[Senate Hearing 110-372]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-372
 
       STRENGTHENING AMERICAN COMPETITIVENESS IN THE 21ST CENTURY 

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

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS,

                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   ON

 EXAMINING STRENGTHENING AMERICAN COMPETITIVENESS FOR THE 21ST CENTURY

                               __________

                             MARCH 7, 2007

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions


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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

               EDWARD M. KENNEDY, Massachusetts, Chairman

CHRISTOPHER J. DODD, Connecticut     MICHAEL B. ENZI, Wyoming,
TOM HARKIN, Iowa                     JUDD GREGG, New Hampshire
BARBARA A. MIKULSKI, Maryland        LAMAR ALEXANDER, Tennessee
JEFF BINGAMAN, New Mexico            RICHARD BURR, North Carolina
PATTY MURRAY, Washington             JOHNNY ISAKSON, Georgia
JACK REED, Rhode Island              LISA MURKOWSKI, Alaska
HILLARY RODHAM CLINTON, New York     ORRIN G. HATCH, Utah
BARACK OBAMA, Illinois               PAT ROBERTS, Kansas
BERNARD SANDERS (I), Vermont         WAYNE ALLARD, Colorado
SHERROD BROWN, Ohio                  TOM COBURN, M.D., Oklahoma

           J. Michael Myers, Staff Director and Chief Counsel

           Katherine Brunett McGuire, Minority Staff Director

                                  (ii)

  


























                            C O N T E N T S

                               __________

                               STATEMENTS

                        WEDNESDAY, MARCH 7, 2007

                                                                   Page
Kennedy, Hon. Edward M., Chairman, Committee on Health, 
  Education, Labor, and Pensions, opening statement..............     1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, 
  opening statement..............................................     2
    Prepared statement...........................................     3
Murray, Hon. Patty, a U.S. Senator from the State of Washington..     6
Gates, Bill, Chairman, Microsoft Corporation, Seattle, Washington     7
    Prepared statement...........................................    11

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Pascrell, Jr. Hon. Bill, a U.S. Representative from the State 
      of New Jersey..............................................    49
    American Federation of Labor and Congress of Industrial 
      Organizations (AFL-CIO)....................................    50

                                 (iii)

  


       STRENGTHENING AMERICAN COMPETITIVENESS IN THE 21ST CENTURY

                              ----------                              


                        WEDNESDAY, MARCH 7, 2007

                                        U.S. Senate
        Committee on Health, Education, Labor, and Pensions
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:34 a.m. in Room 
SH-216, Hart Senate Office Building, Hon. Edward Kennedy, 
chairman of the committee, presiding.
    Present: Senators Kennedy [presiding], Dodd, Murray, Reed, 
Clinton, Sanders, Brown, Enzi, Gregg, Alexander, Burr, Isakson, 
Hatch, Roberts, and Allard.



                  Opening Statement of Senator Kennedy

    The Chairman. We'll come to order.
    I'll make a very brief opening statement, and then I'll 
recognize our friend, our colleague, our committee member, 
Senator Murray, who will have the honor of presenting our very 
distinguished witness here this morning.
    I'm going to ask my colleague and friend, Senator Enzi, if 
he'd say a word of greeting, as well.
    So, I welcome you here this morning, Mr. Gates. The 
committee is very pleased to have the opportunity to talk to 
you about the critical issues of America's competitiveness. 
We're eager to hear the insights you've gained through your 
leadership of the Microsoft Corporation and through your 
unparalleled philanthropic endeavors which have shed a light on 
the critical issues facing our families, the Nation, and the 
world.
    You and your family are powerful advocates for the 
principle that all people need and deserve the opportunity to 
achieve their full potential, regardless of race, ethnic 
background, or financial means. In fact, today equal 
opportunity is more than a guiding principle for our Nation, 
it's essential to our strength and our prosperity, and we must 
make use of the skills and talents of every American to compete 
and win in today's competitive global economy. We should face 
the future not by lowering American wages, but by increasing 
American skills, to equip our citizens to compete and win in 
the global economy.
    We've met these challenges before. We did it after the 
second World War, with the GI bill. And the GI bill equipped 
the Greatest Generation to build a new peacetime economy. We 
did it after the Sputnik launch, when we trained a new 
generation of Americans in math and science. And we inspired 
millions more to greater and greater innovation when President 
Kennedy challenged us to send a man to the Moon. We can reach 
great heights of innovation yet again.
    To meet these challenges, we must renew our commitment to 
education and job training, give our citizens the skill to spur 
innovation and progress, the No Child Left Behind Act, the 
Higher Education Act, the America Competes Act, the Workforce 
Investment Act, the Head Start Act. All of these matters are 
before this committee this year, and each one is vital to the 
innovation and competitiveness of our Nation.
    To be globally competitive, we need to provide a world-
class education to each and every student, and we must close 
the significant and shameful achievement gap that exists in 
this country. We must also do more to improve math and science 
instruction in our public schools, to encourage more young 
people to become scientists and engineers.
    We passed the No Child Left Behind Act to tackle these 
issues. We're making progress, but we need to make changes to 
the law and make it work better for our schools and our 
children. And we need to provide the resources to support the 
reform.
    Improving education is essential, but it alone isn't 
enough. We must strengthen our commitment to help workers 
adjust to the new economy, particularly those who lost their 
jobs due to trade and those who need training in the 21st-
century skills. We must encourage innovation to support 
industries that will create the new jobs in the future.
    When it comes to innovation, we must look beyond the 
horizon and chart the future. Mr. Gates, you have done that 
throughout your career. We're delighted to have you before our 
committee, and look forward to your testimony.
    I'd ask Senator Enzi, if he would, to say a word, we'll go 
to Patty Murray, and then move on to your thoughts.

                   Opening Statement of Senator Enzi

    Senator Enzi. Mr. Chairman, I thank you for holding this 
hearing. I think it's at a particularly critical time, and Mr. 
Gates is an outstanding person to present.
    This year marks 50 years since Sputnik went up, and that's 
the last time that we really had a huge turmoil in this 
country, worrying about engineering. It had a drastic effect on 
our system of education. It inspired people to be the best.
    Since that time, of course, computers came along and 
stimulated us. I remember some of the early Radio Shack models 
that kids got to play with, and adults admired. And people were 
stimulated to write programs. Now, programs have gone to a 
whole different level from that time. And, in fact, I think one 
of the things kind of stymying kids is how far it has gone. How 
can they possibly do something as complicated as what's out 
there already? Of course, the game industry, kind of, came 
along, and that stimulated a few more to do some different 
things in the computer area. But somehow we've got to have the 
kind of a revolution that got the minds working in that new 
area of innovation. We've got to have more kids that are 
entrepreneurs and risk-takers.
    And so, I admire you for what you've done, and you're a 
great symbol for the country and an inspiration to kids. 
Appreciate the effort that you're making through a lot of 
different programs with your Foundation to make that emphasis. 
Anything we can do to get some more risk-takers and 
entrepreneurs out there will make a difference. And, of course, 
we will have to rely on people from other countries and hope 
that they come here and become a part of the innovation that 
later moves to other countries or that becomes old technology.
    So, thank you. I would ask that my full statement be 
included in the record.
    The Chairman. All statements will be included in the 
record.
    [The prepared statement of Senator Enzi follows:]

                   Prepared Statement of Senator Enzi

    Thank you, Senator Kennedy, for holding this hearing today. 
Employers of all sizes know that a skilled workforce is 
essential to being competitive in the global economy.
    Our businesses must have the workers they will need to be 
competitive. Strengthening America's competitiveness requires 
that students and workers of all ages have the opportunity to 
gain the knowledge and the skills they will need to be 
successful throughout their lives, regardless of their 
background. Education and training are integral to meeting this 
goal.
    A substantial portion of our workforce now finds itself in 
direct competition for jobs with highly motivated and often 
well-educated people from around the world. We can no longer 
afford to ignore that over the past 30 years, one country after 
another has surpassed us in the proportion of their entering 
workforce that has the equivalent of a high school diploma. We 
used to have the best-educated workforce in the world, but that 
is no longer true.
    We must re-build, strengthen and maintain our educational 
pipeline, beginning in elementary school. We need to find ways 
to encourage high school students to stay in school and prepare 
for and enter high-skill fields such as math, science, 
engineering, health, technology and critical foreign languages. 
We must also strengthen the programs that encourage and enable 
citizens of all ages to enroll in postsecondary education 
institutions and obtain or improve knowledge and skills. The 
decisions we make about education and workforce development 
will have a dramatic impact on the economy and our society for 
a long time to come.
    The present situation is discouraging. Every day in the 
United States, 7,000 students drop out of school. We must deal 
with the situation head on--we cannot allow students to 
``waste'' their senior year, and graduate unprepared to enter 
postsecondary education and a workforce focused on skills and 
knowledge. Unless high schools are able to graduate their 
students at higher rates than the 68 to 70 percent they 
currently do, more than 12 million students will drop out 
during the course of the next decade. The result long term will 
be a loss to the Nation of $3 trillion, and as you can imagine, 
even more in terms of the quality of life for those dropouts.
    To remain competitive in a global economy, we cannot afford 
to lose people because they do not have the education and 
training they need to be successful. Thirty years ago the 
United States was proud to claim 30 percent of the world's 
population of college students. Today that proportion has 
fallen to 14 percent and is continuing to fall.
    Demographics are responsible for some of this shift--keep 
in mind that if India alone educates just one-third of its 
population, it will have more educated people than the total 
population of the United States. We have control over whether 
we continue to let so many students fall through the cracks and 
out of the education and training pipeline.
    To be successful in the 21st century economy we need to 
challenge our high school students more, increase high school 
graduation rates, reduce remedial education at the college 
level, increase student retention and completion rates for 
students in college, reduce barriers to adult worker 
participation in postsecondary education and training. Lifetime 
education and training is no longer an option, it is a 
necessity--for individuals, for employers and for the economy.
    Innovation provides a way for individuals to create their 
own jobs or jobs for others. That is one of the primary reasons 
I began my annual free Inventors Conferences in Wyoming in 
2004--to encourage and provide resources to individuals to 
impact the economy with their ideas. Too often, young people in 
Wyoming start thinking at too early an age that they will have 
to leave the State to find a good job. I offered another 
suggestion--create your own product--create your own job. That 
kind of mindset will encourage creativity and begin to tap the 
well of good ideas so many of our State's young people have to 
share. We can attract businesses, but we can grow our own new 
businesses too. Good ideas generate good jobs and that is 
something that will keep our kids at home and attract new 
businesses to our State.
    I have had terrific role models, such as Dean Kamen, speak 
at my conference. I am hosting the Inventors Conference again 
in Wyoming this April. We need to encourage this kind of 
activity because America no longer holds the sole patent on 
innovation. Inspired by our example, countries such as China, 
India and South Korea have invested heavily in education, 
technology and research and development. Billions of new 
competitors are challenging America's economic leadership. In 
2005, foreign-owned companies were a majority of the top 10 
recipients of patents awarded by the U.S. Patent and Trademark 
Office.
    In addition, we need to look at how we address immigration. 
Many people are concerned about illegal immigration and the 
impact legal immigration could have on their employment. Many 
employers have a need for trained and educated employees and 
are unable to fill these positions with domestic employees. The 
companies are often faced with the choice of hiring foreign 
workers or considering moving their operations overseas.
    In the high-tech sector and across the Nation, I believe 
employers must be a partner in ensuring that employees are in 
the United States legally and holding the proper visas and work 
permit. It is clear, however, that the current system is not 
working. The complicated and overly burdensome process for 
visas and permanent residency cards serves as a disincentive to 
both the employer and the employee.
    Initial efforts have been taken to address the problems 
with the H-1B visa process and immigration in general but no 
final action has been set. Congress has considered legislation 
that specifically addresses foreign workers with masters or 
higher degrees from accredited U.S. universities to return or 
stay in the United States. I believe we should continue to work 
on this issue in the context of larger immigration reform as 
well in the context of our international competitiveness.
    While we work to make our domestic workforce better trained 
to fill high-tech jobs, we must ensure that our high-tech 
companies remain in the United States.
    We have our work cut out for us to meet the challenge of 
ensuring that America expands its competitive edge. We need a 
plan. We need to ensure opportunities are available to all 
Americans, because our future depends on widely available and 
extensive knowledge and training and a commitment to 
excellence. Strong partnerships and alignment among K-12 
schools, institutions of higher education, business and 
government will help us meet the needs.
    In the HELP Committee, we are using this opportunity to 
shape policy and strengthen the education and training 
pipeline. Through the reauthorization of Head Start, No Child 
Left Behind, the Higher Education Act and the Workforce 
Investment Act (WIA) we can make sure that every individual has 
access to a lifetime of education and training opportunities 
that provide the knowledge and skills they need to be 
successful and that our employers need to remain competitive.
    As important as education is to the knowledge and skills of 
our workforce, I want to emphasize the need to reauthorize the 
Workforce Investment Act. It strengthens connections with 
economic development, links training to the skill needs of real 
jobs, and supports greater business engagement.
    In a global economy where innovation and technology have 
created an increasing demand for skilled workers, access to 
training that prepares workers to meet these challenges is 
essential. The skills needed to keep current with the 
requirements of the 21st century workplace are changing at an 
ever increasing pace. Workforce development is not only hiring 
the right worker, but knowing how to help them keep current 
with escalating skill requirements and advances in their 
occupations. By helping low-wage workers advance in their jobs, 
entry level jobs will open up and more opportunities will be 
created. Our efforts in reauthorizing the Workforce Investment 
Act must ensure that it achieves this goal and is relevant to 
both employers and workers.
    I look forward to hearing the contribution of our witness 
to this vital conversation.
    The Chairman. Mr. Gates, if Senator Murray doesn't give you 
a good introduction, we'll make sure we find someone up here 
that will.
    [Laughter.]
    The Chairman. But we're confident that she will. As you 
well know, she's been one of the great voices in this 
institution and in our country, in terms of supporting 
innovativeness and creativity and competitiveness.
    Senator Murray, we're so glad to have you----
    Senator Murray. Thank you, Chairman Kennedy.
    The Chairman [continuing]. As well as our veterans, I might 
add.
    Thank you.

                      Statement of Senator Murray

    Senator Murray. Thank you.
    Chairman Kennedy, Ranking Member Enzi, members of the 
committee, when it comes to making our country more 
competitive, improving our schools, and preparing our 
workforce, we face real challenges today. Those challenges 
require innovative solutions, and that's why I'm so pleased to 
welcome to the Senate one of the most innovative thinkers of 
our time, Bill Gates.
    We all know about his work launching Microsoft, back in 
1975, and turning it into one of America's most successful 
companies. Microsoft software is used here in the Senate, on 
most of the PCs around the world, and increasingly on servers, 
mobile phones, and broadband networks.
    We're also familiar with his visionary work through the 
Bill and Melinda Gates Foundation, which has quickly become a 
global leader in the philanthropy, protecting and saving 
millions of lives around the world.
    From my work with him over the years, I've seen firsthand 
his commitment to making our country more competitive. Over the 
years, he's tackled these issues from several perspectives. As 
the leader of a high-tech company, he's familiar with the 
challenges of finding highly skilled workers. He's supported 
educational programs and training partnerships with schools and 
the private sector. And he understands how technology can help 
move us toward a system of lifelong learning that reflects the 
reality of tomorrow's economy.
    As the head of a major foundation, he's invested in 
education and workforce solutions in the United States and 
around the world. His analysis of our high school system has 
been provocative and thought-provoking. As someone who helped 
develop the tools of our knowledge economy, he's working to 
make sure that all Americans can benefit from the opportunities 
that technologies offer.
    Personally, I can tell you he's done so much to support the 
economy and workers in my home State, where Microsoft and Gates 
Foundation are pillars of our community.
    I am very pleased that he's agreed to share his insights 
with us here in the Senate today. And I really want to thank 
him for his leadership, vision, and eagerness to help us 
address the challenges that are facing our country.
    Thank you very much.
    And welcome to the Senate, Bill.
    The Chairman. Mr. Gates, we have a rule about having our 
testimony from our witnesses, usually 24 hours. You have broken 
that rule. You got yours here a week ago.
    [Laughter.]
    The Chairman. And we thank you. It gives us an idea, again, 
of efficiency, and we thank you very much for--it's a very 
extensive testimony, let me add----
    Mr. Gates. Thank you.
    The Chairman [continuing]. And valuable.
    Thank you.
    Mr. Gates. Should I go ahead?
    The Chairman. You may proceed.
    Mr. Gates. Thank you.

