[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 AMERICA COMPETES: BIG PICTURE PERSPECTIVES ON THE NEED FOR INNOVATION,
         INVESTMENTS IN R&D, AND A COMMITMENT TO STEM EDUCATION

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

                                HEARING

                               BEFORE THE

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 20, 2010

                               __________

                           Serial No. 111-70

                               __________

     Printed for the use of the Committee on Science and Technology


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

                                 ______


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                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                 HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
DAVID WU, Oregon                     LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington              DANA ROHRABACHER, California
BRAD MILLER, North Carolina          ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois            VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona          FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland           JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio                W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico             RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York              BOB INGLIS, South Carolina
JOHN GARAMENDI, California           MICHAEL T. McCAUL, Texas
STEVEN R. ROTHMAN, New Jersey        MARIO DIAZ-BALART, Florida
JIM MATHESON, Utah                   BRIAN P. BILBRAY, California
LINCOLN DAVIS, Tennessee             ADRIAN SMITH, Nebraska
BEN CHANDLER, Kentucky               PAUL C. BROUN, Georgia
RUSS CARNAHAN, Missouri              PETE OLSON, Texas
BARON P. HILL, Indiana
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
VACANCY













                            C O N T E N T S

                            January 20, 2010

                                                                   Page
Hearing Charter..................................................     2

                           Opening Statements

Statement by Representative Bart Gordon, Chairman, Committee on 
  Science and Technology, U.S. House of Representatives..........     7
    Written Statement............................................     8

Statement by Representative Ralph M. Hall, Minority Ranking 
  Member, Committee on Science and Technology, U.S. House of 
  Representatives................................................     8
    Written Statement............................................    10

Prepared Statement by Representative Eddie Bernice Johnson, 
  Member, Committee on Science and Technology, U.S. House of 
  Representatives................................................    11

                               Witnesses:

Mr. John Castellani, President, Business Roundtable
    Oral Statement...............................................    12
    Written Statement............................................    14
    Biography....................................................    16

Mr. Thomas J. Donohue, President and CEO, U.S. Chamber of 
  Commerce
    Oral Statement...............................................    17
    Written Statement............................................    19
    Biography....................................................    22

Governor John Engler, President and CEO, National Association of 
  Manufacturers
    Oral Statement...............................................    23
    Written Statement............................................    24
    Biography....................................................    30

Ms. Deborah L. Wince-Smith, President and CEO, Council on 
  Competitiveness
    Oral Statement...............................................    30
    Written Statement............................................    32
    Biography....................................................    37

              Appendix: Answers to Post-Hearing Questions

John Castellani, President, Business Roundtable..................    68

Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce...    72

Governor John Engler, President and CEO, National Association of 
  Manufacturers..................................................    75

Deborah L. Wince-Smith, President and CEO, Council on 
  Competitiveness................................................    81

 
AMERICA COMPETES: BIG PICTURE PERSPECTIVES ON THE NEED FOR INNOVATION, 
         INVESTMENTS IN R&D, AND A COMMITMENT TO STEM EDUCATION

                              ----------                              


                      WEDNESDAY, JANUARY 20, 2010

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

    The Committee met, pursuant to call, at 10:06 a.m., in Room 
2318 of the Rayburn House Office Building, Hon. Bart Gordon 
[Chairman of the Committee] presiding.
                            hearing charter

                     U.S. HOUSE OF REPRESENTATIVES

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

               America COMPETES: Big Picture Perspectives

             on the Need for Innovation, Investments in R&D

                   and a Commitment to STEM Education

                      wednesday, january 20, 2010
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

1. Purpose

    On Wednesday, January 20, 2010, the House Committee on Science and 
Technology will hold a hearing entitled ``America COMPETES: Big Picture 
Perspectives on the Need for Innovation, Investments in R&D and a 
Commitment to STEM Education.'' The purpose of the hearing is to 
examine the role that science and technology play in promoting economic 
security and maintaining U.S. competitiveness and to understand the 
perspective of the business community on the reauthorization of the 
America COMPETES Act.
    Witnesses were asked to provide testimony on ways to build upon the 
America COMPETES Act to further strengthen U.S. competitiveness. 
Witnesses were asked specifically to discuss how the programs 
authorized in the America COMPETES Act have affected or will affect 
innovation and the ability to maintain a skilled workforce in the 
United States, and whether the priorities and focus of the America 
COMPETES Act will put the U.S. on course to maintain its ability to 
compete successfully in the global economy.

2. Witnesses

          Mr. John Castellani--President, Business Roundtable

          Mr. Tom Donohue--President, U.S. Chamber of Commerce

          Governor John Engler--President, National Association 
        of Manufacturers

          Ms. Deborah Wince-Smith--President and CEO, Council 
        on Competitiveness

3. Background

    It is widely recognized that scientific advancement and 
technological innovation have contributed to economic growth in the 
United States. In fact, some economists estimate that about half of 
economic growth in the United States since World War II has been the 
result of technological innovation. At the same time, the Organisation 
for Economic Co-operation and Development (OECD) concluded that, since 
World War II, leadership in science and engineering in the United 
States has driven its dominant strategic position, economic advantages, 
and quality of life.
    Although the United States continues to be a world leader in 
research and development, technological innovation, and science and 
mathematics education, there is indication that this leadership is 
slipping. For example, between 1990 and 2001, the United States trade 
surplus in high technology products turned into a trade deficit. In 
addition, in recent years, American students have been performing 
poorly on international assessments of math and science proficiency and 
a growing number of American companies have moved assets and jobs 
overseas.
    On October 12, 2005, the National Academy of Sciences' Committee on 
Prospering in the Global Economy of the 21st Century released a report 
entitled Rising Above the Gathering Storm: Energizing and Employing 
America for a Brighter Economic Future. The report was prompted by a 
request to the National Academies from Chairman Bart Gordon, former 
Chairman Sherwood Boehlert, and Senators Lamar Alexander and Jeff 
Bingaman to identify the top 10 actions, in priority order, that 
Federal policymakers could take to enhance the science and technology 
enterprise so that the United States can successfully compete, prosper, 
and be secure in the global community of the 21st century.
    The Rising Above the Gathering Storm report offered four 
recommendations, with specific action items for implementation. The 
recommendations were:

          Recommendation A: Increase America's talent pool by 
        vastly improving K-12 science and mathematics education.

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

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

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

    In August of 2007, the America COMPETES Act passed the House of 
Representatives by a vote of 367-57 and was signed into law by 
President George W. Bush. The bill, which was the culmination of a 
lengthy bipartisan effort by Members of the Science and Technology 
Committee, implemented many of the recommendations of the Rising Above 
the Gathering Storm report. Among other things, it increased funding 
for basic research by putting funding for the National Science 
Foundation, the National Institute of Standards and Technology, and the 
Department of Energy's Office of Science on a path to doubling and 
increased investment in science, technology, engineering and 
mathematics (STEM) education. The legislation was endorsed by a wide 
range of stakeholders, including the U.S. Chamber of Commerce, the 
National Association of Manufacturers, Business Roundtable, and the 
Council on Competitiveness.
    Many of the provisions and programs in the America COMPETES Act are 
set to expire at the end of Fiscal Year 2010 and must be reauthorized.

4. Summary of America COMPETES Act

TITLE I-Office of Science and Technology Policy (OSTP)/Government Wide 
        Science

    The legislation directed the President to convene a National 
Science and Technology Summit to examine the health and direction of 
the U.S. STEM enterprise; required a National Academy of Sciences study 
on barriers to innovation; changed the National Technology Medal to the 
National Technology and Innovation Medal; established a President's 
Council on Innovation and Competitiveness; required prioritization of 
planning for major research facilities and instrumentation nationwide 
through the National Science and Technology Council; and expressed a 
sense of Congress that each Federal research agency should support and 
promote innovation through funding for high-risk, high-reward research.

TITLE II-National Aeronautics and Space Administration

    The legislation established the National Aeronautics and Space 
Administration (NASA) as a full participant in all interagency 
activities to promote competitiveness and innovation and to enhance 
science, technology, engineering and mathematics education. The 
legislation affirmed the importance of NASA's aeronautics program to 
innovation and to the competitiveness of the United States. It urged 
NASA to implement a program to address aging workforce issues at NASA 
and to utilize NASA's existing Undergraduate Student Research program 
to support basic research by undergraduates on subjects of relevance to 
NASA. The legislation also expressed the sense of Congress that the 
International Space Station (ISS) National Laboratory offers unique 
opportunities for educational activities and provides a unique resource 
for research and development in science, technology, and engineering 
which can enhance the global competitiveness of the U.S.

TITLE III-National Institute of Standards and Technology

    The legislation authorized a total of $2.652 billion over fiscal 
years 2008-2010 for NIST.
    The legislation established a Manufacturing Extension Partnership 
(MEP) Advisory Board and required the Board to provide advice on MEP 
programs, plans, and policies; assessments of the soundness of the MEP 
plans and strategies; and assessments of current performance against 
MEP program plans. It also established a program to award competitive 
grants among MEP Centers, or a consortium of Centers, for the 
development of projects to solve new or emerging manufacturing 
problems.
    The legislation authorized a manufacturing research pilot grants 
program to make awards to partnerships that foster cost-shared 
collaborations among firms, educational and research institutions, 
state agencies, and nonprofit organizations in the development of 
innovative, multidisciplinary manufacturing technologies. It required 
such partnerships to include at least one manufacturing industry 
partner and one non-industry partner, and to conduct applied research 
to develop new manufacturing processes, techniques, or materials that 
would contribute to improved performance, productivity, and 
competitiveness of U.S. manufacturing.
    The legislation established a program to award postdoctoral 
research fellowships at NIST for research activities related to 
manufacturing sciences and senior research fellowships to establish 
researchers in industry or at institutions of higher education who wish 
to pursue studies related to the manufacturing sciences at NIST.
    The legislation created a new initiative called the Technology 
Innovation Program (TIP), which is based on the proven success of the 
Advanced Technology Program (ATP), but is focused on high-risk, high-
reward, pre-competitive technology development through small- and 
medium-sized companies. TIP allowed for greater industry input in the 
operation of the program and allows university participation for the 
first time.

TITLE IV-National Oceanic and Atmospheric Administration

    The legislation established a coordinated ocean, Great Lakes, 
coastal and atmospheric research and development program at the 
National Oceanic and Atmospheric Administration (NOAA) in consultation 
with the National Science Foundation (NSF) and NASA. The bill required 
NOAA to build upon existing educational programs and activities to 
enhance public awareness and understanding of the ocean, Great Lakes, 
and atmospheric science, and to develop a science education plan. It 
required NOAA to be a full participant in any interagency effort to 
promote innovation and economic competitiveness through basic 
scientific research and development and the promotion of science, 
technology, engineering, and mathematics education.

TITLE V-Department of Energy

    The legislation provided nearly $17 billion to Department of Energy 
(DOE) programs over fiscal years 2008-2010. It specifically authorized 
$5.8 billion for the DOE Office of Science for Fiscal Year 2010.
    The legislation also established an Advanced Research Projects 
Agency for Energy, or ARPA-E. ARPA-E will address long-term and high-
risk technological barriers in energy through collaborative research 
and development that private industry or the DOE are not likely to 
undertake alone. ARPA-E is specifically structured to respond very 
quickly to energy research challenges, as well as terminate or 
restructure programs just as quickly. A fund is established in the U.S. 
Treasury, separate and distinct from DOE appropriations, for ARPA-E. 
The legislation authorized $300 million in FY 2008, and such sums as 
are necessary thereafter for fiscal years 2009 and 2010.
    The legislation provided $150 million for K-12 STEM education 
programs that capitalize on the unique scientific and engineering 
resources of the national laboratories. These programs include a pilot 
program of grants to states to help establish or expand statewide 
specialty high schools in STEM education; a program to provide 
internship opportunities for middle and high-school students at the 
national labs, with priority given to students from high-needs schools; 
a program at each national lab to help establish a Center of Excellence 
in STEM education in at least one high-need public secondary school in 
each lab region in order to develop and disseminate best practices in 
STEM education; and a program to establish or expand summer institutes 
at the national labs and partner universities in order to improve the 
STEM content knowledge of K-12 teachers throughout the country. All of 
these programs are coordinated by a newly appointed Director for STEM 
Education at the Department, who also serves as an interagency liaison 
for K-12 STEM education.
    The legislation highlighted the critical role of young 
investigators working in areas relevant to the mission of DOE by 
establishing an early career grant program for scientists at both 
universities and the national labs, and a graduate research fellowship 
program for outstanding graduate students in these fields. The 
legislation also brought attention to research and education needs in 
the nuclear sciences and hydrocarbon systems sciences by establishing 
grant programs to universities to establish or expand degree programs 
in these areas.
    Finally, the legislation helped DOE recruit distinguished 
scientists to the national labs and foster collaboration between 
universities and the labs by providing competitive grants to support 
joint appointments between the two.

TITLE VI-Department of Education

    To enhance teacher education in the STEM fields and critical 
foreign languages, the legislation authorized two new competitive grant 
programs. One program specifically enabled partnerships to implement 
courses of study in STEM fields and critical foreign language that lead 
to a baccalaureate degree with concurrent teacher certification. 
Another program implemented two- or three-year part-time master's 
degree programs in these areas for current teachers to improve their 
content knowledge and pedagogical skills. The legislation authorized 
$151,200,000 for the baccalaureate degree program and $125,000,000 for 
the master's degree program for fiscal year 2008 and the two succeeding 
fiscal years.
    The legislation authorized competitive grants to increase the 
number of highly qualified teachers serving high-need schools and to 
expand access to AP and IB classes. It also authorized the Secretary of 
Education to contract with the National Academy of Sciences to convene 
a national panel within a year after the enactment of this Act to 
identify promising practices in the teaching of science, technology, 
engineering and mathematics in elementary and secondary schools.
    The legislation authorized grants to states to implement 
mathematics programs or initiatives that are research-based, provide 
professional development and instructional leadership activities for 
teachers and administrators on the implementation of mathematics 
initiatives, and conduct student mathematics progress monitoring and 
identify areas in which students need help in learning mathematics. It 
also established a demonstration program which awards grants to states 
for the provision of summer learning grants to disadvantaged students. 
It also authorized grants to states to establish new service and 
activities to improve the overall mathematics performance of secondary 
school students.
    The legislation also authorized a competitive grant program to 
increase the number of students studying critical foreign languages, 
starting in elementary school and continuing through postsecondary 
education programs.
    The legislation also authorized competitive grants to states to 
promote better alignment of elementary and secondary education with the 
knowledge and skills needed to succeed in academic credit-bearing 
coursework in institutions of higher education, in the 21st century 
workforce and in the Armed Forces. It also authorized the Secretary of 
Education to award grants of $50,000 to three elementary and 3 
secondary schools, with a high concentration of low-income students in 
each state, whose students demonstrate the largest improvement in 
mathematics and science.

TITLE VII-National Science Foundation

    The legislation provided $22 billion to NSF over fiscal years 2008-
2010. Particularly large increases were provided for K-12 STEM 
education programs. These programs, including the Noyce Teacher 
Scholarship program and the Math and Science Partnerships program, are 
geared to preparing thousands of new STEM teachers and provide current 
teachers with content and pedagogical expertise in their area of 
teaching.
    The legislation increased support for the STEM talent expansion 
program (STEP) and the Advanced Technological Education (ATE) program 
in an effort to help create thousands of new STEM college graduates, 
including two-year college graduates.
    The legislation provided support for young, innovative researchers 
by expanding the graduate research fellowships (GRF) and integrative 
graduate education and research traineeship (IGERT) programs, 
strengthening the early career grants (CAREER) program, and creating a 
new pilot program of seed grants for outstanding new investigators.
    Finally, the legislation included provisions to help broaden 
participation in STEM fields at all levels. These include several 
programs of outreach and mentoring for women and minorities, a request 
for a National Academy of Sciences report to identify barriers to and 
opportunities for increasing the number of underrepresented minorities 
in STEM fields, and an emphasis on inclusion of students and teachers 
from high-needs schools.

    TITLE VIII-General Provisions

    The legislation required the Secretary of Commerce to report to 
Congress on the feasibility, cost and potential benefits of 
establishing a program to collect and study data on export and import 
of services; expressed a sense of the Senate that the Securities and 
Exchange Commission and the Public Company Accounting Oversight Board 
should promulgate final regulations implementing the section of the 
Sarbanes-Oxley Act that are designed to reduce burdens on small 
businesses; directs the Government Accountability Office, after three 
years, to assess a representative sample of programs under this Act and 
make recommendations to ensure their effectiveness; expressed a sense 
of the Senate that Federal funds should not be provided to any 
organization or entity that advocates against a U.S. tax policy that is 
internationally competitive; directed a National Academy of Sciences 
study on the mechanisms and supports needed for an institution of 
higher education or non-profit organization to develop and maintain a 
program to provide free access to on-line educational content as part 
of a degree program, especially in science, technology, engineering, 
mathematics and foreign languages, without using Federal funds; 
expressed a sense of the Senate that deemed exports should safeguard 
U.S. national security and basic research and that the President and 
the Congress should consider the recommendations of the Deemed Exports 
Advisory Committee; and lastly, expressed a sense of the Senate that 
U.S. decision-makers should take the necessary steps for the U.S. to 
reclaim the preeminent position in the global financial services 
marketplace.
    Chairman Gordon. This Committee will come to order. We 
would like to get things started here on time. Governor Engler 
is stuck in traffic. We have all had that situation, and he 
will be joining us shortly. Also, just so that you will know, 
he also has to leave at 11:30 and we will try to get everyone 
out of here by 11:30.
    So good morning, and I am sure we will have some more that 
will be coming in later. Welcome, everyone. Before we start the 
hearing today, I want to quickly take care of a little bit of 
housekeeping, and I want to thank you all for having a 
productive last session and particularly for the subcommittees 
for all the work that you did. At your desk you will find an 
agenda for this coming year. On it says ``draft.'' The reason 
that it says draft is that, you know, we welcome your 
continuing thoughts on that. Much of it reflects what we have 
been discussing over the last year.
    And this morning we are going to kick off one of the most 
important efforts of the year, to reauthorize our Committee's 
landmark legislation, the America COMPETES Act. We will also 
reauthorize NASA [National Aeronautics and Space 
Administration] this year, setting up a path for the next 10 or 
20 years, and Ms. Giffords and Mr. Olson are going to have 
their hands full putting that together for us, and we welcome 
that.
    Among other initiatives, we also expect the Committee to 
take a closer look at advancing several energy technologies 
including those associated with nuclear energy, carbon capture 
and sequestration, marine and hydrokinetic energy, as well as 
energy efficiencies and conservation technologies. These 
technologies not only have the potential to help curb climate 
change, they also are poised to create new industries and new 
jobs to go along with them, and Mr. Ehlers, we are going to 
take another crack at that organic NOAA [National Oceanic and 
Atomospheric Administration] Act. You worked on that quite a 
bit and we will continue to work there.
    And finally, we need to finish the work that this Committee 
has started. Last year, the Committee passed a total of 37 
bills and resolutions of the House with strong bipartisan 
support. We are currently working with the Senate to speed up 
progress on 21 bills that are still waiting for action in that 
chamber. So this year poses a tall order for this Committee. 
However, I am optimistic that through our bipartisan approach 
we will be able to produce good legislation for the American 
people, and I look forward to continuing good counsel with my 
friend, Ralph Hall, and the Republican Members of this 
Committee.
    Now, thanks to our panelists for being here and for their 
patience as we took care of some quick housekeeping. Now we 
move on to the reason that we are here this morning, and that 
is the America COMPETES Act.
    As you know, in 2005, I, along with former Chairman Sherry 
Boehlert, Senators Lamar Alexander and Jeff Bingaman, requested 
that the National Academies conduct a study to assess the state 
of the Nation's competitiveness, the science and technology 
infrastructure in the United States and how it would affect 
future U.S. prosperity. The result was ``Rising Above the 
Gathering Storm.'' This report included a comprehensive set of 
recommendations to create jobs and further U.S. competitiveness 
in an increasingly global marketplace. The Committee used these 
recommendations to create the America COMPETES Act, which was 
signed into law in August of 2007.
    The bill also established an Advanced Research Project 
Agency for Energy, better known as ARPA-E. This federal agency 
has already awarded its first round of $4 million to $5 million 
grants to researchers who are conducting high-risk, high-reward 
research in the energy field.
    The funding process amazed everyone involved. They received 
a shocking 3,700 initial concept papers, asked 344 of those to 
submit full proposals, and eventually selected 37 proposals for 
first-round funding. The speed with which this agency was 
organized and processed these applications seemed unprecedented 
in the Federal Government. This efficiency is a direct result 
of the countless hours spent by ARPA-E Director Arun Majumdar 
and his dedicated staff working to achieve the agency's 
mission. Last month, ARPA-E announced that it is accepting 
applications for a second round of funding, which will soon go 
out.
    But federal funding can only go so far. Many of the 
finalists have projects that are certainly just as deserving 
for grant funding as the award winners. That is why I suggested 
to Secretary Chu that he set up or create a fair in which these 
finalists could display their ideas and meet with potential 
investors. They agreed, and the first ARPA-E Innovation Summit 
will be held March 1st through 3rd at the Gaylord Convention 
Center in nearby National Harbor, and we are going to be 
looking for additional ways to try to bring in private-sector 
dollars for these good proposals as well as finding ways to try 
to get them to market as quickly as possible.
    Now, this morning, however, we are here to discuss the need 
to reauthorize the America COMPETES Act, which expires at the 
end of the current fiscal year. We learned from the Gathering 
Storm, in order to create a sustained, well-educated workforce 
for an innovative economy, we need to establish sustained 
funding streams for these programs. Our witnesses this morning 
will help us to better understand how critical this Committee's 
commitment is to our prosperity and to our economic growth. I 
look forward to hearing from them about how COMPETES has 
affected or will affect U.S. innovation in the workforce and 
how these programs will help them sustain a skilled workforce 
in the future.
    Chairman Gordon. Now I would like to I yield to my friend 
from Texas, Mr. Hall.
    [The prepared statement of Chairman Gordon follows:]
               Prepared Statement of Chairman Bart Gordon
    Good morning. Before we start our hearing, I want to quickly talk 
about the Committee's agenda for this year. Members have a draft agenda 
at their desk. Much of it reflects what we have already discussed, and 
I welcome your further thoughts.
    This morning, we are kicking off one of most important efforts of 
the year--to reauthorize our committee's landmark legislation, the 
America COMPETES Act.
    We will also reauthorize NASA this year--setting it on a path for 
the next 10 to 20 years.
    Among our initiatives, I also expect the Committee to take a closer 
look at advancing several energy technologies including those 
associated with nuclear energy, carbon capture and sequestration, 
marine and hydrokinetic energy, as well as energy efficiency and 
conservation technologies. These technologies not only have the 
potential to help curb climate change, they are also poised to create 
new industries and the jobs that go along with them.
    Finally, we need to finish the work that we started last year. This 
Committee passed a total of 37 bills and resolutions out of the House 
with strong bipartisan support. We are currently working with the 
Senate to speed up progress on the 21 bills that are still waiting for 
action in that chamber.
    So, this year poses a tall order for this Committee, however I am 
optimistic that through our bipartisan approach we will be able to 
produce good legislation for the American people. I look forward to 
continued good counsel with my friend, Ralph Hall, and the Republican 
members during this next year.
    Thanks to our panelists for being here and for their patience as we 
took care of some quick housekeeping. Now, we'll move on to the reason 
we're all here this morning--the America COMPETES Act.
    As you all know, in 2005 I, along with our former Chairman Sherry 
Boehlert and Senators Lamar Alexander and Jeff Bingaman, requested that 
the National Academies conduct a study to assess the state of our 
nation's competitiveness, the science and technology infrastructure in 
the United States and how it would affect future U.S. prosperity. The 
result was Rising Above the Gathering Storm.
    This report included a comprehensive set of recommendations to 
create jobs and further U.S. competitiveness in an increasingly global 
marketplace. The Committee used these recommendations to create the 
America COMPETES Act which was signed into law in August 2007.
    COMPETES authorized a total of $33.6 billion over fiscal years 
2008-2010 for science, technology, engineering and math education 
programs across the Federal Government. The bill also authorized 
multiple grant programs to help educate current and future teachers in 
the areas of science and math education, as well as invested in support 
for young researchers by expanding early career grant programs.
    And, the bill also established the Advanced Research Projects 
Agency for Energy, better known as ARPA-E. This Federal agency has 
already awarded its first round of $4 to 5 million grants to 
researchers who are conducting high-risk, high-reward research in the 
energy field.
    The funding process amazed everybody involved--they received a 
shocking 3,700 concept papers, asked 334 of those to submit full 
proposals, and eventually selected 37 proposals for funding.
    The speed with which this agency was organized and processed these 
applications seems unprecedented in the Federal Government. This 
efficiency is a direct result of the countless hours spent by ARPA-E 
director, Arun Majumdar and his dedicated staff working to achieve the 
agency's mission.
    Last month, the ARPA-E announced that it is accepting applications 
for the second round of funding, and expect to announce those winners 
``soon.'' With this track record, I would not be surprised if ``soon'' 
means some time this Spring.
    But, Federal funding can only go so far. Many of the finalists have 
projects that are certainly just as deserving of grant funding as the 
award winners. That's why I suggested to Secretary Chu and Director 
Majumdar that they create a fair in which those finalists could display 
their ideas and meet with potential investors. They agreed, and the 
first ARPA-E Innovation Summit will be held March 1st-3rd at the 
Gaylord Convention Center at nearby National Harbor in Maryland.
    This morning, however, we are discussing the need to reauthorize 
the America COMPETES Act which expires at the end of the current fiscal 
year. As we learned from Gathering Storm, in order to create a 
sustained, well-educated workforce for an innovative economy, we need 
to establish sustained funding streams for these programs.
    Our witnesses this morning will help us better understand how 
critical this commitment is to our prosperity and our economic growth.I 
look forward to hearing from them about how COMPETES has affected or 
will affect U.S. innovation and the workforce, and how these programs 
will help them sustain a skilled workforce in the future.

    Mr. Hall. Mr. Chairman, thank you, and what a panel. Thank 
you very much, all of you, for your very valuable time.
    You know, it has been nearly three years since we sat in 
this room with Norm Augustine and officially kicked off what 
was to become the America COMPETES Act. As everyone here is 
aware, America COMPETES was the culmination of recommendations 
from the off-quoted Gathering Storm report, former President 
Bush's American Competitiveness Initiative and efforts begun by 
this Committee under Republican leadership and continued very 
well by this chairman, one of the great chairmen in the history 
of this committee. We all worked in a bipartisan fashion to get 
to where we are today with this measure, and I am very proud of 
our accomplishments.
    My message hasn't changed much since then. If America is 
going to remain on top of the evolving world economy, we have 
to be dedicated to encouraging innovation and entrepreneurship 
while simultaneously cultivating the scientifically and 
technologically astute future workforce. While my message 
hasn't changed, unfortunately, our economy has.
    America COMPETES was a step in the right direction to 
accomplish what was needed to be done. In H.R. 2272, we set out 
to double funding for the National Science Foundation, the 
National Institutes of Standards and Technology, and the DOE's 
Office of Science over a 10-year period. By the time we got 
through conference, this timetable was accelerated to seven 
years, plus these agencies received enormous amounts of 
stimulus funding, results of which have yet to be seen. That 
goes for COMPETES and for the stimulus funding.
    Therefore, I am very much looking forward to the testimony 
of our very distinguished panel today because there is no doubt 
that we still have a lot to accomplish. At the same time, I 
would urge you, Chairman Gordon, to proceed cautiously through 
this reauthorization process as I believe it is prudent for us 
to ensure that we are reaping the benefits of the numerous 
initiatives already set forth in America COMPETES before 
creating others. Furthermore, and I hope our witnesses will 
attest to this today, COMPETES is just one aspect of improving 
America's competitiveness. President Bush once said, ``The role 
of government is not to create wealth; the role of government 
is to create an environment in which the entrepreneur can 
flourish, in which minds can expand and which technologies can 
reach new frontiers,'' and I understand that that is in the 
Competitive Initiative today, that statement. Encouraging 
private-sector innovation through tax credits, a positive 
regulatory environment and other such programs will also 
improve the American economy, make us more competitive globally 
and bring new products and jobs to the American people.
    I look forward to working closely again with you, Mr. 
Chairman, in this reauthorization and hear what our esteemed 
witnesses have to say.
    With that, I yield back my time.
    [The prepared statement of Mr. Hall follows:]
           Prepared Statement of Representative Ralph M. Hall
    Thank you, Mr. Chairman. It's been nearly three years since we sat 
in this room with Norm Augustine and ``officially'' kicked off what was 
to become the America COMPETES Act. As everyone here is aware, America 
COMPETES was the culmination of recommendations from the oft-quoted 
Gathering Storm report, former President Bush's American 
Competitiveness Initiative, and efforts begun by this Committee under 
Republican leadership and continued by you, Mr. Chairman. We all worked 
in a bipartisan fashion to get to where we are today with this measure, 
and I am proud of our accomplishments.
    My message hasn't changed much since then: If America is going to 
remain on top in the evolving world economy, we must be dedicated to 
encouraging innovation and entrepreneurship, while simultaneously 
cultivating a scientifically and technologically astute future 
workforce. While my message hasn't changed, unfortunately, our economy 
has.
    America COMPETES was a step in the right direction to accomplish 
what needs to be done. In H.R. 2272, we set out to double funding for 
the National Science Foundation, the National Institute of Standards 
and Technology, and the DOE's Office of Science over a 10-year period. 
But by the time we got through Conference, this timetable was 
accelerated to seven years. Plus, these agencies received enormous 
amounts of stimulus funding, the results of which have yet to be seen. 
This goes for COMPETES and for the stimulus funding.
    Therefore, I'm very much looking forward to the testimony of our 
distinguished panel today, because there is no doubt that we still have 
much to accomplish. At the same time, I would urge you, Chairman 
Gordon, to proceed cautiously through this reauthorization process, as 
I believe it is prudent for us to ensure that we are reaping the 
benefits of the numerous initiatives already set forth in America 
COMPETES before creating others. Furthermore, and I hope our witnesses 
will attest to this today, COMPETES is just one aspect of improving 
America's competitiveness.
    President Bush once said, ``The role of government is not to create 
wealth; the role of our government is to create an environment in which 
the entrepreneur can flourish, in which minds can expand, in which 
technologies can reach new frontiers.'' \1\ Encouraging private sector 
innovation through tax credits, a positive regulatory environment, and 
other such programs will also improve the American economy, make us 
more competitive globally, and bring new products and jobs to the 
American people.
---------------------------------------------------------------------------
    \1\ --President George W. Bush, May 2001.
---------------------------------------------------------------------------
    I look forward to working closely with you, Mr. Chairman, on this 
reauthorization and to hearing what our esteemed witnesses have to say 
on the subject.

