[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                     SCIENCE, TECHNOLOGY, AND GLOBAL
                        ECONOMIC COMPETITIVENESS

=======================================================================

                                HEARING

                               BEFORE THE

                          COMMITTEE ON SCIENCE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 20, 2005

                               __________

                           Serial No. 109-27

                               __________

            Printed for the use of the Committee on Science


     Available via the World Wide Web: http://www.house.gov/science

                                 ______

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                          COMMITTEE ON SCIENCE

             HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas                 BART GORDON, Tennessee
LAMAR S. SMITH, Texas                JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania            EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California         LYNN C. WOOLSEY, California
KEN CALVERT, California              DARLENE HOOLEY, Oregon
ROSCOE G. BARTLETT, Maryland         MARK UDALL, Colorado
VERNON J. EHLERS, Michigan           DAVID WU, Oregon
GIL GUTKNECHT, Minnesota             MICHAEL M. HONDA, California
FRANK D. LUCAS, Oklahoma             BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois               LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland         RUSS CARNAHAN, Missouri
W. TODD AKIN, Missouri               DANIEL LIPINSKI, Illinois
TIMOTHY V. JOHNSON, Illinois         SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia            BRAD SHERMAN, California
JO BONNER, Alabama                   BRIAN BAIRD, Washington
TOM FEENEY, Florida                  JIM MATHESON, Utah
BOB INGLIS, South Carolina           JIM COSTA, California
DAVE G. REICHERT, Washington         AL GREEN, Texas
MICHAEL E. SODREL, Indiana           CHARLIE MELANCON, Louisiana
JOHN J.H. ``JOE'' SCHWARZ, Michigan  DENNIS MOORE, Kansas
MICHAEL T. MCCAUL, Texas
VACANCY
VACANCY
                            C O N T E N T S

                            October 20, 2005

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Sherwood L. Boehlert, Chairman, 
  Committee on Science, U.S. House of Representatives............    24
    Written Statement............................................    25

Statement by Representative Bart Gordon, Minority Ranking Member, 
  Committee on Science, U.S. House of Representatives............    26
    Written Statement............................................    27

Prepared Statement by Representative Vernon J. Ehlers, Chairman, 
  Subcommittee on Environment, Technology, and Standards, 
  Committee on Science, U.S. House of Representatives............    28

Prepared Statement by Representative Jerry F. Costello, Member, 
  Committee on Science, U.S. House of Representatives............    28

Prepared Statement by Representative Eddie Bernice Johnson, 
  Member, Committee on Science, U.S. House of Representatives....    29

Prepared Statement by Representative Michael M. Honda, Member, 
  Committee on Science, U.S. House of Representatives............    30

Prepared Statement by Representative Russ Carnahan, Member, 
  Committee on Science, U.S. House of Representatives............    30

Prepared Statement by Representative Sheila Jackson Lee, Member, 
  Committee on Science, U.S. House of Representatives............    30

Prepared Statement by Representative Brian Baird, Member, 
  Committee on Science, U.S. House of Representatives............    31

                               Witnesses:

Mr. Norman R. Augustine, Retired Chairman and CEO, Lockheed 
  Martin Corporation
    Oral Statement...............................................    33
    Written Statement............................................    36
    Biography....................................................    44

Dr. P. Roy Vagelos, Retired Chairman and CEO, Merck & Co.
    Oral Statement...............................................    44
    Written Statement............................................    46
    Biography....................................................    48

Dr. William A. Wulf, President, National Academy of Engineering
    Oral Statement...............................................    49
    Written Statement............................................    51
    Biography....................................................    53

Discussion.......................................................    54

             Appendix 1: Answers to Post-Hearing Questions

Responses on behalf of Norman R. Augustine, Retired Chairman and 
  CEO, Lockheed Martin Corporation; P. Roy Vagelos, Retired 
  Chairman and CEO, Merck & Co.; and, William A. Wulf, President, 
  National Academy of Engineering................................    72

             Appendix 2: Additional Material for the Record

Rising Above the Gathering Storm: Energizing and Employing 
  America for a Brighter Economic Future, National Academy of 
  Sciences, National Academy of Engineering, and Institute of 
  Medicine, February 2006........................................    77


        SCIENCE, TECHNOLOGY, AND GLOBAL ECONOMIC COMPETITIVENESS

                              ----------                              


                       THURSDAY, OCTOBER 20, 2005

                  House of Representatives,
                                      Committee on Science,
                                                    Washington, DC.

    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2318 of the Rayburn House Office Building, Hon. Sherwood L. 
Boehlert [Chairman of the Committee] presiding.



                            hearing charter

                          COMMITTEE ON SCIENCE

                     U.S. HOUSE OF REPRESENTATIVES

                    Science, Technology, and Global

                        Economic Competitiveness

                       thursday, october 20, 2005
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

1. Purpose

    On Thursday, October 20, 2005, the House Science Committee will 
hold a hearing to receive testimony on the report released by the 
National Academy of Sciences on October 12 entitled Rising Above the 
Gathering Storm: Energizing and Employing America for a Brighter 
Economic Future. The report, which was requested by Congress, 
recommends ways to strengthen research and education in science and 
technology.

2. Witnesses

Mr. Norman R. Augustine, Retired Chairman and CEO of the Lockheed 
Martin Corporation. Mr. Augustine chaired the National Academy of 
Sciences (NAS) committee that wrote the report.

Dr. P. Roy Vagelos, Retired Chairman and CEO of Merck & Co. Dr. Vagelos 
served on the NAS committee that wrote the report.

Dr. William A. Wulf, President of the National Academy of Engineering 
and Vice Chair of the National Research Council, the principal 
operating arm of the National Academies of Sciences and Engineering.

3. Overarching Questions

          What are the principal innovation-related challenges 
        the United States faces as it competes in the global economy?

          What specific steps should the Federal Government 
        take to ensure that the United States remains the world leader 
        in innovation?

4. Brief Overview

          While the U.S. continues to lead the world in 
        measures of innovation capacity--research and development (R&D) 
        spending, number of scientists and engineers, scientific 
        output, etc.--recent statistics on the level of U.S. support 
        for research relative to other countries indicate that this 
        lead may be slipping. Overall U.S. federal funding for R&D as a 
        percentage of gross domestic product (GDP) has declined 
        significantly since its peak in 1965, and the focus of this R&D 
        has shifted away from the physical sciences, mathematics, and 
        engineering--the areas of R&D historically most closely 
        correlated with innovation and economic growth.

          At the same time, other nations--particularly 
        emergent nations such as China and India--have recognized the 
        importance of innovation to economic growth, and are pouring 
        resources into their scientific and technological 
        infrastructure, rapidly building their innovation capacity and 
        increasing their ability to compete with the United States in 
        the global economy.

          In May 2005, at the request of Congress, the National 
        Academy of Sciences (NAS) began a study of ``the most urgent 
        challenges the United States faces in maintaining leadership in 
        key areas of science and technology.'' NAS assembled a high-
        level panel of senior scientists and business and university 
        leaders and produced a report in five months.

          The NAS report offers four broad recommendations: (A) 
        increase America's talent pool by vastly improving K-12 science 
        and mathematics education; (B) sustain and strengthen the 
        Nation's traditional commitment to long-term basic research; 
        (C) make the United States the most attractive setting in which 
        to study and perform research; and (D) ensure that the United 
        States is the premier place in the world to innovate. (The 
        executive summary of the NAS report is attached in Appendix A.)

          The NAS report also describes 20 explicit steps that 
        the Federal Government could take to implement its 
        recommendations. The report estimates the total cost of these 
        steps to be $9.2-$23.8 billion per year.

5. Summary of NAS Report

    In May of this year, Senators Lamar Alexander and Jeff Bingaman, 
Chairman of the Energy Subcommittee and Ranking Member of full Senate 
Committee on Energy and Natural Resources, respectively, asked the 
National Academy of Sciences (NAS) to conduct a study of ``the most 
urgent challenges the United States faces in maintaining leadership in 
key areas of science and technology.'' In June, Science Committee 
Chairman Sherwood Boehlert and Ranking Member Bart Gordon wrote to the 
NAS to endorse the Senate request for a study and suggest some 
additional specific questions (the text of the Senate and House letters 
are attached in Appendices B and C). The study was paid for out of 
internal Academy funds, and NAS released the report on October 12.
The Problem
    The NAS report begins by describing how science and engineering are 
critical to American prosperity. Technical innovations, such as 
electricity and information technology, have increased the productivity 
of existing industries and created new ones and improved the overall 
quality of life in the U.S. The report then examines how the U.S. is 
doing relative to other countries in science and technology today--
looking at indicators such as science and engineering publications, R&D 
investment, venture capital funding, and student proficiency levels--to 
see if the U.S. is positioned to make the next generation of 
innovations needed to maintain U.S. competitiveness and security going 
forward.
    ``Worrisome indicators'' outlined in the report\1\ include:
---------------------------------------------------------------------------
    \1\ See pages 18-19 of this charter for the pages of the NAS report 
that contain the sources for these statistics.

          The United States today is a net importer of high-
        technology products. Its share of global high-technology 
        exports has fallen in the last two decades from 30 percent to 
        17 percent, and its trade balance in high-technology 
        manufactured goods shifted from plus $33 billion in 1990 to a 
---------------------------------------------------------------------------
        negative $24 billion in 2004.

          In 2003, only three American companies ranked among 
        the top 10 recipients of patents granted by the United States 
        Patent and Trademark Office.

          In Germany, 36 percent of undergraduates receive 
        their degrees in science and engineering. In China, the figure 
        is 59 percent, and in Japan 66 percent. In the United States, 
        the corresponding figure is 32 percent.

          Fewer than one-third of U.S. 4th grade and 8th grade 
        students performed at or above a level called ``proficient'' in 
        mathematics (``proficiency'' was considered the ability to 
        exhibit competence with challenging subject matter). About one-
        third of the 4th graders and one-fifth of the 8th graders 
        lacked the competence to perform basic mathematical 
        computations.

    The NAS report concludes that education, research, and innovation 
are essential if the U.S. is to succeed in providing jobs for its 
citizenry.
Recommendations and Steps the Federal Government Should Take to 
        Implement Them
    The NAS report makes four recommendations, each of which is 
supported by explicit steps that the Federal Government could take to 
implement the recommendations. These recommendations and steps are 
provided verbatim below; more details on each step are available in the 
report executive summary in Appendix A.
            10,000 Teachers, 10 Million Minds and K-12 Science and 
                    Mathematics Education
    Recommendation A: Increase America's talent pool by vastly 
improving K-12 science and mathematics education.

    Implementation Steps:

          A-1: Annually recruit 10,000 science and mathematics 
        teachers by awarding four-year scholarships and thereby 
        educating 10 million minds.

          A-2: Strengthen the skills of 250,000 teachers 
        through training and education programs at summer institutes, 
        in Master's programs, and Advanced Placement and International 
        Baccalaureate (AP and IB) training programs and thus inspire 
        students every day.

          A-3: Enlarge the pipeline by increasing the number of 
        students who take AP and IB science and mathematics courses.

            Sowing the Seeds through Science and Engineering Research
    Recommendation B: Sustain and strengthen the Nation's traditional 
commitment to long-term basic research that has the potential to be 
transformational to maintain the flow of new ideas that fuel the 
economy, provide security, and enhance the quality of life.

    Implementation Steps:

          B-1: Increase the federal investment in long-term 
        basic research by 10 percent a year over the next seven years.

          B-2: Provide new research grants of $500,000 each 
        annually, payable over five years, to 200 of our most 
        outstanding early-career researchers.

          B-3: Institute a National Coordination Office for 
        Research Infrastructure to manage a centralized research 
        infrastructure fund of $500 million per year over the next five 
        years.

          B-4: Allocate at least eight percent of the budgets 
        of federal research agencies to discretionary funding.

          B-5: Create in the Department of Energy an 
        organization like the Defense Advanced Research Projects Agency 
        called the Advanced Research Projects Agency-Energy (ARPA-E).

          B-6: Institute a Presidential Innovation Award to 
        stimulate scientific and engineering advances in the national 
        interest.

            Best and Brightest in Science and Engineering Higher 
                    Education
    Recommendation C: Make the United States the most attractive 
setting in which to study and perform research so that we can develop, 
recruit, and retain the best and brightest students, scientists, and 
engineers from within the United States and throughout the world.

    Implementation Steps:

          C-1: Increase the number and proportion of U.S. 
        citizens who earn physical-sciences, life-sciences, 
        engineering, and mathematics Bachelor's degrees by providing 
        25,000 new four-year competitive undergraduate scholarships 
        each year to U.S. citizens attending U.S. institutions.

          C-2: Increase the number of U.S. citizens pursuing 
        graduate study in ``areas of national need'' by funding 5,000 
        new graduate fellowships each year.

          C-3: Provide a federal tax credit to encourage 
        employers to make continuing education available (either 
        internally or through colleges and universities) to practicing 
        scientists and engineers.

          C-4: Continue to improve visa processing for 
        international students and scholars.

          C-5: Provide a one-year automatic visa extension to 
        international students who receive doctorates or the equivalent 
        in science, technology, engineering, mathematics, or other 
        fields of national need at qualified U.S. institutions to 
        remain in the United States to seek employment. If these 
        students are offered jobs by U.S.-based employers and pass a 
        security screening test, they should be provided automatic work 
        permits and expedited residence status.

          C-6: Institute a new skills-based, preferential 
        immigration option.

          C-7: Reform the current system of ``deemed exports.''

            Incentives for Innovation and the Investment Environment
    Recommendation D: Ensure that the United States is the premier 
place in the world to innovate; invest in downstream activities such as 
manufacturing and marketing; and create high-paying jobs that are based 
on innovation by modernizing the patent system, realigning tax policies 
to encourage innovation, and ensuring affordable broadband access.

    Implementation Steps:

          D-1: Enhance intellectual property protection for the 
        21st century global economy.

          D-2: Enact a stronger research and development tax 
        credit to encourage private investment in innovation.

          D-3: Provide tax incentives for U.S.-based 
        innovation.

          D-4: Ensure ubiquitous broadband Internet access.

Costs of the Recommendations
    The NAS report provides a ``back of the envelope'' estimate of the 
annual cost to the Federal Government of each of the implementation 
steps that are recommended.

          For the three steps in Recommendation A (increase 
        America's talent pool by vastly improving K-12 science and 
        mathematics education): $1.5-$2.4 billion per year.

          For the six steps in Recommendation B (sustain and 
        strengthen the Nation's traditional commitment to long-term 
        basic research): $1.1-$3.4 billion per year.

          For the seven steps in Recommendation C (make the 
        United States the most attractive setting in which to study and 
        perform research): $1.6-$3.6 billion per year.

          For the four steps in Recommendation D (ensure that 
        the United States is the premier place in the world to 
        innovate): $5.1-$14.4 billion per year.

    The total cost of these steps would be $9.2-$23.8 billion per year.

6. Issues Related to Specific Recommendations in the NAS Report and 
                    Related Questions for the Witnesses

    In the invitation letter for the hearing, each of the witnesses was 
asked to answer questions about the three specific recommendations 
discussed below. These were major recommendations that seemed to call 
for further elaboration.
    Recommendation B-1: Increase the federal investment in long-term 
basic research by 10 percent a year over the next seven years: Numerous 
reports and groups in recent years have suggested doubling federal 
funding for basic research, as the NAS report recommends.\2\ (The 
authorization bill for the National Science Foundation the Congress 
passed in 2002 called for doubling that agency's budget, and Congress 
did double the budget of the National Institutes of Health over the 
past six years or so.) While these reports have included a rationale 
for increasing federal R&D spending, none has explained the reason why 
a specific level of spending needs to be achieved by a particular date. 
The U.S. currently spends $56 billion annually on non-defense R&D, more 
than the rest of the G-7 countries\3\ combined. Also, total R&D 
spending (government and industry) in the U.S. has remained relatively 
constant as a percentage of the U.S. gross domestic product, indicating 
that investment in R&D has grown as the U.S. economy has grown, begging 
the question of why increased federal investment is necessary. (This 
may be especially true if federal R&D is being invested in the same 
kinds of research as private R&D rather than in kinds of research, 
particularly basic research, that might otherwise be neglected.)
---------------------------------------------------------------------------
    \2\ For example, the U.S. Commission on National Security in the 
21st Century (the Hart-Rudman Commission, Phase III, 2001) recommended 
doubling the federal research and development budget by 2010.
    \3\ The six non-U.S. members of the G-7 are France, Great Britain, 
Germany, Japan, Italy and Canada.
---------------------------------------------------------------------------
    In addition, the NAS report argues that federal investment in basic 
research fuels economic growth by contributing new ideas that can 
eventually lead to commercial products. Yet recent surveys of industry 
suggest that companies' investments in R&D have had only a very limited 
impact on the success of the individual companies.\4\ What is true for 
individual companies is not necessarily true for nations as a whole; 
R&D may contribute greatly to the relative economic success of the U.S. 
as a whole, while not being so important to any individual company. 
(This would make sense. Nations stay ahead through innovation, but 
individual companies may have other comparative advantages.) But the 
company statistics and attitudes on R&D at least raise the question 
about whether the contribution of R&D to economic success is 
exaggerated, and how federal R&D investment contributes to overall 
economic success.
---------------------------------------------------------------------------
    \4\ Booz Allen Hamilton's Global Innovation 1,000 study was 
released on October 11, 2005 and is available on line at http://
www.boozallen.com. An example of their findings is that companies in 
the bottom 10 percent of R&D spending as a percentage of sales under-
perform competitors on gross margins, gross profit, operating profit, 
and total shareholder returns. However, companies in the top 10 percent 
showed no consistent performance differences compared to companies that 
spend less on R&D.
---------------------------------------------------------------------------
    Questions in the witness letters on this recommendation:

          How did the study panel arrive at the recommended 10 
        percent annual increase in federally-sponsored basic research 
        over the next seven years? What other options did the panel 
        consider and what led to the choice of 10 percent?

          Recent surveys of industry suggest that basic 
        research performed at universities and transformational 
        technological innovation have only a very limited impact on the 
        success of individual companies. Is the impact of research and 
        innovation different for the economy as a whole than it is for 
        individual companies?

    Recommendation B-4: Allocate at least eight percent of the budgets 
of federal research agencies to discretionary funding: A number of 
recent reports have expressed concern that the current grant selection 
system in most agencies shies away from daring proposals. The view is 
that when funding is tight (like now), researchers and the peer review 
system both tend to favor incremental research proposals--projects that 
are guaranteed to produce results--results that are generally in 
keeping with existing ideas. In this situation, high-risk research 
(especially that proposed by young investigators or involving 
interdisciplinary studies) can be underfunded or neglected entirely. 
The NAS report recommends that funding be set aside at federal research 
agencies (and distributed at program officers' discretion) for high-
risk, high-payoff research. While such research is valuable, so is the 
research that provides steady if incremental advances on existing 
scientific questions. In addition, not every agency is equally well 
equipped to solicit and select high-risk projects. Finally, even if 
setting aside such funding is a good idea, it's unclear whether eight 
percent is a reasonable amount.
    Questions in the witness letters on this recommendation:

          How did the study panel arrive at the recommended 
        eight percent allocation within each federal research agency's 
        budget to be managed at the discretion of technical program 
        managers to catalyze high-risk, high-payoff research? What 
        other options did the panel consider and what led to the choice 
        of eight percent?

    Recommendation B-5: Create in the Department of Energy an 
organization like the Defense Advanced Research Projects Agency called 
the Advanced Research Projects Agency-Energy (ARPA-E): The 
recommendation seems to assume that the main reason the U.S. has not 
made more progress in deploying technologies that use less energy or 
that use alternative energy sources is that the technology is not being 
developed. But numerous studies have concluded that the primary problem 
in energy technology is that existing advanced technologies never get 
deployed. These studies tend to recommend policy changes to encourage 
the deployment of advanced technologies, as opposed to recommending (or 
merely recommending) programs to develop new technologies. For example, 
a recent American Council for an Energy Efficient Economy study 
estimated that ``adopting a comprehensive set of policies for advancing 
energy efficiency could lower national energy use by 18 percent in 2010 
and 33 percent in 2020.'' \5\ Similarly, a 2001 NAS study on automotive 
fuel economy described numerous existing technologies that could reduce 
dependence on foreign oil, but are not yet deployed.
---------------------------------------------------------------------------
    \5\ Energy Efficiency Progress and Potential, American Council for 
an Energy-Efficient Economy, no date.
---------------------------------------------------------------------------
    In addition, it is not clear whether the DARPA analogy is entirely 
apt. DARPA funds advanced technologies that will eventually be used by 
the Pentagon. The government itself would not be the main purchaser of 
technologies developed by ARPA-E, so those technologies would still 
face existing problems in finding markets. It is also unclear how the 
research that would be supported by ARPA-E would differ from that 
already funded by the Department of Energy's current conservation and 
renewable energy research programs.
    Questions in the witness letters on this recommendation:

          Industry and government have both developed numerous 
        energy production and energy efficiency technologies that have 
        not been deployed. How did the study panel arrive at its 
        implicit conclusion that technology development is the greater 
        bottleneck (as opposed to policy) in developing energy systems 
        for a 21st century economy?

7. General Issues

Overall Federal Support for R&D
    The amount of the country's overall wealth devoted to federal R&D 
has declined significantly since the post-Sputnik surge in support for 
R&D. According to Office of Management and Budget statistics, in 1965, 
funding for federal R&D as a percentage of GDP (measured as outlays), 
also known as R&D intensity, was slightly over two percent (Chart 1). 
In 2005, it is estimated to be 1.07 percent.
    While this ratio has recently begun to increase again, turning 
upward over the last five years, the majority of those increases have 
gone toward short-term defense development and homeland security 
applications. For example, the Department of Defense (DOD) R&D 
increases alone--most of which have supported development projects that 
have very little impact on innovation or broader economic development--
has accounted for almost 70 percent of the overall R&D increases of the 
last five years. Of the remaining increases, 75 percent has gone to the 
National Institutes of Health (NIH) and the Department of Homeland 
Security (DHS). At $71 billion and $29 billion, respectively, the R&D 
budgets of DOD and NIH now account for over 75 percent of all federal 
R&D. Meanwhile, funding for the physical sciences and engineering--the 
areas historically most closely associated with innovation and economic 
growth--have been flat or declining for the last thirty years.
    Also, the long-term outlook for the federal budget does not favor 
future increases in discretionary spending (through which almost all 
R&D is funded). Absent major policy changes, the growth in mandatory 
federal spending--primarily for health and retirement benefits and 
payments on the national debt interest--will demand a significantly 
greater share of the government's resources.




Shift of Private Sector R&D
    During the heyday of the corporate research laboratory in the 
middle decades of the 20th century, U.S. corporate laboratories 
supported all stages of R&D, from knowledge creation to applied 
research to product development, and were quite successful in their 
efforts to nurture innovation. The most notable example of this was 
AT&T's Bell Laboratories, which grew to be one of the world premier 
research organizations of the last century, developing numerous 
breakthrough technologies that changed American life, including 
transistors, lasers, fiber-optics, and communications satellites. 
Researchers at Bell Labs and other corporate laboratories were eligible 
for, and received, grants from federal research agencies such as the 
National Science Foundation and DOD, but they received core support 
from the parent company and they conducted basic and applied research 
directed toward developing technology relevant to the company's 
business.
    While overall growth of industry-funded R&D has remained strong in 
recent years, the focus of this R&D has shifted significantly away from 
longer-term basic research in favor of applied research and development 
more closely tied to product development. Because of market demands 
from investors to capitalize on R&D quickly, large corporate 
laboratories of the Bell Labs model are increasingly rare (notable 
exceptions include companies such as IBM and GE). Instead, corporations 
now focus research projects almost exclusively on lower-risk, late-
stage R&D projects with commercial benefits, leaving the Federal 
Government as the predominant supporter of long-term basic research.
Increasing Competitiveness of Foreign Countries
    While trends of support for the innovation system in the U.S. have 
showed signs of slowing, other nations are committing significant new 
resources to building their science and technology enterprises. More 
than one-third of OECD (Organization for Economic Cooperation and 
Development) countries have increased government support for R&D by an 
average rate of over five percent annually since 1995. The European 
Union has recently established a target to achieve EU-wide R&D 
intensity of three percent of the EU economy by 2010. (By comparison, 
the current U.S. R&D intensity, public and private sector combined, is 
2.6 percent of GDP.) Similarly, individual nations, including South 
Korea, Germany, the U.K. and Canada, have recently pledged to increase 
R&D spending as a percentage of GDP.
    However, no nation has increased its support for innovation as 
dramatically as China. It has doubled its R&D intensity from 0.6 
percent of its GDP in 1995 to 1.2 percent in 2002 (this during a time 
of rapid GDP growth). R&D investments in China by foreign corporations 
have also grown dramatically, with U.S. investments alone increasing 
from just $7 million in 1994 to over $500 million in 2000. China is now 
the third largest performer of R&D in the world, behind only the U.S. 
and Japan.
    The increased innovation capacity of other countries is also 
becoming evident in output-based R&D benchmarks. For example, the U.S. 
share of science and engineering publications published worldwide 
declined from 38 percent in 1988 to 31 percent in 2001, while Western 
Europe and Asia's share increased from 31 to 36 percent and 11 to 17 
percent, respectively. Similar trends have occurred in the area of U.S. 
patent applications and citations in scientific journals.
Education and Workforce Issues
    While the supply and demand of future scientists and engineers is 
notoriously difficult to predict, most experts believe that the 
transition to a knowledge-based economy will demand an increased 
quality and quantity of the world's scientific and technical workforce. 
As is the case with R&D figures, trends in the distribution of the 
world's science and engineering workforce are also unfavorable to long-
term U.S. competitiveness.
    The world is catching up and even surpassing the U.S. in higher 
education and the production of science and engineering specialists. 
China now graduates four times as many engineering students as the 
U.S., and South Korea, which has one-sixth the population of the U.S., 
graduates nearly the same number of engineers as the U.S. Moreover, 
most Western European and Asian countries graduate a significantly 
higher percentage of students in science and engineering. At the 
graduate level, the statistics are even more pronounced. In 1966, U.S. 
students accounted for approximately 76 percent of world's science and 
engineering Ph.D.s. In 2000, they accounted for only 36 percent. In 
contrast, China went from producing almost no science and engineering 
Ph.D.s in 1975 to granting 13,000 Ph.D.s in 2002, of which an estimated 
70 percent were in science and engineering.
    Meanwhile, the achievement and interest levels of U.S. students in 
science and engineering are relatively low. According to the most 
recent international assessment, U.S. twelfth graders scored below 
average and among the lowest of participating nations in math and 
science general knowledge, and the comparative data of math and science 
assessment revealed a near-monopoly by Asia in the top scoring group 
for students in grades four and eight. These students are not on track 
to study college level science and engineering and, in fact, are 
unlikely ever to do so. Of the 25-30 percent of entering college 
freshmen with an interest in a science or engineering field, less than 
half complete a science or engineering degree in five years.
    All of this is happening as the U.S. scientific and technical 
workforce is about to experience a high rate of retirement. One quarter 
of the current science and engineering workforce is over 50 years old. 
At the same time, the U.S. Department of Labor projects that new jobs 
requiring science, engineering and technical training will increase 
four times higher than the average national job growth rate.
Industry Concerns and Reports
    Some leading U.S. businesses have become increasingly vocal about 
concerns that the U.S. is in danger of losing its competitive 
advantage. In an effort to call attention to these concerns, several 
industry organizations have independently produced reports specifically 
examining the new competitiveness challenge and recommending possible 
courses of action to address it. Prominent among these efforts is the 
National Innovation Initiative (NII), a comprehensive undertaking by 
industry and university leaders to identify the origins of America's 
innovation challenges and prepare a call to action for U.S. companies 
to ``innovate or abdicate.'' The December 2004 NII final report, 
Innovate America: Thriving in a World of Challenge and Change, is 
intended to serve as a roadmap for policy-makers, industry leaders, and 
others working to help America remain competitive in the world economy.
    Other industry associations that have also produced recent reports 
include AeA (formerly the American Electronics Association), the 
Business Roundtable, Electronic Industries Alliance, National 
Association of Manufacturers, and TechNet. While the companies and 
industry sectors represented by these organizations varies widely, one 
general recommendation was common to all of the reports: the Federal 
Government needs to strengthen and re-energize investments in R&D and 
science and engineering education. The Science Committee held a hearing 
on July 21, 2005 on U.S. Competitiveness: The Innovation Challenge to 
examine the issues raised in these reports and how federal science and 
engineering research and education investments impacts U.S. economic 
competitiveness.