   STATEMENT OF BILL GATES, CHAIRMAN, MICROSOFT CORPORATION, 
                      SEATTLE, WASHINGTON

    Mr. Gates. Well, thank you, Senator Murray, for that kind 
introduction and for your leadership on education and so many 
other issues that are important to Washington State and the 
Nation.
    Chairman Kennedy, Ranking Member Enzi, members of the 
committee, I'm Bill Gates. I'm the chairman of Microsoft 
Corporation. I'm also a co-chair with my wife, Melinda, of the 
Bill and Melinda Gates Foundation. It's an honor for me to 
appear before you today and to share my thoughts on the future 
of American competitiveness.
    Any discussion of competitiveness in the 21st century must 
begin by recognizing the central role that technology and 
innovation play in today's economy. The United States has a 
great deal to be proud of in this respect. Many of the most 
important advances in computing, healthcare, 
telecommunications, manufacturing, and many other fields have 
originated here in the United States. Yet, when I reflect on 
the state of American competitiveness, my feeling of pride is 
mixed with deep anxiety. Too often, it seems, we're content to 
live off the investments previous generations made and that 
we're failing to live up to our obligation to make the 
investments needed to make sure the United States remains 
competitive in the future. We know we must change course, but 
we have yet to take the necessary steps.
    In my view, our economic future is in peril unless we take 
three important steps.
    First, we must equip America's students and workers with 
the knowledge and skills they need to succeed in today's 
economy.
    Second, we need to reform our immigration policies for 
high-skilled workers so that we can be sure our workforce 
includes the world's most talented people.
    And third, we need to provide a foundation for future 
innovation by investing in new ideas, and providing the 
framework for capturing their value.
    Today, I would like to address these three priorities.
    First and foremost, the United States cannot maintain its 
economic leadership unless our workforce consists of people who 
have the knowledge and skills needed to drive innovation. The 
problem starts in our schools with the great failure taking 
place in our high schools.
    Consider the following facts. The United States has one of 
the lowest high school graduation rates in the industrialized 
world. Three out of ten ninth-graders do not graduate on time. 
Nearly half of all African-American and Hispanic ninth-graders 
do not graduate within 4 years. Of those who do graduate and 
continue on to college, nearly half have to take remedial 
courses on material they should have learned in high school.
    Unless we transform the American high school, we'll limit 
the economic opportunity for millions of Americans. As a 
Nation, we should start with the goal of every child in the 
United States graduating from high school. To achieve this 
goal, we need to adopt more rigorous standards and set clear 
expectations. We must collect data that will enable students, 
parents, and teachers to improve performance. And if we are 
going to demand more from our students, we'll need to expect 
more from teachers. In turn, we must provide teachers the 
support they need, and we must be willing to reward those who 
excel. The Teacher Incentive Fund is an important first step.
    Making these changes will be hard, but positive change is 
achievable. I know this through my work with the Gates 
Foundation and our education partnerships throughout the 
country, and through Microsoft's education initiatives, 
including in our Partners in Learning Program. I mentioned 
several examples of progress in my written testimony, but let 
me mention three, in particular.
    The Philadelphia School District joined with Microsoft to 
create a 750-student School of the Future, which opened last 
September. This public high school is rooted in the vision of 
an empowered community where education is continuous, relevant, 
adaptive, and incorporates best-in-class technology in every 
area of learning.
    Second, New York City has opened almost 200 new schools in 
the last 5 years, with many replacing the city's most 
underperforming schools. Our Foundation supports this effort 
through advocacy and grantmaking. The first set of new schools 
achieved an average 79-percent graduation rate, compared to 
graduate rates ranging from 31 to 51 percent at the schools 
they replaced.
    Early-college high schools are perhaps the most innovative 
initiative underway nationally. The approach is to recruit low-
performing students to attend high schools that require 
enrollment in college courses. The results are astounding. 
Currently, there are more than 125 early-college high schools 
in operation around the country. So far, more than 95 percent 
of the first class of ninth-graders of the original three early 
high schools have graduated, and over 80 percent of students 
have been accepted into 4-year colleges.
    Such pockets of success are exciting, but they're just the 
start. Transforming our education system will take political 
leadership, broad public commitment, and hard work. This 
committee has done very important work in this regard. And, as 
you consider legislation during this Congress, there are 
opportunities to build on this work.
    The challenges are great, but we cannot put them aside. 
That is why our Foundation has joined with the Broad Foundation 
to support the Strong American Schools Partnership. This is 
intended to inspire American people to join an effort that 
demands more from our leaders and educators on ensuring that 
our children benefit from good teachers, high expectations, and 
challenging coursework.
    A specific area where we're failing is in math and science 
education. In my written testimony, I detail concerns about the 
alarming trends in elementary and secondary schools. We cannot 
sustain an economy based on innovation unless we have citizens 
well educated in math, science, and engineering. Our goal 
should be to double the number of science, technology, and 
mathematics graduates in the United States by 2015. This will 
require both funding and innovative ideas. We must renew and 
reinvigorate math and science curricula with engaging, relevant 
content.
    For high schools, we should aim to recruit 10,000 new 
teachers and strengthen the skills of the existing teachers. To 
expand enrollment in postsecondary math and science programs, 
each year we should provide 25,000 new undergraduate 
scholarships and 5,000 graduate scholarships.
    America's young people must come to see science and math 
degrees as key to opportunity. If we fail at this, we won't be 
able to compete in the global economy.
    Even as we need to improve our schools and universities, we 
cannot lose sight of the need to upgrade the skills of people 
already in our workforce. Federal, State, and local governments 
and industry need to work together to prepare all of our 
workers for the jobs required in the knowledge economy. In the 
written testimony, I highlight some of Microsoft's work during 
the past decade to provide IT skills training to United States 
workers, such as our Unlimited Potential Program. We're working 
with other companies, industry associations, and State agencies 
to build a workforce alliance that will promote the digital 
skills needed to strengthen U.S. competitiveness.
    As a Nation, our goal should be to ensure that, by 2010, 
every job-seeker in the U.S. workforce can access the education 
and training they need to succeed in the knowledge economy.
    The second area I want to--one I want to particularly 
underscore today--is the need to attract top science and 
engineering talent from around the globe to study, live, and 
work in the United States. America's always done its best when 
we bring the best minds to our shores. Scientists, like Albert 
Einstein, were born abroad, but did great work here, because we 
welcomed them. The contributions of such powerful intellects 
has been vital to many of the great breakthroughs made here in 
America.
    Now we face a critical shortage of scientific talent, and 
there's only one way to solve that crisis today. Open our doors 
to highly talented scientists and engineers who want to live, 
work, and pay taxes here. I cannot overstate the importance of 
overhauling our high-skilled immigration system. We have to 
welcome the great minds in this world, not shut them out of our 
country.
    Unfortunately, our immigration policies are driving away 
the world's best and brightest, precisely when we need them the 
most. The fact is that the terrible shortfall in the visa 
supply for highly skilled scientists and engineers stems from 
visa policies that have not been updated in more than 15 years. 
We live in a different economy now, and it makes no sense to 
tell well-trained, highly-skilled individuals, many of whom are 
educated at our top universities, that they're not welcome 
here.
    I see the negative effect of these policies every day at 
Microsoft. In my written testimony, I discuss some of the 
shortfalls of the current system.
    For 2007, the supply of H-1B visas ran out 4 years before 
the fiscal year even began. For 2008, they will run out even 
earlier, well before degree candidates graduate. So, for the 
first time ever, we will not be able to seek H-1Bs for this 
year's graduating students. The wait times for green cards 
routinely reach 5 years, and are even longer for scientists and 
engineers from India and China, key recruiting grounds for 
skilled, technical professionals.
    The question we must ask is, How do we create an 
immigration system that supports the innovation that drives 
American growth, economic opportunity, and prosperity? Congress 
can answer that question by acting immediately in two 
significant ways. First, we need to encourage the best students 
from abroad to enroll in our colleges and universities, and to 
remain here when they finish their studies. Today, we take 
exactly the opposite approach.
    Second, we should expedite the path into our workforce and 
into permanent-resident status for highly-skilled workers. 
These employees are vital to American competitiveness, and we 
should encourage them to become permanent U.S. residents. They 
can drive innovation and economic growth alongside America's 
native-born talent.
    Finally, maintaining American competitiveness requires that 
we invest in research and reward innovation. Our Nation's 
current economic leadership is a direct result of investments 
that previous generations made in scientific research, 
especially through public funding of projects in government and 
university research laboratories.
    American companies have capitalized on these innovations, 
thanks to our world-class universities, innovative policies on 
technology transfer, and pro-investment tax rules. These 
policies have driven a surge in private-sector research and 
development.
    While private-sector research and development is important, 
Federal research funding is vital. Unfortunately, while other 
countries and regions, such as China and the European Union, 
are increasing their public investment in R&D, Federal research 
spending in the United States is not keeping pace. To address 
this problem, I urge Congress to take action.
    The Federal Government should increase funding for basic 
scientific research. Recent expansion of the research budgets 
at the Department of Energy and National Science Foundation is 
commendable, but more must be done. We should also increase 
funding for basic research by 10 percent annually for the next 
7 years.
    Second, Congress should increase and make permanent 
private-sector tax credits for R&D. The United States ranks 
17th among OECD nations in the tax treatment of R&D. Without a 
renewed commitment to R&D tax credits, we may drive innovative 
companies to locate their R&D operations outside the United 
States.
    We must also reward innovators. This means ensuring that 
inventors can obtain intellectual property protection for their 
innovations, and enforce those rights in the marketplace.
    America is fortunate that our leaders recognize the 
importance of intellectual property protection at home and 
abroad. I know I join many other Americans in thanking this 
Congress and this Administration for their tireless efforts to 
promote such protection.
    The challenges confronting Americans--America's 
competitiveness and technological leadership are among the 
greatest we have faced in our lifetime. I recognize that 
conquering these challenges will not be easy, but I firmly 
believe that, if we succeed, our efforts will pay rich 
dividends for all Americans. We've had the amazing good fortune 
to live through a period of incredible innovation and 
prosperity. The question before us today is, Do we have the 
will to ensure that the generation that follows will also enjoy 
the benefits that have come with economic leadership? We must 
not squander this opportunity to secure America's continued 
competitiveness and prosperity.
    Thank you, again, for this opportunity to testify. I 
welcome your questions on these topics.
    [The prepared statement of Mr. Gates follows:]
                    Prepared Statement of Bill Gates
    Chairman Kennedy, Ranking Member Enzi, honorable members of the 
committee, my name is Bill Gates and I am Chairman of Microsoft 
Corporation. I am also a co-chair, with my wife Melinda, of the Bill & 
Melinda Gates Foundation. It is an honor for me to appear before you 
today to share my thoughts on the future of American education, the 
development of our workforce, and other policies necessary to ensure 
America's continued competitiveness in the global economy.
    Any discussion of competitiveness in the 21st century must, in my 
view, begin by recognizing the central role of technology and 
innovation. Having spent the last 30 years as the head of one of the 
world's leading software companies, I am continually astounded at the 
tremendous potential for technology to improve people's lives. My faith 
that technology can help transform lives has only been strengthened 
through my work with the Gates Foundation, which focuses on funding 
innovative solutions in health care and education in order to reduce 
inequities in the United States and around the world.
    When it comes to innovation, America has a great deal of which to 
be proud. Many of the greatest advances in computing originated in 
America's research labs, public and private. These technologies have 
helped America achieve unprecedented gains in productivity and real 
wage growth.\1\ American companies are global leaders in producing 
innovative pharmaceuticals, and our biotechnology industry is the envy 
of the world.\2\
---------------------------------------------------------------------------
    \1\ For a recent report on the impact of information technology 
innovations on U.S. productivity and economic growth, see Robert D. 
Atkinson & Andrew S. McKay, The Information Technology & Innovation 
Foundation, Digital Prosperity: Understanding the Economic Benefits of 
the Information Technology Revolution, Jan. 2007.
    \2\ I witness the impact of these innovations every day in my work 
with the Gates Foundation. The Foundation is working with dozens of 
leading research institutions and biotechnology and pharmaceutical 
companies, many located in the United States, to develop innovative 
vaccines for HIV, malaria, and a host of other developing world 
illnesses. More information about the Gates Foundation's work on global 
health issues is available on its website: http://
www.gatesfoundation.org/GlobalHealth.
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    In these and other areas--energy, transportation, 
telecommunications, financial services, manufacturing, agriculture, and 
many others--the achievements borne of American ingenuity and 
inventiveness have fueled unprecedented prosperity and improved the 
lives of people everywhere. America will need every ounce of this 
ingenuity as it confronts the challenges of this century: climate 
change, energy independence, national security, rising health care 
costs for an aging population, and the emergence of new innovative 
economies in Asia and elsewhere.
    When I reflect on the State of American competitiveness today, my 
immediate feeling is not only one of pride, but also of deep anxiety. 
Too often, we as a society are sacrificing the long-term good of our 
country in the interests of short-term gain. Too often, we lack the 
political will to take the steps necessary to ensure that America 
remains a technology and innovation leader. In too many areas, we are 
content to live off the investments that previous generations made for 
us--in education, in health care, in basic scientific research--but are 
unwilling to invest equal energy and resources into building on this 
legacy to ensure that America's future is as bright and prosperous as 
its present.
    America simply cannot continue along this course. We must invest 
now to secure our economic and technological leadership for the future. 
In my view, we will lose this leadership unless we take three important 
steps:
     First, we must ensure that America's students and workers 
have the skills necessary to compete in a digital economy by providing 
them with the necessary educational opportunities and resources. A top 
priority must be to reverse our dismal high school graduation rates--
with a target of doubling the number of young people who graduate from 
high school ready for college, career, and life--and to place a major 
emphasis on encouraging careers in math and science. We must also focus 
far more of our energies on upgrading the skills of Americans already 
in the workforce.
     Second, we need to attract and retain the brightest, most 
talented people from around the world. This will not happen until we 
reform our immigration policies for highly skilled workers. America 
should be doing all it can to attract the world's best and brightest. 
Instead, we are shutting them out and discouraging those already here 
from staying and contributing to our economic prosperity.
     Third, we need to provide a foundation for innovation by 
investing in ideas and capturing their value. The public sector in 
particular needs to continue to increase investments in R&D, especially 
in basic scientific research, to complement the R&D of the private 
sector and address new challenges. The R&D tax credit, which provides a 
critical, proven incentive for companies to increase their investment 
in U.S.-based research and development, needs to be made permanent. We 
also need a legal framework that rewards innovation.