    [The prepared statement of Ms. Johnson follows:]
       Prepared Statement of Representative Eddie Bernice Johnson
    Thank you Mr. Chairman for holding today's hearing. I would like to 
thank today's witnesses for their commitment to increasing the 
competitiveness of our Country and sharing their perspectives on the 
need for innovation and STEM education.
    In 2005, Members of this committee learned some startling facts 
from experts at the National Academy of Sciences ``Gathering above the 
rising storm'' report. We learned that children in other developed 
Nations may be better prepared for the jobs of the future than our own 
children here in the States. We learned from the experts that there are 
clear signs that the United States has begun to lose its status as a 
global economic and technological leader due to an inadequate 
investment to Research and Development and STEM development.
    In response, I along with other Members of Congress, many on this 
committee today, worked to draft the America COMPETES Act in a bi-
partisan fashion. This legislation represents a concerted effort to 
create a more competitive science and engineeringworkforce.
    Today in 2010, as many components of the original COMPETES bill are 
just now taking effect, the need for the reauthorization of this act is 
now more pressing than ever. Our nation's students are still falling 
behind our international competitors due to a lack of commitment. We 
have allowed ourselves to fall behind because we are not consistently 
investing in our future. The time to act is now.
    In order to achieve these goals, I have always fought to make sure 
we legislate effectively in an equitable fashion.
    Socioeconomic stature, race, or gender should not stand in the way 
of a child's career. I fought for the America COMPETES Act to include 
special provisions to include and encourage women and under-represented 
minorities to pursue science and technology careers. As minorities and 
women continue to be under-represented in most STEM fields, we must do 
more to create opportunities to educate and retain them, especially at 
the university faculty level.
    Year after year, my colleagues on this committee as well as those 
on the Congressional Black Caucus, Diversity and Innovation Caucus and 
others fight to urge support for programs that broaden participation in 
science, technology, engineering and mathematics: also called STEM.
    A few weeks a go, I attended the President's ``Educate to 
Innovate'', kickoff event at the White House. One of the goals of this 
campaign is to expand STEM education and career opportunities for 
under-represented groups, including women and girls. I am pleased the 
administration is stepping forward to address these challenges.
    The United States is slipping in STEM competitiveness worldwide, 
and it is a matter of our international standing in the world, and 
national security that we maintain adequate funding for science and 
technology education. Our country benefits the most if we ensure all 
Americans have the skills necessary to compete in the 21st Century.
    I would like to commend today's panelists for their hard work. It 
is consistent commitment like yours that will help create new jobs, 
invoke new innovation, and prepare a strong, diverse STEM workforce for 
our future.

    Chairman Gordon. Thank you, Mr. Hall, and you can be well 
assured that we are going to move with care as we reauthorize 
this. As Mr. Castellani and others have pointed out in their 
written testimony, there does need to be reviews, evaluations 
and accountability for COMPETES, and within the original bill 
there were a number of reports that were required to be 
submitted to us concerning accountability. The first one has 
come in and the others will be coming in as we go through this 
authorization.
    I also concur with you, and this is a very distinguished 
panel. We have been fortunate to have Bill Gates, the Speaker, 
many Nobel laureates speak before us, but no panel has been 
more distinguished than this panel, and I say that sincerely 
and we welcome you.
    Now it is my pleasure to briefly introduce you so we can 
get on with business.
    Mr. Hall. Mr. Chairman?
    Chairman Gordon. Yes, sir.
    Mr. Hall. First, can I tell you, I couldn't help but ask 
Bill Gates for some money. I asked him for $300. He said he 
hasn't had that little amount of money in his pocket since he 
was 12.
    Chairman Gordon. It is my pleasure to first introduce Mr. 
John Castellani. He is the President of the Business 
Roundtable, an association of chief executive officers of 
leading U.S. corporations. These corporations represent a 
combined workforce of nearly 12 million employees. Second, Mr. 
Tom Donohue is the President and CEO of the U.S. Chamber of 
Commerce. Since assuming the role in 1997, Mr. Donohue has 
helped the Chamber grow to represent more than three million 
businesses, nearly 3,000 state and local chambers, 830 
associations and over 90 America Chambers of Commerce abroad. 
Governor John Engler is President and CEO of the National 
Association of Manufacturers, the largest manufacturing 
industry trade group in America representing small and large 
manufacturers in every industrial sector in all 50 states. And 
Ms. Deborah Wince-Smith is President and CEO of the Council on 
Competitiveness, an association where CEOs, labor leaders and 
university presidents work together to ensure that the United 
States remains competitive in a global economy.
    Your written testimony will be included in the record, and 
when you complete your testimony, we will then begin questions. 
Each Member will have five minutes to question the panel.
    Mr. Castellani, please begin.

  STATEMENT OF STATEMENTS OF MR. JOHN CASTELLANI, PRESIDENT, 
                      BUSINESS ROUNDTABLE

    Mr. Castellani. Thank you, Mr. Chairman, Ranking Member 
Hall, Members of the Committee.
    As the Chairman said, the Business Roundtable is an 
association of chief executive officers. In addition to the 12 
million employees that they represent, they also represent 
nearly $6 trillion in annual revenue, and most relevant for 
this Committee, they spend more than $111 billion annually in 
research and development. That is nearly half of all of the 
total research and development, private research and 
development, in the United States.
    I welcome the opportunity to appear before you today to 
address reauthorizing the America COMPETES Act, which Business 
Roundtable views as a fundamental prerequisite to restoring 
stable, long-term economic growth and job creation.
    America's CEOs are committed to accelerating American 
innovation and boosting worldwide competitiveness of the United 
States. They understand that investments in science research 
and math and science education help create the platform for 
sustained long-term growth.
    The formula is simple. Investments in research and 
education provide the tools for accelerated technological 
innovation, which drives productivity growth. Innovation leads 
to new products and processes and even whole new industries, 
generating high-wage employment and a higher standard of living 
for all Americans.
    The Business Roundtable's commitment to fostering U.S. 
innovation and competitiveness is not new. In 2005, the 
Roundtable, together with other national business associations, 
including my friends on this panel, created Tapping America's 
Potential campaign, or TAP, with the goal of significantly 
increasing the number of American science, technology, 
engineering and mathematics graduates with bachelor's degrees. 
We believe that expanding the talent pool is a critical 
element, perhaps the critical element, of the innovation agenda 
that America must pursue to remain competitive in the 21st 
century.
    When Congress passed the America COMPETES Act in 2007, the 
United States faced major competition from powerful new 
economic rivals. Some were minor competitors only a decade ago. 
Today, those rivals have emerged from the economic downturn in 
an even stronger position, and while the United States 
struggles with high unemployment and crippling budget deficits, 
China is pouring billions into research and education. 
Reauthorizing the Act and providing sustained support for its 
key provisions will help attract more young Americans into 
technical fields and expand American workers' employment 
horizons and earning potential.
    The America COMPETES Act authorized significant increases 
in research investments that directly enhance America's ability 
to innovate and create new jobs. COMPETES also authorized 
scholarship and training programs to recruit high-performing K-
12 math and science teachers to enhance the skills of existing 
teachers. The lack of qualified math and science teachers in 
American public schools are a major impediment to improved U.S. 
educational achievement in math and science. In many respects, 
the state of America's public education system is one of our 
Nation's greatest weaknesses. Nearly every job created in the 
United States over the next ten years will require more math 
and science fluency than the average job today. The question 
is, will America produce the skilled workers to fill these 
positions?
    Last month, Business Roundtable released the final 
recommendations from The Springboard Project, which is an 
independent commission we convened to ensure that American 
workers thrive after the economy rebounds. The commission found 
that the gap between worker skills and the needs of employers 
is widening, exactly the opposite of what we would hope to see 
if every American is to gain fulfilling employment. 
Strengthening STEM [Science, Technology, Engineering, and 
Mathematics] education at all levels needs focused attention 
now and in the future.
    One of our greatest challenges going forward is securing 
stable funding commitments from Congress for the America 
COMPETES Act. It is our job to persuade you that nurturing 
America's innovation's ecosystem, even in the face of severe 
fiscal constraints, is necessary for the near term and for the 
long term.
    The Business Roundtable is proud to have been an early 
supporter of the original America COMPETES Act, and we strongly 
support its reauthorization. With the right policy choices, we 
believe that America will recover from its current economic 
circumstances and provide prosperity and opportunity for all 
its citizens.
    I want to thank you again, Mr. Chairman and Ranking Member 
Hall and the Members of the Committee. Mr. Chairman, under your 
leadership, this Committee has been a model for developing 
bipartisan solutions that address critical issues. We will miss 
that leadership. We look forward to the remainder of your term, 
and I would be delighted to answer your questions. Thank you.
    [The prepared statement of Mr. Castellani follows:]
                 Prepared Statement of John Castellani
    Mr. Chairman, Ranking Member Hall, Members of the Committee, good 
morning. My name is John Castellani, and I serve as President of the 
Business Roundtable, an association of chief executive officers of 
leading U.S. companies with more than $5 trillion in annual revenues 
and more than 12 million employees. Business Roundtable member 
companies are technology innovation leaders, with more than $111 
billion in annual research and development spending--nearly half of all 
total private R&D spending in the U.S.
    I welcome the opportunity to appear before you today to address the 
vitally important task of reauthorizing the America COMPETES Act, which 
Business Roundtable views as a fundamental prerequisite to restoring 
stable, long-term U.S. economic growth and job creation.
    America's CEOs are committed to accelerating American innovation 
and boosting the worldwide competitiveness of the United States. They 
understand that investments in scientific research and math and science 
education help create the platform for sustained, long-term growth.
    The formula is simple. Investments in research and education 
provide the tools for accelerated technological innovation, which 
drives productivity growth. Innovation leads to new products and 
processes-even whole new industries-thereby generating high-wage 
employment and a higher standard of living for all Americans.
    Business Roundtable's commitment to fostering U.S. innovation and 
competitiveness is not new. In 2005, the Roundtable, together with 
other national business associations, including those on this panel, 
created the Tapping America's Potential campaign, or TAP, with the goal 
of significantly increasing the number of American science, technology, 
engineering and mathematics graduates with bachelor's degrees. We 
believe that expanding the talent pool is a critical element-perhaps 
the critical element-of the innovation agenda that America must pursue 
in order to remain competitive in the 21st century. The America 
COMPETES Act is an important tool in achieving that goal.
    When Congress passed the America COMPETES Act in 2007, the United 
States faced major competition from powerful new economic rivals, some 
of which were minor competitors only a decade ago. Today, those rivals 
have emerged from the worldwide economic downturn in an even stronger 
position. While the United States struggles with persistent high 
unemployment and crippling budget deficits at every level of 
government, China continues to pour billions intoresearch and education 
in a determined effort to move up the value chain and produce more 
high-value-added products and services. At a time when America's 
ability to finance critical investments in national innovation capacity 
is constrained, our global competitors are redoubling their efforts to 
challenge U.S. innovation leadership.
    Mr. Chairman, as you know, after you and your colleagues on the 
Committee led Congress to pass the America COMPETES Act, it took nearly 
two years and the worst economic crisis since the Great Depression 
before the provisions of the Act were adequately funded. It is perhaps 
ironic that as Congress prepares to reauthorize the Act, its original 
enactment is just nowbeginning to be implemented and the programs have 
not yet been rigorously evaluated. Yet we can say with confidence that 
reauthorization of the America COMPETES Act is absolutely vital to 
ensuring future U.S. innovation leadership and prosperity and security 
for America's workers.
    Reauthorization of the Act will provide support for the foundations 
of America's innovation system at a time when some question America's 
commitment to continued worldwide technological and economic 
leadership. Reauthorizing the Act and building on its key provisions 
will help restore confidence in America's future, attract more young 
Americans into technical fields, and expand the employment horizons and 
earnings potential of millions of new American workers.
    The America COMPETES Act authorized significant increases in 
physical science and engineering research sponsored by key civilian 
science agencies, research that directly enhances America's ability to 
innovate and create new jobs. These research investments will also help 
America address its energy and sustainability challenges. In June of 
last year, Business Roundtable released a major economic study, The 
Balancing Act: Climate Change, Energy Security and the U.S. Economy, 
which outlined six key technology investment pathways that can lead to 
efficient greenhouse gas reductions without harming long-term economic 
growth. Extending the authorized increases for physical sciences and 
engineering research will provide the knowledge creation necessary to 
accelerate development of the advanced energy technologies recommended 
in Business Roundtable's report.
    Mr. Chairman, you and your colleagues on this Committee have led 
Congress in adopting a farsighted approach to energy technology 
development that focuses on a balanced, portfolio of research 
investments that will yield dramatic gains in energy efficiency, 
renewable energy technology, carbon capture and storage for coal-fired 
power plants, advanced nuclear energy technology, and smart grid and 
transmission technologies that will enable greater use of electric 
vehicles and renewable power. The fact is that we will need every one 
these new technologies to address climate change and power our economy. 
Technology is not a silver bullet, but it does offer a critical 
advantage in smoothing the transition to more sustainable economic 
growth, greater energy security and a cleaner environment. This is a 
clear case of science in service of national need. Reauthorizing the 
America COMPETES Act is an essential component of our national effort 
to address America's energy and sustainability challenges.
    The America COMPETES Act authorized new and expanded scholarship 
and training programs to recruit new K-12 math and science teachers and 
enhance the skills of existing teachers. Business Roundtable has 
identified the lack of qualified math and science teachers in America's 
public schools as a major impediment to improved U.S. educational 
achievement in math and science. In 2008, Business Roundtable and our 
partners released the TAP progress report, Gaining Momentum, Losing 
Ground, which documented how U.S. student achievement in math and 
science continues to fall short compared with students from our global 
economic competitors--despite commitments from the White House and 
Congress to improve U.S. math and science education. When it comes to 
innovation, the state of America's public education system is our 
nation's greatest weakness. Extending the math and science education 
provisions of the America COMPETES Act and evaluating their 
effectiveness helps give America's children the preparation they need 
to succeed in the 21st century workplace.
    Mr. Chairman, this is a critical issue for America and for this 
Committee. The persistent poor performance of U.S. students in math and 
science threatens our security and long-term prosperity. Over the fast 
twenty years, occupations that require technical proficiency have grown 
nearly three times faster than the overall rate of employment growth. 
Workers in technical fields earn more and enjoy greater job security 
than most other workers. Technical professionals have weathered the 
economic downturn better than other workers, and there is some evidence 
that the technology-intensive industries that employ these workers are 
leading America's economic recovery. Nearly every job in America 
requires more math and science proficiency than those same jobs 
required twenty years ago. Nearly every job created in the United 
States over the next 10 years will require more math and science 
fluency than the average job today. Will America produce the skilled 
workers to fill these positions?
    Last month, Business Roundtable released the final recommendations 
from The Springboard Project--an independent commission it convened--to 
ensure that American workers thrive after the economy rebounds. Based 
on surveys of workers and employers, the commission found that the gap 
between worker skills and the needs of employers is widening, exactly 
the opposite of what we would hope to see if every American is to find 
gainful, fulfilling employment. It will come as no surprise to you, Mr. 
Chairman, that the commission found that improving education and 
training in the United States is essential to building a more highly 
skilled workforce. The need is pressing. Seventy-three percent of the 
U.S. Bureau of Labor Statistics' projected fastest growing occupations 
require some level of postsecondary credentials, yet the United States 
ranks second-to-last among developed countries in postsecondary 
completion rates.
    As you and your colleagues examine the America COMPETES Act, the 
math and science education provisions of the Act have the potential to 
offer the most promise for beneficial results for the American people. 
Strengthening K-12 math and science teacher recruitment and training, 
expanding proven math and science education programs, and supporting 
math and science education in the nation's community colleges provide 
the foundation to advance overall U.S. competitiveness and the 
individual economic success of Americans. It also is critical for you 
to coordinate closely with the Education and Labor Committee during the 
reauthorization of the Elementary and Secondary Education Act in order 
to ensure a coherent strategy to improve science, technology, 
engineering and math education.
    One of our greatest challenges going forward, Mr. Chairman, is one 
that you are intimately familiar with and that is securing stable 
funding commitments from Congress for the programs authorized by the 
America COMPETES Act. Our nation's science and technology enterprise is 
a miraculous font of knowledge and wealth creation. The technology that 
has flowed out of this enterprise over the last century has transformed 
our lives, created an ever-rising standard of living for all Americans, 
and unleashed an astonishing wave of productivity and economic growth. 
The economic data are clear. Investments in research and education are 
among the most productive investments available to Federal policy 
makers. It is our job to help persuade Congress that nurturing 
America's innovation ecosystem, even in the face of severe fiscal 
constraints, is the right policy choice for the near term and the long 
term. Our future depends on it.
    Business Roundtable is proud to have been an early and robust 
supporter of the original America COMPETES Act, and we strongly support 
its reauthorization. It embodies a sound, positive agenda for growth 
that will help lift America out of the economic doldrums and open up 
new opportunities for U.S. workers.
    Mr. Chairman, it is up to us to ensure that America remains the 
world's technological and economic leader for the remainder of this 
century. With your help, and the help of all of the Members of the 
Committee on Science and Technology, Business Roundtable believes that 
America will recover from its current economic circumstances and 
continue to lead the world in providing prosperity and opportunity for 
its citizens.
    Thank you again Mr. Chairman, Ranking Member Hall, and Members of 
the Committee. Under your leadership, Mr. Chairman, this Committee is a 
model for developing bipartisan solutions that address critical issues. 
I appreciate this opportunity to express Business Roundtable's views on 
this important legislation. I welcome your questions.

                     Biography for John Castellani
    John J. Castellani is President of Business Roundtable, an 
association of chief executive officers of leading U.S. corporations 
with a combined workforce of nearly 10 million employees and $5 
trillion in annual revenues. Business Roundtable has been cited by the 
Financial Times as ``the most influential chief executive lobbying 
group in the U.S.'' and is at the forefront of public policy debates, 
advocating for a vigorous, dynamic global economy.
    Business Roundtable companies give more than $7 billion a year in 
combined charitable contributions, representing nearly 60 percent of 
total corporate giving. They are technology innovation leaders, with 
more than $70 billion in annual research and development spending--more 
than a third of the total private R&D spending in the U.S.
    Since joining Business Roundtable in May 2001, Castellani has 
significantly strengthened the Roundtable's reputation in Washington, 
DC, nationally and internationally and has led the Roundtable's efforts 
on key public policy issues ranging from trade expansion to civil 
justice reform to fiscal policy. He has been cited by Bloomberg as one 
of Washington's six most influential lobbyists.
    Castellani and the Roundtable played vital roles in the adoption of 
long-awaited civil justice reform legislation in 2005, approval of the 
Central America Free Trade Agreement, and enactment of critically 
important legislation to lower tax rates and slash taxes on dividends 
in 2003. He also has been a leader of the coalition working in support 
of Social Security reform. Other significant areas of leadership for 
Castellani and the Roundtable include passage of bilateral free trade 
agreements with partners including Australia, Chile and Morocco; 
passage of the SarbanesOxley corporate governance reforms; organizing 
the Partnership for Disaster Response to improve the flow of private 
sector resources, services and staff following a major disaster; and 
development of the Business Roundtable Institute for Corporate Ethics, 
a first-of-its-kind business ethics center designed to renew and 
enhance the link between ethical behavior and business practices.
    Castellani is called frequently by the news media for comment on 
business and public policy issues, and has appeared on such programs as 
NBC's ``Meet the Press,'' PBS' ``The NewsHour with Jim Lehrer,'' Fox 
News Channel's ``Special Report,'' and CNBC's ``Street Signs.'' He 
regularly provides testimony before Congress on issues of key concern 
to Business Roundtable, and has discussed the Roundtable's agenda for 
economic growth in speeches to the Detroit Economic Club and the 
National Conference of State Legislatures.
    Prior to becoming President of Business Roundtable, Castellani was 
Executive Vice President of Tenneco Inc., and part of the senior 
management team that led the transformation of the ailing conglomerate 
into seven strong companies.
    Castellani's Washington experience includes serving as Vice 
President for Resources and Technology with the National Association of 
Manufacturers, and as Vice President of State, Federal and 
International Government Relations for TRW Inc. He started his career 
at General Electric as an environmental scientist and strategic 
planner.
    In 2007, Castellani was named one of the 100 most influential 
people in corporate governance by Directorship Magazine.
    A graduate of Union College (Schenectady, New York), Castellani now 
serves on its board of trustees. He is also an Ethics Resource Center 
Executive Fellow and a member of the Advisory Council of the Business 
Roundtable Institute for Corporate Ethics in addition to being a member 
of The Economic Club of Washington, D.C. He and his wife, Terry, reside 
in Washington, DC, and have two sons.

    Chairman Gordon. Mr. Donohue is recognized.

