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


 
                 AVERTING THE STORM: HOW INVESTMENTS IN
                SCIENCE WILL SECURE THE COMPETITIVENESS
                    AND ECONOMIC FUTURE OF THE U.S.

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

                                HEARING

                               BEFORE THE

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 29, 2010

                               __________

                           Serial No. 111-111

                               __________

     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
STEVEN R. ROTHMAN, New Jersey        MICHAEL T. McCAUL, Texas
JIM MATHESON, Utah                   MARIO DIAZ-BALART, Florida
LINCOLN DAVIS, Tennessee             BRIAN P. BILBRAY, California
BEN CHANDLER, Kentucky               ADRIAN SMITH, Nebraska
RUSS CARNAHAN, Missouri              PAUL C. BROUN, Georgia
BARON P. HILL, Indiana               PETE OLSON, Texas
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
JOHN GARAMENDI, California
VACANCY


                            C O N T E N T S

                           September 29, 2010

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

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

                           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................................................     9
    Written Statement............................................    10

Prepared Statement by Representative Jerry F. Costello, Member, 
  Committee on Science and Technology, U.S. House of 
  Representatives................................................    12

                               Witnesses:

Mr. Norman R. Augustine, Retired Chairman and CEO of the Lockheed 
  Martin Corporation and Former Undersecretary of the Army
    Oral Statement...............................................    13
    Written Statement............................................    15
    Biography....................................................    17

Dr. Craig Barrett, Retired Chairman and CEO of Intel Corporation
    Oral Statement...............................................    18
    Written Statement............................................    19
    Biography....................................................    21

Mr. Charles Holliday, Jr., Chairman of the Board of Bank of 
  America and Retired Chairman of the Board and CEO of DuPont
    Oral Statement...............................................    22
    Written Statement............................................    23
    Biography....................................................    28

Dr. C.D. (Dan) Mote, Jr., President Emeritus of the University of 
  Maryland and Glenn L. Martin Institute Professor of Engineering
    Oral Statement...............................................    29
    Written Statement............................................    30
    Biography....................................................    31

Discussion.......................................................    32

             Appendix 1: Answers to Post-Hearing Questions

Mr. Norman R. Augustine, Retired Chairman and CEO of the Lockheed 
  Martin Corporation and Former Undersecretary of the Army.......    52

Dr. Craig Barrett, Retired Chairman and CEO of Intel Corporation.    55

Mr. Charles Holliday, Jr., Chairman of the Board of Bank of 
  America and Retired Chairman of the Board and CEO of DuPont....    57

Dr. C.D. (Dan) Mote, Jr., President Emeritus of the University of 
  Maryland and Glenn L. Martin Institute Professor of Engineering    58


    AVERTING THE STORM: HOW INVESTMENTS IN SCIENCE WILL SECURE THE 
            COMPETITIVENESS AND ECONOMIC FUTURE OF THE U.S.

                              ----------                              


                     WEDNESDAY, SEPTEMBER 29, 2010

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

    The Committee met, pursuant to call, at 10:18 a.m., in Room 
2318 of the Rayburn House Office Building, Hon. Bart Gordon 
[Chairman of the Committee] presiding.


                            hearing charter

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     U.S. HOUSE OF REPRESENTATIVES

                  Averting the Storm: How Investments

               in Science Will Secure the Competitiveness

                    and Economic Future of the U.S.

                     wednesday, september 29, 2010
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

1. Purpose

    On Wednesday, September 29, 2010, the Committee on Science and 
Technology will hold a hearing to receive testimony from distinguished 
members of the 2005 ``Rising Above the Gathering Storm'' Committee who 
participated in a recent review of the 2005 report and produced an 
updated report entitled, Rising Above the Gathering Storm, Revisited: 
Rapidly Approaching Category 5. Witnesses will comment on the findings 
included in the new report, and offer recommendations to the Committee 
and to Congress on how to maintain U.S. competitiveness and economic 
security for the long-term.