I. Providing 21st Century Educational & Training Opportunities

    America cannot maintain its innovation leadership if it does not 
educate world-class innovators and train its workforce to use 
innovations effectively. Unfortunately, available data suggest that we 
are failing to do so--in our math and science programs, in our job 
training programs, and especially in our high schools.
A. Improving America's High Schools
    America's greatest educational shortcoming today is what for much 
of our history was its greatest pride: our public schools. American 
schools have long been the cornerstone of this country's fundamental 
belief that all people have equal value and deserve an equal 
opportunity to lead productive lives. Yet all of the evidence indicates 
that our high schools are no longer a path to opportunity and success, 
but a barrier to both.
    Our current expectations for what our students should learn in 
school were set 50 years ago to meet the needs of an economy based on 
manufacturing and agriculture. We now have an economy based on 
knowledge and technology. Despite the best efforts of many committed 
educators and administrators, our high schools have simply failed to 
adapt to this change. As any parent knows, however, our children have 
not--they are fully immersed in digital culture.
    As a result, while most students enter high school wanting to 
succeed, too many end up bored, unchallenged and disengaged from the 
high school curriculum--``digital natives'' caught up in an industrial-
age learning model. Many high school students today either drop out or 
simply try to get by. For those who graduate, many lack the skills they 
need to attend college or to find a job that can support a family. 
Until we transform the American high school for the 21st century, we 
will continue limiting the lives of millions of Americans each year. 
The cost of inaction substantially increases each year that we fail to 
act. Consider the following facts:
    America has one of the lowest high school graduation rates in the 
industrialized world. According to a study released by Education Week, 
three out of every 10 ninth-grade students will not graduate on time 
and about half of all African-American and Hispanic ninth graders will 
not earn a diploma in 4 years. Of those who do graduate and continue on 
to college, over a quarter have to take remedial courses on material 
they should have learned in high school. Employers complain that high 
school graduates today lack the basic writing and analytic skills 
required to succeed even in entry level positions.
    Every student in America should graduate from high school ready for 
college, career and life. Every child. No exceptions. Whether they are 
going off to college or into the work force or a combination of the 
two, it is the responsibility of public education to give our young 
people the skills, knowledge and preparation for life they need and 
deserve.
    As we work toward this goal, I would urge Congress to place an 
equal focus on standards, measurements and data, and additional support 
for students and teachers. Educational standards have one central 
purpose--to ensure that students make the most of their abilities. For 
our country and our young people to be successful, all students should 
have access to schools and courses that prepare them for college, 
career and life. Many State standards in place today are unacceptably 
low.
    For instance, only about half of our States require students to 
take 3 or 4 years of math to graduate from high school. Eight States do 
not set any math course requirements. Furthermore, in many States, any 
math course counts toward that requirement, as if consumer math were 
the same as calculus. If high standards encourage young people to make 
the most of their talents, then low standards discourage them from 
doing so--and right now, that is our predominant policy. I applaud the 
commitments made by more than 30 governors to raise their States' math 
and literacy standards and ensure K-12 policies help students meet the 
demands of college and work. I commend the President and Secretary of 
Education for their call for rigorous coursework and the members of 
this committee for their tireless attention to these issues. We need to 
continue to support these efforts by offering incentives for States to 
adopt higher standards.
    We also must understand how well our schools and students are 
performing relative to these standards. Data collection systems must be 
transparent and accurate so that we can understand what is working and 
what isn't and for whom. Therefore, we need data by race and income. I 
urge this committee to support the creation of a Center for State 
Education Data, which will serve as a national resource for State 
education data and will provide one-stop access for education research 
and policymakers, along with a public Web site to streamline education 
data reporting. But we can't just collect data. We also need to use the 
data we collect to implement change, including by personalizing 
learning to make it more relevant and engaging for students--and 
thereby truly ensure that no child is left behind.
    We also need to accurately define and measure graduation rates. 
Currently, States use a variety of different methods for calculating 
graduation rates. There is no universally accepted standard that would 
allow easy comparisons between States or school districts. Recently, 
the governors of all 50 States took a big step to correct this problem 
by signing the National Governors Association's Graduation Rate 
Compact, which commits them to adopt accurate and consistent 
measurements. Federal policies should provide incentives for States to 
meet this important goal.
    If we are going to demand more from our students and teachers, then 
it is our obligation to provide them with the support they need to meet 
the challenge. All students--regardless of age, grade level, gender, or 
race--do better when they are supported by a good teacher. Committed, 
quality teachers are the lynchpin of a good educational system, and 
those that excel--especially in challenging schools or in high-need 
subjects like math and science--should be rewarded. The Teacher 
Incentive Fund is an important first step in ensuring that teachers are 
rewarded, valued and respected as they would be in my company or in any 
other organization. This program should be made permanent through 
authorization.
    We also need to take steps to ensure that curricula are engaging 
and relevant to students' current needs. A model for this is the 
Partnership for 21st Century Skills, of which Microsoft is a member. 
This unique partnership of education, government, and business leaders 
seeks to help schools adapt their curricula and classroom environments 
to align more closely with the skills that students need to succeed in 
the 21st century economy, such as communication and problem-solving 
skills.
    Finally, we must also ensure that our struggling students have more 
opportunities for in-depth learning and personal attention. This means 
more quality learning time in schools, access to high-quality learning 
materials, after school enrichment programs, and tutors.
    Making these changes will be hard, but not impossible. This 
committee has done important work in this regard through the No Child 
Left Behind legislation. The reauthorization of No Child Left Behind 
offers Congress an opportunity to build on this work and address the 
other critical issues I have highlighted. I know these changes are 
possible in part through my work with the Gates Foundation, which has 
invested over $1.5 billion in partnership with nonprofits, school 
districts, States, the private sector and others, to improve high 
school education, including the support of more than 1,800 high-quality 
high schools in 40 States and the District of Columbia. Microsoft has 
likewise made deep investments in education, especially through our 
Partners in Learning program. That program creates partnerships to 
provide resources to educators focused on leadership development and 
holistic learning reform. One of the program's flagship initiatives has 
been our collaboration with the School District of Philadelphia to 
build a ``School of the Future''--bringing innovation to all areas of 
high school redesign, including instruction, technology integration, 
hiring and professional development, and building design.
    I would like to mention three other initiatives in particular that 
demonstrate what can be achieved:
     New York City has opened close to 200 new schools in the 
last 5 years with many replacing some of the city's most 
underperforming schools. The first set of new schools achieved an 
average 79 percent graduation rate compared to graduation rates ranging 
from 31 to 51 percent at the schools they replaced.
     Boston's business, education and civic leaders have made a 
commitment to dramatically increase the number of young people ready 
for college and career. A winner of the Broad Prize this year, Boston 
has increased math scores on the fourth and eighth grade National 
Assessment of Educational Progress at a faster rate than other large 
American cities participating in NAEP's Trial Urban District 
Assessment. The number of AP math and English exams taken by minority 
students is up more than 200 percent for Latino students and 78 percent 
for African-Americans since 2002.
     Early College High Schools are perhaps the most innovative 
and groundbreaking initiative underway nationally and show all of us 
what we can do if we think differently. The early college model is 
counter-intuitive to most, at least initially. The approach is to 
recruit traditionally low-performing, struggling students to attend 
high schools that require enrollment in college courses. The schools 
provide the corresponding support and guidance for students to graduate 
with 2 years of college credit and/or an associate's degree. Today, 
there are more than 125 early college high schools in operation in over 
20 States, and there are plans to open up to 45 more by 2008. So far, 
among the first class of ninth graders at the original three Early 
College high schools, over 95 percent graduated with a high school 
diploma, over 57 percent have earned an associate's degree, and over 80 
percent have been accepted into 4-year colleges.
    I encourage all of you to visit any of these school models or 
districts and see this innovation first hand.
    These pockets of success are exciting. But they alone cannot 
transform our education systems. Doing that will take political and 
public will. When people learn about the problems with our high 
schools, and they hear about the possibility of success, they demand 
change. That is why the Gates Foundation has joined with the Broad 
Foundation to support the Strong American Schools Partnership. This 
Partnership, which will be formally launched later this month, is 
intended to express America's shared vision that we need to demand more 
for our children now so that they will be more prepared and more 
successful as adults.
B. Promoting Math and Science Education
    Another area where America is falling behind is in math and science 
education. We cannot possibly sustain an economy founded on technology 
pre-eminence without a citizenry educated in core technology 
disciplines such as mathematics, computer science, engineering, and the 
physical sciences. The economy's need for workers trained in these 
fields is massive and growing. The U.S. Department of Labor has 
projected that, in the decade ending in 2014, there will be over 2 
million job openings in the United States in these fields. Yet in 2004, 
just 11 percent of all higher education degrees awarded in the United 
States were in engineering, mathematics, and the physical sciences--a 
decline of about a third since 1960.
    Recent declines are particularly pronounced in computer science. 
The percentage of college freshmen planning to major in computer 
science dropped by 70 percent between 2000 and 2005.\3\ In an economy 
in which computing has become central to innovation in nearly every 
sector, this decline poses a serious threat to American 
competitiveness. Indeed, it would not be an exaggeration to say that 
every significant technological innovation of the 21st century will 
require new software to make it happen.
---------------------------------------------------------------------------
    \3\ Jay Vegso, Drop in CS Bachelor's Degree Production, Computing 
Research News, March 2006, available at: http://www.cra.org/CRN/
articles/march06/vegso.html.
---------------------------------------------------------------------------
    The problem begins in high school. International tests have found 
our fourth graders among the top students in the world in science and 
above average in math. By eighth grade, they have moved closer to the 
middle of the pack. By 12th grade, U.S. students score near the bottom 
of all industrialized nations. Too many students enter college without 
the basics needed to major in science and engineering. Part of our 
effort to transform the American high school for the 21st Century must 
focus on reversing this trend and improving education in math and 
sciences.
    I believe our schools can do better. High schools are emerging 
around the country that focus on math and science, and they are 
successfully engaging students who have long been underrepresented in 
these fields--schools like the School of Science and Technology in 
Denver, Aviation High School in Seattle, and University High School in 
Hartford, Connecticut. These schools have augmented traditional 
teaching methods with new technologies and a rigorous, project-centered 
curriculum, and their students know they are expected to go on to 
college. This combination is working to draw more young people, 
especially more African-American and Hispanic young people, to study 
math and science.
    Schools are also partnering with the private sector to strengthen 
secondary school math and science education, and I want to mention one 
recent initiative in particular with which Microsoft has been involved. 
It is called the Microsoft Math Partnership, and it is a public-private 
initiative designed to focus new attention on improving middle-school 
math education. Although the program is currently focused on schools in 
Washington State, we believe this Partnership provides a sound model 
for public-private sector efforts across America.
    To remain competitive in the global economy, we must build on the 
success of these schools and initiatives and commit to an ambitious 
national agenda for high school education. But we also must focus on 
postsecondary education. College and graduate students are simply not 
obtaining science, technology, engineering, and mathematics (``STEM'') 
degrees in sufficient numbers to meet demand. The number of 
undergraduate engineering degrees awarded in the United States fell by 
about 17 percent between 1985 and 2004.
    This decline is particularly alarming when we look at educational 
trends in other countries. In other countries, a much greater 
percentage of college degrees are in engineering than in the United 
States.\4\ If current trends continue, a significant percentage of all 
scientists and engineers in the world will be working outside of the 
United States by 2010.\5\
---------------------------------------------------------------------------
    \4\ National Science Foundation, http://www.nsf.gov/statistics/
seind06/append/c2/at02-38.xls.
    \5\ Hannah Beech, Asia's Great Science Experiment, Time Magazine, 
October 23, 2006, available at: http://www.time.com/time/magazine/
article/0,9171,1549364,00.html.
---------------------------------------------------------------------------
    For years, the decline in the percentage of graduate degrees 
awarded to American students in science, technology, engineering, and 
math was offset by an increase in the percentage of foreign students 
obtaining these degrees.\6\ But new security regulations and our 
obsolete immigration system--which I will address in a moment--are 
dissuading foreign students from studying in the United States. 
Consider this: applications to U.S. graduate schools from China and 
India have declined and fewer students are taking the Graduate Record 
Exam required for most applicants to U.S. graduate schools.\7\ The 
message here is clear: We can no longer rely on foreign students to 
ensure that America has enough scientists and engineers to satisfy the 
demands of an expanding economy.
---------------------------------------------------------------------------
    \6\ A recent study concluded that roughly 43 percent of computer 
science and engineering degree recipients are nonresident aliens. See 
Kessler, supra note 4.
    \7\ Id.
---------------------------------------------------------------------------
    Tackling this problem will require determination by government and 
support by industry. The goal should be to ``double the number of 
science, technology, and mathematics graduates by 2015.'' \8\ Achieving 
this goal will require both funds and innovative ideas. For high 
schools, we should aim to recruit 10,000 new science and mathematics 
teachers annually and strengthen the skills of existing teachers. To 
expand enrollment in postsecondary math and science programs, we should 
provide 25,000 new 4-year, competitive undergraduate scholarships each 
year to U.S. citizens attending U.S. institutions and fund 5,000 new 
graduate fellowships each year. America's young people must come to see 
STEM degrees as opening a window to opportunity. If we fail at this, we 
simply will be unable to compete with the emerging innovative 
powerhouses abroad.
---------------------------------------------------------------------------
    \8\ The Business Roundtable, Tapping America's Potential: The 
Education for Innovation Initiative, July 2005, http://
www.businessroundtable.org/pdf/20050727002TAPStatement.pdf.
---------------------------------------------------------------------------
C. Greater Opportunities for Job Training
    Even as we work to improve educational opportunities in our school 
systems and universities, we cannot lose sight of the need to 
constantly upgrade and enhance the skills and expertise of those people 
already in our workforce. Securing America's global competitiveness 
requires not only a highly educated pool of innovators, but also a 
workforce that is equipped with the skills necessary to use technology 
effectively. In today's economy, that means a high degree of basic 
literacy, an increasing level of computing skills, and the ability to 
create, analyze and communicate knowledge.
    Over the next several years, 6 out of every 10 new jobs will be in 
professional and service-related occupations.\9\ Given the state of our 
educational system, it is not surprising that U.S. companies are 
reporting serious shortages of skilled workers.\10\ According to a 2005 
U.S. Department of Education study, only 13 percent of American adults 
are proficient in the knowledge and skills needed to search, comprehend 
and use information, or to perform computational tasks.\11\ This 
yawning gap between America's economic needs and the skills of its 
workforce indicates that as a nation we are not doing nearly enough to 
equip and continuously improve the capabilities of American workers.
---------------------------------------------------------------------------
    \9\ Daniel Hecker, Occupational Employment Projections to 2014, 
Monthly Labor Review, November 2005, at 70, 71, http://www.bls.gov/
opub/mlr/2005/11/art5full.pdf.
    \10\ See, e.g., Phyllis Eisen, et al., 2005 Skills Gap Report--A 
Survey of the American Manufacturing Workforce, December 2005, http://
www.nam.org/s--nam/bin.asp?CID=202426&DID=
235731&DOC=FILE.PDF.
    \11\ National Center for Education Statistics, U.S. Department of 
Education, National Assessment of Adult Literacy: A First Look at the 
Literacy of America's Adults in the 21st Century, December 2005, at 4, 
http://nces.ed.gov/NAAL/PDF/2006470.PDF.
---------------------------------------------------------------------------
    Part of this task must fall to the private sector. For its part, 
Microsoft over the past decade has launched a range of both commercial 
and philanthropic programs aimed at providing IT skills training to 
U.S. workers. Our commercial offerings include the Microsoft Learning 
program, which provides IT skills training and certification in 
cooperation with hundreds of commercial partners, and the Microsoft IT 
Academy, which provides online IT training programs and other resources 
to accredited educational institutions across the United States.
    But several years ago, we decided to focus our community outreach 
programs to support training in basic computing and Internet skills--a 
program we call Unlimited Potential. Through this program, we provide 
the curriculum, software and grants to support digital skills training 
in community learning centers run by government and nongovernment 
agencies throughout the country and around the world. For example, last 
year, Microsoft partnered with the U.S. Department of Labor to provide 
$3.5 million in cash and software to 20 of the Department's One-Stop 
Career Centers located throughout the country. We also donated our 
innovative Digital Literacy curriculum to those Centers to advance 
their technology training mission. We have similar partnerships with 
the Boys and Girls Clubs, the National Urban League and with many 
development agencies and NGOs in more than 100 countries.
    In combination with our parallel program for school-based training, 
Partners in Learning, our ambition is to reach a quarter of a billion 
people by the end of this decade. Meanwhile, we have begun reaching out 
to other companies, industry associations and State agencies to build a 
workforce alliance that will promote the digital skills needed to 
compete in a wide range of industry and service sectors.
    As a Nation, our goal should be to ensure that, by 2010, every job 
seeker, every displaced worker, and every individual in the U.S. 
workforce has access to the education and training they need to succeed 
in the knowledge economy. This means embracing the concept of 
``lifelong learning'' as part of the normal career path of American 
workers, so that they can use new technologies and meet new challenges. 
Neither industry nor government can achieve these goals if we act 
alone. Federal, State, and local governments must help to prepare all 
of our workers for the jobs required in a knowledge economy. Workforce 
enhancement should be treated as a matter of national competitive 
survival. It is a down-payment on our future, an extremely vital step 
to secure American competitiveness for future generations and to honor 
the American ideal that every single one of us deserves the opportunity 
to participate in America's success.

II. Attracting and Retaining the World's Best and Brightest

    For generations, America has prospered largely by attracting the 
world's best and brightest to study, live and work in the United 
States. Our success at attracting the greatest talent has helped us 
become a global innovation leader, enriched our culture, and created 
economic opportunities for all Americans.
    Unfortunately, America's immigration policies are driving away the 
world's best and brightest precisely when we need them most. I 
appreciate the vital national security goals that motivate many of 
these policies. I am convinced, however, that we can protect our 
national security in ways that do less damage to our competitiveness 
and prosperity. Moreover, the terrible shortfall in our visa supply for 
the highly skilled stems not from security concerns, but from visa 
policies that have not been updated in over a decade and a half. We 
live in a different economy now. Simply put: It makes no sense to tell 
well-trained, highly skilled individuals--many of whom are educated at 
our top colleges and universities--that the United States does not 
welcome or value them. For too many foreign students and professionals, 
however, our immigration policies send precisely this message.
    This should be deeply troubling to us, both in human terms and in 
terms of our own economic self-interest. America will find it 
infinitely more difficult to maintain its technological leadership if 
it shuts out the very people who are most able to help us compete. 
Other nations are recognizing and benefiting from this situation. They 
are crafting their immigration policies to attract highly talented 
students and professionals who would otherwise study, live, and work 
here. Our lost opportunities are their gains.
    I personally witness the ill effects of these policies on an almost 
daily basis at Microsoft. Under the current system, the number of H-1B 
visas available runs out faster and faster each year. The current base 
cap of 65,000 is arbitrarily set and bears no relation to U.S. 
industry's demand for skilled professionals. For fiscal year 2007, the 
supply did not last even 8 weeks into the filing period, and ran out 
more than 4 months before that fiscal year even began.
    For fiscal year 2008, H-1Bs are expected to run out next month, the 
first month that it is possible to apply for them. This means that no 
new H-1B visas--often the only visa category available to recruit 
critically needed professional workers--will be available for a nearly 
18-month period. Moreover, this year, for the first time in the history 
of the program, the supply will run out before the year's graduating 
students get their degrees. This means that U.S. employers will not be 
able to get H-1B visas for an entire crop of U.S. graduates. We are 
essentially asking top talent to leave the United States.
    As with H-1B visas, the demand for green cards far exceeds the 
supply. Today, only 140,000 permanent employment-based visas are 
available each year, which must cover both key employees and their 
family members. There is a massive backlog in many of the employment-
based green card categories, and wait times routinely reach 5 years. 
Ironically, waiting periods are even longer for nationals of India and 
China--the very countries that are key recruiting grounds for the 
professionals desperately needed in many innovative fields.
    In the past, we have succeeded in attracting the world's best and 
brightest to study and work in the United States, and we can and must 
do it again. We must move beyond the debate about numbers, quotas, and 
caps. Rather, I urge Congress to ask, ``How do we create a system that 
supports and sustains the innovation that drives American growth, 
economic opportunity and prosperity?'' Congress can answer that 
question by acting immediately in two significant ways.
    First, we need to encourage the best students from abroad to enroll 
in our colleges and universities, and to remain in the United States 
when their studies are completed. Today, we take exactly the opposite 
approach. Foreign students who apply for a student visa to the United 
States today must prove that they do not intend to remain here once 
they receive their degrees. This makes no sense. If we are going to 
invest in educating foreign students--which we should and must continue 
to do--why drive them away just when this investment starts to pay off 
for the American economy?
    Barring high-skilled immigrants from entry to the United States, 
and forcing the ones that are here to leave because they cannot obtain 
a visa, ultimately forces U.S. employers to shift development work and 
other critical projects offshore. This can also force U.S. companies to 
fill related management, design, and business positions with foreign 
workers, thereby causing further lost U.S. job opportunities even in 
areas where America is strong, allowing other countries to 
``bootstrap'' themselves into these areas, and further weakening our 
global competitive strength. If we can retain these research projects 
in the United States, by contrast, we can stimulate domestic job and 
economic growth. In short, where innovation and innovators go, jobs are 
soon to follow.
    Second, Congress should expedite the path to Permanent Resident 
status for highly skilled workers. The reality for Microsoft and many 
other U.S. employers is that the H-1B visa program is temporary only in 
the sense that it is the visa we use while working assiduously to make 
our H-1B hires--whether educated in the United States or abroad--
permanent U.S. residents. Rather than pretend that we want these highly 
skilled, well trained innovators to remain for only a temporary period, 
we should accept and indeed embrace the fact that we want them to 
become permanent U.S. residents so that they can drive innovation and 
economic growth alongside America's native born talent.
    These reforms do not pit U.S. workers against those foreign born. 
They do not seek to make or perpetuate distinctions among the best and 
brightest on the basis of national origin. They simply recognize the 
fact that America's need for highly skilled workers has never been 
greater, and that broad-based prosperity in America depends on having 
enough such workers to satisfy our demand. Far from displacing U.S. 
workers, highly skilled foreign-born workers will continue to function 
as they always have: as net job creators.