  STATEMENT OF MR. THOMAS J. DONOHUE, PRESIDENT AND CEO, U.S. 
                      CHAMBER OF COMMERCE

    Mr. Donohue. Thank you very much, Mr. Chairman, Ranking 
Member Hall and Members of the Committee.
    As the Chairman indicated, the Chamber is the world's 
largest business federation representing companies of every 
type. My colleagues here have special relationships with many 
of those companies and we all are going to testify today in a 
way that you will probably find a lot of common spirit and 
common thought in our remarks.
    In the wake of the worst economic crisis since the Great 
Depression, our Nation is engaged in a vigorous debate on how 
to create jobs, how to force long-term growth and how to 
enhance our global competitiveness. There are many different 
voices and viewpoints and plans but almost everyone agrees on 
one thing: the fate of our economy, the hopes of our children 
and the viability of the American dream begin and end with 
education.
    There was a time not long ago when America was the 
unquestioned leader in education. We led in math and science. 
We led in the number of post-graduate degrees. Our K-12 system 
was the envy of the world. Our research fueled tremendous new 
discoveries in every field. Those days are gone. The rest of 
the world is catching up and we are running in place or falling 
behind in some places.
    Our education system still has many great strengths. We 
have the best universities and research facilities in the 
world. We have many outstanding teachers. We have ambitious 
students eager to learn and to realize their potential, but it 
is not good enough. Our Nation can't do well by simply doing 
okay.
    The statistics tell a very alarming tale. High school 
dropout rates are approaching 30 percent for all students and 
nearly 50 percent for minorities. American 15-year-olds rank 
21st out of 30 in science literacy among their peers from 
developed countries and 25th out of 30 in math literacy. More 
than half of the U.S. science and engineering postdoctoral 
students in the United States are on temporary visas from other 
countries, and even though IBM topped the 2009 list of new 
patent awards, only four U.S. companies were in the top 10. So 
we can't continue this way and expect to compete and win in the 
worldwide economy. We can't continue this way if we hope to 
lead the world in science, technology, engineering and math, 
and we can't continue this way if we hope to provide better 
opportunities and a higher standard of living for our children 
and our grandchildren. That is why the U.S. Chamber and the 
business community it represents strongly supports the 
reauthorization of the COMPETES Act.
    This legislation is moving America in the right direction. 
It is improving the number and quality of STEM teachers, 
increasing support and access for STEM students, attracting 
underrepresented groups to STEM courses, supporting basic 
research, and establishing programs that will help create new 
forms of energy and commercialize these innovations. The 
COMPETES Act puts the focus right where it should be, on 
increasing the number of American students proficient in STEM 
and ensuring that we have sufficient R&D funding to drive 
innovation and to propel technological progress. When it comes 
to research and development, the Chamber also strongly supports 
the permanent extension of the R&D tax credit. It will 
encourage needed investments in important areas of the economy 
such as renewable energy, energy efficiencies technologies, 
health care and biotechnology. Taken together, these 
initiatives can move us in the right direction, and I encourage 
you to move aggressively on it.
    Mr. Chairman, with your permission, there is another area 
that I would like to just mention. I spent a good deal of time 
this morning at Walter Reed with the wounded veterans. We had a 
big job fair out there, and there are thousands of these people 
coming out of the military both wounded and otherwise who need 
our support, and the STEM program can go a long way to do that. 
One of the points that I would like to suggest is that many of 
these veterans are certified in important skills, and I hope 
that the Committee working with the government will look at how 
that certification can be done in a way that it is accepted in 
the private sector when they leave the military. Clearly it 
would help us recruit and it would help us place our veterans 
who need our support.
    So, Mr. Chairman, the time runs short but I want to suggest 
that we move forward, and when you do so you vigorously 
evaluate the Act's progress as Mr. Hall suggested so that we do 
the right thing, get the major bang for the buck, be vigilant 
about duplicating of funding of efforts among different 
departments. I am more interested that they know what each 
other is doing, and encourage public-private partnerships. This 
is a very important thing that you have given much of your 
skill and energy and the Committee has as well, and we would do 
anything we can to help you complete this progress, complete 
this reauthorization and get it to work out in the real world, 
and I thank you very much for your time and I hope you will 
take a special look at the wounded veterans. They have earned 
our support.
    [The prepared statement of Mr. Donohue follows:]
                Prepared Statement of Thomas J. Donohue
    Thank you Chairman Gordon, Ranking Member Hall, and members of the 
Committee, for inviting me to present this statement on the importance 
of a robust research and development program and rigorous Science, 
Technology, Engineering, and Math (STEM) education programs that will 
put the U.S. on course to maintain our ability to compete successfully 
in the global economy.
    I commend Chairman Gordon and the Committee for your foresight in 
2005. By joining Senator Lamar Alexander and Senator Jeff Bingaman in 
urging the National Academies to examine the top ten actions that 
Federal policymakers could take to enhance the science and technology 
enterprise, you brought this issue to the forefront of the national 
debate on American competitiveness.
    Your efforts resulted in the 2005 groundbreaking report Rising 
Above the Gathering Storm. From this report, the American public 
learned that the Internet had not only brought the world closer 
together and created a global marketplace, but that ``the Death of 
Distance'' had created international competition for jobs.
    In the early years of the information age, America led the way in 
global innovation. We believed that the education system we had and 
that the research and development investments we had made would keep us 
in the lead. But Mr. Chairman as you stated at the 50th anniversary of 
this committee in March of 2008, ``I fear that our country has coasted 
on the investments we made 50 years ago.''
    We are faced today with four challenges, a leaky pipeline for 
future talent; a lack of a national strategy for research and 
development; an aging workforce; and a set of national policies that 
need to be updated in order for America to regain its competitive edge.
    At the heart of the knowledge economy is the notion that we can 
gather, manipulate, and convey information to create things and solve 
problems. There was a time when America topped the list for many key 
indicators such as: performance of students on international math and 
science exams, postsecondary degree attainment in the U.S. workforce, 
and number of patents awarded to U.S. companies. Today's results on 
those same indicators reflect a nation that is falling behind. I have 
seen these numbers and the trends are moving in the wrong direction.
    Our students' results on national and international exams are 
especially troubling because they give us a glimpse of how deficient in 
STEM our future workforce will be. While we know that there are great 
schools, dedicated teachers, and high-achieving students across the 
country, we must recognize that our STEM performance has reached a 
plateau while other countries have improved dramatically.
    High school dropout rates in the United States are approaching 30 
percent for all students and nearly 50 percent for African-American and 
Hispanic students. Unfortunately, for those who make it to college, 35 
percent will need remedial math in the first year, 23 percent for 
writing, and 20 percent for reading (NCES 2004).
    On the 2009 Nation's Report Card, also known as the National 
Assessment of Education Progress (NAEP), U.S. 4th graders who took the 
math test showed no improvement over previous years. Even more 
troubling, our 8th graders demonstrated only nominal gains after 
showing steady increases for years.
    In the 2006 Programme for International Student Assessment (PISA) 
comparison, American 15-year-old students ranked 21st out of 30 in 
science literacy among their peers from developed countries, and 25th 
out of 30 in math literacy.
    The OECD's Education at a Glance 2009 report, shows university-
level graduation rates have virtually doubled from 18 percent in 1995 
to 36 percent in 2007 in other OECD countries with available data. In 
contrast, the United States dropped from Rank 2 in 1995 to Rank 14 in 
2007.
    Our universities are preparing more graduate students from other 
nations than our own. Temporary visa holders accounted for 55% of U.S. 
science and engineering postdoctoral students in academic institutions 
in fall 2005.
    The 2009 annual report by IFI Patent Intelligence, states that 51 
percent of new patents issued by the U.S. Patent and Trademark Office 
were awarded to companies from outside the United States. While IBM was 
still number one with 4,186 patents, only four U.S. companies were in 
the top 10 down from five in 2008 and of the top 35, only 12 are U.S. 
companies.
    I agree with President Obama that we must be makers of things and 
not just consumers of things. But in order for us to make things 
whether we are talking about nanotechnology, green energy, or life-
saving medical devices, we must have people who possess the skills to 
do this work.
    One challenge is that the American workforce is aging across all 
sectors. The Aerospace Industries Association reported in 2008 that 
Lockheed Martin conservatively estimates it will need to hire 140,000 
people in the next 10 years, but that figure could be as high as 
190,000 with half of that number being STEM professionals.
    The aging of the baby boomer generation means a growing percentage 
of the industry's workforce will be eligible to retire in coming years. 
Nearly 6 percent of the R&D workforce retired in 2008, up from 2 
percent the year before. Retirement eligibility remained roughly the 
same at 13 percent but is forecast to rise to more than 20 percent of 
the workforce by 2013. (Aviation Week)
    The nature of work has evolved with the knowledge economy, and if 
America is to remain competitive, we must move from a model where only 
the elite STEM professionals are trained in these disciplines, to a 
model where all citizens have a common foundation in these subjects and 
are STEM-capable.
    We must create a new definition of what it means to be a STEM 
professional. They are not just doctors, engineers, research scientists 
and information technology specialists. They are also electrical line 
workers, skilled technicians, and allied health professionals among 
others.
    This means we must invest in an education system that will produce 
the workers we need, and invest in R&D so that our universities and 
private industry can continue to innovate.
    The Carnegie Corporation of New York joined with the Institute for 
Advanced Study to create a STEM commission that released a report last 
year entitled the Opportunity Equation. The report emphasizes the 
importance of changing the way that math and science are taught. 
``Learning math and science from textbooks is not enough: students must 
also learn by struggling with real-world' problems, theorizing possible 
answers, and testing solutions.''
    Through the Math and Science Partnerships at the Department of 
Education and the National Science Foundation, there is ample 
opportunity to improve teaching in math and science. We are encouraged 
that there are preliminary efforts to coordinate programs between the 
Department of Education and the National Science Foundation. Hopefully 
this will increase shared learning, provide a framework for evaluating 
programs, improve efforts to scale success throughout schools, 
districts and states, and reduce duplication of effort when possible.
    The Institute for a Competitive Workforce (ICW) at the U.S. Chamber 
of Commerce is working with Carnegie and others to bring the business 
community together around these concepts. In November, ICW released the 
second report in its Leaders and Laggards series focused on education 
reform in America. We will encourage our members to support the 
policies and programs that will help to move the nation forward.
    We must change the attitudes in this country about STEM and create 
a new paradigm where young people and adults understand the connection 
between STEM learning, career opportunities, and improving our society.
    We applaud President Obama for advancing the development a national 
STEM agenda. The President and Secretary Duncan should be commended on 
their efforts to improve STEM learning by making it a priority in the 
Race to the Top competitive grant applications and through the 
Investing in Innovation Fund.
    In November of 2009, President Obama launched the ``Educate to 
Innovate'' campaign which aims to increase STEM literacy so that all 
students can learn deeply and think critically in science, math, 
engineering, and technology; move American students from the middle of 
thepack to top in the next decade; and expand STEM education and career 
opportunities for underrepresented groups, including women and girls.
    The business community firmly supports these goals and has pledged 
to engage its employees in state and local activities that support 
teaching and learning in STEM subjects. Several corporations have 
aligned their corporate philanthropy programs with these goals as a way 
to scale successful programs quickly. ExxonMobil supports the UTeach 
program and the National Math and Science Initiative. IBM s transition 
to teaching program directly addresses the STEM teacher shortage. The 
Knoxville Chamber of Commerce has launched the Volunteers 4 STEM 
initiative that will pair 500 STEM teachers with professionals in 
relevant fields who can provide them with advice and support.
    The America COMPETES Act of 2007 laid the foundation for a 
revitalization of a national STEM agenda. In conjunction with the 
American Recovery and Reinvestment Act, the COMPETES Act addresses the 
concern about public investments in STEM education, workforce 
development, and research.
    In relation to Federal research and development much of the 
American COMPETES Act has yet to be implemented fully which makes it 
difficult to truly assess its impact to date. However, progress has 
been made and the incremental impacts have largely been positive. The 
creation of ARPA-E represents a, bold step toward bypassing some of the 
traditional ``stovepiping'' that frequently hinders the efficiency and 
expediency of research and development at DOE and its National 
Laboratories. While implementation was initially slow, the $400 million 
cash infusion from the Stimulus Bill has already led to significant 
movement. The projects that this program supports, ranging from 
advanced batteries to electricity generation, are projects that would 
probably not otherwise receive Federal funding because they are simply 
too risky. As the Congress recognized in creating ARPA-E, it is vital 
that we keep an eye well beyond the horizon and take chances on these 
high risk--high reward projects that might just change the entire 
landscape of how we produce and use our energy resources.
    While several of the education programs that were authorized 
through America COMPETES have not been running long enough to evaluate 
how well they are working, we believe that the focus on improving the 
number and quality of STEM teachers; increasing support and access for 
STEM students at the postsecondary level; attracting underrepresented 
groups to STEM courses and careers; supporting basic research; and 
establishing programs that will help create new forms of energy and 
commercialize new innovations moves the right direction.
    We encourage the committee to focus on evaluation as a priority 
when considering funding for new programs so that we can better 
understand where resources will do the most good. We also urge the 
committee to continue to be vigilant about duplication of funding and 
efforts among the Department of Education, the National Science 
Foundation, NASA, the Department of Energy and other Federal agencies. 
Coordination should be encouraged whenever possible to maximize the 
impact of government resources for individuals and for communities.
    When possible, the committee should look at incentives that lead to 
public-private partnerships, the commercialization of new technologies, 
and regional STEM initiatives. These innovation ecosystems drive job 
creation, economic development, and regional stability that will 
contribute to regaining America's lead in the global innovation market.
    There are thousands of civilians and military personnel who have 
extensive STEM education and training. Unfortunately, the 
certifications that they have often do not translate from the military 
to the civilian, world or vice versa. The lack of reciprocity in 
certifications and licensure creates two problems, it discourages 
people from entering or leaving the military due to the need for 
retraining, and it wastes time and taxpayer dollars when people must be 
trained again to do something that they have already been certified to 
do. Inova Hospital in Virginia has a created a joint program with the 
Army Reserve so that together they can recruit, train, credential, 
license and certify qualified Soldier candidates who are entering the 
health care field. I encourage the committee to find ways to replicate 
and scale programs like this one. We must find a way to make skills 
more transferable if we are going to expand and strengthen our 
workforce.
    While I realize it's not necessarily within the scope of the 
COMPETES Act or this Committee's jurisdiction, but given the focus of 
this hearing on innovation and American competitiveness, I would be 
remiss if I didn't note perhaps the single most important policy the 
Federal Government has for helping the private sector develop the 
products and ideas that will continue to keep the U.S. economy 
competitive for generations to come. The research and development (R&D) 
tax credit encourages businesses of all sizes to undertake cutting-edge 
research projects in the United States. Research and development is the 
very lifeblood of our knowledge economy. At a time when the American 
economy is weak, research and development across industry sectors makes 
it possible to create and maintain good, high-paying jobs at home and 
sharpens the ability of companies to compete in the global marketplace.
    The Chamber has long supported the enactment of a permanent and 
stronger R&D tax credit. The Chamber believes the R&D credit spurs 
economic growth and encourages investments we need to make in important 
areas of the economy such as renewable energy and energy efficiency 
technologies, health care, biotechnology, manufacturing processes, and 
information and communications technologies. Making this credit 
permanent would bring certainty which would encourage businesses to 
make long-term, high risk investments in the United States.
    We commend the committee for its work on this issue and its 
dedication to ensuring that the America COMPETES Act achieves its 
purpose. Global competitiveness is a top priority for the business 
community and we will not be able to compete and win without strong 
national policies that support innovation.

                    Biography for Thomas J. Donohue



    Chairman Gordon. Thank you, Mr. Donohue.
    Governor Engler, you are recognized, and we also recognize 
your time constraint at the end of the hearing too.

STATEMENT OF GOVERNOR JOHN ENGLER, PRESIDENT AND CEO, NATIONAL 
                  ASSOCIATION OF MANUFACTURERS

    Governor Engler. Thank you, Chairman, Ranking Member Hall, 
distinguished Committee Members. It is a pleasure to be here 
today and we appreciate the invitation to testify on behalf of 
the Nation's manufacturers on the America COMPETES Act. The 
National Association of Manufacturers [NAM] is the Nation's 
largest industry association representing manufacturers in all 
50 states, every sector. We are also a very proud founding 
member of the Task Force on American Innovation formed to 
support basic research in the physical sciences and 
engineering, and I want to begin by thanking the Committee for 
championing the America COMPETES Act. I note behind you, 
``Where there is no vision, the people perish.'' Well, the 
bipartisan vision that led to this legislation and its 
enactment in 2007 and then the funding recently under the 
Recovery Act has really worked to fulfill some of the promise 
to the country, and I think this panel will be strongly in 
support of the issue of federal funding for basic research, and 
I certainly want to lend strong words of support as well, 
continued support. I point out, as John Castellani did, that 
research has long been a priority for the manufacturing sector 
in this country.
    In December of 2005, the manufacturers joined the 
Department of Commerce in sponsoring a competitiveness summit 
that Deborah was very much a moving force in as well where 
basic research in that meeting was identified as a key 
contributor to economic growth and innovation, and so we 
certainly want to demonstrate broad support for programs we are 
addressing today. In the interests of time, let me focus on 
three other areas quickly: ARPA-E, the Advanced Research 
Projects Agency for Energy, STEM education, science, 
technology, engineering and math education, and the Hollings 
Manufacturer Extension Partnership, or the MEP.
    First, ARPA-E. One of the most exciting elements of the 
America COMPETES Act was the establishment of ARPA-E. 
Manufacturers know you can't separate energy from the economy. 
ARPA-E supports research in both while also attempting to usher 
in new generations of clean, efficient sources of energy. The 
COMPETES Act calls for ARPA-E to accelerate transformational 
technological advances in the areas that industry by itself is 
not likely to undertake because of technical and financial 
uncertainty. ARPA-E's first funding opportunity released last 
May produced an outpouring of applications and award agreements 
are now being finalized, and the agency has also announced a 
second round totaling approximately $100 million, and we want 
to work with the Committee certainly to evaluate the work of 
the agency as part of the preparation for this reauthorization 
so that ARPA-E can continue to encourage high-risk, high-reward 
projects and technological innovation, and I commend the Chair 
for the mention of the upcoming ARPA-E fair that is coming. It 
sounds like a very good idea.
    Let me talk about STEM, preparing our next generation of 
manufacturers by improving education. Strong science, 
technology, engineering and math education is a foundation of a 
technical workforce, helps students and workers prepare to 
develop the essential skills for a competitive manufacturing 
economy. However, the government's emphasis on STEM skills 
often begins and ends with the academic side of science and 
math. That is essential, of course, but the best R&D in the 
world can't go to market without the ability to produce the 
product. For manufacturers, the application of STEM skills for 
real-world workplaces is critical to developing this Nation's 
technical workforce. Programs outlined in the America COMPETES 
Act take a step toward this integration of skills needed by 
employers. We can move that integration to the next level 
through a series or a system of portable skills certification, 
not unlike what Mr. Donohue mentioned for our veterans coming 
back, recognize these portal skills certification by broad 
industry partners and implement it in high school and local 
two- and in some cases four-year colleges. The National 
Association of Manufacturers and our Manufacturing Institute 
have worked with key partners, world leaders in skills 
certification programs to develop a new system of credentials 
for students in postsecondary education, and Mr. Hall, the Bill 
and Melinda Gates Foundation, they did give us a couple of 
bucks, about a million and a half dollars, actually, of a grant 
to help bring this vision to reality. When the academic and 
technical programs are aligned with industry-recognized skill 
certifications, students can demonstrate and transfer their 
skills throughout the country and companies gain access to a 
richly enhanced pool of skilled workers. The recently 
introduced H.R. 4072, the AMERICA Works Act, sponsored by 
Congressman Minnick but also cosponsored by Congresswoman 
Dahlkemper of this very Committee, it elevates these programs 
such as these to proper standing and their educational 
priority. The NAM strongly supports this legislation.
    Finally, just on MEP, I will close with that. High-tech 
manufacturing assistance to small manufacturers, we think it is 
a key program. It has received increased funding. The Hollings 
Manufacturing Extension Partnership, or MEP, as we all know it, 
is a network of not-for-profit centers that provides small and 
medium-sized manufacturers with expert advice on an array of 
business operations, and let me mention that a vast majority of 
American manufacturers are actually smaller companies, fewer 
than 500 employees. They account for something like two-thirds 
of manufacturing employment, and about half the value of all 
domestic production. In 2008, there were 59 of the NIST 
[National Institute of Standards and Technology] MEP centers 
serving nearly 32,000 manufacturers, helping them streamline 
plant operations, improve the bottom line, and that was 
opportunity then for growth in the market. In the previous 
years, just a couple of data points. The partnership 
contributed to more than 57,000 manufacturing jobs, helped 
deliver in excess of $1.4 billion in cost savings and played a 
role in generating more than $10.5 billion in sales. So we 
think that program pays a big dividend, a great ROI [Return on 
Investment] for our economy and helps the next generation of 
manufacturers.
    So Members, we thank you very much for the opportunity to 
be here today. We strongly support the reauthorization of the 
America COMPETES Act. It is going to pay off for more jobs, 
more manufacturing and a more competitive U.S. economy.
    [The prepared statement of Governor Engler follows:]
               Prepared Statement of Governor John Engler

Introduction

    Chairman Gordon, Ranking Member Hall, and distinguished members of 
the Committee: thank you for inviting me to testify on ``America 
COMPETES: Big Picture Perspectives on the Need for Innovation, 
Investments in R&D and a Commitment to STEM Education.''
    I am the President and CEO of the National Association of 
Manufacturers (NAM), the nation's largest industrial trade association, 
representing small and large manufacturers in every industrial sector 
and in all 50 states. We are also a member of the Task Force on 
American Innovation,\1\ whose mission it is to support basic research 
in the physical sciences and engineering. I am pleased to testify on 
behalf of our nation's manufacturers and all those who wish to preserve 
our nation's competitiveness and prosperity, on a critical issue--
reauthorizing the America COMPETES Act.
---------------------------------------------------------------------------
    \1\ http://www.InnovationTaskForce.org/
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    I want to thank you, Mr. Chairman and Ranking Member Hall for 
championing and supporting the America COMPETES Act. Although the 
America COMPETES Act was signed in 2007, only recently did it achieve 
the funding necessary to fulfill its commitment to America.
    I can tell you that the programs authorized in the America COMPETES 
Act are working to strengthen innovation in the U.S. manufacturing 
sector, and are helping us to build a stronger workforce. Today, I 
would like to highlight four programs that are of significant interest 
to America's manufacturers. They are Federal funding for basic R&D the 
Advanced Research Projects Administration for Energy (ARPA-E); science, 
technology, engineering and mathematics (STEM) education, and the 
Hollings Manufacturing Extension Partnership (MEP).

The Connection Between Federal R&D and Innovation in Manufacturing

    Technology and the ability to translate innovation into products 
and services that meet the needs of businesses and consumers bolster 
the United States' economy and our standard of living. Just as 
technology is key to strong economic growth and U.S. global 
competitiveness, manufacturing is key to technological advancement. No 
one sector has played a more important role in developing new 
technologies than manufacturers. Similarly, manufacturers lead the way 
in adopting new technologies to maximize efficiency and productivity.
    Despite these advances, international competition continues to grow 
and America's advantage in developing new technology can no longer be 
taken for granted. In order for the U.S. to maintain its competitive 
edge, it must promote forward-looking policies that encourage 
technology, and by extension, the U.S. economy. Our global 
competitiveness, in part, depends upon two important goals: encouraging 
growth in technology sectors that benefit U.S. manufacturers, and 
incentivizing manufacturers to further embrace advances in technology 
that will strengthen and secure the place of American manufacturers in 
the global economy.
    The public sector plays a critical role in innovation. Over the 
past 60 years, government-funded research has contributed to major 
breakthroughs in science and technology. Through the Manhattan Project, 
we harnessed the atom; through NASA,\2\ we unleashed space travel; 
through ARPA,\3\ we grew the Internet; and through SEMATECH,\4\ we 
shrunk the microchip.
---------------------------------------------------------------------------
    \2\ National Aeronautics and Space Administration.
    \3\ Advanced Research Projects Agency was the forerunner of DARPA, 
the Defense Advanced Research Projects Agency, an agency of the United 
States Department of Defense responsible for the development of new 
technology for use by the military.
    \4\ SEMATECH (SEmieonductor MAnufacturing TECHnology) is a non-
profit consortium that performs basic research into semiconductor 
manufacturing, created to solve common manufacturing problems and 
regain competitiveness for the U.S. semiconductor industry that had 
been surpassed by Japanese industry in the mid-1980's.
---------------------------------------------------------------------------
    Federally-funded R&D is what sets the United States apart from the 
rest of the world, but it is a distinction that we can lose. In 2008, 
the U.S. spent $116.5 billion on federally funded R&D, facilities and 
fixed equipment--or 2.62% of its Gross Domestic Product (GDP).\5\ In 
the same period, China's government invested $52.4 billion in R&D 
(about 1.49% of GDP; up from $29.4 billion in 2005). This does not 
include R&D expenses at labs owned by foreign companies. If China 
continues a ratio of R&D spending of about 1.5% of GDP for 2009, its 
research will total about $72 billion.\6\ However, China has one of the 
fastest-growing research budgets in the world, and by 2020 the 
government's goal is to invest 2.5% of GDP annually in research, which 
will cause China to rank third in the world in terms of total annual 
investment.\7\
---------------------------------------------------------------------------
    \5\ Federal R&D Support Shows Little Change in 2008.'' National 
Science Foundation, Info Brief September 2009.
    \6\ ``Engineering & Research'', Plunkett Research, website visited 
January 14, 2010.
    \7\ Ibid.
---------------------------------------------------------------------------
    In order to ensure that ground-breaking achievements continue, it 
is critical that policymakers both authorize and appropriate adequate 
funds for important government research agencies such as the National 
Science Foundation (NSF), the Department of Energy, the National 
Institute of Standards and Technology (KIST) and NASA. The America 
COMPETES Act put these key research agencies on a glide path to 
doubling their 2006-funding levels by 2016. The America COMPETES Act 
needs to be reauthorized to ensure that this goal does not fall to the 
wayside. As I mentioned earlier, only recently have sufficient funds 
been appropriated to fulfill our commitment to the COMPETES Act, 
funding that has come through the American Reinvestment and Recovery 
Act, the 2009 Omnibus Appropriations Act, and the pending passage of 
the FY' 10 appropriations bills. We are greatly encouraged by the 
President's commitment to fulfilling the promise of the America 
COMPETES Act by his pledge to double the funding for these important 
research agencies through the President's Plan for Science and 
Innovation.\8\
---------------------------------------------------------------------------
    \8\ See ``The President's Plan for Science and Innovation, Doubling 
Funding for Key Basic Research Agencies in the 2070 Budget,'' Office of 
Science and Technology Policy, Executive Office of the President, May 
7, 2009.
---------------------------------------------------------------------------
    The increase in NSF funding to $7 billion in 2010, or 8.5 percent 
more than the 2009 enacted level, will support many more researchers, 
students, post-doctoral fellows and technicians contributing to the 
innovation enterprise. The 2010 DOE Office of Science Budget of $4.9 
billion, 3.5 percent more than the 2009 enacted level, will help us 
improve our understanding of climate science, continue the U.S. 
commitment to international science and energy experiments, and expand 
Federal support at the frontiers of energy research. And the 2010 
Budget of $652 million for NIST's intramural laboratories will improve 
NIST's research capabilities by providing high-performance laboratory 
research and facilities for a diverse portfolio of basic research in 
areas such as health information technology, the digital smart grid, 
and carbon measurements. Separately, the 2010 Budget also sustains 
NIST's external programs, including $125 million in 2010 (a $15 million 
increase over the 2009 enacted level) for the Hollings Manufacturing 
Extension Partnership (MEP) to enhance the competitiveness of the 
nation's manufacturers.\9\
---------------------------------------------------------------------------
    \9\ Source: Office of Management and Budget, Budget of the United 
States Government FY 2010.

Federal R&D Funding: Creating Jobs, Now and in the Future
    The funds authorized by America COMPETES and released by the 
Recovery Act are going to help basic R&D create jobs in two ways: 
building infrastructure necessary to do cutting edge science, and 
funding grants that will help spur innovation. Infrastructure building 
includes completion of ``bricks and mortar'' projects at national 
laboratories, procurement of commodities for major Federally-funded 
research programs, purchases of modern scientific instrumentation 
associated with ongoing grants at universities and investments in both 
the scientific workforce and ``green energy'' initiatives. Short term, 
infrastructure building means that construction projects can begin in 
local areas, creating manufacturing and construction jobs and economic 
benefits now. Long term, the science done at these new facilities may 
bring about whole new industries, which will in turn create new jobs 
and economic benefits--as well as enhancing innovation, public safety 
and environmental protection--well into our future.
    Economists can easily determine job creation numbers from physical 
infrastructure programs; determining job creation from federally funded 
R&D research projects is a bit more speculative. However, from these 
research projects industries are created, products are produced, 
Americans are employed, savings are realized, and our future is 
strengthened.
    For instance, when the laser was first created using basic research 
from the Department of Defense, it was dubbed ``a solution looking for 
a problem.'' However, through other federally sponsored research 
programs, applications were discovered and advances made; today, the 
laser. is a critical component to the U.S. military, to health care, to 
consumer and business electronics, and especially to the manufacturing 
industry. It is just one example of how basic research--which may begin 
with no specific technology or product in mind--can lead to important 
discoveries, life-changing inventions, and economic growth.
    The benefits that can be reaped from federally funded research from 
the NSF, NIST and DOE Office of Science also produce ancillary benefits 
in areas that are critical to the American manufacturing sector, such 
as the economic health of the United States, health care, and energy 
consumption. Here are a few examples:

         Economic Development: According to a joint analysis by the 
        Commerce Department's Bureau of Economic Analysis and NSF, if 
        R&D spending were treated as investment in the U.S. national 
        income and product accounts, U.S. GDP would have been nearly 3 
        percent higher each year between 1959 and 2004. In 2004 alone, 
        the U.S. GDP would have been $284 billion more with the R&D 
        satellite account.\10\
---------------------------------------------------------------------------
    \10\ See ``Toward Better Measurement of Innovation and 
Intangibles,'' BEA Briefing, Ana M. Aizeorbe, Carol E. Moylan, and 
Carol A. Robbins, January 2009.

         Health Care: The life expectancy of Americans rose from 47 to 
        78 between 1900 and 2009, largely due to advances gained from 
        Federal biomedical research conducted with National Science 
        Foundation, National Institute of Health, and Centers for 
---------------------------------------------------------------------------
        Disease Control funding.

         Energy Consumption: Buildings are the largest energy users in 
        the United States. Federal research at agencies like the 
        Department of Energy focused on emerging technologies for 
        components, such as heating, cooling, ventilation, and 
        refrigeration could lead to energy savings of 3.3 quadrillion 
        BTU, or the equivalent to up to 200 million tons of coal.

    Because of the America COMPETES Act, the Recovery Act and the 2009 
Omnibus Appropriations bill, research grants are being awarded that 
will create jobs, foster innovation, and help revolutionize current 
industries and perhaps create new industries. Below is a sample of the 
dollar amounts of some of the grants that are now flowing into key 
research states.



ARPA-E and the Future of American Manufacturing
---------------------------------------------------------------------------

    \11\ Source: National Science Foundation, January 14, 2009.
    \12\ Source: U.S. Department of Energy, January 14, 2009.
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    As this country and the manufacturing economy seek to remain 
competitive in an ever-evolving global marketplace, we must avail 
ourselves of every opportunity to drive economic growth, bolster our 
domestic energy resources and protect the environment. In order to 
secure these opportunities, significant and consistent investments must 
be made; we cannot let American ingenuity and innovation become a 
success story in other countries.
    I commend the House Science Committee for recognizing the 
importance of supporting high-risk, high-reward projects by bringing 
the Advanced Research Projects Agency--Energy (ARPA-E) online. As the 
Director for ARPA-E, Arun Majumdar, notes in his open letter of 
December 15, 2009, the nation that successfully grows its economy with 
more efficient energy use, a clean domestic energy supply, and a smart 
energy infrastructure will lead the global economy of the 21st 
Century.'' \13\ ARPA-E is designed to ensure that the U.S. can do just 
that.
---------------------------------------------------------------------------
    \13\ http://arpa-e.energy.gov/public/dir-ltr.pdf.
---------------------------------------------------------------------------
    The NAM has long advocated that, in order to move this country 
forward, we need a fundamental transformation in how we produce, 
distribute, and consume energy. This transformation should start with a 
shift in how we view and approach energy research. While quality 
research is successfully conducted by U.S. manufacturers and the DOE, a 
new approach is needed that will expedite the development and 
deployment of technological innovations. This approach should leverage 
the vast intellectual capital throughout our country that we hope will 
lead to market success, the building of the necessary infrastructure 
and high paying jobs. This is the goal of ARPA- and it presents a 
unique platform to integrate innovative industry, research and 
development, and yield results.
    The NAM was pleased to see that ARPA-E released its first funding 
opportunity announcement in May 2009. After the unprecedented response, 
award agreements are now being finalized. Additionally, ARPA-E has 
announced the launch of its second round of opportunities for a total 
of $100 million. Knowing that demand for ARPA-E resources is so 
significant, the NAM looks forward to working with this Committee to 
ensure that the Agency is reauthorized and its funding remains at 
levels that will continue to support high-risk, high-reward projects 
and technological innovation.
    The goals are simple--reduce our reliance on foreign sources of 
energy, improve the energy efficiency of all economic sectors, slow and 
reduce greenhouse gas emissions; and maintain US technological 
leadership in the world and in the development and deployment of energy 
technologies. Long term, this research will form the foundation of new 
R&D investments that meet the size and complexity of the challenges 
facing the energy sector.

Preparing our Next Generation Manufacturers by Improving Education

    Strong Science, Technology, Engineering, and Math (STEM) education 
is the foundation for a technical workforce, and provides the 
fundamental skills necessary for a vibrant and competitive 
manufacturing economy. Improving the quality of K-12 STEM education and 
creating stronger educational pathways for graduate students in these 
fields, as supported in the America COMPETES Act, will provide 
employers with candidates that possess the necessary educational base 
to drive innovation in the manufacturing industry.
    However, far too often our policies and investments related to the 
STEM skills begin and end with a focus on high science and math 
academic theory. For manufacturers, it is the application of science, 
technology, engineering, and math skills in real world workplaces that 
is critical to developing this nation's technical workforce and 
preparing an educated and skilled manufacturing workforce for the 21st 
Century.
    It is in this area where we are experiencing a tangible skills gap. 
In a recent study by the Manufacturing Institute and Boston Consulting 
Group, over 1000 manufacturing executives identified a skilled educated 
workforce as the single most critical element of innovation 
success.\14\ In turn, they reported that innovation is the single most 
critical element of business success. So, if manufacturers require an 
educated and skilled workforce for business success, job creation, and 
the ability to compete in a global market, we must ensure we have the 
policies and investments in place to train our future workforce in 
critical STEM skills. The fundamentals developed with a strong STEM 
education program are not only for use as a pathway to advanced science 
research. No company can take R&D to market without the ability to 
produce the product. Strong STEM skills create a competitive business 
environment by contributing to skills on the production line as well as 
in the research lab.
---------------------------------------------------------------------------
    \14\ ``The Innovation Imperative in Manufacturing,'' The 
Manufacturing Institute, Boston Consulting Group, 2009.
---------------------------------------------------------------------------
    As manufacturers, we take pride in measurable successes. Just-in-
Time inventory management and Six Sigma process management defines how 
manufacturers look at business. It is therefore important to the 
manufacturing sector that modifications to the education system have 
quantifiable advantages. While many education and workforce reforms can 
take many years to have an impact, some reforms yield results much more 
quickly. For example, there is a direct statistical correlation between 
quality of workforce and innovation performance.\15\ Stated more 
directly, quality input means quality output. We need to ensure that we 
continue to train workers with the right skills to keep pace with the 
increasingly technical demands of the productivity-oriented 
manufacturing sector.
---------------------------------------------------------------------------
    \15\ Ibid.
---------------------------------------------------------------------------
    The P-16 program outlined in the America COMPETES Act takes a step 
toward integration of the skills needed by employers and education 
systems calling for education alignments with the private sector. 
Driving students toward advanced degrees in STEM areas is critical for 
competitive success; however, so is continuing the education for those 
who may not follow the traditional educational path. Preparing students 
and transitioning workers with applied STEM education to real world 
skills is just as important, and engages a sector of the workforce 
without a four-year college or graduate degree.
    A portable skills certification system \16\ developed and 
recognized by broad industry partners, and implemented in high school 
and local two- and four-year college programs, moves the integration to 
the next level. When academic and technical programs are aligned with 
industry needs and standards, students gain recognized credentials and 
companies gain skilled workers. By creating more STEM pathways for 
secondary and post-secondary education, and aligning education with 
industry-recognized skills credentials, the United States can create 
the kind of manufacturing workforce that will facilitate ever-needed 
product and process innovations in an evolving global business climate. 
In fact, the recently introduced H.R. 4072, The America Works Act, 
sponsored by Rep. Minnick and co-sponsored by Rep. Dahlkemper who sits 
on this Committee, takes programs like these and prioritizes them 
within current educational programs.
---------------------------------------------------------------------------
    \16\ Nationally portable, industry-recognized certifications 
validate that workers have the skill sets necessary to perform in a 
manufacturing environment and provide flexibility for the employee to 
take those skills anywhere in the marketplace, while also providing a 
streamlined hiring process for the employer.

