INNOVATION

Science and Technology Is the Answer

And Government Must Provide the Leadership

As we enter the 21st century, America faces significant new challenges, including increased globalization and threats to U.S. economic leadership, runaway entitlement and health care spending, and climate change. We can meet these challenges, but doing so will require considerable political will coupled with the recognition that science and technology will have to be at the center of any solution.

Many economists now see innovation as the key factor in improving the standard of living and boosting U.S. competitiveness. Indeed, all of the acceleration in productivity growth since 1995 has been due to the IT revolution. Going forward, technological innovation will be even more important if we are going to compete successfully with other nations and sustain the growth rates needed to support our growing numbers of retirees.

We can start by realizing that science and technology should not be the province of a couple of congressional committees with the term “science” in their title.

Innovation will help boost productivity and create more high-wage jobs. Innovation in health care is no different—without new discoveries enabling more effective treatments for costly conditions such as diabetes, stroke, hypertension, Alzheimer’s, and obesity, it will be difficult to limit the growth of health care costs, particularly as we work toward universal care.

New technology is also the key to solving global warming. Even if all Americans recycled, bought energy-efficient appliances, and drove hybrid cars, global carbon emissions would still increase. There’s only one answer: Produce most of our energy from sources that do not emit CO2. Without technological innovation, getting there will be difficult and expensive.

So how do we do more to bring science and technology to bear on these and other challenges? We can start by realizing that science and technology should not be the province of a couple of congressional committees with the term “science” in their title. Nor is it just something that only the “science community” should have an interest in. Rather, policymakers need to realize that solving most key societal problems will be impossible without a renewed commitment to science and technology. To do that, we need to make science and technology the fourth leg of government policy, supplementing the other three legs of tax, fiscal, and regulatory policy. At minimum this means increasing investment, collaboration, and talent.

More Investment

In the past, when the United States faced challenges that could be addressed by science and technology, we acted with resolve. In the decade following the launch of Sputnik, for example, federal support for research and development doubled (in constant dollars). In contrast, over the past decade (and in the face of challenges arguably much more profound than the launch of Sputnik), federal support for R&D increased just 25 percent, and as a share of Gross Domestic Product, it actually went down.

In fact, the United States is one of the few nations where total (public and private) investments in R&D as a share of GDP fell from 1992 to 2005. To restore federal support for research as a share of GDP to the level it was during Bill Clinton’s first year in office, we would have to increase federal support for R&D by 50 percent, or over $37 billion.

To reverse this decline, we should significantly expand public investment in research, particularly research focused on pressing societal challenges. The modest increases Congress is now considering, while a step in the right direction, are woefully short of what is needed. It’s time to make a national commitment to increase federal support for research by $3 billion per year for the next decade. This would be equivalent (in constant dollars) to the increase in federal support for R&D in the decade following Sputnik (when the U.S. economy and overall government revenues were significantly less).

One way to pay for at least a portion of this increase is to impose a carbon tax and devote a significant share of the revenues toward clean energy R&D. This could be done in conjunction with a carbon cap-and-trade system, as proposed by the Center for American Progress in a detailed report and in testimony on Capitol Hill.

But it is not sufficient to simply increase public support for R&D. We also need to encourage businesses to do more R&D, especially here at home. Unfortunately, between 1998 and 2003, investment in R&D by U.S. companies increased twice as fast overseas as did total corporate R&D in the United States, 52 percent vs. 26 percent. Not only are wages of researchers in places such as India and China less than one-fifth as high as they are here, but many other nations now provide significant R&D incentives.

As a decade’s worth of economic research has shown, increasing the corporate tax credit for technology R&D would spur companies to conduct more research in the United States. When Bill Clinton took office, the United States enjoyed the most generous R&D tax credit in the world. Today, we are 16th, behind countries as different by levels of development as Mexico, Canada, Japan, and France. It’s time to bring the R&D tax credit into the 21st century by doubling both the regular credit and the Alternative Simplified Credit. Doing so would make an important statement that the United States is serious about keeping and growing research-based economic activities.

More Collaboration

The federal government’s traditional focus on basic science (principally through the National Science Foundation), agency-specific mission-oriented research, and managing a patent system is no longer sufficient to ensure that the United States remains the world leader in R&D and innovation. If the United States is going to meet the economic challenges of the future, the federal government will need to make the promotion of innovation partnerships a larger part of its national economic policy framework.

