TCS Daily

"NIP" and Tuck?

By Dominic Basulto - June 3, 2004 12:00 AM

The recent release of the federal budget plan for FY2005 has already ruffled the feathers of the U.S. scientific and technical establishment. The preliminary numbers do not look good: 21 of the 24 leading R&D-funding government agencies -- including the NIH, NSF and NIST -- are bracing for an R&D funding cutback over the next five years.

Not surprisingly, the IEEE, the American Association for the Advancement of Science (AAAS) and the National Science Board have all expressed -- at least informally -- their disappointment with the current federal budget proposal. The problem, quite simply, is that the U.S. may be on the verge of scaling back R&D spending on basic research -- the raw material for innovation -- at the very same time that competitors in Asia appear to be closing the gap with the U.S. Is it finally time for the U.S. to adopt a broad-based national innovation policy (NIP) that will increase R&D spending on basic research, improve training in math and the sciences, and consolidate America's position as a technological superpower?

Some would argue that the U.S. already has an innovation policy -- or that if it doesn't -- it really doesn't matter so much anyway, since the gap between the U.S. and the rest of the world is so great anyway. In fact, President Bush's science adviser, John H. Marburger III, recently noted that "the United States' technological lead over other countries is so overwhelming that talk of the country losing its competitive edge to competitors is premature." Countries like China or Russia may have the technological know-how to challenge the USA, but hardly the budgetary resources to compete. From this perspective, government agencies appear to be crying "The sky is falling" in an attempt to rake in more federal dollars. R&D spending has actually increased by 44% since the time that President Bush took office nearly four years ago -- and will increase by another $5.45 billion in FY2005. Over the past four years, federal funding for basic research has actually increased by 26%, to a level of $26.8 billion annually.

A cold, hard look at the numbers points out a surprising number of contradictions. For example, that $5.45 billion is a nice number, but $4 billion has already been earmarked for Pentagon-related R&D research. While it is true that federal R&D funding now stands at an all-time high ($132 billion), it is also true that non-defense R&D is actually set to decline over the next five-year period. While key areas -- such as weapons research, biotech, space exploration and nanotech -- are actually posting a net increase in federal R&D dollars, initiatives funded by the Departments of Energy, Commerce and Agriculture are facing steep cutbacks of 20% or more in R&D funding over the next five years.

So what does it really mean to have a national innovation policy? For one thing, it does not mean greater government involvement in the private sector. It does mean, however, that the government will allocate money to neglected areas that are neither sexy nor immediately profitable -- areas like basic research in unglamorous fields like physics or chemistry. It is here that proponents of a NIP make the most sense. Defense-related R&D already accounts for more than 55% of all federal R&D, and given the current state of world affairs, it is not hard to extrapolate that this share of the R&D funding pie will only increase.

The link between R&D spending, innovation and economic growth is almost too simple to require explanation. Innovation opens the door to new markets, new products, and new business models. Who can forget that funding from DARPA (Defense Advanced Research Projects Agency) led to the creation of the Internet? In theory, companies that spend the most on R&D are able to deliver the most innovative products and services and create new market opportunities. Thomas Kalil of the Center for American Progress has even linked the rise of companies like Inktomi and Google to increased federal spending on basic R&D research. After all, the two co-founders of Google each received federal funding from the U.S. government via the Digital Libraries Initiative (DLI) while they were graduate students at Stanford.

Both President Bush and Senator Kerry have floated a few trial balloons in the innovation debate. President Bush, for example, unveiled a series of specific policy measures on April 26 that will form the basis of the administration's innovation policy -- hydrogen fuel technology as a clean and reliable energy source, more investment in IT to improve national healthcare delivery, and universal broadband Internet access. Is it enough, though, for the government to vocalize its support for key technologies and then sit back and watch the private sector shoulder the brunt of the R&D spending required to bring new technologies out of the lab and into the marketplace?

The Task Force on the Future of American Innovation, formed in part by leading technology companies (Intel, IBM, HP) has already warned that the U.S. is at a "tipping point" when it comes to innovation. At a time when U.S. competitiveness appears to be on the wane and private sector R&D operations are flowing to exotic offshore locales, maybe it is time to consider the need for more than a little nip and tuck to the current state of U.S. innovation.


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