The Hollings Manufacturing Extension Partnership: Bringing High-Tech to 
                    Small Manufacturers

    Another key program in the America COMPETES Act that has received 
increased funding is the Hollings Manufacturing Extension Partnership 
(MEP). The MEP is a nationwide network of not-for-profit centers that 
provide small- and medium-sized manufacturers with services ranging 
from process improvements and worker training, to business practices 
and information technology.
    Small manufacturing enterprises--defined by the Federal Government 
as companies with fewer than 500 employees--are critical to the U.S. 
manufacturing base as well as to the national economy. Over 99 percent 
of American manufacturers are smaller companies, and these 
manufacturers account for two-thirds of manufacturing employment and 
half of the value of all domestic production. Faced with steep downward 
cost pressures as a result of the global business environment, 
efficiency and innovation are critically important to these companies. 
The MEP provides small- and medium-sized manufacturers affordable 
access to technical expertise, so that they can create more high-paying 
manufacturing jobs--despite today's daunting economic cost pressures.
    MEP's mission is to support, strengthen, and grow U.S. 
manufacturing. To do this, it provides customized and direct assistance 
to manufacturers through its nationwide network of MEP centers, with 
nearly 392 locations across the country, and more than 1600 field staff 
working every day with companies in their plants and offices. The 
nation's manufacturers, thanks to MEP assistance, have streamlined 
their plant operations and improved their bottomline--and as a result, 
have been able to create opportunities for growth via new sales, new 
markets, and new products. In 2008, MEP served 31,961 
manufacturers.\17\
---------------------------------------------------------------------------
    \17\ Source: NIST MEP Website, January 14, 2009.
---------------------------------------------------------------------------
    The impact of the MEP program on the U.S. economy is truly 
impressive. In FY' 07 alone (from projects completed in 2007), the MEP 
helped to:

         create or retain more than 57,000 jobs;

         deliver $1.44 billion in cost savings annually;

         generate more than $10.5 billion in sales; and

         stimulate more than $2.19 billion in economic growth.\18\

    \18\ See ``Making a Difference for America's Manufacturers,'' NIST 
MEP Publication, February 11, 2009.
---------------------------------------------------------------------------
    Thanks to the vision of this Committee, Congressional Leadership, 
and the Administration, the MEP program received increased funding this 
year, authorizing and appropriating $122 million for its parent agency, 
the National Institute of Standards and Technology--Unfortunately, due 
to an uncertain economy, the future of this important program is in 
jeopardy. The NAM greatly supports the NIST MEP as it is a program that 
consistently reaps an enormous return on investment for our economy and 
fosters the next generation of American manufacturers.

Conclusion

    Chairman Gordon, Ranking Member Hall, and other members of the 
Committee, thank you for the opportunity to testify today and represent 
our nation's manufacturing industries. We strongly support the 
reauthorization of the America COMPETES Act as the small investment in 
its critical components--doubling Federal R&D funding for the NSF, NIST 
and DOE Office of Science, reauthorizing ARPA-E, strengthening STEM 
education, and renewing our commitment to the Hollings Manufacturing 
Extension Partnership--will reap considerable returns by helping to 
create jobs today, and ensure our economic security in the future.

                   Biography for Governor John Engler
    John Engler is president and CEO of the National Association of 
Manufacturers (NAM), the largest industry trade group in America, 
representing small and large manufacturers in every industrial sector 
and in all 50 states.
    Mr. Engler is a leading advocate for the 12 million American 
manufacturing workers. He promotes a broad-based agenda for maintaining 
U.S. competitiveness by lifting unnecessary burdens on manufacturing: 
excessive taxation and regulation, the high cost of health care, 
expensive litigation and soaring energy costs.
    Recognizing that manufacturing provides the bulk of U.S. exports, 
Mr. Engler promotes opening foreign markets to this country's 
manufactured goods. He also has emerged as one of the nation's top 
advocates for developing the abundant domestic energy supplies in the 
U.S. He strongly supports expanding renewable energy and clean-coal 
technology and revitalizing America's nuclear power industry.
    Mr. Engler sees the looming shortage of skilled manufacturing 
employees as a growing threat to American competitiveness in the 21st 
century's high-tech global economy. A former three-term governor of 
Michigan, he signed 32 tax cuts into law and helped create more than 
800,000 new jobs during his tenure.
    Prior to becoming Michigan's 46th governor in 1991, Mr. Engler 
served for 20 years in the Michigan legislature, including seven years 
as state Senate majority leader.

    Chairman Gordon. Thank you, Governor.
    Ms. Wince-Smith, you are up to bat.

  STATEMENT OF MS. DEBORAH L. WINCE-SMITH, PRESIDENT AND CEO, 
                   COUNCIL ON COMPETITIVENESS

    Ms. Wince-Smith. Chairman Gordon, Ranking Member Hall and 
distinguished Members of the Committee, thank you for the 
opportunity to provide testimony on the reauthorization of the 
America COMPETES Act. This landmark legislation was a turning 
point in the effort by government and private-sector leaders to 
refocus America's attention on the critical importance of 
innovation as the driver of economic growth. Your leadership 
and that of the Committee was crucial to its success. The 
Council fully supports its reauthorization.
    Mr. Chairman, when the Council on Competitiveness was 
founded in 1986, our country was facing its most dire economic 
challenge since the end of World War II. Today we face new and 
grave challenges to our competitiveness. U.S. companies must 
retool their business strategies to remain competitive and the 
U.S. government must support policies to grow high-paying jobs 
here and investment. STEM education, investment in R&D and a 
skilled workforce are at the heart of that challenge.
    The Council's 2004 National Innovation Initiative responded 
to these emerging challenges by bringing together more than 400 
public and private-sector leaders to shape a national agenda to 
drive talent, investment and infrastructure and we were pleased 
to work with our colleagues around this table. The Council 
strongly supported the America COMPETES Act as it mirrored many 
of these recommendations and it is also consistent with our 
next-generation initiatives in technology leadership, energy 
security and sustainability, and 21st century manufacturing.
    Among those provisions that were included and should be 
included in future authorizations are strength in STEM 
education for all Americans irrespective of their future 
careers, steady and predictable increases in federal research 
funding for long-term basic research across all agencies, 
greater coordination across federal agencies for innovation 
policy and very important new models for public-private 
partnerships such as ARPA-E.
    As the Committee looks to reauthorize the America COMPETES 
Act, let me emphasize that the importance of these provisions 
has increased, further compounded by the global economic crisis 
and the highest unemployment levels in America since the Great 
Depression. During these years, the world has not stood still. 
Global competition has accelerated, especially the rapid 
advancement of emerging economies all competing for high-value 
investment, manufacturing jobs and market success. In just one 
generation, emerging economies' shares of global imports, 
exports and foreign direct investment have nearly doubled. In a 
decade, China's R&D has grown from $12 billion to $102 billion, 
now placing China third in R&D spending behind only the United 
States and Japan, and China is now poised to surpass Japan as 
the world's second largest economy.
    As companies have evolved from multinationals to global 
enterprises, they are building global talent networks for R&D 
for design, for manufacturing and service hubs to meet growing 
global consumer-driven demand. Additionally, the real-time 
global trade in tasks has also accelerated. Information, 
knowledge and technology are increasingly commodities, and the 
economic rewards are going to go to those nations who are 
prepared to invest in their people, take risks to develop and 
deploy products and services and create entirely new 
industries.
    If we want to see investments, jobs, and growth in the 
United States, we must have a vibrant and diversified high-tech 
manufacturing sector. Our national security and competitiveness 
demand a strong industrial base. Under the leadership of our 
new chairman, Sam Allen, the CEO of John Deere and Company, the 
Council's Competitiveness Initiative is going to redefine the 
manufacturing enterprise as a value creation system, not just a 
product fabrication process. We will focus on productivity 
drivers and lifecycle cost structures to enable us to rise 
above the rising bar. We will benchmark the policy, regulatory 
and capital incentives our competitor nations are using to 
attract manufacturing investments at the forefront of science 
and technology ranging from the atomic world to large-scale 
extreme systems. We will also utilize our leadership technology 
initiative, bringing together the CTOs [Chief Technology 
Officer] across America's companies, led by the CTOs of 
Lockheed Martin and of General Electric, to create a roadmap 
for our science and technology leadership.
    Clearly, energy and environmental issues and their impact 
on U.S. competitiveness in a low-carbon world are at the heart 
of these challenges. Our new work, released in a recent summit, 
called ``Drive'' is really going to push a tremendous 
generation of innovation that will transform the world. We have 
to also ensure that we build on our strengths and use our 
innovation accelerators such as modeling, simulation and high-
performance computing in which we still lead the world, to 
leapfrog our competitors.
    Mr. Chairman, Ranking Member Hall and Members of the 
Committee, the America COMPETES Act was and is an urgent wakeup 
call for America. The need for Congressional bipartisan 
legislation and the involvement of all stakeholders in our 
society has not diminished. It has accelerated. The rest of the 
world is not waiting for us to act or to lead. We must act and 
lead. And Mr. Chairman, thank you for your tremendous 
leadership on this Committee and your service to our Nation. 
Thank you.
    [The prepared statement of Ms. Wince-Smith follows:]
              Prepared Statement of Deborah L. Wince-Smith
    Chairman Gordon, Ranking Member Hall and members of the Committee, 
thank you for the opportunity to provide testimony on the 
reauthorization of the America COMPETES Act. This landmark legislation 
signed into law in 2007 was a turning point in the effort by many 
people inside and outside of government to refocus America's attention 
on the critical importance of innovation as the driver of economic 
growth. Your leadership and that of the Committee was crucial to the 
legislation's success and I hope the effort to reauthorize the 
legislation will be similarly successful.
    In my testimony today, I would like to share with the Committee a 
brief history of the impetus and outcome of the Council's work on a 
national innovation agenda and how critical parts of this agenda 
related to the legislation passed in 2007. Then, I want to highlight 
some transformational changes in the national and global economy that 
have occurred in the past few years and how those shifts are impacting 
where and how innovations occurs; and, as a result, what issues this 
committee should consider as it seeks to reauthorize the America 
COMPETES Act.

THE COUNCIL ON COMPETITIVENESS AND THE NEED FOR AN INNOVATION AGENDA

    The Council on Competitiveness is a non-partisan and non-
governmental organization of CEOs, university presidents and labor 
leaders working to ensure U.S. prosperity. To achieve this mission we 
convene top private and public sector leaders to address America's 
long-term. competitiveness challenges by generating innovative public 
policy solutions and galvanizing our unique coalition to translate 
ideas into action. We also seek to measure U.S. performance in the 
global marketplace to identify key obstacles and opportunities facing 
the nation.
    The Council on Competitiveness was founded in 1986 during a time 
when the United States was facing its most dire economic challenges 
since the end of World War H. The country had slid from being the 
world's largest creditor to its largest debtor, its position as a 
global leader in technology and innovation was being challenged and 
American industries were losing market share to international 
competitors. To meet these mounting challenges, two-dozen industrial, 
university and labor leaders joined together to found the Council, a 
forum for elevating national competitiveness to the forefront of 
national consciousness.
    The 21st century poses new challenges to American competitiveness--
globalization, high-speed communications, enterprise resilience and 
energy sustainability issues are forcing organizations at all levels to 
rethink how U.S. companies will remain competitive and how we will 
sustain and grow high paying jobs. After two decades, the Council on 
Competitiveness continues to set an action agenda to drive U.S. 
productivity and leadership in world markets and to raise the standard 
of living for all Americans.
    The Council's work on innovation dates back to the late-1990's when 
we held a major innovation summit at MIT. This summit brought together 
private sector and government leaders to begin the conversation around 
where the United States stood with regard to its long term role as the 
world's innovator. By 2003, it was clear that America could no longer 
assume that its past leadership in innovation would ensure its future 
prosperity. The world had changed.

          The United States was now competing and collaborating 
        globally to attract the best and brightest minds to develop new 
        knowledge and create the disruptive technologies that will 
        launch new industries and products and create jobs.

          The United States was now competing and collaborating 
        in a world in which the power of networked communications, the 
        extended manufacturing enterprise and access to low-wage talent 
        has enabled the outsourcing of both low and highskilled jobs.

          And the United States was now competing and 
        collaborating in a post-Cold War security environment in which 
        the United States must protect its citizens and homeland from 
        threats from terrorist groups and rogue nations which have the 
        technological means to wreak havoc on advanced economies.

    The Council also recognized that the very nature of how innovation 
occurs, where it occurs and who the innovators are were changing as 
well.

          It was diffusing at ever-increasing rates. It took 
        the radio 38 years to reach a market audience of 50 million 
        people, but only 13 years for television, four years for the 
        Internet, three years for the I-pod and one year for Facebook.

          It was multidisciplinary and technologically complex 
        arising from the intersections of different fields or spheres 
        of activity encompassing physical and biological sciences as 
        well as social sciences and the humanities.

          It was becoming global in scope--with advances coming 
        from centers of excellence around the world and driven by the 
        demands of billions of new consumers.

    What became clear as the Council prepared to launch its innovation 
initiative back in 2003 was that the innovation economy is 
fundamentally different from the industrial or even the information 
economy. It requires a new vision, new approaches and a new action 
agenda. The United States must create the conditions that will 
stimulate individuals and enterprises to innovate and take the lead in 
the next generation of knowledge creation, technologies, business 
models, dynamic management systems and high value job creation. A new 
relationship among companies, government, educators and workers is 
needed to ensure a 21st century innovation ecosystem that can 
successfully adapt and compete in the global economy.

NATIONAL INNOVATION INITIATIVE

    This is why the Council launched the National Innovation Initiative 
(NIT) under the leadership of Duane Ackerman, the CEO of BellSouth and 
Chairman of the Council from 2003-2005 and co-chaired by Sam Palrnisano 
the CEO of IBM, and Wayne Clough, the President of the Georgia 
Institute of Technology and now the Secretary of the Smithsonian 
Institution. We relied on the input of more than 400 public and private 
sector leaders including my colleagues testifying with me today and 
other leaders such as Norm Augustine, Craig Barrett, Chuck Vest and 
Bill Brody from the private sector as well as a bipartisan Honorary 
Committee of Members of Congress and Governors.
    The 2005 NII report, Innovate America was downloaded more than 
300,000 times and coupled with subsequent reports from the National 
Academies, the Business Roundtable, the National Governors Association 
and many others, helped build the momentum for congressional action on 
an innovation agenda for the country. It also created interest around 
the world with countries like China, Korea, Brazil and Turkey 
fashioning innovation agendas modeled on the NII.
    Innovate America had three foundational platforms Talent, 
Investment and Infrastructure--the building blocks for an integrated, 
resilient innovation ecosystem and the subsequent legislation in many 
ways mirrored this structure.
    In brief, Innovate America called for:

    Talent
          Ensuring all Americans have the skills necessary to 
        compete and prosper in the 215E Century with a strong emphasis 
        on science, technology, engineering and math education (STEM).

          Increased support for multidisciplinary education and 
        research.

          Attracting the best and brightest from around the 
        world to study and work in the United States.

    Investment
          Increased national investment in a balanced basic 
        research portfolio.

          A focus on high risk/high reward research.

          A move toward regional economic development and a 
        transition to an advanced manufacturing infrastructure.

    Infrastructure
          Accelerating the deployment of 21St Century 
        innovation infrastructures from broadband and high performance 
        computing networks to a 21St Century patent system.

          A manufacturing infrastructure that will enable 
        America to capture the economic value from our investments in 
        research and our people.

          Tax incentives to encourage research and risk taking.

THE AMERICA COMPETES ACT

    Needless to say, the Council strongly supported the America 
COMPETES Act as it mirrored many of the recommendations included in 
Innovate America as well as our 2006 Competitiveness Index. Among those 
provisions that were included and should be included in any future 
authorizations were strengthened S'lEM education for all Americans 
regardless of their career aspirations; steady and predictable 
increases in Federal research funding for long term basic research 
across all agencies; and greater coordination across Federal agencies 
and with the states on innovation policy.
    Without going into great detail, I would like to highlight a few of 
the provisions from the 2007 legislation that I think remain critical 
and should be supported by the Members of the Committee.

         1. The Council on Competitiveness strongly urged the creation 
        of a President's Council on Innovation and the legislation 
        included such a provision, yet the reality has not matched the 
        intent. What became clear as we sought the input and advice 
        from leaders within government and the private sector was that 
        the government's innovation policy was fragmented, poorly 
        coordinated and often running at cross purposes between 
        agencies and departments. We would urge a fresh look at this 
        provision.

         2. Predictable and steady support for long-term research 
        across Federal agencies including the National Science 
        Foundation, DoE Office of Science, NIST and NASA is a vital 
        first step toward an innovation-based economy. America COMPETES 
        made great strides in this area. Any authorization should 
        continue this commitment.

         3. Support for the National Institutes of Standards and 
        Technology's (NIST) work in the area of manufacturing is 
        critical to many small and medium sized manufacturers. These 
        companies are key job producers in America's economy. NIST has 
        made strides toward embracing innovation in manufacturing and 
        this trend is worthy of the Committee and Congress's support.

         4. Strengthening STEM education through programs at the 
        Department of Education, the National Science Foundation and 
        other R&D agencies and departments is important. I realize 
        there are multiple programs that touch upon this issue across 
        the Federal Government and I will not try to analyze each one 
        separately here. I only urge the Committee to recognize that 
        almost every career today requires some grasp of or skill in 
        science, technology, engineering and mathematics and we must 
        ensure that all Americans have a solid grounding in these 
        fields.

    Before turning to where we go from here, I want to highlight a 
couple of items that were important parts of the Council's report, but 
were not included in the legislation. I recognize that not all of these 
issues fall under the Science Committee's jurisdiction, but any 
comprehensive innovation bill is going to touch multiple committee 
jurisdictions.

          Attracting the best and brightest from around the 
        world to study, work and innovate in the United States would 
        benefit our economy, but our high skilled immigration system 
        continues to fail in this regard. This is a competitiveness 
        issue as much as if not more than an immigration issue and 
        should be addressed as such. A green card should be given to 
        any foreigner who passes appropriate security screening and 
        receives an advanced degree in science or engineering.


          Innovate America called for the creation of and 
        support for regional innovation hot spots--locally developed 
        and federally incentivized regions that bring together the 
        public and private sectors to capitalize on local competitive 
        assets to create new jobs and new industries. The 
        Administration is currently looking at ways to achieve this 
        goal and those efforts should be supported.


          Innovate America also sought to focus attention on 
        the importance of critical technologies and processes that need 
        to remain viable in the United States if we are to generate 
        value from our investments and continue to create jobs in the 
        United States.

          Innovate America also identified over-the-horizon 
        issues like energy security and sustainability that led to our 
        recent Energy Security, Innovation and Sustainability 
        initiative and summit last fall.
    As the Committee looks to reauthorize the America COMPETES Act, I 
can only emphasize that the importance of these provisions has not 
waned with the passage of time and the deterioration of the global 
economy-they are critical to America's prosperity.

GLOBALIZATION CONTINUES TO CHANGE THE WORLD IN WHICH WE COMPETE

    We knew the global economy was changing when the America COMPETES 
Act was first debated. Now, we know the global economy has 
fundamentally shifted. Global competition has accelerated--especially 
the rapid advancement of emerging economies:

          Because of their large and rapidly growing markets 
        and relatively low wage labor, they are the favored location 
        for foreign direct investment

          In just one generation, emerging economies' shares of 
        global imports, global exports and foreign direct investment 
        have nearly doubled

          And some are advancing rapidly as R&D performing 
        countries. In about a decade, China's R&D grew from $12 billion 
        to $86 billion. In 2008 China's R&D spending was $102 billion, 
        placing China in third place in R&D spending, behind only the 
        United States and Japan. China is now poised to surpass Japan 
        as the world's second largest economy.

    The integrated global enterprise has developed rapidly. These 
enterprises use global networks for developing products and services, 
and for serving customers.

          For example, sales from foreign affiliates of U.S. 
        companies are more than three times greater than U.S. exports 
        of goods and services.

          These global enterprises are building global talent 
        networks for innovation. And it is vital for regions to enter 
        these networks.
    Global trade in tasks has grown rapidly. If work is routine, rule-
based, or if it can be digitized, there's a low cost source of labor 
somewhere in the world to compete for that work and those jobs.
    Information, knowledge and technology are increasingly commodities. 
And rewards do not necessarily go to those who have a great deal of 
these things, but to those nations who are prepared to create new 
industries and deploy new products and services. Besides, many nations 
have rapidly built-up their own science and technology assets, so 
having those alone does not ensure success.
    Instead, rewards go to those who know what to do with knowledge, 
information and technology once they get it. This has created an 
innovation imperative for the United States that is, if anything, more 
urgent today than it was four years ago.

BEYOND AMERICA COMPETES

    America still has the best innovation system in the world, but if 
we want to see investments, jobs and growth in the United States, we 
need a vibrant and diversified manufacturing sector. Our national 
security, energy security and economic competitiveness demand it.
    America lacks a strategy for manufacturing competitiveness. We need 
policies that make America a really attractive place to invest--a pro-
innovation, pro-investment, pro-growth, pro-opportunity environment.
    And that means we need to look at manufacturing as a value chain 
that spans ideas to delivered products, including cutting-edge science 
and technology, sustainable design and systems engineering, supply 
chain excellence and smart services--as well as lean and green 
production. The integration of these systems and services creates the 
value premium that captures global market share.

    The Council is launching a major initiative in this area that will 
seek to:

          Redefine manufacturing as a value creation system, 
        not product fabrication

          Focus on productivity drivers that enable us to rise 
        above a rising bar

          Benchmark policy incentives and strategies competitor 
        nations use to attract manufacturing investment

          Develop an integrated action agenda for 21St century 
        competitive success.

    A successful manufacturing strategy will exploit the leading edge 
of nanotechnology, biotechnology and digital technology. Advances in 
these fields will increase technological possibilities exponentially, 
unleashing a flood of innovation--creating new industries, companies, 
products, services and markets.
    This ability to move quickly to deploy and capture value is a focus 
of the Council's Technology Leadership and Strategy Initiative, chaired 
by Dr. Ray Johnson, Senior Vice President and Chief Technology Officer 
for Lockheed Martin Corporation and Dr. Mark M. Little, Senior Vice 
President and Director of Global Research for the General Electric 
Company.
    There is a great and growing need to solve global grand challenges-
food and water shortages, pandemics, security threats, the needs of 
aging populations worldwide, climate change and meeting the global need 
for cheap, clean energy.
    Energy and environmental challenges alone have created a perfect 
storm for energy innovation. As detailed in the Council's recent call 
to action on energy security, innovation and sustainability--Drive--
energy and energy efficiency innovations are needed in transportation, 
appliances, green buildings, materials, fuels, power generation, 
industrial processes and more. I am pleased to enclose the full report 
for the Committee's review.
    The environment for innovation is target rich, but we also need 
innovation accelerators. Modeling and simulation with high performance 
computing can be a force multiplier for innovation. These tools offer 
an extraordinary opportunity for U.S. manufacturers to design products 
and ancillary services:

          Faster

          To minimize the time to create and test prototypes

          To streamline production processes

          Lower the cost of innovation, and

          Develop high-value innovations that would otherwise 
        be impossible.

    Driving HPC, modeling and simulation throughout the supply chain 
would put these powerful tools into the hands of companies of all 
sizes, entrepreneurs, innovators and inventors to transform what they 
do.

CONCLUSION

    Mr. Chairman, Ranking Member Hall and Members of the Committee, the 
America COMPETES Act was not a perfect bill, but it was an urgent wake 
up call. The bill included some provisions we did not recommend and 
left some out we felt were critical. Yet, there was no question of the 
need for action, by Congress. That need for action has not diminished 
and, if anything, the need is greater. Other countries are making 
investments in their science and technology infrastructure. They are 
educating and training their people. They are attracting investment and 
talent from around the world. To prosper, America must compete.
    Thank you.

