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“THE IMPORTANCE OF FEDERAL INVESTMENTS IN RESEARCH AND DEVELOPMENT” mentioning the U.S. Dept. of Transportation was published in the Senate section on pages S16562-S16563 on Nov. 2, 1995.
The publication is reproduced in full below:
THE IMPORTANCE OF FEDERAL INVESTMENTS IN RESEARCH AND DEVELOPMENT
Mr. BINGAMAN. Mr. President, I rise this morning to call the Senate's attention to a report that was released yesterday by the Council of Economic Advisors. The report is entitled, ``Supporting Research and Development to Promote Economic Growth: The Federal Government's Role.''
This report eloquently makes the case for the enormous positive impact which Federal investments and research and development have in promoting economic growth and providing greater opportunities for our children and for future generations. Most of the debate we have had, Mr. President, about this budget this year has focused on whether particular cuts or reductions or particular tax increases have been fair to one group or another in our country. For example, are the Medicaid cuts too deep? Are the Medicare cuts too deep? Should we be putting an additional financial burden on students in schools? Should Congress be scaling back the earned-income tax credit on low- and moderate-income families while cutting taxes for those who are better off?
But another important part of the debate, the budget debate, needs to be about the impact of what is proposed in this budget on the long-term economic growth of the country. And that is the issue that I would like to focus on here this morning.
The report that was released yesterday by the Council of Economic Advisors makes several crucial points that the congressional majority needs to understand as it embarks on what I see as a disastrous course of slashing Federal civilian research investments by the year 2002. Let me just read a couple sentences from the report.
It says:
Increasing the productivity of the American workforce is the key to higher living standards and stronger economic growth in the future. Evidence indicates that investments in research and development have large payoffs in terms of growth. . . . Indeed, investments in--research and development--are estimated to account for half or more of the increase in output per person. Maintaining or increasing this country's research and development effort is essential if we are to increase the rate of productivity growth and improve American living standards.
The report finds that ``many studies have demonstrated that investments in research and development yield high returns to investors and even higher returns to society.'' The report points out that it is this difference between the returns capturable by a single firm or an individual and the returns to the society as a whole that leads the private sector to underinvest in research and creates the need for public investment in research and development.
Mr. President, this is a need that has been recognized throughout this Nation's history, going back to the first Treasury Secretary of this country, Alexander Hamilton. The report points to the $30,000 that was appropriated in 1842 to build a telegraph between Washington, DC, and Baltimore, to demonstrate the feasibility of Samuel Morse's new technology.
It points to the 1862 Morrill Act, and that is an act, of course, that has benefited each of our States--Government funding of agricultural research. It points to the enormous benefits that have flowed from the expansion of Federal research investments following World War II pursuant to the vision that Vannevar Bush described in his report ``Science: The Endless Frontier,'' which was submitted to President Truman in June 1945 at the end of the war.
Yet, there are some very disturbing charts in this report. The first of these charts I want to refer my colleagues to is a chart of nondefense research and development expenditures as a percentage of gross domestic product. What you can see here is that the United States has been lagging behind Japan and Germany in its nondefense research expenditures as a percentage of gross domestic product for more than two decades.
The yellow line is the United States. Japan is now substantially above both the United States and Germany in its investment in research and development, nondefense research and development, as a percentage of its gross domestic product.
This second chart indicates Federal investments, U.S. investments in nondefense research and development and shows very clearly that they have been declining substantially since the 1960's as a percentage of gross domestic product. You can see from the period 1961 to 1996, there was a short period there in the early sixties where there was a substantial increase during the heyday of the space program. It began to come down. It has continued its downward trend, as a general matter, until today, and it is scheduled in this proposed GOP budget for a substantial additional decline in the next several years. That Federal research investment, as this chart shows, will plummet during the next several years.
As the report that was issued yesterday points out, this is a greatly different plan of action from what governments in other parts of the world are doing, particularly Japan and Germany, who are our main rivals economically and technologically. Those countries around the world are seeking to follow the example of the United States, to emulate the successful American model of the last century, just at the same time that we, as a nation, seem bent on abandoning that model or wrecking it. The Council of Economic Advisers' report points out that the Japanese Government recently announced its plans to double its research and development spending by the year 2000.
We have a chart here that I think is a very important chart for people to focus on. This highlights the effect of our congressional budget plan and the effect of the Japanese plan. What you can see is that by the year 1997, Japan will overtake the United States in Government support for nondefense research and development, and that is not as a percentage of our gross domestic product, that is in absolute dollars. You can see that by 1997, the Japanese will be spending more than we will if we stay on the course that has been laid out in this budget resolution. Obviously, this gets even worse in the years ahead, as you go to the year 2000.
The Council of Economic Advisers' report also points out that there is no basis in historical data to believe that cuts in Federal research and development spending will be compensated for through additional private sector investments. I think this is a very important point, Mr. President.
This next chart, which I really do commend to everybody because I think it has a very important message about how history works, it makes it very clear that there is a correlation between changes in Federal research and development expenditures and changes in private sector research and development expenditures 1 year later. The private sector follows the Federal Government lead in investing in research and development.
The report concludes the correlation means that if Federal research and development support is cut, the Nation is likely to lose future rewards not only from the federally supported research and development that will not be undertaken, but also from the industrial research and development that will not be undertaken as the private sector scales back in response to Federal cuts.
Stated very simply, when the Federal Government spends more on research and development, the private sector follows its lead. When the Federal Government spends less on research and development, the private sector follows its lead and spends less.
Mr. President, this is a horrible position for our country to place itself in as we approach the beginning of the 21st century. These cuts in Federal civilian research and development are not just theoretical numbers out there. These are cuts that are being made in many of the appropriations bills that we are passing on the floor of this Senate.
The energy and water appropriations bill, which we passed on Tuesday, cuts civilian energy research by 17 percent, $637 million. That was 17 percent from the President's request and it was cut 13 percent, or $462 million, from the last year's level of funding. Some research and development activity, such as solar and renewable energy research and development, were cut an even larger percentage, 35 percent, in that particular bill.
The same is true in the transportation appropriations bill that we passed on Tuesday. The conference report cut the Transportation Department's R&D budget request by 30 percent from the President's level of request and by 8 percent from last year's level.
In these two bills alone, civilian research and development is cut by almost $1 billion from the President's request, by over $500,000 from the fiscal year 1995 level.
Far deeper cuts are coming in the Commerce, State, Justice appropriations bill, in the VA-HUD appropriations bill and in the Labor-HHS appropriations bill.
This is not what we should be doing to our country as we approach the 21st century. If we do not change from this path, I believe that we will condemn future generations and our own children to a less prosperous and less productive America.
I urge my colleagues to read the Council of Economic Advisers' report and think about the consequences, the long-term consequences, of eating the seed corn of our future prosperity.
I urge my colleagues to think about the consequences of falling behind other industrialized nations in research and development and ultimately in productivity and standard of living. There is a clear and a constructive role for the Federal Government in investing in research. It has been carried out since the beginning of our Republic and, on a very large scale, it has been carried out since the Second World War. It has served our Nation well. It should not be lightly discarded as a collateral casualty of the effort to balance the budget.
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