2. Witnesses

          Mr. Norman R. Augustine, retired Chairman and CEO of 
        the Lockheed Martin Corporation and former Undersecretary of 
        the Army

          Dr. Craig Barrett, retired Chairman and CEO of Intel 
        Corporation

          Mr. Charles Holliday, Jr., Chairman of the Board of 
        Bank of America and retired Chairman of the Board and CEO of 
        DuPont

          Dr. C.D. (Dan) Mote, Jr., President Emeritus of the 
        University of Maryland and Glenn L. Martin Institute Professor 
        of Engineering

3. Overarching Questions

          Why is the promotion of science, technology and STEM 
        education so critical to America's prosperity? What are the 
        principal challenges the United States faces in these areas as 
        it competes in the global economy?

          What specific steps should the federal government 
        take to ensure that the United States remains the world leader 
        in innovation and job creation? What role can reauthorization 
        of the America COMPETES Act play in securing U.S. 
        competitiveness and economic security?

4. Brief Overview

          In May 2005, at the request of Congress, the National 
        Academy of Sciences (NAS) began a study of ``the most urgent 
        challenges the United States faces in maintaining leadership in 
        key areas of science and technology.'' NAS assembled a high-
        level panel of senior scientists and business and university 
        leaders and produced a report entitled, Rising Above the 
        Gathering Storm: Energizing and Employing America for a 
        Brighter Economic Future.

          The NAS report offered four broad recommendations: 
        (A) increase America's talent pool by vastly improving K-12 
        science and mathematics education; (B) sustain and strengthen 
        the nation's traditional commitment to long-term basic 
        research; (C) make the United States the most attractive 
        setting in which to study and perform research; and (D) ensure 
        that the United States is the premier place in the world to 
        innovate. The NAS report also described 20 explicit steps that 
        the federal government could take to implement its 
        recommendations.

          In August 2007, in response to the recommendations in 
        the Gathering Storm report, Congress enacted and the President 
        signed the America COMPETES Act, an Act to invest in innovation 
        through research and development, and to improve the 
        competitiveness of the United States. The COMPETES conference 
        report received overwhelming bipartisan support in both 
        chambers of Congress, with a vote of 367 to 57 in the House, 
        and by unanimous consent in the Senate.

          The 2007 COMPETES Act implemented the majority of the 
        Gathering Storm recommendations that fell within the 
        jurisdiction of the Science and Technology Committee and the 
        Education and Labor Committee, and their respective 
        counterparts in the Senate. Specifically, COMPETES placed the 
        National Science Foundation (NSF), the National Institute of 
        Standards and Technology's (NIST) research labs, and the 
        Department of Energy's (DOE) Office of Science on a 7-year 
        doubling path. In addition, the Act created ARPA-E at DOE, and 
        addressed many specific policies to strengthen the research 
        programs across all three of the agencies. Finally, the Act 
        authorized a number of programs to strengthen K-12 STEM 
        education, in particular by ensuring that current and future 
        teachers are well prepared to teach STEM subjects. The COMPETES 
        Act expires at the end of this month.

          It took two years to realize appropriations for the 
        COMPETES Act. Most of this funding was provided through the 
        American Recovery and Reinvestment Act (ARRA), a one-time, two-
        year infusion of funding into science and technology that 
        helped research agencies provide support for a long backlog of 
        world class R&D facilities and top-rated research proposals. 
        The current budget and economic environment has challenged 
        Administration, Congressional and stakeholder efforts to ensure 
        sustainable increases in funding for agencies and programs 
        authorized in COMPETES.

          In May 2010, the House passed a 5-year 
        reauthorization of the America COMPETES Act, by a bipartisan 
        vote of 262-150. The House bill reauthorized all of the 
        programs in the 2007 Act that had been funded, repealed most 
        programs that had never been funded, and in response to various 
        reports since Gathering Storm, created a few new programs 
        focused primarily on innovation. The Senate Committee on 
        Commerce, Science and Transportation reported out its own 
        reauthorization bill in July. The Senate Energy and Natural 
        Resources released a draft of its piece of the reauthorization 
        last week. To date, the Senate has not taken any further action 
        on COMPETES reauthorization.