III. Investing in Research, Rewarding Innovation

A. Investments in Research and Development
    America's current technology leadership is a direct result of 
investments that previous generations made in basic scientific 
research, especially publicly funded projects undertaken in government 
and university research labs. For instance, research in the 1970s by 
the Defense Department's Advanced Research Projects Agency (ARPA, later 
known as DARPA) led directly to many of the technologies that underlie 
today's Internet. As another example, grants from the U.S. Navy and the 
National Science Foundation helped fund the development of public key 
encryption systems, which we now use daily in everything from ATM 
machines to email and electronic commerce.
    American companies were able to capitalize on these innovations and 
turn them into globally successful products because of our world-class 
universities, innovative policies on technology transfer, and pro-
investment tax rules. These policies have driven a surge in private-
sector R&D investment. Since the mid-1970s, U.S. industry investment in 
R&D has more than quadrupled. Today, industry is responsible for two-
thirds of total R&D in the United States, and as of the early part of 
this decade, industry R&D investments were growing faster than the 
economy as a whole. Microsoft in many ways exemplifies this trend. We 
annually invest over $6 billion in R&D, which ranks among the highest 
R&D expenditures in the world by a major technology provider, both in 
absolute terms and as a percentage of revenues.
    As important as private-sector R&D investment is, Federal research 
funding is equally vital to America's technology leadership. Federally 
funded research enriches the commons of knowledge and provides the raw 
material for U.S. industry to transform into commercially successful 
products. Federal funding for university-based R&D also helps educate 
the next generation of scientists and engineers--those who will largely 
determine whether America remains innovative and globally competitive.
    In my view, America's ability to remain a technological powerhouse 
will depend in large part on the extent to which the Federal Government 
invests in basic research. Unfortunately, Federal research spending is 
not keeping pace with our Nation's needs. According to the Task Force 
on the Future of American Innovation, ``as a share of GDP, the U.S. 
Federal investment in both physical sciences and engineering research 
has dropped by half since 1970. In inflation-adjusted dollars, Federal 
funding for physical sciences research has been flat for two decades. . 
. .'' \12\ This stagnation in spending comes at a time when other 
countries and regions, such as China and the EU, are increasing their 
public investments in R&D.
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    \12\ Task Force on the Future of American Innovation, Measuring the 
Moment: Innovation, National Security, and Economic Competitiveness, 
November 2006, at 9, http://futureofinnovation.org/2006report/ (follow 
``Benchmarks of Our Innovation Future'' report hyperlink).
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    To ensure that our Federal and university research labs continue to 
serve as sources of innovation and expertly trained scientists, and 
that industry has incentives to continue investing heavily in R&D, it 
is critical that Congress take the following steps:
    First, the Federal Government needs to increase funding for basic 
scientific research significantly. While recent increases in the 
research budgets of the Department of Energy and the National Science 
Foundation are commendable, more must be done. As Federal research 
priorities expand into new areas, we should seek to increase funding 
for basic research by 10 percent annually over the next 7 years. 
Congress should consider other innovative ideas as well, such as: (1) 
new research grants of $500,000 each annually to 200 of the most 
outstanding early-career researchers; (2) a new National Coordination 
Office for Research Infrastructure to manage a centralized research-
infrastructure fund of $500 million per year; (3) establishing and 
providing funding for Advanced Research Projects Agencies in various 
departments, similar to DARPA of the 1970s; and (4) ensuring that 
research projects are communicated to the private sector so that 
companies can collaborate more effectively with recipients of public 
research funds.
    Second, Congress should permanently extend the R&D tax credit, 
which expires again at the end of 2007. Each year, Microsoft creates 
thousands of new R&D jobs throughout the world. As we continue to look 
for opportunities to reduce costs across our business, the R&D tax 
credit provides an important incentive to encourage Microsoft and other 
U.S. companies to continue to increase R&D investment in the United 
States. The credit is a positive stimulus to U.S. investment, 
innovation, wage growth, consumption, and exports, all contributing to 
a stronger economy and a higher standard of living. As other countries 
recognize the long-term value of R&D and offer permanent and generous 
incentives to attract R&D projects, the United States must renew its 
commitment to U.S.-based R&D by making the tax credit permanent so 
businesses may rely on it when making decisions on where to source R&D 
projects.
B. Rewarding Innovation
    In addition to investing in innovation, we must also reward 
innovators. This means giving inventors the ability to obtain 
intellectual property protection for their innovations, and to enforce 
these rights in the marketplace. America is fortunate that our leaders 
recognize the importance of intellectual property rights and the need 
for these rights to be respected, both at home and abroad. I know I 
join many other Americans in thanking this Congress and this 
Administration for their tireless efforts to promote intellectual 
property protection.
    In this regard, I would briefly note Microsoft's support for 
current efforts in Congress to reform the U.S. patent system to meet 
the needs of the 21st century. Microsoft and other technology companies 
are working closely with Chairman Leahy and Senator Hatch on the Senate 
Judiciary Committee, and with the leadership of the House Judiciary 
Committee, to advance legislation on needed reforms. Although I will 
not delve into the details here, the reforms supported by Microsoft and 
many others will improve patent quality, reduce excessive litigation, 
and promote international patent harmonization--reforms that are vital 
if America is to retain its pre-eminence in technology innovation.
    In my view, the challenges confronting America's global 
competitiveness and technological leadership are among the greatest we 
have faced in our lifetime. Frankly, we have not been the careful 
stewards of our own ``innovation account'' that our children and 
grandchildren have a right to expect of us. It is time to revisit our 
game plan in this regard.
    I recognize that implementing these solutions will not be easy and 
will take strong political will and courageous leadership. But I firmly 
believe that our efforts, if we succeed, will pay rich dividends for 
our Nation's next generation. We have had the amazing good fortune to 
live through one of the most prosperous and innovative periods in 
history. We must not squander this opportunity to secure America's 
continued competitiveness and prosperity.
    Thank you again for this opportunity to testify. I welcome your 
questions on these topics.