                  Biography for Deborah L. Wince-Smith



    Chairman Gordon. Thank you. It is good to have a good 
committee to work with.
    Mr. Donohue, you mentioned your time there at the military, 
or at Walter Reed this morning. Within the COMPETES bill, we 
set up a program where the National Science Foundation fast 
tracks STEM professionals into teaching, and I will talk with 
Chairman Skelton today about trying to partner with the DOD 
[Department of Defense], at least in that area. Hopefully we 
will be able to accomplish something. And you also mentioned, 
or cautioned, about duplication of programs. One of the themes 
of this Committee has been how do we stretch $2 into $3 rather 
than having to spend an extra dollar, and what we have tried to 
do is look at the various research programs within our 
jurisdiction and create an umbrella to coordinate that. We have 
done that in nanotechnology, in water research, and we are also 
now looking into the STEM areas, and we will continue to do 
that.
    You also mentioned public-private partnerships, and I think 
what we have done here, again, is a theme in that much of our 
legislation when we set up research programs, we ask that there 
be a private-sector component or an advisory group set up to 
advise, not for all the research, but for a portion of the 
research, where should we be going with that? And I think today 
really is an example of a private-public relationship in that 
it was the public sector that asked the private sector, what do 
we need to do to make ourselves more competitive. You gave us 
recommendations. We put that into legislation. You helped us to 
pass it. And so what I would like to do now is really ask the 
panel what additional public-private partnerships might be 
necessary, and Mr. Donohue, I know that in a recent speech to 
the Chamber, you wanted to do 10 million jobs in 10 years, and 
is there a role there? I suspect that probably the whole panel 
would concur that less government is better but the question 
now, though, is there appropriate role for public-private 
partnerships? And I welcome your recommendations.
    Mr. Donohue. Thank you, Mr. Chairman. We want to do 20 
million jobs in 10 years.
    Chairman Gordon. Oh, good.
    Mr. Donohue. We need seven to replace the people that are 
out of work. We need 13 for all of those people who will be 
coming into the economy. And as was mentioned by a number of 
the speakers this morning, many of these jobs are going to be 
technologically based or far more technologically based than 
they were years before, and therefore the work that your 
Committee is leading here are preparing people for those jobs 
is critical. Our suggestion on how to drive those 20 million 
jobs we made in that speech is first of all expand our efforts 
because 95 percent of the people we want to sell things to live 
somewhere else, and we have the opportunity to do that right 
now, and if we would double it in five and double it again, you 
would create many of those jobs. And by the way, that is a 
public-private partnership because we need the help of the 
government to build the trade agreements and the trade 
arrangement that allow the private sector to compete against 
150 other countries around the world that are trying to sell in 
and out of those markets.
    The second thing we suggested and that I will focus on here 
for a minute is the issue of infrastructure. Now, we always 
think about infrastructure as roads and bridges and we have a 
highway bill for that and we ought to hurry up and reauthorize 
it, but there is an extraordinary opportunity and a great deal 
of money waiting around for infrastructure issues on water, on 
questions of power generation, power lines, ports, railroads. 
Much of that money would come from the private sector. Had we 
not had this recession, it is my opinion we would have bumped 
up against the wall when we would have more business than we 
had infrastructure to support it, and I think you can find in 
those areas an extraordinary opportunity for public-private 
partnership both on the technological side, on the planning and 
development side, and particularly on the financing side, and I 
would call to your attention and keep you posted on the 
material that we are putting together on that. There are a 
whole series of other issues but I have already taken more time 
than you expected, and I thank you very much.
    Chairman Gordon. Does anyone else want to comment there?
    Governor Engler. Let me pick up on the STEM issue because I 
know that is of great concern to many Committee Members, and I 
think that is really obvious because it is the longest standing 
public-private partnership. Public education is part of the 
fabric of the Nation. I always say this when you ask me what 
should be done in public education: I have got a simple plan, 
that every child leave high school either prepared to go to 
college without needing remediation when they get there or 
prepared to go to the workforce with skills that have hopefully 
been measured and even certified, and the dropout rate has to 
be zero. That alone would of course transform the people coming 
into the workforce and would stretch $2 into probably $5. I am 
not sure. But I think the ability to link--and we have formed a 
first ever for us, a council of community college leaders to 
work with the manufacturers to talk about how we make this 
transition because there is, I think, for many people who don't 
know what they want to do, the need for them to become 
prepared. We have specific needs in manufacturing but there are 
other needs in other parts of the economy. Tom would have a lot 
of members that aren't our members that have maybe financial 
services needs or whatever but people need to be prepared, and 
we think that STEM education has a great value, and some of it 
is less traditional than the K-12 pre-college curriculum, and 
we think that there are programs, and I think if you look 
across America we have solved all of our education problems 
somewhere. We just are terrible at replicating it. And if we 
could simply replicate what works and if everybody used best 
practices that are available today, no new research, you would 
get a quantum improvement in STEM specifically, we think that 
the community college system and that integration has to go 
much further. I think some of the steps that you have laid out, 
some of the efforts that are underway are very powerful but we 
probably need to measure more and report more because we still 
have a problem. As Tom mentioned, there are a lot of people who 
are aging out of the workforce but they are aging out with 30 
years of experience. The people who are coming in to replace 
them can't just walk in off the street and hope to do these 
jobs. They have to have preparation.
    Chairman Gordon. Ms. Wince-Smith?
    Ms. Wince-Smith. Well, I would just add and pick up on what 
Governor Engler just said about the material workforce. One of 
the things that the Council is doing under our Tapping Mature 
Workers Initiative with Atlantic Philanthropy is to identify 
this tremendous pool of workers that have skills, and to work 
with them across communities as part of an innovation strategy 
to ensure that they can be redeployed into new occupations.
    But I really wanted to mention the R&D partnership model 
and the importance of bringing the power of modeling, 
simulation and supercomputing down into the hands of our 
entrepreneurs and throughout the supply chain. This is 
something where the data and the productivity gains are huge, 
and if we can get this tool to do advanced design and 
prototyping, moving beyond traditional ways products are 
designed and deployed, I think it will have a tremendous 
impact. Excitngly, the capability for this exists in our 
national labs, it exists in our universities, and we have 
leading companies that are working with the Council to really 
spur this partnership along. It is also something that will be 
embedded into the new ARPA-E programs as well. So that is one 
in particular I want to highlight as very strategic for the 
future.
    Chairman Gordon. Mr. Castellani?
    Mr. Castellani. Briefly, Mr. Chairman, let me suggest three 
areas. One, to reiterate what John Engler said, the private 
sector spends, we have added it up sometimes, somewhere between 
$800 million and $900 million a year trying to support 
education improvement, and learning from our mistakes, learning 
from what has worked I think is very important to avoid 
replication of those mistakes, so I think that is very much an 
opportunity--and that is $900 billion. I am sorry. I didn't 
mean to shortchange it. Learning what we found has worked, 
learning within the government what has worked and sharing that 
information would be very helpful.
    Secondly, the selection of the technologies that are 
supported in the research. Clearly what would be most desirable 
are making sure that those that are supported are ones that can 
track private capital to be able to become commercialized that 
had broad appeal within the private sector and have an 
opportunity for return so that the private capital can be 
applied to it.
    And third, related to that, focusing on broad-based 
projects, technologies that meet both critical national needs 
but also are deployable and useable in a number of different 
sectors of the economy would be valuable, so those are three 
things that we would suggest.
    Chairman Gordon. Thank you. I don't want to impose on the 
Committee's time any longer. But Mr. Hall, before I yield to 
you, let me just quickly say to this panel that your staff has 
been very good to work with as we have gone through this bill. 
We are going to have several more hearings in a few more months 
that are going to be dealing with this. We want to continue to 
work with you, and we will probably send you questions, and I 
am not going to ask for an answer now but I want one later. Mr. 
Engler and Ms. Wince-Smith, you have both talked about the 
manufacturing sector, and we are interested in authorizing 
comprehensive manufacturing research and development programs 
and we would like to see your suggestions on that.
    So now, Mr. Hall, I apologize for the overtime and I yield 
to you.
    Mr. Hall. If you think 20 million jobs in 10 years is 
tough, you ought to have 10 questions in just five minutes. 
Bear with me.
    As recommended in Mr. Donohue's testimony, this Committee 
should be, quote, ``vigilant about duplication of funding of 
efforts among the Department of Education, the National Science 
Foundation, NASA and the Department of Energy and other federal 
agencies.'' This was a major concern of ours when this 
Committee considered ARPA-E. Likewise, we felt that some of the 
STEM programs established within DOE [Department of Energy] are 
repetitious of existing programs. I would ask you all to share 
with me those programs that you consider to be duplicative in 
the current version of COMPETES or may have the potential for 
duplication in the reauthorization, and because I don't have 
time to get from each of you, I will send each of you that 
question and with the chairman's good agreement we will put 
those into the record. I will go to the other question that I 
have. I am trying to save time.
    In 2008, the U.S. trade deficit in high-technology products 
was $55 billion, up from $16 billion in 2002. The U.S. trade 
balance in high-technology products was last in surplus in 
2001. So a portion of this deficit is from U.S. companies that 
manufacture overseas and bring the products back to the United 
States. Even if we invest in STEM education programs and 
attract more professionals into high-technology fields, how do 
we encourage companies from taking production outside the 
United States other than treat them right when they are here. 
Thank you, Governor.
    Governor Engler. I will be glad to start on that. There are 
several factors in that question. One that many Members of 
Congress are now focusing on, the Administration I think is 
focused on, is reform of our antiquated export control laws 
which have actually cost us high-technology exports in this 
country while our allies have been happy to fill the gap, and 
we have got Cold War language in the statute and we really 
think that while you protect national security, you also need 
to recognize that national security ultimately is harmed if we 
end up with our manufacturers going out of those lines of 
business because they can't compete with the British company or 
the Germany company, so that is a factor.
    A second is one that Mr. Donohue mentioned is on export 
promotion. We think that a lot of this technology in the hands 
of small or medium-sized companies, if we looked at exports in 
a macro sense, agriculture annually exports what manufacturing 
exports each month, so we are roughly 10 to 12 times the size, 
yet the agriculture export promotion budget dwarfs the Commerce 
Department export promotion budget, so there is an imbalance. I 
am happy to support and have an ag background. I am happy to 
support agricultural exports but we need to level that up. 
Again, that is something that Tom Donohue talked about.
    The other factor that I would say in terms of your--and I 
think there has been a lot of confusion on the way the tax laws 
work but I believe that we today have policies that 
inadvertently have resulted in almost disincenting the location 
here. In effect, we have chosen not to make the R&D tax credit 
permanent. It has now fallen to--it is about the 17th most 
useful R&D credit out there in the world today. We were in the 
1980s far and away the leaders there. So we are losing that 
competition. In addition, there are a number of other 
incentives that countries offer that sort of are added on to 
that and then when you look at the ability of other countries 
to impose in their countries territorial tax structures, we try 
to do a worldwide one and in effect punish you if you try to 
bring the capital back home. We are in effect creating an 
incentive to keep capital offshore and that desperately needs 
to be addressed and I think all of that would lead to more 
investment at home and additional export opportunities, so that 
would be the view of our manufacturers.
    Mr. Hall. Governor, that is very great and being specific 
on other regulatory barriers that you all see that we can 
correct. Anyone else want to address that?
    Ms. Wince-Smith. Building on what Governor Engler said, I 
want to emphasize the importance of the entire capital cost 
structure and the regulatory environment for manufacturing, 
taking into consideration that our tremendous standards on 
safety and health really are the best in the world, and we want 
to maintain those standards. We have a collective set of 
permitting and regulation that makes it very hard for some of 
the advanced technologies that we don't want to deploy in the 
United States to be done here. Product liability is a perfect 
example. I mean, if we want to do the R&D for next-generation 
batteries, are we going to be able to actually manufacture 
these here? I will also give you the example of the flat-panel 
display industry. We invented every technology path for 
displays in the United States, and we did not make them here, 
and a lot of work can go back and show why. It was a 
combination. But the rest of the world is creating policies to 
attract and keep this manufacturing. In fact, Sweden has a 
lower capital cost structure than we do for manufacturing and 
we think of the Nordic counties as having one of the highest in 
the world.
    Mr. Hall. I thank you.
    Mr. Castellani, do you have--------
    Mr. Castellani. Just two things briefly. One, let me 
reemphasize what has been said. We have a tax structure in this 
country that acts as a disincentive for U.S. companies to 
participate in world-wide markets from a U.S. base. Even 
countries like Japan and the United Kingdom last year 
recognized that they had to change and did change to a 
territorial system. We are uncompetitive with our tax 
structure.
    Secondly, because of the political environment around trade 
and trade agreements, the rest of the world is continuing to 
negotiate market opening opportunities for activity from their 
countries in other countries while we have not been able to 
forward a trade agenda. We need appropriate trade agreements to 
be able to invest, to be able to export, to be able to 
participate in those economies around the world.
    Mr. Hall. I thank you. I think that is all the time I have. 
But your answers will got to every Member of Congress because 
they are being printed and taken down by--Mr. Donohue, did you 
want to say a word or so?
    Mr. Donohue. My colleagues have done such a good job on 
this, I would just say amen.
    Mr. Hall. Thank you. I yield back my time.
    Chairman Gordon. Thank you, Mr. Hall.
    This Committee is going to do what we can for 
competitiveness. I think you are going to have to go by and 
have a talk with Ways and Means, though, to take care of those 
other issues.
    Ms. Fudge, you are recognized for five minutes.
    Ms. Fudge. Thank you, Mr. Chairman, and thank all of you 
for being here.
    My first question is to Ms. Wince-Smith. You mentioned in 
your written testimony that Innovate America called for the 
creation of regional innovation hotspots. I am very interested 
in this concept as I represent a district that has the 
potential to do so much. I mean, we have great research 
universities, an extensive biotech industry, biomedical 
research facilities, NASA Center and STEM high school as well 
many other stakeholders. Could you just elaborate for me 
briefly on some of the criteria that you would designate a 
region as an innovation hotspot?
    Ms. Wince-Smith. Thank you. Well, of course, this concept 
of regional innovation hotspots has been at the heart of the 
Council's work now for many years because people live and work 
and innovate in regions. We can set national policies, but the 
actual delivery of the goods and services occurs where people 
live. Clearly having world-class universities and the network 
of community colleges around them are critical to this because 
this is where the knowledge and the talent generation occurs. 
Then of course, having a set of policies that support 
investment and keep investment as part of this menu for the 
regional innovation hotspots is also important and the thing I 
would emphasize most importantly in regions such as yours where 
there is a lot of success and movement is that the different 
stakeholders have come together in leadership networks. So if 
you have foundations in regions, they are coinvesting around 
their particular strengths and assets. If you think of places 
like the Midwest, the heartland of our manufacturing, they are 
now moving to create the green manufacturing clusters and 
ensuring that all of their investments and their skills are 
aligned around that. And one of the things we should be proud 
of in the United States is that the rest of world does come to 
look and see how we have done this in our regions. We need to 
take it to the next generation, and many of the things we are 
talking about here will be part of that process. Companies stay 
and go and invest in places where there is a dynamic economy of 
creativity and talent and infrastructure to build on.
    Ms. Fudge. Thank you very much. And by the way, I am from 
Cleveland, Ohio, so--------
    Ms. Wince-Smith. And I am from Akron.
    Ms. Fudge. And you did raise something that I would really 
like for all of you to respond to, and that is, the question 
is, what is the role that community colleges should play in 
workforce training. We have sent a lot of money to community 
colleges through our stimulus package. We have looked at how we 
increase getting students involved. What do you think that role 
should be across the country for community colleges?
    Governor Engler. Congresswoman, I think that community 
colleges have a vital role to play because they are by their 
nature regional and by their hiring ability able to bring the 
right personnel in quickly when things change or when they are 
shifting. I personally think that community colleges need to be 
sort of looking down the line. Community colleges over the 
years have had visions in their head and they will become a 
four-year institution by becoming a college. Well, what they 
need to be--they need to look at the 11th and the 12th grades. 
I think there is a wasted senior year in a lot of programs for 
the non-college-bound and I think there is the possibility in 
this country to take the 11th grade and 12th grade, year one, 
year two that are the normal associate degree, look at four 
years becoming three--that is a big cost savings, really--and 
allow for that specialization to come earlier with these young 
people choosing because again, back to the point. Everybody 
needs to leave prepared either to go to college without needing 
remediation or to go to the workplace with something that has 
been measured and certified, and we ought to move them more 
quickly, and as Deborah indicated, regions have different 
characteristics, different industries, and that needs to be 
developed. That way there is no cookie-cutter approach. That 
needs to be thought through, and that was the whole promise of 
WIA [Workforce Investment Act] at one time was to try to do 
that and to integrate that, and I think that there is an area--
with Mr. Hall's question about where there is duplication in 
the workforce area, they are falling all over each other and we 
can sort that out--simplify it, and I actually think that one 
of the problems we have got people thinking about workforce is 
that the peer pressure to go to college is so great. Well, they 
need to also look at all education is pre-work and so how am I 
prepared to do some work, and we maybe can make working more 
attractive if they can realize I can get a higher income if I 
get prepared earlier, and guess what, you can still go to 
college. This is America. You can go later if you want to go on 
and then get a different kind of degree or you can become a 
Ph.D. in physics like Congressman Ehlers.
    Ms. Fudge. Thank you.
    Mr. Castellani. We would certainly agree that community 
colleges have a critical role. If you look at workforce skills 
right now, their half-life is becoming increasingly shorter. So 
as we have to move our economy and as a people that need to 
learn to accept lifelong learning and need to develop what is 
going to be critical basic analytical skills for all jobs, 
community colleges play a very critical role in that and they 
should be looked on to play that role.
    Chairman Gordon. Thank you, Ms. Fudge.
    Ms. Fudge. Thank you so much. I yield back, Mr. Chairman.
    Chairman Gordon. We could have a three-day seminar on this, 
it is such an interesting topic, but I will ask our witnesses 
to be a little more crisp and we will try to get back on time. 
Comrade Rohrabacher, you are recognized for five minutes.
    Mr. Rohrabacher. Comrade Rohrabacher? All right. Well, 
thank you very much. After what happened in Massachusetts last 
night, I understand.
    A couple things. First and foremost, when we are talking 
about innovation and especially STEM education, et cetera, but 
are we not dependent on patent protection for our innovators? 
And I can't help but have noticed that the patent legislation 
that was passed by this Congress that is now waiting action 
over in the Senate has been applauded in India and China as 
favoring infringers, especially in the sense that we are trying 
to take out triple damages that have some major companies 
intentionally infringe on a small inventor. We are trying to 
take away that right of having triple damages against that 
company. How do you stand on that particular issue, if you 
could just very quickly?
    Ms. Wince-Smith. I think that protection of intellectual 
property is one of our most critical issues and that we have to 
be very, very vigilant across every sector: I have many 
concerns in that legislation, and indeed the rest of the world, 
is going to continue to use our intellectual property as a 
building block and this requires change.
    Mr. Rohrabacher. And the triple damages, you are not in 
favor of taking that out of the current law?
    Ms. Wince-Smith. My personal opinion is that taking it out 
should be very carefully considered.
    Governor Engler. If you are going down the line, I think we 
have tried to--we think patent reform is useful but there is 
clearly two different philosophies with the tech community on 
one hand and they are going to invent it quickly, use it 
quickly and move on to the new, new thing. Manufacturing--and I 
would include pharmaceuticals and others in there--have much, 
much steeper upfront costs and then need a longer time to 
recover. That is true with a lot of manufacturing processes and 
a lot of--so we are hoping that Congress in its wisdom, and 
this has been a debate that has been raging for too many years, 
perhaps, is going to be able to divine a way to deal with that 
so that we have protections. The other thing we need--------
    Mr. Rohrabacher. Before you go on, because we only have a 
limited time, let me just note, the electronics industry does 
have a different interest in mind but that is against 
intellectual property protection. As you were just stating, 
they want to move on. They want to use something and move it on 
without paying royalties, and they have a different interest 
than other major scientific industries. So are you in favor or 
opposed to the triple damages?
    Governor Engler. We have not supported the effort that 
passed the House hoping that there was a way to find a more 
effective compromise on this.
    Mr. Rohrabacher. Well, specifically about triple damages. 
That is what the House is trying to take out. Our bill tried to 
take that out.
    Governor Engler. I don't--I am not--------
    Mr. Rohrabacher. Uncertain?
    Governor Engler. I want to check on what I have actually 
said before, before I say it again and wrongly.
    Mr. Rohrabacher. Okay. Mr. Donohue?
    Chairman Gordon. That is good advice for all of us.
    Mr. Donohue. Congressman, we have all walked on a tightrope 
on this issue. The pressure over in the Senate on some of the 
industries not to try and cut a deal with other industries has 
been difficult. The bottom line is simple: both groups of 
industries can agree on a series of common interests and then 
they have some specific interests, and we have got to get 
together and put together in this Congress and in this Senate 
and with this White House a system that works because we are 
being disadvantaged around the world and we need to do it, and 
I don't have anything to say about the triple damages because 
then I would put myself in the deal about sooner or later the 
three of us are going to end up in that deal.
    Mr. Rohrabacher. Okay. Well, let us just note again it has 
been applauded, what we passed in favor so that whatever 
interest the electronics industry has had here to win favor by 
them has won applause in China and India while they are just 
waiting to be able to have a great chance to infringe upon our 
innovators. That is not a way to build trust and to build an 
economy.
    Mr. Donohue. That I agree with?
    Mr. Rohrabacher. Triple damages?
    Mr. Donohue. No. I agree that it is not the way to build 
trust and to build our economy. We need a piece of legislation. 
We need to put the common interests and then the individual 
interests into one bill and we need to get it done because we 
are losing without it.
    Governor Engler. And we need to support a Customs and 
Border Patrol that thinks this is part of their job too, which 
they at present do not.
    Chairman Gordon. Thank you, Mr. Rohrabacher. I think you 
got lost on your way to the Judiciary Committee this morning.
    Mr. Rohrabacher. Well, I should note, Mr. Chairman, that 
when we are talking about innovation, it is a lot wider than 
just we need more money here on various bureaucratic research 
projects.
    Chairman Gordon. Mr. Costello is recognized for five 
minutes.
    Mr. Costello. Mr. Chairman, thank you, and thank you and 
Mr. Hall for your leadership on this issue and for calling this 
hearing today.
    A question for each one of our witnesses. We often hear 
that there is a shortage of highly trained American scientists 
and engineers. I wonder what the track record has been from 
your member companies in hiring scientists and engineers over 
the past few years or let us say the past five years.
    Mr. Castellani. We have to divide it between the current 
economic situation and, shall we say, normal times. But indeed, 
there has been a shortage, lack of critical skills. 
Particularly, engineering and scientific skills have been a 
problem that our companies have pointed to regularly. Even now 
at the height of the recession, unemployment among engineers is 
3.9 percent, which would be the envy of any other skill set. So 
it remains a problem, particularly in the future as the 
workforce that has those skills ages and retires.
    Mr. Donohue. Congressman, we will continue to have serious 
shortage of skills because the demand curve is going up faster 
than the supply curve. The suggestions that have been put in 
and implemented in this legislation have started at the bottom, 
bringing people along who will eventually get into that curve. 
We must continue H-1B and related visas, and we have a new 
problem. For years we have brought people to the United States 
to train at our universities from countries around the world 
and then after they became very skilled we were able to talk 
them into staying. We would get them a different visa, they 
would go to work in important companies or universities, and 
now they want to go home because the extraordinary--for 
example, in India, to go home, work for three years for one of 
the big companies over there, maybe even one of our companies, 
and then they all want to start their own business. It is very, 
very hard to keep the people that just a few years ago we were 
able to encourage to stay.
    Governor Engler. I agree with everything Tom said and would 
add to it that the other complicating factor is, it is the 
competition for the best talent. It is like the NBA. It is our 
basketball league but they will take the best players wherever 
they can find them in the world. That is true in science and 
engineering, and if we can't find them here or we can't bring 
them here or we can't keep them here, then they are going to go 
elsewhere, and as Tom testified earlier, 95 percent of the 
markets in other places in the world, it is a rare company 
today that isn't getting 50, 60, 65 percent of their sales from 
foreign sales and so the idea that we will make it all here, we 
will invent it all here and sell it all there is not going to 
hold up and so we are going to have to, I think, recognize what 
are the competitive factors that allow us to make sure we can 
develop our own but then keep the best of theirs if we can.
    Ms. Wince-Smith. I would just add to that, that in addition 
to the science and technology skills, this concept of having an 
engineer that is not a commodity engineer is very important for 
our competitiveness. While we haven't talked about it here, 
ensuring our STEM initiatives should also be coupled in our 
education to make sure that our young people have languages, 
they understand history, the humanities and the arts because 
bringing those things together creates a future worker that is 
going to have the creative capacity in the next stage of 
innovation. And one place that does this, and I am prejudiced 
but I want to share it, is at the U.S. Naval Academy. I think 
it is the only place in the country where no matter what your 
major is, history, Arabic, whatever, you also end up with a 
full engineering degree and that is an incredible set of skills 
for going forward in the 21st century economy.
    Mr. Costello. I thank you.
    Thank you, Mr. Chairman.
    Chairman Gordon. Dr. Ehlers is recognized.
    Mr. Ehlers. Thank you, Mr. Chairman, and thank you so much 
for holding this hearing and I hope we have many more that are 
this good. I thank the panel too for their expertise. But I was 
reflecting here while I was waiting for my turn to speak. Next 
Sunday will mark the 16th year that I have been in this body. I 
am the son of a preacher and I inherited his characteristics so 
I have been preaching to my colleagues, to the country, to the 
world for 16 years precisely the things that you are saying. 
Frankly, having you here and saying these things, I feel as 
Billy Graham did when he had a successful altar call. You are 
really right on target. What is discouraging is that has taken 
16 years to reach this point, and even with the America 
COMPETES Act. I worked on that issue for a number of years. 
Fortunately, it all came together when I managed to convince 
the Bush Administration over with Sherry Boehlert and Frank 
Wolf at a breakfast meeting in the White House that they take 
this on, and the President fortunately was eager to do it and 
the America COMPETES Act resulted with a lot of collaboration. 
But so much of what you said indicates the problem. Governor 
Engler, for example, you mentioned STEM issues, the MEP and so 
forth, and your example of agriculture versus manufacturing is 
a very important one because I have used an example from that 
in all my years of arguing to get more money for MEP, and 
strenuous arguing and lots of time and we just managed to keep 
it stable, and that is absurd. We have had a cooperative 
extensive service in agriculture since about 1860, somewhere in 
there. At that time, 80 percent of the workforce was on the 
farms and so it made sense to have a very strong activity 
there. Today, less than 2 percent is on the farm and we spent 
roughly $400 million a year on the Agriculture Cooperative 
Extension Service. I don't regret that. I think it is valuable. 
But we are spending less than that on the Manufacturing 
Extension Partnership, which is the manufacturing cooperative 
extension service, and I have been unable to bring that up, 
even though I point out less than 2 percent of the workforce is 
in agriculture and 14 to 15 percent of the workforce is in 
manufacturing. Why haven't we changed that ratio yet in terms 
of MEP? And hours and hours of discussion, I convince people 
one by one, but it shouldn't be that hard. And if we have as 
much support from all the manufacturers and their sector and as 
much support from the schools, school boards and faculty as we 
have from the four of you, we would be far, far further ahead 
in solving this problem.
    In the meantime, our country, I am afraid, continues to go 
downhill in manufacturing as evidenced during the time I have 
been here, particularly the last 10 years. You are right on in 
your responses. The chairman and ranking member were right on 
in saying what has to be done. The problem is not in this 
Committee. At one time it was in the Education and Labor 
Committee, and Newt Gingrich, who is one of the most farsighted 
individuals I have worked with in the Congress, deliberately 
stuck me on the Education Committee to try to resolve that 
problem. Again, we made a lot of progress. But somehow you have 
to be engaged and your colleagues, and by that, I mean all of 
manufacturing have to be engaged with the other Members of 
Congress to let them know what is really going on in the world 
and what we have to do if we as a Nation are going to survive 
and continue to be leaders of the world in research, in 
education, in manufacturing, and most people simply don't 
realize that. I come from a manufacturing state. A lot of 
people in Michigan recognize that. But in many parts of the 
country, that is simply not true and so thank you so much for 
being here.
    I don't really have any questions except one extremely 
trivial one for Mr. Castellani, and that is, do you really own 
a roundtable?
    Mr. Castellani. Indeed we do.
    Mr. Ehlers. And is it circular or spherical?
    Mr. Castellani. It is circular.
    Mr. Ehlers. Then it should work. But thank you very much 
for being here and thank you for your testimony.
    Chairman Gordon. Thank you, Dr. Ehlers.
    Mr. Smith, you will have an opportunity to rebut the 
agriculture issues a little bit later, but right now Mr. Wu is 
recognized.
    Mr. Wu. Thank you very much, Mr. Chairman.
    Ms. Wince-Smith, you might be the lead person to address 
this inquiry but perhaps the rest of the panel would be 
interested also. A couple of organizations, I believe the 
Information Technology and Innovation Foundation and Brookings, 
have surfaced the idea of taking a systematic look and work in 
innovation, perhaps setting up a national innovation foundation 
or such organization, not so much to engage in the individual 
innovative ideas process but to look at the process overall, to 
understand it better and then to advocate for it at local 
government, national government and to work with the private 
sector on setting up better conditions for innovation where 
apparently other nations have been focusing on this process, 
and while we have been great innovators in individual ideas, we 
are in the process of developing an overall approach which I 
believe your organization has been working on for some time 
now. Could the panel address whether we can make some gains in 
our capacity to innovate by setting up basically an 
organization to do for innovation what perhaps NIH [National 
institutes of Health] does for the life science enterprise and 
other organizations do for other parts of our technology and 
science enterprises?
    Ms. Wince-Smith. Thank you, Congressman. Well, let me just 
start by saying that as we are hearing today, innovation is an 
ecosystem that involves everything from the R&D, tax, 
regulatory, workforce issues, to manufacturing and national 
security. I think the biggest challenge for the United States 
both in the government and also in the private sector is that 
we don't look at it in the systemic way and we still operate in 
stovepipes. Even in the Federal Government--and I served in the 
Federal Government myself and it is still going--while we have 
committees, we don't really pull together the pieces, so if it 
is an antitrust, a product liability issue, just as one 
example, that stays in the Justice Department, it is not 
brought in at a systemic level, and similarly on trade and 
other matters. And so I think one of the first things, which 
was a recommendation of the Council's and is in America 
COMPETES, in the Federal Government, let us get the White House 
to pull together the Cabinet officers to focus on a systemic 
innovation policy. In the private sector, the council and our 
colleagues around the table, we can all do that together but we 
need to connect the dots, and Brookings and other groups are 
very wise in talking about this. Whether the foundation is the 
optimal mechanism or not. I wouldn't perhaps want to comment as 
much, but we need to do this in the Federal Government and we 
need to have private-sector groups that also come together to 
look at the system of innovation, and that is what our 
competitors are doing.
    Mr. Wu. Thank you very much. Would anyone else like to 
comment?
    Governor Engler. I would add this, that what Deborah Wince-
Smith said about an ecosystem is really important, and I think 
markets are beautiful things. I think they drive the dollars 
where they need to be, but I worry that--take nuclear power, 
for example. That is all our technology and it is being 
implemented around the world. There is a great need for 
reprocessing, waste minimization there. Other countries have 
stepped way ahead because we backed way off. Clearly, I think 
envisioning a low-carbon future, nuclear power has got a big 
role to play but we haven't let that go forward. Medical tools 
and devices, we were talking earlier. I look at that. We are 
clearly the world leaders. In every other nation where there 
might be a department of innovation, they would probably be 
really promoting that, how can we grow that industry? We are 
debating whether or not there should be several hundred million 
dollars in new taxes applied to that as opposed to what the 
export strategy might be to grow our dominance. So I am not 
sure centralizing it is the answer but I do think that the 
right incentives where we want to be, and I think one thing 
that has been done well here is battery technology. Congressman 
Peters knows. Right in his own district there has been 
significant investments there to try to catch up. There are 
some really big things where I think the Federal Government 
through the old DARPA [Defense Advanced Research Projects 
Agency] programs, you know, under defense or much of, you know, 
science programs through universities, those are great, but 
whether we centralize it or not, I would be a skeptic 
preferring maybe the markets to work.
    Mr. Wu. Well, I don't think the concept is a centralizing 
one so much as to try to understand it and promote it 
elsewhere.
    Chairman Gordon. Thank you, Mr. Wu.
    Ms. Biggert is recognized for five minutes.
    Ms. Biggert. Thank you, Mr. Chairman.
    There is so much I want to ask but I don't have time so I 
am going to try get as much in, but thank you all. I have a 
great district and I have a district that really has a lot of 
development, a lot of innovation and creativity and companies 
and a lot of these are startup companies and they will come in 
and say they have this great concept. They maybe have a 
demonstration program but they need help and they need help in 
funding, and particularly in this economy where there isn't the 
venture capital available and so they come in and say what can 
you do. Well, they are in what we call the valley of death. 
They are in between demonstration and commercialization so 
investors don't want to take a chance, that is this really 
going to go or not. Is there anything--you know, we talk about 
the America COMPETES, ARPA-E is a possibility. We have got a 
couple of them we have sent to DOE and actually DARPA has been 
available for them. Is there anything that you could recommend 
that should go into the America COMPETES Act that would help as 
far as that investment or what to do within the private sector? 
We are missing so many, you know, really great concepts that 
take so long to develop that we could be using right now.
    Ms. Wince-Smith. I would just add one that is very 
important, and some states are doing this, and I don't know if 
it is across the board yet in the Federal Government, but that 
is, extending the Small Business Innovation Research [SBIR] 
provisions beyond stage two into stage three that takes a 
company farther in to the commercial prototype demonstration 
phase. I remember years ago when the Japanese were investing in 
our startups. They used to say let us look for those companies 
that have SBIR phase one and two because they don't have the 
capital to go to the next phase, we will come in and swoop up 
that innovation. Let us invest farther along on SBIR, and that 
is something that the federal agencies could contribute to.
    Mr. Donohue. You know, that is exactly how private equity 
people look at sound investments. You are exactly right. This 
is a valley where it is hard to get capital and funding and 
there are all sorts of people with great ideas. One caution I 
would make to the Members of Congress, while it looks like a 
wonderful idea to go out in need of money and drive up the 
taxes on individuals, that is where the greatest amount of 
investment capital comes for startups. You know, if you go talk 
to people that are entrepreneurs and say ``how did you get 
started?'' they didn't do it in a bank. The banks lend money to 
people that have money. That is the way the structure is. So we 
have got to be very careful that we keep individuals in a 
position to support innovation and to support folks they know, 
and then of course, the second place for money is from larger 
companies who find this as a great place for their own research 
and development and it is often cheaper for them to buy it than 
it is for them to develop it.
    Mr. Castellani. One of the things the Chairman mentioned 
before the hearing began is something that I think this 
Committee can look at and certainly is within the purview of 
this Committee, other things are outside, obviously the tax 
code and some other support programs, but one of the 
difficulties that we see in this area is making the connection 
between those who develop the technologies and those who could 
see an application for those technologies, and finding a way to 
protect the intellectual property but get more information out 
more broadly to both potential users and investors about what 
technologies and their attributes might be available, what 
their time horizons are, what it would cost, what their 
advantages are, is something more of a national exchange 
opportunity and something that would benefit those companies.
    Governor Engler. I would just add a couple quick things. I 
mean, that is what the R&D credit in part was for, and probably 
this is where your capital gains treatment and some type of 
accelerated write-offs so you can encourage investor pools. 
There is private capital out there. I think we need to try to 
make this more attractive. Again, I am not sure that I would 
trust an agency to do the selecting there. States will do it if 
they view it as critical sometimes to existing but those are 
very limited funds and so I--it is 11:30, Mr. Chairman. I need 
to step out and make a quick call. I will come back and rejoin 
if you are still in session. I don't know long it will be.
    Chairman Gordon. Thank you, Ms. Biggert. I will point out 
that the old ATP [Advanced Technology Program] program was a 
vehicle for that and that has been changed now and it is called 
the TIP [Technology Innovation Program] program, and it will be 
a part of this authorization.
    Another thing that we mentioned earlier about how there 
will be a fair around the ARPA-E-type proposals. The problem 
with bringing private-sector dollars in, and we are really 
looking at that, is obviously they want to come at different 
