Needed: A Revitalized National S&T Policy

The proposed 2005 federal budget puts the nation at risk by shortchanging support for critical research activities.

A lot has been said and written recently about U.S. manufacturing job losses. Much of the focus, though, has been on the movement of U.S. jobs overseas. Not enough attention has been paid to the need to create new high-wage jobs in the U.S. economy. What actions should the United States be taking to achieve that goal?

A high-wage society has some obvious building blocks. They include a fair and equitable tax structure, an educated and skilled workforce, an efficient and robust transportation infrastructure, a modern communications infrastructure, and so on. But we would argue that any discussion of high-wage job creation should start with what military strategists refer to as “the tip of the spear.” And we firmly believe that in the economic competition for high-wage job creation, the tip of the spear is S&T. Just as in the case of national security, economic security depends on the United States remaining the world leader in S&T. If that leadership is lost, the nation’s capacity for high-wage job creation will soon atrophy.

Losing the capacity for high-wage job creation would leave the United States without an adequate response to the creative destruction that Joseph Schumpeter described as inherent in our capitalist system. The competition brought about by new technologies and new markets destroys companies and entire industries. The jobs that existed in those industries are lost, only to be replaced by new jobs in other industries and in companies that are nimble enough to take advantage of dynamic change. As Andrew Grove of Intel says, “Only the paranoid survive.”

If the United States is to lead in the 21st century, it must begin by recognizing that the world of the future will be shaped by new technologies and their rapid diffusion. Entire industries may disappear in the process or be utterly transformed. For example, the entire industry of recorded music is already being reshaped by the ease of downloading music from the Internet. Sales of recorded CDs have been dropping each year for the past few years. Today, blank CDs for making recordings at home substantially outsell recorded CDs. When you walk into a Staples or Office Depot store and see a big display of blank CDs for sale, you can be certain that most of those CDs are not destined to be used to store spreadsheets of data. Even the small number of high-profile lawsuits against individuals who burn discs of music without regard to copyrights has not appreciably altered this phenomenon. The music industry is still in search of a mechanism to adapt to a fundamentally new business environment brought about by the diffusion of two technologies: the Internet and cheap CD-burning drives.

The biotechnology industry is an example of an industry that has sprung up in a very short time. The basic patent for genetic engineering–the Cohen-Boyer patent on making recombinant DNA–was issued 30 years ago. No one at that time would have predicted that we would one day have a biological industry rivaling the chemical processing industry, which was already a century old in 1974.

The United States reaped enormous economic benefits from being the first country to lead in the development of the Internet and the harnessing of biotechnology. But these revolutions are far from being the last technological revolutions that we will see. The key questions as we look to the future are which countries will win the competition to develop new industries and new jobs based on future technological changes? Which countries will lose out? And, once the current wave of technological change has passed, which countries will be best positioned for the next inevitable wave of change?

The United States ignores these questions at its peril. After reviewing President Bush’s proposed 2005 budget for S&T, we are persuaded that the Bush administration is ignoring them now.

Technological revolutions

The United States is, in fact, in the middle of a set of interrelated technological revolutions that are reshaping existing industries and leading, in a number of cases, to entirely new industries. Lester Thurow’s recent book, Fortune Favors the Bold, refers to a number of the most important such revolutions:

• Biotechnology, including the new frontier of developing “artificial life” forms
• Microelectronics, including the continued miniaturization of electronic devices and the increasingly widespread diffusion of data-processing power
• High-end supercomputing
• Telecommunications technologies
• Human-made materials (including materials in which the structure has been designed and built at the atomic or molecular level–the essence of nanotechnology)
• Robotics

To these we would add new energy technologies, including renewable energy technologies that are as inexpensive as traditional fossil sources of energy, technologies using hydrogen as an energy carrier, and technologies for energy efficiency.

All these technologies are obviously crucial to our future. Will the United States play a leading role in their continued development? The answer is not that self-evident. In the 60 years since World War II, other countries and regions of the world have built S&T capabilities that rival or are destined to rival that of the United States. The governments of China, India, Japan, and the European Union have all targeted advancements in their research and innovation system as key elements of their plans for future national and regional economic prosperity. Even if the United States maintains a strong S&T policy, these other countries and regions will provide stiff competition. Unfortunately, though, just as this international challenge is becoming very clear, this administration appears to be sticking its head in the sand.

A look at the budget proposal for fiscal year (FY) 2005, submitted by President Bush, shows serious gaps in support for the kind of basic science and engineering that will be most important to the development of technologies and industries in the future. These include:

• $660 million in cuts proposed for basic and applied research at the Department of Defense–the sort of research that has the greatest potential for dual use and effective spinoff to the civilian high-technology industries
• $68 million in cuts proposed for the Department of Energy’s Office of Science, which is a major supporter of basic physical sciences and engineering research
• $63 million in cuts proposed for energy conservation R&D at the Department of Energy
• $183 million in cuts proposed for agricultural research
• $24 million in cuts proposed for transportation research
• Total elimination of the Advanced Technology Program (ATP) at the Department of Commerce, a loss of $171 million in FY 2005 for new technologies that would have otherwise been enabled and brought to commercial reality

The termination of the ATP is a particularly egregious step in the wrong direction, in light of the past accomplishments of the program and the current global competition in technology that the United States faces. To understand why this is the case, a brief explanation of the role and track record of the ATP is in order.

