It is often said that budgets are values-based documents. If we value the future competitiveness of the United States, there are three critical priorities that must be reflected in federal spending: education, infrastructure, and research & development (R&D). While much attention is given to investments in education and infrastructure, these components are three legs of the same stool. R&D funding is just as vital to maintaining our global competitive edge, and it is one area where the importance and value proposition of federal investment is clear.
In Fiscal Year 2021, federal spending on R&D was around $157 billion. The president’s Fiscal Year 2022 budget would increase that number to $171 billion. While that increase is welcome, the trend in federal R&D spending has been on an unfortunate downward trajectory for years.
Federal spending on R&D as a percent of national GDP has dropped by more than 40 percent since 1980, and it is down 65 percent from its all-time high of 2 percent of GDP in 1964. That is the equivalent of spending $250 billion less per year than the rate of investment in 1964.
This decline is concerning for several reasons.
First of all, it ignores the value of federal investments. It is a simple fact that a dollar spent on a cup of coffee is different than a dollar spent on research and development. That R&D dollar comes with a return on investment.
Technology transfers alone from Department of Defense labs have generated an estimated $3.5 billion per year in private sector economic activity over the past two decades. The national labs are estimated to produce nearly $6 billion in economic output each year from licensing agreements alone.
Second, this continued decline in federal R&D cedes future innovation opportunities to our global competitors. China currently spends nearly $400 billion each year on R&D—a stunning 2.4 percent of their GDP.
We cannot fall behind as our international competitors invest in research into emerging technologies like artificial intelligence and quantum computing. Such tech will be decisive for global competitiveness in the coming decades and is likely to pervade every aspect of our lives, from warfighting platforms to cybersecurity to basic consumer products.
Third, federal investment is foundational to U.S. R&D efforts. Here in the United States, the federal government occupies a unique position in the R&D life cycle. When broken down by basic research, applied research, and development, the federal government is by far the biggest player in basic research, accounting for 42 percent of total national R&D spending. That role diminishes as one moves to applied research, currently at 34 percent, and development, just 13 percent. This tells us that the federal government bears the lion’s share of the burden for research that is not clearly profitable to the private sector.
To be a good partner with the private sector, the federal government must help bridge the gap between entrepreneurs and our world class inventors to solve existing government problems and commercialize the technology outputs from our national and defense labs. This is a mission Congress wholeheartedly supports. It was the Stevenson-Wydler Technology Innovation Act of 1980 that created the original statutory mandate for federal agencies to engage in technology transfer as a clear message from Congress that we must realize a return on investment for federal research and development.
In the pending Build Back Better Act, we have identified more than $180 billion in funding for research and development investments. This budget package conveys our understanding that we must invest in the foundations of a more vibrant and resilient research and development ecosystem in the United States.
The purpose of those investments is for the federal government to work with the private sector to seed innovation. It is a mission that must continue.
Connolly represents the 11th District of Virginia and is a senior member of the House Committee on Oversight and Reform and serves as the chairman of the Subcommittee on Government Operations.
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