    The Chairman. Well, thank you very much, Mr. Gates. And 
thank you particularly for your extensive testimony. I hope 
members will get a chance to, sort of, take that with them. 
It's a very detailed, elaborate testimony that expands on each 
of these points, an enormous amount of useful and constructive 
information.
    We'll try and do 4-minute rounds. I think we've got quite a 
group here. I'd cut it to less than that but hopefully, we'll 
keep the questions short.
    We're going to address a number of these issues on the 
immigration--we've had a chance to talk, and we're continuing 
to talk, and I think the points that you mentioned make a lot 
of very, very good sense, and we'll work closely with you when 
we have an opportunity to get to that.
    I'd like to ask you a broader question, and that is about 
the spirit of innovation and discovery. Your company is THE 
company in the world that really epitomizes innovation and 
discovery. We have seen this Nation, at different times--
whether it was building the Brooklyn Bridge or going to the 
Moon--where we had this spirit of innovation and discovery. I'm 
interested in what you would say--or what your comment is on 
the broad theme about how you generate that kind of spirit of 
innovation and discovery, and have something that's valued by 
the American people, so that they expect leadership in these 
areas by those who are going to lead this Nation. How do we get 
to the point where this Nation is just not eating seed corn 
from the past generation, as you, kind of, referenced, but 
really is going to be the kind of generation that is going to 
add an additional dimension into our society in these areas--
the life science century. We are there, in terms of the 
progress in the human genome and stem cell research. The 
possibilities are virtually unlimited. What can you tell us and 
tell the American people about what they ought to expect and 
what leaders ought to provide?
    Mr. Gates. Well, the opportunities for innovation in the 
computer field and in the health field, in particular, are much 
greater than I think people recognize. The pace of innovation 
in those areas will be far more rapid than ever before. And so, 
there'll be some wonderful breakthroughs--computers that we can 
talk to and continued low cost, even using computers in 
education in some ways that we've never seen before, so that 
every kid can access the world's knowledge and find other kids 
who have similar interests. I think as people see that, there 
will be a great level of excitement.
    The world at large envies two things that the United States 
has. We have the world's best universities--the top 20 
universities--a list anywhere from 15 to 19 of those, people 
would say, are in the United States. Now, that's recognized by 
countries overseas, and they're, likewise, making investments 
in their universities. But that is a huge advantage. And even 
if you look at where the companies that do technological 
advances--biotech or computer companies, where they've grown 
up, it's largely where the top universities are, as opposed to 
just the large population centers.
    This is a country that the most talented people in the 
world want to come and work at. And so, if you look at any of 
the technology companies, which are the ones I know best, 
they're quite a mix of people who grew up in the United States 
and foreign-born people.
    The excitement about these breakthroughs--we definitely 
need to do more to share that story, because if we look at the 
enrollment trends in science and math, it continues to decline, 
and the declines are even more pronounced if you look at women 
in those fields, or minorities in those fields. And so, you 
have this contradiction. Here you have Apple, Google, 
Microsoft, great companies doing neat things, and you'd expect 
that would draw the young people in, into those fields. And 
yet, because of the curriculum or the quality of the teaching 
in those areas, it's not happening here. And that's partly why 
there is this shortage. And yet, other countries are putting 
the energy in----
    The Chairman. Let me just ask, because----
    Mr. Gates. Yeah.
    The Chairman [continuing]. My time is going to be up. You 
outlined, in particular, the area of education. You're noted 
for accountability. What do you expect of the business 
community. This would be extensive kinds of investments that 
you've outlined, in terms of the recommendations. What should 
we expect from the business community--what role can they play, 
in terms of helping to move in these directions, particularly 
the area of education? Do you see a role for them in there? 
What should we expect from them? What should we ask them?
    Mr. Gates. Well, first and foremost, the business community 
has to be an advocate for high-quality education, that those 
investments are fundamental to their future. The business 
community also will be a leader, in terms of workforce 
training. There's some very innovative ways of using online 
Internet training and skills testing that is starting in the 
business community, but I think will even start to be used in 
universities, as well.
    Businesses like Microsoft have a particular expertise--in 
our case, software--can provide that to schools, can make sure 
our employees are volunteering and getting the computer science 
learning, even down in the elementary schools, to be as strong 
as it can be. So, I think business is seeing this as a top 
issue, and wants to get more involved. In some cases, coming in 
to the schools and helping out, that's hard for them to do, but 
I think the desire is definitely there.
    The Chairman. Senator Enzi.
    Thank you.
    Senator Enzi. Thank you, Mr. Chairman.
    I really appreciate your comments about rewarding teachers 
who excel. We did have, in our appropriations, a little over 
$100 million for doing that. But there seems to be some concern 
about paying a little bit more to somebody who does well, and 
that got pulled out of the final appropriations bill.
    A year ago, I was in India. We were trying to find out how 
they graduate so many scientists and engineers. I met with one 
person that I thought had some great insight. They said that 
they didn't have any professional sports teams.
    [Laughter.]
    Senator Enzi. So, the highest pay and the most prestige 
that they could get was being a scientist or an engineer or a 
doctor, something in that kind of field.
    We're trying to strengthen Americans' competitiveness in 
this global economy, and we know that workers have to know and 
understand math and science. And once kids drop out of math and 
science, they never seem to get back into it. So, how do we do 
that? Do we fire them up with fear, or just desire and 
knowledge? Do you have any suggestions for how we get kids 
interested in the science and math fields?
    Mr. Gates. Well, one of the positive data points in this 
area is that there's over a thousand high schools that the 
Gates Foundation has helped support that take a bit of a 
different approach. These are smaller high schools where kids 
are taking less subjects at a time, and a number of those have 
themes. The themes are quite varied. Some are early college, 
some are high-tech, some are art, construction, aviation, 
Outward Bound. It takes the math curriculum, and instead of it 
just being math for math's sake, they teach it in terms of 
solving a problem, dealing with a project. Many of these 
schools are seeing much higher percentages of kids interested 
in going into math and science. For example, High Tech High, 
which there's quite a few of those now, over 30 percent of the 
kids say they want to go into math and science. So, that's more 
than double the number that you have out of the typical high 
school.
    I think with the quality of the math and science teachers 
that are engaged in their field, who can share the love of 
their field, and some improvements in the curriculum, would be 
very important elements of that.
    Senator Enzi. Thank you. We have a first robotics 
competition that gets kids interested in engineering and some 
of those things, too. I've been doing an inventors conference 
in Wyoming every year to stimulate kids to think about 
inventions--not necessarily ones as complicated as computers, 
just the idea of innovation--and that's been having some 
success at getting kids into science.
    Since we have a lot of members here with us, I'll go ahead 
and relinquish the rest of my time. I really appreciate your 
testimony, and I'll be inviting you to my inventors 
conferences.
    Mr. Gates. Excellent. Thank you.
    The Chairman. Senator Dodd.
    Senator Dodd. Thank you very much, Mr. Chairman.
    And, Mr. Gates, welcome to the committee. All of us want to 
underscore the comments of Senator Kennedy and Senator Murray 
in the opening remarks. We have great admiration for you, what 
you've done with your company, but also what you're doing with 
your Foundation and your deep commitment to these issues. So, 
thank you immensely for that.
    Vern Ehlers and I have a piece of legislation on voluntary 
national standards. We emphasize the word ``voluntary'' because 
of the problems with mandated standards. We'd invite your 
attention to take a look at it. We provide some incentives in 
there to try and get them--given the fact that we see States 
dumbing-down, too many cases, test scores here so that they're 
not--they stay in operation, but certainly not providing the 
kind of standardized judgments that we want to make about 
whether or not we're reaching the goals that we all want to 
have for us.
    And I appreciate you mentioning the university high 
schools. We had a hearing of this committee at the University 
of Hartford several years ago, which is one of those 
institutions you talked about here, where the university has 
the high school on the campus of the University of Hartford. In 
fact, Senator Alexander and I had a witness before this 
committee, of a young man who's a student at that university 
high school, who was very compelling to all of us here, and the 
experience he's having as a result of being drawn out and 
brought into that environment, making a difference with it.
    United Technologies Corporation, in Connecticut, George 
David, who I think you may know, the chief executive officer 
there, offers to all of their employees worldwide the time, the 
cost, and the incentive of offering stock to students who get a 
higher degree, who are employees of the United Technologies. It 
costs the corporation, obviously, a significant amount, but the 
advantage has been tremendous, in terms of retention and 
productivity of their employees. So, there's very creative 
ideas that are occurring all over the place.
    I want to draw your attention, if I can, to a subject 
matter we've spent a lot of time on in this committee over the 
years, dealing with 0 to 3. In fact, one of your great pals and 
friends, Warren Buffett, his daughter, Susie Buffett, is very 
involved in this issue, as well. I wonder if you might draw 
some attention to that question here in response, to this idea 
of early intervention with these--the brain development. We 
start identifying--in fact, many people made by the time a 
student's in the third grade, they're already--if they're not 
succeeding and moving forward, their ability to succeed and 
develop the appetites for math and science are diminished to a 
large extent. And there's been some suggestions of starting 
things like universal pre-K programs so you really--and quality 
childcare, so that you begin to get that parental involvement 
early on to develop and nurture the ability of these children 
to be ready to learn, to then accept the disciplines in math 
and science. I know you've done a lot of work in the health-
related areas, but I wonder if you might just address some of 
the early interventions that might be made to increase the 
possibility of students developing these appetites.
    Mr. Gates. OK. The first times of the tests, I think it is 
important for us to know where we stand. Mathematics is not 
different in one State versus another State. Having a clear 
understanding of where our fourth-graders, eighth-graders, and 
seniors are in these areas, we're certainly a big advocate of 
that. The problem you get into is, as soon as you realize how 
bad the situation is, then it's like a hot potato, people say, 
``Well, what's the problem?'' I think with NCLB, one of the 
great things is, it has pointed out these deficits, and there's 
lots of discussion about how that can be improved. But, I 
think, overall that's a big contribution, that people have 
seen, the minority achievement is not where it should be, and 
the various high schools are not where they should be.
    In terms of the early-learning part, there's varying data 
on this. If you take the United States, at the fourth-grade 
level we are still largely at the top in testing of fourth-
graders. By eighth-graders, we're in the middle of the pack; 
and by senior year, we're basically at the bottom of rich 
countries. So there's clearly something happening there. We 
have the highest dropout rate, and that's why the Foundation--
early learning's important, elementary's important--we took 
high schools as our big focus, particularly because there 
wasn't a lot going on in that area. We do, in Washington State, 
have a couple of early-learning pilots that are very similar to 
what Susie Buffett's done in Omaha and what a number of people 
have done in Chicago. Some of the tracking data suggests those 
early interventions last, some of the data suggests those early 
interventions fade in benefit, because the environment, both 
the social and home environment that those kids are in, that 
within 3 years, a lot of that is gone away.
    Some of these tough issues in education, like merit systems 
that teachers will embrace, or curricula that uses technology a 
new way, those are some of the issues that, in the middle of 
next year, as I move to be full time at the Foundation, I want 
to spend a lot more time sitting and watching what goes on, and 
learning a lot about. Early learning has some real benefits, 
but the numbers are still--there's quite a range of opinions 
about how impactful it is.
    Senator Dodd. I appreciate that very much and look forward 
to it, as well.
    Thanks, Mr. Chairman.
    The Chairman. Senator Gregg.
    Senator Gregg. Thank you.
    Let me join my colleagues in thanking you for your efforts 
in putting your dollars behind your language, especially on the 
issue of education. I agree with you that the issue is at the 
high school level. When Senator Kennedy and I were putting 
together No Child Left Behind, we focused on math and science 
because it was a quantitative event, but we didn't get into 
high school issues because the Federal Government really 
doesn't have a role in high schools. We don't fund high 
schools.
    The one place we do have a role is in this area of 
immigration, which you've mentioned. I'm also in total 
agreement with your view, which I would characterize, and maybe 
inappropriately, as going around the world and picking the best 
and the brightest, and having them come to the United States. 
That's what we've done as a culture, and we've been very 
successful.
    So, I guess my first question to you is, Do you have a 
number that you think we need, relative to the H-1B visa 
program? Today, it's statutorily set at about 65,000, but we're 
up to about 120,000. Do you think that number should be raised 
to 200,000, 300,000? What number would give America the 
capacity to get the people we need to come here to take 
advantage of our society and allow us to access their 
abilities?
    Mr. Gates. Well, my basic view is that an infinite number 
of people coming who are taking jobs that pay over $100,000 a 
year are going to pay taxes--we create lots of other jobs 
around those people--so my basic view is that the country 
should welcome as many of those people as we can get, because 
people with those great talents, particularly in engineering 
areas, the jobs are going to exist somewhere, and the jobs 
around them are going to be created wherever those uniquely 
talented people are. So, even though it may not be realistic, I 
don't think there should be any limit. Other countries have 
systems where, based on your education, your employability, 
you're scored for immigration. And so, these people would not 
have difficulty getting into other rich countries. In fact, 
countries like Canada and Australia have been beneficiaries of 
our system--discouraging these people with both the limits and 
the long waits and the--what the process feels like as they go 
through the security checks.
    There are some suggestions about if we could, say, in the 
green card system not have to count the family members--if you 
somewhat more than doubled that, you could start to clear the 
backlog and not have that be a problem. Likewise, with H-1B, if 
you had a few categories, like people who are educated here in 
this country, that you gave an exemption outside of the quota 
that somewhat more than doubling would get us what we need. But 
that--to some degree, that's sort of like a centrally managed 
economy, both----
    Senator Gregg. Unfortunately, if I could--because my time's 
going to be up--that's what we have here. I agree 100 percent 
that we shouldn't have a limit on highly skilled people coming 
into the country. But we do have a centrally managed economy, 
and right now it's not being managed well. So, I would presume 
that if we were to double the number, say, to 300,000, you 
wouldn't have any problem with that, since you're willing to go 
to infinity.
    Mr. Gates. Well, it would be a fantastic improvement. And I 
do think that there's a draft bill that has provisions that 
would largely take care of this problem.
    Senator Gregg. We also have something called a lottery 
system, which allows 50,000 people in the country simply 
because they win a lottery. They could be a truck driver from 
the Ukraine. Last year, I offered an amendment which would have 
changed that system by requiring that 60 percent of those in 
the lottery be people with advanced degrees. So, you'd have to 
be a physicist from Ukraine before you could win the lottery. 
Do you think that would be a better approach, maybe?
    Mr. Gates. Well, I'm not an expert on the various 
categories that exist. I don't actually know that lottery 
system. I know the engineers at Microsoft, nobody comes up to 
me and says, ``Hey, I won this lottery.''
    Senator Gregg. Well, that's the problem.
    Mr. Gates. But there's a lot of different categories in 
there and I'm not sure how they should all be handled. But I do 
know in the case of the engineering situation we should 
specifically have that be dramatically increased.
    Senator Gregg. Thank you.
    The Chairman. Normally, Mr. Gates, we'd have Senator Murray 
here. She's chairing a Veterans Committee at this time. And I 
think we understand the importance of that, particularly at 
this time. So, she is necessarily absent and wanted me to 
extend her wishes.
    Senator Clinton.
    Senator Clinton. Thank you, Mr. Chairman.
    And welcome, Mr. Gates. We're delighted to have you.
    Senator Enzi made reference to Sputnik, 50 years ago. And 
one of the ongoing results of that event was to really focus 
America's attention on what we needed to do with math and 
science education to try to provide loans for school, the NDEA 
loans. I've got one, even though I was not a math or science 
person. And I think it's really appropriate in the--2007 we 
would take another look at what we need to do to be competitive 
and to maintain our scientific and technological edge.
    You said in your testimony that we should set a goal of 
making sure every young person graduates from high school, 
which I agree with. And there are benefits to that, even if the 
curriculum is not as good as we would want it, or the outcomes, 
it is still a positive. And then, in your testimony you also 
talk about the skills of the existing workforce. And I'd like 
to turn our attention to that for a minute, because clearly we 
have an existing workforce that we hope can be supplemented 
both by people coming from abroad, but also by a better 
pipeline of our own citizens. How do you see the most effective 
way of trying to improve the skills of the workforce here? I 
know you have a couple of programs that Microsoft has used to 
try to do that. Could you give us a little more detail on what 
works to improve the IT and computing skills, and how we could 
perhaps focus on that also from this committee to try to 
improve the outcomes?
    Mr. Gates. Many of the Microsoft programs have focused on 
the areas where you have industries which are reducing the 
number of employees, and then going into those situations and 
giving the training--and fairly basic training; this is not 
high-level engineering, this is training somebody so they'd be 
effective in a call-center environment or an aide-type work, 
which is very good work. And so, we've gone to the hotspots 
where you have, say, a factory shutting down or significant 
employment, and made sure that the opportunities to learn are 
there.
    One of our most successful things wasn't really intended as 
a workforce training thing, it was actually the libraries 
program, where we went to all the libraries in the country. The 
computers were funded by the Foundation, and Microsoft gave the 
software. And it's been amazing to see people coming into those 
libraries, who are looking at job opportunities and then 
looking at what kind of training can be available. One of the 
new trends is that training, instead of just being in a 
classroom, that the videos--great videos and great tests for 
these things are starting to become available on the Internet. 
And so, if you're lucky enough to be able to get to a computer, 
either in a library or a community center or somehow, then you 
can access all of this great learning material, and even test 
your skills, and even get accreditation. And so, Microsoft, 
Cisco, and a number of others have created accreditation tests, 
not just for high-level engineering, but for, like, operators 
and other jobs. And people with those certificates are able, 
then, to move into the workforce in a fairly straightforward 
fashion.
    So, we can use technology to improve these training 
opportunities. We can go after the hotspots, and then just 
broad infrastructure, going beyond libraries, can give people 
more access.
    Senator Clinton. I also think, though, that some of these 
programs would be useful in our high schools, and even our 
junior high schools, because a lot of the data that I'm seeing 
says that kids are bored, they don't feel stimulated, there's 
not enough technology in their school environment compared to 
their outside-of-school environment.
    Finally, Mr. Gates, you made a brief reference to health 
IT, as you made your initial remarks. This is something that 
Senator Kennedy and Senator Enzi and I and others have been 
working on for a number of years, to try to create an 
architecture for a national system of health IT in the medical 
field, which we think will have innumerable benefits for 
patients and providers and others. Could you say just an 
additional word about what you see for the future of health IT 
and how important it is that we begin to set up some kind of a 
system so that everybody knows what the standards are and how 
we can begin to implement that?
    Mr. Gates. Well, the current state of health IT is 
surprisingly poor; that is, the amount of paperwork, the 
information that's incorrect, the overhead in the system of 
just trying to shuffle things around. We see that, whether it's 
in the costs, or also in the outcomes. If you're away from your 
normal location, and you're injured, how do they have access to 
the information? And, so far, a lot of the things have just 
made you sign more privacy release statements. And so, I think 
Microsoft, Intel, a lot of the technology companies are saying, 
``We've got to invest more in healthcare.'' We created, 
ourselves, just 2 years ago, a new business in this area, 
because there's really an opportunity to create the software. 
We're also seeing that consumers are interested in looking at 
their healthcare costs, not--for themselves, partly, but also--
say you have an older relative that you're helping to manage 
their bills, what's going on--how do you easily see what's 
going on and make sure the right choices are being made there? 
And if we could get some standards, then this idea of having it 
online and having people make choices, even being able to look 
at quality data, look at cost data, we'd get more of a market 
dynamic into the health system, which is a very important 
thing.
    So, there are some initiatives that we're behind, and we've 
got some of our experts coming out and spending time talking 
about that. There is more that Congress could do on this, 
because within the next 3 or 4 years, we ought to be able to 
make a dramatic change and reduce those costs, and create the 
visibility that better choices and incentives are driven into 
the system.
    Senator Clinton. Thank you.
    The Chairman. Thank you very much.
    Senator Bingaman and Senator Alexander have been 
particularly involved in this--in competitiveness legislation--
many members of this committee. And so, we acknowledge that 
effort and are glad to call on Senator Alexander.
    Senator Alexander. Thank you, Mr. Chairman.
    And, Mr. Gates, thank you for coming. I'm especially glad 
that you came, because it calls attention to what Senator 
Kennedy just mentioned. Two years ago, we asked the National 
Academy of Sciences a simple question, Exactly what should we 
do to keep our brainpower advantage? And they gave us 20 
specific recommendations, in priority order, starting with K 
through 12. Up to 70 Senators have been working on that in one 
way or the other over the last 2 years, and our two Senate 
leaders, Reid and McConnell, introduced that on Monday into the 
Senate, with broad support, and it includes most of the 
provisions that you recommended, or at least many of your 
recommendations that were in your excellent testimony. So, your 
presence here helps call attention to this issue, in fact it is 
getting more attention than our announcement on Monday, and I'm 
glad to call attention to what's going on.
    Also, as Senator Gregg mentioned, the immigration bill that 
many worked on had several provisions--stapling a green card to 
the lapel of Ph.D. or master's degree person, foreign-born 
person. And there is an opportunity, I would say, this year, as 
we work on immigration, to significantly expand that. I think 
there's a broad consensus in the Senate that we ought to give 
more preference to highly skilled foreign-born people. We 
should be insourcing brainpower. And we just need to think of 
ways to do it.
    My question goes back to a comment that Senator Enzi made, 
about a reference you made, to your work with the foundation--
25 some--years agos that not one State was paying one teacher 
one penny more for being a good teacher. I was Governor of 
Tennessee at the time. And I didn't know that until my second 
term as Governor. So, I set about to try to change it. And one 
of the persons I worked with was Albert Shanker, the late head 
of the American Federation of Teachers, who said, ``Well, if we 
can have master plumbers, we should be able to have master 
teachers.'' But we've made very little progress on that since 
then, because we haven't been able to find a fair way to reward 
outstanding teachers and outstanding school leadership.
    Yesterday, Senator Kennedy hosted a discussion, where every 
witness talked about the need for gifted mentor teachers, 
gifted teachers to go into the inner city, gifted teachers to 
teach gifted students. All exceptional men and women, yet we 
dance around the problem that we have no way to reward them, 
for their excellence, with higher pay.
    Now, the Teacher Incentive Fund you mentioned in your 
testimony was in the No Child Left Behind Act. President Bush 
has recommended $200 million for next year, but it got cut, 
maybe by accident in the confusion between last session and 
this session. But it basically has a series of programs across 
the country--Philadelphia, New York, places where you're 
working, some working with local union leadership to find fair 
ways to reward outstanding principals and teachers. So, my 
question for you is, and my hope would be, as you move more 
into your Foundation work, do you think it would be useful, the 
next 5 years, to encourage such efforts as a Teacher Incentive 
Fund and private foundation efforts to crack this nut of 
finding multiple fair ways of rewarding excellence in teaching 
and school leadership by paying people more for teaching and 
leading well?
    Mr. Gates. Absolutely. Having the incentive system work is 
very, very, important. And one of our challenges is that these 
two areas, health and education, that are higher and higher 
percentage of the economy, bringing the right type of metrics 
and, sort of, market-based activities to those has proven to be 
very difficult. And I think, in terms of how teacher evaluation 
is done, we should encourage lots of experiments and make sure 
that people are doing the experiments, get some extra funds to 
go and do those. This is a great example where we don't know 
the answer today of what is a merit system that would pay great 
teachers more, that teachers, as a whole, would feel is a 
predictable, well-run system. And, as we do these experiments, 
we might have to invest more in teacher remediation or 
reviewing what's going on with teachers.
    Technology can help. The costs of actually seeing what goes 
on, helping teachers see how they can do better, and letting 
them learn from other teachers, seeing what they do and using 
their curriculum, the cost of that is coming down quite a bit. 
So, we need to make sure that a willingness to try these things 
are out there, and that the--some of the extra money that it 
requires is there. Simply, if you just say, ``We're going to do 
merit-based'' today, people don't think the measurement 
approaches are going to be predictable enough for them.
    Senator Alexander. Thank you, Mr. Chairman. And I think the 
data center that Mr. Gates suggested in his testimony might be 
helpful in gathering the increasing information on student 
achievement, and relating that to teacher effectiveness.
    The Chairman. Thank you very much.
    Senator Reed.
    Senator Reed. Well, thank you very much, Mr. Chairman.
    And welcome, Mr. Gates. Thank you.
    And your testimony, I found, was very persuasive. And you 
said committed quality teachers are the lynchpin of a good 
education system. And I think many of the questions you're 
getting today are, sort of, circling around that issue of, How 
do we get quality teachers into our system? And I'm just very 
curious, in general, what are your thoughts of things we could 
be doing, things that we could do in partnership with private 
foundations like your own. What are the impediments that you 
see, from your perspective, to getting good teachers, 
technically qualified, in the right places?
    Mr. Gates. Well, I definitely think if you could have an 
incentive system that allowed good teachers to be paid more, 
you would draw more people into the field. So, you have this 
Catch-22, that, because there's no good measurement system, you 
don't have people who like to have that type of approach taken. 
Historically, we probably benefited--it was unjust, but that--
because women had less opportunities in other fields, there 
were super-talented people who went in, even though the 
economic rewards were not that great. That's changed. A lot of 
those talented women are now the majority of our business 
schools, our law schools, and that sort of thing.
    Senator Reed. Some of them are sitting right next to me.
    Mr. Gates. Absolutely. The lack of attention that is given 
to making it attractive to be a teacher, and having measurement 
systems there, now it's more important than ever.
    There are some of these charter schools that we're involved 
with that have been given permission to certify teachers. And 
so, they're able to take people who are math- and science-
oriented, and who do not have, say, the broad set of 
requirements that a normal teacher certificate would require, 
but they're allowed to come in and teach in those areas. And 
so, how much loosening up you could do to let people come in, 
both full time for a number of years, or even, in some cases, 
part-time, to come in and share their enthusiasm and be part of 
that mix, I think we need a lot more experimentation with that. 
And the charter structure, in many States, has allowed us to 
try some of those things out. And in California, in particular, 
it's been quite effective.
    Senator Reed. Well, I agree with your insight that the 
metrics are very important. I would hope that that would be 
something that you would be working on through your educational 
issue, and other thoughtful individuals and groups.
    Then, the second issue, if you've got the metrics right, 
how do you actually do the compensation? Some thought has been 
given to using the tax system now, because it might avoid the 
whole issue of who decides, in terms of the pay? Is it a local 
level? And a group of policy people of the Horizon projects 
have suggested significant tax breaks for qualified teachers 
who meet certain criteria. And it just strikes me as that might 
avoid some of the fighting we've seen between--at the local 
level between--this notion of merit pay is distrusted, because 
who's going to distribute it? How are they going to decide, 
etc.? And I'm just wondering if you have a thought or comment.
    Mr. Gates. Yeah, I don't see any technique that avoids the 
hard fact that a merit-based system involves making judgments 
about----
    Senator Reed. Right.
    Mr. Gates. ``You did a good job. You did not do a good 
job.''
    Senator Reed. Right.
    Mr. Gates. It's kind of like in healthcare, where you say, 
``This expense is reasonable. This expense is unreasonable.'' 
Who's willing to stand up and say, ``Yes, I made that choice?'' 
And, in terms of saying to a teacher, ``No, you need to go 
under remediation,'' or, ``No, you've been in remediation three 
times. You're not the right person for this career,'' that's, 
in a political sense, very, very difficult.
    Senator Reed. Right.
    Mr. Gates. But all these merit-based systems involve those 
judgments being made. No matter what the source of the money 
is, that really needs to happen.
    And in all these educational things, you have to always be 
careful, because when you create new schools, you often 
attract--even if you have no criteria for it, the better 
teachers will just show up there, and the better students will 
just show up there. And so, when you look at these results, you 
have to be very careful that you're not just seeing that 
effect, as opposed to some new approach. That's partly why 
we've gone, in the Foundation, to 1,400, and it'll get up to 
about 2,000, high schools, a large enough number that it's not 
just a few good people or that effect. There's some big cities, 
including New York, Chicago, and Washington, DC., where we're 
trying to do things on a large scale.
    Some things are less controversial, like having the smaller 
high schools or having the theme-based high schools. The pay-
practice issues have been the toughest. And so, although 
there's been some changes--for example, in New York, the mayor 
took some of the worst things of the seniority system, of 
people being able to bump other teachers around, and was able 
to override that. Most of what we're doing is more about 
curriculum and structure. And, so far, although we'd love to 
have it be about it, it's not been so much about the teacher 
evaluation.
    Senator Reed. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Do you remember who was your best teacher 
when you were growing up?
    Mr. Gates. Yeah, I hate to say it--I went to a private high 
school, myself.
    The Chairman. OK.
    Mr. Gates. But, yes----
    The Chairman. But, I mean----
    Mr. Gates. Absolutely.
    The Chairman. You remember who the teacher was. Was that 
person the person with the most degrees? Or was it----
    Mr. Gates. It was a person who understood science--one 
science teacher, one match teacher--who loved the field. That 
is, they had a college degree in the subject, but they also 
were interested in following the subject and just loved the 
idea that somebody else was interested in what they were 
interested in. So, it's--that engagement certainly made a huge, 
huge difference for me.
    The Chairman. That's good.
    Senator Burr.
    Senator Burr. Thank you, Mr. Chairman.
    You remember who was the strictest teacher you had?
    [Laughter.]
    Senator Burr. Part of the challenge that we've got is that 
we've got a generation of kids that are relying on us to make 
the right decision. And I want to thank you for your 
willingness to come in. More importantly, I want to thank you 
and your wife for your passion for education, but also your 
investment in education.
    I think, this weekend, you might have spent some time with 
the president of our university system, and your wife is 
familiar with Duke University. You know about higher education 
in North Carolina. I want to talk about high school, because I 
think that should be our passion today.
    You made a statement in your testimony, ``The goal should 
be that every child should graduate prepared to go to higher 
education or to work.'' And the need to transform America's 
high schools for the 21st century. Let me ask you, do our 
expectations for high school students limit our ability to 
transform the system?
    Mr. Gates. Absolutely. The low standards we have today 
allow us, (a) to think we're doing better than we are, and they 
don't challenge the students. One of the most amazing things 
about these early college schools is, they're taking the kids 
who did poorly, and, by asking them to do literally more than 
they were doing in the school they dropped out of, a very high 
percentage of them rise to the occasion. They were essentially 
bored. It wasn't hard enough for them in the high school that 
they were in. And particularly if it's curriculum that gets 
connected to--``This is what you need to do to achieve some job 
that you're interested in.'' It works amazingly well.
    There's been a move afoot to raise the standards, the 
State-level standards for high schools--North Carolina's been a 
leader in this--to say that you should have 3 years of 
mathematics, and that those math classes shouldn't be just 
balancing the checkbook. So, in the last couple of years, I 
think it's almost 30 States now have raised their high school 
standards. It's still not where it should be.
    Senator Burr. I want to emphasize something that you said, 
that the boredom--the dislocation of students is not always 
because they just don't want to be in class, and they don't 
want to learn. In many cases, it's because they're not 
challenged enough. And that's one of the unique things about 
the Gates high schools. I found that it engages every student 
at a different level, and it engages them as a team, in many 
cases.
    Should States consider, those that haven't, raising the age 
that one can voluntarily disengage from a high school education 
from 16 to 18?
    Mr. Gates. Well, I don't know about that. I mean, the 
question is--okay, say you raise that age. What are you doing 
to that 16-year-old? Are you going out and finding him and 
handcuffing him and dragging him in? I mean, these--this issue 
of these demotivated students who just aren't connecting is a 
very tough problem. One of the things that's happened in all 
the high schools we back is, we make them small high schools. 
And what I mean by ``small'' is that the total high school size 
is about 500 to 600. And that's very different than the big 
high schools that get up in 2,000 to 3,000. In those high 
schools, the goal is that every adult knows every student, 
and--so that when you're walking the halls, they say, ``Hey, 
you're supposed to be over there,'' or, ``Hey, I heard you 
didn't turn your homework in,'' ``Do you need help?'' And so, 
if you create a smaller social environment, then it really 
changes the behavior in the high school. You don't think, ``OK, 
I'm just a motorcycle-gang guy. I'm not supposed to work 
hard,'' and you only end up with this small percentage who are 
the hardworking students. So, this small size, although it's 
still somewhat controversial, looks like it's making a big 
difference. And the nice thing about that, it's not more 
expensive. You may need to pool some things for the sports 
program, but it's not an increase in expense. And so, that's 
one of the few things we've found that we think really does 
draw the kids in and create relationships that have expectation 
that get them to step up.
    Senator Burr. Great. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Senator Sanders.
    Senator Sanders. Thank you very much, Mr. Chairman.
    And, Mr. Gates, let me add my voice to those of the other 
Senators here in applauding you not just for the huge amount of 
money that you have provided all kinds of groups, but the 
innovative quality of your Foundation that you and your wife 
head, and not just in the United States, but all over the 
world. You've done an extraordinary job, and I applaud you.
    Now I'm going to take a little different tack than some of 
my colleagues. And I want to know how you're getting along with 
your dad. Because when we talk about many of the challenges 
that we're facing, we have to do it within the context of a 
country which has an $8-trillion national debt. And I certainly 
agree with you that we need more innovation in education in a 
whole lot of areas. They're going to cost money. So, let me ask 
you a question. Your dad and Warren Buffett and others have 
been very loud and articulate in saying that repealing the 
estate tax, which would cost us about a trillion dollars over a 
10-year period, is not a good idea, that some of the wealthiest 
people in this country are doing just fine, they don't need, 
for their families, that additional wealth that repealing the 
estate tax would provide. Do you agree with your dad that 
repealing the estate tax is not necessary?
    Mr. Gates. Well, I think there are very few people who 
speak out for a tax. Many people come and like I have today, 
said, ``OK, research is more important. We need to spend more 
on that. Education, although the Federal piece is only a small 
piece of it, there probably needs to be more put into that.'' 
So those things do create budget challenges. In my dad's case, 
he's actually saying that there's merit in terms--for a number 
of reasons, including the revenue raised--of that tax being 
preserved.
    I, myself, in terms of speaking out publicly, have chosen 
the innovation issues that are key, and trade issues that are 
key for Microsoft, and the global health and education issues 
that are key to the Foundation. So that's a lot, and those are 
the things where I'm speaking out as much as I can.
    I do agree with my dad. I think what he's doing there has 
got a lot of merit. He, together with a colleague, wrote a book 
about the issue, which actually, after I read that, I was--I 
thought there were a lot of good arguments in there that I had 
not heard before.
    Senator Sanders. I won't ask you what your kids feel about 
it, but----
    [Laughter.]
    Senator Sanders. You do agree with your dad that repealing 
the estate tax is not a good idea. Is that what I'm hearing you 
say?
    Mr. Gates. Yes. In terms of speaking out, I've picked 
global health, education, and some key innovation issues around 
Microsoft as the ones that I'm developing expertise and really 
putting the time into, but I think what my dad has done is 
right, and if I had a vote on it, I would agree with----
    Senator Sanders. Thank you.
    Mr. Gates [continuing]. What he's saying.
    Senator Sanders. Thanks very much.
    Let me ask you this. And this is a sensitive issue and a 
touchy issue. I think there is no disagreement on this 
committee or in the Congress that, as a Nation, we're doing a 
terrible job in math and science, that it is a disgrace how few 
engineers we are graduating. And you have done a fantastic job 
in focusing on that issue. But there is another side of the 
coin where you and I may disagree, and I'd like your comments 
on that, and that is the issue of outsourcing. And that is, my 
understanding is that from January of--this is quoting from the 
Bureau of Labor Statistics--that from January of 2001 to 
January of 2006, the information sector of the U.S. economy 
lost 644,000 jobs, etc., etc. Also, I think you would probably 
agree that many major corporations, including your own, if they 
can hire qualified labor--engineers, scientists--in India or 
China for a fraction of the wages being paid in the United 
States, they're going to go there. And we have quotes from 
people like Andy Grove and John Chambers, leaders in 
information technology, who basically predict that the IT 
industry may end up in China. Now, how do you address that 
issue, understanding we are in agreement, all of us are, the 
need to do a heck of a lot better job in education, high school 
education--math, science. But isn't there still going to be a 
lure, unless we get a handle on it, that companies are going to 
be running to China and India for qualified workers who are 
often paid a fraction of the wages that they are in the United 
States?
    Mr. Gates. Well, the demand worldwide for these highly 
qualified engineers is going to guarantee them all jobs, no 
matter where they're located. So, anyone in the United States 
who has these skills, no matter whether they were born here or 
came here, not only will they have a super-high-paying job, 
there will be many jobs created around them that are also great 
jobs. And so, we should want to have as many of those people be 
here as possible, and have those jobs that are created around 
them. We've been increasing our employment in the United 
States, and a limiting factor for us is how many of these great 
engineers that we can get here. And yes, that does cause a 
