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Maintaining America’s Competitive Edge

By Senator Jeff Bingaman

Unquestionably, America today is the world’s R&D powerhouse. There are, however, disturbing indications that US dominance in science and technology is starting to wane. More and more ideas are being generated in laboratories outside the US. We can no longer take the supremacy of America’s scientific and technological enterprise for granted because other nations are on a fast track to overtake the US in discovery and innovation.

Moreover, the Administration’s proposed FY 2006 budget for science and technology contains some poor decisions which could further weaken our economic and scientific posture. A number of mid-course corrections, new policies, and additional investments will be needed to put us back on the solid path of scientific preeminence which this nation has enjoyed since World War II.

It goes without saying that one of the basic policies of our nation’s economic security must be to maintain a sustained investment in science and technology. There is no dispute that science, and the technology that flows from it, are duly recognized as the principal engine of our economic growth.

Nor is there any contention of the fact that America’s present strength, prosperity, and global preeminence depend directly on fundamental research. The scientific record of the past half century constitutes overwhelming proof. At the present time, we lead the world in such areas as nanoscience, genomics and proteomics, and advanced scientific computing.

Still, there are signs that we are beginning to slip in our world leadership role in science.

Troubling trends across the R&D spectrum were recently spotlighted in a recent report prepared by The Task Force on the Future of American Innovation entitled, "The Knowledge Economy: Is the United States Losing its Competitive Edge?"

In the area of education, undergraduate science and engineering degrees within the US are being awarded less frequently than other countries. In 2000, Asian universities accounted for almost 1.2 million of the world’s S&E degrees, and European universities (including Russian and Eastern Europe) accounted for about 850,000 S&E degrees, while North American universities accounted for only about 500,000 degrees.

As for doctoral degrees, the US has a smaller share than both Asia and Europe. In fact, in 2000, about 89,000 of the approximately 114,000 degrees earned worldwide were earned outside the US.

Countries that once sent their students to learn in the US are now able to educate them at home. As a result, they have an expanding workforce of undergraduate engineers to staff manufacturing facilities, as well as a growing increase in intellectual property because of a flourishing number of graduate degreed scientists. Lagging international interest in US graduate study is not recovering from record lows. Last year applications dropped another 5 percent, and the number of Asian students pursing Ph.D.’s in the US has dropped by 19 percent, while it has doubled in their own countries.

Our science and engineering workforce is aging while many of those overseas are young and vibrant. In fact, more than half of those with science and engineering degrees in our workforce are now over 40.

Another troubling issue is in the area of R&D investment. Currently, the US invests about 2.7 percent of its GDP in R&D. That is pretty good and it puts us as number 5 in the world, yet still behind Korea and Japan, who invest over 3 percent.

However, the issue is not to look at the static picture, but the rate of change. From 1995 through 2001, the US increased its R&D investments by 34 percent, while the world’s fastest growing economies such as China, Korea, and Taiwan, boosted their R&D investments by a whopping 140 percent.

During that same time period, China’s R&D percentage of GDP jumped from 0.6 to 1.2 percent—still well behind the US—but it has doubled in slightly more than a half-dozen years at a 7 percent annual growth rate.

Moreover, considering benchmarks per GDP, federal funding of basic research in engineering and physical sciences has experienced little to no growth for the past three decades. In fact, as a percentage of GDP, federal investment in the physical sciences has declined by 50 percent over the past 30 years, from 0.1 percent per GDP to today’s 0.05 percent.

What do these disturbing trends indicate? It means that other nations are coming up fast behind us on the scientific track. The rapidly developing Asian economies are forging ahead, nearly matching their R&D investments with their GDP growth rates, while the US is lagging behind.

What impressed me most from my recent science and technology fact finding trips to India, China and Taiwan is their growing skilled workforce.

In India, the President of Infosys, the first great Indian software company, told me that last year they received 1.2 million applications, they gave a standardized test to 300,000, interviewed 30,000 and hired 10,000—and they expect to repeat that again this year. This is the highly trained workforce we are now up against.

Another finding is that US and foreign high technology companies are now building their newest R&D centers in these developing nations to tap into their intellectual capital and highly skilled workforce.

Today, General Electric’s largest R&D center is in Bangalore, employing 2300 Ph.D.’s in all areas of research from trains to cat scanners. In fact, these researchers are now telling production plant managers in Indiana what process controls to use.

Intel has just built an innovative center in Bangalore with 2000 engineers, soon to almost double in size, which designs chips that are produced at their Albuquerque plant.

So the paradigm of the US producing cutting edge R&D which is then manufactured in lesser developed countries has been turned on its head. US companies are not waiting for foreign students with visas to come here—they are simply building R&D centers over there where the intellectual capital is, bypassing the US visa bottleneck issue that has dramatically constricted the flow of foreign graduate students due to new security screening restrictions.

The stark question is what are we currently doing in the R&D arena to reverse the situation–because by the time the majority of our policy makers read the handwriting on the wall, their backs will be up against it.

