Innovation, Competitiveness Plans Advance, But Hurdles Ahead

Washington Update

By Peter Harsha

Some high-profile legislative efforts to bolster U.S. competitiveness by fostering greater U.S.-based innovation have begun to move in Congress, putting the spotlight on the importance of increasing federal support of fundamental research, improving education efforts, and addressing needs in federal tax policy and workforce and immigration issues. But despite the positive action, there are a number of obstacles to enactment of these innovation plans including, most seriously, a perceived lack of support from the House Republican leadership. 

Two legislative packages have received the most attention and the most action in the Senate. A bipartisan package of three bills called the “Protecting America’s Competitive Edge” Acts (PACE), introduced by Senators Pete Domenici (R-NM), Jeff Bingaman (D-NM), Lamar Alexander (R-TN), and Barbara Mikulski (D-MD), has attracted 66 Senate co-sponsors. The PACE acts (S. 2197, 2198 and 2199) are based largely on a 2005 National Academies report, Rising Above the Gathering Storm, that included 20 recommendations—from increased research funding to immigration changes that would help the U.S. recruit and retain the world’s best talent—aimed at ensuring that the U.S. retains its competitive edge.

The other package receiving attention is the “National Innovation Act” (NIA) (S.2109)—and a related piece dealing only with the commerce-related provisions (S. 2390)—which was introduced in December 2005 by Senators John Ensign (R-NV) and Joseph Lieberman (D-CT), and has since attracted 23 co-sponsors. The NIA is modeled on the conclusions of the December 2004 Council on Competitiveness report, Innovate America: Thriving in a World of Challenge and Change, in which a panel of preeminent academic and industry leaders offered 60 recommendations for improving America’s competitiveness. 

Though both packages of bills have been referred to the Senate committees with jurisdiction, it appears the PACE bills have the most momentum behind them. The PACE legislation is broken into three parts: 

1. PACE Energy (S. 2197)—includes provisions for bolstering the federal investment in energy science, including doubling the DOE Office of Science budget over 7 years; creation of a new “DARPA-like” agency within DOE called ARPA-E; and support for math, science and engineering education through DOE.
2. PACE Education (S. 2198)—includes a series of provisions aimed at increasing the production and supporting the professional development of K-12 teachers in math and science; increases support for NSF and NASA’s Early Career grants; directs federal research agencies to devote 8 percent of their budgets to “high-risk, high-payoff research;” authorizes the doubling of  the NSF budget over 7 years; creates a new “F-4” visa category to encourage foreign students in the physical sciences, math, computing or engineering to stay in the U.S. after receiving their degrees; and authorizes the increase of DOD basic research (6.1) by 10 percent a year over the next 7 years.
3. PACE Finance (S. 2199)—provides a credit of up to $500,000 annually to employers who provide qualified education to maintain or improve employees’ knowledge in science or engineering; doubles and makes permanent the research and development tax credit.

The Senate has begun consideration of the PACE bills. In February, both the Senate Energy and Natural Resources Committee and the Health, Education, Labor and Pensions Committee held hearings on the PACE bills under their jurisdiction (PACE Energy and PACE Education, respectively). In March, the Energy and Natural Resources Committee approved the PACE Energy bill in a markup, clearing the way for that bill’s consideration by the full Senate. The PACE Finance bill, which includes the costliest provision of the PACE proposals, the R&D Tax Credit—extending the credit in FY 07 would cost $4.9 billion in federal revenue—is the only PACE bill that has not received consideration so far. Its cost, and the general unwillingness of the Finance Committee to consider making the R&D Tax Credit permanent, makes it the least likely to see further action. 

Passage of the original NIA even through the Senate, where it finds many supporters, is likely hampered by its inclusion of a very broad array of legislative provisions covering everything from research funding to tax credits to workforce and immigration issues in one single bill. This “omnibus” approach presents some procedural difficulties, as every congressional committee that can claim jurisdiction over a particular provision receives the bill in referral. The bill cannot move to the full Senate without the approval of every committee to which it has been referred. The PACE bills sidestepped this issue by confining all provisions under a particular jurisdiction under separate bills, resulting in single referrals for each bill. 