Appendix A

Executive Summary of National Academy of Sciences Report, Rising Above 
 the Gathering Storm: Energizing and Employing America for a Brighter 
                            Economic Future

    The United States takes deserved pride in the vitality of its 
economy, which forms the foundation of our high quality of life, our 
national security, and our hope that our children and grandchildren 
will inherit ever-greater opportunities. That vitality is derived in 
large part from the productivity of well-trained people and the steady 
stream of scientific and technical innovations they produce. Without 
high-quality, knowledge-intensive jobs and the innovative enterprises 
that lead to discovery and new technology, our economy will suffer and 
our people will face a lower standard of living. Economic studies 
conducted before the information-technology revolution have shown that 
even then as much as 85 percent of measured growth in U.S. income per 
capita is due to technological change.\6\
---------------------------------------------------------------------------
    \6\ For example, work by Robert Solow and Moses Abramovitz 
published in the middle 1950s demonstrated that as much as 85 percent 
of measured growth in U.S. income per capita during the 1890-1950 
period could not be explained by increases in the capital stock or 
other measurable inputs. The big unexplained portion, referred to 
alternatively as the ``residual'' or ``the measure of ignorance,'' has 
been widely attributed to the effects of technological change.
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    Today, Americans are feeling the gradual and subtle effects of 
globalization that challenge the economic and strategic leadership that 
the United States has enjoyed since World War II. A substantial portion 
of our workforce finds itself in direct competition for jobs with 
lower-wage workers around the globe, and leading-edge scientific and 
engineering work is being accomplished in many parts of the world. 
Thanks to globalization, driven by modern communications and other 
advances, workers in virtually every sector must now face competitors 
who live just a mouse-click away in Ireland, Finland, China, India, or 
dozens of other nations whose economies are growing.

CHARGE TO THE COMMITTEE

    The National Academies was asked by Senator Lamar Alexander and 
Senator Jeff Bingaman of the Committee on Energy and Natural Resources, 
with endorsement by Representatives Sherwood Boehlert and Bart Gordon 
of the House Committee on Science, to respond to the following 
questions:

         What are the top 10 actions, in priority order, that federal 
        policy-makers could take to enhance the science and technology 
        enterprise so that the United States can successfully compete, 
        prosper, and be secure in the global community of the 21st 
        Century? What strategy, with several concrete steps, could be 
        used to implement each of those actions?

    The National Academies created the Committee on Prospering in the 
Global Economy of the 21st Century to respond to this request. The 
charge constitutes a challenge both daunting and exhilarating: to 
recommend to the Nation specific steps that can best strengthen the 
quality of life in America--our prosperity, our health, and our 
security. The committee has been cautious in its analysis of 
information. However, the available information is only partly adequate 
for the committee's needs. In addition, the time allotted to develop 
the report (10 weeks from the time of the committee's meeting to report 
release) limited the ability of the committee to conduct a thorough 
analysis. Even if unlimited time were available, definitive analyses on 
many issues are not possible given the uncertainties involved.
    This report reflects the consensus views and judgment of the 
committee members. Although the committee includes leaders in academe, 
industry, and government--several current and former industry chief 
executive officers, university presidents, researchers (including three 
Nobel prize winners), and former presidential appointees--the array of 
topics and policies covered is so broad that it was not possible to 
assemble a committee of 20 members with direct expertise in each 
relevant area. Because of those limitations, the committee has relied 
heavily on the judgment of many experts in the study's focus groups, 
additional consultations via email and telephone with other experts, 
and an unusually large panel of reviewers. Although other solutions are 
undoubtedly possible, the committee believes that its recommendations, 
if implemented, will help the United States achieve prosperity in the 
21st century.

FINDINGS

    Having reviewed trends in the United States and abroad, the 
committee is deeply concerned that the scientific and technical 
building blocks of our economic leadership are eroding at a time when 
many other nations are gathering strength. We strongly believe that a 
worldwide strengthening will benefit the world's economy--particularly 
in the creation of jobs in countries that are far less well-off than 
the United States. But we are worried about the future prosperity of 
the United States. Although many people assume that United States will 
always be a world leader in science and technology, this may not 
continue to be the case inasmuch as great minds and ideas exist 
throughout the world. We fear the abruptness with which a lead in 
science and technology can be lost--and the difficulty of recovering a 
lead once lost, if indeed it can be regained at all.
    This nation must prepare with great urgency to preserve its 
strategic and economic security. Because other nations have, and 
probably will continue to have, the competitive advantage of a low-wage 
structure, the United States must compete by optimizing its knowledge-
based resources, particularly in science and technology, and by 
sustaining the most fertile environment for new and revitalized 
industries and the well-paying jobs they bring. We have already seen 
that capital, factories, and laboratories readily move wherever they 
are thought to have the greatest promise of return to investors.

RECOMMENDATIONS

    The committee reviewed hundreds of detailed suggestions--including 
various calls for novel and untested mechanisms--from other committees, 
from its focus groups, and from its own members. The challenge is 
immense, and the actions needed to respond are immense as well.
    The committee identified two key challenges that are tightly 
coupled to scientific and engineering prowess: creating high-quality 
jobs for Americans and responding to the Nation's need for clean, 
affordable, and reliable energy. To address those challenges, the 
committee structured its ideas according to four basic recommendations 
that focus on the human, financial, and knowledge capital necessary for 
U.S. prosperity.
    The four recommendations focus on actions in K-12 education (10,000 
Teachers, 10 Million Minds), research (Sowing the Seeds), higher 
education (Best and Brightest), and economic policy (Incentives for 
Innovation) that are set forth in the following sections. Also provided 
are a total of 20 implementation steps for reaching the goals set forth 
in the recommendations.
    Some actions involve changes in the law. Others require financial 
support that would come from reallocation of existing funds or, if 
necessary, from new funds. Overall, the committee believes that the 
investments are modest relative to the magnitude of the return the 
Nation can expect in the creation of new high-quality jobs and in 
responding to its energy needs.

10,000 TEACHERS, 10 MILLION MINDS IN K-12 SCIENCE AND MATHEMATICS 
                    EDUCATION

    Recommendation A: Increase America's talent pool by vastly 
improving K-12 science and mathematics education.
Implementation Actions
    The highest priority should be assigned to the following actions 
and programs. All should be subjected to continuing evaluation and 
refinement as they are implemented:
    Action A-1: Annually recruit 10,000 science and mathematics 
teachers by awarding four-year scholarships and thereby educating 10 
million minds. Attract 10,000 of America's brightest students to the 
teaching profession every year, each of whom can have an impact on 
1,000 students over the life of their careers. The program would award 
competitive four-year scholarships for students to obtain Bachelor's 
degrees in the physical or life sciences, engineering, or mathematics 
with concurrent certification as K-12 science and mathematics teachers. 
The merit-based scholarships would provide up to $20,000 a year for 
four years for qualified educational expenses, including tuition and 
fees, and require a commitment to five years of service in public K-12 
schools. A $10,000 annual bonus would go to participating teachers in 
underserved schools in inner cities and rural areas. To provide the 
highest-quality education for undergraduates who want to become 
teachers, it would be important to award matching grants, perhaps $1 
million a year for up to five years, to as many as 100 universities and 
colleges to encourage them to establish integrated four-year 
undergraduate programs leading to Bachelor's degrees in science, 
engineering, or mathematics with teacher certification.

    Action A-2: Strengthen the skills of 250,000 teachers through 
training and education programs at summer institutes, in Master's 
programs, and Advanced Placement and International Baccalaureate (AP 
and IB) training programs and thus inspires students every day. Use 
proven models to strengthen the skills (and compensation, which is 
based on education and skill level) of 250,000 current K-12 teachers:

          Summer institutes: Provide matching grants to state 
        and regional one- to two-week summer institutes to upgrade as 
        many as 50,000 practicing teachers each summer. The material 
        covered would allow teachers to keep current with recent 
        developments in science, mathematics, and technology and allow 
        for the exchange of best teaching practices. The Merck 
        Institute for Science Education is a model for this 
        recommendation.

          Science and mathematics Master's programs: Provide 
        grants to universities to offer 50,000 current middle-school 
        and high-school science, mathematics, and technology teachers 
        (with or without undergraduate science, mathematics, or 
        engineering degrees) two-year, part-time Master's degree 
        programs that focus on rigorous science and mathematics content 
        and pedagogy. The model for this recommendation is the 
        University of Pennsylvania Science Teachers Institute.

          AP, IB, and pre-AP or pre-IB training: Train an 
        additional 70,000 AP or IB and 80,000 pre-AP or pre-IB 
        instructors to teach advanced courses in mathematics and 
        science. Assuming satisfactory performance, teachers may 
        receive incentive payments of up to $2,000 per year, as well as 
        $100 for each student who passes an AP or IB exam in 
        mathematics or science. There are two models for this program: 
        the Advanced Placement Incentive Program and Laying the 
        Foundation, a pre-AP program.

          K-12 curriculum materials modeled on world-class 
        standards: Foster high-quality teaching with world-class 
        curricula, standards, and assessments of student learning. 
        Convene a national panel to collect, evaluate, and develop 
        rigorous K-12 materials that would be available free of charge 
        as a voluntary national curriculum. The model for this 
        recommendation is the Project Lead the Way pre-engineering 
        courseware.

    Action A-3: Enlarge the pipeline by increasing the number of 
students who take AP and IB science and mathematics courses. Create 
opportunities and incentives for middle-school and high-school students 
to pursue advanced work in science and mathematics. By 2010, increase 
the number of students in AP and IB mathematics and science courses 
from 1.2 million to 4.5 million, and set a goal of tripling the number 
who pass those tests, to 700,000, by 2010. Student incentives for 
success would include 50 percent examination fee rebates and $100 mini-
scholarships for each passing score on an AP or IB mathematics and 
science examination.
    The committee proposes expansion of two additional approaches to 
improving K-12 science and mathematics education that are already in 
use:

          Statewide specialty high schools: Specialty secondary 
        education can foster leaders in science, technology, and 
        mathematics. Specialty schools immerse students in high-quality 
        science, technology, and mathematics education; serve as a 
        mechanism to test teaching materials; provide a training ground 
        for K-12 teachers; and provide the resources and staff for 
        summer programs that introduce students to science and 
        mathematics.

          Inquiry-based learning: Summer internships and 
        research opportunities provide especially valuable laboratory 
        experience for both middle-school and high-school students.

SOWING THE SEEDS THROUGH SCIENCE AND ENGINEERING RESEARCH

    Recommendation B: Sustain and strengthen the Nation's traditional 
commitment to long-term basic research that has the potential to be 
transformational to maintain the flow of new ideas that fuel the 
economy, provide security, and enhance the quality of life.
Implementation Actions
    Action B-1: Increase the federal investment in long-term basic 
research by 10 percent a year over the next seven years, through re-
allocation of existing funds\7\ or if necessary through the investment 
of new funds. Special attention should go to the physical sciences, 
engineering, mathematics, and information sciences and to Department of 
Defense (DOD) basic-research funding. This special attention does not 
mean that there should be a disinvestment in such important fields as 
the life sciences (which have seen growth in recent years) or the 
social sciences. A balanced research portfolio in all fields of science 
and engineering research is critical to U.S. prosperity. This 
investment should be evaluated regularly to realign the research 
portfolio--unsuccessful projects and venues of research should be 
replaced with emerging research projects and venues that have greater 
promise.
---------------------------------------------------------------------------
    \7\ The funds may come from anywhere in an agency, not just other 
research funds.

    Action B-2: Provide new research grants of $500,000 each annually, 
payable over five years, to 200 of our most outstanding early-career 
researchers. The grants would be made through existing federal research 
agencies--the National Institutes of Health (NIH), the National Science 
Foundation (NSF), the Department of Energy (DOE), DOD, and the National 
Aeronautics and Space Administration--to underwrite new research 
---------------------------------------------------------------------------
opportunities at universities and government laboratories.

    Action B-3: Institute a National Coordination Office for Research 
Infrastructure to manage a centralized research-infrastructure fund of 
$500 million per year over the next five years--through reallocation of 
existing funds or if necessary through the investment of new funds--to 
ensure that universities and government laboratories create and 
maintain the facilities and equipment needed for leading-edge 
scientific discovery and technological development. Universities and 
national laboratories would compete annually for these funds.

    Action B-4: Allocate at least eight percent of the budgets of 
federal research agencies to discretionary funding that would be 
managed by technical program managers in the agencies and be focused on 
catalyzing high-risk, high-payoff research.

    Action B-5: Create in the Department of Energy (DOE) an 
organization like the Defense Advanced Research Projects Agency (DARPA) 
called the Advanced Research Projects Agency-Energy (ARPA-E).\8\ The 
Director of ARPA-E would report to the Under Secretary for science and 
would be charged with sponsoring specific research and development 
programs to meet the Nation's long-term energy challenges. The new 
agency would support creative ``out-of-the-box'' transformational 
generic energy research that industry by itself cannot or will not 
support and in which risk may be high but success would provide 
dramatic benefits for the Nation. This would accelerate the process by 
which knowledge obtained through research is transformed to create jobs 
and address environmental, energy, and security issues. ARPA-E would be 
based on the historically successful DARPA model and would be designed 
as a lean and agile organization with a great deal of independence that 
can start and stop targeted programs on the basis of performance. The 
agency would itself perform no research or transitional effort but 
would fund such work conducted by universities, startups, established 
firms, and others. Its staff would turn over about every four years. 
Although the agency would be focused on specific energy issues, it is 
expected that its work (like that of DARPA or NIH) will have important 
spin-off benefits, including aiding in the education of the next 
generation of researchers. Funding for ARPA-E would start at $300 
million the first year and increase to $1 billion per year over 5-6 
years, at which point the program's effectiveness would be evaluated.
---------------------------------------------------------------------------
    \8\ One committee member, Lee Raymond, does not support this action 
item. He does not believe that ARPA-E is necessary as energy research 
is already well funded by the Federal Government, along with formidable 
funding of energy research by the private sector. Also, ARPA-E would 
put the Federal Government in the business of picking ``winning energy 
technologies''--a role best left to the private sector.

    Action B-6: Institute a Presidential Innovation Award to stimulate 
scientific and engineering advances in the national interest. Existing 
presidential awards address lifetime achievements or promising young 
scholars, but the proposed new awards would identify and recognize 
persons who develop unique scientific and engineering innovations in 
---------------------------------------------------------------------------
the national interest at the time they occur.

BEST AND BRIGHTEST IN SCIENCE AND ENGINEERING HIGHER EDUCATION

    Recommendation C: Make the United States the most attractive 
setting in which to study and perform research so that we can develop, 
recruit, and retain the best and brightest students, scientists, and 
engineers from within the United States and throughout the world.
Implementation Actions
    Action C-1: Increase the number and proportion of U.S. citizens who 
earn physical-sciences, life sciences, engineering, and mathematics 
Bachelor's degrees by providing 25,000 new four-year competitive 
undergraduate scholarships each year to U.S. citizens attending U.S. 
institutions. The Undergraduate Scholar Awards in Science, Technology, 
Engineering, and Mathematics (USA-STEM) would be distributed to states 
on the basis of the size of their congressional delegations and awarded 
on the basis of national examinations. An award would provide up to 
$20,000 annually for tuition and fees.

    Action C-2: Increase the number of U.S. citizens pursuing graduate 
study in ``areas of national need'' by funding 5,000 new graduate 
fellowships each year. NSF should administer the program and draw on 
the advice of other federal research agencies to define national needs. 
The focus on national needs is important both to ensure an adequate 
supply of doctoral scientists and engineers and to ensure that there 
are appropriate employment opportunities for students once they receive 
their degrees. Portable fellowships would provide funds of up to 
$20,000 annually directly to students, who would choose where to pursue 
graduate studies instead of being required to follow faculty research 
grants.

    Action C-3: Provide a federal tax credit to encourage employers to 
make continuing education available (either internally or though 
colleges and universities) to practicing scientists and engineers. 
These incentives would promote career-long learning to keep the 
workforce current in the face of rapidly evolving scientific and 
engineering discoveries and technological advances and would allow for 
retraining to meet new demands of the job market.

    Action C-4: Continue to improve visa processing for international 
students and scholars to provide less complex procedures and continue 
to make improvements on such issues as visa categories and duration, 
travel for scientific meetings, the technology-alert list, reciprocity 
agreements, and changes in status.

    Action C-5: Provide a one-year automatic visa extension to 
international students who receive doctorates or the equivalent in 
science, technology, engineering, mathematics, or other fields of 
national need at qualified U.S. institutions to remain in the United 
States to seek employment. If these students are offered jobs by United 
States-based employers and pass a security screening test, they should 
be provided automatic work permits and expedited residence status. If 
students are unable to obtain employment within one year, their visas 
would expire.

    Action C-6: Institute a new skills-based, preferential immigration 
option. Doctoral-level education and science and engineering skills 
would substantially raise an applicant's chances and priority in 
obtaining U.S. citizenship. In the interim, the number of H-1B\9\ visas 
should be increased by 10,000, and the additional visas should be 
available for industry to hire science and engineering applicants with 
doctorates from U.S. universities.
---------------------------------------------------------------------------
    \9\ The H-1B is a nonimmigrant classification used by an alien who 
will be employed temporarily in a specialty occupation of distinguished 
merit and ability. A specialty occupation requires theoretical and 
practical application of a body of specialized knowledge and at least a 
Bachelor's degree or its equivalent. For example, architecture, 
engineering, mathematics, physical sciences, social sciences, medicine 
and health, education, business specialties, accounting, law, theology, 
and the arts are specialty occupations. See http://uscis.gov/graphics/
howdoi/h1b.htm

    Action C-7: Reform the current system of ``deemed exports.'' \10\ 
The new system should provide international students and researchers 
engaged in fundamental research in the United States with access to 
information and research equipment in U.S. industrial, academic, and 
national laboratories comparable with the access provided to U.S. 
citizens and permanent residents in a similar status. It would, of 
course, exclude information and facilities restricted under national-
security regulations. In addition, the effect of deemed-exports 
regulations on the education and fundamental research work of 
international students and scholars should be limited by removing all 
technology items (information and equipment) from the deemed-exports 
technology list that are available for purchase on the overseas open 
market from foreign or U.S. companies or that have manuals that are 
available in the public domain, in libraries, over the Internet, or 
from manufacturers.
---------------------------------------------------------------------------
    \10\ The controls governed by the Export Administration Act and its 
implementing regulations extend to the transfer of technology. 
Technology includes ``specific information necessary for the 
`development,' `production,' or `use' of a product'' [emphasis added]. 
Providing information that is subject to export controls--for example, 
about some kinds of computer hardware--to a foreign national within the 
United States may be ``deemed'' an export, and that transfer requires 
an export license. The primary responsibility for administering 
controls on deemed exports lies with the Department of Commerce, but 
other agencies have regulatory authority as well.

INCENTIVES FOR INNOVATION AND THE INVESTMENT ENVIRONMENT

    Recommendation D: Ensure that the United States is the premier 
place in the world to innovate; invest in downstream activities such as 
manufacturing and marketing; and create high-paying jobs that are based 
on innovation by modernizing the patent system, realigning tax policies 
to encourage innovation, and ensuring affordable broadband access.
Implementation Actions
    Action D-1: Enhance intellectual-property protection for the 21st 
century global economy to ensure that systems for protecting patents 
and other forms of intellectual property underlie the emerging 
knowledge economy but allow research to enhance innovation. The patent 
system requires reform of four specific kinds:

          Provide the Patent and Trademark Office sufficient 
        resources to make intellectual-property protection more timely, 
        predictable, and effective.

          Reconfigure the U.S. patent system by switching to a 
        ``first-inventor-to-file'' system and by instituting 
        administrative review after a patent is granted. Those reforms 
        would bring the U.S. system into alignment with patent systems 
        in Europe and Japan.

          Shield research uses of patented inventions from 
        infringement liability. One recent court decision could 
        jeopardize the long-assumed ability of academic researchers to 
        use patented inventions for research.

          Change intellectual-property laws that act as 
        barriers to innovation in specific industries, such as those 
        related to data exclusivity (in pharmaceuticals) and those 
        which increase the volume and unpredictability of litigation 
        (especially in information-technology industries).

    Action D-2: Enact a stronger research and development tax credit to 
encourage private investment in innovation. The current Research and 
Experimentation Tax Credit goes to companies that increase their 
research and development spending above a base amount calculated from 
their spending in prior years. Congress and the administration should 
make the credit permanent,\11\ and it should be increased from 20 
percent to 40 percent of the qualifying increase so that the U.S. tax 
credit is competitive with that of other countries. The credit should 
be extended to companies that have consistently spent large amounts on 
research and development so that they will not be subject to the 
current de facto penalties for previously investing in research and 
development.
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    \11\ The current R&D tax credit expires in December 2005.

    Action D-3: Provide tax incentives for United States-based 
innovation. Many policies and programs affect innovation and the 
Nation's ability to profit from it. It was not possible for the 
committee to conduct an exhaustive examination, but alternatives to 
current economic policies should be examined and, if deemed beneficial 
to the United States, pursued. These alternatives could include changes 
in overall corporate tax rates, provision of incentives for the 
purchase of high-technology research and manufacturing equipment, 
treatment of capital gains, and incentives for long-term investments in 
innovation. The Council of Economic Advisers and the Congressional 
Budget Office should conduct a comprehensive analysis to examine how 
the United States compares with other nations as a location for 
innovation and related activities with a view to ensuring that the 
United States is one of the most attractive places in the world for 
long-term innovation-related investment. From a tax standpoint, that is 
---------------------------------------------------------------------------
not now the case.

    Action D-4: Ensure ubiquitous broadband Internet access. Several 
nations are well ahead of the United States in providing broadband 
access for home, school, and business. That capability will do as much 
to drive innovation, the economy, and job creation in the 21st century 
as did access to the telephone, interstate highways, and air travel in 
the 20th century. Congress and the administration should take action--
mainly in the regulatory arena and in spectrum management--to ensure 
widespread affordable broadband access in the near future.

CONCLUSION

    The committee believes that its recommendations and the actions 
proposed to implement them merit serious consideration if we are to 
ensure that our nation continues to enjoy the jobs, security, and high 
standard of living that this and previous generations worked so hard to 
create. Although the committee was asked only to recommend actions that 
can be taken by the Federal Government, it is clear that related 
actions at the State and local levels are equally important for U.S. 
prosperity, as are actions taken by each American family. The United 
States faces an enormous challenge because of the disadvantage it faces 
in labor cost. Science and technology provide the opportunity to 
overcome that disadvantage by creating scientists and engineers with 
the ability to create entire new industries--much as has been done in 
the past.
    It is easy to be complacent about U.S. competitiveness and pre-
eminence in science and technology. We have led the world for decades, 
and we continue to do so in many research fields today. But the world 
is changing rapidly, and our advantages are no longer unique. Without a 
renewed effort to bolster the foundations of our competitiveness, we 
can expect to lose our privileged position. For the first time in 
generations, the Nation's children could face poorer prospects than 
their parents and grandparents did. We owe our current prosperity, 
security, and good health to the investments of past generations, and 
we are obliged to renew those commitments in education, research, and 
innovation policies to ensure that the American people continue to 
benefit from the remarkable opportunities provided by the rapid 
development of the global economy and its not inconsiderable 
underpinning in science and technology.

                       SOME WORRISOME INDICATORS

          When asked in spring 2005 what is the most attractive 
        place in the world in which to ``lead a good life,'' \1\ 
        respondents in only one of the 16 countries polled (India) 
        indicated the United States.
---------------------------------------------------------------------------
    \1\ Interview asked nearly 17,000 people the question: ``Supposed a 
young person who wanted to leave this country asked you to recommend 
where to go to lead a good life--what country would you recommend ?'' 
Except for respondents in India, Poland, and Canada, no more than one-
tenth of the people in the other nations said they would recommend the 
United States. Canada and Australia won the popularity contest. Pew 
Global Attitudes Project, July 23, 2005.

          For the cost of one chemist or one engineer in the 
        United States, a company can hire about five chemists in China 
        or 11 engineers in India.\2\
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    \2\ The Web site http://www.payscale.com/about.asp tracks and 
compares pay scales in many countries. Ron Hira, of Rochester Institute 
of Technology, calculates average salaries for engineers in the United 
States and India as $70,000 and $13,580, respectively.

          For the first time, the most capable high-energy 
        particle accelerator on Earth will, beginning in 2007, reside 
        outside the United States.\3\
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    \3\ CERN, http://public.web.cern.ch/Public/Welcome.html.

          The United States is today a net importer of high-
        technology products. Its share of global high-technology 
        exports has fallen in the last two decades from 30 percent to 
        17 percent, and its trade balance in high-technology 
        manufactured goods shifted from plus $33 billion in 1990 to a 
        negative $24 billion in 2004.\4\
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    \4\ For 2004, the dollar value of high-technology imports was $560 
billion; the value of high-technology exports was $511 billion. See 
Appendix Table 6-01 of National Science Board's Science and Engineering 
Indicators 2004.

          Chemical companies closed 70 facilities in the United 
        States in 2004 and have tagged 40 more for shutdown. Of 120 
        chemical plants being built around the world with price tags of 
        $1 billion or more, one is in the United States and 50 in 
        China.\5\
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    \5\ ``No Longer The Lab Of The World: U.S. chemical plants are 
closing in droves as production heads abroad,'' Business Week (May 2, 
2005).