          The Rising Above the Gathering Storm, Revisited 
        report \1\ opens as follows: ``In the five years that have 
        passed since Rising Above the Gathering Storm was issued, much 
        has changed in our nation and world. Despite the many positive 
        responses to the initial report, including congressional 
        hearings and legislative proposals, America's competitive 
        position in the world now faces even greater challenges, 
        exacerbated by the economic turmoil of the last few years and 
        by the rapid and persistent worldwide advance of education, 
        knowledge, innovation, investment, and industrial 
        infrastructure. Indeed the governments of many other countries 
        in Europe and Asia have themselves acknowledged and 
        aggressively pursued many of the key recommendations of Rising 
        Above the Gathering Storm, often more vigorously than has the 
        U.S. We also sense that in the face of so many other daunting 
        near-term challenges, U.S. government and industry are letting 
        the crucial strategic issues of U.S. competitiveness slip below 
        the surface.''
---------------------------------------------------------------------------
    \1\ http://www.nap.edu/catalog.php?record-id=12999

          The report goes further to state, ``Although 
        significant progress has been made as a result of the above 
        legislation \2\, the Gathering Storm effort once again finds 
        itself at a tipping point. It is widely agreed that addressing 
        America's competitiveness challenge is an undertaking that will 
        require many years if not decades; however, the requisite 
        federal funding of much of that effort is about to terminate. 
        In order to sustain the progress that has begun it will be 
        necessary to (1) reauthorize the America COMPETES Act, and (2) 
        ``institutionalize'' funding and oversight of the Gathering 
        Storm recommendations--or others that accomplish the same 
        purpose--such that funding and policy changes will routinely be 
        considered in future years' legislative processes.
---------------------------------------------------------------------------
    \2\ America COMPETES Act and the American Recovery and Reinvestment 
Act

5. Indicators of U.S. Competitiveness

    The 2010 ``Gathering Storm'' Committee assembled 64 factoids in 
support of their finding that the ``nation's outlook has worsened'' 
since 2005. A few of them are listed here. Citations for these data, in 
addition to a fuller analysis of the current state of U.S. 
competitiveness, can be found in the Gathering Storm, Revisited report.

          In 2009, 51 percent of United States patents were 
        awarded to non-United States companies.

          In less than 15 years, China has moved from 14th 
        place to second place in published research articles (behind 
        the United States).

          GE has now located the majority of its R&D personnel 
        outside the United States.

          In the 2009 rankings of the Information Technology 
        and Innovation Foundation the U.S. was in sixth place in global 
        innovation-based competitiveness, but ranked 40th in the rate 
        of change over the past decade.

          The World Economic Forum ranks the United States 48th 
        in quality of mathematics and science education.

          Ninety-three percent of United States public school 
        students in fifth through eighth grade are taught the physical 
        sciences by a teacher without a degree or certificate in the 
        physical sciences.

          According to the 2008 ACT College Readiness report, 
        78 percent of high school graduates did not meet the readiness 
        benchmark levels for one or more entry-level college courses in 
        mathematics, science, reading and English.

          The United States graduates more visual arts and 
        performing arts majors than engineers.

          Almost one-third of U.S. manufacturing companies 
        responding to a recent survey say they are suffering from some 
        level of skills shortages.

6. Summary of 2005 Gathering Storm report recommendations

    The 2005 NAS report made four recommendations, each of which was 
supported by explicit steps that the federal government could take to 
implement the recommendations. These recommendations and steps are 
provided verbatim below.

