SUPPORTING INNOVATION,

FOSTERING JOB GROWTH

Making Discovery and Innovation Job One

Paid for by Cory Booker for Senate.

SUPPORTING INNOVATION, FOSTERING LONG-TERM JOB GROWTH: MAKING DISCOVERY AND INVENTION JOB ONE

THE CHALLENGE We find ourselves in an increasingly crowded and competitive world economy. To stay on top, we must hold on to what America has long done best: global leadership in innovation and big ideas. Since our countrys founding, we have charted a path to address humankinds greatest challenges. What follows is a series of steps we can take today to ensure we remain the nation looked to by the world as the best hope to address the greatest challenges of the next century. Surely, its about American leadership, but its also about protecting and creating American jobs. From curing the deadliest diseases to putting a man on the moon, we have shown there is no limit to our countrys ingenuity. But we have to act now and with urgency if we are to maintain our primacy. THE PATH FORWARD There are five actions we must take in order to quickly correct our course. Together, they will increase internal government commitment to basic research; provide new incentives and predictability for private sector R&D; better coordinate academia, business, and government in tackling resource intensive, diffuse-benefit research; inspire researchers to tackle big problems without exposing taxpayers to potentially paying for failure; and provide for a high-skill workforce. I. Increase internal government commitment to basic research: Accelerate support for R&D at select government agencies to better reflect the goals established by the America COMPETES Act of 2007. The America COMPETES Act proposed a ten-year window beginning in 2006 to double funding for the National Science Foundation, the Office of Science at the Department of Energy, and key programs at the National Institute of Standards and Technology. This timeline has repeatedly slipped, and current budget projections have us hitting the target not in 2016, but rather in 2027.1 Thats not good enough.
John F. Sargent Jr., Federal Research and Development Funding: FY2013, Congressional Research Service, (April 19, 2013), https://www.fas.org/sgp/crs/misc/R42410.pdf.
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Paid for by Cory Booker for Senate.

And we arent taking this imperative seriously enough: We rank 8th in the world in combined public and private R&D spending as a percentage of GDP. 2 We should we must be number one. From 1953 to 1987, federal funding for R&D grew by 4.9 percent annually. From 1987 to 2008, annual growth slowed to 0.3%.3 The public proportion of R&D investment is shrinking, and private R&D spending now accounts for two-thirds of total investment.4 Unlike private sector R&D, which is invaluable but usually industry-specific with narrower applications, public sector R&D focuses on broad questions, leading to scientific breakthroughs that benefit or create entire industries.5 Our comparatively weak commitment was further imperiled by sequestration, which cut $12 billion of R&D funding in 2013 and, if not adjusted for, will cut an additional $83 billion through 2021.6 This failure matters. The social rate of return on R&D spending is estimated to be between 30 percent and 100 percent.7 Other countries understand this, and China, South Korea, and Japan have all increased R&D spending more quickly than the U.S. in recent years. 8 China, for example, has grown its investment by almost 19 percent per year
Based on World Bank data from 2008. Research and development expenditure (% of GDP), World Bank, (accessed July 8, 2013). http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS?order=wbapi_data_value_2008+wba pi_data_value+wbapi_data_value-first&sort=desc 3 Steven J. Markovich, Promoting Innovation Through R&D, Council on Foreign Relations, (November 5, 2012), http://www.cfr.org/innovation/promoting-innovation-through-rd/p29403. 4 U.S. Scientific Development and Research 101, Science Progress, (February 16, 2011), http://www.scienceprogress.org/wp-content/uploads/2011/02/SciProgResearchandDevelopment101.pdf. 5 Id. at pg. 4. 6 Kwame Boadi Sequestration Nation: Our Future Standing Is on the Line, Center for American Progress, (May 6, 2013), http://www.americanprogress.org/issues/economy/news/2013/05/06/62370/our-future-economicstanding-is-on-the-line/. 7 Social rate of return is defined by increases in consumption caused by the R&D. Charles I. Jones and John C. Williams, Measuring the Social Return to R&D, The Federal Reserve, (February 1997), http://www.federalreserve.gov/pubs/feds/1997/199712/199712pap.pdf. 8 GDP spending as a share of R&D increased by 104% in China, 89% in South Korea, 24% in Japan, and decreased by 1% in US between 1991 and 2007. Main Science and Technology
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between 1992 and 2009, compared to 6 percent in the U.S.9 Simply put, by not investing, were falling behind. Enhanced investment in R&D is particularly crucial to getting New Jerseys economy back on track. Our state has the highest density of scientists and engineers of any place in the world.10 Home to 1,700 life sciences companies, New Jersey can better leverage these assets and set the standard other states must meet for our nation to lead the world.11 12 We cant afford to let other countries create the technologies that will define the 21st-century. We must make our promised investment now, and pledge to cut the America COMPETES delay in half, doubling funding levels by no later than 2021. II. Stimulate Private Sector Investment Through Enhanced and Predictable Incentives. Private sector investment in R&D is critical to promoting innovation, maintaining global competitiveness, and creating jobs. The Research and Experimentation Tax Credit has played a critical role inducing private investment in far-ranging research. By making this R&D tax credit permanent, we can provide a clear tax climate for industry leaders to invest in future innovation. Under current law, the R&D tax credit requires frequent reauthorization. Since the credits introduction in 1981, the credit has expired eight times and has been extended 13 times. 13 The repeated expiration and reauthorization cycle deprives industry of the certainty required to pursue long-term R&D. Congress should pass legislation to make permanent and expand the alternative simplified research credit (ASC), which offers a streamlined process for computing R&D credit. Expanding the ASC from 14 percent to 20 percent would stimulate private sector investment in R&D and produce long-lasting economic benefits. The policy would