          Fewer than one-third of U.S. 4th grade and 8th grade 
        students performed at or above a level called ``proficient'' in 
        mathematics; ``proficiency'' was considered the ability to 
        exhibit competence with challenging subject matter. Alarmingly, 
        about one-third of the 4th graders and one-fifth of the 8th 
        graders lacked the competence to perform basic mathematical 
        computations.\6\
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    \6\ National Center for Education Statistics, Trends in 
International Mathematics and Science Study, 2003, http://nces.ed.gov/
timss.

          U.S. 12th graders recently performed below the 
        international average for 21 countries on a test of general 
        knowledge in mathematics and science. In addition, an advanced 
        mathematics assessment was administered to U.S. students who 
        were taking or had taken precalculus, calculus, or Advanced 
        Placement calculus and to students in 15 other countries who 
        were taking or had taken advanced mathematics courses. Eleven 
        nations outperformed the United States, and four countries had 
        scores similar to the U.S. scores. No nation scored 
        significantly below the United States.\7\
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    \7\ Data are from National Science Board. 2004. Science and 
Engineering Indicators 2004 (NSB 04-01). Arlington, VA: National 
Science Foundation. Chapter 1.

          In 1999, only 41 percent of U.S. 8th grade students 
        received instruction from a mathematics teacher who specialized 
        in mathematics, considerably lower than the international 
        average of 71 percent.\8\
---------------------------------------------------------------------------
    \8\ Data are from National Science Board. 2004. Science and 
Engineering Indicators 2004 (NSB 04-01). Arlington, VA: National 
Science Foundation. Chapter 1.

          In one recent period, low-wage employers, such as 
        Wal-Mart (now the Nation's largest employer) and McDonald's, 
        created 44 percent of the new jobs, while high-wage employers 
        created only 29 percent of the new jobs.\9\
---------------------------------------------------------------------------
    \9\ Roach, Steve. More Jobs, Worse Work. New York Times. July 22, 
2004.

          In 2003, only three American companies ranked among 
        the top 10 recipients of patents granted by the United States 
        Patent and Trademark Office.\10\
---------------------------------------------------------------------------
    \10\ U.S. Patent and Trademark Office, Preliminary list of top 
patenting organizations. 2003, http://www.uspto.gov/web/offices/ac/ido/
oeip/taf/top03cos.htm.

          In Germany, 36 percent of undergraduates receive 
        their degrees in science and engineering. In China, the figure 
        is 59 percent, and in Japan 66 percent. In the United States, 
        the corresponding figure is 32 percent.\11\
---------------------------------------------------------------------------
    \11\ Data are from National Science Board. 2004. Science and 
Engineering Indicators 2004 (NSB 04-01). Arlington, VA: National 
Science Foundation, Appendix Table 2-33.

          The United States is said to have 10.5 million 
        illegal immigrants, but under the law the number of visas set 
        aside for ``highly qualified foreign workers'' dropped to 
        65,000 a year from its 195,000 peak.\12\
---------------------------------------------------------------------------
    \12\ Colvin, Geoffrey. 2005. ``America isn't ready.'' Fortune 
Magazine, July 25. H-1B visas allow employers to have access to highly 
educated foreign professionals who have experience in specialized 
fields and who have at least Bachelor's degree or the equivalent. The 
cap does not apply to educational institutions. In November 2004, 
Congress created an exemption for 20,000 foreign nationals earning 
advanced degrees from U.S. universities. See Immigration and 
Nationality Act Section 101(a)(15)(h)(1)(b).

          In 2004, China graduated over 600,000 engineers, 
        India 350,000, and America about 70,000.\13\
---------------------------------------------------------------------------
    \13\ Geoffrey Colvin. 2005. ``America isn't ready.'' Fortune 
Magazine, July 25.

          In 2001 (the most recent year for which data are 
        available), U.S. industry spent more on tort litigation than on 
        R&D.\14\
---------------------------------------------------------------------------
    \14\ U.S. research and development spending in 2001 was $273.6 
billion, of which industry performed $194 billion, and funded about 
$184 billion. (National Science Board Science and Engineering 
Indicators 2004). One estimate of tort litigation costs in the United 
States was $205 billion in 2001. (Leonard, Jeremy A. 2003. How 
Structural Costs Imposed on U.S. Manufacturers Harm Workers and 
Threaten Competitiveness. Prepared for the Manufacturing Institute of 
the National Association of Manufacturers. http://www.nam.org/s--nam/
bin.asp?CID=216&DID=227525&DOC=FILE.PDF.









    Chairman Boehlert. The hearing will come to order.
    Before we start the official part of today's hearing, I 
would like to take a moment to recognize a real person to 
illustrate the importance of the issues we are going to be 
discussing today. Neela Thangada, who is in the audience today. 
Neela, would you please stand?
    Just yesterday, she won the Discovery Channel Young 
Scientist Challenge. She got into the finals of this contest by 
doing an individual project on plant cloning and won by 
demonstrating leadership, teamwork, and scientific problem-
solving on a series of experiments related to forces of nature, 
a very timely thing for this year's contest. Now let me point 
out that Neela is 14. She is in the seventh grade. What she is 
doing is so exciting. She is accompanied by her mom. Where is 
mom, Neela? You know, when I first met Neela, this is not as a 
politician, this is just an observation, I didn't know which 
one was the student and which one was the mom. Mom, please 
stand and be recognized. I want to thank you for the guidance 
you are providing.
    Neela is what this whole hearing is about and what the 
whole Augustine report is about, so we are so pleased to see 
you, and thank you for joining us.
    It is a pleasure to welcome everyone here this morning for 
our hearing on the new and vitally important National Academy 
report, ``Rising Above the Gathering Storm.'' This report is 
already getting an unusual amount of media coverage, and how 
refreshing that is to have the media concentrating on something 
that is not sensational but is critically important, a tribute, 
in part, to the reputations and work of our witnesses here 
today, and that is helping to jump-start, and in other 
quarters, to intensify, a national discussion on research and 
education and the Nation's future.
    The overarching message of the report is simple and clear, 
and it is one the Congress had better heed. And the message is 
this: complacency will kill us. ``Where there is no vision, the 
people perish.'' If the United States rests on its withering 
laurels in the competitive world, we will witness the slow 
erosion of our preeminence, our security, and our standard of 
living. That is a very sobering message. We used to be so far 
ahead of everybody else in the global enterprise that when we 
looked around, we couldn't even find a person in second place. 
Now we can't even take a nanosecond to look over our shoulder, 
because they are breathing down our neck.
    It is a message that this committee has been trying to send 
for many, many years, and now, joined by Chairman Wolf of the 
Appropriations Committee and some of our other friends over 
there who get it, indeed this committee has pressed, sometimes 
successfully and, unfortunately, sometimes not, for many of the 
specific proposals in the Academy report. So Mr. Augustine, you 
guys are really helping us, and I appreciate it.
    We have authorized increased spending on basic research, 
including funding for research equipment and for more daring 
and cross-disciplinary research, and we have created programs 
like the Noyce Scholarships to try to attract more top students 
into teaching. And Neela, consider teaching as a career, will 
you please? And like Tech Talent to get more students who 
express interest in science, math, and engineering to complete 
majors in those fields.
    We have pushed for greater funding for the education 
directorate at the National Science Foundation and for the 
basic and applied research programs at the Department of 
Energy.
    But clearly, we haven't done enough. We have all of the 
zeal of the most fervent missionary, and we are trying, but we 
haven't done enough, and we haven't succeeded nearly as much as 
we would like. That is why the Augustine report helps this. 
Science programs still have to scrounge around for every 
additional cent. Young scientists still have to beg for funds. 
Our education system is still producing too many students who 
can not compete with our counterparts around the world. And the 
Federal Government is still ignoring our fundamental energy 
problems while wasting money pandering to special interests.
    So I urge our witnesses today, who are among the most 
prominent and respected leaders in the Nation, to redouble your 
efforts to get the word out about this report. We need a lot 
more missionary work, especially in this era of fiscal 
constraint. While Congress turns its attention to fixing the 
immediate problems caused by the literal storms that have hit 
our coasts, we can't skimp on the funds needed to address the 
gathering storm described so starkly in your report.
    There is an exchange in a Hemingway novel in which one 
character asks another how he went bankrupt. He answers, ``Two 
ways. First gradually and then suddenly.'' As a nation, we are 
gradually going bankrupt now in the ways described in the 
Academy report. If we don't act, we are going to wake up one 
day and find ourselves suddenly unable to compete.
    I look forward to further guidance this morning on exactly 
what we should do to compete. And I hope we will have a 
spirited discussion about the details of the Academy report 
recommendations. But as we argue about the specifics, and it 
won't be so much an argument, it will be sort of a debate, I 
hope we can all come away with an open and even greater 
commitment to address the problems that the report lays before 
us.
    [The prepared statement of Chairman Boehlert follows:]
          Prepared Statement of Chairman Sherwood L. Boehlert
    It's a pleasure to welcome everyone here this morning for our 
hearing on the new and vitally important National Academy report 
``Rising Above the Gathering Storm.'' This report is already getting an 
unusual amount of media coverage--a tribute, in part, to the 
reputations and work of our witnesses today--and that is helping to 
jump-start (and in other quarters, to intensify) a national discussion 
on research and education and the Nation's future.
    The overarching message of the report is simple and clear, and it's 
one the Congress had better heed. And the message is this: complacency 
will kill us. If the United States rests on its withering laurels in 
this competitive world, we will witness the slow erosion of our 
preeminence, our security and our standard of living. It's a sobering 
message.
    It's also a message that this committee has been trying to send for 
many years, now joined by Chairman Wolf and some of our other friends 
on Appropriations. Indeed, this committee has pressed--sometimes 
successfully, sometimes not--for many of the specific proposals in the 
Academy report.
    We have authorized increased spending on basic research, including 
funding for research equipment and for more daring and cross-
disciplinary research; and we have created programs like the Noyce 
Scholarships to try to attract more top students into teaching, and 
like Tech Talent to get more students who express interest in science, 
math and engineering to complete majors in those fields.
    We have pushed for greater funding for the education directorate at 
the National Science Foundation (NSF) and for the basic and applied 
research programs at the Department of Energy.
    But we clearly haven't done nearly enough. Science programs still 
have to scrounge around for every additional cent; young scientists 
still have to beg for funds; our education system is still producing 
too many students who cannot compete with their counterparts around the 
world; and the Federal Government is still ignoring our fundamental 
energy problems while wasting money pandering to special interests.
    So I urge our witnesses today--who are among the most prominent and 
respected leaders in this nation--to redouble your efforts to get the 
word out about this report. We need a lot more missionary work, 
especially in this era of fiscal constraint. While Congress turns its 
attention to fixing the immediate problems caused by the literal storms 
that have hit our coasts, we can't skimp on the funds needed to address 
the ``gathering storm'' described so starkly in your report.
    There's an exchange in a Hemingway novel in which one character 
asks another how he went bankrupt. He answers, ``Two ways. First 
gradually and then suddenly.'' As a nation, we're gradually going 
bankrupt now in the ways described in the Academy report. If we don't 
act, we're going to wake up one day and find ourselves ``suddenly'' 
unable to compete.
    I look forward to getting further guidance this morning on exactly 
what we should do to compete, and I hope we have a spirited discussion 
about the details of your recommendations. But as we argue about the 
specifics, I hope we can all come away with an even greater commitment 
to address the problems this report lays before us.

    Chairman Boehlert. With that, it is a pleasure to turn to 
my partner in this venture, the Ranking Member from Tennessee, 
Mr. Gordon.
    Mr. Gordon. Thank you, Mr. Chairman.
    Let me, once again, concur with your statements and also 
say that I have witnessed firsthand your passion for these 
issues. You are a leader in the area, and I appreciate working 
with you on it.
    Let me also thank the Committee for the work you have done, 
Mr. Augustine. Once again, you have done a tremendous service 
for the country.
    And let me say this, without diminishing what you have 
done. To a great extent, what you have done is just rehash what 
we already knew and brought it together from different sources. 
There is not a lot new here, and I don't mean that as--I mean, 
I think it is good that we have brought it together. I think 
that it is good that we can look to your report and say these 
are leaders in academia, with the private sector, and hopefully 
get us more energy in trying to accomplish something here. But 
again, as our Chairman has pointed out, this committee has 
passed many of these things already.
    And so really, what I would like to hear you talk a little 
bit about is how do we get the private sector, and what do you 
intend to do to help implement these proposals. I mean, again, 
you know, we have to have more energy. Clearly, what we are 
doing is not enough. And I would like to hear something about 
that.
    The other thing that I noted reading through this report is 
that, with the exception of talking about R&D credits, there 
really wasn't much said about the private sector in this area. 
Now maybe you didn't think that was your charge, but I think 
the charge said what are some federal policies that deal with 
it. The R&D credit is one of those. And I pose this question 
that I would like to hear more about. There seems to be a 
growing disparity between top level CEO and other kind of 
salaries and the salaries of others in those companies in 
relationship to other countries. And is this leading us to a 
situation where those top executives are so pushed because of 
this type of compensation that they have to be so quarterly 
oriented to having results that the private sector is not doing 
its part in R&D? And is there some, I mean, I guess, one, is 
this accurate? And if it is not, then that is fine. If it is 
accurate, then is there a federal role in somehow trying to 
encourage looking beyond the quarter? Looking beyond. I mean, 
right now folks, in two or three years, can make all of the 
money they can spend the rest of their life. So you know, as 
long as they keep the stock up, why should I worry about five 
years from now? Why should I make these investments?
    Again, if I am wrong, I would like to know.
    The other thing is in your statement, and it was $10 
billion, I hate to say, is a modest amount of money, but it is 
not, I think in terms of investment and in terms of our budget, 
it is a reasonable amount of money to spend. And you are 
talking about how we need to reallocate. We can get part of 
this by reallocating some funds within, I guess, our current 
budget. But I didn't see the section about what to allocate and 
what were those specifically. So if you have some suggestions 
in addition to reallocate, which ones we should reallocate, I 
would like to hear that today.
    So with that in mind, again, I want to thank you. This is 
an important document. This is a document that we all need to 
wave and that we all need to charge forward with. It is 
important to our kids and our grandkids. So I thank you for it.
    Again, my questions did not try to diminish what you did 
but to try to take this a step farther.
    Thank you.
    [The prepared statement of Mr. Gordon follows:]
            Prepared Statement of Representative Bart Gordon
    I want to join Chairman Boehlert in welcoming everyone to this 
morning's hearing.
    I also want to thank our distinguished panel for not only taking 
the time to appear before us today, but for their time and effort in 
preparing this report.
    The title of this report, ``Rising Above the Gathering Storm: 
Energizing and Employing America for a Brighter Economic Future,'' 
summarizes the challenge before us.
    There is a general uncertainty about our country's future economic 
prospects and a desire for guidance on how to move forward. I think 
that the report provided by the Panel takes some steps towards 
providing that guidance.
    A few disturbing facts from the report jumped out at me:

         The large wage disparity between U.S.-based scientists and 
        engineers and their competitors in China and India; and

         The 110 chemical facilities that have closed or are slated for 
        closure in the U.S. coupled with the 120 large chemical plants 
        currently under construction globally--one new plant in the 
        U.S. and 50 in China.

         China is producing more than 600,000 engineers per year.

    As the report notes, ``Thanks to globalization, workers in 
virtually every sector must now face competitors who live just a mouse-
click away, . . .'' I'm left wondering where will the good high-paying 
jobs be for the next generation--in the U.S. or in some other country.
    The report outlines a number of specific actions we can take to 
improve the innovation environment in the U.S. Many of these 
recommendations are familiar to us because they are what the Science 
Committee has advocated in legislation.
    For example, substantial increases in funding for NSF and the 
Office of Science at DOE. In the area of science education, the 
Committee has authorized scholarships for math, science and engineering 
students to obtain teaching certificates as well as the math and 
science partnership program to improve the training of new teachers.
    There seems to be a broad consensus on what the U.S. should be 
doing, but the Administration has not followed through in its funding 
requests.
    This report highlights that our current federal R&D investment 
strategies are not up to meeting the global competitive paradigm of the 
21st century. The recommendations represent a challenge to the 
Administration and to Congress to take action now.
    I am interested about one of the Panel's statements which is that 
some of its recommendations ``require funds that would ideally come 
from the re-allocation of existing funds.'' What is not identified is 
what funds should be re-allocated or why. I hope our witnesses will 
provide some more detail into the Panel's thinking.
    We can all agree that more R&D will result in more innovation, but 
one issue not addressed by this report is will it really generate more 
and better jobs in the U.S.? Or will the exploitation of these 
innovations quickly move to countries with lower cost labor?
    I hope the panel has some thoughts on how to ensure that the 
development of new technologies leads to the creation of new jobs in 
the U.S. One only has to look at most types of consumer electronics--
the history of VCR technology as an example--to see that we have often 
lost the economic payoff from technology invented here.
    In closing, it seems that we understand the challenges we face and 
we have agreement on how to address these challenges. What is lacking 
is the political will to make the investment.
    I would like to point out that his report represents a consensus of 
panelists representing business, academic, and education leaders. I 
would challenge the Panel to press the Administration and Congress to 
fund their recommendations. As a nation, we cannot afford not to.

    [The prepared statement of Mr. Ehlers follows:]
         Prepared Statement of Representative Vernon J. Ehlers
    I am delighted with the Academy for producing this report, and am 
pleased that the Committee is taking the time to delve into the 
report's recommendations and proposed implementation.
    For many years, I have stressed the need to increase our national 
investment in fundamental research and education. Despite passing an 
authorization bill to double the budget of the National Science 
Foundation (NSF) by 2008, we are still falling very short of that goal 
set by Congress in 2002. Each year, the chasm between the authorization 
and appropriation broadens, while at the same time the NSF education 
budget continues to diminish. But today there are an increasing number 
of voices joining the chorus recognizing the need for change. The 
voices are louder and clearer as the message begins to unify: build our 
science, technology, engineering and math skills, and we will maintain 
the strength and competitiveness of the United States. Business, 
industry and academic leaders are all drawing attention to the 
connection between our prosperity and a technically-skilled workforce. 
As we see the indications that our science and math education is 
slipping, we are jeopardizing our quality of life and national 
security, especially for our children and grandchildren. Without 
bolstering our science and technology infrastructure, we cannot expect 
these trends to change.
    There are many challenging questions raised by the report; it will 
take the strong dedication of the Committee and Chair to share these 
recommendations with a variety of stakeholders. I thank the witnesses 
today for their good work, and encourage them and the others they 
represent to continue to publicize this problem and lobby Members of 
Congress to make national competitiveness a priority through their 
strong support of fundamental research and education. I commend the 
witnesses for being here today, and look forward to continuing to work 
with you to not only share your report recommendations, but to actively 
seek solutions.

    [The prepared statement of Mr. Costello follows:]
         Prepared Statement of Representative Jerry F. Costello
    Good morning. I want to thank the witnesses for appearing before 
our committee to discuss the report released by the National Academy of 
Sciences (NAS) on October 12, 2005 entitled, Rising Above the Gathering 
Storm: Energizing and Employing America for a Brighter Economic Future. 
I commend Chairman Boehlert and Ranking Member Gordon for holding this 
hearing today because the recommendations this report issued will 
provide our committee with good policy options to explore to ensure new 
ideas and innovation.
    In June of this year, Chairman Boehlert and Ranking Member Gordon 
wrote to NAS to endorse the Senate request for a study of ``the most 
urgent challenges the United States faces in maintaining leadership in 
key areas of science and technology,'' to provide advice and 
recommendations for maintaining U.S. leadership in science and 
technology in the face of growing global competition. Today, Americans 
are feeling the effects of globalization because a substantial portion 
of our workforce finds itself in direct competition for jobs with 
lower-wage workers around the globe. It comes as no surprise that high-
tech jobs are being out-sourced to foreign countries like China and 
India. Without high-quality, knowledge intensive jobs and the 
innovative enterprises that lead to discovery and new technology, our 
economy will suffer and our constituents will face a lower standard of 
living. I am very concerned about the issue of off-shoring and out-
sourcing and how these trends will affect current scientists and 
engineers, as well as the future employment opportunities and career 
choices of students.
    A few months ago, Ranking Member Gordon and I hosted our first in a 
series of several bipartisan roundtable discussions to frame what is 
known and unknown about supply and demand for the Science and 
Technology workforce, outline factors that influence supply and demand, 
and explore policy options. From the first Roundtable, we learned that 
it is difficult to determine how many jobs we have lost because we do 
not have sufficient or accurate data on the problem. I believe we have 
to raise awareness of this issue--the federal research and development 
budget--in order to keep high wage science and engineering jobs here in 
the U.S.
    Despite claims to the contrary by the Administration, the Federal 
R&D budget is not faring well, particularly the non-defense component 
which has been flat for 30 years. In FY06, the Administration proposed 
a 1.4 percent spending reduction in the federal science and technology 
budget. Reductions like this continue to chip away at the U.S. research 
base and jeopardize our economic strength and long-term technological 
competitiveness. Innovation does indeed drive our economic growth, but 
we must have the knowledge base to drive innovation. Encouraging more 
children in careers in math and science is a needed start but only the 
beginning. We must do better in understanding the global competition 
facing our science and engineering workforce.
    I hope this hearing will draw us closer to an answer of how we can 
ensure the U.S. benefits from innovation, compete with foreign 
scientists and engineers without lowering salaries, increase funding 
for basic research in the physical sciences and engineering, and 
improve teacher recruitment and retention so we can increase student 
interest levels and their knowledge and understanding of these valuable 
subjects.
    I welcome our panel of witnesses and look forward to their 
testimony.

    [The prepared statement of Ms. Johnson follows:]
       Prepared Statement of Representative Eddie Bernice Johnson
    Thank you, Mr. Chairman and Ranking Member.
    The United States has slashed its federal investment in scientific 
research. In 1965, in the Sputnik era, funding for federal research and 
development as a percentage of gross domestic product was slightly over 
two percent. In 2005, it is estimated to be 1.07 percent.
    As a result, scientists are not getting the money they need and are 
pursuing alternative careers. Young people see the trend and opt not to 
study science.
    Meanwhile, other nations have ramped up their technical 
infrastructure and workforce. The National Academies' recent report on 
the United States and global competitiveness found that in Germany, 36 
percent of undergraduates receive their degrees in science and 
engineering. In China, the figure is 59 percent, and in Japan 66 
percent. In the United States, the corresponding figure is 32 percent.
    I concur that these are ``worrisome indicators'' indeed. Our 
competitiveness is quietly slipping. We are a net importer of high 
technology products, and soon we will be a net importer of people with 
high technology expertise.
    I am glad the National Academies published this report and hope the 
leadership of this Congress will act on these recommendations. Progress 
is expensive, but decay is intolerable.

    [The prepared statement of Mr. Honda follows:]
         Prepared Statement of Representative Michael M. Honda
    Chairman Boehlert and Ranking Member Gordon, I thank you for 
holding this important hearing today and for requesting that the study 
``Rising Above the Gathering Storm: Energizing and Employing America 
for a Brighter Economic Future'' be undertaken.
    This report makes a many good recommendations in a number of areas. 
In the area of education, for example, it suggests that we should 
recruit new science and math teachers, that we should strengthen the 
skills of teachers the math, science, and engineering subject areas, 
and we increase the number of students who take math and science 
courses.
    But what I do not see in the recommendations troubles me. What I 
think is missing is the idea of teaching innovation.
    I'm worried that if we simply try to produce a bunch of new 
scientists and engineers with the same skills as the ones who are 
unemployed back home in my district today, things aren't going to get 
any better here. China and India will be able to produce more 
scientists and engineers than us, and if they are paid less, work will 
still be done overseas.
    We have been lucky in the past that a few people who were innately 
innovative and inventive also had enough knowledge in math and science 
to make breakthroughs in these areas that started entirely new 
industries. Skilled scientists and engineers have been able to sustain 
incremental progress in these new industries, but the pressure from 
other nations is growing ever greater.
    While some people are simply blessed with the special skills of 
innovation and invention and they have prospered in the past, we need 
to realize that these skills are teachable and bring them into our 
curriculum. An MIT-Lemelson/NSF study on invention recognized this and 
suggested incorporating innovation into our curriculum, and Singapore's 
Minister of Education has begun to make such changes to his own 
country's curriculum to prepare his country for the future.
    I hope that the witnesses will address this shortcoming of their 
report during the hearing, and that the Committee will pay attention to 
this important issue in the future.

    [The prepared statement of Mr. Carnahan follows:]
           Prepared Statement of Representative Russ Carnahan
    Mr. Chairman and Mr. Ranking Member, thank you for again bringing 
this important issue to our attention in the Science Committee.
    For years, the U.S. has felt the backlash of an increasingly 
competitive global market, most sharply felt in the loss of jobs as 
they shift overseas. I applaud the effort to look beyond the problems 
and causes associated with competing in a global marketplace and to 
look toward solutions.
    It is our duty as leaders of this nation to wisely consider options 
and vigorously advocate for the right changes. Our workforce, and thus 
many of our constituents' livelihoods, depend on it.
    Mr. Augustine, Dr. Vagelos, and Dr. Wulf, thank you for your 
efforts with this report and for appearing before us today. I look 
forward to hearing your testimony.

    [The prepared statement of Ms. Jackson Lee follows:]
        Prepared Statement of Representative Sheila Jackson Lee
    Mr. Chairman, let me first thank you for holding this important 
hearing regarding the recent report published by the National Academy 
of Sciences. I would also like to thank our witnesses, Mr. Augustine, 
Dr. Vagelos, and Dr. Wulf, for being here today.
    The report being presented to us today highlights what is becoming 
more and more apparent in recent years, that the United States is 
losing footing as the dominant knowledge, innovation, and business 
center of the world; our policies are resulting in the deterioration of 
our economy. As highlighted in the testimony, an overwhelming amount of 
evidence points to this. Students today are less prepared to face the 
global market than they once were, and foreign students are becoming 
more and more prepared. The most glaring statistic to me contained in 
the testimony was that in 2003, foreign students earned almost 60 
percent of engineering doctorates awarded in U.S. universities!
    Our children today are not being given the tools necessary to 
compete in the world of tomorrow. We are not giving them the proper 
training, the proper teachers or incentive to succeed. This is an issue 
that must cross party lines and rest at the heart of all Americans 
because this is about the future strength of our nation. We became the 
world's greatest economic power through innovation and education, and 
today we must renew that challenge to push the boundaries of discovery.
    The importance of a strong scientific and technological enterprise 
is a primary factor in driving economic growth. Substantial and 
sustained U.S. investments in research and education over the last 50 
years spawned an abundance of technological breakthroughs that 
transformed American society and helped the U.S. to become the world's 
dominant economy. Economists estimate that these technological advances 
have been responsible for half of U.S. economic growth since the end of 
World War II. The relationship between innovation and economic growth 
has only grown in recent years as the world shifts to an increasingly 
knowledge-based economy. In an age where information travels around the 
world at previously unimaginable speeds, the United States must 
continue to stay steps ahead of everyone else. This means that status 
quo policies on education will not work.
    At the same time, other nations--particularly emerging nations such 
as China and India--have recognized the importance of science and 
technology to economic growth, and are pouring resources into their 
scientific and technological infrastructure, rapidly building their 
human capital and dramatically increasing their ability to compete with 
U.S. businesses on the world stage.
    As was mentioned in the testimony, there unfortunately will not be 
a Sputnik-like event, where the United States gets a powerful wakeup 
call. Instead, our decline in competitiveness is occurring slowly, and 
from a combination of many factors. The foundation our mothers and 
fathers laid for us slowly crumbles around us. This is why I find this 
hearing to be so important. We as the Federal Government must ensure 
that our nation does not lag behind in innovation and discovery. We 
must ensure that our children are properly prepared to face the 
increasingly challenging global market. Finally, we must continue to 
ensure that we in the United States continue to be the Nation that sets 
the bar for everyone else.
    I would again like to thank our witnesses for being here today, and 
I look forward to an open and enlightened conversation on the powerful 
suggestions made in this report.

