The new wave of technological innovation is creating an unparalleled era of higher productivity and income growth. Nurturing the growth of a digital economic infrastructure must be one of the main concerns of the new economy policy.

Current estimations place over $350 billion within the U.S. Internet economy, establishing an enormous potential within our economy. By the end of 2001, 35 percent of America's adults and 45 percent of America's businesses will be connected to the Internet. The flourishing of this digital economy has the strength to reverse the 25-year-old slowdown in productivity and income growth that has plagued the U.S. economy.The full benefits of digital economy will not be felt until a number of factors are in place. There must be broadband telecommunications capability in the home, extensive access to the Internet, ability to allow individuals to authenticate themselves online, systems that give consumers trust and confidence, and finally, a legal framework that enables e-commerce to function effectively. To ensure that the digitization of the economy in the 21st century will bring the same kinds of economic benefits to Americans that mechanization brought in the 20th century, there are three main policy areas requiring government intervention.

First, the federal government should develop the appropriate national and international legal, tax and regulatory framework to promote e-commerce. Second, digital technology should be incorporated into government systems. This will re-engineer its structure in a way to provide more efficient service at a lower price. A few cities should be given funds to "push the envelope" and integrate digital technology into its systems. They will serve as models for other cities and local governments.

Three factors will assist in this process: (a) State governments should require the Department of Motor Vehicles to issue digital certificates to residents who want them. This will allow individuals to "sign" documents online; (b) Establish a $500 million annual digital federal government fund to invest in cross-agency projects. This will enable the streamlining of government, automated business-government and consumer-government transactions; (c) Establish the position of a federal chief information officer who would report directly to the president. This person would be responsible for an independent budget that will drive the next generation of digital government.

Third, the government must resist pressures from threatened industry and business interests in their attempt to delay the transition to digital technology. Many of these industries will lobby for laws making it difficult to conduct e-commerce. These laws will be disguised as protection for smaller business or for the benefit of the consumer, when in reality their objective is to advance their firm or industry.

In order to continue American economic dominance into the 21st century, we must be willing to accept and incorporate new technology that is so readily available. This emerging technology includes smart cards, voice-based computing, video telephony and expert systems. As more of the economy and society are linked through digital networks, the majority of the economic functions will be conducted through digital technology, thus decreasing the need for low technology services (e.g., cash, forms, files, clerks and order takers). As a result, the animating force for productivity and wage growth in the new economy will be the pervasive use of digital technologies. Once this occurs, the productivity paradox could very likely give way to a productivity boom.

Scott N. Howell, an IBM executive, is Senate Democratic leader. Elected to the Utah Senate in 1990, Howell's Senate district encompasses a portion of southeastern Salt Lake County.