Nevertheless, the Senate Commerce Committee has begun hearings related to the NIA on the need for continued and increased federal funding for fundamental research. In March, Sen. Ensign used his Senate Commerce Subcommittee on Technology, Innovation and Competitiveness to highlight federally funded basic research, noting “basic research is the key to innovation.” Even in tight budget years, Ensign said, policymakers need to fund basic research and infrastructure priorities, which are not a drain on the economy. 

Both the NIA and PACE packages are primarily funding authorizations—not actual appropriations—so they will not necessarily result in any new funding. Unfortunately, there is great reluctance among the members of the House leadership to support “big ticket” authorization bills in the current budget climate. House leaders, feeling the need to protect the GOP majority in Congress in preparation for the 2006 congressional elections, are wary of any new “perceived” spending increases that might alienate the conservative voting base, which has been applying great pressure to the leadership to cut discretionary spending since Congress passed the massive emergency payouts in the wake of Hurricanes Katrina and Rita. House staffers have indicated that both bills are unlikely to get much consideration in the House.  

Whether funding called for in any of the innovation plans will receive appropriations in FY 2007 is still an open question, however. The highest-profile endorsement of the belief that the Federal Government needs to act now to ensure that the U.S. maintains its dominant position in innovation came when President George W. Bush used his January 2006 “State of the Union” address to announce his American Competitiveness Initiative (see “President’s Budget Includes Increases for Fundamental Research, Computing” in Computing Research News, vol. 18, No. 2, March 2006, for more details of the ACI). The President included funding for ACI—which would double the research budgets of NSF, NIST and the Department of Energy (DOE) Office of Science over ten years—in the budget he submitted to Congress in February. 

The Senate responded favorably to the ACI, including the President’s requested funding for ACI in its version of the FY 2007 Congressional Budget Resolution. The House Budget committee, however, was more parsimonious in its support, cutting the President’s requested funding for General Science, Space and Technology by $300 million (from $26.3 billion to $26.0 billion) in their version of the budget resolution. [At press time, the full House had not yet considered the budget resolution—for the latest updates see: http://www.cra.org/govaffairs/blog.] In contrast, the Senate included $100 million more than the President requested for the same account. 

Whether this slight by the House Budget Committee will impact the final appropriations levels enacted by the Congress is not yet clear. While the Congressional Budget Resolution does determine the total cap on discretionary spending for the appropriators—the President requested $873 billion for FY 2007, the House and Senate will have to agree on a number—its impact on specific appropriations accounts is less direct. Once the appropriators have the cap number (called the 302(a) allocation) they will work among themselves and with the House leadership to determine the share of the total to be distributed to each of the appropriations subcommittees (called the 302(b) allocation). That 302(b) allocation will either enable or hamper supporters of the ACI in appropriating the requested amounts to the key agencies. 

Unfortunately for supporters of increased federal funding for basic research at NSF, NIST and DOE Office of Science, the House leadership has not been very vocal in supporting that aspect of the President’s ACI. In fact, the leadership has had two opportunities to address the issue in recent days and has demonstrated a decided lack of enthusiasm for incurring any extra spending. First, in response to an event sponsored by House Democratic Leader Nancy Pelosi (D-CA) to highlight the Democratic Innovation Agenda—an agenda markedly similar to the President’s ACI—House Majority Leader John Boehner (R-OH) released a statement slamming the Democrats’ plan as “just more tax and spend” government. Then, in introducing their own plan, the entire House GOP leadership came together behind the House Republican High-Tech Task Force to announce an innovation plan focused on tort reform, reforms to education, and tax credits—without a mention of research funding. 

There is a sense among supporters of the ACI that the House leadership, though outwardly unsupportive of the various “big-ticket” innovation authorizations, will come through with support for the President’s request come appropriation time. House leadership staffers have suggested that “ultimately, we’ll support the President’s budget.” Supporters of the ACI should get their first sign of the truth of that suggestion when the 302(b) allocations are made known in mid to late April (after this issue of CRN has gone to press). For the latest information on the outcome of this important appropriations milestone, check CRA’s Computing Research Policy Blog at http://www.cra.org/govaffairs/blog.