    [The prepared statement of Mr. Baird follows:]
            Prepared Statement of Representative Brian Baird
    Mr. Chairman, I would like to thank you and Ranking Member Gordon 
for raising importance to the issue of math and science education as it 
relates to scientific and technological competitiveness. I would also 
like to thank the witnesses--Mr. Augustine, Dr. Vagelos, and Dr. Wulf--
for testifying today on the recently released National Academy of 
Sciences report entitled, ``Rising Above the Gathering Storm: 
Energizing and Employing America for a Brighter Economic Future.'' One 
of the recommendations made in this report is to vastly improve K-12 
math and science education. I could not agree more. This should be one 
of the highest priorities of the Federal and State governments and I 
look forward to reviewing the testimony of our witnesses and the 
specific recommendations from this report to translate these 
recommendations into Congressional action.
    With the topic of today's discussion centering around science 
competitiveness, it could not be more appropriate to honor a guest 
visiting the Committee today, as she can speak directly to the 
importance of a quality science education--and she can do so quite well 
I might add. This honoree is Neela Thangada, the winner of the 
Discovery Channel Young Scientist Challenge, and her mother, Mrudula 
Rao Thangada. Neela was named ``Top Young Scientist'' at an awards 
ceremony yesterday evening for her project, ``Effects of Various 
Nutrient Concentrations on the Cloning of the Eye of the Solanum 
Tuberosum at Multiple Stages'' or, in laymen's terms, she set out to 
explore potato cloning.
    I had the chance to meet with her and her mother before the 
hearing, and was impressed with her enthusiasm for science and 
discovery and her ability to effectively speak about her research. She 
is indeed an incredible young lady.
    Her trip to the House Science Committee today from her home in 
Texas was the result of an important public-private partnership 
initiated by the Discovery Channel. Every year since 1999, Discovery 
has launched the competition in partnership with Science Service to 
nurture the next generation of American scientists at a critical age 
when interest in science begins to decline. The cutting-edge 
competition gives 40 of the Nation's top middle school students the 
opportunity to demonstrate their scientific know-how and push the 
limits of their knowledge in the quest for the title of America's ``Top 
Young Scientist of the Year.''
    More than 9,500 middle school students have formally entered the 
Challenge since its inception, and these students are drawn from an 
initial pool of 75,000 students annually. Previous winners have 
attained more than $500,000 in scholarship awards and participated in 
science-related trips that have taken them to the far corners of the 
globe, from the Galapagos Islands to the Ukraine.
    This year's finalists traveled to Washington, D.C., to compete in 
team-based, interactive challenges designed around the theme of 
``Forces of Nature.'' In the wake of the recent natural disasters that 
ravaged the Gulf Coast of the United States and Southeast Asia, each 
student faced simulated challenges--from fog banks to hurricanes to 
tsunamis--that utilized their broad range of knowledge in order to 
understand the implications and scope of natural disasters.
    Public-private partnerships such as these exist to challenge and 
engage our students and we must continue to support such programs. 
However, we must also better prepare and inspire our math and science 
teachers to provide the highest-quality education for all students 
throughout the country. We can start by implementing some of the 
recommendations laid out here today.

    Chairman Boehlert. Thank you very much.
    And you will notice the similarity in theme between, you 
know, this is not a division. The center of this committee 
separating the Democrats from the Republicans doesn't separate 
us at all on the importance of the subject matter today. This 
is something that Mr. Gordon and I and every single Member of 
this committee, on both sides, believe passionately in and 
work, we think, hopefully, effectively on. And that is why we 
welcome what you bring to the table. And we want to give it as 
much attention as possible.
    I would suggest that this probably, if we are looking on 
the grand scheme of things on the Hill today of what is going 
on, there is probably no more important discussion than the one 
we are having right here. And quite frankly, it doesn't have a 
lot of sex appeal for a lot of the media. And so we don't get a 
lot of coverage. I don't care if they print what I say, but I 
darn sure care about printing what you guys are going to say to 
us. That message has to get out.
    And the other observation I would make, and we have had it 
in private conversations, but I will make it again for the 
official record, I know that some of the captains of industry, 
in circles you travel, you know and they know and we know that 
we have got to do better. And in the polite conversation we 
have at these various functions, they will talk about such 
needs as getting back to the basics of greatly improving K-12 
science and math education. There is no more basic building 
block for the foundation of the future development of this 
nation than that. And they will talk to me all of the time 
about it. Some of the great names in the captains of industry 
will talk to me about that. And then they will talk to me about 
the importance of our investment in long-range research, about 
how magnificent the National Science Foundation is, sponsoring 
university-based research, and why we need young scholars like 
I have been privileged to introduce here today to inspire them 
to greater heights. And I say to them, ``You know what?'' I 
have told these guys, ``You people have got more lobbyists 
running around this Hill, high-priced lobbyists who know what 
they are doing, and they are very smart, and they are very 
effective, and they knock on the door and they come in. You 
know, they don't come in to talk to me about the importance of 
K-12 science and math education or investing more in the 
science enterprise. They are in to discuss the latest tweaking 
needed in the tax policy or the adjustment necessary for trade 
policy. They are thinking of the moment and the bottom line for 
the next quarterly statement.'' And I understand that. But 
there is never enough time to get to the second part of their 
agenda, which is what we are discussing today.
    So that is why I think this is very important, and that is 
why I applaud what you have done, and so does Mr. Gordon. I 
mean, we have had conversation about your work, and boy, we 
couldn't be happier. And we just want to try to--we are going 
to play the role of dentist this morning and sort of pull from 
you some new ideas on what we can do beyond the report, because 
this town is filled with reports that have gone on for years 
and the libraries of the various Committee rooms and offices 
have reports that are gathering dust. They read them initially 
and say, ``Oh, what a great report,'' and then go on to the 
next thing and never go back to look at the report.
    I pledge to you, and I think I can do it for both of us, 
that we are going to follow through, because some of the things 
that you have mentioned here we are already doing, but we are 
nickel-and-diming the issue. We have got to make some 
substantial investments, and it is an investment that is going 
to pay handsome dividends.
    With that, let me present our distinguished panel.
    Mr. Norman Augustine, Retired Chairman and CEO, Lockheed 
Martin Corporation. Mr. Augustine is a frequent visitor to this 
committee and to Capitol Hill and has served in so many 
capacities in government and in the private sector with great 
distinction. Dr. P. Roy Vagelos, Retired Chairman and CEO, 
Merck & Company. And Doctor, you are preceded by your 
reputation, and we thank you for the great work you are doing. 
And a dear friend of long standing who is constant counsel for 
this committee, Dr. William Wulf, President of the National 
Academy of Engineering.
    Every day, what good comes from government usually comes 
because government has the common sense, to work with leaders 
in the private sector to interact and to be guided and to 
develop an agenda that offers some positive approaches to some 
thorny problems. And we have before us three people who are 
always there to propose workable solutions. And for that, we 
are eternally grateful.
    With that, let me say the general rule, and you know the 
ground rules, is don't get nervous when the light comes on, but 
we would ask that you summarize your opening statement. And I'm 
not even going to put an arbitrary time limit on it, because 
this is so important and you are the only panel. And we will go 
right to it.
    With that, Mr. Chairman, the floor is yours.

STATEMENT OF MR. NORMAN R. AUGUSTINE, RETIRED CHAIRMAN AND CEO, 
                  LOCKHEED MARTIN CORPORATION

    Mr. Augustine. Well, thank you, Mr. Chairman, and Members 
of the Committee. And I thank you in particular for all of your 
efforts in this area in the past--really, it was by virtue of 
your committee and your colleagues in the Senate that gave us 
the opportunity to take on our study. And we, all 20 members, I 
can assure you, feel very compassionate about the topic.
    Also, I would like to congratulate Neela. My 
congratulations and ours. She is an example to why we are here.
    I would, Mr. Chairman, with your permission, like to submit 
a longer statement for the record and brief----
    Chairman Boehlert. Without objection, your entire statement 
will appear in the record. And summarize it in any manner you 
think is appropriate.
    Mr. Augustine. Thank you very much.
    The thrust of our committee's findings are fairly 
straightforward. They would begin by saying that we conclude 
that individuals' prosperity, the prosperity of individuals, 
depends very heavily upon the quality of the jobs they can 
hold. And collectively, our prosperity depends very heavily on 
the tax revenues that our government can acquire, which, in 
turn, depend upon the quality of the jobs our citizens can 
hold. So quality jobs are at the root of our discussions.
    But there has been a major change brought about by 
technology largely in this scenario. That change some people 
refer to as the ``death of distance''. And it has been brought 
about by the advent of advanced information processing, storage 
and transmissions that have made those functions almost free in 
today's world. What that means is that jobs that used to have 
to be performed by people who are in near proximity to their 
work or to each other now can be performed by people all around 
the world. And that, in turn, means that Americans, when they 
compete for jobs, will no longer compete with their neighbors. 
They will compete with people throughout the globe. And that is 
true not only at the so-called lower end of the job spectrum, 
it will be true throughout the job spectrum. This is in a world 
where there are three billion new capitalists who have appeared 
in the last 15 years since the end of the Cold War.
    The United States operates at a considerable disadvantage 
today in this competition for jobs. You could--I was in Vietnam 
recently. You could hire 20 assembly workers for the minimum 
U.S. wage. In India today, you could hire 11 engineers for the 
cost of one in the United States. And they are very good 
engineers. Many of them trained at our universities.
    And as I said, few jobs are safe. Today, if you go to many 
hospitals in this country and have a CAT scan or an X-ray, 
there is a fair chance it will be read by a physician in 
Bangalore. Similarly, there is an office very near to where we 
are now that, if you go in their building, they have a flat 
screen on the wall, and their receptionist there very 
pleasantly helps you find the person you are supposed to go see 
and controls access to the building. She is in Bangalore. I am 
sure you are familiar with many other examples of this type.
    Is this not good that the rest of the world is prospering? 
And our committee's conclusion is a resounding yes. It will 
make the world safer. It will create more customers for our 
products, and it will create less costly products for our 
consumers. But as with all times of tectonic changes, there are 
likely to be winners, and there are likely to be losers. And 
our committee's goal is to help assure that America will be 
among the winners.
    There is an enigma, and your quote from Hemingway, Mr. 
Chairman, summarizes it better than I am able to do it. But we 
are in an environment where we are not likely to see sudden 
warnings such as we had on 9/11, Pearl Harbor, Sputnik. It is 
more like the proverbial frog being gradually boiled. Thomas 
Friedman has summarized by saying, in his great book ``The 
World is Flat,'' globalization has ``accidentally made Beijing, 
Bangalore, and Bethesda next door neighbors.'' And indeed, when 
it comes to seeking a job, those jobs are just a mouse click 
away to many people throughout the world.
    We operate at a severe disadvantage in the labor cost area, 
but there are other indicators that are not particularly good, 
either. One of the things that has been keeping us going, as 
this committee knows so well, in the area of science, has been 
the number of very talented foreign-born individuals who have 
chosen to come to America and live and work here. Today, 38 
percent of the Ph.D.s in America working in science and 
technology are foreign-born. Fifty-nine percent of last year's 
doctorates in engineering were foreign students, and that is at 
U.S. universities.
    But if you look at how we are doing ourselves with our 
native-born population, a recent test of mathematical 
understanding among about tenth grade students conducted in 
various nations of the world, the United States was in 27th 
place.
    This sort of thing is propagating into the industrial world 
where last year U.S. chemical companies closed 70 plants in the 
United States. They have earmarked 40 more to close. At the 
same time, there are 120 new chemical plants being built in the 
world, each with a price tag of $1 billion or more. Of those, 
one is in the United States and 50 are in China.
    U.S. companies now spend more money on litigation and 
related costs than they spend on research and development, Mr. 
Gordon, to your point. These are trends that we can not long 
survive. And as we know, once you lose your lead in R&D, it 
takes a very long time to recover it, if, indeed, one can at 
all.
    The committee that we assembled through the auspices of the 
National Academies included 20 members, four or five CEOs or 
former CEOs of Fortune 100 companies, three nobel laureates, 
presidents of five or six major universities, several former 
presidential appointees, as far as I know, from both parties. 
We didn't ask that question. And they, as you said, Mr. 
Chairman, with regard to your committee, come together in a 
spirit of unanimity on each of the issues that we have 
discussed.
    I will close my opening remarks by indicating that we have 
provided four recommendations. They tend to be rather broad. We 
have backed them with 20 quite specific implementing actions, 
things you can go do, some of which you are doing, some of 
which we do need to do more of.
    Of the four general recommendations, the one that all 20 of 
us agree is the highest priority, is to fix the K-12 science 
and technology education system in this country, public 
education. Secondly is to put more money into basic research in 
specific fields, namely into the physical sciences, 
mathematics, engineering, and computer sciences. This should be 
done not to disinvest in the health and biological sciences, 
which are very important, but they have just seen a period of 
major investment. Thirdly, to encourage more students to study 
math and science and engineering and to make it easier to 
attract foreign students to study and stay in our country in 
those fields. And then lastly, to create an environment that 
makes the United States an attractive place for innovation that 
will attract companies from abroad as well as our own companies 
to invest here rather than abroad.
    So with that opening, I will turn to my colleagues and 
thank you for this opportunity. And we look forward to your 
questions.
    [The prepared statement of Mr. Augustine follows:]
               Prepared Statement of Norman R. Augustine

Mr. Chairman and Members of the Committee,

    Thank you for this opportunity to appear before you on behalf of 
the National Academies' Committee on Prospering in the Global Economy 
of the 21st Century. As you know, our effort was sponsored by the 
National Academy of Sciences, National Academy of Engineering and 
Institute of Medicine (collectively known as the National Academies). 
The National Academies were chartered by Congress in 1863 to advise the 
government on matters of science and technology.
    The Academies were requested by Senator Alexander and Senator Jeff 
Bingaman, members of the Senate Committee on Energy and Natural 
Resources to conduct an assessment of America's ability to compete and 
prosper in the 21st century--and to propose appropriate actions to 
enhance the likelihood of success in that endeavor. This request was 
endorsed by Representatives Sherwood Boehlert and Bart Gordon of the 
House Committee on Science.
    To respond to that request the Academies assembled 20 individuals 
with diverse backgrounds, including university presidents, CEOs, Nobel 
Laureates and former presidential appointees. The result of our 
committee's work was examined by over forty highly qualified reviewers 
who were also designated by the Academies. In undertaking our 
assignment we considered the results of a number of prior studies which 
were conducted on various aspects of America's future prosperity. We 
also gathered sixty subject-matter experts with whom we consulted for a 
weekend here in Washington and who provided recommendations related to 
their fields of specialty.
    It is the unanimous view of our committee that America today faces 
a serious and intensifying challenge with regard to its future 
competitiveness and standard of living. Further, we appear to be on a 
losing path. We are here today hoping both to elevate the Nation's 
awareness of this developing situation and to propose constructive 
solutions.
    The thrust of our findings is straightforward. The standard of 
living of Americans in the years ahead will depend to a very large 
degree on the quality of the jobs that they are able to hold. Without 
quality jobs our citizens will not have the purchasing power to support 
the standard of living which they seek, and to which many have become 
accustomed; tax revenues will not be generated to provide for strong 
national security and health care; and the lack of a vibrant domestic 
consumer market will provide a disincentive for either U.S. or foreign 
companies to invest in jobs in America.
    What has brought about the current situation? The answer is that 
the prosperity equation has a new ingredient, an ingredient that some 
have referred to as ``The Death of Distance.'' In the last century, 
breakthroughs in aviation created the opportunity to move people and 
goods rapidly and efficiently over very great distances. Bill Gates has 
referred to aviation as the ``World Wide Web of the 20th century.'' In 
the early part of the present century, we are approaching the point 
where the communication, storage and processing of information are 
nearly free. That is, we can now move not only physical items 
efficiently over great distances, we can also transport information in 
large volumes and at little cost.
    The consequences of these developments are profound. Soon, only 
those jobs that require near-physical contact among the parties to a 
transaction will not be opened for competition from job seekers around 
the world. Further, with the end of the Cold War and the evaporation of 
many of the political barriers that previously existed throughout the 
world, nearly three billion new, highly motivated, often well educated, 
new capitalists entered the job market.
    Suddenly, Americans find themselves in competition for their jobs 
not just with their neighbors but with individuals around the world. 
The impact of this was initially felt in manufacturing, but soon 
extended to the development of software and the conduct of design 
activities. Next to be affected were administrative and support 
services. Today, ``high end'' jobs, such as professional services, 
research and management, are impacted. In short, few jobs seem 
``safe'':

          U.S. companies each morning receive software that was 
        written in India overnight in time to be tested in the U.S. and 
        returned to India for further production that same evening--
        making the 24-hour workday a practicality.

          Back-offices of U.S. firms operate in such places as 
        Costa Rica, Ireland and Switzerland.

          Drawings for American architectural firms are 
        produced in Brazil.

          U.S. firm's call centers are based in India--where 
        employees are now being taught to speak with a mid-western 
        accent.

          U.S. hospitals have X-rays and CAT scans read by 
        radiologists in Australia and India.

          At some McDonald's drive-in windows orders are 
        transmitted to a processing center a thousand miles away 
        (currently in the U.S.), where they are processed and returned 
        to the worker who actually prepares the order.

          Accounting firms in the U.S. have clients tax returns 
        prepared by experts in India.

          Visitors to an office not far from the White House 
        are greeted by a receptionist on a flat screen display who 
        controls access to the building and arranges contacts--she is 
        in Pakistan.

          Surgeons sit on the opposite side of the operating 
        room and control robots which perform the procedures. It is not 
        a huge leap of imagination to have highly-specialized, world-
        class surgeons located not just across the operating room but 
        across the ocean.

    As Tom Friedman concluded in The World is Flat, globalization has 
``accidentally made Beijing, Bangalore and Bethesda next door 
neighbors.'' And the neighborhood is one wherein candidates for many 
jobs which currently reside in the U.S. are now just a ``mouse-click'' 
away.
    How will America compete in this rough and tumble global 
environment that is approaching faster than many had expected? The 
answer appears to be, ``not very well''--unless we do a number of 
things differently from the way we have been doing them in the past.
    Why do we reach this conclusion? One need only examine the 
principal ingredients of competitiveness to discern that not only is 
the world flat, but in fact it may be tipping against us.
    One major element of competitiveness is, of course, the cost of 
labor. I recently traveled to Vietnam, where the wrap rate for low-
skilled workers is about twenty-five cents per hour, about one-
twentieth of the U.S. minimum wage. And the problem is not confined to 
the so-called ``lower-end'' of the employment spectrum. For example, 
five qualified chemists can be hired in India for the cost of just one 
in America. Given such enormous disadvantages in labor cost, we cannot 
be satisfied merely to match other economies in those other areas where 
we do enjoy strength; rather we must excel . . . markedly.
    The existence of a vibrant domestic market for products and 
services is another important factor in determining our nation's 
competitiveness, since such a market helps attract business to our 
shores. But here, too, there are warning signs: Goldman Sachs analysts 
project that within about a decade, fully 80 percent of the world's 
middle-income consumers will live in nations outside the currently 
industrialized world.
    The availability of financial capital has in the past represented a 
significant competitive advantage for America. But the mobility of 
financial capital is legion, as evidenced by the willingness of U.S. 
firms to move factories to Mexico, Vietnam and China if a competitive 
advantage can be derived by doing so. Capital, as we have observed, 
crosses geopolitical borders at the speed of light.
    Human capital--the quality of our work force--is a particularly 
important factor in our competitiveness. Our public school system 
comprises the foundation of this asset. But as it exists today, that 
system compares, in the aggregate, abysmally with those of other 
developed--and even developing--nations . . . particularly in the 
fields which underpin most innovation: science, mathematics and 
technology.
    Of the utmost importance to competitiveness is the availability of 
knowledge capital--``ideas.'' And once again, scientific research and 
engineering applications are crucial. But knowledge capital, like 
financial capital, is highly mobile. There is one major difference: 
being first-to-market, by virtue of access to new knowledge, can be 
immensely valuable, even if by only a few months. Craig Barrett, a 
member of our committee and Chairman of Intel, points out that 90 
percent of the products his company delivers on December 31st did not 
even exist on January 1st of that same year. Such is the dependence of 
hi-tech firms on being at the leading edge of scientific and 
technological progress.
    There are of course many other factors influencing our nation's 
competitiveness. These include patent processes, tax policy and 
overhead costs--such as health care, regulation and litigation--all of 
which tend to work against us today. On the other hand, America's 
version of the Free Enterprise System has proven to be a powerful 
asset, with its inherent aggressiveness and discipline in introducing 
new ideas and flushing out the obsolescent. But others have now 
recognized these virtues and are seeking to emulate our system.
    But is it not a good thing that others are prospering? Our 
committee's answer to that question is a resounding ``yes.'' Broadly 
based prosperity can make the world more stable and safer for all; it 
can make less costly products available for American consumers; it can 
provide new customers for the products we produce here. Yet it is 
inevitable that there will be relative winners and relative losers--and 
as the world prospers, we should seek to assure that America does not 
fall behind in the race.
    The enigma is that in spite of all these factors, America seems to 
be doing quite well just now. Our nation has the highest R&D investment 
intensity in the world. We have indisputably the finest research 
universities in the world. California alone has more venture capital 
than any nation in the world other than the United States. Two million 
jobs were created in America in the past year alone, and citizens of 
other nations continue to invest their savings in America at a 
remarkable rate. Total household net worth is now approaching $50 
trillion.
    The reason for this prosperity is that we are reaping the benefits 
of past investments--many of them in the fields of science and 
technology. But the early indicators of future prosperity are generally 
heading in the wrong direction. Consider the following:

          For the cost of one engineer in the United States, a 
        company can hire 11 in India.

          America has been depending heavily on foreign-born 
        talent. Thirty-eight percent of the scientists and engineers in 
        America holding doctorates were born abroad. Yet, when asked in 
        the spring of 2005, what are the most attractive places in the 
        world in which to live, respondents in only one of the 
        countries polled indicated the U.S.A.

          Chemical companies closed seventy facilities in the 
        U.S. in 2004, and have tagged forty more for shutdown. Of 120 
        new chemical plants being built around the world with price 
        tags of $1 billion or more, one is in the U.S. Fifty are in 
        China.

          In 1997 China had fewer than 50 research centers 
        managed by multi-national corporations. By 2004 there were over 
        600.

          Two years from now, for the first time, the most 
        capable high-energy particle accelerator on Earth will reside 
        outside the United States.

          The United States today is a net importer of high 
        technology products. The U.S. share of global high tech exports 
        has fallen in the last two decades from 30 percent to 17 
        percent, while America's trade balance in high tech 
        manufactured goods shifted from a positive $33B in 1990 to a 
        negative $24B in 2004.

          In a recent international test involving mathematical 
        understanding, U.S. students finished in 27th place among the 
        nations participating.

          About two-thirds of the students studying chemistry 
        and physics in U.S. high schools are taught by teachers with no 
        major or certificate in the subject. In the case of math taught 
        in grades five through 12, the fraction is one-half. Many such 
        students are being taught math by graduates in physical 
        education.

          In one recent period, low-wage employers like Wal-
        Mart (now the Nation's largest employer) and McDonald's created 
        44 percent of all new jobs. High-wage employers created only 29 
        percent.

          In 2003 foreign students earned 59 percent of the 
        engineering doctorates awarded in U.S. universities.

          In 2003 only three American companies ranked among 
        the top 10 recipients of patents granted by the U.S. Patent 
        Office.

          In Germany, 36 percent of undergraduates receive 
        their degrees in science and engineering. In China, the 
        corresponding figure is 59 percent, and in Japan it is 66 
        percent. In the U.S., the share is 32 percent. In the case of 
        engineering, the U.S. share is five percent, as compared with 
        50 percent in China.

          The United States is said to have over 10 million 
        illegal immigrants, but the number of legal visas set-aside 
        annually for ``highly qualified foreign workers'' was recently 
        dropped from 195,000 per year down to 65,000.

          At a time when the world's nations are clamoring to 
        obtain science and engineering talent, U.S. law will grant a 
        visa for outstanding foreign students to attend U.S. 
        universities only if they promise they will go home when they 
        graduate.

          In 2001 (the most recent year for which data are 
        available), U.S. industry spent more on tort litigation and 
        related costs than on research and development.

    As important as jobs are, the impact of these circumstances on our 
nation's security could be even more profound. In the view of the 
bipartisan Hart-Rudman Commission on National Security, ``. . .the 
inadequacies of our system of research and education pose a greater 
threat to U.S. national security over the next quarter century than any 
potential conventional war that we might imagine.''
    The good news is that there are things we can do to assure that 
America does in fact share in the prosperity that science and 
technology are bringing the world. In this regard, our committee has 
made four broad recommendations as the basis of a prosperity 
initiative--and offers 20 specific actions to make these 
recommendations a reality. They include:

          ``Ten Thousand Teachers, Ten Million Minds''--which 
        addresses America's K-12 education system. We recommend that 
        America's talent pool in science, math and technology be 
        increased by vastly improving K-12 education. Among the 
        specific steps we propose are:

                  Recruitment of 10,000 new science and math 
                teachers each year through the award of competitive 
                scholarships in math, science and engineering that lead 
                to a Bachelor's degree accompanied by a teaching 
                certificate--and a five-year commitment to teach in a 
                public school.

                  Strengthening the skills of 250,000 current 
                teachers through funded training and education in part-
                time Master's programs, summer institutes and Advanced 
                Placement training programs.

                  Increasing the number of students who take 
                Advanced Placement science and mathematics courses.

          ``Sowing the Seeds''--which addresses America's research 
        base. We recommend strengthening the Nation's traditional 
        commitment to long-term basic research through:

                  Increasing federal investment in research by 
                10 percent per year over the next seven years, with 
                primary attention devoted to the physical sciences, 
                engineering, mathematics, and information sciences--
                without disinvesting in the health and biological 
                sciences.