problem.
    The IT industry, I guarantee, will be in the United States 
to the degree that these smart people are here in the United 
States. And that's why I think it's important to maximize that 
number.
    By and large, you can say, Is this country a beneficiary of 
free trade? And the answer is overwhelmingly yes. Why can our 
inventions--whether it be drugs or movies or software or 
planes--why can we invest so much in those products? It's 
because we're able to sell them into a global market. And by 
having people of this skill level, we can have an economy that 
has very high defense costs, very high legal costs, very high 
medical costs, and yet continue to capture our fair share of 
the economic improvement that takes place. If we do things that 
artificially shut off our ability to engage in that trade 
system, then the impacts on our leading industries would be 
fairly dramatic.
    So we love these high-paying jobs and our industry has 
continued to draw people into these jobs. We pay way above the 
prevailing wage rate because of the shortage that we see.
    Senator Sanders. OK. Well, thank you very much.
    The Chairman. Senator Isakson.
    Senator Isakson. Well first of all, I want to thank you. In 
my company, in the 1980s and 1990s, I credited you with 
doubling the productivity of my employees and my agents. 
Microsoft is just--Windows is just a phenomenal product. And 
all of us, the whole country, has benefited from your 
innovation. Which reminds me of a quote of Robert Kennedy's 
years ago when he made a pretty well-known famous speech in 
Biafra during the African famine, when he said, ``Some people 
see things as they are and ask why, others see things as they 
never were and ask why not.'' You obviously are a ``why not'' 
guy. I mean, nobody could have envisioned Windows without 
having had a vision to say, ``Well, why not?''
    What is it about this country that you attribute 
contributing to your can-do spirit and your ability to envision 
that? This is a great country. We criticize it a lot of times. 
I think it's good, also, to--I don't think you could have done 
what you did anywhere else in the world but in America. So, I'd 
like to hear from you, who did that, some of the good things 
about this country.
    Mr. Gates. Well, absolutely. The success that I've had, and 
that Microsoft has had, has benefited immensely from unique 
characteristics that this country has. These are 
characteristics that the country continues to lead in. They're 
not unnoticed by others. But if we renew those strengths we can 
stay in the leadership position.
    The quality of our universities is high on that list. I 
personally went to a great high school. I attended some years 
at Harvard University. I didn't graduate, but I still had 
some----
    Senator Isakson. You're a famous dropout.
    Mr. Gates [continuing]. Some----
    [Laughter.]
    Mr. Gates [continuing]. Benefit. And then, I proceeded to 
hire lots and lots of people from the great universities. And 
these were people who were willing to take risks. It was 
actually during the 1980s, the country was, sort of, worried 
about Japan. But that was actually the time when the Internet, 
which benefited immensely from research funding from the U.S. 
Government, was actually becoming the standard, not just for 
computing, but for information sharing and an efficiency in the 
entire world economy. So, certainly in the 1990s, and even 
today, we're the envy of the world, in terms of how many jobs 
our economy's created. We have, by many measures, record-low 
unemployment. Despite some imbalances, our economy's continued 
to do very well.
    When you go overseas, people look at our university system, 
and they say, ``Well, you've got alumni that give money. How do 
we duplicate that?'' When they look at social services, they 
see that philanthropy is widespread at all levels of income, 
not just at the highest levels; but philanthropy is a value 
that is very strong through our citizenship, and other 
countries don't have that nearly to the degree that we do. And 
that engages citizens in seeing what the nonprofits are doing, 
what the Government can do better, and gets an active dialogue 
that allows us to be smart about those things.
    Protecting intellectual property, including the patent 
system, the copyright system. Yes, you can read about how 
people want to reform and improve those things, and we're one 
of the advocates for tuning those systems, but, fundamentally, 
incentives to invent are very strong here, things like the 
bidual provisions that allow even work done under Government-
funded research, that there's some royalties for the inventors 
in the university. Other countries have been very slow to match 
that, and that's benefited us in a great number of fields, 
particularly in fields related to biology.
    So, we build on a foundation of strength in these issues. 
But when you see us turning away these graduates from these 
great computer science departments, and force them to go back, 
you say, ``Wow,'' ``is that renewing the magic that's put the 
country in that top position?''
    Senator Isakson. Thank you very much.
    The Chairman. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman, very much.
    And, Mr. Gates, thank you for your unprecedented work on 
combating global poverty, especially infectious disease. Not 
since--fellow Ohioan--I think you're a native of Ohio also, if 
I remember right--fellow Ohioan, Dr. Henderson organized the 
worldwide project to eliminate smallpox. I think your work 
since then has been the greatest--yours and your wife's and the 
Foundation's--the greatest contribution to global health and--
of anybody since Dr. Henderson.
    I want to shift to something a bit different. When I hear 
you talk about--thank you for your comments about protecting 
intellectual property. I think that's a very important thing 
that we, as a Nation, need to do. I want to talk about 
international health a bit. And I think that the strength of 
our economy in this country over the last century has been that 
we, as a Nation, have shared in the wealth--the workers have 
shared in the wealth they've created. We've done that through 
trade unionism, we've done that through education, we've done 
that all under the umbrella of a democratic system of 
government, so people that are productive have shared in the 
productivity and shared in the wealth they've created. Our 
trade agreements have not worked so well in the same direction. 
And I know you and I have very different opinions about trade. 
But I look at just a year or so before the time when you began 
Microsoft. We still had a trade surplus in this country. Today 
we have a trade deficit of approaching $800 billion. We--in 
terms of what you've done for international health and what we 
need to do for international health, when I look at our trade 
policy, whether it's Mexico or whether it's multilaterally, we 
simply haven't found a way to help those countries really 
share--those workers share in the wealth they create. And that 
means they've not established a healthcare system, they've not 
been able to bring up standards of living, because those 
workers, without labor standards, without environmental 
standards, without the kinds of things that we've done in this 
country--again, because of trade unionism, because of 
democratic government, because of education--that we've been 
able to lift people up. Discuss for a moment how we should 
revise our trade policy. You talked about--and don't go into 
the--I mean, that's just a whole 'nother issue. But, just 
generally, our trade policy, what we should be doing to lift 
standards in the developing world. So, your efforts on 
healthcare, your efforts, from vaccines to combating TB, 
malaria, and AIDS, and all that, can build on a foundation of a 
better structural healthcare system in the developing world.
    Mr. Gates. Well, in terms of trade, we've seen the results 
of countries like, say, North Korea, that chose not to engage 
in the world trade system. And, we can compare, say, South 
Korea and North Korea--one is a trade-oriented country, one's a 
nontrade-orientated country--and see what sort of outcomes come 
out of that. So, yes, I am----
    Senator Brown. With all due respect, that's an outlier. 
Let's talk about countries we deal with--poor countries--
South--North Korea is----
    Mr. Gates. OK.
    Senator Brown. OK. Fair enough.
    Mr. Gates. Health conditions in Mexico continue to improve 
quite substantially. One of the consultants to our Foundation, 
Julio Frank, was the Secretary of Health down there, and 
they've done a number of very innovative things, including 
payments to poor families relating to following health 
practices and keeping their kids in schools. And, in fact, 
that's an approach that now other countries are looking at, 
where you use economic incentives to get poor families to 
engage in these things.
    Health statistics are--worldwide--are improving quite a 
bit, even with some negative trends--of course, the AIDS 
epidemic is very negative; drug resistance, in the case of 
malaria and TB, are negative things--but, despite that, overall 
health conditions are improving quite substantially. And, for 
example, measles, back in the 1970s, before widespread 
immunization, actually killed 6 million people a year, 
children. And now, it's down under 600,000. And so I see a very 
positive picture in global health. It's one that we need to 
invest more in an accelerated--in a faster way.
    Having jobs in those countries, and not over-regulated so 
they can't create jobs in those countries, is one of the best 
things. The commodities boom has been a great thing for a 
number of African countries. The exports of coffee, even some 
products like cotton that are extremely distorted by 
subsidization policies, there's been increases in the exports 
of those things. And that is a great development. Because, in 
the long run, you've got to have the agricultural productivity, 
and that means you've got to have exports. Most countries that 
have gotten into the virtuous cycle, have done it by being 
allowed to export and participate in the free-trade system.
    And whenever we look at the standards for these countries, 
we should say, ``OK, when we were at their level of wealth, 
what were we doing on the comparable things?'' It's always an 
interesting comparison to make.
    Senator Brown. But when we were at their level of wealth, 
we didn't have an outside economic power with the kind of 
influence that American corporations did playing in our 
country, to the degree that many of them do in ours.
    Mr. Gates. I'm not sure what you're saying. I mean, the 
United States, economically, was way behind Europe in its early 
days. It benefited from investment and trade. You know I 
believe in trade.
    Senator Brown. As I do.
    Mr. Gates. You know the Doha round, in particular, would be 
quite beneficial to the African countries, where our Foundation 
focuses a lot of its efforts. So, I'm very hopeful that 
something can happen there.
    Senator Brown. If I can make one more comment, Mr. 
Chairman, on the question with Julio Frank, in Mexico, the AMA 
said the area along the U.S./Mexican border is the most toxic 
place in the western hemisphere, because we had no 
environmental standards--real, enforceable environmental 
standards in American companies and other companies on--near 
the Mexican border, south of the border, in terms of disposal 
of waste. And there's no reason we shouldn't--I assume you'd 
agree with that--no reason we shouldn't build that into trade 
agreements. That's not a trade barrier, any more than 
intellectual property is a trade barrier, I don't believe.
    Mr. Gates. Well, when we have a common river like the Rio 
Grande, or something like that, certainly we have a very close 
interest in it. I'm not an expert on that issue. Some basic 
environmental things clearly are of global interest.
    Senator Brown. Thank you.
    Thanks. Thank you, Mr. Chairman.
    The Chairman. Good.
    Senator Hatch.
    Senator Hatch. Well, thank you, Mr. Chairman. Welcome back.
    I just want to make one comment, and that is that I hold 
you and your wife in high regard. You've done so much with your 
wealth that is so good for mankind that I don't think anybody 
should fail to recognize that. I just wanted to be here to tell 
you that, because I usually don't lavish praise on anybody, but 
I think you deserve it. And anybody that can get Warren Buffett 
to commune with all this, where he's a mutual friend, and, I've 
got to say, one of the most brilliant people I've ever met in 
my life, as you are. But I'm just very grateful to you for what 
you're doing in so many ways.
    Let me just say one thing. I'm also pleased with what 
you're doing with Medstory. You acquired that company, and I 
think that you can do an awful lot there to help people all 
over the world.
    I'm not going to ask you any questions, I just wanted to 
personally express my regard for you, and for your wife, and 
for Warren, and for what you people are doing. You just really 
are making a difference in this world. And I agree with you--
with virtually everything you said in your statement. I think 
that it's a very precocious statement, and very much 
appreciated by all of us here.
    Thank you, Mr. Chairman.
    Mr. Gates. Well, thank you. Medstory, for people who don't 
know what it's about, letting consumers find health 
information. And the interest in that has risen, and they 
were--did some very innovative work to make it easy to find 
medical data. So, that's become part of our new investments in 
that medical area.
    Thanks for your comments. Warren has been incredibly 
generous, so now we have to justify the trust that he's put in 
us.
    Senator Hatch. I figured that would be a very good 
combination. But I just raised Medstory, because a lot of 
people don't know about it, and it's an innovative thing that I 
think can make a real different in healthcare all over the 
world.
    Thanks. I appreciate it.
    Mr. Gates. Super.
    The Chairman. Senator Roberts.
    Senator Roberts. Thank you, Mr. Chairman.
    On page 6, Mr. Gates--and I guess I'm showing my bias if I 
say mega-dittos in regards to all the accolades that have been 
mentioned to you, and all of them----
    Mr. Gates. Thank you.
    Senator Roberts [continuing]. Well deserved.
    On page 6 of your written testimony, you say the problem 
begins in high school. International tests have found our 
fourth-graders among the top students in the world and above 
average in math. By eighth grade, they move closer to the 
middle of the pack. By the twelfth grade, we're down at the 
bottom. My question to you is, Why? I think you answered a 
little bit--this is the Enzi question--really, by saying that 
your favorite teacher was somebody that made math pertinent, or 
it was relevant, as opposed to math for math's sake. And you 
could also include science in that category.
    Why is it that China and India are getting their students 
to be so terribly interested, at a young age, in these academic 
pursuits, but somehow we can't generate the intellectual 
curiosity in math and science from our adolescents?
    Mr. Gates. First, to be clear, the comparisons there, where 
we go from the top to the middle to the bottom, those are 
against the industrialized countries, the rich countries.
    Senator Roberts. Right.
    Mr. Gates. So, Korea would be part of that, Japan, 
Singapore, the Nordic countries. Among the top are countries 
like Korea and Singapore.
    India and Japan, as you say, are getting a higher and 
higher percentage of their students going into science and 
math. They're the only countries where you see significant 
increases. Europe, the United States, Canada has all seen these 
decline. So, whatever we're doing about making the field 
interesting and attractive and showing the opportunity, there's 
something shared across a lot of the rich countries.
    India and China, to some degree, as was mentioned, they 
don't have--these are the professions that are most admired and 
that people are most excited about. They don't have the 
equivalent of Wall Street or other things.
    Senator Roberts. Well, how do we generate that excitement 
here?
    Mr. Gates. Well, to some degree, this is a--I'm very 
surprised we haven't been able to do better on this, because 
these jobs are very interesting jobs. Perhaps the image of them 
is that they're not very social. But, in fact, if you're 
designing a software product, you're working with a lot of 
people, you're getting a lot of feedback. We've worked with a 
number of universities, including a group called the Anita Borg 
Institute, to really go down and talk to high-schoolers and ask 
them what did they think about this field. And the 
misperceptions are a real problem for this. When we show them 
examples, particularly examples they can relate to--so, showing 
the women a woman who's very successful, she comes out and 
shares her enthusiasm--that can make a big difference.
    Senator Roberts. OK, pardon the interruption. Senator 
Reed----
    Mr. Gates. Go ahead.
    Senator Roberts [continuing]. Mentioned teachers. You can't 
teach in the secondary school, because you don't have a 
certification, and it takes 5 years. And yet, I would think 
you'd be a pretty good teacher in regards to science and math, 
not only because of your reputation, but it would make it real, 
it would make it pertinent, they could touch it, they could 
feel it. It would become exciting, as opposed to, ``I have to 
take math courses.'' Is there some way that we can arrange to 
shorten up that certification process to let people like 
yourself, in the military or the business world or whatever, 
who say, ``Well, I've had a career here. I'd like to at least 
teach, but I can't teach in a secondary school.'' Now, you 
could in a university, which I'm sure you do all the time. 
What's your comment about that?
    Mr. Gates. Yeah, I definitely think that, particularly 
where we've got this huge shortage, and, as you say, the 
benefit of somebody who's engaged and excited in the field 
makes such a difference that perhaps making it simpler for them 
to come in, either as a full-time teacher or even, in some 
cases, come in to the schools, on a part-time basis and talk 
about the things they do, and be part of that teaching process. 
I absolutely think we need to encourage a lot more openness and 
a lot of experimentation in that. We're seeing some of it in 
some of the charter systems that we're involved with, but 
that's one of the regulations that even the charter system 
often doesn't let you get----
    Senator Roberts. I understand that.
    Mr. Gates [continuing]. Get around.
    Senator Roberts. On page 10, you say, ``I appreciate the 
vital national security goals that motivate many of these 
policies.'' We're talking about immigration. ``I am convinced, 
however, we can protect our national security in ways that do 
less damage to our competitiveness and prosperity.'' How? As a 
former chairman of the Intelligence Committee, I'd just like to 
hear your comment.
    Mr. Gates. Sure. As part of this immigration process, at 
many, many different points during the process you undergo a 
security check, the same person, many, many times. If they 
actually go up to Canada briefly, they often can't get back 
into the United States, because these security checks are now 
taking months to take place. It's done on a very manual basis, 
without much resources. In fact, it's done in a way that one 
doubts that it's working very well----
    Senator Roberts. Yeah, that it's working.
    Mr. Gates [continuing]. At all. And so, I think that some 
of the humiliation and delays that come through the security-
check process could be eliminated without dropping the goal of 
being able to check a list or whatever the security concern is 
there.
    Senator Roberts. I appreciate it very much.
    Thank you, Mr. Chairman.
    The Chairman. Yeah.
    Senator Allard.
    Senator Allard. Thank you, Mr. Chairman.
    I would like to join my colleagues up here in their 
accolades for you and your wife and the Foundation.
    I want to delve into this issue about performance levels at 
high schools and elementary schools. I agree with you that we 
need to be very concerned about what is happening at the high 
school level, but I think we have to be careful by saying that, 
because students are performing well, that's where their area 
of interest is going to be, and that we need to say, ``Well, if 
you're interested in science, for example''--and I'm a 
scientist--we have to catch their fascination. We've got to--
they have to--somewhere at that point in education, they've got 
to view science as magic, or math as fun. I happen to disagree 
with my colleagues, that, even though they're performing well, 
that they start in the elementary school. I mean, it's the 
third, fourth, fifth grade that you kind of say, ``well, 
because of somebody you know''--in your case, maybe a teacher. 
I don't know where your fascination started, but my fascination 
started in science when I was in fourth and fifth grade, 
because of people I knew and interacted with.
    I think, somehow or the other, we need to get teachers in 
those grade levels excited about it, so they can share that 
with their students. Also, I think we need to figure out a 
program that gets elementary schools--teachers excited. The 
reason they teach there--I think science is intimidating, and 
they get into the heavy science courses--or heavier science 
courses in college and high school. And I think the seed needs 
to be planted at the elementary school.
    Have you given that any thought? And would you have a 
comment on what I just said?
    Mr. Gates. Well, I agree with you that elementary school is 
where we start to lose people. It's not where we lose the bulk 
of the people, but having teachers at that level who can make 
the subject interesting and fun, and not have people self-label 
as though ``I'm not one of those people who likes math.'' 
``That's that''----
    Senator Allard. Yeah, that's a problem.
    Mr. Gates [continuing]. ``Geeky guy''----
    Senator Allard. Yeah.
    Mr. Gates [continuing]. ``Over there.'' That labeling, 
there's some of that that happens in elementary school, but it 
gets way more extreme in high school. And I think the thing 
that characterizes a great elementary schoolteacher is more 
about their teaching technique and less about their depth of 
knowledge in the subject. So, yes, I think there should be a 
focus there.
    The place where we really need people who majored in the 
subject in college and have a pretty in-depth knowledge of the 
subject, that's more as you move up to the higher grades, that 
if you're going to teach algebra and geometry, that they are 
very comfortable with the ninth- through twelfth-grade 
curriculum. So, I think what we--what's beneficial to teachers 
to have them keep kids interested is somewhat different at 
these different levels, and our expertise, because the 
foundation is focused on high school, is much more at that 
level. But you do see a dropoff in elementary school. You see 
it in high school. And then, there's a huge dropoff, people who 
enter college thinking they're going into science and math----
    Senator Allard. Yeah.
    Mr. Gates [continuing]. That starts out at about, I think, 
14 percent, and then it's less than 5 percent have followed 
through on that by the end of the undergraduate 4-year period.
    Senator Allard. That's very interesting.
    Coming out of the Sputnik era, when science was being 
stressed, we in the TV programming, had some fun science 
programs. I never was one that spent a lot of time in front of 
the TV, but I think we had those sort of programs. I'm 
wondering if there isn't some way, maybe on the Internet, to 
begin to establish an Internet location where you could have 
fun science. The fascination, for young people today, is not TV 
so much, I think it's more the computer and the computer 
screen. And if we can, somehow or the other, reach out to them 
and make a fascinating program and pull them into this idea of 
science. I think it might be something worth thinking about.
    Mr. Gates. Yeah, absolutely. And Microsoft and others are 
very involved in getting this started. I think there's two 
flavors of that. One is the student who's motivated, who would 
actually go out there and say, ``OK, let me see how volcanoes 
work, or how global warming works, or how spaceflight works.'' 
The other thing is to take and gather the material so that a 
teacher can go to those sites----
    Senator Allard. Yeah.
    Mr. Gates [continuing]. And then drawn down, kind of, the 
images, the animations, the stories, and bring those sort of 
real-life science neat stories into the classroom. And that 
ability of great--some great teachers have always been doing 
that, but they didn't really have a way of publishing and 
sharing their ideas, and then having other people build on 
those. By creating communities on the Internet of these various 
types of teachers and the material and things they're doing, or 
even videos of the best practice, there's a lot more we can do 
to make teaching less isolated, let them benefit from one 
another. And that spans all the way from the elementary to the 
collegiate level.
    In the extreme case, we're actually seeing--we're saying to 
universities that--let's get all the great lectures online; and 
so, say, a community college wouldn't have to do the lectures 
in a subject like physics or chemistry, but they would do the 
study groups, and they--so, they would take the world's best 
lectures, but then do that. And so, education can be more 
specialized and more efficient as we use the technology.
    Senator Allard. Mr. Chairman, thank you.
    And thank you for your testimony, Mr. Gates.
    The Chairman. Thank you. Thank you very much.
    Mr. Gates, when you were talking about ``interesting in 
science,'' I was up at the Museum of Science in Boston not long 
ago, and they had Mr. Ballard, who is a great oceanographer, 
found the Titanic and the Bismarck, and the Lusitania. And he 
was conducting--they had this submersible that--he was down in 
the Galapagos Islands, and steering this--letting the students 
steer the submersible through the Galapagos, with all of the 
sea life that was there, and they had 600 inner-city children 
in that auditorium. You could hear a pin drop--absolute pin 
drop, the interest these children had. And then they had--I saw 
a fellow named Lesser, who was the principal cellist for the 
Boston Symphony Orchestra, talking about the sound, how sound 
moves through the air when he played his cello, in a room with 
50 inner-city schoolchildren. And the fascination, the opening 
of the mind, about--interest by these children in both music 
and in technology and science--unlimited. How we get that kind 
of interest is going to be the challenge. But you've reminded 
us about this.
    Let me quickly go into another subject. Mary Robinson, 
President of Ireland, head of the World Health Organization, 
met with a number of us. She's very concerned about just this 
brain drain to the United States, particularly in health, in 
health professions. She pointed out that the flow, for example, 
at a time when we have eight or nine applications for every 
nursing slot in my State of Massachusetts at community 
colleges, we can get one applicant that can take it, because we 
don't have the training facilities, we don't have the 
professors for the training of nurses. And we're considering an 
amendment on the floor now on the homeland security bill to 
increase the number of nurses on this.
    Now, here are some of the countries. Nigeria, we have 2,500 
doctors here from Nigeria, and 8,900 nurses. From South Africa, 
we have 1,950 doctors, 877 nurses. In Kenya, HIV rate, 15 
percent, 865 doctors, 765 nurses. Ghana, HIV rate, doctors, 
850, 2,100 nurses on this. Her point was, they--many of these 
countries around the world, so many of these doctors and the 
nurses, health professionals that are so vital, in terms--
trying to deal with the challenges of healthcare, are here in 
the United States--are coming to the United States, working in 
the United States. This is costing these countries--they're 
training these people. It's an outlay for--training them. How 
do we balance this, versus what you've said about, sort of, the 
openendedness, in terms of having skilled people be able to 
come into the United States? What's really the--where do we--
where do we really begin to draw the line? When do we say, 
``Well, we're going to try and invest more to develop more 
opportunities for Americans to become nurses, Americans to 
become the doctors of''--we have qualified people that don't 
get into our great medical schools or to our nursing. But 
what's the balance in there?
    Mr. Gates. Well, the--when foreign labor comes to the 
United States, there's this incredible benefit to the country 
that they come from of the remittances they send back to the 
country. And that's a huge thing, in terms of bootstrapping 
those economies, letting them send kids back there to school, 
and having the right nutrition, and great things. So, I don't 
think the right answer is to restrict that ability to come and 
earn a high wage and have that go into the economy that they 
came from.
    Clearly when you get shortages like that, the systems like 
the community college system are usually quite responsive in 
creating capacity and meeting that demand. I'm not an expert on 
the nurse situation in----
    The Chairman. Yeah, that's OK.
    Mr. Gates [continuing]. In this country. I do know that, as 
we think about global health outside the United States, and 
people have talked about this, this talent drain, I don't think 
putting restrictions on letting people come and work would be 
the way to solve that, because there's other countries that 
they would end up going to. And what you need to do is deal 
with the supply.
    Also, many of the medical inventions that we need, need to 
be things that don't require an expensive healthcare system, 
because the reason many of those people are leaving those 
countries is that the healthcare system doesn't use their 
talents very well; that is, they don't stock drugs properly, 
they don't have electricity, and a number of these things. And 
so, getting those countries to invest in healthcare, and having 
things like vaccines that can actually be given without 
advanced medical training--for example, if we had an AIDS 
vaccine, which is a very tough thing, we'd greatly reduce the 
burden on those healthcare systems. In fact, if we had a 
malaria vaccine, that would have this amazing effect to free up 
that capacity for dealing with other health problems, because 
that actually puts more people in these hospitals in many 
countries than anything else. I'm optimistic about the vaccines 
coming along, and that those will change--get rid of the 
unbelievable overload in the health budgets of these countries.
    The Chairman. Just one additional point. In the H-1B there 
are provisions in there where they pay a fee into a fund so 
that they train Americans and upgrade their skills as a part of 
the H-1B.
    Let me, just finally, ask you this. You've given a number 
of recommendations on competitiveness, immigration, others, in 
education. What's your--just if you could summarize your sense 
of urgency--how much time do we have? I mean, what are we--
what's the framework, where would you say, as somebody that's 
obviously thought about this a good deal, has specific 
recommendations, and is familiar with these forces in other 
parts of the world? What guidance can you give to us about the 
sense of urgency? I think for--all of us who deal with 
education think every day that's gone by with a lost child--for 
a child to lose that opportunity for learning is a day that 
probably can't be recaptured. There's a sense of urgency, in 
terms of education. Years go by, we lose these opportunities. 
What's your sense, just in terms of the country and 
competitiveness, what's happening in other parts of the world?
    Mr. Gates. Yeah, I think both of these are incredibly 
urgent issues. Education, because, as you say, it takes a long 
time, and so, you might--you've got to get started now, 
improving the teachers and trying out the new incentive 
systems. Even if it's going to take decades, the sooner you get 
going, the better.
    In the immigration case, it's much more of an acute crisis, 
in that the message is clearly here today that you come to the 
United States, go to these great universities, and you go back, 
and not only take your very-high-paying job, but also all the 
jobs around it back to another country. Other rich countries 
are stepping up and showing the flexibility to try and benefit 
from the way we're turning these people away. This country 
benefits in every way by having these very-high-paid jobs here 
in this country. If you talk to a student who's in school 
today, going to graduate in June, they're seeing that they 
cannot apply until they get their degree, and, by the time they 
get their degree, all those spaces are gone. If somebody's here 
on an H-1B, if you're from India, say, with a bachelor's 
degree, the current backlog would have you wait decades before 
you could get a green card. And, during that time, your family 
can't work, there's limits, in terms of how you can change your 
job. There was one calculation done that you--the fastest way 
to get a green card is to have a child who becomes a United 
States citizen, and then your child sponsors you to become a 
U.S. citizen. That's because it's--there's more than 21 years 
in some of these backlogs.
    So, this is an acute crisis. And it's a thing--as you say, 
there's fees paid. And Microsoft makes no complaint about those 
fees. We end up paying a lot more to somebody who comes in for 
these jobs from overseas than we do to somebody domestically. 
We have every reason--we have 3,000 open jobs right now. We're 
hiring the people domestically, every one that we can. In fact, 
there's a great competition. This wage rate continues to go up, 
as it should. And the wage rate for this type of skill set is 
not that different in other countries. It's escalated very 
rapidly in India and China, and particularly if you include the 
tax costs and the infrastructure costs that we pay to support 
this kind of job in those countries. This is not about saving a 
ton of money for a top engineer, this is about being able to 
put them here in this country, where the other skill sets 
around them are the best in the world. And there's not a 
shortage in those other skill sets. India and China haven't 
yet, and it'll take them a long time before they're as good at 
the management, testing, marketing elements that go around 
those engineers.
    So, this is an acute crisis, and one that, in terms of the 
taxes these people will pay, the fees that get paid around 
them, is fiscally accretive to the United States immediately, 
in terms of what happens. To me it's a very clear one with 
basically no downside that I can see whatsoever.
    The Chairman. Good. Lamar.
    Senator Alexander. Thank you, Mr.----
    The Chairman. Senator Alexander.
    Senator Alexander. Thank you, Mr. Chairman.
    Two comments and a question. One is, you've been a very 
eloquent spokesman for what I like to characterize as 
insourcing brainpower, and, I think, helping our country 
understand that insourcing--we talk a lot about outsourcing 
jobs, but insourcing brainpower is insourcing jobs, too, which 
is a--which you've said several times today, and which is a 
point we don't make as well.
    Second comment. In our little discussion about teacher 
incentives, where we were talking about this area--this 
difficult area of finding fair ways to reward teachers and 
school leaders who excel, and that how a good way to do that is 
not to impose, suddenly, a big system, but to encourage this 
effort across the country, where communities are, as a--New 
Leaders for New Schools is, in Memphis, for example, and they 
pay a third of the principals $15,000 more if they go to 
Wharton and learn--and they stay a part of the system and learn 
to be leaders. And the teachers make $6,000 more if they're 
highly effective teachers and their low-income kids improve. 
So, the point being that one of the big differences between 
today and 20 years ago is that we now have a number of ways to 
measure student achievement. Dr. Sanders was at the meeting 
Senator Kennedy hosted yesterday. And there are other methods. 
And because we're now able to say, ``This low-income child in a 
New York school is making great progress because this teacher 
consistently helps that,'' then there's a--perhaps a fair basis 
for rewarding that teacher or that school leader. Because we 
can see improvement.
    And so, I hope--the reason I bring that back up--and here's 
my question--is because that's a scenario where I think we can 
hopefully move ahead with a teacher incentive fund, and perhaps 
you and others in the private sector can do the same over the 
next 5 years, and we can work in parallel and learn from one 
another.
    Here's another area. We have long lines at two-thirds of 
the places around our country of people who don't know English, 
who want to learn English. Now, I'm not talking about making 
people learn English, or English only. I'm talking about the 
huge number of people who live here, who don't speak English, 
who want help learning English. And the Senate adopted my 
amendment to give $500 grants to prospective citizens who want 
help learning English so they could take it to the PUENTE 
Learning Center in Los Angeles or other places, where, for $500 
you can learn English pretty quickly.
    So, I've had on my mind for many years, and I'm going to 
put this in legislation, but it'll be hard to do in government, 
that if we had $100-million bank, or 200 or whatever amount, 
and we said to virtually anyone who's living in the United 
States, ``If you want help learning English, we'll give you a 
$500 voucher, which you can then spend at any one of--at any 
accredited center for learning English, with the hope that 
you'll 1 day pay it back.'' My--``no strings, just with the 
hope that 1 day you'll pay it back.'' My guess would be that 
that bank would grow, over 5, 10, or 15 years, to be a very big 
bank that would turn over and over and over again, providing an 
easy way for people, who needed a little help, to learn 
English. So, I wanted to take advantage of you today by--since 
you're here--by suggesting that idea to you, that I'm going to 
introduce it in legislation here, but it'll have--it'll run 
into a lot of problems if we try to set it up, with all the 
government rules and regulations and accounting. As a purely 
private matter, a bank to help people learn English, which we 
hope they would pay back, I think would be--help equal 
opportunity, it would help improve our workforce, and it would 
be a big help toward national unity by encouraging our common 
language, but not in any sort of coercive way.
    Mr. Gates. Yeah, in terms of teacher's innovation fund, 
I'm--as I said in my comments, I'm a big believer in that, 
because having the money that lets you try out merit pay be 
viewed as incremental allows people to go along with it, even 
if, in the early days, they think, ``OK, the system is 
unproven,'' and they're worried about that, at least they're 
not being told, from the beginning, ``Hey, we're taking it''--
it's purely zero-sum, even when the system isn't proven. The 
fact that during that experimental phase, it's incremental, 
then they see that they are not a loser, and they see, ``OK, 
here's Federal money that we don't get unless we do a merit-
based system,'' so it'll encourage experimentation. And I do 
think there are--in these labor-practice areas, we should have 
100 such experiments, because I think 90 of them won't work. 
We're certainly not at the point where you can test people 
going into a class--have them take a class, and test them going 
out, and just pay the person based on, ``OK, here's the delta 
in those test results.'' It's too--the testing is good. We know 
a lot more. But at that level of granularity, it's not viewed 
as predictable enough to put a huge reliance on it. And so, 
figuring out, ``OK, how do we supplement that? Do we have 
teachers who come in and do evaluations anyway?'' A lot of 
things should be tried there.
    Terms of English, it is one of the advantages the United 
States has. English is being adopted as essentially the second 
language globally. Every country I go to, they're saying how 
they've changed their education system to teach English at a 
younger age, and they're proud of the percentage of people in 
the country who speak English--not as a primary language, but 
as a second language. And so, that is helping us. The demand 
for English training as you say, actually demand is very high 
today. People are moving to do that. There are some things on 
the Internet that can help with that. There's some self-
training courses where the prices of those have come down.
    I haven't thought about a way of encouraging people to do 
that. It would be interesting to think, would you actually have 
a lot more people who would learn because of that incentive? 
What follow-on benefits might you get from that? Obviously, as 
you think of different age groups, it's different. Kids going 
into school, we want them to get comfortable in English very 
quickly, because that could be a huge challenge to a school 
system. And many of these urban school systems, it's 
unbelievable the variety of languages that they have as native 
languages. It's great, but it's a challenge for them. You need 
some innovation and encouraging it would be good. For young 
people, it's really actually quite necessary for them to 
benefit from the education system.
    Senator Alexander. Thank you, Mr. Chairman.
    The Chairman. Senator Sanders.
    Senator Sanders. Thank you, Mr. Chairman.
    Before I ask Mr. Gates a question, I did--wanted to comment 
that I thought your statement on nurses was right on. My 
understanding is that we have some 50,000 Americans or so who 
want to go to nursing school in the midst of a nursing crisis, 
and can't get in them, because we don't have nursing educators.
    The Chairman. Yeah, you got it.
    Senator Sanders. And, in fact, that's what I want to talk 
to you, on Friday, about the higher education bill. Just----
    The Chairman. We'll do that on Friday. And be----
    Senator Sanders. Right.
    The Chairman. I'm sure Mr. Gates will be interested.
    [Laughter.]
    Senator Sanders. All right.
    Mr. Gates, there--I think there is no debate that we have 
got to focus a lot of attention on urban schools. How minority 
kids are treated is a disgrace, and so forth. But what--I 
represent a very rural State, the State of Vermont. And, by the 
way, we'd love you to come up and say hello, visit us. It's 
only 20 below, today, but it'll warm up in a few weeks.
    In rural America, and in rural Vermont, we have situations 
where there are not a lot of good-paying jobs. And kids don't 
really get a sense of why they need an education, because they 
don't see much in front of them. Kids are dropping out, kids 
are doing self-destructive behavior--drugs, crime, so forth and 
so on. What thoughts do you have about how we might be able to 
revitalize education and create excitement in rural communities 
around this country?
    Mr. Gates. The Foundation schools, a very high percentage 
of them are urban schools, because that's where we've seen--
where you've got the large minority populations, and you have 
these super high dropout rates. I agree with you that the rural 
situation is not some panacea. In fact, when we first got 
involved, I said, ``Well, hey, if it's just urban, let's just 
copy what they're doing in the rural areas.'' And, in fact, as 
you say, it has some particular problems, in terms of the 
breadth of teacher skills. Often, for political reasons, school 
districts that should merge together----
    Senator Sanders. Yeah.
    Mr. Gates [continuing]. Do not want to merge together, 
because that comes down to the point of, ``OK, we should merge 
the schools to try to get scale,'' and that takes some 
political leadership, because there's a hard choice there 
about--as you have less students, how do you--how do you create 
that critical mass? So, I do think there should be a lot of 
school-district mergers--would help a lot in these rural areas.
    There has been some work done by the Foundation in rural 
areas, and I'll get them to write that up and send you and I a 
copy of it.
    Senator Sanders. Good.
    Mr. Gates. We do think that the--some of these technology 
things, where you can go and get great courses over the 
Internet, and have even rural areas sharing with each other, 
where one is very good at one thing, and one is good at another 
thing, that those can be quite advantageous----
    Senator Sanders. Right.
    Mr. Gates [continuing]. Because--and in Vermont, you have 
good broadband connectivity. Most of the schools are hooked up. 
And so, it should be very possible.
    Senator Sanders. OK, thank you.
    The Chairman. Just finally, we have--Mr. Gates, we have 
77,000 jobs that are waiting--in my State of Massachusetts, 
probably 300,000 people are unemployed, and we've got 24 
applications for every job slot existing today. I mean, under 
our existing--listening to you talking about upgrading our 
training programs and the education and ensuring people are 
going to be upgrading their skills, there's a lot of work for 
us to do.
    This has been an enormously helpful hearing. You've raised 
all of our sights, and raised our spirits, as well. And we're 
going to be busy concentrating and learning from that extensive 
testimony, and absorbing those recommendations. And I think 
you've seen that the members of the committee have been 
enormously appreciative of your taking the time to join with 
us, and we look forward to keeping in touch with you as we move 
forward on many of these initiatives. We'll value very highly 
your ideas and recommendations, suggestions. And we have 
benefited immensely this morning. We thank you very much for 
taking the time.
    The committee stands in recess.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