levels, venture capital at one place, private equity another 
place, but that is--we will have some hearings on that, how we 
bring more private-sector dollars in.
    Mr. Peters, you are recognized for five minutes.
    Mr. Peters. Thank you, Mr. Chairman. It is too bad Governor 
Engler had to step out because I actually had a couple of 
questions related to MEP. Bad timing there, but we will have an 
opportunity to follow up.
    I just want to concur with my colleague, Congressman 
Ehlers, on the Manufacturing Extension Partnership and how 
important that is, and for the panelists, we have actually 
introduced some legislation together, both Congressman Ehlers 
and myself, dealing with the funding issues related to MEP. As 
you know, the states have been stressed, particularly our State 
of Michigan. It is a critical program for us in that State to 
help our small manufacturers as we continue to hemorrhage 
manufacturing jobs, and the bill changes some of the 
contributions. Right now two-thirds of the contribution for MEP 
comes from states and yet those states that are hit the very 
hardest and need the services of the MEP are having difficulty 
coming up with those matching funds. It would change that to a 
50/50 match, which would allow these critical programs to 
continue and certainly hope that your organizations would be 
supportive of that effort and are supportive of MEP. I assume 
in addition to Governor Engler, all three of you are also very 
supportive of MEP? All are nodding, so for the record, please 
reflect that all three are nodding in strong support for the 
program and will continue to move.
    Chairman Gordon. And Mr. Peters, we will be reauthorizing 
MEP in the COMPETES bill.
    Mr. Peters. Right.
    Chairman Gordon. And we will be having hearings to see how 
it can be fine-tuned for what we might call the 21st century in 
contrast to when it was originally authorized.
    Mr. Peters. Great. Thank you, Mr. Chairman.
    I want to ask a little broader question of all three there, 
and we have had some discussions, and Ms. Wince-Smith has 
addressed this as well, but kind of get your reaction to R&D 
investments generally and whether or not government investments 
in research and development are going to have the same kind of 
impact that we have seen in the past. Certainly as we are 
talking about globalization, technology transfer is extremely 
rapid, and as soon as technology is developed in one place in 
innovation, it is quickly picked up somewhere else in the world 
due to other cost structures that exist--labor, technology, 
regulations, things that you have brought up. How should we be 
thinking as COMPETES Act, how effective will this be given that 
kind of rapid transfer and do we need to be really talking 
about manufacturing policy in total in addition to COMPETES 
because we are simply not going to get the same kind of bang 
for our dollar as we have done in the past. What should we be 
thinking about?
    Ms. Wince-Smith. I think, Congressman, you just stated in 
your last comment very much we have to think of a national 
manufacturing strategy that encompasses all the things in 
COMPETES but also takes us into some of these other spheres 
that relate to capital cost structures, regulatory environment, 
exports and trade and look at that as something that is 
systemic. But in terms of R&D, we must invest in R&D, we must 
invest in the frontiers and we must link the private sector to 
these tremendous investments in the frontiers of knowledge.
    Mr. Donohue. I believe that government gets a significant 
return on the frontier investments. I mean, going to the moon, 
running the space shuttle, very forward-thinking activities at 
NIH, those kinds of investments are fundamental.
    The second thing that I would comment briefly on, you are 
exactly right that as soon as we come up with an innovation, 
everybody all over the world is trying to figure out a way if 
not to borrow it, to use it as a leader for their own 
innovation. But Americans are beginning to be able to look 
around the world now and find things as well that they are able 
to inculcate into their businesses and their processes.
    The third point I would make while we are talking about 
manufacturing, the often overlooked competitive issues here are 
supply chain, are transportation, are all of the technology and 
software around that. The greatest increase--one of the great 
increases in productivity in this country came during the 
Clinton Administration when we put together information 
technology and supply chain management, and it is one of the 
things that keeps us somewhat competitive in the manufacturing 
area, even though as the governor indicated, we have serious 
disadvantages in tax policy and regulatory policy. You know, 
competition drives innovation. Regulation stifles innovation. 
Now, we need regulation for safety and all of that but we have 
to be very, very careful when we are looking at competing 
around the world that, you know, it is always a great idea to 
start a new group, but let us go back and look at what we do to 
help the process or to hurt the process, and you can change a 
lot of things by simply getting rid of the hurt and maximizing 
the help.
    Mr. Castellani. Two quick comments. One, focusing on those 
technologies that are broadly applicable within the economy is 
key. That way you don't have to pick winners and losers, 
although the normal process of development will produce more 
losers than winners. Secondly, as important as the 
manufacturing sector is, and it is very important as high-
value-added activity, these technologies and these activities 
also have beneficial impact within the services sector, within 
the transportation sector, within the hospitality sector. Tom 
mentioned one that has been the single biggest driver of 
productivity improvement in this country over the last 10 
years, and that has been information technology.
    Chairman Gordon. Thank you, and Mr. McCaul is recognized 
for five minutes.
    Mr. McCaul. Thank you, Mr. Chairman. I, as you know, 
supported this, the COMPETES Act. It was really a response to 
the ``Rising Above the Gathering Storm'' report, which was a 
bit of an eye opener, and I support the idea of federal 
investments in R&D and public-private partnerships with 
universities. Certainly NASA, close to my district, has been a 
beneficiary of this. NIH has done a fantastic job. But I want 
to follow up on Mr. Donohue's comments.
    You know, the President signed a stimulus bill into law. It 
is about 5.4 percent of our GDP. Unemployment has gone up over 
10 percent. The federal debt is above $12 trillion. And there 
comes a point where we get overleveraged in the Federal 
Government. Any private-sector business that overleveraged 
wouldn't be able to stay in business. And I think there is a 
healthy balance between the federal investment of dollars and 
public-private partnerships versus what we can do at the 
federal level to incentivize the private sector, and I think 
that is the philosophical debate we are having in the Congress 
right now. And so in terms of job creation, because both sides, 
we want the same thing, both Democratic and Republican. We want 
the economy to rebound. We want to create more jobs and good 
jobs in the United States and so with all of your experience in 
the private sector in the business world and for the panel as 
well, I would be interested in your take on this balance, if 
you will, that we have to provide up here in the Congress.
    Mr. Donohue. Congressman, if I might just comment a minute 
about this. There is no question that the federal deficit is a 
serious matter, growing and compounded in a significant way, a 
lot of it being driven by programs that are entitlements that 
just grow themselves and these are serious matters. It is not a 
Democrat or Republican issue. So everybody says we ought to 
deal with that but trying to deal with that issue without first 
dealing with the questions of employment, as you indicated, is 
counterproductive because you are just going to keep driving up 
federal support programs. So our issue here is to say here is a 
plan to create jobs. Hopefully as we go forward, we will be 
careful not to be adding unnecessary federal spending, and as 
the economy grows we are going to be in a much better shape to 
attack this deficit. You ask a fundamental question: when can 
the government--when should the government stop investing in 
significant ways and hope the private sector will take a larger 
role. And I think if you look at the suggestions of expanding 
trade, expanding infrastructure, being very, very careful on 
our re-regulation of the capital markets that we could move 
efficiently in that direction. There is one crippling issue 
keeping us from creating more private-sector jobs: it is 
uncertainty, uncertainty about what tax policy is what going to 
be, uncertainty about health care policy, uncertainty about 
climate policy, and if I walked into John's office when he was 
back in the private sector and said let us create 500 new jobs, 
he would throw me out because he would say I am uncertain about 
this, I am uncertain about that; until I get some amount of 
certainty, I am going to keep my cash in my jeans and I am 
going to hold off.
    Mr. McCaul. I couldn't agree with you more. I think the 
uncertainty here in Washington with a lot of the policies 
coming out is that uncertainly is keeping a lot of capital on 
the sidelines and not investing in the private sector. Any of 
the other two witnesses like to comment?
    Mr. Castellani. One of the things--I mean, certainly I 
agree with what Tom said, although I never wore jeans to the 
office. The uncertainty is certainly a big part of it. 
Obviously there is a role for the government. The government 
needs to do those things that the private sector cannot do, and 
a lot of what is in the America COMPETES Act are things that 
the private sector cannot do without government help. But one 
of the things that we face day in and day out in terms of 
making decisions on where to invest and in what to invest is 
the needs of our shareholders, and that is, getting them a fair 
return for the money that they have given us to be stewards of. 
The United States is suffering from what we all recognize, and 
that is that we have the second highest corporate tax rate in 
the industrialized world. That has an effect. We have a tax 
structure that disincentivizes exports and participation in an 
international marketplace where 95 percent of the world lives. 
That has an effect. We have a start and stop incentive system 
for research and development where other countries in the world 
do not have it. That has an effect. All of those things have an 
effect on where the capital goes. Our shareholders are not 
nationalistic. They want a return for their investment. Our 
obligation is to give them that return and so addressing those 
fundamental issues is as fundamental to being able to be 
competitive as what you are talking about in the America 
COMPETES Act.
    Chairman Gordon. Thank you, Mr. McCaul.
    Mr. Donohue. And John, you would say you have global 
shareholders.
    Mr. Castellani. Absolutely.
    Chairman Gordon. And thank you, Mr. McCaul.
    With no objection, we are going to move forward with those 
Members that haven't had a first question. If there is a 
request for a second question, later we will do that. I am also 
going to request that Members try to hold their questions to 
about three minutes so that we can try to get through everyone, 
and that will encourage you to get here earlier next time.
    Mr. Matheson, you are recognized.
    Mr. Matheson. Thank you, Mr. Chairman.
    You know, one of the issues that is interesting is, we look 
at the government role in promoting research and development of 
new technologies, and after that we want to figure out a way to 
transfer those technologies so the private sector runs with it. 
And there has been a lot of talk about technology transfer for 
decades in this town, and over 30 years ago we had Bayh-Dole 
and Stevenson-Wilder, for example, that tried to pursue this 
goal. I am curious what your assessment is of how our 
technology transfer regimen that we have got today works in 
terms of getting these technologies out to the private sector 
and how it actually manifests itself and what the ultimate goal 
is we are trying to achieve, which is not just doing research 
here but actually creating jobs in America.
    Ms. Wince-Smith. I will comment on that. Certainly, you 
know, with the creation of Bayh-Dole and the whole legislative 
framework, we again led the world in these new public-private 
partnerships to capitalize on the R&D invested by the taxpayer. 
Intellectual property issues have become a challenge in that 
rather than making the intellectual property a baseline for 
establishing these partnerships, they often become the hurdle 
and slows up the process, and that is something that across the 
board I think the community would say is an issue.
    The other challenge we are seeing in different parts of the 
country with our national labs and universities is how they 
bring companies and partners in from the beginning to work with 
them, as opposed to waiting until you throw something over the 
fence which has emerged as the best practice to create the 
strategic R&D partnerships such as ARPA-E is going to do as 
opposed to treating this as a linear sequential process. 
Certainly, U.S. companies and chief technology officers in the 
Council on Competitiveness are very committed to working on 
this very topic, and we have formed a working group under our 
Technology Leadership and Strategy Initiative to address that, 
and would like to report back to this Committee on our 
findings.
    Mr. Donohue. I just have one very quick comment. There 
isn't a bright line between the government and the private 
sector. When a government agency whether it is NASA or it is 
the military or whoever it happens to be, NIH, standards, 
bureaus, others, when they are doing the work that is being 
pushed by the money that is used in the government, they are 
doing it in partnership with the private sector. They are 
already transferring technology and know-how by the people they 
contract with to get this work. The perfect world wouldn't have 
the obstructions we have but in the perfect would we wouldn't 
have so many lawyers, except in the Congress.
    Chairman Gordon. Thank you, Mr. Matheson.
    Now we have a real live small-business owner, Ms. 
Dahlkemper.
    Ms. Dahlkemper. Thank you very much, Mr. Chairman. I was 
hoping to have Governor Engler here. I appreciate his 
mentioning my cosponsorship of the AMERICA Works bill, which I 
think is a great piece of legislation. In his testimony, he 
mentioned the need to ensure that STEM education spurs the 
interest of students in manufacturing careers, so I guess I 
just want to ask the three of you, because I agree with this, 
but how do we build that bridge between the STEM classroom to a 
career choice in manufacturing and innovation, some concrete 
ways if you could give us some suggestions how we can make that 
environment.
    Mr. Castellani. One of the things that we have found that 
has worked very well is where there is real-world examples on 
how those disciplines can be applied to something that is 
exciting. You want to capture the imagination of a young person 
in college. That is how I ended up going into the sciences. I 
got psyched by looking at some of the research that was being 
done down the road in Schenectady, New York, and that got me 
very excited about it. It is role models. I mean, clearly young 
people want to see people who are successful in those fields. 
They want to see things that are exciting in those fields. Some 
of the best programs that have worked is where promising 
students at the high school level are mentored, are given 
internships in research labs, in manufacturing facilities, in 
businesses so they get excited about it and they see people 
like them, which is one of the most difficult things that we 
face in what has been unfortunately male-dominated disciplines. 
We need young ladies to see women who are successful in the 
STEM disciplines. We need minorities to see minorities that are 
successful in the STEM disciplines and are excited about it. 
Those programs tend to work best where they have a real-life 
example of something that is cool, quite frankly.
    Ms. Dahlkemper. Do you think we need to do more on the high 
school level? Because I wonder, you know, how many of our------
------
    Mr. Castellani. Absolutely. If you don't capture them at 
the high school level--you know, there is an institute, the 
Committee for Excellence in Education, that looks at the other 
end of the spectrum, which takes the brightest high school 
students and does everything you can to encourage them to be in 
the STEM disciplines, and what they found that worked best is 
getting them associated with a lab, with a research facility, 
with a manufacturer, with a business, with scientists, with 
engineers in high school so that they are excited about that as 
something to pursue.
    Ms. Dahlkemper. Mr. Donohue?
    Mr. Donohue. You know, this is also a cultural issue. After 
the second World War and the Korean War, there was this 
tremendous, you know, Sputnik and then go to the moon and there 
was this massive effort for people to go into engineering. It 
was the way to a better life and to a great job. Well, we have 
matured. I will use that world. And now it is hard in high 
schools, in many high schools to convince people they ought to 
put all their time and energy into the most complicated 
subjects. It has--for a while it was hard to have people see a 
great career there but there is a resurgence of demand and of 
need. The computer, the tech revolution got that started. 
People saw that as a way. I think demand and need have a great 
deal to do to show people where they can do well and where they 
can do things that they can achieve, not only on a personal 
basis but a financial basis and there needs to be some of that 
cultural goings-on. That is what John was talking about. What 
happened to him, he was in college. He went down the street----
--------
    Mr. Castellani. Actually high school.
    Mr. Donohue. Well, in high school. Good. He went down the 
street and he got motivated, and he wasn't only motivated 
because of what he saw, he was motivated because of what people 
convinced him he could do. I think there is a soft-goods part 
of this that is as essential as the actual teaching--------
    Ms. Dahlkemper. My time is almost up. Is there a connection 
with business in this?
    Mr. Castellani. Absolutely.
    Mr. Donohue. Of course.
    Ms. Dahlkemper. And Ms. Wince-Smith, I will give you my 
last two seconds here.
    Ms. Wince-Smith. Well, just building on my colleagues, the 
Japanese used to say manufacturing is not dirty, dumb, 
dangerous and disappearing, but that is what we think in our 
country in many cases, and I like your idea of bringing this to 
high schools and providing opportunities for young people to 
actually go into manufacturing operations because the modern 
ones are extremely high-tech and exciting. I mean, how many 
have been in a clean room, for instance? And that is something 
we could all do in our communities and it is something that 
would have a big cultural shift.
    Ms. Dahlkemper. Thank you very much.
    Chairman Gordon. Thank you, Ms. Dahlkemper.
    Governor Garamendi, you are recognized for three minutes.
    Mr. Garamendi. I thank you very much, Mr. Chairman, and to 
this Committee, it is a great pleasure to be here and 
particularly to be listening to this particular discussion, the 
COMPETES Act and the work that it has done and the good that it 
has done.
    My question really goes to the preparation of these skills, 
and I am going to go back to California issues and ask the 
witnesses a specific question, but first let me set the stage 
here. California universities, the state universities of 
California, are in serious financial trouble as are many of the 
universities across the Nation, particularly the public 
universities. In California last year and this year, 40,000 
students are not able to enter for lack of money to fund the 
universities. So my question to you is, what can be done about 
that? All of the talk is good but if there is no money, there 
is no action, and are your organizations willing to have the 
tax increases necessarily? Specifically, University of 
California is short $1 billion. The state university is short 
$1 billion. That is two-tenths, together two-tenths of one 
percent of the state's economy to find that $2 billion. What is 
your view on raising taxes to fund higher education?
    Mr. Donohue. I got the short straw. Just three quick 
things. Number one, yes, there are those serious problems in 
California as well as in other states, and what we are seeing, 
and I was going to make the point before when we were talking 
about the community colleges, more and more people--and this is 
another pressure on the community colleges--are going to the 
community colleges for the first two years and families find 
that they can afford that and then might be able along with 
some federal and state help to get into the universities for 
the last two years. Now, this creates a problem for the 
universities because, you know, they sort of make money on the 
first couple of years where they don't make it on the back 
years. To the question, would we increase taxes, my view is, 
first of all, California has a hell of a lot of problems that 
haven't got anything to do with the education system.
    Mr. Garamendi. No, in fact, they do because more than half 
the budget is education.
    Mr. Donohue. Well, that is--I am thinking about the college 
education system. I would agree with you because when you teach 
in the California system and you can retire at 51 years of age 
at half pay and full medical, whatever the exact numerics are, 
you have got real serious issues. My deal is, you know, I 
always thought the issue by saying what don't we have to spend 
and then how do we get additional revenue and how does that 
come, some of it should be from the students, some of it should 
be from the community, some of it from contributions because 
there are major efforts there, and then if you are down to 
taxes, that is up to the community. Would I support them? Wait 
until they are proposed. Now, I mean, look, our deal is 
everybody, everybody has got a new tax. The President has a 
whole set of new taxes. All the states have new taxes. All the 
states, particularly the big states are coming to the Federal 
Government for money. If you buy everybody's proposal on a tax, 
we are going to be in serious problems. We need to look at it 
in totality. We need to do what we need to make this country 
work. But by the way, we can spend money like nobody you ever 
saw.
    Chairman Gordon. Does any other witness want to address 
that quickly?
    Mr. Castellani. Just very quickly. I mean, business has 
always been willing to invest in things that pay off but before 
that investment comes, we have to make sure that we are 
operating efficiently, and even in the higher education system 
there are opportunities to overhaul the delivery system through 
greater use of technology. You know, I have the honor of 
serving on the board of trustees in my alma mater in 
Schenectady, Mr. Tonko, and the inefficiencies that we apply in 
the higher education structure, to be very blunt about it, 
would be unsustainable in the private sector. So we need to do 
a better job of doing that. Then if that is done and we need to 
invest more, then, yes, we always support those investments if 
they will pay off.
    Chairman Gordon. I think it is appropriate now that we go 
to a professor, a university professor, Dr. Lipinski.
    Mr. Lipinski. Thank you, Chairman Gordon. Yes, I was a 
professor of political science but before that I was an 
engineer, so Mr. Donohue, I would say yes, we do need to have 
fewer lawyers in Congress and probably some more scientists and 
engineers. One thing I agree with you, Mr. Donohue, is on the 
multi-year highway funding bill. Definitely, we need to do 
that.
    So I think the one thing, since we have limited time here, 
I want to focus on is sort of playing off of what Mrs. 
Dahlkemper had said earlier talking about what business can do 
in partnering, in helping out with STEM education. In my 
subcommittee, Research and Science Education, we have had a 
couple of hearings on informal science education, and I think 
this is an area where it is important also for businesses to 
get involved. We saw some of the best informal education taking 
place where business would get together, say, with a science 
museum or many other ways that they can get together with other 
organizations to promote informal science education. As you 
probably know, a couple weeks ago President Obama announced the 
Educate to Innovate campaign, which highlighted over $250 
million in private-sector STEM education partnerships. These 
involve universities, large corporations, foundations and 
nonprofits and government agencies. Now, is there anything more 
that you think the Federal Government should be doing to be an 
effective collaborator in these partnerships or to better 
support private-sector STEM education initiatives, especially 
in informal education? Whoever wants to start out here.
    Ms. Wince-Smith. One innovative model that is emerging is 
that many companies are creating summer STEM camps in their 
regions and cities to bring in 7th, 8th graders, women and 
minorities across the board to be exposed to math and science 
through project-based learning, and, you know, just as 
companies often sponsor a school, doing these STEM summer camps 
or something, that is a really exciting private-sector 
initiative across the country.
    Mr. Lipinski. And how can government in general--as we move 
on here, how can government be involved in this? Mr. 
Castellani, Mr. Donohue, do you have any--------
    Mr. Castellani. Well, one of the things that I think 
government ought to consider because it does a lot of this good 
work also, whether it be at NASA or the national labs is doing 
the kinds of things that are being pioneered in the private 
sector. Deborah mentioned a STEM camp but also highlighting the 
technology. I think Tom mentioned earlier and it was one of the 
reasons I went into the sciences, I mean in the 1950s and the 
1960s--I am giving away my age, 50s--the excitement of the 
Space Race was what stimulated a lot of people. A lot of what 
is done in government, particularly in the science areas, not 
just within the Department of Defense but outside of it, NIH, 
NASA, the national labs, is something that should be looked at 
as being like what the private sector does, a stimulation, 
excitement, a point of excitement to get young people 
interested in, highlight it more, participate more in it.
    Chairman Gordon. Thank you, Dr. Lipinski.
    I don't want to take time now, but many of those things you 
are advocating are in this bill, whether it be through the 
national labs, in a variety of different ways, and so--but we 
want to continue to do better.
    Now Mr. Lujan, you are recognized for three minutes.
    Mr. Lujan. Thank you, Mr. Chairman, and I really appreciate 
you bringing this hearing, Mr. Chairman, because as we talk 
about moving forward and spurring economic opportunity and 
realizing where we have fallen further and further behind in 
this country, the lack of our ability to get more students in 
engineering fields and science fields, the creativity, the 
innovation, the problem solvers that are going to be key to 
moving us ahead and keeping us ahead are all important policy 
decisions we have to make and I certainly hope that as we 
embark upon education reform later on this year that we have an 
emphasis in creativity, making sure that we are educating 
problem solvers and that we have a structure that looks like 
that.
    Now, with that being said, with the commitment that it 
sounds like we all have with creating a systemic innovation 
policy and moving forward along those lines, and looking to 
investments that we have made, national treasures in our 
national laboratories--I come from a state and a district that 
has one. We have two NNSA [National Nuclear Security 
Administration] laboratories in New Mexico, Sandia National 
Labs, Los Alamos National Labs. We have Whit Sands with NASA 
down in southern New Mexico. And to truly see how we can bridge 
those opportunities with tech transfer, making sure that we are 
bringing our universities in and we are looking to our national 
laboratories to create those public-private collaboratives and 
partnerships, the investment that is required for the R&D to 
allow for that modeling, to allow for the simulation to get 
into the hands of the private sector all sound like things that 
we agree upon. It sounds like we have support from all business 
entities, from those of you that are responsible for making 
sure that we are sometimes representing interests that 
sometimes compete with one another. But this is certainly an 
issue that we all can agree upon.
    And just to hear quickly from you, from a tech transfer 
perspective with the problems that you hear from companies that 
are working with laboratories to get the modeling and 
simulation in their hands, ideas that you may have on what we 
can do eliminate some of those barriers, bring that forward and 
build upon that, and Mr. Chairman, I know we are out of time so 
I would like to also make these questions for the record, and 
also to hear your thoughts--New Mexico with Los Alamos National 
Laboratories, a program has been created where our scientists, 
engineers and researchers are working with local school 
districts and teachers, teaching teachers, if you will, 
bringing them in and then getting those programs back into the 
school districts. The school districts that have been 
beneficiaries of these programs have seen their math scores 
increase dramatically through the roof, again, teaching kids 
how to be problem solvers, and I certainly hope, Mr. Chairman, 
that as we build upon all that COMPETES has to offer, which it 
is in there, that we look to see how we can incorporate these 
other ideas and programs that are working and make the 
investments necessary and truly see the partnership that can 
come from the government, from the public sector and working 
collaboratively with our private sector and with our education 
system to get us moving ahead. Thank you, Mr. Chairman.
    Chairman Gordon. Thank you, Mr. Lujan. You know, really the 
basis of much of the COMPETES Act was not trying to create new 
programs but rather it was to look at the National Science 
Foundation and elsewhere, what are the programs that are 
working and scale those out, so that really was the foundation 
of this.
    Mr. Tonko is recognized for three minutes.
    Mr. Tonko. Thank you, Mr. Chair. First, let me thank John 
Castellani for a couple of shout-outs for Schenectady, New 
York. I know we appreciate that, and I appreciate the panel and 
their input today.
    Let me frame my question first with a couple of comments I 
heard a couple times over from the panel: uncertainty. I 
couldn't agree with you more. The certainty is a major factor, 
but the certainty of an American clean energy opportunity here 
in this House was passed and we are still fighting the science 
of having to have a clean energy economy. I don't know how we 
resolve that. And then also when you speak, Mr. Donohue, about 
the global space race, we have a global race that we are 
supposed to be entering now because if we don't, we are going 
to be letting down generations of American workers. We are 
still struggling with that issue here. I don't know what it 
takes. Maybe more engineers in the process. My question is 
about the role of the clean energy economy. Do you see that 
bearing great relevance? Is it growing more important as a 
sector of our economy? And will government funds be required, 
at least in the short term, to advance that effort?
    Mr. Donohue. Two points about the clean energy economy. 
First of all, there are great opportunities there to create 
jobs through advanced science and to engage people in the 
process, a significant expansion of the clean coal efforts that 
people are engaged in on a scientific basis and carbon capture, 
the issues of nuclear power whereas Governor Engler indicated 
we have let a lot of that capacity go elsewhere. We now have 26 
potential sites there. We can get a lot of money for that. It 
won't have to come from the government, a little backstop, but 
you are going to have to assure that after I build it, I can 
open it and not be stopped by 30 environmental lawsuits because 
otherwise you are not going to get any money to do that. There 
are all sorts of issues in a green economy that will create 
jobs.
    There is one other thing to understand, though. if I buy a 
green refrigerator, I am not going to buy the other 
refrigerator I was going to buy, so there is some activities 
that are significant increases in economic activity, some that 
are substitutes, and one also has to understand that much of 
the green economy to date has depended on a good deal of 
federal subsidies or incentives, particularly in alternate 
fuels and so on. We are going to have to work our way through 
this, and it is a long way from start to finish. There are 
clear benefits if we can rally around it. At the same time, we 
have to be careful. One of the major issues with the bill that 
came out of the House, it starts a global trade war, you know, 
by saying that all we have to do is decide we don't like this 
country or that country's environmental position and we can put 
taxes on the products they sell in the United States. We need 
to take a broader look at these issues. We want a domestic bill 
and we want a global bill but we want one that keeps people 
working, that uses technology that we have a lot of engagement 
in, and that is global in nature. We have got to get people 
around the world involved. If we don't, we're not taking 
advantage of it.
    Chairman Gordon. Mr. Castellani, do you want to briefly 
comment?
    Mr. Castellani. Yes. In my written testimony, and I am 
sorry I didn't have time to bring it in the oral testimony, 
last year we convened a large number of our CEOs to address the 
issue of what do we do about global climate change, and they 
divided themselves up into technology sectors and pathways, and 
our report, the Balancing Act: Climate Change, Energy Security 
and the U.S. economy, highlights exactly what you are talking 
about, and that is, irrespective of your position on the regime 
that is going to be necessary, any regime is going to require 
substantial investment in technologies, and if we do it smart 
and we do the whole array of technologies, we can minimize the 
impact on the economy. So it is absolutely vital to the United 
States, to this country and to the world for two reasons, the 
two very important reasons. One, is to have the energy to 
continue to drive our economy. The other, is to be responsible 
in alleviating global climate change and global warning.
    Mr. Tonko. And perhaps even drive our own energy security.
    Chairman Gordon. And if you have something compelling to 
say, Ms. Smith?
    Ms. Wince-Smith. I would just say that the clean energy 
revolution, in addition to energy security and climate, is 
going to drive how things are made, and that is a tremendous 
opportunity that needs to be embedded in our manufacturing 
initiative.
    Chairman Gordon. Mr. Carnahan, thank you for your patience, 
and you are recognized for three minutes.
    Mr. Carnahan. Thank you, Mr. Chairman.
    I thank the panel for being a part of this great national 
conversation to move us forward. I am from St. Louis and we 
have got a great science infrastructure there from great 
companies, great institutions of higher education, and we have 
seen kind of a tale of two different industries there in terms 
of innovation. Aviation industry based there has been right on 
the cutting edge of innovation. Not only do they produce great 
products for our country but also opened up a lot of markets 
overseas whereas the auto industry, we have seen the auto 
industry to be slow to innovate. I think they are coming around 
but they have been slow and lost a lot of markets overseas. So 
we also have seen really a disconnect between those great 
companies and institutions of higher education with some of our 
K-12 education has not been producing, you know, that new 
generation, hasn't been capturing them early enough and our 
companies are beginning to see that connection, and many are 
partnering. So really I am pleased to see some efforts there in 
terms of partnering companies directly with our schools. But I 
really think, you know, we have seen innovation, you know, the 
estimates are about half the economic growth in our country 
from World War II to present was from innovation in new 
technology. I think we have got to get back to these basics of 
making things again, and making things that matter, new 
innovative products that attract people that want to be 
involved, that can grow jobs here at home but also grow markets 
around the world, and I think it is certainly key in the energy 
sector, and also keeping that talent pool here and attracting 
the best talent from all over the world. I appreciate what you 
said earlier about that.
    One of the ideas that has been put out by Craig Nassey with 
NIST, he has advocated for establishment of a coordinated 
national innovation policy infrastructure, that he has said the 
United States is the only major industrialized nation without 
an institutionalized science, technology, innovation and 
diffusion policy development and management infrastructure and 
that such concepts as a national innovation foundation that 
have been jointly proposed by Brookings and the ITIF 
[Information Technology and Innovation Foundation] have not 
received enough attention in terms of our policy development. I 
guess I wanted to ask the panel, how do you see that kind of a 
coordinated national effort really going forward from here?
    Ms. Wince-Smith. I would just reiterate, Congressman, that 
the White House needs to take--------
    Chairman Gordon. Your microphone.
    Ms. Wince-Smith. Excuse me. The White House should take the 
leadership to do this; take cross-agency coordination for a 
national innovation strategy, and I think they are making 
progress, and the private sector and the groups at the table 
today; we all work very closely and look forward to working on 
that issue.
    Mr. Carnahan. Thank you.
    Mr. Donohue. Coordination is essential to maximizing 
investment and competition is absolutely essential to creating 
the products that make us a leader around the world, and 
coordination and competition occasionally bump into each other.
    Mr. Carnahan. Very diplomatically said.
    Mr. Castellani. Just like we had in this country for a long 
time looked at the comprehensive environmental impact of 
everything that we do from a policy standpoint, it is vitally 
important to look at the impact on economic activity on the 
different policy initiatives that we bring on the innovation 
process and our ability to compete and to win, quite frankly, 
so that is a very important concept.
    Chairman Gordon. Thank you, Mr. Carnahan.
    Mr. Carnahan. Thank you.
    Chairman Gordon. Mr. Rohrabacher, do you have some 
concluding wisdom for us?
    Mr. Rohrabacher. Well, thank you very much, Mr. Chairman. I 
want to thank you for your leadership in holding this hearing 
and I want to thank the witnesses. This has been a very 
valuable exchange of ideas. Just for the record, I am going to 
throw out some things that weren't covered just so people can 
know that that was part of the discussion, even though it is 
right here at the end. My belief is that policies that lower 
the compensation for those people, especially young people, who 
go into the sciences, technology and engineering eventually 
work against us by discouraging high-quality people from 
getting into these areas, so I imagine you would all agree with 
that.
    Let me just throw out for the record, Mr. Chairman, H1B 
visas bring down wages. H1B visas, I have had people in my 
district come to me and give lots of examples where businessmen 
are telling them to take a lower wage because they can get some 
H1B visa person from India to do the job. This is not good for 
encouraging more young people and other people to get into the 
professions of engineering. We need to drive up the wages for 
people who are engineers and scientists rather than bring them 
down, and one of the most effective is, we talked about 
education, but again, let us bring the wages up of people who 
are involved in this. There is never a mention in education of 
paying teachers who teach math and science more money than 
people who teach poetry and physical education, and that would 
have a tremendous impact on our students by bringing higher-
quality teachers because you are paying them more money. More 
pay will get you higher quality and better people involved.
    And last, when we are talking about graduate students in 
our universities, let us just remember, when we see that 55 
percent of our graduate students in these high-tech area are 
foreigners, that this too is damaging to our country. The fact 
is, we should be focusing on educating our own young people and 
filling those slots rather than going to foreigners who by the 
way subsidize their young people. They come over, they learn a 
great deal about important scientific endeavors and then they 
go back and they use that knowledge against us in their own 
countries, and that is not good.
    And one last issue, technology transfer. Any technology 
transfer, any controls that we have, if loosen those and it 
results in technology going overseas that will eventually be 
used to helping their manufacturing to compete with ours is 
working against our interest and especially it works against us 
if it puts us in jeopardy and endangers our national security.
    Those are just a few thoughts and I thought I would throw 
them out here at the end of the hearing. My time is up. Thank 
you.
    Chairman Gordon. Thank you, Mr. Rohrabacher. This is a 
great country, isn't it?
    Dr. Ehlers, you can close us out.
    Mr. Ehlers. Thank you very much, and thank you, Mr. 
Chairman, for holding this hearing and especially for putting 
together such a super panel. I really appreciate the testimony 
that was offered and the wisdom that all four of you have 
displayed.
    I just want to make two points. Based on my educational 
career, which was 22 years long, the most important thing is to 
educate for the jobs of the future. Too often we tend to be 
educating for the jobs of the past or perhaps the present but 
we have to anticipate what the jobs of the future are going to 
be and educate accordingly. That is not easy but it has to be 
done.
    Secondly, math and science education has to be done 
properly in the early elementary grades. If you really want 
someone to become an engineer, that means they have to do well 
in math and science in elementary school. To the extent that 
they like it when they get to high school, they will take the 
advanced math and science courses there, and when they go to 
the university they will slip right into the program. Too 
often, and I learned this from my colleagues at the 
universities, too often someone who would make a good scientist 
or a good engineer was not excited by science in the early 
years, in high school took the easiest courses possible, then 
went to the university and said I would like to be an engineer 
or a physicist or whatever. They say oh, sure, we would love to 
have you do that but first of all you'll have to take two more 
years at the university in order to get up to speed with the 
math and science that you need. Well, obviously, very few of 
them are going to say well, yes, I would love to spend two more 
years here and spend another $80,000 of my parents' money. They 
are just going to say well, okay, I will take something else. 
And so we really have to be farsighted enough to recognize the 
key role that the elementary schools will play in this as well.
    Thank you very much. You were right on target and I really 
appreciate your testimony and your time and your wisdom. Thank 
you very much.
    Chairman Gordon. Thank you, Dr. Ehlers.
    Mr. Tonko, Mr. Carnahan, any final conclusions?
    Mr. Hall is recognized.
    Mr. Hall. Mr. Chairman, thank you. I had to go to Energy 
and Commerce and I had some other questions, but we have a 
reporter that is taking down everything and the rest of 
Congress will get to hear your answers and I will review that. 
I was just thinking back as I listened to my friend from 
California here back when I was on a church board, the word was 
that the Lord kept the preacher humble and the board kept him 
broke. Rohrabacher has the same effect on this committee. He is 
the last word of the rest of the story and he is a very good 
member of this committee.
    I yield back my time and I thank this good panel.
    Chairman Gordon. Thank you, Mr. Hall. I think Dr. Ehlers 
said it very well. This was a superb panel. We appreciate you 
altering your schedules. I know, Ms. Wince-Smith, you have to 
get going out of the country. Both your testimony and your 
presence was a very strong way to kick off this important 
reauthorization. We thank you. One thing I took away from this 
is that I need to talk to Mr. Rangel, Oberstar, Berman, Miller, 
Obey and Waxman this afternoon and see if they will share some 
of their jurisdiction, and we could really make some real 
progress there. Thank you.
    The record will remain open for two weeks for additional 
statements from Members and answers to any follow-up questions 
Members may ask the witnesses. The witnesses are excused.
    [Whereupon, at 12:19 p.m., the Committee was adjourned.]
                               Appendix:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by John Castellani, President, Business Roundtable