                  Providing research grants to early career 
                researchers.

                  Instituting a National Coordination Office 
                for Research Infrastructure to oversee the investment 
                of an additional $500M per year for five years for 
                advanced research facilities and equipment.

                  Allocating at least eight percent of the 
                existing budgets of federal research agencies to 
                discretionary funding under the control of local 
                laboratory directors.

                  Creation of an Advanced Research Projects 
                Agency-Energy (ARPA-E), modeled after DARPA in the 
                Department of Defense, reporting to the Department of 
                Energy Undersecretary for Science. The purpose is to 
                support the conduct of out-of-the-box, 
                transformational, generic, energy research by 
                universities, industry and government laboratories.

                  Establish a Presidential Innovation Award to 
                recognize and stimulate scientific and engineering 
                advances in the national interest.

          ``Best and Brightest''--which addresses higher education. In 
        this area we recommend:

                  Establishing 25,000 competitive science, 
                mathematics, engineering, and technology undergraduate 
                scholarships and 5,000 graduate fellowships in areas of 
                national need for U.S. citizens pursuing study at U.S. 
                universities.

                  Providing a federal tax credit to employers 
                to encourage their support of continuing education.

                  Providing a one-year automatic visa extension 
                to international students who receive a science or 
                engineering doctorate at a U.S. university, and 
                providing automatic work permits and expedited 
                residence status if these students are offered 
                employment in the U.S.

                  Instituting a skill-based, preferential 
                immigration option.

                  Reforming the current system of ``deemed 
                exports'' so that international students and 
                researchers have access to necessary non-classified 
                information or research equipment while studying and 
                working in the U.S.

          ``Incentives for Innovation''--in which we address the 
        innovation environment itself. We recommend:

                  Enhancements to intellectual property 
                protection, such as the adoption of a first-to-file 
                system.

                  Increasing the R&D tax credit from the 
                current 20 percent to 40 percent, and making the credit 
                permanent.

                  Providing permanent tax incentives for U.S.-
                based innovation so that the United States is one of 
                the most attractive places in the world for long-term 
                innovation-related investments.

                  Ensuring ubiquitous broadband Internet access 
                to enable U.S. firms and researchers to operate at the 
                state-of-the-art in this important technology.

    It should be noted that we are not confronting a so-called 
``typical'' crisis, in the sense that there is no 9/11, Sputnik or 
Pearl Harbor to alert us as a nation. Our situation is more akin to 
that of the proverbial frog being slowly boiled. Nonetheless, while our 
committee believes the problem we confront is both real and serious, 
the good news is that we may well have time to do something about it--
if we start now.
    Americans, with only five percent of the world's population but 
with nearly 30 percent of the world's wealth, tend to believe that 
scientific and technological leadership and the high standard of living 
it underpins is somehow the natural state of affairs. But such good 
fortune is not a birthright. If we wish our children and grandchildren 
to enjoy the standard of living most Americans have come to expect, 
there is only one answer: We must get out and compete.
    I would like to close my remarks with a perceptive and very 
relevant poem. It was written by Richard Hodgetts, and eloquently 
summarizes the essence of innovation in the highly competitive, global 
environment. The poem goes as follows:

         Every morning in Africa a gazelle wakes up. It knows it must 
        outrun the fastest lion or it will be killed.

         Every morning in Africa a lion wakes up. It knows it must 
        outrun the slowest gazelle or it will starve.

         It doesn't matter whether you're a lion or a gazelle--when the 
        sun comes up, you'd better be running.

    And indeed we should.
    Thank you for providing me with this opportunity to testify before 
the Committee. I would be pleased to answer any questions you have 
about the report.

Response to House Committee on Science Questions

1.  How did the study panel arrive at the recommended 10 percent annual 
increase in federally-sponsored basic research over the next seven 
years? What other options did the panel consider and what led to the 
choice of 10 percent?

    After reviewing the proposals for enhanced research funding that 
have been made in recent years, the committee concluded that a 10 
percent annual increase over a seven-year period would be appropriate. 
This achieves the doubling that was in principle part of the NSF 
Authorization Act of 2002 approved by Congress and the President, but 
would expand it to other agencies and focus that increase on the 
physical sciences, engineering, mathematics, and the information 
sciences as well as DOD basic research.
    The committee viewed enhanced funding in these fields as urgent. It 
chose the 10 percent level and seven-year time frame as the best way 
for these funds to be spent effectively. The base for this doubling 
(federal funding for the fields listed plus DOD basic research--not 
including the specified fields so there is no double-counting) was 
approximately $8 billion in FY 2004.
    By taking this action, the balance of the Nation's research 
portfolio in fields that are essential to the generation of both ideas 
and skilled people for the Nation's economy and national/homeland 
security would be restored. That does not mean that there should be a 
disinvestment in such important fields as the life sciences (which have 
in fact seen growth in recent years) or the social sciences. A balanced 
research portfolio in all fields of science and engineering research is 
critical to U.S. prosperity.
    As indicated in the National Academies Committee on Science, 
Engineering, and Public Policy's (COSEPUP) 1993 report Science, 
Technology, and the Federal Government: National Goals for a New Era

         The United States needs to be among the world leaders in all 
        fields of research so that it can

                  Bring the best available knowledge to bear on 
                problems related to national objectives even if that 
                knowledge appears unexpectedly in a field not 
                traditionally linked to that objective.

                  Quickly recognize, extend, and use important 
                research results that occur elsewhere.

                  Prepare students in American colleges and 
                universities to become leaders themselves and to extend 
                and apply the frontiers of knowledge.

                  Attract the brightest young students.\1\
---------------------------------------------------------------------------
    \1\ COSEPUP. 1993. Science, Technology, and the Federal Government: 
National Goals for a New Era. Washington, DC: National Academy Press.

2.  How did the study panel arrive at the recommended eight percent 
allocation within each federal research agency's budget to be managed 
at the discretion of technical program managers to catalyze high-risk, 
high-payoff research? What other options did the panel consider and 
---------------------------------------------------------------------------
what led to the choice of eight percent?

    The committee found that at many agencies approximately one to 
three percent of a program's budget is to be managed at the discretion 
of the program managers. The committee believes, as shown through the 
Defense Advanced Research Projects Agency (DARPA) model, that more 
risky research that crosses disciplinary lines can be funded by using 
the ``strong program manager'' approach as is the case at DARPA. Some 
committee members believed that five percent was sufficient, others 10 
percent--in the end a compromise was reached at eight percent. The 
committee is flexible about the specific number as long as the goal of 
catalyzing high-risk, high-payoff research (as opposed to incremental 
research) is achieved. Experience shows that research investments of 
this type are exceptionally highly leveraged.

3.  Industry and government have both developed numerous energy 
production and energy efficiency technologies that have not been 
deployed. How did the study panel arrive at its implicit conclusion 
that technology development is the greater bottleneck (as opposed to 
policy) in developing energy systems for a 21st century economy?

    The committee believes that both policy and technology play a role 
in responding to the Nation's need for clean, affordable, and reliable 
energy.
    While the implementation of some technologies, such as nuclear 
energy, is discouraged by policy, we still face environmental and 
safety challenges only science and engineering research can 
ameliorate--even if policy-makers were willing to deploy that 
technology today. There are no doubt questions of cost and policy that 
affect use of various energy technologies. When was the last nuclear 
plant commissioned? But those policy decisions are often directly 
linked to technical capabilities or the absence thereof. No `final' 
solutions without serious problems are waiting in the wings for policy 
changes. Nuclear energy is an (the) important potential source of 
energy but it has security and waste disposal/storage problems that 
have not been handled satisfactorily. That is a prime example of a 
policy problem that requires research to unlock it.
    Similarly, the Nation, as the report indicates, has made 
substantial strides in efficiency, but much more can be done. Yes there 
is existing efficiency technology that can be deployed, and, following 
market forces if oil prices do not return to recent levels, will 
probably be used increasingly.
    As a result, the Nation will not significantly decrease energy 
dependence without technology--policy changes alone are insufficient. 
The production of electricity and mobility on a worldwide basis cannot 
go on for ever in their present form. This country is running a 
significant risk of remaining substantially dependent on foreign oil.
    The history of science and technology suggests that radical new 
solutions may well be available. The field of energy has not been 
viewed as exciting by a generation of engineering students. The time 
required to effect an energy solution from research to implementation 
is considerable. The rate of growth of the energy problem (usage) 
worldwide is likely to have profound effects.
    We believe that the Advanced Research Projects Agency (ARPA-E) 
proposed by the committee can jump start new approaches to high risk/
high payoff research of the type that DARPA has historically performed 
to great effect for the military. It can capture the talents of 
outstanding young people in industry and academia. DARPA is a 
demonstrably effective approach to advanced research and development, 
and Energy is one of the most important challenges to our nation's 
future.

4.  Recent surveys of industry suggest that basic research performed at 
universities and transformational technological innovation have only a 
very limited impact on the success of individual companies. Is the 
impact of research and innovation different for the economy as a whole 
than it is for individual companies?

    There is broad consensus among economists that for decades the 
growth of the U.S. economy has been driven by technological advances 
and innovation. These come almost exclusively from two sources--
companies and universities. Companies are devoting fewer and fewer 
resources to longer-term research that contributes to the common base 
of technology that is available to all; i.e., work that improves our 
national capacity but doesn't necessarily directly drive that company's 
profits. Universities are increasingly the only avenue for the research 
that will lead to fundamentally new things and to a highly-educated 
workforce. Most large companies now strive for a large percentage of 
their products to have been developed within the last two or three 
years. This requires constant and focused innovation. The immediate 
crowds out the strategic.
    Truly transformational technologies do not come along every day, 
and cannot be readily predicted. But one thing is certain--if we do not 
invest in research and advanced training for scientists and engineers, 
they will not occur at all--at least not in the United States.
    Because of this, the committee disagrees with the first premise in 
the question. Industry gains not only from the new knowledge generated 
as a result of academic research, but also from the skilled people 
generated as a result of research.
    Although many industries as diverse as the pharmaceutical and 
banking industry understand the linkage of their business to science 
and technology, others do not always fully understand the linkages 
between its day-to-day activities and science and technology. For 
example, at one point, we thought that the trucking industry was not 
particularly sensitive to science and technology. But the trucking 
industry certainly has been able to enhance its competitiveness by 
using tools such as the global positioning system, advanced lightweight 
materials, the ability to use the Internet, and weather forecasting to 
enhance its ability to locate the best route to a destination thus 
lowering its operating cost. In addition, its competitiveness could be 
enhanced further if new ways are developed for the industry to be more 
efficient in its use of fuel and if more affordable fuels are 
developed.
    As a result, when looking at its primary operations, a single 
company may not see direct use of basic research if it has not licensed 
a patent, contracted for studies or undertaken its own work. But 
slightly below the surface the substantial contribution of basic 
research to essentially every company is evident.
    For some industries, research provides them with the talented 
people they need whose education is influenced in substance, thinking 
and methods by basic research experience/training. Talented graduates 
for corporate laboratories are a primary deliverable of basic research 
operations at universities. Many major companies, in addition, support 
basic research at universities first and foremost to gain access to 
these people.
    Secondly, essentially every company buys technology whose function 
and cost are controlled by basic research conducted earlier. So 
companies that assemble products using others' components may not be 
involved in basic research directly but their business remains 
dependent on the basic research behind the component technologies that 
they use.
    Third, basic research creates the new technologies and new 
enterprises that these companies will sell to, or buy from or even 
become. Frankly, it is difficult to think of a company that does not 
use technology at some level, and that technology evolved from basic 
research.
    Fourth, the people generated as a result of the higher education 
they receive, underpinned by basic research, create whole new 
industries and jobs. For example, in 1997, BankBoston conducted the 
first national study of the economic impact of a research university. 
It found that graduates of the Massachusetts Institute of Technology 
founded 4,000 firms which, in 1994 alone, employed at least 1.1 million 
people and generated $232 billion of world sales. Further, if the 
companies founded by MIT graduates and faculty formed an independent 
nation, the revenues produced by the companies would make that nation 
the 24th largest economy in the world. Within the United States, the 
companies founded by MIT graduates employed a total of 733,000 people 
in 1994 at more than 8,500 plants and offices in the 50 states--equal 
to one out of every 170 jobs in America. Eighty percent of the jobs in 
the MIT-related firms are in manufacturing (compared to 16 percent 
nationally), and a high percentage of products are exported.

COMMITTEE BIOGRAPHIC INFORMATION

NORMAN R. AUGUSTINE [NAE*] (Chair) is the retired Chairman and CEO of 
the Lockheed Martin Corporation. He serves on the President's Council 
of Advisors on Science and Technology and has served as Under Secretary 
of the Army. He is a recipient of the National Medal of Technology.

CRAIG BARRETT [NAE] is Chairman of the Board of the Intel Corporation.

GAIL CASSELL [IOM*] is Vice President for Scientific Affairs and a 
Distinguished Lilly Research Scholar for Infectious Diseases at Eli 
Lilly and Company.

STEVEN CHU [NAS*] is the Director of the E.O. Lawrence Berkeley 
National Laboratory. He was a co-winner of the Nobel prize in physics 
in 1997.

ROBERT GATES is the President of Texas A&M University and served as 
Director of Central Intelligence.

NANCY GRASMICK is the Maryland State Superintendent of Schools.

CHARLES HOLLIDAY JR. [NAE] is Chairman of the Board and CEO of DuPont.

SHIRLEY ANN JACKSON [NAE] is President of Rensselaer Polytechnic 
Institute. She is the Immediate Past President of the American 
Association for the Advancement of Science and was Chairman of the U.S. 
Nuclear Regulatory Commission.

ANITA K. JONES [NAE] is the Lawrence R. Quarles Professor of 
Engineering and Applied Science at the University of Virginia. She 
served as Director of Defense Research and Engineering at the U.S. 
Department of Defense and was Vice-Chair of the National Science Board.

JOSHUA LEDERBERG [NAS/IOM] is the Sackler Foundation Scholar at 
Rockefeller University in New York. He was a co-winner of the Nobel 
prize in physiology or medicine in 1958.

RICHARD LEVIN is President of Yale University and the Frederick William 
Beinecke Professor of Economics.

C.D. (DAN) MOTE JR. [NAE] is President of the University of Maryland 
and the Glenn L. Martin Institute Professor of Engineering.

CHERRY MURRAY [NAS/NAE] is the Deputy Director for Science and 
Technology at Lawrence Livermore National Laboratory. She was formerly 
the Senior Vice President at Bell Labs, Lucent Technologies.

PETER O'DONNELL JR. is President of the O'Donnell Foundation of Dallas, 
a private foundation that develops and funds model programs designed to 
strengthen engineering and science education and research.

LEE R. RAYMOND [NAE] is the Chairman of the Board and CEO of Exxon 
Mobil Corporation.

ROBERT C. RICHARDSON [NAS] is the F.R. Newman Professor of Physics and 
the Vice Provost for Research at Cornell University. He was a co-winner 
of the Nobel prize in physics in 1996.

P. ROY VAGELOS [NAS/IOM] is the retired Chairman and CEO of Merck & 
Co., Inc.

CHARLES M. VEST [NAE] is President Emeritus of MIT and a Professor of 
Mechanical Engineering. He serves on the President's Council of 
Advisors on Science and Technology and is the Immediate Past Chair of 
the Association of American Universities.

GEORGE M. WHITESIDES [NAS/NAE] is the Woodford L. & Ann A. Flowers 
University Professor at Harvard University. He has served as an adviser 
for the National Science Foundation and the Defense Advanced Research 
Projects Agency.

RICHARD N. ZARE [NAS] is the Marguerite Blake Wilbur Professor of 
Natural Science at Stanford University. He was Chair of the National 
Science Board from 1996 to 1998.

                   Biography for Norman R. Augustine
    NORMAN R. AUGUSTINE was raised in Colorado and attended Princeton 
University where he graduated with a BSE in Aeronautical Engineering, 
magna cum laude, an MSE and was elected to Phi Beta Kappa, Tau Beta Pi 
and Sigma Xi.
    In 1958 he joined the Douglas Aircraft Company in California where 
he held titles of Program Manager and Chief Engineer. Beginning in 
1965, he served in the Pentagon in the Office of the Secretary of 
Defense as an Assistant Director of Defense Research and Engineering. 
Joining the LTV Missiles and Space Company in 1970, he served as Vice 
President, Advanced Programs and Marketing. In 1973 he returned to 
government as Assistant Secretary of the Army and in 1975 as Under 
Secretary of the Army and later as Acting Secretary of the Army. 
Joining Martin Marietta Corporation in 1977, he served as Chairman and 
CEO from 1988 and 1987, respectively, until 1995, having previously 
been President and Chief Operating Officer. He served as President of 
Lockheed Martin Corporation upon the formation of that company in 1995, 
and became its Chief Executive Officer on January 1, 1996, and later 
Chairman. Retiring as an employee of Lockheed Martin in August, 1997, 
he joined the faculty of the Princeton University School of Engineering 
and Applied Science where he served as Lecturer with the Rank of 
Professor until July, 1999.
    Mr. Augustine served as Chairman and Principal Officer of the 
American Red Cross for nine years and as Chairman of the National 
Academy of Engineering, the Association of the United States Army, the 
Aerospace Industry Association, and the Defense Science Board. He is a 
former President of the American Institute of Aeronautics and 
Astronautics and the Boy Scouts of America. He is currently a member of 
the Board of Directors of ConocoPhillips, Black & Decker and Procter & 
Gamble and a member of the Board of Trustees of Colonial Williamsburg 
and Johns Hopkins and a former member of the Board of Trustees of 
Princeton and MIT. He is a member of the President's Council of 
Advisors on Science and Technology and the Department of Homeland 
Security Advisory Board and was a member of the Hart/Rudman Commission 
on National Security.
    Mr. Augustine has been presented the National Medal of Technology 
by the President of the United States and has five times been awarded 
the Department of Defense's highest civilian decoration, the 
Distinguished Service Medal and has received the Joint Chiefs of Staff 
Distinguished Public Service Award. He is co-author of The Defense 
Revolution and Shakespeare In Charge and author of Augustine's Laws and 
Augustine's Travels. He holds eighteen honorary degrees and was 
selected by Who's Who in America and the Library of Congress as one of 
the Fifty Great Americans on the occasion of Who's Who's fiftieth 
anniversary. He has traveled in nearly 100 countries and stood on both 
the North and South Poles.

    Chairman Boehlert. Thank you very much.
    Dr. Vagelos.

  STATEMENT OF DR. P. ROY VAGELOS, RETIRED CHAIRMAN AND CEO, 
                          MERCK & CO.

    Dr. Vagelos. Thank you, Mr. Chairman and Committee Members. 
I am delighted to be here to talk about my specific interest in 
this committee work.
    And let me start with K-12 education since that was 
mentioned by both the Chairman and Mr. Gordon. Mr. Gordon made 
the statement that much of what is recommended is a rehash of 
old material. And to some degree, that is true. The problem is 
that if you go to the American public today, they will tell you 
that they are not pleased with the results of what we are doing 
in K-12 education, and therefore, the committee looked very 
hard. And as Norm just mentioned, among the committee of 20 
people, the unanimous number one priority was to do something 
in K-12 education.
    So let me tell you a couple of things that we focused on. 
First of all, a recognition that if one is going to teach in 
science and mathematics, that one should have had some 
expertise and some courses in those fields that are going to be 
taught in K-12, especially in grades eight through twelve. What 
we have found is that many of the teachers have had no major, 
and not even a good course in the subjects that they are 
teaching. So you will have a teacher teaching physics or 
chemistry or mathematics never having had a major course in 
those areas. And so can we expect such teachers to turn on our 
young people to be able to enter these fields?
    We decided not, and therefore, what are we recommending?
    We are suggesting several programs that are aimed at just 
that kind of thing. For instance, there are students who are 
already majoring as undergraduates in mathematics, science, and 
engineering, and there is a program, for instance, it is called 
``U Teach'' at the University of Texas in Austin, which selects 
these students and offers them scholarships if they will also 
take some courses in education and learn to teach during the 
four years that they are already majoring in these subjects 
that they are going to potentially teach. Now these are the 
people who really understand their subjects.
    And so one of the recommendations is 10,000 students per 
year of that sort nationally who are going to be expert in 
their field and who are becoming teachers, and the payback is 
that they teach for five years.
    Another program that we have. So that would cover 10,000 
new teachers coming through the mill. If you take the large 
numbers of people who are already teaching in these subjects 
and say can we resuscitate them because they don't really have 
the expertise. And we have a program, several programs for 
them.
    The one I like best is those people who are willing to come 
back for a Master's degree and spend two years, two summers and 
weekends to take a Master's in subject matter, whether it is 
physics, chemistry, technology, or mathematics, and they end 
up, at the end of two years, as master teachers, really 
understanding deeply their subject and being able to turn out 
other teachers and certainly to recruit and excite students.
    In addition to these Master's programs, there are programs 
that are summer institutes, large numbers of these, where 
teachers come back for two to four weeks annually have their 
education in specific subject matter improved. So these are the 
kinds of people who can turn people on and students on.
    Now we can do that for teachers. We can also increase the 
number of students that are going through middle and high 
schools who go into science and math by inducing them to take 
advanced placement courses and tests or international 
baccalaureate subjects. And there is a program, again which was 
tested and has been going for 10 years in Texas, centered in 
Dallas in this instance, where both the teachers are trained in 
the summer institutes to teach advanced courses, and students 
are induced by offering them scholarships, and then if they 
pass the test, they get a bonus of $100. Not only do the 
students get $100, but the teachers get $100. Now this program 
has been going on for 10 years, and the number of students 
taking these advanced placement courses and tests has gone up 
tenfold, 10 times over the course of 10 years. Now the beauty 
of that is that these students who are now taking advanced 
courses are more likely to go into such courses when they go to 
college.
    Okay. So those are two programs that I think are really 
important and have been demonstrated to work. And so this is 
what we would recommend.
    We would also recommend a development of a curriculum, a 
national curriculum, that would be voluntary and available 
through the Internet to, available to all teachers nationally 
and all school districts that could be optimizing all of these 
subjects that we are talking about.
    To jump ahead, to get students then to go into science, 
engineering, mathematics, computer sciences, there would be 
scholarships, undergraduate scholarships at the level of 
$25,000 per year, competitive, picking the best students in the 
country to go into these, also 5,000 fellowships for graduate 
study in such subjects to get our students in there and in the 
same subjects, and finally, as Norm just talked about the 
international students, we would like to have a correction and 
improvement in both the visa and the immigration policies so 
that we can continue to attract or attract again those kinds of 
top students internationally who were coming to the United 
States and have been slowed down because of various problems 
since 9/11.
    So I think, in summary, I think we all agree that K-12 is 
important. Certainly our higher education is also important. 
But it is not only important for competitiveness, it is 
important for the jobs, the high-knowledge jobs of the future 
that are going to dictate our economy.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Vagelos follows:]
                  Prepared Statement of P. Roy Vagelos

Mr. Chairman and Members of the Committee.

    Thank you for this opportunity to appear before you on behalf of 
the National Academies' Committee on Prospering in the Global Economy 
of the 21st Century. As you know, our effort was sponsored by the 
National Academy of Sciences, National Academy of Engineering and 
Institute of Medicine (collectively known as the National Academies). 
The National Academies were chartered by Congress in 1863 to advise the 
government on matters of science and technology.
    Mr. Augustine, Chair of the Committee, has discussed the overall 
concerns the Committee has about the future vitality of the United 
States economy. During my testimony, I will focus on the problems that 
we're having in K through 12 education. The Committee believes the 
education issue is the most critical challenge the United States is 
facing if our children and grandchildren are to inherit ever-greater 
opportunities for high-quality, high-paying jobs--and our solution and 
recommendations to respond to the Nation's challenge in K-12 science, 
mathematics, engineering, and technology education were the Committee's 
top priority.
    The Committee found that the American public is not satisfied with 
the K through 12 education available for their children. They are 
worried about the international comparative surveys that show that 
children outside the United States--even those in countries with far 
less resources than ours--rank higher than their own children in their 
understanding of mathematics or science.
    The Committee then made the recommendation we call ``10,000 
teachers, 10 million minds'' which proposes increasing America's talent 
pool by vastly improving K-12 science and mathematics education.
    In developing its action steps to reach this goal, the Committee 
first focused on what part of K-12 science, mathematics, engineering, 
and technology education was of greatest concern. The Committee 
immediately recognized that many of these teachers do not have 
sufficient education in these fields, and its recommendations respond 
to that concern.
    Of all its action steps, the Committee's highest priority is a 
program that would annually recruit 10,000 of America's brightest 
students to the science, mathematics, and technology K-12 teaching 
profession. The program would recruit and train excellent teachers by 
providing scholarships to students obtaining Bachelor's degrees in the 
physical or life sciences, engineering, or mathematics to gain 
concurrent certification as K-12 science and mathematics teachers. Over 
their careers, each of these teachers would educate 1,000 students, so 
that each annual cadre of teachers educated in this program would 
impact 10 million minds.
    The program would provide merit-based scholarships of up to $20,000 
a year for four years for qualified educational expenses, including 
tuition and fees, and would require a commitment to five years of 
service in public K-12 schools. A $10,000 annual bonus would go to 
program graduates working in under-served schools in inner cities and 
rural areas.
    To provide the highest-quality education for undergraduates who 
want to become K-12 science and mathematics teachers, it would be 
important to award matching grants, perhaps $1 million a year for up to 
five years, to as many as 100 universities and colleges to encourage 
them to establish integrated four-year undergraduate programs leading 
to Bachelor's degrees in science, engineering, or mathematics with 
concurrent teacher certification.
    This program, modeled after a very successful program in Texas (and 
which is being replicated in California), takes advantage of those 
people who are already in science, mathematics, engineering, and 
technology higher education programs and offer them the ability to get 
into teaching. It also incorporates in-classroom teaching experiences, 
master K-12 teachers, and ongoing mentoring--the combination of which 
produces highly qualified teachers with the skills and support to 
remain effective in the classroom.
    Our second action step focuses on strengthening the skills of 
250,000 current K-12 science and mathematics teachers through summer 
institutes, Master's programs, and Advanced Placement and International 
Baccalaureate (AP and IB) professional development programs. Each of 
these activities also builds on very successful model programs that can 
be scaled up to the national level.
    In the case of the summer institutes, the Committee recommends that 
the Federal Government provide matching grants for state-wide and 
regional one- to two-week summer institutes to upgrade the content 
knowledge and pedagogy skills of as many as 50,000 practicing teachers 
each summer. The material covered would allow teachers to keep current 
with recent developments in science, mathematics, and technology and 
allow for the exchange of best teaching practices. The Merck Institute 
for Science Education is a model for this recommendation.
    For the science and mathematics Master's programs, the Committee 
recommends that the Federal Government provide grants to universities 
to develop and offer 50,000 current middle-school and high-school 
science, mathematics, and technology teachers (with or without 
undergraduate science, mathematics, or engineering degrees) two-year, 
part-time Master's degree programs that focus on rigorous science and 
mathematics content and pedagogy. The model for this recommendation is 
the University of Pennsylvania Science Teachers Institute.
    In the case of AP, IB, and pre-AP or pre-IB training, the Committee 
recommends that the Federal Government support the training of an 
additional 70,000 AP or IB and 80,000 pre-AP or pre-IB instructors to 
teach advanced courses in mathematics and science. Assuming 
satisfactory performance, teachers may receive incentive payments of up 
to $2,000 per year, as well as $100 for each student who passes an AP 
or IB exam in mathematics or science. There are two models for this 
program: the Advanced Placement Incentive Program and Laying the 
Foundation, a pre-AP program.
    The Committee also proposes that high-quality teaching be fostered 
with world-class curricula, standards, and assessments of student 
learning. Here, the Committee recommends that the Department of 
Education convene a national panel to collect, evaluate, and develop 
rigorous K-12 materials that would be available free of charge as a 
voluntary national curriculum. The model for this recommendation is the 
Project Lead the Way pre-engineering courseware.
    Why are we doing this? Because, as Mr. Augustine mentions, many of 
the teachers who are teaching subjects have no background in the 
subjects that they are teaching. It is very hard for someone who does 
not have a physics education to turn students on to physics, because 
they have no basic feeling for the subject. Teachers with strong 
content knowledge, either through a Bachelor's or Master's program, who 
also have strong pedagogy skills and access to ongoing skills updates 
can be truly effective at encouraging students in science, mathematics, 
and technology fields. That is the thesis that we've built on.
    The Committee also proposes a program that will enlarge the 
pipeline by encouraging more students to take AP and IB science and 
mathematics courses and tests through providing more opportunities and 
incentives for middle-school and high-school students to pursue 
advanced work in science and mathematics. The Committee suggests a 
national goal of increasing the number of students in AP and IB 
mathematics and science courses from 1.2 million to 4.5 million, and 
setting a goal of tripling the number who pass those tests, to 700,000, 
by 2010. Student incentives for success would include 50 percent 
examination fee rebates and $100 mini-scholarships for each passing 
score on an AP or IB mathematics and science examination.
    The reason we are encouraging more students to participate in AP/IB 
courses is because we have found, through the Dallas-based AP Incentive 
Program, that those students who take AP/IB courses are twice as likely 
to enter and complete college as those who do not. Of particular 
interest is the ability of programs such as the University of 
California College Prep Program to reach currently under-served areas 
or populations of students with specific learning needs through online 
access to teachers and tutors.
    We also propose scholarships for American undergraduates who are 
willing to go into science and technology and engineering and 
fellowship programs for those pursing graduate science and engineering 
degrees in areas of national need.
    In sum, the Committee is proposing a whole spectrum of 
recommendations that will enhance the quality of science, mathematics, 
engineering, and technology education for all American students and 
providing incentives for Americans to pursue higher education degrees 
in these fields. By taking the proposed actions, we believe that the 
United States will be better positioned to compete as a country for 
future high knowledge jobs.
    Thank you for providing me with this opportunity to testify before 
the Committee. I would be pleased to answer any questions you have 
about the report.