Prepared Statement of U.S. Representative Bill Pascrell, Jr., State of 
                               New Jersey

    I would like to thank Chairman Kennedy and Ranking Member 
Enzi for convening this hearing on the vitally important topic 
of strengthening American competitiveness. I also want to thank 
the Chairman and Ranking Member for allowing me to submit my 
testimony on the need for comprehensive H-1B visa reform.
    I believe we must evaluate all options to strengthen 
American competitiveness as we move forward. However, I feel 
strongly that any such progress must include reform of the 
broken H-1B visa system that is coming at the expense of 
American workers especially those in the IT sector. Major 
corporations are throwing labor standards out the window by 
abusing this program.
    The facts are clear and staggering. U.S. electronic 
engineers and computer scientists have experienced higher 
levels of unemployment over the past 5 years than in the past 
three decades. In 2003, for the first time in history, the 
unemployment rate for these professions exceeded the national 
average. In fact, a study by the job placement firm Challenger 
Gray and Christmas Inc. found that 16 percent of all U.S. jobs 
cut this year were from high-tech companies. There are many 
reasons for the high levels of unemployment for our Nation's 
innovators, including the dot-com and telecom busts and the 
general business climate against hiring. However, it is 
apparent that the abuse of the H-1B visa program is a 
significant and growing cause of low demand for U.S. high-tech 
workers.
    The abuse of the H-1B visa program has an obvious negative 
effect of the competitiveness of the American worker. High-tech 
workers who are laid off face extra burdens. They are more 
likely to be unemployed for an extended period of time, which 
means that they will lose hands-on experience needed to keep up 
with the fast pace of technological change. If a high-tech 
worker is out of work for 1 or more years, it is obvious that 
he or she will be losing skills more rapidly than another 
occupation.
    In addition, the poor labor market is causing young 
Americans to shy away from technology disciplines such as 
computer science in significant numbers--students are 
responding rationally to what they perceive as diminished long-
term prospects in those fields.
    The poor labor market for tech workers is also causing wage 
depression. For the first time in three decades, yearly 
compensation actually decreased in 2003. It is clear that 
employers are using H-1B visas in order to pay those visa 
holders less than Americans of the same qualifications. INS 
data of 2001 wage estimates show that the median salary for 
computer-related H-1B visa holders is $50,000, while the 
corresponding median for American workers in similar jobs is 
$66,230.
    The H-1B visa program plays an important role in the 
American economy when it is used as intended--to allow the 
hiring of skilled foreign workers when no American is 
available. The current misuse of the H-1B visa, however, leads 
to exploitation of foreign workers. They are vulnerable because 
of their immigration status, and are subject to termination if 
they speak up about their mistreatment.
    In the 109th Congress I introduced the ``Defend the 
American Dream Act'' to address the gaping loopholes in the H-
1B visa program. This legislation would protect American 
workers by reducing the H-1B visa quota to its original level 
of 65,000 per year. It would also substantially increase 
protections of American and foreign workers by requiring 
companies to actively recruit for American workers first and to 
pay all workers the median wage in that industry. Finally this 
legislation would greatly strengthen the Department of Labor's 
ability to enforce the law--which is today nearly non-
existent--by allowing the Labor Department to audit and 
investigate companies and to apply substantial penalties to 
companies in violation.
    I plan to reintroduce the ``Defend the American Dream Act'' 
this year as the number of American workers adversely affected 
by the H-1B visa program continues to grow exponentially. We 
must reform the H-1B program to give Americans the first chance 
at some of the best jobs in our economy. I will continue to 
work closely with my colleagues on the House side on this 
significant issue and likewise I look forward to working with 
members of this committee as we seek to undertake comprehensive 
immigration reform. In conclusion, I will always believe that 
any discussion on strengthening American competitiveness must 
begin and end by addressing the concerns of American workers.