10,000 Teachers, 10 Million Minds and K-12 Science and Mathematics 
        Education
    Recommendation A: Increase America's talent pool by vastly 
improving K-12 science and mathematics education.
    Implementation Steps:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          D-4: Ensure ubiquitous broadband Internet access.
    Chairman Gordon. This hearing will come to order. Good 
morning. I want to thank our witnesses for being here on this 
very busy morning. Ralph Hall looked over at me, when he looked 
at you, and said, we got a good group of folks here today, and 
I agree with him.
    This is a very important hearing on securing the 
competitiveness of our economic future here in the United 
States. Just to remind everyone, in 2005, I joined then-
Chairman Sherry Boehlert and Senators Lamar Alexander and Jeff 
Bingaman in requesting the National Academies to conduct a 
study assessing the state of our Nation's competitiveness. The 
resulting report was entitled ``Rising Above the Gathering 
Storm'' and foreshadowed a troubling future for our Nation--one 
in which our scientific leadership, technological edge, and 
ability to compete effectively in the global economy is 
uncertain.
    The report maintained that, without decisive action, our 
children and grandchildren may very well be the first 
generation of Americans to inherit a standard of living lower 
than their parents. The report outlined specific actions to be 
taken to ensure the future competitiveness and prosperity of 
the U.S., including increasing the federal investment in long-
term basic research and improving K-12 science and mathematics 
education.
    Congress responded. In 2007, this committee took the lead 
in drafting legislation to implement the recommendations 
included in the ``Rising Above the Gathering Storm'' report. 
This landmark legislation, which became known as the America 
COMPETES Act, received overwhelming bipartisan support in both 
chambers of Congress, passed by a vote of 367 to 57 in the 
House, and it passed by unanimous consent in the Senate. Norm 
was at an event the other day where I told Senator Alexander 
and Senator Bingaman if they can get unanimous consent in the 
Senate again, then we are going to recommend them to be special 
envoys in the Middle East. That should be a piece of cake after 
working with the Senate.
    Unfortunately, despite our best-laid plans, the America 
COMPETES Act is set to expire tomorrow. A little more than nine 
months ago, in this very room, we held a hearing with the U.S. 
Chamber of Commerce, the National Association of Manufacturers, 
the Business Roundtable, and the Council of Competitiveness on 
the reauthorization of the America COMPETES Act. That hearing 
was one of more than 30 hearings that we have held to inform 
our reauthorization process, all of which have been very 
supportive of reauthorization.
    The Committee reported out the America COMPETES 
Reauthorization Act of 2010 in April. The bill, which continued 
critical investments in our science and technology and renewed 
our commitment to future competitiveness and economic security 
of the United States, passed the House on a bipartisan basis at 
the end of May. The Senate version of the bill was reported out 
of the Senate Commerce Committee in July and is currently 
awaiting floor action.
    Last week, we received a stark reminder about why the 
reauthorization and full funding of America COMPETES is so 
critical. The original ``Rising Above the Gathering Storm'' 
report Committee released an update of its 2005 report entitled 
``Rising Above the Gathering Storm, Revisited, Rapidly 
Approaching Category Five.'' According to the update, the 
Nation's outlook has worsened substantially over the last five 
years. We now face even greater challenges in sustaining our 
competitive position in the world.
    Our marching orders are clear. We must continue what we 
started and recommit ourselves to the ideas we laid out in the 
original COMPETES Act. If this report tells us nothing else, it 
tells us that the worst thing we can do is to let our efforts 
of reauthorization languish.
    So with that I recognize the distinguished Chairman or 
Ranking Member from Texas, Mr. Hall.
    [The prepared statement of Chairman Gordon follows:]