                      Biography for P. Roy Vagelos
    Dr. Vagelos served as Chief Executive Officer of Merck & Co. Inc., 
for nine years from July 1985 to June 1994. He was first elected to the 
Board of Directors in 1984 and served as its Chairman from April 1986 
to November 1994.
    Dr. Vagelos joined the worldwide health products firm in 1975 as 
Senior Vice President of Research and became President of its research 
division in 1976; in addition, starting in January 1982, he served as 
Senior Vice President of Merck with responsibility for strategic 
planning. He continued to hold both positions until 1984, when he was 
elected Executive Vice President.
    Before assuming broader responsibilities of business leadership, 
Dr. Vagelos had won scientific recognition as an authority on lipids 
and enzymes and as a research manager. This followed a decision early 
in his career to put his principal energies into research rather than 
the practice of medicine.
    Dr. Vagelos received a A.B. degree (1950) from the University of 
Pennsylvania, where he was elected to Phi Beta Kappa, the academic 
honor society. He received his M.D. from Columbia University (1954) and 
was elected to Alpha Omega Alpha, the medical honor society. After 
internship and residency (1954-56) at Massachusetts General Hospital in 
Boston, he joined the National Institutes of Health in Bethesda, 
Maryland.
    At the NIH (1956-66) he served in the National Heart Institute, 
holding positions in cellular physiology and biochemistry--first as 
Senior Surgeon and then as Head of Section of Comparative Biochemistry, 
both in the Laboratory of Biochemistry.
    In 1966, Dr. Vagelos joined Washington University in St. Louis, 
Missouri, as Chairman of the Department of Biological Chemistry of the 
School of Medicine. In addition, from 1973 to 1975, he assumed more 
extensive responsibilities as Director of the University's Division of 
Biology and Biochemical Sciences, which he founded.
    Dr. Vagelos has received honorary Doctor of Science degrees from 
Washington University (1980) for his research achievements and 
important influence on national science policy; Brown University (1982) 
for distinguished contributions to the advancement of knowledge as a 
teacher, research scientist, and head of one of the Nation's 
outstanding laboratories; the University of Medicine and Dentistry of 
New Jersey (1984) for outstanding leadership in biomedical research 
leading to drugs and other therapeutic agents of direct benefits to 
mankind; New York University (1989) for contributions in helping to 
discover and produce medicines that both extend and enhance life; 
Columbia University (1990) for an extraordinary range of 
accomplishments in biological science, pharmaceutical research, and 
leadership in the pharmaceutical industry; the New Jersey Institute of 
Technology (1992) for his contributions to medical research; Pamukkale 
University in Turkey (1992); and the University of New York at Stony 
Brook (1994) for outstanding achievement; Mount Sinai Medical School 
(1997); and the University of British Columbia (1998). He received 
Honorary Doctor of Laws degrees for leadership in the battle to conquer 
diseases from Princeton University (1990), the University of 
Pennsylvania (1999) and Harvard University (2003). Rutgers University 
(1991) granted him honorary Doctor of Humane Letters degree in 
recognition of his ``ambitious agenda to develop effective cures for 
the most perplexing illness of our time.''
    The author of more than 100 scientific papers, he received the 
Enzyme Chemistry Award of the American Chemical Society in 1967. He was 
elected in 1972 to the American Academy of Arts and Sciences and the 
National Academy of Sciences, and in 1993 to the American Philosophical 
Society. In 1989 he received the Thomas Alva Edison Sciences Award from 
Governor Thomas Kean. In 1993, he received the Lawrence A. Wien Prize 
in Social Responsibility from Columbia University. In 1994 he received 
the C. Walter Nichols Award from New York University's Stern School of 
Business. In 1995 he received the National Academy of Science Award for 
Chemistry in Service to Society. In 1998 he was awarded the Prince 
Mahidol Award conferred by His Majesty the King in Bangkok (Thailand). 
In 1999 he received the Othmer Gold Medal from the Chemical Heritage 
Foundation and Bower Award in Business Leadership from Franklin 
Institute.
    Dr. Vagelos was Chairman of the Board of Trustees of the University 
of Pennsylvania from October 1994 to June 1999, having served as a 
trustee since 1988. He also served as Co-Chairman of the New Jersey 
Performing Arts Center from 1989-99, was President and CEO of the 
American School of Classical Studies at Athens from 1999-2001 and 
served in the National Research Council Committee on Science and 
Technology for Countering Terrorism in 2002.
    He is currently Chairman of Regeneron Pharmaceuticals, Inc. and 
Theravance, Inc., two biotech companies. He is also Chairman of the 
Board of Visitors at Columbia University Medical Center where he also 
chairs the Capital Campaign. He serves on a number of public policy and 
advisory boards, including the Donald Danforth Plant Science Center and 
the Danforth Foundation.
    Dr. Vagelos is married to the former Diana Touliatos. They live in 
New Jersey, and have four children and seven grandchildren.
    Dr. Vagelos was born on October 8, 1929, in Westfield New Jersey.

    Chairman Boehlert. Thank you very much, Doctor.
    Dr. Wulf.

 STATEMENT OF DR. WILLIAM A. WULF, PRESIDENT, NATIONAL ACADEMY 
                         OF ENGINEERING

    Dr. Wulf. Good morning, Mr. Chairman.
    I have to say I am particularly delighted to be here this 
morning with Norm and Roy. I would point out that Norm 
Augustine is a member of the National Academy of Engineering, 
and in fact, was its Chairman a few years ago.
    Just echoing your comments before, I think the issue that 
we are talking about today is the most important issue facing 
our country. It may not be the most urgent, but I believe it is 
the most important.
    I wasn't a member of Norm's committee, and so I can't hope 
to represent the content of ``Rising Above the Gathering 
Storm'' as well as Norm or Roy, so I am not going to try, but I 
would like to make three points.
    First, as Norm suggested, the problem is, itself, a 
creeping crisis. In fact, it is not a problem; it is a set of 
problems. And those set of problems I view as rather like tiles 
in a mosaic. Each one of them viewed up close, perhaps, doesn't 
sound like a crisis and isn't, perhaps, likely to provoke 
action, but if you stand back and you look at the overall 
mosaic, a pattern emerges. It is a pattern of short-term 
thinking, a pattern of lack of long-term investment. It is a 
pattern for preserving the status quo rather than reaching for 
the next big goal. It is a pattern that presumes that we in the 
United States are entitled to a better quality of life than 
others and that all we have to do is to circle the wagons and 
defend that entitlement. It is a pattern that does not balance 
the dangers and opportunities in current circumstances.
    I don't have time to talk about all of the tiles in this 
mosaic, and I would largely be redundant with the report that 
is the subject of this hearing if I did, but they include the 
dramatic decline in industry-based basic research, the flat-to-
declining federal support of research in the physical sciences 
and engineering, the increasingly short-term risk averse nature 
of the research that is supported, the discouraging effect on 
foreign students and scholars of our current visa policy and 
its impact on our ability to get the world's best and brightest 
to come to the United States and to contribute to our security 
and prosperity, the draconian proposals for handling of deemed 
exports in basic research, and their chilling impact on long-
term basic research at universities, and finally, the rapid 
growth in the use of the category of sensitive but unclassified 
information and its impact on the free flow of scientific 
information.
    My second point is that although the problems depicted in 
``Rising Above the Gathering Storm'' may not have a Sputnik-
like wake-up event, that does not mean they are unimportant. 
Quite the contrary. In my view, collectively, they are the most 
important issue currently facing the United States.
    I am hardly alone in that view. There is an increasingly 
wide recognition of it, I believe. In my written testimony, 
there are references to some recent reports from a variety of 
sources that reflect this deep concern, from the National 
Academies, from the private sector, from government agencies, 
and from academia. Despite the differing perspectives of the 
authoring organizations, there is surprising consistency among 
this report.
    As is said in the American Electronics Association report, 
and I quote, ``We are slipping. Yes, the United States still 
leads in nearly every way one can measure, but that does not 
change the fact that the foundation on which this lead was 
built is eroding. Our leadership in technology and innovation 
has benefited from an infrastructure created by 50 years of 
continual investment, education, and research. We are no longer 
maintaining that infrastructure.''
    In my view, the erosion alluded to by the AEA, if 
unchecked, will lead to a poorer quality of life for our 
grandchildren, and quite possibly to a world that is less 
secure and less free.
    My third, and final, point is that it is all about 
innovation and the multifaceted environment that supports 
innovation. There is wide agreement in the reports cited in my 
written testimony that the U.S. ability to innovate has been 
the source of its prosperity, and hence that ensuring our 
ability to continue to innovate is central to our future 
prosperity and security. Each of these reports proposes 
specific policy options to do this. Many of them are similar, 
few are identical. I think that is because there is no simple 
formula for innovation. There is, instead, a multi-component 
environment that collectively encourages, or discourages, 
innovation. Just to mention a few of the components of this 
environment: there must be a vibrant research base; there must 
be an educated workforce; there must be a culture that permits 
and even encourages risk taking; there must be a social climate 
that attracts the best and brightest to practice engineering, 
whether from within the country or outside it; there must be 
``patient capital'' available to the entrepreneur; the tax laws 
must reward investment; there must be adequate and appropriate 
protection for intellectual property; and there must be laws 
and regulations that protect the public but also encourage 
experimentation.
    To prosper in the future, we need to attend to all of these 
components of the innovation environment.
    In summary, by almost any objective measure, the United 
States is doing very well at the moment. But, the prosperity 
and security that we now enjoy is the result of decades of 
investment, research, and education. We now see a pattern, a 
mosaic, of disinvestment, of a retreat from bold research, and 
of a declining interest of American youth in education in 
science and engineering. We see a pattern suggesting a shift 
from creating the new to protecting the status quo. No single 
tile in this mosaic is going to ruin the American economy, 
which perhaps makes it all the more dangerous. There is a 
chance that we won't take action until the consequences become 
apparent in a decade or two, at which point it may be too late.
    Thank you for the opportunity to testify, Mr. Chairman.
    [The prepared statement of Dr. Wulf follows:]
                 Prepared Statement of William A. Wulf
    Good afternoon, Mr. Chairman and Members of the Committee. My name 
is William (Bill) Wulf and, since 1996, I have been on leave from the 
University of Virginia to serve as President of the National Academy of 
Engineering (NAE).
    Founded in 1964, the NAE provides engineering leadership in service 
to the Nation. It operates under the same congressional act of 
incorporation that established the National Academy of Sciences, signed 
in 1863 by President Lincoln. Under this charter the NAE is directed 
``whenever called upon by any department or agency of the government, 
to investigate, examine, experiment, and report upon any subject of 
science or art [technology].'' The NAE's 1998 strategic plan, however, 
goes beyond this reactive, ``whenever called upon,'' role to one in 
which we are to ``Promote the technological health of the Nation. . 
..'' It is much in the latter spirit that I am here today.
    I am particularly delighted to be here in the company of Norm 
Augustine, former Chairman of the NAE, to testify on what I believe to 
be the most important (as opposed to urgent) issue facing our country. 
I was not a member of Norm's Committee, but I participated in its 
initial meeting and tracked its progress closely, so I first want to 
acknowledge and thank all of the stellar committee members for the 
enormous energy and creativity that went into producing the report. I 
hope that the Science Committee will appreciate that the Academies' 
committee's willingness to spend countless hours on this report was the 
result of their depth of concern over our nation's future.
    I cannot hope to represent the content of ``Rising Above the 
Gathering Storm'' as well or as fully as Norm Augustine or Roy Vagelos, 
so I won't try--but I would like to draw attention to three points.

First, unfortunately the problem is a ``creeping crisis.''

    Unfortunately the problems we are concerned about don't have a 
Sputnik-like wake-up call.
    You all know the storied procedure for boiling a frog. They say 
that if you drop a frog in boiling water, it will jump out. But, if you 
put a frog in cool water and heat it very slowly, the frog won't jump 
out, and you'll get a boiled frog. The theory is that each small, 
incremental rise in temperature is not enough of a crisis to make the 
frog react. I don't know if this story is true, but it fits my 
purpose--the slowly warming water is a creeping crisis for the frog!
    Our creeping crisis is not a slow, one-dimensional change like the 
frog's water temperature. We are facing a number of problems--each one 
like a tile in a mosaic. No one of these problems by itself creates the 
sort of crisis that provokes action. But if you stand back and look at 
the collection of problems, a disturbing picture emerges--a pattern of 
short-term thinking and a lack of long-term investment. It's a pattern 
for preserving the status quo rather than reaching for the next big 
goal. It's a pattern that presumes that we in the United States are 
entitled to a better quality of life than others and that all we have 
to do is circle our wagons to defend that entitlement. It's a pattern 
that does not balance the dangers and opportunities in current 
circumstances.
    I do not have the time to discuss all the tiles in this mosaic, and 
I would be largely redundant with the report that is the subject of 
this hearing if I did, but they include:

        --  The dramatic decline in industry-based basic research.

        --  The flat-to-declining federal support of research in the 
        physical sciences and engineering.

        --  The increasingly short-term, risk-averse nature of the 
        research that is supported.

        --  The discouraging effect on foreign students and scholars of 
        our current visa policies, and its impact on our ability to get 
        the world's best and brightest to come to the U.S. and 
        contribute to our security and prosperity.

        --  The draconian proposals for handling of ``deemed exports'' 
        in basic research, and their chilling impact on long-term basic 
        research at universities.

        --  The rapid growth in the use of the category of ``sensitive 
        but unclassified'' information, and its impact on the free flow 
        of scientific information.

Second, nonetheless the problem is both important and widely 
recognized.

    Although the problems depicted in ``Rising Above the Gathering 
Storm'' may not have a Sputnik-like wake-up event, that does not mean 
they are unimportant. Quite the contrary; in my view collectively they 
are the most important issue currently facing the United States. I am 
hardly alone in that view; there is an increasingly wide recognition of 
it. Below are references to recent reports from a variety of sources 
that reflect this deep concern:

        --  From the National Academies\1\,\2\
---------------------------------------------------------------------------
    \1\ National Academy of Engineering. 2005. Engineering Research and 
America's Future: Meeting the Challenges of a Global Economy. 
Washington, D.C.: Nation Academies Press.
    \2\ National Academy of Sciences, National Academy of Engineering, 
Institute of Medicine. 2005. Rising Above the Gathering Storm: 
Energizing and Employing America for a Brighter Economic Future. 
Washington, D.C.: National Academies Press.

        --  From the private 
        sector\3\,\4\,\5\,\6\,
        \7\,\8\
---------------------------------------------------------------------------
    \3\ AeA (American Electronics Association). 2005. Losing the 
Competitive Advantage? The Challenge for Science and Technology in the 
United States. Washington, D.C. AeA.
    \4\ Business Roundtable. 2005. Tapping America's Potential: The 
Education for Innovation Initiative. Washington, D.C.: U.S. Chamber of 
Commerce.
    \5\ Business Roundtable. March 2005. Securing Growth and Jobs: 
Improving U.S. Prosperity in a Worldwide Economy. Washington, D.C.: 
U.S. Chamber of Commerce.
    \6\ Council on Competitiveness. 2004. Innovate America. Washington, 
D.C.: Council on Competitiveness.
    \7\ Electronics Industry Alliance. 2004. The Technology Industry at 
an Innovation Crossroads. Arlington, VA. Electronic Industry Alliance.
    \8\ National Association of Manufacturers. 2005. The Looming 
Workforce Crisis: Preparing American Workers for 21st Century 
Competition. Washington, D.C.: National Association of Manufacturers.

        --  From government 
        agencies,\9\,\10\,\11\,\12\ 
        and
---------------------------------------------------------------------------
    \9\ National Intelligence Council. 2004. Mapping the Global Future: 
Report of the National Intelligence Committee's 2020 Project. 
Washington, D.C.: National Intelligence Council.
    \10\ National Science Board. August 2003. The Science and 
Engineering Workforce: Realizing America's Potential. Report NSB 03-69. 
Arlington, Virginia: National Science Foundation.
    \11\ President's Council of Advisors on Science and Technology. 
January 2004. Sustaining the Nation's Innovation Ecosystems, 
Information Technology Manufacturing and Competitiveness. Washington, 
D.C.
    \12\ President's Council of Advisors on Science and Technology--
Workforce Education Subcommittee. June 2004. Sustaining the Nation's 
Innovation Ecosystem: Maintaining the Strength of Our Science & 
Engineering Capabilities. Washington, D.C.

        --  From academia\13\,\14\
---------------------------------------------------------------------------
    \13\ Council of Graduate Schools. June 2005. NDEA 21: A Renewed 
Commitment to Graduate Education. Washington, D.C.: Council of Graduate 
Schools.
    \14\ American Association of Universities, To be released.

    Despite the differing perspectives of the authoring organizations, 
there is surprising consistency among these reports. They all identify 
problems like the tiles in my mosaic as representing serious long-term 
problems for the country--problems that require action now! As is said 
---------------------------------------------------------------------------
in the American Electronics Association (AeA) report33:

         ``We are slipping. Yes, the United States still leads in 
        nearly every way one can measure, but that does not change the 
        fact that the foundation on which this lead was built is 
        eroding. Our leadership in technology and innovation has 
        benefited from an infrastructure created by 50 years of 
        continual investment, education and research. We are no longer 
        maintaining this infrastructure.''

    In my view, the erosion alluded to by the AeA, if unchecked, will 
lead to a poorer quality of life for our grandchildren--and quite 
possibly to a world that is less secure and less free.

Third and finally, it's all about innovation and the multi-faceted 
environment that supports innovation.

    There is wide agreement in the reports cited above that the U.S. 
ability to innovate has been the source of its prosperity--and hence 
that ensuring our ability to continue to innovate is central to our 
future prosperity and security. Each of these reports proposes specific 
policy options to do this--many of them are similar, but few are 
identical. I think that is because, in my view, there is no simple 
formula for innovation. There is, instead, a multi-component 
``environment'' that collectively encourages, or discourages, 
innovation. Just to mention a few of the components of this 
environment:

          There must be a vibrant research base.

          There must be an educated workforce.

          There must be a culture that permits and even 
        encourages risk-taking.

          There must be a social climate that attracts the best 
        and brightest to practice engineering--whether from within the 
        country or outside it.

          There must be ``patient capital'' available to the 
        entrepreneur.

          The tax laws must reward investment.

          There must be adequate and appropriate protection for 
        intellectual property.

          There must be laws and regulations that protect the 
        public while also encouraging experimentation.

    To prosper in the future we must attend to all the components of 
this innovation environment--and in particular we need to be sure that 
they are attuned to the current and future technologies rather than 
those of the past (when many of the components of the environment were 
first created).

In Summary

    By almost any objective measure, the U.S. is doing very well at 
this moment. But, the prosperity and security that we now enjoy is the 
result of decades of investment, research and education. We now see a 
pattern, a ``mosaic,'' of disinvestment, of a retreat from bold 
research, and of a declining interest of American youth in education in 
science and engineering. We see a pattern suggesting a shift from 
creating the new to protecting the status quo. No single tile in this 
mosaic is going to ruin the American economy--which perhaps makes it 
all the more dangerous. There is the chance that we won't take action 
until the consequences become apparent in a decade or two, at which 
point it will be too late.
    Thank you for the opportunity to testify, Mr. Chairman. I would be 
pleased to answer any questions the Committee might have.
                     Biography for William A. Wulf

Personal:

    Wm. A. Wulf, President, National Academy of Engineering, 2101 
Constitution Ave., NW, Washington, DC; e-mail: [email protected]

    University Professor and AT&T Professor of Engineering and Applied 
Science, Department of Computer Science, Thornton Hall, University of 
Virginia

Education:

B.S., Engineering Physics, University of Illinois, 1961

M.S., Electrical Engineering, University of Illinois, 1963

Ph.D., Computer Science, University of Virginia, 1968

Positions:

President, National Academy of Engineering, 1996 to present.

AT&T Prof. of Engr., University of Virginia, 1988 to present.

Assistant Director, National Science Foundation, 1988 to 1990.

Chairman & CEO, Tartan Laboratories Inc., 1981 to 1987.

Professor, Carnegie-Mellon University, 1975 to 1981.

Associate Professor, Carnegie-Mellon University, 1973 to 1975.

Assistant Professor, Carnegie-Mellon University, 1968 to 1973.

Instructor, University of Virginia, 1963 to 1968.

Descriptive Biography:

    Dr. Wulf was elected President of the National Academy of 
Engineering (NAE) in April 1997; he had previously served as Interim 
President beginning in July 1996. Together with the National Academy of 
Sciences, the NAE operates under a congressional charter and 
presidential executive orders that call on it to provide advice to the 
government on issues of science and engineering.
    Dr. Wulf is on leave from the University of Virginia, where he is a 
University Professor and the AT&T Professor of Engineering and Applied 
Science. Among his activities at the University were a complete 
revision of the undergraduate Computer Science curriculum, research on 
computer architecture and computer security, and an effort to assist 
humanities scholars exploit information technology.
    In 1988-90 Dr. Wulf was on leave from the University to be 
Assistant Director of the National Science Foundation (NSF) where he 
headed the Directorate for Computer and Information Science and 
Engineering (CISE). CISE is responsible for computer science and 
engineering research as well as for operating the National 
Supercomputer Centers and NSFNET. While at NSF, Dr. Wulf was deeply 
involved in the development of the High Performance Computing and 
Communication Initiative and in the formative discussions of the 
National Information Infrastructure.
    Prior to joining Virginia, Dr. Wulf founded Tartan Laboratories and 
served as its Chairman and Chief Executive Officer. Before returning to 
academe, Dr. Wulf grew the company to about a hundred employees. Tartan 
developed and marketed optimizing compilers, notably for Ada. Tartan 
was sold to Texas Instruments in 1995.
    The technical basis for Tartan was research by Dr. Wulf while he 
was a Professor of Computer Science at Carnegie-Mellon University, 
where he was Acting Head of the Department from 1978-1979. At Carnegie-
Mellon Dr. Wulf's research spanned programming systems and computer 
architecture; specific research activities included: the design and 
implementation of a systems-implementation language (Bliss), 
architectural design of the DEC PDP-11, the design and construction of 
a 16 processor multiprocessor and its operating system, a new approach 
to computer security, and development of a technology for the 
construction of high quality optimizing compilers. Dr. Wulf also 
actively participated in the development of Ada, the common DOD 
programming language for embedded computer applications.
    While at Carnegie-Mellon and Tartan, Dr. Wulf was active in the 
``high tech'' community in Pittsburgh. He helped found the Pittsburgh 
High Technology Council and served as Vice President and Director from 
its creation. He also helped found the CEO Network, the CEO Venture 
Fund, and served as an advisor to the Western Pennsylvania Advanced 
Technology Center. In 1983 he was awarded the Enterprise ``Man of the 
Year'' Award for these and other activities.
    Dr. Wulf is a member of the National Academy of Engineering, a 
Fellow of the American Academy of Arts and Sciences, a Corresponding 
Member of the Academia Espanola De Ingeniera, a Member of the Academy 
Bibliotheca Alexandrina (Library of Alexandria), and a Foreign Member 
of the Russian Academy of Sciences. He is also a Fellow of five 
professional societies: the ACM, the IEEE, the AAAS, IEC, and AWIS. He 
is the author of over 100 papers and technical reports, has written 
three books, holds two U.S. Patents, and has supervised over 25 Ph.D.s 
in Computer Science.