                                ------                                

         American Federation of Labor and Congress 
             of Industrial Organizations (AFL-CIO),
                                    Washington, D.C. 20006,
                                                     March 6, 2007.
Hon. Edward M. Kennedy, Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, D.C. 20510.

Hon. Michael B. Enzi, Ranking Minority Member,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, D.C. 20510.

    Dear Chairman Kennedy and Ranking Member Enzi: I wish to express 
strong concern with the composition of the panel before the Committee 
on Health, Education, Labor, and Pensions (HELP) for tomorrow's hearing 
entitled ``Strengthening American Competitiveness for the 21st 
Century.'' I am deeply disturbed that the panel consists only of Bill 
Gates and excludes the voice of workers. Working people just elected a 
Congress on a platform of economic justice; the least we expect is that 
workers will be given a voice on matters that are at the heart of that 
agenda. The way you have structured this hearing guarantees that you 
will only be given the corporate perspective on this important issue.
    Mr. Gates will no doubt once again advocate the massive expansion 
of the H-1B guest worker program as a solution to keeping America 
competitive. We could not disagree more.
    Simply put, there is no justification for massively increasing the 
size of the H-1B guest worker program, other than to continue to 
provide corporations a steady stream of exploitable workers. Thai runs 
completely contrary to an economic justice agenda and is not in the 
interest of workers in our Nation. Guest worker programs like the H-1B 
program are detrimental to all workers in the United States, both 
American workers and foreign workers who are imported through the H-1B 
program.
    The H-1B program has become the preferred mechanism for employers 
in professional and technical sectors to keep labor standards from 
rising. As the National Research Council concluded, ``the current size 
of the H-1B workforce relative to the overall number of IT 
professionals is large enough to keep wages from rising as fast as 
might be expected in a tight labor market.''
    Congress adopted the H-1B program in 1990 as a means to assist 
employers in addressing a temporary labor shortage in high-tech 
industries. The program was never intended to address long-term labor 
shortages. Seventeen years later, as unemployment rates in the high 
technology sector have increased substantially, employers are still 
calling for more increases in the number of temporary foreign workers 
that they can import into the U.S. labor market.
    The AFL-CIO repeats its call for policymakers to focus attention on 
the true solution to current and anticipated skills shortages in the 
high-tech and information technology (IT) sectors: training of current 
workers, investment in educational opportunities, and reform of our 
permanent employment-based immigration system.
    The primary focus for policymakers and for industry should be to 
ensure that our workers are prepared for job demands of today, to 
predict future skills needs, and to encourage government, industry, and 
labor to work together to ensure that our workforce is fully prepared 
to meet those needs. Instead of tackling these important policy 
challenges, the simple expansion of the H-1B temporary foreign worker 
program shifts attention to a program with little agency oversight that 
is readily susceptible to fraud and abuse of U.S. and foreign workers 
alike.
    The Government Accountability Office (GAO) has issued several 
reports related to the H-1B program. It issued a report in June 2006 
that focused on Department of Labor (DOL) oversight of employers' 
compliance with H-1B program requirements, which are the only 
safeguards against abuse and displacement of workers. GAO concluded 
that the DOL ``does not use its full authority to oversee employers' 
compliance with programs requirements'' and that it ``lacks quality 
assurance controls and may overlook some inaccuracies.''
    We recognize that even with necessary investments to training and 
educational opportunities in the fields of math and science for our 
domestic workforce, employers may still encounter long-term labor 
shortages. The answer to those shortages should not be the expansion of 
temporary worker programs that are failing American workers, but rather 
a reform of our permanent employment-based visa system.
    The permanent employment system isn't working, mainly because it is 
based on a system of arbitrary caps that are the result of political 
compromise that have no relation to economic realities. The current 
number of visas available, for permanent jobs 140,000 per fiscal year, 
was set by Congress more than a decade ago and has not changed. While 
economic demands certainly have changed, the fundamental policy behind 
our permanent immigration system remains valid. Employers that 
demonstrate they cannot find workers in the United States to do jobs 
that are permanent (that is, not seasonal or temporary in nature) 
should be able to bring in foreign workers under conditions that 
guarantee that there will be no negative impact on the wages and 
working conditions of other workers in that industry. The key to 
protecting U.S. labor standards is to ensure that new foreign workers 
come in with fully enforceable rights.
    It is irresponsible for Congress to contemplate yet another 
increase in the total annual number of H-1B visas available when it has 
done nothing to address the myriad and well-documented problems 
associated with the H-1B temporary worker program. Nor is it 
responsible for Congress to allow corporations to import more and more 
workers under conditions that have detrimental impacts on entire 
industries instead of focusing its energy on finding long-term 
solutions that involve access to training and educational opportunities 
for domestic workers, and on reform of our permanent employment-based 
immigration system.
            Sincerely,
                                     Linda Chavez Thompson,
                                 Executive Vice President, AFL-CIO.

    [Whereupon, at 11:35 a.m., the hearing was adjourned.]

                                    

      
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