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December 9, 2010

The Gathering Storm, Five Years On

Michael Feldman

“Gentlemen, we have run out of money. It is time to start thinking.” That quote, attributed to Physics Nobel Laureate Sir Ernest Rutherford, kicks off the new National Academy of Sciences (NAS) report on the state of US competitiveness in science and technology. This latest work, titled “Rising Above The Gathering Storm, Revisited,” documents what has transpired in the intervening five years since the 2005 publication of the NAS’ landmark report, “Rising Above the Gathering Storm.” And, as the opening quote implies, the authors believe that to maintain US science and technology leadership, we’ll have to start acting a lot smarter.

Here are just a few sobering nuggets from the recent report:

The World Economic Forum ranks the United States 48th in quality of mathematics and science education.

Hon Hai Precision Industry Co. (computer manufacturing) employs more people than the worldwide employment of Apple, Dell, Microsoft, Intel and Sony combined.

United States consumers spend significantly more on potato chips than the government devotes to energy R&D.

GE has now located the majority of its R&D personnel outside the United States.

Eight of the ten global companies with the largest R&D budgets have established R&D facilities in China, India or both.

The United States ranks 27th among developed nations in the proportion of college students receiving undergraduate degrees in science or engineering.

The total annual federal investment in research in mathematics, the physical sciences and engineering is now equal to the increase in United States healthcare costs every nine weeks.

For the next 5-7 years the United States, due to budget limitations, will only be able to send astronauts to the Space Station by purchasing rides on Russian rockets.

In May 2010, a supercomputer produced in China was ranked the world’s second-fastest.

That last one is particularly worrisome. If this latest NAS report had been delayed just a few months, they could have recorded that the Chinese Tianhe-1A system is now ranked the world’s fastest. In fact, the rise of China’s R&D presence over the last half-decade fueled a lot of the more pointed observations in the new study. Although the Asian nation still lags the US in almost all science and technology metrics, the two countries appear to be headed in different directions.

America’s R&D trajectory has been problematic for awhile, though. In 2005, the original Gathering Storm report served as a wake-up call to the feds about how the US could become an also-ran in the science and technology arena. Its main thesis was that tech innovation is the largest single driver for our economy, and should enjoy the level of investment commensurate with that role. And while the number of scientists and engineers is relatively small, comprising a mere four percent of the country’s work force, the work they do has a disproportionate effect on the well-being of the nation. The report argued that eroding the foundation that supports these innovation makers will result in a loss of economic leadership, a decline in the standard of living, and an inability to compete for jobs in the global marketplace.

The 2005 report spelled out four main recommendations: Restore the country’s K-12 education system for science and mathematics back to the top of the global heap; double the federal budget for basic research in math, science and engineering over the next seven years; encourage more students to pursue science and tech careers; and institute tax, patent, immigration and litigation reforms that spur innovation. The price tag for all this: around $19 billion per year.

In fact all of the recommendations could be fully implemented with the amount the US spends on cigarettes each year – with $60 billion left over. Think about that. If you could somehow get smokers to stop committing slow-motion suicide, we’d have enough money to fully fund a robust R&D and education budget for science and technology.

Of course, that’s not likely to happen. But in an era of trillion dollar wars, tax rebates, and entitlement outlays, finding a paltry $19 billion a year certainly seemed to be within reach. And it was. As a response to the original Gathering Storm report, Congress developed the America COMPETES Act, a bill that addressed most of the report’s recommendations. It was designed to significantly increase spending for basic research across a number of federal agencies — the DOE, NSF, NASA, NIST and NOAA, in particular. The bill had broad bipartisan report and the backing of the Bush administration. It was passed and signed into law in 2007.

So what could go wrong? As it turned out, quite a bit.

Appropriations to fund the COMPETES bill’s mandate fell short, especially in regard to science, technology, engineering, and mathematics (STEM) education and workforce development. And of course, the recession of 2008 and 2009 changed the political calculation and economic incentives for everyone. Funding priorities for the government shifted to restoring the financial sector. Meanwhile universities lost endowments and state support.

The subsequent US stimulus funding, encapsulated in the American Recovery and Reinvestment Act (ARRA) restored some of this money, but that legislation was designed as a two-year boost to the economy. And in any case, even the COMPETES Act was a three-year deal, designed to expire in 2010.

Given the current economic climate as well as the emergence of other tech players like China and India, the US situation has become more dire. To quote the authors of the new report:

…The unanimous view of the committee members participating in the preparation of this report is that our nation’s outlook has worsened. While progress has been made in certain areas—for example, launching the Advanced Research Projects Agency-Energy—the latitude to fix the problems being confronted has been severely diminished by the growth of the national debt over this period from $8 trillion to $13 trillion.