                               Discussion

    Chairman Boehlert. Thank you for leaving us with some 
degree of comfort by your closing statement, ``By almost any 
objective, the United States is doing very well at this 
moment.'' Guess what? That is not good enough. That might make 
us feel better, we may be doing very well, but our competition 
is doing a lot better a lot quicker. So this is serious 
business.
    And Dr. Vagelos, you know, you emphasized something that is 
so very important. Right back to the basics, K-12 science and 
math education. You know, I am sort of tired of appearing 
before business groups, as I do frequently, and to get some guy 
raising his hand, I will call on him, and you know, he starts 
moaning and groaning about K-12 education and the high schools 
are graduating students that we can't hire because they can't 
function, and we have to start training them. And I listen to 
them moan and groan, and I acknowledge that it is a serious 
problem we have got to address, and then I will say to him and 
all of the other representatives of business in the audience, 
and I did this a couple of times at a Chamber of Commerce 
meeting and a National Association of Manufacturers, ``All 
right, you hot shots in business. Let me ask you a question.'' 
All right. Well, that is sort of unusual. I say, ``How many of 
your employees, Mr. President of this company, Mr. Manager of 
that company, how many of your employees serve on a local 
school board?'' You know. The answer, usually the response is, 
``Gee, we don't know.'' ``Go back and check, will you, please? 
And then, in a couple weeks, let me know.'' And I never hear 
back. You know why? They check and they don't run. Well, gee, 
we are in business to make a profit, and it is too important. 
And why not have them run for school boards?
    And then the other thing is, and I am giving you some of my 
pet theories, but I want to work together, because I want to 
follow through on this and go forward on this. How many letters 
do you think the average Member of Congress gets from his or 
her constituents saying, ''You know, we have got to invest more 
in basic research, as a government,'' or, ``We should do better 
by the National Science Foundation,'' which is a primary funder 
of all university-based research? Do you know how many letters? 
Probably the average congressperson gets zero. And I doubt if 
there is a sitting Member of either the House or the Senate who 
campaigned on doing better by the science enterprise. You know, 
we have got to reform Social Security. We are going to get out 
of Iraq. We are going to do all of these things, but they don't 
talk about these things. And I say, once again, Mr. Augustine, 
I will say to people like the Chairman of the Board of Lockheed 
Martin, your former position, ``Why don't you look at your 
Board of Directors?'' It reads like a Who's Who in America. All 
well compensated, all very heavily influential in the political 
process, some Republican, some Democrat. They are all over the 
lot. I would suggest that if Board Member X from central 
Oklahoma or Board Member Y from northern Kansas called up his 
or her representative and said, ``Look. Here is something that 
Congress is ignoring, and this is very important. You have got 
to do better by K-12 science and math education, and I don't 
see how the hell you propose to do so if you are cutting 
funding for the Education Directorate at the National Science 
Foundation, and I want you to do something about that.'' People 
would begin to take notice.
    So I don't think this is too daunting a task, and I want to 
have some follow-through with you guys after this. You know, 
there are 435. You get 435 master cards, and we can get a file 
on each Member of Congress. And then we can just sort of work 
them and figure out how we can get them to focus on this 
subject area.
    So with that, a sort of preamble of my speech, let me ask 
you this. Help us prioritize your recommendations. And help us 
explain how you decided on a 10 percent increase. Can we go 
with those two?
    Mr. Augustine.
    Mr. Augustine. Thank you.
    I will be glad to begin.
    The question of prioritizing, we feel, quite strongly, that 
one has to view our recommendations as a package. We did single 
out as the highest priority K-12, because that seemed to 
underpin everything we are doing. If we don't solve that 
problem, we have lost.
    Beyond that, the reason we view it as a package is, for 
example, to create more scientists and engineers but to not 
increase the research budget for them to work on just creates 
people without jobs. And so this is a closely-knit package that 
we have proposed. We gathered 60 experts in various fields who 
came to Washington for two days with us, and they made 
recommendations as to what we should recommend to you. They 
made over 150 recommendations, which we boiled down and 
refined. So what you are seeing is our prioritized list of the 
very top ones. There were others we didn't consider.
    Your question of why 10 percent, and you are referring to 
the increase in basic research in the specific fields. Our 
motivation was to, rather quickly, increase the budget in those 
fields, which have been basically flat in real dollars for 20 
years. That contrasts sharply with the progress in the 
biological sciences. So we wanted to do it as quickly as we 
could, but we also want to be sure the money is spent 
efficiently. And it is our view that about 10 percent per year, 
this is obviously judgmental, is about what you can increase 
and spend very efficiently. It might be 15 percent. It might be 
eight percent, but it would be in that range.
    The question of why we put the seven-year limit on it; it 
turns out, of course, that 10 percent per year for seven years 
roughly doubles the existing $8 billion budget in this area. 
That is encouraging to us, and seems rational in the sense that 
the Congress, with your leadership, recently proposed that the 
NIH budget be doubled. And the Administration supported that. 
That was through the authorization process, unfortunately not 
through the appropriations process.
    So that would be my answer to your question. I am sorry. 
Did I say NIH? I meant NSF.
    Chairman Boehlert. Yeah. Yeah. It is NSF. Well, you know, 
we are following the NIH model, and everybody got nervous, 
because we doubled the NIH budget over five years, and I really 
think the basic reason is because it does so much in research 
in things like Alzheimer's and cancer and everything else, and 
Members couldn't vote fast enough, because they had looked out 
and said there, but for the grace of God, go I and vote aye. 
And we ought to do the same thing with the physical sciences 
and following that model. And a lot of people with biological 
sciences interested in NIH were concerned that I was trying to 
cut their funding. I don't want to cut their funding one dime. 
It is important. But I want to elevate NSF.
    But the basic problem is, and this is our problem on 
Capitol Hill. We passed the legislation putting the NSF on a 
path to double its budget over five years. We had a big 
ceremony down at the White House. The president signed it, we 
patted each other on the back. Boy, we felt good. But that 
didn't appropriate one dime. And while we put the agency on a 
path with authorization from this committee to double a budget 
over five years, you know, the percentage increase is a little 
better than flat, but not a heck of a lot better. You know what 
the total budget is? I bet you if you asked the board members 
of Merck or Lockheed Martin or anybody else, what do you think 
NSF gets. You know, they sponsor, basically, all university-
based research in America. They wouldn't know, $5 billion a 
year. You know what, they spend more than that in a coffee 
break over in the Pentagon. That is another place you are 
associated with. And I am for national defense, but we have got 
to get some priorities in order.
    My time is expired.
    Mr. Gordon.
    Mr. Gordon. As I said earlier, I admire my Chairman's 
passion for this issue. I am also the beneficiary of, 
hopefully, some extra time that could be allocated to me over 
the next few weeks because of all of his passion here. And I do 
admire it.
    As the Chairman said, the National Science Foundation, we 
passed an authorization to double it. It was signed by the 
President, yet the President never has made those requests. I 
think one of the benefits of your proposal is that you went 
beyond flowery rhetoric and gave us some specific 
recommendations.
    You also have specific recommendations for an action plan. 
You gave us an action plan on what to do. What about an action 
plan on how to get it implemented, how to get the President to 
make these proposals, how to get Congress to go forward? Or do 
you feel like your job is over? Have you given us the sheet and 
now you all are going home? Mr. Augustine, is there another 
step?
    Mr. Augustine. No, we believe that our job has just begun, 
and we do have a plan. I should say that we are in a difficult 
position, because the National Academies don't lobby, by 
policy. On the other hand, the National Academies do provide 
information, disseminate information, share views, and we 
intend to do a lot of that. And we would hope that we will have 
the opportunity to do that broadly with the Business 
Roundtable, with labor unions, with other organizations that 
are interested in this topic, with teachers. And indeed, we do 
plan to pursue this, and our members have----
    Mr. Gordon. Good.
    Mr. Augustine.--in fact, been----
    Mr. Gordon. Well, I would hope that you would put together, 
around my office, I, you know, sort of have a, I don't know 
whether it is a saying, but if it is not written down, it is 
not a plan. And we would hope that, not as extensively as this, 
but that you might put together an action plan for 
implementing, whether informally or formally, meet with us and 
tell us how we can help. And we would all like to work together 
on that.
    The second question that I have, back when the original 
President Bush was President, he and Congress got together and 
passed something called PAYGO. We had a big deficit, and we 
wanted to do something about it, and we all know that the first 
thing you do when you are in a hole, you stop digging. And that 
is what PAYGO tried to do. Every time there was legislation 
that came to the Floor, it had to have a fiscal note to say 
what it cost. And you had to have either additional revenue or 
you had to have offsets for that. That was passed two more 
times under, again, under two Presidents and several 
Congresses. Unfortunately, it expired in 2002, and we can't get 
the current Congress to renew that.
    But going back to that same type of idea, it is going to be 
hard to get additional funds. Nobody likes to talk about taxes, 
and maybe we will just say fee or something here. Do you have 
any suggestions as to a fee that might be appropriate on, 
maybe, the business sector somewhere that would be dedicated 
for this $10 billion? You know, and that it would be a, you 
know, somewhat of a tit for tat if we have, you know, one-
eighth of a percent additional something here that would go to 
these various teaching programs? Do you have any 
recommendations on that?
    Mr. Augustine. I am afraid I will have to disappoint you 
here, because our committee's charter really didn't include 
looking for offsets of----
    Mr. Gordon. Well, I am just asking you as informed 
individuals and----
    Mr. Augustine. As an individual, and not speaking for the 
committee, you know, kind of the way I look at it is that we 
have gross domestic product of $12 trillion. The Federal 
Government spends, as you know, $2 trillion a year. Last year, 
I am told that our citizens lost $7 billion betting on the 
Super Bowl. The cost of litigation to corporations in America 
is about 10 to 20 times what we have asked for here. And so it 
is our belief that this kind of money can be found. Now I have 
my own personal list, as I am sure everybody else does, of, you 
know, where I would start looking for money, but it is not 
particularly relevant, because I have no expertise in the 
subject.
    Mr. Gordon. Well, we are not voting on a budget today, 
because there wasn't the ability, the will, or whatever to go 
from a $35 billion reduction to $50 billion. So that was $15 
billion that apparently couldn't be found. And it was a pretty 
hard effort. Now maybe they will find it next week, I don't 
know. So yes, there is probably, you know, there is enough 
money sloshing around. But if that is the answer, then we are 
not going to get this done.
    Mr. Augustine. Well, you know, I, as an individual, feel, I 
can't speak for other CEOs. I feel so strongly that it is in 
the best interest of our companies that if it requires an 
additional tax of some kind to fix some of these problems, and 
it is not a huge amount of money in the grand scheme of things, 
I personally would support that kind of thing. But again, I 
can't speak for the----
    Mr. Gordon. Well, I think that would be another, again, the 
follow-up, both in the action plan and implementing this, and 
if the business community thinks it is important, it would give 
a lot of credibility and a lot of cover for folks. And I think 
that we want it as small as possible. It needs to be dedicated 
so that you know where it is going, and this old PAYGO kind of 
process. So I would hope that, again, with all of those big 
thinkers as you are around doing big thinking, that that might 
be added to the agenda.
    And again, thank you all for your, well, let me add, does 
anyone else want to comment on any of those subjects?
    Dr. Vagelos. Mr. Gordon, I haven't really thought on the 
source, but there are sources, even within the current research 
budget of the government that I think could be reallocated. I 
would not like to discuss them at this time, because I--they 
just haven't been generalized, but I certainly have ideas. And 
I certainly would support, also, an increase in taxes that 
would cover these subjects.
    But let me say that although the statements that I have 
heard today that corporations are not doing enough is a general 
statement that doesn't cover all corporations. And let me give 
you an example. At Merck, 15 years ago, we started what we 
called the Merck Institute for Science Education and developed 
a program for K-6 students in the region around our locations 
in the United States, of which there are several. And we have a 
person who heads that, Carlo Parravano, who is previously a 
professor of physical chemistry at a university and with a 
passion for teaching young people. And the idea is to train 
teachers in the K-6 level to understand some level of hands-on 
science in order to excite and demystify science for young 
children, because it demystifies for those teachers who are 
exposed in summer institutes, and then they are followed by 
master teacher visitations during the course of a year to get 
the children excited about science. Merck started this program 
about 15 years ago, and it has continued. It is so good that 
the NSF actually is replicating some of it. And Merck continues 
to invest in that regard.
    So some companies, at least, are doing that. And I know of 
other companies doing similar programs. So I would like not to 
leave with a negative thought of all corporations not being 
interested in K-12, because they are, indeed. And certainly in 
higher education, many research corporations invest in 
universities and in high schools to bring up the number of 
people who are going into technology because they are looking 
at their future workforce, frankly. It really benefits them to 
have better people coming through the pipelines.
    Mr. Gordon. Yeah, I don't think, hopefully no one overtly 
or insinuated that everyone is in that boat. What we want is to 
find incentives to increase that leadership.
    But thank you very much.
    Chairman Boehlert. Thank you.
    Mr. Gordon. I would also, in fact, I would like to request 
if you do have any kind of material on the Merck program----
    Dr. Vagelos. Yes.
    Mr. Gordon.I would like to see that so we might be able to 
see how we could replicate it, also.
    Chairman Boehlert. Well, just let me stress that what Merck 
has done, what Lockheed is doing, Westinghouse scholarships, 
corporate America is magnificent in its generosity in so many 
instances, so I don't want anyone to go away from this with the 
impression that this committee, particularly, does not 
acknowledge the great contributions corporate America is 
making. But they need to do a better job, and so do we. And you 
know, before we start asking you to do a better job, we have 
got to look ourselves in the mirror and say are we doing a 
better job. And I hope it--yes, Doctor. Did you want to make an 
observation?
    Dr. Vagelos. I just want to say something about the long-
term investment in research, because it is so crucial to what 
we are talking about. First of all, we have to have people who 
can do it, so that is K-12 and higher education. But are 
corporations really making a difference? And have we impacted 
health? Yeah, we have spent, the Nation has spent, you know, 
billions in the last 25 years. Has it been worth it? Well, I 
will give, as an example, what happened in 1981. There was the 
identification of a new thing called AIDS. It turned out a 
couple years later, the virus was identified through work at 
NIH and the Pasteur Institute, but then the universities and 
industry both focused on how do you handle this virus, a virus 
which caused the disease which was 100 percent lethal. And 
within, you know, a decade, you have the development of several 
different mechanisms of antiretroviral drugs that, in 
combination, converted a 100-percent lethal disease to a 
disease, which is a chronic infection where people leave 
hospitals, go back to work, and live normal lives. Now that is 
the interaction between basic research investing by government 
and research investment by industry.
    There are other things that are coming today. We heard in 
the paper today an advance in breast cancer outcomes using 
Herceptin, a drug that has been around for a while, but it is a 
monochromal antibody. Here is a technology that has been 
essentially developed in the United States over the last 25 
years and is having an impact now. There is a vaccine being 
developed both by Merck and by GSK that will prevent cervical 
cancer. This is against human papilloma virus. This has come 
from years of basic research now converted to--do you know how 
long it takes to make a vaccine?
    Chairman Boehlert. Oh, I know that.
    Dr. Vagelos. And do you know the panic now over influenza, 
avian flu?
    Chairman Boehlert. Well, that gets into a different 
subject. Let us get to Ms. Biggert, because she will get us 
back on course here, because this is such an enthusiastic group 
that we all could talk forever, but I hope it should not go 
unnoticed that we have a higher percentage of both sides of the 
aisle participating in this hearing than I will bet you any 
other hearing on Capitol Hill, which is a testament to the 
importance that we view the subject and to the distinguished 
panel we have.
    Ms. Biggert.
    Ms. Biggert. Thank you, Mr. Chairman.
    First of all, I just wanted to mention that I did serve as 
President of my local high school school board, and I 
appreciate all that you are doing. The problem that we always 
had was, first of all, to find the teachers that were the best 
and the brightest for what we wanted in our school. And then 
the second was to keep up with technology and the equipment 
that changed so to have available for the students.
    But I really wanted to talk about or ask questions to focus 
attention on energy and your proposal for the creation of a 
DARPA-like entity at the Department of Energy.
    It has been my experience representing a DOE National Lab, 
and serving as the Chairman of the Subcommittee on Energy here 
in this committee, that the bigger problem is technology 
transfer, getting new technologies or the products of 
government-funded research from the lab to the market. And I 
know that so many times things, for example, right after 9/11, 
we found that the labs really had done the research, had the 
products that then could go, for example, to the subway to 
identify, you know, foreign chemicals in there and things like 
that that were there, but nobody had ever really processed that 
or gone further.
    So my first question is what specific problem was the 
committee trying to address through this recommendation, 
recommendation B5?
    Mr. Augustine. There you go. Your question is a very good 
one and touches on a number of points we have debated at 
length. Really, the problem we saw, maybe I should say, in the 
way of background, the company I had the privilege of serving 
has operated for the DOE a number of National Labs, and so we 
had some experience with the challenges. And the notion with 
ARPA-E was to do for the Department of Energy what DARPA has 
done for the Department of Defense, specifically to take high-
risk, very high-payoff transformational research, support that 
research, and then to transfer it into industry, and to where 
it could produce products. There does seem to be a gap between 
the DOE's ability to produce great new products, great new 
ideas, just as you have cited, and to make something happen. 
And our hope was that this might provide that transformational 
mechanism.
    The reason we think it could well work is that ARPA-E, the 
Advanced Research Projects Agency-Energy that we have proposed, 
would not do research itself. It would support research that 
was done in universities and done in industry and possibly in 
the labs of National Labs themselves. It would be competitively 
awarded, and so there would be a built-in involvement of 
industry and of universities that you don't have in the labs 
themselves. And part of the reason we don't have it in the labs 
is the well-meaning conflict of interest rules we have that 
makes it hard for companies to access some of this information.
    Ms. Biggert. I understand that there were a couple, one or 
more members, that did not agree with this recommendation, 
and----
    Mr. Augustine. Yes, of all of the 20 recommendations we 
made, one member disagreed with one recommendation, and it was 
this one. And this particular individual felt, and I hope I can 
do justice to his views, that we already are spending a great 
deal of money on energy research in the government and that the 
industrial firms in the field are also devoting a great deal of 
money to research. And this individual believed that there was 
no more money needed at this point and also that the government 
would be in a position of picking winners and losers in terms 
of research and companies, and that wouldn't be healthy. Now I 
personally don't share that view, but I think I have done 
justice to his position.
    Ms. Biggert. Well, it sounds like, then, that this really 
is a way to move from the lab to market. Is that the major 
focus of it, or just the basic research itself?
    Mr. Augustine. Well, I think it is two things. The first is 
what you said. It is a way to build a bridge to getting ideas 
and research out and applied. The second is to be able to spend 
more money on transformational, breakthrough, high-risk, long-
term research that companies just won't perform and that the 
NSF and the NIH and Defense Department are all doing much less 
of because of their risk aversion.
    Ms. Biggert. So much, particularly in the labs, it seems 
like, you know, the basic research in physical sciences, so 
many times, what might start out to be a project to work on one 
item will be able to discover something else, and it will 
probably, you know, be much more of the thing that is going to 
change the world or whatever. Will this destroy that at all by 
having to compete for these grants on specific types of 
research?
    Mr. Augustine. Not at all. And your point is such a good 
one. And that is one reason, of course, why industry is 
reluctant to invest in basic research, because what you come up 
with may help your competitor more than it helps you, and 
whereas the ARPA-E idea would promote that.
    In addition, we had another recommendation that you are 
familiar with, I am sure, that the government labs be provided 
latitude to spend eight percent of their budget at the 
discretion of the people in the lab that know better than the 
central managers where those other opportunities are popping 
up.
    Ms. Biggert. I think some people have tried to cut that 
back, which is disturbing, because that is a very----
    Chairman Boehlert. The gentlelady's time has expired. Thank 
you very much.
    Ms. Biggert. Thank you.
    Chairman Boehlert. Mr. Miller, the Floor is yours for 300 
seconds.
    Mr. Miller. Thank you, Mr. Chairman.
    Mr. Chairman, I rarely pass the chance to ask questions to 
amplify some point, but this panel has made all of the points 
that I think need to be made.
    Mr. Chairman, I will disagree with you on one point. You 
said you thought no Member of Congress campaigns on the need to 
fund basic research to provide for science education and to try 
to move ideas, the product research, from the laboratory to the 
market. Mr. Chairman, I do. I represent a textile District. I 
represent a District that has lost a lot of jobs, and I voted 
against CAFTA, but I tell the folks who ask me all of the time 
not how are we bringing the jobs back, but where are the new 
jobs coming from, that our future can not be having low-skilled 
jobs in labor-intensive industries. It has to be the most 
innovative economy in the world, and that means research, 
funding research. It means science education. It means a 
commitment to community colleges where people learn new job 
skills throughout their lifetimes and will have to go back 
again and again. And it means efforts to move to provide the 
funding and the assistance to take research out of the 
laboratory to the marketplace.
    So Mr. Chairman, I am delighted to be here, and my 
enthusiasm for this topic, I think, may be the equal of yours.
    Chairman Boehlert. Dr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman.
    And I will join Mr. Miller in the ranks of those who 
campaign for science. In fact, my very first election, I scored 
a coup on a live TV debate when all of the attorneys running 
against me were saying that they would come here and straighten 
out the laws, the business people were coming here saying they 
would come here to balance the budget. And I pointed out that 
if we elected an attorney, we would add one to the 175 already 
here, and I didn't think that would make much difference. If we 
elected a businessperson, we would add one to the 137 already 
here, and I didn't think that would make much difference. But 
if they elected me, they would double the number of scientists 
in the Congress, and that would make a difference, and it 
seemed to resonate with the people.
    I also am in somewhat the same camp as Mr. Miller. When I 
read your executive summary, I haven't had time to read the 
whole report yet, but I just checked them off, and virtually 
everything, with one small exception, is exactly what I have 
been advocating for 12 years here. And I want to thank you 
very, very much for an excellent report, not just because you 
agree with me, but because you make the case well, and it is 
what this country needs. And now it is up to us, as a Congress, 
to implement that.
    So I congratulate you. I am afraid I have to go vote 
somewhere else, but let me just try to clarify one point.
    We talked about ARPA-E. And by the way, I think it would be 
better to call it ``DARPE,'' and maybe you could have a stuffed 
doll named ``DARPE,'' you know, as a symbol. Come up with 
something catchy. But DARPA has been a powerful force in basic 
research in this country. All right.
    Chairman Boehlert. Only a physicist would have his cell 
phone with Beethoven's Fifth.
    Mr. Ehlers. No, it is only a fourth. I don't drink.
    But DARPA has been extremely successful, but it has been 
very much a basic research agency. And yet, in the discussion I 
just heard, it sounded like you are talking about this as much 
a tech transfer as a basic research entity. And I think the 
Department of Energy badly needs this sort of thing. I am not 
questioning that, but it is not clear to me precisely what you 
are trying to accomplish here. If the goal is to have the 
Department of Energy address, in a more direct way, the 
national problems that we face, I would heartily welcome that. 
We have huge energy problems here, and I would like to see that 
happen. But tech transfer, we have CRADAs. I don't know if they 
are still around, but they were very successful. And we could 
address technology transfer through an MEP-like type of program 
or agriculture extension program, which I would also favor.
    But could you just give me a little clarification, a little 
more clarification I would say? What are you really trying to 
achieve with the ARPA-E proposal?
    Mr. Augustine. I am glad you asked to give us an 
opportunity to clarify, and I will call on my colleagues, with 
your permission, to add, and so I will be brief.
    The intent with the ARPA-E is, indeed, to focus on basic 
research of a specific kind, namely high-risk, high-payoff, 
long-term, generic applications. That is the focus. I think 
where I misled you is I was addressing the question of how, 
once you have done that, do you get that applied, get it out 
where it becomes useful. And my answer to that was that ARPA-E 
would not do research of its own, but rather, with funds, work 
by others, including universities, industry, and the National 
Labs competitively awarded. And that is the way I was 
suggesting that the knowledge could be transferred.
    Mr. Ehlers. Yeah. I guess my response to that, and I heard 
that answer, but that, in itself, won't transfer it unless you 
have industrial partners for each grant, or something of that 
sort. But NSF gives direct grants to universities, and that 
doesn't guarantee the results get transferred. I think you 
really have to build in a specific mechanism to do it, and that 
is what I was trying to clarify.
    Dr. Vagelos. May I add something to that, Norm, and that is 
there is the feeling on the committee, as the majority of the 
committee, that there are ideas and basic observations that are 
made at universities principally which are not mature enough to 
be picked up by either industry or the VCs. And these just will 
not be funded, because they are sort of falling in between the 
cracks. People are not yet recognizing that these can be 
applied, and therefore, there would be a committee that 
includes industry people, who are identifying these ideas that 
are otherwise not going to be funded, but the best of these to 
be brought along so that they would gain the visibility so that 
they would be either picked up by industry or capitalized in 
some other way.
    Mr. Ehlers. So you basically want to bridge the valley of 
death?
    Dr. Vagelos. Exactly.
    Mr. Ehlers. Yeah. Well, thank you very, very much for an 
excellent report. I really appreciate what you have done. Thank 
you.
    Mr. Hall. [Presiding] The Chair recognizes Mr. Green, the 
gentleman from Texas.
    Mr. Green. Thank you, Mr. Chairman. And I thank the Ranking 
Member as well.
    Mr. Augustine, your comments were quite shocking, and I 
appreciate the way you presented them. They were very much an 
awakening, to a certain extent. And I appreciate each member of 
the panel for what you have presented.
    I would like to start, if I may, with Dr. Wulf.
    Dr. Wulf, sir, your colleagues had indicated that they 
would support a tax increase, if you will. Do you have a 
similar view?
    Dr. Wulf. Well, of course, I am not a captain of industry 
like the two gentlemen sitting to my right, but I have to say 
that more than one CEO has said to me that they can't invest in 
research within their own company easily, because that detracts 
from the bottom line, and it is an optional cost. And so the 
market, Wall Street, will penalize them for doing that. And I 
think Norm has a marvelous story about that. But if they were 
taxed the same amount and that money was guaranteed to go into 
research, they would be happy.
    Mr. Green. Thank you.
    A quick comment. It appears that with reference to fixing, 
as it was articulated, K-12, it appears that many of our young 
people, and even their parents, don't see education as the way 
out. And I think that is very unfortunate, but the Powerball, 
lottery, athletics, rock stars, they seem to dominate the 
persona of the successful person. And unfortunately, there is 
this belief among too many young people that that is the way 
out for them.
    So my first question is, is there a one-size-fits-all 
remedy for fixing K-12, because you have urban versus rural, 
you have inner city versus outer city, you have some cultural 
concerns that, in my opinion, will have to be addressed? How do 
we make sure that when we fix K-12, we fix it for all of the 
children, regardless of whether they are rural or they are 
urban, whether they are inner city or outer city? It seems that 
there is a little bit more to concern ourselves with, if we 
truly want to leave no child behind.
    And I would like for each of you, if you would, to address 
the aspect of leaving no child behind. And I will start with 
you, Mr. Augustine, if you would, please.
    Mr. Augustine. Well, thank you for that question. And I am 
very glad you asked it.
    Certainly, there has been a change that today the students 
don't look at education or being a physicist, by and large, as 
the way out. In my own case, I was the first in my family to go 
to college. I was the second to go to high school. But my 
parents made very clear to me that the way out, the way ahead, 
was education. And that was just fundamental. We have lost 
that, to a great degree.
    The way I think that we address this question of the 
different backgrounds, different interests of students, is 
through the teachers, because the one thing that all of those 
students have in common is the teachers. And if we give them 
good teachers that show them that know their subject, that know 
what they are talking about, that inspire them, demand 
excellence, I don't think it matters where you come from, that 
is going to make a difference in your life, I think. So that is 
why we focused on teachers.
    Roy?
    Dr. Vagelos. Yeah, well, you took the words right out of my 
mouth on focusing on teachers and getting them to understand 
the subjects that they teach.
    Mr. Green, you come from the State of Texas, and you may 
have caught, I don't know whether you have caught or were in 
the room when I mentioned that the advanced placement incentive 
program, which originated in Dallas, really introduces the 
concept that you can train teachers who are already teaching to 
be able to teach advanced placement. You can incentivize 
students to take that by offering them the courses and a $100 
bonus, if they pass. And taking a school district, which is 
largely poor and has many immigrants and under-served 
minorities, you can increase the number of students taking 
advanced placement courses and passing them by tenfold with 
such a program, it is those students, they won't be stars, or 
they may not be all of the athletes, but you can increase, 
including minority students, the number of students taking 
these advanced programs and the advanced programs are in math 
and science. So that is one thing that can affect every city. 
And that is one of the programs we are recommending.
    Dr. Wulf. Just to answer your question very directly, no, I 
do not believe that one size fits all. I think all of my adult 
life we have been collectively, as a society, talking about the 
problems we have with K-12 education. And we have made, in my 
view, very, very little progress. We have this seminal event of 
``A Nation at Risk'' being published and getting a lot of 
attention focused on the problem, and yet, I think if you 
objectively look at where we are relative to, what, 15 years 
ago, when that report was published, I would find it very hard 
to argue that we have made very much progress. And I think a 
lot of the reason is that people have advanced one silver 
bullet after the next and that is not just going to work. We 
have to attack it on a very broad front. I happen to concur 
that focusing on teachers is a very, very, very important piece 
of it, but that is not all of it, either.
    Chairman Boehlert. Thank you very much.
    The gentleman's time has expired.
    Let me point out that we created a scholarship program, an 
incentive program, to get the best and the brightest in the 
undergraduate years majoring in science, math, and engineering, 
and agreed to give them a stipend each year and in exchange for 
an agreement to teach for two years, and we had that on the 
books authorized from this committee for several years before 
we got one thin dime. And now we are spending a grand total, I 
think, of about $5 million a year on it. That shows you where 
our priorities are, unfortunately.
    Mr. Hall.
    Mr. Hall. I thank you. And I thank this panel here. And I 
thank the very distinguished Mr. Chairman, you have mentioned 
the attendance here. It is no wonder when you read the array of 
men and women who are giving their time. And Norm Augustine is 
no stranger here. The Augustine report was a bible for us for 
about 10 years in the '80s. Thank you for that and others of 
you.
    And I think it is very, very important that we seek ability 
to compete in this century with jobs and especially for older 
people. You know, Norm, I am the oldest guy in Congress, or in 
the House, and when that guy from West Virginia finally takes 
everybody's advice and leaves, well, I will be the oldest in 
Congress. And jobs are important. Other than my opponents, my 
wife has even suggested that, you know, I should quit, but at 
82, I checked with Wal-Mart, and they weren't hiring any 
greeters. I didn't have a cap and a pistol. I couldn't be a 
crossing guard for anybody, but what a wonderful thing it is 
for you to give your valuable time, and your time to prepare to 
get here, to give us your time here, and your time staying 
here.
    You know, with China calling us out on the world energy 
allocation and their end of the space program now, we have got 
so many, so many reasons to listen to this group here.
    But let me ask you this, the 60 subject matter experts, are 
they of the same caliber? And how do you all work together? And 
when do the 20 and the 60 ever get together?
    Dr. Vagelos. Well, sure. These were experts that were 
recommended largely by the committee. The committee was invited 
by the President of the National Academy of Sciences. Twenty-
one people were called, as I understand it. Twenty people 
responded, which is an incredible response rate.
    Mr. Hall. Right.
    Dr. Vagelos. Now they were asked to suggest their 
priorities individually and other experts in the United States 
who would be able to speak to these subjects, and they also 
were asked to prioritize their recommendations. And then there 
was one major long weekend around-the-clock meeting, and then 
numerous conference calls and trading of tons of information 
through the Internet. That is the way we ran the thing.
    Mr. Hall. Peter O'Donnell is a special friend of mine, 
and----
    Dr. Vagelos. He was right in the middle of it.
    Mr. Hall.--a great and giving person in our part of the 
country. And because I was late getting here, I have been on 
other committees, I don't know what questions have been asked, 
but if I have any questions, I will submit them to you later, 
but I am sure that the Chairman and Ranking Member have asked, 
probably, the proper questions, and I can refer to the record 
for that.
    And I thank you for your time. Very much I thank you for 
giving your ability to your country.
    I yield back.
    Chairman Boehlert. Thank you very much.
    Mr. Honda.
    Mr. Honda. Thank you, Mr. Chairman.
    I will be real quick and to the point, because we are going 
to be asked to vote.
    I went through the report and just generally perused the 
recommendations and everything, and I was captivated by the 
term ``innovation'' running through the whole report, but you 
have never addressed the concept of teaching innovation 
creativity. And I think that that is the piece that we are 
missing. And when I speak with some of the other folks in 
education and who have just recently retired from high tech or, 
you know that their main concern is that if we are talking 
about producing more science students and more folks adept at 
math and science, that we will still be outperformed by India 
and China, because they are going to do the same thing. When we 
talk about the history of Silicon Valley, we know that Silicon 
Valley is not only a geographic place, but it is a phenomena of 
a combination of folks or of factors. And one of the factors is 
the talent and the people. And one of the factors of the talent 
of the people is their innate ability to be creative and 
inventive. We don't teach that, and it is a teachable skill to 
be able to teach innovation and creativity.
    What is your opinion about making education a goal for this 
nation, the teaching of innovation and creativity? And what do 
you think the costs may be and with the insights you have from 
your own report?
    Dr. Wulf. One of the things that I have focused a lot of my 
attention on in the last nine years that I have been President 
of the Academy has been engineering education reform. And a 
strong theme running through that is that engineering is all 
about creativity. It is all about--as Theodore von Karman said, 
``creating what has never been.'' And so making engineering 
education better adapted and suited to the actual environment 
that engineers are going to practice in really involves 
teaching creativity and innovation.
    Mr. Honda. But there----
    Dr. Wulf. And so that is starting to happen.
    Mr. Honda. Right. But there is no curricula that speaks to 
creativity or innovation, and in the discussion in the report, 
I don't see that as being highlighted or important. It is 
mentioned, but you know, teaching math and science, if we keep 
teaching the way we have taught, we still teach youngsters and 
people a compartmentalized approach to math and science, and it 
should be multi-disciplinary and integrated and then teaching 
how to teach innovation and creativity. And if that is not a 
stated goal, how will we understand and know that that is going 
to be one of the outcomes?
    Dr. Wulf. There actually are a number of engineering 
schools around the country now, which make innovation and 
creativity central to the curriculum.
    Mr. Honda. Would you be willing to have a long discussion 
on that----
    Dr. Wulf. I sure would.
    Mr. Honda.--in your report?
    Dr. Wulf. Well, the report is the report.
    Mr. Honda. Well, the report is a document that people look 
at to refer to from experts in the field, and if it is not 
specifically mentioned as a goal, but it is only mentioned as 
one of the things that we look for, but is not specifically 
addressed, I wonder whether it is going to have the impact that 
we are looking for.
    Dr. Wulf. I would be happy to share with you another pair 
of reports, which collectively have the title, ``The Engineer 
of 2020''----
    Mr. Honda. Okay. Thank you.
    Dr. Wulf.--which focuses on that.
    Mr. Honda. Dr. Vagelos, I thought maybe you might have a 
comment.
    Dr. Vagelos. Well, the teaching innovation, I think, is 
very difficult than you are suggesting. Because the innovators, 
you can have great scientists who make key observations and 
then someone else comes along and takes that observation to the 
next step. An example, the discovery of penicillin, which was 
about 1928, something like that, by Fleming, and it sat around 
in his lab for a couple of years, and he essentially gave up. 
This was taken up by a scientist about 10 years later who saw 
that it was important, and they took the step to make it in 
large amounts and discover what this substance was that was 
able to kill organisms and might be a drug. And so it takes 
certain kinds of people. And I don't know that it is. A lot of 
it is innate. There were lots of people thinking about 
programming when Bill Gates came along. There is only one Bill 
Gates.
    Mr. Honda. But to say that teaching innovation and 
creativity is difficult is to beg the issue of whether it 
should be taught or not, and it is a teachable skill. As a 
teacher, I know that processes are important. And to have our 
youngsters in our schools subjected to traditional instruction 
and not being challenged to think outside the box is, you know. 
We have a lot of Ph.D.s in my valley that are unemployed. And 
if we are going to be competitive, I think that, you know, to 
think out of the box and have them be able to grasp this 
concept or this ability to innovate----
    Chairman Boehlert. Point well taken.
    Mr. Honda.--we will lose----
    Chairman Boehlert. The gentleman's time has expired. We 
have a vote on the Floor.
    Mr. Carnahan, we would like to get you in. You have been 
faithful here all morning.
    Mr. Carnahan. Thank you, Mr. Chairman, and thank you. I 
share your passion for this, and Mr. Matheson, I guess I have 
join him, because I talked about this back home as well, 
research and innovation, and had a fascinating tour back home 
in St. Louis recently with the company there who is competing 
internationally, and not just competing, actually expanding 
their operations, and they are able to do that because of 
innovation in unique products. And so it was a great boost for 
me to see a local company doing that, and to see the power of 
that innovation.
    I also want to compliment all of you for your big ideas and 
for your frankness about how to really go to the next steps and 
what this is going to cost, but also talk about how you believe 
it is worth the cost, because it is so important to our future.
    I really wanted to focus on a couple of questions in our 
short time here.
    I think your idea about the scholarships for younger, newer 
teachers is a good idea. There are some of those out there, but 
I think we can do more there. I also like the idea of trying to 
get some of our scientists and engineers that may be laid off 
or retired to try to get them into teaching programs. But the 
bottom line is, our ability, I believe, to really improve our 
system is so much based upon our teachers. And salary levels, 
we all know, drive that. You know, what about including in 
these initiatives, you know, doubling the salaries of our 
teachers in our country? To me, that is fundamental, and I 
would like your comments about that.
    Thank you.
    Mr. Augustine. You have raised a point that was difficult 
for our committee in the sense that we were asked to address 
things that could be done at the federal level, and so we 
didn't spend a lot of time on teachers unions, on increasing 
teachers' salaries. But I think it would be safe to say there 
is not a one of us that wouldn't think that teachers' salaries 
should be substantially increased. But I suspect most of us 
would have added the footnote that the increase should be 
merit-based and performance-based, that we shouldn't just 
double every teachers' salary tomorrow. I am sure you didn't 
imply that. But I think that we would strongly support an 
increase in teachers' salaries, if it was based on performance. 
Yes.
    Dr. Vagelos. And we did, in part, in some of our 
recommendations, suggested that the teachers who go through 
these programs go back with an additional salary increase of 
$10,000. This is a recommendation, but of course these school 
districts have to decide what they are going to pay. We can 
make these recommendations. And if the private sector gets in 
and buys into these programs, as they have done into the 
advanced placement incentive program in Texas, then the extra 
funds can come privately to complement what is being done 
otherwise.
    Mr. Carnahan. I just want to say in closing, I came from 
our state legislature, where I had served on our Education 
Appropriations Committee. Not once did we ever hear from anyone 
from the business community talking about education policy. So 
to me, it is another important thing. I know you are talking 
about federal level recommendations, but since the bulk of our 
education funding and policy is driven at the state level, I 
think it is vital that we engage policy-makers at the State 
level to begin some of these innovations and also address some 
of these key funding issues.
    So thank you very much.
    Chairman Boehlert. Thank you very much.
    And unfortunately, time has run out. We have to get over to 
the Floor for a series of votes, and we are not going to ask 
you to remain. We understand your busy schedules. We will be 
submitting, Ms. Jackson Lee, Mr. Wu, and others will be 
submitting questions, and we would ask that you would consider 
them and respond in a timely manner.
    Let me just conclude the hearing by saying how much we 
appreciate the service that all of you have contributed to the 
Nation. The compensation is not high in terms of material 
value. As a matter of fact, it is zero. But I always tell 
people that serve as well as you do and as effectively as you 
do, and Mr. Augustine, I am so familiar with your work over the 
years, and Dr. Wulf, too. Doctor, I don't mean to exclude you, 
but I know you by reputation. Now I have had the privilege of 
meeting you. Your compensation is a rich and rewarding 
experience, and the satisfaction of knowing you have 
contributed something of significance.
    And with that, the hearing will adjourn, but not before I 
remind Mr. Augustine of an outstanding invitation to 
participate in the December 6 conference summit on 
competitiveness, and we have just had confirmation this morning 
that Dr. Jack Marburger, the President's Science Advisor, will 
be a participant.
    And I will tell you what my goal is, Norm, for this summit. 
I want people to be madder than hell that they didn't get an 
invitation, because we have got a small group, and you got one 
of them, and I want you to respond in a positive way.
    With that, the hearing is adjourned.
    Mr. Augustine. Thank you.
    [Whereupon, at 11:42 a.m., the Committee was adjourned.]
                              Appendix 1:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses on behalf of Norman R. Augustine, Retired Chairman and CEO, 
        Lockheed Martin Corporation; P. Roy Vagelos, Retired Chairman 
        and CEO, Merck & Co.; and, William A. Wulf, President, National 
        Academy of Engineering