               Prepared Statement of Chairman Bart Gordon

    Good Morning. I want to thank you for being here for this important 
hearing on securing the competitiveness and economic future of the U.S.
    In 2005, I joined then-Chairman Sherry Boehlert and Senators Lamar 
Alexander and Jeff Bingaman in requesting the National Academies to 
conduct a study assessing the state of our nation's competitiveness. 
The resulting report was entitled Rising Above the Gathering Storm and 
foreshadowed a troubling future for this nation--one in which our 
scientific leadership, technological edge, and ability to compete 
effectively in the global economy is uncertain. The report maintained 
that--without decisive action--our children and grandchildren may very 
well be the first generation of Americans to inherit a standard of 
living lower than their parents. The report outlined specific actions 
to be taken to ensure the future competitiveness and prosperity of the 
U.S., including increasing the federal investment in long-term basic 
research and improving K-12 science and mathematics education.
    Congress responded. In 2007, this Committee took the lead in 
drafting legislation to implement the recommendations included in the 
Rising Above the Gathering Storm report. This landmark legislation, 
which became known as the America COMPETES Act, received overwhelming 
bipartisan support in both chambers of Congress. It passed by a vote of 
367-57 in the House and by unanimous consent in the Senate.
    The America COMPETES Act was more than just a rallying cry for U.S. 
scientific and technological leadership and competitiveness. It 
authorized a doubling of basic research budgets at the National Science 
Foundation, the National Institute of Standards and Technology, and the 
Department of Energy's Office of Science. It also established inventive 
programs to train the next generation of math and science teachers and 
to fund the transformational research that will lead to new industries, 
new businesses, and new jobs. These programs are now up and running, 
laying the foundation for sustained U.S. leadership in science, 
technology and innovation and reversing the trend we were warned about 
in Rising Above the Gathering Storm.
    Unfortunately, despite our best laid plans, the America COMPETES 
Act is set to expire tomorrow.
    A little more than 9 months ago, in this very room, we held a 
hearing with the U.S. Chamber of Commerce, the National Association of 
Manufacturers, the Business Roundtable, and the Council on 
Competitiveness on the reauthorization of the America COMPETES Act. 
That hearing was just one of more than 30 hearings we held to inform 
our reauthorization efforts.
    This Committee reported out the America COMPETES Reauthorization 
Act of 2010 in April. The bill, which continued critical investments in 
science and technology, and renewed our commitment to the future 
competitiveness and economic security of the U.S., passed the House on 
a bipartisan basis at the end of May. The Senate version of the bill 
was reported out of the Senate Commerce Committee in July and is 
currently awaiting floor action.
    Late last week, we received a stark reminder about why a 
reauthorization of the America COMPETES Act is so critical. The 
original Rising Above the Gathering Storm Committee released an update 
to its 2005 report entitled Rising Above the Gathering Storm, 
Revisited: Rapidly Approaching Category 5. According to the update, the 
nation's outlook has worsened substantially over the last 5 years and 
we now face even greater challenges in sustaining our competitive 
position in the world.
    Our marching orders are clear. We must continue what we started and 
recommit ourselves to the ideals we laid out in the original COMPETES 
Act. If this report tells us anything, it tells us that the worst thing 
we can do is let our efforts at reauthorization languish.
    Today's hearing may very well be the last hearing I chair in 
Congress. While I am honored to have such a distinguished group of 
witnesses with us today to mark this occasion, I wish we were here to 
discuss a less sobering topic. At the same time, I am confident that, 
in the America COMPETES Act and the pending reauthorization bill, we 
have laid the groundwork to reverse the troubling trajectory laid out 
in this latest report and to ensure our competitiveness and long-term 
prosperity. I fully expect that the COMPETES reauthorization bill will 
be enacted by the end of the year, and that Congress will have once 
again answered this call to action.