Further, in spite of sometimes heroic efforts and occasional very bright spots, our overall public school system—or more accurately 14,000 systems—has shown little sign of improvement, particularly in mathematics and science. Finally, many other nations have been markedly progressing, thereby affecting America’s relative ability to compete effectively for new factories, research laboratories, administrative centers—and jobs. While this progress by other nations is to be both encouraged and welcomed, so too is the notion that Americans wish to continue to be among those peoples who do prosper.

The Gathering Storm Committee’s overall conclusion is that in spite of the efforts of both those in government and the private sector, the outlook for America to compete for quality jobs has further deteriorated over the past five years.

The Gathering Storm increasingly appears to be a Category 5.

The authors concede that the US cannot compete with lower-cost labor markets that can offer “conventional” high-tech workers at a fraction of the cost of what American workers would demand. Rather, they suggest, local workers need to move up the food chain to become high-end innovators, doing the leading-edge work that is more difficult to move offshore.

But the toughest piece of the puzzle will be political. At a time when the federal deficit is ballooning — and deficit hawks are on the ascendency in both parties — allocating funds for additional R&D spending will be an uphill climb. A recent article in USA today points to Congress’ — and especially the GOP’s — growing ambivalence about funding science programs in the face of tightening budgets.

The main problem described by the article is that lawmakers just don’t understand the role of basic research in the innovation cycle. As Al Teich, budget expert at the American Association for the Advancement of Science, pointed out: “Science grants are an easy target for politicians, frankly. The acoustics study is a classic example, he suggests, of politicians ridiculing a study based on an incomplete explanation, while ignoring its more fundamental purpose.”

Such thinking is counter-productive to the long-term prospects of the economy though, according Teich and Gathering Storm proponents. “One seemingly relevant analogy is that a non-solution to making an over-weight aircraft flight-worthy is to remove an engine,” say the NAS authors.

Getting politicians and the public to see the long-term benefits of science and technology investments will be the big hurdle. A 2010 COMPETES Reauthorization bill is winding its way through Congress. That version authorizes $85.6 billion for five years, which actually represents even less funding than the original 2005 bill. In any case, the 2010 bill is currently stuck in the Senate waiting for the lawmakers to take action.

In a speech last week, President Obama reiterated his commitment to increasing the federal R&D funding, calling this is a “Sputnik moment” for the country. Parroting the theme of the NAS report, Obama said:

[A] lot of companies don’t invest in basic research because it doesn’t pay off right away. But that doesn’t mean it’s not essential to our economic future. Forty years ago, it probably didn’t seem useful or profitable for scientists and engineers to figure out how to increase the capacity of integrated circuits. Forty years later, I’m still not sure what that means. What I do know is that discoveries in integrated circuits made back then led to the iPod and cell phones and GPS and CT scans – products that have led to new companies and countless new jobs in manufacturing and retail, and other sectors.

That’s why I’ve set a goal of investing a full 3 percent — not 2 percent, not 2.5 percent — a full 3 percent of our Gross Domestic Product into research and development. That has to be a priority.

We’ll see. Right now, the administration and Congress seem intent on stimulating the economy in more mundane fashion. Currently on the front burner is the $800-$900 billion tax cut package, designed to stimulate some short-term growth from an anemic economy. The COMPETES Reauthorization Bill is one-tenth that size, but it requires our political class to think beyond the next election cycle. Good luck with that.

But if you really want to wallow in some pessimism, check out historian Alfred McCoy’s analysis of the declining fortunes of the US, reprinted this week in Salon. In the article, McCoy predicts the demise of the US as a global superpower by 2025, citing larger geopolitical trends, exacerbated by a lack of innovation leadership:

Under current projections, the United States will find itself in second place behind China (already the world’s second largest economy) in economic output around 2026, and behind India by 2050. Similarly, Chinese innovation is on a trajectory toward world leadership in applied science and military technology sometime between 2020 and 2030, just as America’s current supply of brilliant scientists and engineers retires, without adequate replacement by an ill-educated younger generation.

Reading McCoy’s assessment, one gets the feeling that the country’s deteriorating science and tech foundation is just a symptom of a larger decline, rather than a root cause. That’s a sobering thought, and it certainly isn’t intended to be an excuse to not try to resuscitate the US innovation machine. But it does suggest that just turning up the volume on federal R&D and education is not a panacea for an American Renaissance.

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