Questions submitted by Representative Bart Gordon

Q1.  Is there a mismatch between the skill sets of graduating 
scientists and engineers in the U.S. and industry's needs? Did the NAS 
committee consider whether there is a need to rethink the Ph.D. degree, 
or the relative production of Ph.D.s versus professional masters 
degrees or some another type of advanced degree that would be more 
valuable to industry?

A1. This is a recurrent question about American universities that needs 
to be revisited periodically. In 1995, for example, the National 
Academies Committee on Science, Engineering, and Public Policy 
(COSEPUP) released a report titled ``Reshaping the Graduate Education 
of Scientists and Engineers.''
    As part of that effort, COSEPUP surveyed employers and asked for 
their evaluation of Ph.D. training. In sum, these employers indicated 
that they were satisfied with the current structure and concept of 
Ph.D. training and affirmed U.S. superiority in graduate education, 
although there are some specific difficulties in the relationship 
between academe and the profession. Some specific comments include the 
need for an:

          Understanding of the nature of industrial research 
        and an appreciation for applied programs;

          Faster response by graduate programs to changing 
        national policies and industrial needs;

          Education with more breadth as opposed to narrow 
        specialization;

          Expansion of educational experiences beyond the 
        academic environment through hands-on experiences and in multi-
        disciplinary teams;

          Training in communication skills including teaching 
        and mentoring.

    This survey was conducted 10 years ago and conditions may have 
changed. It is also likely that some progress has been made on these 
issues since that point.
    In terms of the need to rethink the Ph.D., we still support the 
recommendations in the COSEPUP graduate education report. This report 
recommended the following:

          Offer a broader range of academic options, while 
        maintaining local initiative and not compromising the need to 
        maintain research excellence, control time to degree, and 
        attract women and minority-group members. Specific actions 
        include:

                  Discourage students from overspecializing

                  Enhance communication skills and the ability to work 
                in teams

                  Focus federal financial support mechanisms for 
                graduate students on traineeships as opposed to 
                research assistantships.

          Provide better information and guidance to graduate 
        students and engineers and their advisers so they can make 
        informed decisions about professional careers. Specific actions 
        should include:

                  Development by the National Science Foundation, in 
                concert with other federal agencies, a national 
                database on employment options and trends;

                  Provision of career information and advice by 
                academic departments to both prospective and current 
                students in a timely manner;

                  Encouragement of students once they have met their 
                qualifying requirements to consider the current job 
                market and then reflect on three alternative pathways--
                Master's degree, traditional Ph.D., or Ph.D. with a 
                dissertation of high standards, but designed for non-
                academic career and which would take less time to 
                complete.

          Devise a national human resource policy for advanced 
        scientists and engineers that would involve examination of the 
        goals, policies, conditions, and unresolved issues of graduate 
        level human resources.

    On the issue of the relative production of Master's degree versus 
Ph.D.s, we have insufficient information to answer that question. In 
addition, the answer is likely to change over time. However, based on 
personal experience, it is the opinion of one of us (Augustine) that 
there is a need, from a industrial standpoint, to greatly increase 
emphasis on the Master's degree--not at the expense of the Ph.D. but 
rather at the expense of the Bachelor's as a terminal degree.

Q2.  In addition to sponsoring more basic research, should the Federal 
Government focus more resources on applied, pre-competitive research 
aimed at the gap between support for basic discovery and support for 
development up to the stage where the private sector is willing to 
assume the risk of commercialization? Did the NAS committee consider 
the need for greater federal support for this kind of bridge funding 
for applied research between basic research and proof-of-concept?

A2. The committee that developed the Gathering Storm report agrees that 
it is important to address this gap--which some have called the 
``valley of death.'' It discussed many different options, and among 
those, placed priority on the establishment of the Advanced Research 
Projects Agency-Energy (APRA-E). If it proves successful, it could be 
replicated for other national goals as well.

Q3.  During the past two years the Science Committee has heard from 
academic and industry witnesses about the need for bridge funding, and 
these witnesses have strongly urged funding for the Advanced Technology 
Program (ATP). Did the NAS committee consider the ATP program or other 
possible approaches for addressing this issue?

A3. The committee did discuss the ATP and other related programs. The 
strengths and weaknesses of ATP have been assessed in prior National 
Academies studies.
    It did not re-evaluate these programs per se, but it did determine 
that they were insufficient to address the gap described above and so 
recommended ARPA-E.

Questions submitted by Representative Jerry F. Costello

Q1.  I fully agree with your belief that we need better science and 
math education in our schools. The scholarship idea to provide math, 
science and engineering students with teaching certificates seems a 
good idea. But how attractive will teaching be to these students in the 
long-term? For example, how does the average teacher salary compare to 
that of a scientist or engineer? How do you think this issue will 
factor into a student's decision on which track to pursue?

A1. Economic studies do indicate that the compensation paid to a 
teacher affects both the teaching pool and teacher tenure. Certainly, 
the committee would encourage any efforts to enhance compensation for 
effective science, mathematics, and technology teachers; however, the 
committee was asked to address actions that could be taken at the 
federal level not the State or local level where compensation issues 
are generally addressed. The committee did, however, develop several 
mechanisms to enhance teacher compensation through bonuses as opposed 
to salary increases. For example,

          New teacher recruitment program (action A-1) provides 
        scholarships of up to $20,000 per year and $10,000 per year 
        bonuses for those who teach in under-served schools in inner 
        cities and rural areas;

          Current teachers (action A-2) who participate in the 
        continuing education programs (summer institutes, Master's 
        programs, advanced placement/international baccalaureate (AP/
        IB) teacher training) would receive incentive stipends of 
        $10,000 annually as long as they engage in classroom and 
        leadership activities;

          AP/IB teachers receive a $100 bonus for each student 
        who passes the AP or IB exam in mathematics or science.

    Also important are mentoring programs, particularly for new 
teachers, which are also recommended as part of these programs.

Q2.  The perception of many college students is that science and 
engineering jobs are not remunerative, important and exciting career 
options. How can careers in science and engineering be made more 
attractive to students who have the option of pursuing other well paid 
professional careers with shorter preparation time? Is it enough to 
offer new scholarships and fellowships as recommended in the NAS 
report?

A2. The excitement of science and engineering is best conveyed through 
inquiry-based education and teachers who have a science, engineering, 
or mathematics background themselves. The committee believes that by 
enhancing the science and engineering background of those who teach at 
the middle and high school level, the excitement of those careers can 
be conveyed to students. Those students will then take the classes 
necessary for them to pursue science and engineering careers.
    The time for preparation at the Bachelor degree level is somewhat 
longer in engineering than that in other fields, but the starting 
compensation is also higher (it is not widely appreciated that the 
average salary in engineering is very close to that of lawyers, which 
involves an additional two years of study). Unfortunately, compensation 
for engineering tends to peak at a lower level than for those business, 
management, banking, or other such fields. At the graduate level there 
are also disparities. The National Academies have recommended in past 
reports that the time to Ph.D. be decreased.
    In terms of compensation, salary is just one motivator of those 
interested in science and engineering careers. Perhaps a bigger 
influence than compensation on those deciding whether or not to pursue 
graduate level education is the potential for viable employment and 
interesting research opportunities. The committee's recommendations in 
the ``Sowing the Seeds'' section of the report are meant to address 
those concerns.

Q3.  We know that other nations are increasing their science and 
technology capabilities and are developing large and very capable 
technical workforces. In addition, U.S. companies are moving, not only 
manufacturing, but R&D operations abroad. In light of these trends, 
what kinds of skills will U.S. scientists and engineers need to be able 
to command a premium in salary over foreign scientists and engineers? 
That is, how do we compete in the global economy without lowering U.S. 
salaries and standard of living?

A3. The United States will continue to be challenged to compete on a 
pure salary basis with developing countries such as India and China; 
the primary way to respond to that challenge is to increase the value 
of our engineers and scientists. The primary mechanism for this is 
improved education at all levels--which is what the committee suggests. 
Innovation has been a key U.S. national advantage, and enhancing our 
emphasis on it at all educational levels plays to our strength. When 
innovations occur in the United States, it is able to capture at least 
the near-term market in that innovation area. To maintain the Nation's 
innovation capacity the Nation needs to invest regularly in its people 
and its research.

Question submitted by Representative David Wu and Representative Jerry 
                    F. Costello

Q1.  The report contains convincing arguments and recommendations to 
foster a climate of innovation in the U.S. But an important question is 
whether innovations generated in the U.S. will be exploited in the 
U.S., or abroad. For example, VCR technology was developed in the U.S., 
but the market was taken over by Asian countries. Traditionally, it has 
been the exploitation of new technologies, producing products and 
delivering novel services, which created new, high-paying jobs. What do 
we need to do to ensure that the fruits of research and innovation 
result in the creation of substantial numbers of good jobs in the U.S.?

A1. As indicated in the question, traditionally it has been the 
exploitation of new technologies, producing products and delivering 
novel services, that have created high paying jobs. For the United 
States to benefit from the jobs created by that innovation, the 
research that led to that innovation needs to occur to the United 
States and the environment in the U.S. must be conducive to innovation 
in general. That research will only occur in the United States if there 
are economic incentives for companies to stay here as opposed to moving 
overseas and if the human talent is available to develop and implement 
the ideas.
    In its report, the committee calls for a study that will focus on 
developing the best economic policies to enable the United States to be 
one of the most attractive places in the world for long-term 
innovation-related investment. As time passes, some industries will 
migrate overseas when the technical skills are adequate and the labor 
market is less expensive. But that does not happen immediately, and 
until it does the U.S. is able to benefit in terms of the jobs created 
by that innovation. This is less likely to be the case if the 
innovation occurs elsewhere.
    The U.S. patent system is the Nation's oldest element of policy on 
intellectual property. A sound system for patent enhances social 
welfare by encouraging invention and the dissemination of useful 
technical information. So, in addition, the United States should 
enhance intellectual property protection for the 21st century global 
economy to ensure that systems for protecting patents and other forms 
of intellectual property underlie the emerging knowledge economy but 
allow research to enhance innovation. The patent system requires reform 
of four specific kinds:

          Provide the U.S. Patent and Trademark Office with 
        sufficient resources to make intellectual property protection 
        more timely, predictable, and effective.

          Reconfigure the U.S. patent system by switching to a 
        ``first-inventor-to-file'' system and by instituting 
        administrative review after a patent is granted. Those reforms 
        would bring the U.S. system into alignment with patent systems 
        in Europe and Japan.

          Shield research uses of patented inventions from 
        infringement liability. One recent court decision could 
        jeopardize the long-assumed ability of academic researchers to 
        use patented inventions for research.

          Change intellectual property laws that act as 
        barriers to innovation in specific industries, such as those 
        related to data exclusivity (in pharmaceuticals) and those that 
        increase the volume and unpredictability of litigation 
        (especially in information-technology industries).

Questions submitted by Representative Eddie Bernice Johnson

Q1.  Action A-1 of the NAS report's recommendations suggests awarding 
``competitive four-year scholarships.'' However, I am concerned that 
minority and under-served students will be at a disadvantage for these 
awards because they are already noncompetitive due to their 
circumstances. Why did the Academy not consider this issue?

A1. We share the Congresswoman's concern; however, the committee did 
consider this issue and identified a wide range of existing federal and 
non-federal awards available for minority and under-served students 
should these students decide to become scientists and engineers. The 
challenge is not so much funding these students at the undergraduate 
level, but rather providing them with the resources they need at the 
middle and high school level--these students particularly need teachers 
with science and engineering backgrounds who will excite them about 
science and engineering and encourage them to pursue careers in these 
areas. Action A-1, therefore, provides a $10,000 bonus to teachers who 
graduate from this program and who teach in under-served schools in 
inner cities and rural areas. It is committee's belief that 
strengthening the teaching of science and math in the early grades will 
benefit all students and better prepare all students to compete in 
life.

Q2.  The total cost of the Academy's Implementation recommendation is 
between $9.2 to $23.8 billion per year. The entire NIH budget is around 
$30 billion per year. How realistic is it that this plan will be 
implemented and how do we get the public to agree to such an expensive 
proposition?

A2. This proposal includes far more than research funding and should be 
viewed as an investment in the Nation's future, rather than an expense. 
All four recommendations in the report are part of the fundamental 
building blocks for the Nation's economy.
    Supporting innovation is a cornerstone of the report's conclusions 
and innovation requires much more than research. To be sure a vibrant 
research base is essential, but so are an educated workforce, a culture 
that supports risk-taking, a tax climate the encourages investment, and 
a host of other things. The report presents a package of proposals that 
revitalize many of these necessary components of the ``innovation 
ecosystem.''
    Without quality science, mathematics, and technology teachers, our 
students will not be prepared to be part of a highly technical 
workforce.
    Without students who are well-educated and excited about science 
and engineering, too few Americans will pursue undergraduate and 
graduate education in science, engineering, and mathematics. And, if we 
discourage international talent from coming to the U.S., we will have 
even less talent available.
    If the Nation lacks scientific and technical talent, it will not be 
able to generate the innovative ideas that create whole new industries. 
And, if industries relocate overseas because other countries offer 
better financial incentives, then we won't have high-quality jobs for 
those in science and engineering or Americans in general. Americans may 
not fully appreciate the importance of research, but they do recognize 
the benefits that flow from such research and understand the importance 
of well paying jobs.
    In short, if the Nation's leaders assign as high a priority to the 
concerns which have been raised, as does this National Academies 
committee, the proposed funding will be able to compete very strongly 
with other demands on the federal budget.

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