Between the stages of the R&D process in which the government predominantly invests (fundamental research) and in which industry predominantly invests (commercialization of reliably profitable products) lies what many call the technology “valley of death.” That’s the gap where private capital markets fail to invest applied research dollars to create so-called “platform” technologies. This market failure occurs because such generic technologies are too expensive or too risky for industry to develop on its own. Yet it is precisely these generic platform technologies that are the seed corn for new products, and in many cases entire new market categories. The benefits to industry generally and to our national economy of leadership in platform technologies far outweigh the costs of developing such technologies. Filling in this funding gap in the valley of death is precisely the role that the ATP has been designed to play for civilian technology.

In carrying out this role, the ATP has had a number of successes in preserving critical technology sectors in the United States and facilitating a leading U.S. position in others. These successes include preserving the printed wiring board industry, helping the U.S. automotive industry reduce dimensional variations in components from 5 to 6 millimeters to less than 2.5 millimeters, and stimulating the development of the DNA diagnostic tool industry.

To be sure, not all ATP projects have been as successful as these. The following statistics, though, put the overall program in perspective. The total cost of ATP funding to date has been about $2.1 billion. Preliminary results of a 2003 ATP survey of more than 350 companies indicate that actual economic value resulting from ATP joint ventures now exceeds $7.5 billion. Benefits from just a few projects analyzed to date are projected to exceed $17 billion when those platform technologies are fully exploited by the industries involved. That is an impressive social return on a modest government investment.

The rationale for the termination of the ATP in the president’s budget documents is truly perplexing. The entire discussion of the ATP, as it appears on page 233 of the Appendix Volume of the president’s budget request is as follows: “The ATP endeavors to help accelerate the commercialization of high-risk, broad-benefit enabling technologies with significant commercial potential. ATP is a merit-based, rigorously competitive, cost-shared partnership program that provides assistance to U.S. businesses and joint R&D ventures to help them improve their competitive position. The President’s 2005 Budget proposes to eliminate the program and, therefore, no funds are requested for FY 2005.”

That’s it. Literally, the president’s rationale is that the ATP is a great program, it helps our competitiveness, it is well run and effective; therefore, we are going to kill it. The real message is that programmatic success in S&T does not trump ideology in the current administration.

More cuts

Another aspect of the president’s budget that also underscores the low priority of S&T policy for the administration is the underfunding of important R&D programs that Congress has authorized, by overwhelming margins, and that President Bush has signed into law. A case in point is cybersecurity R&D. Every American knows that computer viruses and worms can cause real damage to the economy. In November 2002, Congress passed, and President Bush signed, the Cyber Security Research and Development Act, which authorized a significant program of R&D on computer and network security at the National Science Foundation (NSF). For FY 2005, those R&D authorizations amounted to just over $122 million. After signing the bill, the president had a complete budget cycle to develop a budget request incorporating the authorizations he signed into law. But no proposed funding in FY 2005 for NSF is designated for carrying out this law. In essence, President Bush’s signature on a law to increase R&D investment in cybersecurity meant nothing when it came time for his administration to put together the FY 2005 budget. Instead, NSF has opted on its own to attempt to carry out a fraction of the authorized program.

A similar situation has occurred in nanotechnology. Last year Congress passed, and President Bush signed, a major research authorization bill for nanotechnology. The contents of the bill were well known during the bulk of the budget cycle. For FY 2005, the bill provided for nanotechnology spending across five agencies of $809.8 million. The president chose to hold a formal signing ceremony at the White House for this bill, something that rarely happens with R&D-related legislation. The White House press release for the signing ceremony noted that the president had previously requested a 10 percent increase in nanotechnology funding in the FY 2004 budget. In the FY 2005 budget request, after the signing ceremony and the photo opportunity were over, the president requested only a 3 percent increase for the National Nanotechnology Initiative, as calculated by the Office of Management and Budget. Thus, before Congress passed the legislation, a 10 percent increase for nanotechnology, but after Congress passed the legislation, only a 3 percent increase. In addition, when one compares the president’s nanotechnology request for FY 2005 to the authorized levels that he signed into law in December, it turns out that President Bush requested $200 million less for nanotechnology R&D in the budget he sent Congress on February 2, compared to the authorization he signed into law only two months earlier.

Finally, there is a total disconnect between science and the administration’s plans for the space program. At the same time that President Bush is cutting, terminating, or failing to fully fund R&D programs with demonstrated effectiveness in creating jobs and wealth in this country, he is proposing a manned Moon-Mars initiative at NASA that is likely to yield little benefit to the nation. Most of the alleged technology spinoffs of past space exploration activities were substantially oversold. We did not invent Teflon, Velcro, or even Tang in the space program. To pay for the new Moon-Mars initiative, the president will take funds from other parts of NASA over the next few years. Beyond that, future presidents will have to direct substantial funds to manned space flight in order to keep the program on schedule.

