in business has been frowned upon in the US.

Nonetheless, in February, the president unveiled a $2.4 trillion budget that includes an increase in military spending of 7 percent, or $26.5 billion, to $401.7 billion, and yet, does not include the cost of continued military operations in Iraq and Afghanistan! Does this federal budget imply a hidden, de facto industrial policy?

U.S. government subsidies can traditionally be found in such areas as agriculture, defense, energy, and transportation. With a budget that is heavily weighted in the area of defense, oligopolistic situations ensue where funds flow to the benefit of the sector's companies and to the detriment of consumers and other sectors of society. By funding cold-war-era programs focused on expensive weapons systems intended for the former Soviet threat, the Pentagon plans to spend hundreds of billions of dollars over the next two decades. Cutting these outdated programs would do nothing to weaken the war on terrorism but they would weaken the profit outlook for defense contractors.

However, after releasing the 2005 budget, the White House issued a list of 128 programs concentrated in health, law enforcement, education, and environment that it wants to eliminate or reduce including big reductions in federal funding of local and state police and other emergency workers, clean-water projects, and literacy programs saving $12.8 billion.

Suddenly the administration reverts to its fiscally conservative dogma. In addition to the aforementioned cuts, the burden of a record federal budget deficit may force a veto of the highway spending bill that sends money for roads and bridges to almost every congressional district. The Senate approved a drastically reduced $318 billion highway bill from an originally proposed $375 billion and it still faces the threat of a presidential veto because Bush wants to keep the total to $256 billion. Even Republican Senate Majority Leader Bill Frist of Tennessee said the highway bill is an election-year imperative to reduce traffic congestion and create up to 2 million jobs.

What does all this mean to the geotechnologies? Let me put it this way, the budget will attract businesses to the federal budget like a powerful magnet draws metal shavings being dragged across a machine shop floor, or the machine shop jobs being sucked overseas. Opportunities lie in the military, homeland security, agriculture, and energy sectors. The problem is that these industries tend to be oligarchic and if you are not already in, or are not a Halliburton-it's extremely difficult to get in. Local and state governments and the environment get hosed with this budget. They will not be getting the flow-through funds from the feds that they desperately need given their own budget crises.

Natural resources will get a boost, but not from the budget. Historically high commodity prices, the housing boom perpetuated by low interest rates, the burgeoning China market, and the expanding U.S. economy will drive the demand for commodities such as forest products, paper, minerals and metals, and energy products. Pipelines will continue to present opportunities because of regulatory requirements and increasing fuel prices. Utilities are neutral for the imagery mapping business.

All in all, except for those firms that strike a vein along the lines of the sectors supported by the budget, it will be another tough year for many in the geotechnologies. The 2005 U.S. Federal Budget may not be industrial policy in name-but it certainly smells like industrial policy and has the same effect.

Until next time ...