March 31, 1995
"ABCs of R&D"
San Jose Mercury News
By Timothy Taylor
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THE GOOD news, according to a report just released by the White House Office of Science and Technology Policy, is that the United States is either ahead or at parity with Japan and Europe "in 27 technology areas deemed critical to national and economic security." These areas range from energy efficiency to environmental protection, from information technology to biotechnology, from manufacturing technology to materials science, from propulsion and power systems to agricultural and food technology.

The bad news, argues the same report, is that America's lead is declining. Japan is closing the gap in 10 of these areas, and Europe is catching up in four.

But the truly disturbing fact, on which this White House report does not care to focus, is that the American system of research and development, which bears responsibility for generating new technologies, is threatened by stagnant funding and a pork barrel mentality. Furthermore, the Clinton administration bears a share of the responsibility for these problems.

The dispiriting facts about American R&D spending should be a source of national concern. U.S. R&D expenditures measured in inflation-adjusted dollars have barely budged since 1988. As a share of gross domestic product, national R&D spending fell from 2.8 percent of GDP in 1988 to 2.6 percent in 1993, according to the National Science Foundation.

Federal R&D funding is 40 to 45 percent of the nation's R&D spending. Yet Clinton's most recent budget shows a drop of 8 percent in federal R&D spending from 1990 to 1996, after adjusting for inflation. Defense-related R&D has been cut even more sharply, and only a part of those cuts have been plowed back into civilian research.

Clinton's proposed 1996 budget does little to reverse this trend. It cuts defense R&D by 1.3 percent and raises civilian R&D by 2.7 percent. Even the growth of civilian R&D will barely keep pace with today's low rates of inflation.

International comparisons are just as troubling. America spends 1.9 percent of GDP on civilian-sector R&D; Japan spends 3.0 percent; and the former West Germany spends 2.7 percent.

Little wonder that the U.S. technology lead is eroding! Worse, the U.S. economy combines static R&D spending with rates of saving and investment that are low by international standards. Even when American researchers discover new technology, American companies are thus somewhat slower to embody that technology in new plant and equipment.

In the face of these overall trends, the Clinton administration strategy is to emphasize particular projects. For example, Chapter 7 of Clinton's proposed budget for 1996 lists a few dozen "agency specific initiatives" -- particular R&D programs where the administration wants political credit.

But it doesn't take a mathematical genius to notice that if overall federal spending on R&D is flat, then every area receiving an increase must necessarily be balanced by a corresponding cutback. Any list of increases must be only half the story.

The list of 27 key technology areas in the recent White House report, along with the "agency specific initiatives" in Clinton's budget, are symptomatic of a further problem. The federal government is focusing more on applications, and less on basic science.

In the past, the government has been the main supporter of basic science. These results were then made broadly available, and formed a base for the predominantly applied and product development R&D from the private sector. The federal government funded 70 percent of the nation's basic R&D back in 1980. In more recent years, the share has fallen to 60-65 percent. In Clinton's 1996 budget, federal support of civilian developmental R&D will be up 6.9 percent, while federal support of basic research is scheduled to rise only 2.2 percent. From a political point of view, basic science has little constituency. Sure, it may lead to the industries of tomorrow. But the workers, managers, suppliers, and investors of those industries don't yet know who they are. They can't form a lobbying group or pose for a political photo opportunity.

Conversely, it is politically attractive to offer government assistance to an existing industry, like auto or semiconductor manufacturing, or to a particular applied project like an electric car or a space shuttle. Too often for my comfort level, the Clinton administration seems to view R&D as a good excuse for short-term, pork barrel thinking.

R&D spending is crucial for the American economy. As Clinton's 1996 budget points out, "Industry R&D may have accounted for about a quarter of overall productivity growth in recent decades, providing rates of return of about 30 percent.... While the rate of return from federally financed R&D is much harder to estimate, it is probably substantial, with many economists believing it provides the highest return of any federal investment."

America's R&D spending badly needs a boost. The available tools are higher government spending, public/private partnerships, and tax credits -- and we should be using all of them. Even in tight fiscal times, America can't afford to neglect its science and technology base.

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