In order to make room for huge tax cuts and address the staggering budget deficits they have helped create, the Administration now proposes major cuts in the research our country depends on to maintain technical leadership. Next year’s proposed "Federal Science and Technology" budget suffers a three percent decrease in real buying power.

The National Science Foundation is woefully underfunded. The Administration’s request next year for NSF is $2.91 billion, or 34 percent below the FY2006 level authorized. At the Department of Energy, the Federal Science and Technology budget would drop by $278 million, or 5 percent. The science programs in the DOE that support much of the nation’s premier work in physics and materials science is cut 6 percent in real spending. Renewable energy research is cut 9 percent in constant dollars and energy efficiency 5 percent. All other energy programs—nuclear, fossil, transmission and distribution—decline by 9 percent. In fact, the entire petroleum and natural gas R&D account has been zeroed out at a time when the price of oil has climbed past $50 per barrel. Even worse, budget constraints have forced the Office of Science to cancel several long lead time big physics projects at Fermilab, and to slash US fusion research by 40 percent due to commitments to the International Thermonuclear Experimental Reactor–when a site has not even been selected.

Additionally, buried within the Department of Defense budget are cuts to investments in science and technology that will substantially determine our war-fighting capabilities 10 to 15 years from now. Defense research–both basic and applied–are starved, and when inflation is factored in, we will end up buying less research than we did before.

What should we be doing? The first thing we can do is increase funding—but for how much, what research, and for how long? That is a hard question for the Congress to answer in programmatic detail, but it seems realistic to me that we should develop a 5 year funding profile that grows our long-term basic sciences in the federal science and technology budget by 5 percent per year.

For FY 2006, that would mean increasing the science and technology account by $3 billion, bringing it up to $63 billion. In 2007, it would rise to $66 billion, and so on. That is not the entire federal R&D budget, which is now about $133 billion, but it is the R&D sweet spot where basic research spurs future innovation and strengthens our science and technology workforce.

Some small help may be on the way. Sixty-eight Senators recently signed a letter Senator Lamar Alexander (R-TN) and I wrote requesting appropriators to ignore the White House’s proposed funding cut for the DOE Office of Science and instead provide a 3.2 percent increase over last year’s appropriations.

We can also make some improvements that are not directly related to increasing science funding. I am introducing legislation to offer incentives to our existing science parks to expand while also constructing new ones. The rise of Taiwan’s microelectronics miracle can be directly attributed to their government’s role–not in picking winners and losers—but by building the necessary infrastructure allowing competition to flourish through their science parks. The same holds true with India’s software science parks and their rise as a world powerhouse in that industry.

In addition, we should modify our R&D tax credits so that participants in a research consortium–five or more unrelated companies working on a specific type of mutually beneficial research–receive a flat 20 percent research tax credit. We should endorse collaboration to share the cost of research.

Furthermore, we should be encouraging at a national level foreign direct investment in the US to locate manufacturing plants that would be built by US or foreign firms overseas. Ideally, the Department of Commerce should administer a program that acts as the Overseas Private Investment Corporation in reverse. It would lay out incentives to encourage US and foreign firms to locate high tech manufacturing in the US. The details are complex, but such an effort would act to collect and analyze trends in the outflow of high technology investments from the US to such countries as China or India. It would develop incentives using public-private partnerships to attract new manufacturing operations in the US. Finally, it would act as the policy focal point across the US Government to coordinate efforts to make the US attractive for foreign high technology investment.

The challenge we face is global in nature and broader in scope than anything we have seen in the past. It will take great determination, considerable resources, and a sustained national effort involving academia, industry, along with state and federal governments to insure that America continues to be the world leader in science and technology.

My greatest fear is that we become so preoccupied with other issues that countries with rapidly developing S&T-based economies surpass us and become regional giants influencing the decisions of countries in that region who were staunch allies of the US. By the time we recognize that we as a nation have fallen behind, it will cost far more to remedy than it will be to address it head-on today.

America has always been a nation built on the hope that we can build a prosperous, healthy world for ourselves and for our children. But it is clear that these long-standing American aspirations depend critically on our far-sighted investment in science and technology. Leadership in science and engineering and the world’s best education and training system are essential for ensuring Americans well-paying jobs and essential for our security.

When J. Robert Oppenheimer, the renowned physicist, warned President Franklin D. Roosevelt in 1943 about Germany’s plan to build an atomic weapon, FDR replied in a secret letter that "whatever the enemy may be planning, American science will be equal to the challenge." Never has a prediction been so prescient.

We know that the dominance of our fundamental research enterprise is a core American strength that must be preserved—and we must not let our position erode and compromise our future economic and national security.

By sustaining our investments in basic research, we can ensure that America remains at the forefront of scientific capability, thereby enhancing our ability to shape and improve our nation’s and the world’s future.

Jeff Bingaman is the junior US Senator from New Mexico. A Democrat, he was first elected to the Senate in 1982.

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Editor: Alan Chodos
Associate Editor: Jennifer Ouellette
Staff Writer: Ernie Tretkoff