Indicators (2009), OECD via National Science Foundation, data available at http://www.nsf.gov/statistics/seind10/c4/fig04-16.xls. 9 See Sequestration Nation, supra note 5. 10 New Jersey: Global Hub for Life Sciences, Choose: New Jersey, (2012), http://www.choosenj.com/NewJersey/media/New-Jersey-Media/PDFs/Brochures/CNJ-LifeScience-2012.pdf. 11 Id. 12 See U.S. Scientific Development, supra note 2 at pg. 2. 13 Gary Guenther, Research Tax Credit: Current Law, Legislation in the 112th Congress, and Policy Issues, Congressional Research Service (Nov. 29, 2011), http://www.ieeeusa.org/policy/eyeonwashington/2011/documents/researchtaxcredit.pdf.

Paid for by Cory Booker for Senate.

produce an estimated $66 billion increase in annual GDP and more than 162,000 new jobs.14 III. Do more to bridge the R&D valley of death the space between academia and business by better funding both non-profit research institutes and science parks that conduct essential applied research. We have boundless potential in our universities, but too much of our talent remains untapped, underfunded, and separated from the practical applications of their research. The U.S. has lagged in developing strategic public-private research partnerships. Just this year, Japan and the UK announced significant investments to bridge the gap between academia and industry, promoting industry-led research designed to meet market demand. Grow national networks of industry-led innovation hubs Creating broad national networks of industry-specific, industry-led nonprofit innovation hubs that bring together universities and the private sector will help companies take on the risks of long-term, diffused-benefit R&D. We have seen the beginnings of this in the Obama Administrations National Network for Manufacturing Innovation (NNMI). Manufacturing is clearly the right place to start: it comprises 68 percent of all spending on R&D15 in the US and manufacturing jobs pay 17 percent more in weekly earnings than non-manufacturing jobs.16 That said, we should embark on an analysis of the potential extension of the NNMI concept to other sectors that are essential to leading in a 21st-century economy, such as transportation, health care and energy. We must, within reason, let the need drive shortterm cost; the easily accessible returns are too great, and the wasted potential and foregone opportunity of inaction too damaging.

Jessica Lee and Mark Muro, Make the Research & Experimentation Tax Credit Permanent, Brookings Institution (November 2012), http://www.brookings.edu/~/media/research/files/papers/2012/12/06%20federalism/06%20resear ch%20experimentation%20tax
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U.S. and International Research and Development: Funds and Technology Linkages, National Science Foundation, (2004), http://www.nsf.gov/statistics/seind04/c4/c4s4.htm.
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The Benefits of Manufacturing Jobs, U.S. Department of Commerce: Economics and Statistics Administration (May 7, 2012), available at http://www.esa.doc.gov/Reports/benefitsmanufacturing-jobs.
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Paid for by Cory Booker for Senate.

Invest in Science Parks and do a better job of bringing taxpayer-supported, universitydeveloped intellectual property to market. We should also incentivize the development of science parks to invigorate regional economies and promote shared research and discovery. Science parks cluster science and technology companies by providing access to high-tech facilities, university resources, and large concentrations of science, technology, engineering, and math (STEM) workers. More than 300,000 workers in North America work in science parks; every job in a science park generates an average of 2.57 new jobs. 17 In Newark, University Heights Science Park has attracted 52 startups and will create more than 6,000 permanent direct and indirect jobs.18 Americas oldest science park is more than 50 years old and dozens of other science parks are more than 25 years old.19 We need to ensure that existing science parks, as well as new ones, are able to meet industry needs in the 21st-century. By creating a competitive matching grant program we can promote the development of the next generation of science parks that serve emerging industries, such as clean energy. And where taxpayer supported innovation happens in a university setting, we need to get those innovations to market. It is vital that we increase the efficiency at university technology transfer offices, vital links in the idea to market chain that ensure research with practical applications is shared with industry and stakeholder groups. Too often, ideas and discoveries dont get commercialized because they get stuck in university bureaucracies. Among other measures, we must improve our metrics and reporting systems to monitor the effectiveness of these offices.