We have already seen the first wrong-headed move at NASA in the area of diverting resources: the proposed abandonment of the Hubble Space Telescope, one of the premier scientific assets in all of NASA. The Hubble is still in its prime and is capable of continuing to make major discoveries about the universe and its formation. The proposal to abandon the Hubble to find money to plan for a manned mission to Mars is a sad commentary on the scientific priorities of this administration. Because of the outcry from the scientific community and from advocates such as Sen. Barbara Mikulski (D-Md.), this proposal is now getting a second review inside NASA. But it is too soon to say that it will be withdrawn. The fact that this termination was proposed in the first place, though, illustrates the low value placed on real science in the administration’s thinking about the nation’s future.

Other administration S&T policies are potentially just as deleterious as the cutbacks in funding in this year’s budget proposal. For example, visa and other immigration restrictions that have been put in place over the past 2 years are threatening the future vitality of the U.S. university system in sciences and engineering. Foreign-born students coming to this country have, for decades, been an important asset to the United States. After completing their training, many have stayed here to make significant contributions to basic science and to new products. They are a great source of strength to the U.S. innovation system and to the country. We have only to look at the current director of the National Institutes of Health, Elias Zerhouni, who was born in Algeria and came to the United States in his early 20s to train in diagnostic radiology at Johns Hopkins University in Baltimore.

Today, in the name of increasing national security, the Bush administration is making it extremely difficult for the best and brightest foreign students to come to the United States, to be educated, and to remain in this country and become citizens. Instead, the effect of our policies is to drive away from the United States scientists and engineers who want to come here to build a better life for themselves and our society.

The end result of these policies may well be that the brightest students from around the world will increasingly choose non-U.S. educational institutions for their advanced education. Major scientific meetings may also increasingly take place outside the United States. U.S. policies could thus have the effect of strengthening the innovation systems of other countries. We might well be encouraging high-wage job growth to take place overseas, instead of in the United States.

An agenda for Congress

We believe that as Congress moves forward with legislative action on S&T this year, it can and must do better than the president has done to date. We recommend several actions that Congress can take.

Congress can put more pressure on the president to beef up the White House Office of Science and Technology Policy (OSTP). One of the basic reasons why there seems to be so little leadership on S&T issues coming out of the White House may be that OSTP appears to be significantly and severely understaffed. The current science advisor is authorized, under law, to have six high-level deputies, and most past science advisors had extremely well-qualified individuals in all these positions. Under this administration, only two of those six positions have been filled. No attempt was made to adjust that staffing strategy after the events of September 11, 2001, put terrorism and homeland security on the president’s radar screen and homeland security R&D on the front burner. Accordingly, the president’s science advisor has appeared to have spent the bulk of his energy on terrorism-related issues, with the result that the overall health of our scientific and technical foundations has not received the attention that it otherwise could have received from a fully functioning OSTP.

Congress can require that the president actually prepare and make public an S&T policy. Having such a document is not a panacea in itself, but the discipline of having to sit down and write one might force the White House to give some thought and examination to the technological opportunities and revolutions facing us that we are about to miss.

In its annual Concurrent Resolution on the Budget, which serves as its own blueprint for action on the president’s budget request, Congress can insist that the whole Federal Science and Technology Budget receive better and more unified consideration. As a start, the relevant committees in the Senate could schedule annual joint hearings on the overall shape of national S&T spending. It might also be worth considering whether the functional structure of the budget itself should be revised to put the entire federal S&T budget in one budget category. This would not involve moving programs from the agencies in which they now reside, but it would mean that the government would simply use a common budget classification code (known as a “budget function”) for all S&T spending. This would improve the transparency of the real trends in the national budget for S&T. It would also allow Congress to more easily address S&T programs in a holistic manner.

Finally, Congress needs to take a strong role in resisting the cuts in R&D being proposed by the president in this budget, particularly to programs such as the ATP. Frankly, instead of terminating the ATP, the Bush administration should be looking to duplicate its strategies and successes in other federal agencies. For example, the Department of Energy, the Environmental Protection Agency, and the Department of Homeland Security could all benefit from having programs structured along the lines of the ATP, as part of the overall mix of programs in each agency to spur the development of new technology.

The one thing that we hope the Congress does not do is what the administration, unfortunately, has done. That is to lose focus on where the real source of our future national wealth and high-wage job creation opportunities lies. Our future national economic security depends crucially on the innovation and genius of our scientists and engineers, particularly in universities and other major laboratories that are supported by the federal government. We need to make well-reasoned choices about what our real priorities are. Developing and executing a coherent national S&T policy needs to be recognized as the priority that it in fact is.

Jeff Bingaman is a Democratic senator from New Mexico and the ranking Democratic member of the Senate Committee on Energy and Natural Resources. Robert M. Simon is the Democratic staff director of the committee. Adam L. Rosenberg is the 2003-2004 American Physical Society Congressional Science Fellow.