    Mr. Hall. Thank you, Mr. Chairman, and I do, I really do 
thank you, and I am beginning to feel like these hearings with 
you and my friends and all of our friends, Mr. Augustine, are 
just episodes of deja vu. We all agree that a strong, skilled, 
and STEM-educated workforce is critical to our Nation's ability 
to compete and our ability to remain the leader in innovation, 
and is our key to economic success.
    And you almost described the Senate properly, but my 
predecessor, Mr. Rayburn, had a new, young Democrat come in and 
went to see the Speaker. He said, show me which Republican you 
want me to take care of, and I will just leave the chimney 
burning. He said, no, no, son. The Republican in the House is 
not the enemy of the Democrat. The Democrat in the House is not 
the enemy to the Republican. The enemy is the Senate. I think 
you had it figured out.
    Almost four years ago we sat in this room with almost the 
same panel and officially kicked off what was to become the 
America COMPETES Act as the Chairman has set out. As everyone 
here is aware, America COMPETES was a culmination of 
recommendations from the often-quoted ``Rising Above the 
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 on this endeavor, and I 
am proud of our accomplishments.
    My message is exactly the same today as it was then and has 
been throughout our current reauthorization of COMPETES. 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.
    And I need to get a speech that doesn't have so many big 
words in it.
    While my message hasn't changed, and seemingly neither has 
the message of Gathering Storm Committee members before today, 
unfortunately, our economy has changed, and I am pleased to see 
that the Gathering Storm revisited report acknowledges ``the 
great difficulty of carrying out the Gathering Storm 
recommendations such as doubling the research budget in today's 
fiscal environment . . . with worthy demand after worthy demand 
confronting budgetary realities.''
    However, I take some issue with not doubling the budget 
then and now just making an overweight aircraft flight worthy 
by removing an engine. That is a pretty good line. That is 
Norm. Rather, I would suggest that the prudent approach would 
be to ensure that our current investments are creating a 
successful return on investment and are being more efficiently 
utilized.
    Perhaps a better analogy would be that in order to make an 
overweight aircraft flight worthy, one needs to offload excess 
baggage, particularly in today's economic uncertainties. We 
need to make sure that we are reaping the benefits of the 
numerous initiatives called for in the initial Gathering Storm 
report and set forth in America COMPETES before creating 
others.
    I am sure it troubles all of us on this committee to hear 
that we continue to be on a decline in a variety of science and 
technology areas, particularly when we have already legislated 
numerous recommendations, set forth in the 2005 report. This 
reinforces my belief, however, that other issues beyond funding 
levels are holding us back. I believe much more needs to be 
done to all of us, not just the Federal Government, to keep and 
in some cases restore the United States to science and 
technology innovation prominence across the board. Everyone has 
a role. The private sector needs to step up, our schools and 
teachers need to step up, parents need to step up, and our 
children need to step up.
    I look forward to the testimony of our distinguished panel 
today because there is no doubt that we still have much to 
accomplish. Everyone here knows of my deep admiration and 
respect for Mr. Augustine and the other four here. Some six 
years ago I suggested that he might make a good candidate for 
President, and he hasn't spoken to me since, but I am serious 
about that, and I see four there that would make good 
candidates.
    I sincerely expect we will hear that it takes a lot more 
than just throwing money at R&D to help us achieve our goals, 
and that America COMPETES is just one aspect of improving 
American's competitiveness. I hope to hear them speak at length 
on the other areas raised in their revised report, a majority 
of which are not within this committee's jurisdiction, but are 
major contributing factors to our competitiveness, and 
encouraging private sector innovation through tax credits, a 
positive regulatory environment, tort reforms, protection of 
intellectual capital, and other such programs will catapult the 
American economy and make us more competitive globally and 
bring new products and jobs to the American people.
    And, Mr. Chairman, I thank you, and I yield back my time if 
I have any left.
    [The prepared statement of Mr. Hall follows:]