IV. Promote Big Thinking, Without Taxpayer Exposure, and Protect Our Discoveries The federal government should fund prizes that incentivize finding solutions to crucial scientific and technological challenges. These inducement prizes focus the genius of multiple groups and individuals on a single, important goal by rewarding results, not
Characteristics and Trends in North American Research Parks, Battelle (2007) http://www.aurp.net/assets/documents/FinalBattelle.pdf 18 University Heights Science Park: An Overview, University Heights Science Parks, (accessed July 9, 2013), http://www.scienceparknewark.com/overview.html. 19 Is there a future for science parks? Science Progress, (August 19, 2009), http://scienceprogress.org/2009/08/science-parks/.
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Paid for by Cory Booker for Senate.

process. 20 And by delegating to private sector entrepreneurs, prizes require limited administrative supervision and only compensate for desired outcomes. The 2010 reauthorization of the America COMPETES Act took a step in the right direction by giving agencies the authority to award prizes to promote innovation. 21 Congress should strengthen the act by allocating the funding necessary for agencies to launch prize competitions. And we must do more to protect the product of our research nothing less than the incentive to invest in research and our economic competitiveness are at stake. Intellectual property theft costs American industry billions of dollars each year, sapping it of jobs and revenue. 22 As a nation, our greatest asset is the ingenuity of our scientists, business owners, and thought leaders. We need to crack down on violations and promote and enforce intellectual property protections in trade agreements to ensure that American businesses are playing on a level playing field. V. Attract and develop top talent Increase H-1B Visas Comprehensive immigration reform is critical to our global competitiveness, and the associated expansion of the H-1B visa program will prove particularly valuable to our STEM worker-reliant industries. The immigration bill recently passed by the Senate would increase the number of annually available H-1B visas from 65,000 to 115,000, with the potential to increase the cap to 180,000 over time. 23 Ideally, high-tech companies would not need to rely on foreign workers, but today H-1B visas are essential to these companies remaining competitive abroad. The Senate bill would help address this problem by increasing labor certification fees for hiring foreign workers, using the additional funds to pay for STEM education in the U.S.24 We must work to pressure the House of Representatives to pass it.
Innovation Inducement Prizes at the National Science Foundation, Academies of Sciences (2007), http://www.nap.edu/openbook.php?record_id=11816&page=1. 21 Strategy for American Innovation, The White House, (accessed July 9, 2013), http://www.whitehouse.gov/innovation/strategy/introduction. 22 Intellectual Property Theft, Federal Bureau of Investigation. (accessed July 9, 2013) http://www.fbi.gov/about-us/investigate/white_collar/ipr/ipr 23 S.744, 113th Congress, 1st Session, (2013), http://www.gpo.gov/fdsys/pkg/BILLS113s744es/pdf/BILLS-113s744es.pdf 24 Senate Committee Passes Immigration Bill with STEM Fund Amendment, National Association of State Budget Officers, (May 22, 2013), http://www.nasbo.org/publicationsdata/washington-report/senate-committee-passes-immigration-bill-stem-fund-amendment.
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Paid for by Cory Booker for Senate.

Invest in early STEM education Big thinking starts early, but in the U.S., were not starting early enough. In order to ensure the success of future generations, given the increasingly sophisticated and technology-driven nature of the world economy, America must invest heavily in the education with particular emphasis in the Science Technology Engineering and Math (STEM) fields. Between 2008 and 2018, employment in STEM fields is expected to grow by 17 percent, compared to 9.8 percent in non-STEM occupations.25 The rapid growth and high rewards associated with STEM occupations underscore the need for a strong primary education incorporating the STEM fields. Yet, in the most recent report from the Program for International Student Assessment, U.S. students ranked 17th in science and 25th in math of 34 nations tested.26 In order to catch up, the U.S. should increase funding for charters and magnets specializing in STEM education, continue current efforts to improve STEM education, such as the Presidents Race to the Top initiative,27 and deliver on the Presidents call for 100,000 new STEM teachers over the next decade.28 To help meet this goal, Congress should double the maximum amount of Stafford loans that can be forgiven for teaching math and science in low-income high schools from $17,500 to $35,000. 29 The need to repay student loans should not dissuade STEM graduates from taking much-needed teaching positions over higher paying jobs in the private sector.

David Langdon, et. al., STEM: Good Jobs Now and for the Future, U.S. Department of Commerce, Economics and Statistics Administration, (July 14, 2011), http://www.esa.doc.gov/sites/default/files/reports/documents/stemfinalyjuly14_1.pdf. 26 "PISA 2009 Results: What Students Know and Can Do," OECD Programme for International Student Assessment (PISA), (2010), http://www.oecd.org/pisa/pisaproducts/48852548.pdf. 27 Federal Science, Technology, Engineering, and Mathematics (STEM) Education 5-Year Strategic Plan, The White House (May 2013), http://www.whitehouse.gov/sites/default/files/microsites/ostp/stem_stratplan_2013.pdf. 28 Obama Administration Announces New Steps to Meet Presidents Goal of Preparing 100,000 STEM Teachers, White House Office of Science and Technology Policy, (March, 18), 2013). http://www.whitehouse.gov/sites/default/files/docs/stem_teachers_release_3-18-13_doc.pdf. 29 Teacher Loan Forgiveness, Federal Student Aid, (accessed July 9, 2013), http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/teacher#what-are-theeligibility-requirements.
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Paid for by Cory Booker for Senate.