Congress took an important step in that direction with the passage of the 2007 America COMPETES Act, which among other things increased funding for physical sciences research and increased support for science education. But the challenge is neither modest nor fleeting and more needs to be done. One key is to spur more research collaboration between companies and between the private sector and universities.

Other nations have come to that conclusion. In recent years, Finland, France, Iceland, Ireland, Japan, the Netherlands, New Zealand, Norway, South Korea, Sweden, Switzerland, and the United Kingdom (among many others) have either established or significantly expanded separate innovation-promotion agencies. They realize that if they want their economies to prosper in the highly competitive, technology-driven global economy they need specifically to promote innovation, particularly among small- and mid-sized companies, especially innovation-driven technology start-up companies and among companies in partnership with universities.

It is time for the United States to do the same and create and fund a new National Innovation Foundation, as ITIF and the Brookings Institution will be proposing in a forthcoming report. This proposed NIF would neither run a centrally directed industrial policy nor dole out “corporate welfare.” Rather, it would work cooperatively with individual businesses, business-university consortia, and state governments to foster the kind of innovation that would benefit the nation but would not otherwise occur.

In addition, Congress should allow businesses to take a flat credit of 40 percent for collaborative research conducted at universities, federal laboratories, and research consortia. This would spur more research partnerships between companies and American universities and federal laboratories.

More Talent

We now lag behind much of the world in the share of college graduates majoring in science and technology.

If we are going to make a significant push to expand science and technology to solve these new challenges, we will need a significantly larger supply of homegrown talent in science, technology, engineering, and math. By most education metrics, the United States is falling further and further behind these so-called STEM skills. We now lag behind much of the world in the share of college graduates majoring in science and technology. As a result, the United States ranks just 29th out of 109 countries in the percentage of 24-year-olds with a math or science degree.

Solving this STEM talent problem will require that we take steps not only to boost domestic supply of talent but also to expand the opportunities for talented foreigners to come the United States and contribute their expertise. Congress took several steps toward the first goal in the recent America COMPETES Act, but these efforts need to be expanded and fully funded, including providing more funding for specialty math and high schools.

But even with these efforts, it’s important to realize that, at least for the short term, we won’t be able to rely on domestic supply alone. As a result, Congress should expand and reform the H-1B visa program for skilled technology workers. In particular, tighter oversight of the program may be required to ensure that employers, particularly foreign ones, are paying prevailing wages. Finally, immigration policy should make it easier for foreign students studying in STEM fields to attend school here and to gain a path to citizenship once they obtain their graduate degrees.

Enacting these and other pro-science and technology policies will not be easy. In fact, there is resistance to these policies across the political spectrum. Among conservatives, many social conservatives oppose federal support for stem cell research and therapeutic cloning and oppose the teaching of evolution. Many fiscal conservatives see the role of government in science and technology as inherently limited, seeing it as “industrial policy.” And rather than increase spending on science and technology, they would prefer to cut taxes on individuals.

Conversely, many social liberals look at science and technology with suspicion, and are particularly skeptical of many biotechnology, nanotechnology, and information technology innovations. Underpinning their opposition is a naïve and elitist belief that we can somehow hold back the forces of progress and even go back to a “simpler” time. Environment activist Bill McKibben sums up this view when he states, “‘More’ is no longer synonymous with ‘better’—indeed, for many of us, they have become almost opposites.”

Yet try telling that to the average American worker struggling to make ends meet and afford a mortgage, health care, and college education for their kids, much less a nice vacation. Without the new products and services from innovation and higher productivity—since innovation is the source of virtually all productivity growth—American standards of living and quality of life will stagnate, and the economy will become less and less competitive vis-à-vis other nations.

Indeed, the science and technology challenge faced by our country today requires that progressives and moderates not let their legitimate concern for fiscal discipline preclude consideration of significant new investments in science and technology. When fiscal discipline becomes a holy grail blocking significant and needed expansions of federal support for science and technology, it loses its ability to be a guide to effective economic policy making.

In spite of these political challenges, I believe we can find our way forward to create a political consensus that is not just supportive of science and technology, but downright passionate. Doing anything less will mean that we give up on what has made America unique: our faith in the future and our belief that technology and innovation will produce a better tomorrow.

Robert D. Atkinson is president of the Information Technology and Innovation Foundation.

Tags: Innovation

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