Questions submitted by Representative Ralph M. Hall

Q1.  As recommended in Mr. Donohue's testimony, this Committee should 
be ``vigilant about duplication of funding and efforts among the 
Department of Education, the National Science Foundation, NASA, the 
Department of Energy, and other Federal agencies.'' This was a major 
concern of ours when this Committee considered ARPA-E. Likewise, we 
felt that some of the STEM programs established within DOE are 
repetitious of existing programs. Please share with us those programs 
that you consider to be duplicative in the current version of COMPETES 
or may have the potential for duplication in the reauthorization.

A1. Business Roundtable is concerned about Federal spending and 
ballooning budget deficits. We believe Congress has a responsibility to 
root out waste, inefficiency and duplication in Federal programs.
    When it comes to STEM education, which represents a fundamental 
investment in future U.S. innovation capacity, a diversified portfolio 
of programs that address different STEM education needs and experiment 
with different ways of motivating students probably makes sense. 
Business Roundtable does not have the knowledge or expertise to render 
a judgment on every single Federal STEM education program but our 
impression is that the programs at different agencies operate in silos 
and are not well aligned.

Q2.  Taking into consideration the current economic environment and the 
fact that we may need to make some tough funding decisions, are there 
any provisions in the currentCOMPETES Act that could be scaled back or 
that you feel are unnecessary? Are there programs that you feel are 
vital and must be preserved?

A2. Although America COMPETES programs were authorized in August 2007, 
they were not funded until early 2009. It is too soon for Business 
Roundtable to judge which provisions are least effective. We can say 
with confidence, however, that STEM education and funding for physical 
sciences and engineering research are the most vital elements of the 
Act. They are the building blocks of U.S. innovation and 
competitiveness.

Question submitted by Representative Daniel Lipinski

Q1.  In response to a question asked by Congressman Garamendi, you 
referred to inefficiencies in the higher education system and stated 
that these inefficiencies would be unsustainable in the business 
sector. Could you elaborate on these comments or provide examples of 
such inefficiencies? Are there any specific steps you would suggest to 
eliminate them or to improve how our higher education system uses 
Federal money?

A1. Over the past three decades, higher education costs skyrocketed and 
tuition and fee increases dramatically exceeded the rate of inflation. 
Two-year public college costs more than quadrupled, and four-year 
public and private colleges saw costs increase 691 percent. Yet the 
number of associate degrees conferred increased by 70 percent and 
bachelor's degrees by 68 percent. Community colleges clearly are a 
better bargain.
    If we are to meet the growing demand for a better educated and 
trained workforce, our institutions of higher education must find 
creative ways to do more with less. On-line learning is a promising 
approach that frees education from a physical plant. Some institutions 
are using flexible scheduling and experimenting with classes 24/7, 
offering options to earn course credits and degrees over shorter, more 
concentrated periods of time. Perhaps most important for Federal 
policy, incentives should be built into both institutional and student 
aid that reward timely completion of degrees and other credentials 
valued in the marketplace.

Question submitted by Representative Ben R. Lujan

Q1.  Key components of Federal technology transfer policy are the Bayh-
Dole and Stevenson-Wydler Acts passed 30 years ago. What is your 
assessment of these Acts on innovation and competitiveness of American 
companies? Also, after 30 years, what recommendations, if any, on how 
the implementation of these Acts could be improves given the current 
focus on innovation policy?

A1. The Bayh-Dole and Stevenson-Wydler Acts were important policy 
innovations that strengthened America's capacity to innovate. They 
remain important contributors to U.S. economic competitiveness. 
America's innovation systems could be further improved by speeding 
processing of patent applications, enacting reforms that reduce patent 
litigation and strengthening international intellectual property 
protection.

Question submitted by Representative Kathleen A. Dahlkemper

Q1.  What types of skills do you expect bachelor, masters and Ph.D. 
level graduates to have when entering your workforce, beyond just 
content knowledge in a particular STEM field? Are our colleges and 
universities today providing students the training and opportunities 
they need to develop those skills? How can industry work more closely 
with colleges and universities to ensure that the students are being 
educated appropriately for today's workforce needs?

A1. Last December, Business Roundtable released the final 
recommendations from The Springboard Project--an independent commission 
it convened--to ensure that American workers thrive after the economy 
rebounds. While the commission found that the gap between worker skills 
and the needs of employers is widening, the skills gap is primarily an 
education gap as employers increasingly require postsecondary degrees 
beyond a high school diploma. In addition to content knowledge at the 
college and advanced degree levels, industry has worked closely with 
engineering and science departments to influence the curriculum and 
identify the need for written and oral communication skills, team 
problem solving and collaboration.
    In terms of college and post-graduate preparation, many Business 
Roundtable companies also work directly with U.S. colleges and 
universities to sponsor scholarships and fellowships and offer 
workplace experience through internships and traineeships to help 
ensure that U.S. higher education remains relevant to the workplace.

Question submitted by Representative Judy Biggert

Q1.  How have your companies reacted to the economic downturn in terms 
of investments in R&D and new technologies? How do your members balance 
the recognized value of R&D in driving long-term success with the 
pressures to improve short-term balance sheets by potentially cutting 
back on such investments?

A1. According to a report released last December by the Battelle 
Memorial Institute and R&D Magazine, private-sector R&D investments 
fell by an estimated 5.5 percent in 2009, compared to 2008. The same 
report, however, projects a robust recovery in industrial R&D spending 
in 2010. Battelle estimates that industrial R&D will account for nearly 
65 percent of all R&D investment in the United States this year. 
Business Roundtable companies invested more than $110 billion in R&D 
last year, nearly half the total private-sector investment in 2009. 
Despite the enormous pressure to reduce costs, Business Roundtable CEOs 
have maintained healthy R&D activities because they understand the 
competitive advantage conferred by in-house innovation. As the economy 
recovers and demand and revenues grow, R&D investments by Business 
Roundtable companies also will grow.

Questions submitted by Representative Brian P. Bilbray

Q1.  The American COMPETES Act focuses on the much needed problem of 
underinvestment of basic science research. However, many of the small 
biotech companies in my San Diego district are just as concerned with 
commercialization of technology. As Venture Capital money dries up, how 
can we best bridge this ``valley of death.'' Do you think ideas such as 
proof of concept grants/programs would work? What about changes to the 
SBIR/STTR programs. What other changes do you think the Federal 
Government should consider in order to address this issue?

A1. The U.S. venture capital system remains the best in the world in 
identifying and promoting promising commercial innovation. No other 
country performs as well as the United States in terms of nurturing 
nascent technology companies. The U.S. venture capital sector was hit 
hard by last year's credit and liquidity crisis. For the better part of 
year, venture capital all but disappeared. As capital markets have 
recovered, so too has the venture capital market, but less rapidly than 
other markets.
    Government can play a useful role in venture capital markets by 
reducing risk, which is what Small Business Innovation Research (SBIR) 
and Small Business Technology Transfer (SBTT) programs are designed to 
help with, but government cannot replace private venture capital. U.S. 
venture capital's history of success rests, in part, on its ability to 
cut its losses and move on to new investments in the face of failure. 
Government has no such ability. The political pressure to continue 
funding underperforming enterprises would be too great to resist in 
many instances.

Q2.  Overall Federal funding for basic research has been flat or 
declining on a real-dollar basis since fiscal year 2005. What 
implications does this trend have for the U.S. science enterprise?

A2. Flat or declining Federal research investments, particularly in 
physical sciences and engineering research, have been a serious drag on 
U.S. innovation for more than twenty years. Last year, however, 
witnessed a dramatic turn around with significant new research 
investments enacted in the American Recovery and Reinvestment Act 
(ARRA), which Business Roundtable endorsed. If last year's trend is 
maintained, it will have a significant, positive effect on the long-
term economic competitiveness of the United States.

Q3.  The America COMPETES Act established specific funding 
authorization levels for both NSF and the Dept. of Energy Office of 
Science--although appropriations for both agencies have not yet reached 
those recommended levels. Should the America COMPETES Act 
reauthorization establish revised specific funding levels for NSF and 
the DOE Office of Science? What are the advantages and disadvantages of 
Congress setting targeted funding levels?

A3. The Science and Technology Committee of the U.S. House of 
Representatives established important guidelines for Congress and the 
Administration in the America COMPETES Act and its authorization levels 
for Federal civilian science agencies. Those authorization levels led 
directly to the generous funding levels for basic research in ARRA and 
in the President's budget requests to Congress. The National Science 
Foundation and the Office of Science in the Department of Energy are 
two of the most important Federal agencies when it comes to investments 
that foster U.S. innovation and competitiveness. The Science and 
Technology Committee has knowledge and expertise related to how these 
agencies function that Congress and the Administration rely on. 
Specific authorization levels proved particularly valuable in the 
America COMPETES Act and likely would be valuable in any 
reauthorization.

Q4.  NSF received a significant infusion of funds through the American 
Recovery and Reinvestment Act (ARRA). Are you concerned about what will 
happen to the NSF budget once the ARRA money has been spent? What 
should Congress do to sustain the momentum created by ARRA?

A4. Business Roundtable has consistently advocated for stable, long-
term funding commitments for Federal investments in fundamental 
physical science and engineering research. While the Roundtable 
endorsed ARRA and was pleased to see Congress fund the research 
investment priorities embodied in the America COMPETES Act, we remain 
concerned about the long-term health of the U.S. science and technology 
enterprise. We are encouraged, however, by the President's Fiscal Year 
2011 budget request for the National Science Foundation and other 
Federal civilian science agencies that sponsor physical science and 
engineering research. Congress can sustain momentum by reauthorizing 
the America COMPETES Act and appropriating funds for Federal science 
agencies consistent with the authorization levels specified in the Act.

Q5.  According to 2010 Science and Engineering Indicators released by 
the National Science Board (NSB) last week, the Federal share of the 
Nation's research and development (R&D) funding was an estimated 26 
percent in 2008--down from 30 percent in 2004. Does the fact that the 
Federal share of R&D funding is declining concern you? What is the 
impact of this declining finding trend?

A5. Business Roundtable has been concerned about the long-term decline 
in Federal R&D investments as a percentage of gross domestic product 
(GDP) for many years. Federal R&D spending is an investment in future 
economic growth and should track the overall size of the economy. ARRA 
included a significant short-term boost to Federal R&D spending and, as 
indicated in my answer to the previous question, Business Roundtable 
believes this momentum must be sustained.
    The declining Federal share of national R&D investment is only a 
concern to the extent that it reflects stagnating Federal R&D budgets 
and a decline in Federal R&D relative to the size of the economy. 
Private-sector R&D investments have grown over the last decade, both in 
absolute terms and relative to Federal investments. Increased private-
sector R&D investments are a good thing. As I mentioned earlier in 
response to a question from another Committee member, Business 
Roundtable companies invested more than $110 billion in R&D last year, 
which represented nearly half of all private-sector R&D investments in 
2009.
    In short, Business Roundtable believes that Federal R&D investments 
relative to GDP are a more meaningful indicator of U.S. innovation 
performance than the Federal share of R&D spending.
                   Answers to Post-Hearing Questions
Responses by Thomas J. Donohue, President and CEO, U.S. Chamber of 
        Commerce

Questions submitted by Representative Ralph M. Hall

Q1.  As recommended in Mr. Donohue's testimony, this Committee should 
be ``vigilant about duplication of funding and efforts among the 
Department of Education, the National Science Foundation, NASA, the 
Department of Energy, and other Federal agencies.'' This was a major 
concern of ours when this Committee considered ARPA-E. Likewise, we 
felt that some of the STEM programs established within DOE are 
repetitious of existing programs. Please share with us those programs 
that you consider to be duplicative in the current version of COMPETES 
or may have the potential for duplication in the reauthorization.

A1. The U.S. Chamber of Commerce believes that every effort should be 
made to prevent Federal spending from resulting in massive budget 
deficits. Congress must be particularly vigilant to avoid duplication 
of effort or funding when it comes to Federal programs. The U.S. 
Chamber has not undertaken a comprehensive evaluation of all Federal 
STEM programs supported by the America COMPETES Act. Our concern is 
that the Federal agencies operating and funding programs have not 
optimized alignment thereby limiting the scale and lessons learned from 
the programs as well as limiting the impact of the available funds.
    In relation to ARPA-E reauthorization, we believe that while there 
exists the very real potential . for duplicative efforts between ARPA-E 
and the Department of Energy's (DOE) Office of Science, we believe such 
duplications are not inherently automatic. As such, we support adequate 
funding for ARPA-E as it provides a particular focus on deployable 
technologies that has historically not been fully met by the Office of 
Science, while at the same time we encourage diligent oversight by 
Congress and DOE to ensure funding of the two offices does not become 
duplicative.

Q2.  Taking into consideration the current economic environment and the 
fact that we may need to make some tough funding decisions, are there 
any provisions in the current COMPETES Act that could be scaled back or 
that you feel are unnecessary? Are there programs that you feel are 
vital and must be preserved?

A2. As a result of the America COMPETES programs not receiving funding 
until early 2009, we believe that an insufficient amount of time has 
passed to ascertain program efficacy with any amount of certainty. With 
that in mind, we urge the committee to support STEM education and 
funding for physical sciences and engineering research. These are the 
programs that fuel U.S. innovation and preserve our competitiveness.

Question submitted by Representative Ben R. Lujan

Q1.  Key components of Federal technology transfer policy are the Bayh-
Dole and Stevenson-Wydler Acts passed 30 years ago. What is your 
assessment of these Acts on innovation and competitiveness of American 
companies? Also, after 30 years, what recommendations, if any, on how 
the implementation of these Acts could be improves given the current 
focus on innovation policy?

A1. The Bayh-Dole and Stevenson-Wydler Acts play a significant role in 
creating incentives for government contractors, universities and other 
beneficiaries of Federal agency support to commercialize their 
innovations thereby driving competitiveness. There are some key areas 
where improvements to the intellectual property environment could be 
made both domestically and abroad. This committee can play a critical 
role in bringing attention to these areas. The backlog of patents must 
be reduced by speeding up the processing of patent applications. Work 
must be done to enhance pro-IP positioning of the Organization for 
Economic Co-operation and. Development (OECD) so that it advances 
research, policy positions, and other products that promote IP as key 
to innovation and creativity and calls for the protection of IP and the 
enforcement of IP rights globally.

Question submitted by Representative Kathleen A. Dahlkemper

Q1.  What types of skills do you expect bachelor, masters and Ph.D. 
level graduates to have when entering your workforce, beyond just 
content knowledge in a particular STEM field? Are our colleges and 
universities today providing students the training and opportunities 
they need to develop those skills? How can industry work more closely 
with colleges and universities to ensure that the students are being 
educated appropriately for today's workforce needs?

A1. The skills that are commonly referred to as 21st century skills are 
now required for success in the workplace for STEM and all other 
professionals. They can be summarized in four groups: critical thinking 
and problem solving, communication, collaboration, and creativity and 
innovation. These are the areas where U.S. secondary students begin to 
fall short on the international exams. Students in the United States 
fare less well when they are asked to apply knowledge that they possess 
to solve a problem or to explain a problem. This is one factor that has 
resulted in U.S. 15 year olds ranking 24th out of 29 participating OECD 
countries on the Math Literacy portion of the PISA exam. The lack of 
these skills persists through post-secondary education and into the 
workforce. Many of the U.S. Chamber's members work closely with 
colleges and universities from which they recruit employees to improve 
the programs offered by those institutions and the success rates of the 
students they prepare.

Question submitted by Representative Judy Biggert

Q1.  How have your companies reacted to the economic downturn in terms 
of investments in R&D and new technologies? How do your members balance 
the recognized value of R&D in driving long-term success with the 
pressures to improve short-term balance sheets by potentially cutting 
back on such investments?

A1. There is insufficient data available to render a definitive 
response to this questions at this time. Each company balances the 
short term and long term demands differently. Research and Development 
is essential and has beneficial effects over the long haul. Economic 
theory supports this analysis.

Questions submitted by Representative Brian P. Bilbray

Q1.  The American COMPETES Act focuses on the much needed problem of 
underinvestment of basic science research. However, many of the small 
biotech companies in my San Diego district are just as concerned with 
commercialization of technology. As Venture Capital money dries up, how 
can we best bridge this ``valley of death.'' Do you think ideas such as 
proof of concept grants/programs would work? What about changes to the 
SBIR/STTR programs. What other changes do you think the Federal 
Government should consider in order to address this issue?

A1. The U.S. venture capital system is unparalleled. No other nation 
has a system as successful at identifying and developing new technology 
companies. The downturn in the economy had a negative effect on all 
markets and particularly the venture capital markets. While recovery 
has been slow, it is on the rise.
    Small Business Innovation Research (SBIR) and Small Business 
Technology Transfer (SBTT) programs can help to reduce risk which is an 
appropriate role for the Government. Flexibility, efficiency, agility, 
and resistance to political pressure when determining the length and 
level of investments account for the success of the U.S. venture 
capital system.
    Within the energy sector we recognize that many nascent 
technologies find it extremely difficult to secure adequate capital to 
bridge the ``valley of death'' between development and deployment, 
hindering our pursuit of a more secure energy future. We strongly 
support the creation of an independent Federal entity empowered to 
provide concessionary financial products such as loans, loan 
guarantees, and risk insurance in support of new energy technology 
deployment. This entity would operate in a manner similar to the 
Export-Import bank, but focused on domestic deployment of new energy 
technologies.

Q2.  Overall Federal funding for basic research has been flat or 
declining on a real-dollar basis since fiscal year 2005. What 
implications does this trend have for the U.S. science enterprise?

A2. Federal research investments have decreased in real dollars for the 
past 5 years. Many would argue that the trend started much earlier and 
that the United States has coasted on investments made as long as 50 
years ago. Last year, the Chamber endorsed the American Recovery and 
Reinvestment Act (ARRA) which included significant new research 
investments. The passage of ARRA signified the recommitment of America 
to innovation through research and development. We believe that the R&D 
investments in ARRA will help us regain our lead in innovation among 
our global peers.

Q3.  The America COMPETES Act established specific funding 
authorization levels for both NSF and the Dept. of Energy Office of 
Science--although appropriations for both agencies have not yet reached 
those recommended levels. Should the America COMPETES Act 
reauthorization establish revised specific funding levels for NSF and 
the DOE Office of Science? What are the advantages and disadvantages of 
Congress setting targeted funding levels?

A3. The funding recommendations set by the Science and Technology 
Committee of the U.S. House of Representatives for the National Science 
Foundation and the Office of Science in the Department of Energy 
translated into significant investments in these two agencies through 
ARRA and subsequent budget requests from the White House. With 
increased demand for government transparency and efficiency, the 
committee's funding recommendations will surely be valuable to the 
general public, Members of Congress, and the Administration in during 
the reauthorization process.

Q4.  NSF received a significant infusion of funds through the American 
Recovery and Reinvestment Act (ARRA). Are you concerned about what will 
happen to the NSF budget once the ARRA money has been spent? What 
should Congress do to sustain the momentum created by ARRA?

A4. The U.S. Chamber stated in our 2010 Policy Priorities that we will 
work to ``promote ways to better value long-term investment, 
entrepreneurial risk taking, revolutionary research and development, 
and intangible assets.'' We believe that the America COMPETES Act 
coupled with ARRA provided necessary investments and focus on the U.S. 
science and technology enterprise. Greater effort must now be placed by 
Congress on creating a sustainable the level of funds for the Federal 
agencies that are responsible for the bulk of science and engineering 
innovations. If America is serious about its competitiveness, we must 
reauthorize the America COMPETES Act and appropriate the funds required 
to accomplish the goals set forth in the Act.

Q5.  According to 2010 Science and Engineering Indicators released by 
the National Science Board (NSB) last week, the Federal share of the 
nation's research and development (R&D) funding was an estimated 26 
percent in 2008--down from 30 percent in 2004. Does the fact that the 
Federal share of R&D funding is declining concern you? What is the 
impact of this declining funding trend?

A5. The Chamber is concerned about the downward trend in Federal R&D 
investments, however, over the same period, from 2004-08, private 
sector investments increased as a share of GDP. While we are not fully 
aware yet how much private sector investment in R&D may have declined 
over the recent economic downturn, it is important to note that ARRA is 
providing a significant boost in both Federal and private sector R&D 
that may help put the country back on the right track. in the long 
term, we believe that Federal R&D spending should be considered in the 
context of the larger economy as a percentage of GDP. Our challenge 
going forward will be to increase and stabilize the level of 
investments needed to keep America's competitiveness strong.
                   Answers to Post-Hearing Questions
Responses by Governor John Engler, President and CEO, National 
        Association of Manufacturers



Questions submitted by Chairman Bart Gordon

Q1.  Both of you touch on the importance of strong manufacturing 
programs in the Federal Government. One area that we hope to include in 
a COMPETES Act reauthorization is a comprehensive manufacturing 
research and development program across agencies. We want to take a 
look at what is currently being done and what we might be able to do 
better. We'd be very interested in your specific thoughts on this 
effort and any concrete suggestions you might have.

