Update Report on Benchmarks of US Innovation and the Knowledge Economy

The America Exceptionalism, American Decline? report, published by the Task Force on American Innovation, provides an update of two previous Task Force reports that focused on key benchmarks and economic competitiveness. The Task Force on American Innovation is an alliance of research universities, technology companies and large scientific societies and includes the American Institute of Physics as well as two of its Member Societies, the American Physical Society and the American Astronomical Society. The 2005 and 2006 Task Force reports highlighted declining and eroding trends in research and development and the 2012 report reiterates that these trends are unchanged.

“There are strong indications that the health of the US innovation system is faltering. First, the stagnation of the American K-12 education system and the inadequate numbers of US students entering the STEM (science, technology, engineering, and mathematics) disciplines are threatening the nation’s ability to recruit, train, and retain the scientists and engineers required to create new products and systems,” the report cautions.

The report states “the US is not sending a clear signal that the country is supporting its science and engineering innovators” as evident by the “years of boom-and-bust cycles of federal funding for scientific research.” The reauthorization of the America COMPETES Act was not met with a financial commitment from Congress that matches the investments called for in the legislation. While the report recognizes that this reflects the current difficult economic climate, it emphasizes that “we must strike the right balance between fiscal discipline and building a better America through scientific research and education.”

The report also highlights that the stability of US “investments in basic scientific and engineering research strongly influences vital sectors of the US economy, including energy and manufacturing. Federal investments in research precipitate additional private sector research investments.” Key findings on this issue include:

• “The energy industry spends 0.3 percent of domestic sales revenue on R&D, compared with nearly 26 percent by the communications sector and 21 percent by the semiconductor industry”.

• “More than six million American manufacturing jobs have been lost since January 2000, exceeding the losses of any other economic sector. Some manufacturers have outsourced their R&D operations to foreign partners or subsidiaries.”

• “In 2008, U.S. publicly-funded energy R&D spending was less than half what it had been three decades before in real purchasing power.”

• “By 2013, one-third of the energy workforce in the U.S. will be eligible for retirement.”

The report emphasizes that “federal investments are crucial to the private sector’s ability to develop new products.” In support of this statement were the arguments that returns on research investments occur over long periods and do not necessarily benefit those who fund or perform the research; and secondly, that private industry investments are nearly two-thirds of US research and development investments. “The federal government plays a crucial role in the innovation system by funding scientific research, while industry invests in taking breakthroughs from that research to market,” the report concluded.

Regarding energy, the “reaction to crisis, rather than any deliberate plan for the future, has guided [US energy] policy.” Federal investments in energy research and development have tracked oil prices. The recommendation that US policies “should not be tied to trends in oil prices, but rather should address the looming issues of our nation’s economic dependence on, and vulnerability to, oil,” was discussed in the context of the growing need for global energy markets.

Another issue addressed in the report is the education of US students in STEM fields. The report includes data comparing the number of Chinese students earning science and engineering undergraduate degrees with the number of US students earning the same degrees. It also includes data on the percentage of undergraduates receiving science and engineering degrees in the US as well as many European and Asian nations. The number of foreign students studying physical sciences and engineering since 2000 has surpassed the number of US students. “The World Economic Forum, in 2010, ranked the US 52nd out of 133 nations in quality of math and science education…. US students earned 11 percent of the world’s four million science and engineering undergraduate degrees awarded in 2006.” Each of these results highlights the sobering point that the US is falling behind international peers in STEM education.

The trends in manufacturing and the high-tech economy benchmarks are equally enlightening. “The US is projected to fall from fourth to fifth in manufacturing competitiveness by 2015,” according to a report issued by the Council on Competitiveness. Charts showing the manufacturing job loss show familiar and serious trends.

Recommendations and conclusions were outlined including that the US should maximize the efficiency of its research investments “by providing sustained funding for scientific research, rather than funding that fluctuates based on perceived short-term crisis. Such decisions will capitalize on our strength – that is, our unique government-university-industry partnerships, which have allowed us to lead the world in discovery and innovation.” Funding cuts to research and development budgets have been significant and should be considered in the context of investments in future research and development, the report warned against “the current emphasis on short-term cuts that do not discriminate sufficiently between spending and investment.”