A1. Chairman Gordon, I want to thank you once again for the opportunity 
to offer the National Association of Manufacturers' (NAM) thoughts on 
the reauthorization of the America COMPETES Act.
    A comprehensive cross-agency strategy to quantify, assess and 
coordinate all federally-funded R&D is an excellent idea. Just as the 
Comprehensive National Cybersecurity Initiative is working to unify 
Federal agencies' approaches to protecting our national cybersecurity 
interests, a similar effort should/be aimed at protecting the future of 
our national economic security, which relies on the ability of American 
manufacturing to innovate. Federally funded R&D is the seed corn that 
will produce the next harvest of benefits for our economy, with much of 
the bounty coming from the manufacturing sector. Such an effort will 
enable policymakers to determine what Federal R&D efforts are 
successful, which efforts are duplicative, and where our finite 
resources can best be used.
    As the Committee contemplates this strategy, it is our 
recommendation that any efforts keep in mind and coordinate with 
private sector efforts. U.S. manufacturers perform half (49 percent) of 
all R&D in the nation--or roughly equal to the combined R&D activities 
of the rest of the private sector, universities and colleges, Federal 
Government non-profits and federally-funded R&D centers. Manufacturers, 
however, who claim the bulk of all R&D credits (71 percent), saw the 
cost of performing domestic R&D increase at the beginning of 2010 due 
to the 14th expiration of the Federal R&D tax credit since it was 
created in 1981. Any such Congressional effort to create a cross-agency 
R&D program should make part of its focus supporting a permanent, 
strengthened R&D tax credit, as R&D is the fuel for innovation that 
drives new product development and increased productivity, two key 
factors necessary for growth in manufacturing.

Questions submitted by Representative Ralph M. Hall

Q1.  As recommended in Mr. Donohue's testimony, this Committee should 
be ``vigilant about duplication of fielding and efforts among the 
Department of Education, the National Science Foundation, NASA, the 
Department of Energy, and other Federal agencies.'' This was a major 
concern of ours when this Committee considered ARPA-E. Likewise, we 
felt that some of the STEM programs established within DOE are 
repetitious of existing programs. Please share with us those programs 
that you consider to be duplicative in the current version of COMPETES 
or may have the potential for duplication in the reauthorization.

A1. With regards to STEM education, there may be programs that should 
be combined, but just as important, existing programs should be 
streamlined and refined to better meet the needs of students. It is 
possible to create better value within existing Departments of Labor 
and Education programs without creating new programs. For example, by 
looking at specific programs such as Trade Adjustment Assistance (TAA), 
the Federal Perkins Loans Program and the Workforce Investment Act 
(WIA), we can create priorities that improve education by linking it to 
employer needs. Looking at these programs to make them more effective 
before creating new programs will streamline government process.

Q2.  Taking into consideration the current economic environment and the 
fact that we may need to make some tough funding decisions, are there 
any provisions in the current COMPETES Act that could be scaled back or 
that you feel are unnecessary? Are there programs that you feel are 
vital and must be preserved?

A2. The P-16 program outlined in the America COMPETES Act takes a step 
toward integrating the skills needed by employers and education systems 
by calling for education alignments with the private sector. Driving 
students toward advanced degrees in STEM areas is critical for 
competitive success; however, so is continuing education for those who 
may not follow the traditional degree path.

Question submitted by Representative Ben R. Lujan

Q1.  Key components of Federal technology transfer policy are the Bayh-
Dole and Stevenson-Wydler Acts passed 30 years ago. What is your 
assessment of these Acts on innovation and competitiveness of American 
companies? Also, after 30 years, what recommendations, if any, on how 
the implementation of these Acts could be improves given the current 
focus on innovation policy?

A1. The NAM recognizes the critical success the Bayh-Dole Act 
represents: a major effort on behalf of the Federal Government to aid 
the rapid commercialization of scientific discovery. At this time, 
however, the NAM has not developed policy recommendations on how the 
Bayh-Dole Act can be improved to strengthen our nation's innovation 
policy.

Question submitted by Representative Kathleen A. Dahlkemper

Q1.  What types of skills do you expect bachelor, masters and Ph.D. 
level graduates to have when entering your workforce, beyond just 
content knowledge in a particular STEM field? Are our colleges and 
universities today providing students the training and opportunities 
they need to develop those skills? How can industry work more closely 
with colleges and universities to ensure that the students are being 
educated appropriately for today's workforce needs?

A1. Nearly every day I hear from employers who have available positions 
but cannot find qualified candidates to fill the slots. It is 
imperative that students have the applicable knowledge necessary to 
succeed in the workforce. Too many times students graduate, not just 
from graduate school and college, but also from high school, with 
skills that cannot be practically applied in the workforce. Basic and 
advanced STEM education should be directly related to the skills and 
competencies required by employers. For example, the NAM-Endorsed 
Skills Certification system is an organized system of nationally 
portable, industry-recognized credentials implemented in coordination 
with community colleges to educate students in the skills relevant to 
the demands of advanced manufacturing. By making programs such as these 
a priority within Perkins, TAA and WIA, we can align the needs of 
students with the needs of employers.

Question submitted by Representative Gary C. Peters

Q1.  You mention in your written testimony that the MEP program, 
despite receiving an increase in funding in FY10, still faces an 
uncertain future. Can you expand on that? What do you hear from your 
membership regarding the future of the program?

A1. The Manufacturing Extension Partnership (MEP) has for years been a 
critical program for small- and medium-sized manufacturers, helping 
them streamline plant operations and improve their bottom lines. 
Despite the MEP's benefits to American manufacturing, its budget has 
been relatively flat since its inception in 1999 and imperiled more 
than once due to cost-cutting efforts. For instance, the proposed 
budget for FY 2004 would have cut its funding from $106 million to 
$12.6 million. Most recently in 2008, an attempt was made to cut its 
funding even more--a full $87 million below the level needed to 
maintain its existing services, to a proposed budget of only $4 
million.
    We are heartened to see that the Obama Administration has reversed 
this trend, especially with the increased funding the MEP received 
through the American Recovery and Reinvestment Act. The MEP is very 
important to NAM members as it provides small- and medium-sized 
manufacturers affordable access to technical expertise so that they can 
create more high-paying manufacturing jobs--despite today's daunting 
economic cost pressures. We will work with Congress and the 
Administration to ensure that the MEP continues to get the attention--
and funding--it deserves.

Q2.  I have introduced a bill with Rep. Ehlers to reduce the 
participant matching requirement in the MEP program to 50%, and give 
the Secretary of Commerce the authority to further reduce the match 
where necessary. Would this change help manufacturers continue to 
access the program in the face of state budge cuts and difficult 
economic times?

A2. As you note, this is an increasingly difficult time not only for 
manufacturers, but for state governments as well, especially as they 
face deeper and deeper budget cuts. H.R. 4394, which authorizes the 
Secretary of Commerce to reduce the matching requirement for MEP 
participants, will go a long way to ensure that states continue to fund 
MEP centers and that smaller manufacturers will be able to take 
advantage of this critical program.
    Under the current MEP cost-sharing ratio, the Federal Government 
covers one-third of the cost, with the states taking up the remaining 
two-thirds. This is the highest cost-sharing ratio in the Dept. of 
Commerce, according to its staff. Because of the economic downturn, 23 
state MEP centers reported a decrease or elimination of state funding. 
Those that remain are now forced to shift the cost-share burden to 
small manufacturers who are unlikely to be able to afford increased 
contributions due to the current economic conditions. The end result is 
that in many areas, the availability of MEP services is in jeopardy.
    H.R. 4394 relieves the states of a large part of this burden, by 
allowing the Federal Government and the states to share the costs 
equally so that local MEP centers can focus on making mission-based 
decisions, such as increasing program management capabilities. Reducing 
the state matching requirement from 66 percent to 50 percent will 
reduce the pressure on state budgets, allowing small manufacturers 
continued access to critical MEP services and helping them decrease 
costs, increase sales and create much-needed jobs.

Question submitted by Representative Judy Biggert

Q1.  How have your companies reacted to the economic downturn in terms 
of investments in R&D and new technologies? How do your members balance 
the recognized value of R&D in driving long-term success with the 
pressures to improve short-term balance sheets by potentially cutting 
back on such investments?

A1. The economic downturn has hurt every sector across the board, not 
the least of which are manufacturers. Many manufacturers have been 
forced to hunker down to weather the economic uncertainty, trying to 
make due with less. Manufacturers understand, however, that investment 
in R&D and new technologies has to be made if they are to have new 
products, services and processes in place for when the economy 
rebounds. An important factor in deciding on how much to invest in R&D 
is how that investment will be treated on their balance sheet. Key to 
that decision is whether their investments will be protected by a 
strengthened, permanent Federal R&D tax credit.
    To that point, I'd like to take this opportunity to thank you for 
your long-time, continued support of a strengthened, permanent Federal 
R&D tax credit and your co-sponsorship of bipartisan legislation. H.R. 
422, sponsored by Representatives Meeks and Brady. This bill will help 
keep R&D jobs in the United States. For manufacturers, who claim 71 
percent of all R&D tax credits, this tax incentive helps reduce the 
cost of R&D done in the United States by lowering the cost of keeping 
and hiring R&D employees. Only R&D performed in the United States 
qualifies for the credit.
    Also, R&D is inherently risky and, for manufacturers, R&D projects 
typically span 5 to 10 years. A strengthened, permanent credit would 
assure companies that the credit will be available during the life of 
an R&D project. More than 500,000 jobs would be created within a decade 
if the R&D credit were strengthened and made permanent according to the 
Milken Institute report released January 2010.\1\
---------------------------------------------------------------------------
    \1\ Jobs for America: Investments and Policies for Economic Growth 
and Competitiveness, Milken Institute, January 2010. 
www.milkeninstitute.org/jobsforamerica.

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Questions submitted by Representative Brian P. Bilbray

Q1.  The American COMPETES Act focuses on the much needed problem of 
underinvestment of basic science research. However, many of the small 
biotech companies in my San Diego district are just as concerned with 
commercialization of technology. As Venture Capital money dries up, how 
can we best bridge this ``valley of death.'' Do you think ideas such as 
proof of concept grants/programs would work? What about changes to the 
SBIR/STTR programs. What other changes do you think the Federal 
Government should consider in order to address this issue?

A1. The Small Business Innovation Research (SBIR) and Small Business 
Technology Transfer (STTR) programs represent a critical effort on 
behalf of the Federal Government in which to aid the rapid 
commercialization of scientific discovery, especially in the 
biotechnology field. At this time, however, the NAM has not developed 
policy recommendations on how the SBIR/STTR programs can be improved to 
strengthen our nation's innovation policy.

Q2.  Overall Federal funding for basic research has been flat or 
declining on a real-dollar basis since fiscal year 2005. What 
implications does this trend have for the U.S. science enterprise?

A2. The fact that overall Federal funding for basic research has been 
flat or declining for the past five years poses a significant issue for 
the future of innovation in America. Even when one incorporates the 
doubling of Federal R&D dollars in the America COMPETES Act into the 
equation, Federal efforts are just keeping at a constant pace--not very 
heartening news when China increased its R&D investment to $52.4 
billion in 2008 (about 1.49 percent of GDP, up from $29.4 billion in 
2005). In that same period, the U.S. spent $116.5 billion on federally 
funded R&D, facilities and fixed equipment--or 2.62 percent of our 
GDP.\2\ As I mentioned in my written testimony, this does not include 
R&D expenses at labs owned by foreign companies. If China continues R&D 
spending of about 1.5 percent of GDP for 2009, its research will total 
about $72 billion.\3\ However, China has one of the fastest-growing 
research budgets in the world, and by 2020 the government's goal is to 
invest 2.5 percent of GDP annually in research, which will rank China 
third in the world in terms of total annual investment.\4\ As the R&D 
innovation gap between the U.S. and China shrinks, so does our global 
competitive advantage.
---------------------------------------------------------------------------
    \2\ ``Federal R&D Support Shows Little Change in 2008,'' National 
Science Foundation, Info Brief September 2009.
    \3\ ``Engineering & Research,'' Plunkett Research, website visited 
January 14, 2010.
    \4\ Ibid.
---------------------------------------------------------------------------
    The future of American innovation requires a commitment to 
investing in R&D, from both the public and private sector. The fortunes 
of the U.S. manufacturing and science sectors are closely entwined, as 
successes in one area usually benefit the other, with the end 
beneficiary being American workers and consumers. We commend Congress 
for having the foresight in creating the America COMPETES Act to ensure 
that successes in innovation continue to benefit our global 
competitiveness. As I mentioned, the private sector has a role to play 
as well, and the Federal R&D tax credit is a proven tool for spurring 
R&D jobs in the United States; the credit's incentive value would be 
enhanced if a permanent, strengthened credit were enacted into law.

Q3.  The America COMPETES Act established specific funding 
authorization levels for both NSF and the Dept. of Energy Office of 
Science--although appropriations for both agencies have not yet reached 
those recommended levels. Should the America COMPETES Act 
reauthorization establish revised specific funding levels for NSF and 
the DoE Office of Science? What are the advantages and disadvantages of 
Congress setting targeted funding levels?

A3. As pointed out by your previous question, even when adjusted to a 
real-dollar basis, Federal funding for basic R&D has largely been flat. 
As noted in the recent Congressional Research Service (CRS) report, 
Federal Funding and Development Funding: FY 2010,\5\ increasing the 
amount spent on basic R&D will be dependent upon two large issues: how 
much the Federal Government can afford in light of increasing pressure 
on discretionary spending, and how those funds will be prioritized. As 
our economic security and global competitiveness are dependent upon how 
much we as a nation are willing to do to invest in our future success, 
Congress may very well have to revise spending levels for the NSF and 
the DOE Office of Science.
---------------------------------------------------------------------------
    \5\ U.S. Congressional Research Service. Federal Research and 
Development Funding: FY 2010 (R40710; Jan. 12, 2010), by John F. 
Sargent, Jr.
---------------------------------------------------------------------------
    That answer may also be impacted by how our emerging competitors--
China, India, Russia--ramp up investment in their future. Although we 
may lead the world in funding basic R&D, we need to be cognizant of how 
our competitors close the innovation gap. We are confident, however, 
that the ultimate answer on how much we need to revise spending levels 
will be revealed as the Committee continues its inquiry into the 
reauthorization of the America COMPETES Act through the many hearings 
scheduled through the remaining Congressional session.

Q4.  NSF received a significant infusion of funds through the American 
Recovery and Reinvestment Act (ARRA). Are you concerned about what will 
happen to the NSF budget once the ARRA money has been spent? What 
should Congress do to sustain the momentum created by ARRA?

A4. Increased funding for basic R&D at the NSF, along with the DOE's 
Office of Science and the NIST, has been a key priority for 
manufacturers because the work they do leads to advances in areas 
critical to American manufacturers, such as energy efficiency, advanced 
materials design, nanotechnology and more powerful computer chips. The 
funds appropriated to the NSF through ARRA increased the NSF's FY 2009 
funding by approximately $3 billion and were critical in ensuring that 
the funding amounts promised by the America COMPETES Act were 
fulfilled, While we applauded this outcome, the goal set out in America 
COMPETES--to double Federal basic R&D funding for key research agencies 
such as the NSF by 2012--may be put in jeopardy by the demands of the 
appropriations process.
    For instance, on June 18, 2009, the House Committee on 
Appropriations passed H.R. 2847, the Commerce, Justice, Science, and 
Related Agencies (CJS) Appropriations Bill, 2010.\6\ The bill would 
have provided a total of $6.937 billion for the NSF in FY 2010, $108.5 
million below the President's request. The Senate Appropriations 
Committee reported the bill on June 25, 2009,\7\ and the Senate passed 
the bill on November 5, 2009. The Senate measure would have provided 
$6.917 billion for the NSF, $19.7 million below the House passed bill 
and $128.2 million below the Administration's request. Finally, on 
December 16, 2009, the President signed into law the Consolidated 
Appropriations Act of 2010.\8\ The omnibus act includes funding for six 
appropriations for FY 2010, including the CJS appropriation, providing 
a total of $6.927 billion for the NSF, approximately $118.0 million 
below the President's request.
---------------------------------------------------------------------------
    \6\ H.Rept. 111-149 (2009).
    \7\ S.Rept. 111-34 (2009).
    \8\ P.L. 111-117 (2009).
---------------------------------------------------------------------------
    While the appropriations process is never as fast or as 
uncomplicated as many would hope, it is our concern that funding of 
critical basic R&D programs such as those at the NSF will be lost in 
the shuffle as Congressional appropriators wrestle with an uncertain 
economy, attempt to heed cries for constrained spending, and work to 
comply with the new pay-as-you-go rules. Perhaps the best way to 
sustain the momentum created by ARRA is to highlight the direct 
successes achieved by increased R&D funding to each agency, including 
jobs and opportunities created. For example, the above-mentioned CRS 
report highlights that on May 27, 2009, the NSF announced its first 
major award made with funding from ARRA--for construction of the Alaska 
Region Research Vessel ($148.0 million). This dual-purpose vessel has 
been designed to operate as both an icebreaker and a research ship, has 
the ability to carry as many as 500 people, stay at sea for as many as 
300 days a year, and has an operational life span of 30 years. The NSF 
states that, ``The three-year construction phase of the project will 
support 4,350 total jobs, 750 directly at the shipyard and as many as 
3,600 in the broader economy.'' \9\ The award announcement noted that 
the NSF intends to ensure that the vessel will be built in a U.S. 
shipyard. It is this very type of good news--jobs and opportunities for 
American workers--that will bring continued support for the federally-
funded R&D envisioned in the America COMPETES Act.
---------------------------------------------------------------------------
    \9\ National Science Foundation, ``NSF Announces First Major Award 
Under American Recovery and Reinvestment Act to the Alaska Region 
Research Vessel (ARRV),'' press release, May 27, 2009.

Q5.  According to 2010 Science and Engineering Indicators released by 
the National Science Board (NSB) last week, the Federal share of the 
nation's research and development (R&D) funding was an estimated 26 
percent in 2008--down from 30 percent in 2004. Does the fact that the 
Federal share of R&D funding is declining concern you? What is the 
---------------------------------------------------------------------------
impact of this declining funding trend?

A5. This concerns the NAM because its impact, as noted above, is to put 
our nation at a competitive disadvantage with our global competition as 
they increase their spending. Of course, it should also be noted that 
the business community has greatly expanded its share of R&D spending 
over the past five years, which would impact the numbers in the above 
report. Further, only recently has the government picked up its pace in 
funding federal R&D, as highlighted above with regards to fulfilling 
the promise of the America COMPETES Act in doubling Federal funding for 
key research agencies by 2012.

Additional Note:

    During the hearing, Representative Rohrabacher asked me whether the 
NAM had opposed the elimination of treble damages in H.R. 1908, the 
Patent Reform Act of 2007. The NAM sent a letter to Judiciary Chairman 
Conyers and Ranking Member Smith on May 18, 2007, commenting on a 
number of aspects of H.R. 1908. In that letter, we raised concerns with 
proposed changes to how damages for an infringement would be 
calculated. However, with his reference to treble damages, I assume 
Representative Rohrabacher was referring to the issue of willful 
infringement, which provides extra-compensatory damages as a form of 
punitive damages when a defendant knowingly infringed on a patent the 
defendant knew was owned by the plaintiff. In our letter, we did 
mention our support for the provision in H.R. 1908 that would reform 
the standard by which a court would determine whether a defendant 
willfully infringed on a plaintiffs patent rights. It is our 
understanding that the treble damages would still be available as 
compensation for a finding of willful patent infringement. I have 
attached a copy of the letter for your files.
                   Answers to Post-Hearing Questions
Responses by Deborah L. Wince-Smith, President and CEO, Council on 
        Competitiveness

Questions submitted by Chairman Bart Gordon

Q1.  Both of you touch on the importance of strong manufacturing 
programs in the Federal Government. One area that we hope to include in 
a COMPETES Act reauthorization is a comprehensive manufacturing 
research and development program across agencies. We want to take a 
look at what is, currently being done and what we might be able to do 
better. We'd be very interested in your specific thoughts on this 
effort and any concrete suggestions you might have.

A1. Greater focus on research and development of manufacturing 
processes is a critical component to any overall manufacturing agenda. 
Not only can innovation bring new ideas to market, but innovative 
solution to how those ideas are brought to market are equally as 
important. Further, in the Council on Competitiveness' report Innovate 
America, we highlighted a collaborative program in upstate New York 
where multiple companies, the state and the Federal Government 
partnered to create an early stage manufacturing facility that enables 
companies small and large to demonstrate a product's viability before 
proceeding to full-scale manufacturing. This concept is worth further 
consideration.

Questions submitted by Representative Ralph M. Hall

Q1.  As recommended in Mr. Donohue's testimony, this Committee should 
be ``vigilant about duplication of funding and efforts among the 
Department of Education, the National Science Foundation, NASA, the 
Department of Energy, and other Federal agencies.'' This was a major 
concern of ours when this Committee considered ARPA-E. Likewise, we 
felt that some of the STEM programs established within DOE are 
repetitious of existing programs. Please share with us those programs 
that you consider to be duplicative in the current version of COMPETES 
or may have the potential for duplication in the reauthorization.

A1. The Council on Competitiveness shares the concerns expressed by 
Congressman Hall regarding unnecessary duplication in STEM education 
programs, but unfortunately I am not able to cite specific programs we 
believe should be eliminated or strengthened. The Council has argued 
strenuously for greater focus on STEM education, as it is the 
foundation for job skills required by the growth sectors of our 
economy.

Q2.  Taking into consideration the current economic environment and the 
fact that we may need to make some tough funding decisions, are there 
any provisions in the current COMPETES Act that could be scaled back or 
that you feel are unnecessary? Are there programs that you feel are 
vital and must be preserved?

A2. As I detailed in my testimony, there are a number of critical 
provisions in the America COMPETES Act that must be a part of any 
reauthorization. These include:

        1.  The Council on Competitiveness strongly urged the creation 
        of a President's Council on Innovation and the legislation 
        included such a provision, yet the reality has not matched the 
        intent. What became clear as we sought the input and advice 
        from leaders within government and the private sector was that 
        the government's innovation policy was fragmented, poorly 
        coordinated and often running at cross purposes between 
        agencies and departments. We would urge a fresh look at this 
        provision.

        2.  Predictable and steady support for long-term research 
        across Federal agencies including the National Science 
        Foundation, DOE Office of Science, NIST and NASA is a vital 
        first step toward an innovation-based economy. America COMPETES 
        made great strides in this area. Any authorization should 
        continue this commitment.

        3.  Support for the National Institutes of Standards and 
        Technology's (NIST) work in the area of manufacturing is 
        critical to many small and medium sized manufacturers. These 
        companies are key job producers in America's economy. NIST has 
        made strides toward embracing innovation in manufacturing and 
        this trend is worthy of the Committee and Congress's support.

        4.  Strengthening STEM education through programs at the 
        Department of Education, the National Science Foundation and 
        other R&D agencies and departments is important. I realize 
        there are multiple programs that touch upon this issue across 
        the Federal Government and I will not try to analyze each one 
        separately here. I only urge the Committee to recognize that 
        almost every career today requires some grasp of or skill in 
        science, technology, engineering and mathematics and we must 
        ensure that all Americans have a solid grounding in these 
        fields.

    As with any major piece of legislation, a number of provisions were 
added to the bill as it moved through the Congress. Many of these were 
valuable additions, but many also were never funded including, as I 
understand it, several reports. I would urge the Committee to focus of 
actions rather than reports and on solutions rather than meetings or 
summits, which inevitably focus on the problems.

Question submitted by Representative Ben R. Lujan

Q1.  Key components of Federal technology transfer policy are the Bayh-
Dole and Stevenson-Wydler Acts passed 30 years ago. What is your 
assessment of these Acts on innovation and competitiveness of American 
companies? Also, after 30 years, what recommendations, if any, on how 
the implementation of these Acts could be improves given the current 
focus on innovation policy?

A1. While far from the being the perfect solutions, these Acts have 
helped move ideas from the laboratory to the marketplace. The greatest 
ongoing challenge I hear about in conversations with CEOs and 
university leaders is the widely disparate approach taken to 
intellectual property. Every university, every company tackles this 
challenge differently (often differently within departments and/or 
divisions). I'm not sure this is a problem that can be solved by 
Federal Government action.

Question submitted by Representative Kathleen A. Dahlkemper

Q1.  What types of skills do you expect bachelor, masters and Ph.D. 
level graduates to have when entering your workforce, beyond just 
content knowledge in a particular STEM field? Are our colleges and 
universities today providing students the training and opportunities 
they need to develop those skills? How can industry work more closely 
with colleges and universities to ensure that the students are being 
educated appropriately for today's workforce needs?

A1. The best answer I can give is to reiterate an example I highlighted 
during the question period at the hearing--the U.S. Naval Academy 
graduates all its students with an engineering degree, but that is just 
the baseline. They also have language skills, communications or 
business degrees, history, government, and writing etc. . .. Success in 
the job market for American students will not be determined by a single 
discipline, but at the intersection of disciplines--with a strong 
foundation in STEM.

Question submitted by Representative Judy Biggert

Q1.  How have your companies reacted to the economic downturn in terms 
of investments in R&D and new technologies? How do your members balance 
the recognized value of R&D in driving long-term success with the 
pressures to improve short-term balance sheets by potentially cutting 
back on such investments?

A1. It's impossible to generalize across all companies as to their 
reaction to the recession. However, I will say that the leading edge 
companies are the ones that maintained their investment in R&D during 
the downturn. They will be the ones that emerge stronger and better 
positioned to capture market share in the months ahead.

Questions submitted by Representative Brian P. Bilbray

Q1.  The American COMPETES Act focuses on the much needed problem of 
underinvestment of basic science research. However, many of the small 
biotech companies in my San Diego district are just as concerned with 
commercialization of technology. As Venture Capital money dries up, how 
can we best bridge this ``valley of death.'' Do you think ideas such as 
proof of concept grants/programs would work? What about changes to the 
SBIR/STTR programs. What other changes do you think the Federal 
Government should consider in order to address this issue?

A1. Augmenting current project funding models is a key factor in 
bridging the ``valley of death.'' Increasing access to funding for 
later stages of product development is essential in getting products to 
market. As I indicated in my testimony, many foreign investment groups 
are stepping in to fund late-stage projects that have stalled in the 
absence of domestic funding sources. In these cases, the foreign 
investors are reaping the benefits of both the initial U.S. investment 
as well as the revenues generated from a product in the market. Our 
approach to supporting investors needs to be more comprehensive and 
focus on all stages of development. Doing so will certainly help put 
more American technologies in the market, and do it faster.
    With regard to SBIR, I would strongly recommend expanding that 
program to cover stage III funding, so we do not lose the potential job 
creation on investments we have already made.

Q2.  Overall Federal funding for basic research has been flat or 
declining on a real-dollar basis since fiscal year 2005. What 
implications does this trend have for the U.S. science enterprise?

A2. America's economic viability is inextricably linked with our 
capacity as a nation to develop and commercialize innovative goods and 
services for consumption at home and abroad. Federal dollars are a 
catalyzing force in the development of the groundbreaking technologies 
which allow America to remain competitive against foreign rivals. 
Declining Federal funding means fewer high-risk, high-high reward, 
long-term projects will receive funding at a time when it is needed the 
most. Without Federal support, America's science enterprises can and 
will be overtaken by foreign competitors whose governments are willing 
to invest heavily in R&D. Investing Federal dollars in American science 
enterprises is an investment in the nation's economy and will help our 
nation remain the global leader in innovation and technology 
development.

Q3.  The America COMPETES Act established specific funding 
authorization levels for both NSF and the Dept. of Energy Office of 
Science--although appropriations. for both agencies have not yet 
reached those recommended levels. Should the America COMPETES Act 
reauthorization establish revised specific funding levels for NSF and 
the DOE Office of Science? What are the advantages and disadvantages of 
Congress setting targeted funding levels?

A3. I would strongly recommend that the levels be maintained and that 
supporters inside and outside of Congress work to bring the 
Appropriations funding up to those authorized levels. Long term 
research requires stable predictable funding levels.

Q4.  NSF received a significant infusion of funds through the American 
Recovery and Reinvestment Act (ARRA). Are you concerned about what will 
happen to the NSF budget once the ARRA money has been spent? What 
should Congress do to sustain the momentum created by ARRA?

A4. The best thing Congress can do to maintain the momentum created by 
ARRA, is to fund these agencies with steady predictable increases as 
authorized in America COMPETES.

Q5.  According to 2010 Science and Engineering Indicators released by 
the National Science Board (NSB) last week, the Federal share of the 
nation's research and development (R&D) funding was an estimated 26 
percent in 2008--down from 30 percent in 2004. Does the fact that the 
Federal share of R&D funding is declining concern you? What is the 
impact of this declining funding trend?

A5. R&D is a key innovation pillar and encouraging the development of 
technologies, supporting nascent industries and funding groundbreaking 
research through R&D investment is integral to America's innovation 
strategy. Trends showing a reduction in Federal R&D funding are indeed 
alarming. Federal R&D dollars have historically supported high-risk, 
far-horizon investments, the variety unlikely to see the same level of 
support from the private sector. Diminishing Federal R&D investment 
will directly impact America's ability to retain its competitive 
advantage in the global arena, and adversely impact the development of 
advanced marketable technologies and services.



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