           Prepared Statement of Representative Ralph M. Hall

    Thank you, Mr. Chairman. I'm beginning to feel like these hearings 
with you and my good friend, Norm Augustine, are just episodes of deja 
vu. We all agree that a strong, skilled and STEM-educated workforce is 
critical to our Nation's ability to compete, and our ability to remain 
the leader in innovation our key to economic success.
    Almost four years ago we sat in this room with almost this same 
panel 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 Rising Above the 
Gathering Storm (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 on this endeavor, and I 
am proud of our accomplishments.
    My message is the exact same today as it was then and has been 
throughout our current reauthorization of COMPETES: 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, and seemingly neither has the 
message of the Gathering Storm Committee members before us today, 
unfortunately, our economy has.
    I am pleased to see that the Gathering Storm Revisited Report 
acknowledges ``the great difficulty of carrying out the Gathering Storm 
recommendations, such as doubling the research budget, in today's 
fiscal environment . . . with worthy demand after worthy demand 
confronting budgetary realities.'' However, I take some issue with not 
doubling the budget being analogous to ``making an over-weight aircraft 
flight-worthy [by removing] an engine.'' Rather, I would suggest that 
the prudent approach would be to ensure that our current investments 
are creating a successful return on investment and are being more 
efficiently utilized. Perhaps the better analogy would be that in order 
to make an over-weight aircraft flight-worthy, one needs to offload 
excess baggage. Particularly in today's economic uncertainties, we need 
to make sure that we are reaping the benefits of the numerous 
initiatives called for in the initial Gathering Storm report and set 
forth in America COMPETES before creating others.
    I am sure it troubles all of us on this Committee to hear that we 
continue to be on a decline in a variety of science and technology 
areas, particularly when we have already legislated numerous 
recommendations set forth in the 2005 report. This reinforces my 
belief, however, that other issues beyond funding levels are holding us 
back. I believe much more needs to be done by all of us, not just the 
federal government, to keep, and in some cases restore, the United 
States to science and technology innovation prominence across the 
board. Everyone has a role. The private sector needs to step up, our 
schools and teachers need to step up, parents need to step up, and our 
children need to step up.
    I look forward to the testimony of our distinguished panel today, 
because there is no doubt that we still have much to accomplish. 
Everyone here knows of my deep admiration and respect of Norm 
Augustine, and I am eager to hear what he has to say, as well the rest 
of our witnesses. I sincerely expect we will hear that it takes a lot 
more than just throwing money at R&D to help us achieve our goals and 
that America COMPETES is just one aspect of improving America's 
competitiveness. I hope to hear them speak at length on the other areas 
raised in their revised report, a majority of which are not within this 
Committee's jurisdiction, that are major contributing factors to our 
competiveness. Encouraging private sector innovation through tax 
credits, a positive regulatory environment, tort reform, protection of 
intellectual capital, and other such programs will catapult the 
American economy, make us more competitive globally, and bring new 
products and jobs to the American people.
    Thank you, Mr. Chairman.

    Chairman Gordon. Thank you, Mr. Hall.
    Ms. Edwards. Mr. Chairman.
    Chairman Gordon. Yes. The gentlelady from Maryland is 
recognized.
    Ms. Edwards. Thank you, Mr. Chairman, and I know it is not 
our custom, but I wanted to take this moment, and I know that 
the Ranking Member would do it as well, to acknowledge that 
this is probably your last sitting in the Chair in this 
committee, and I just want you to know how much I really 
appreciate--I know that we all do--your leadership and your 
guidance of our Committee. It is one of the committees in the 
Congress that operates in the most unified way on so many 
issues, this one included, and so I just want to thank you for 
your leadership and your guidance and your service in the 
United States Congress.
    Chairman Gordon. Well, thank you. Let us not bury the 
corpse quite yet. Let us let it get cold. We have got a lame 
duck session, we have got more work to do, we have got to get 
this COMPETES passed, but thank you for your very nice words.
    Mr. Hall. I thought she was talking about me there for a 
while.
    Chairman Gordon. Well, Mr. Hall, I wish that we had an 
expanded jurisdiction, because if we did, we would take care of 
those other issues that you mentioned. It is a shame that the 
United States has the second highest corporate tax rate in the 
world, and we certainly have to have other changes.
    But y'all, what we have is what is on our plate, so we want 
to deal with that and deal with it well, and we--if there are 
Members who wish to submit additional opening statements, your 
statements will be added to the report at this point.
    [The prepared statement of Mr. Costello follows:]

         Prepared Statement of Representative Jerry F. Costello

    Good Morning. Thank you, Mr. Chairman, for holding today's hearing 
to receive testimony on the report, Rising Above the Gathering Storm, 
Revisited: Rapidly Approaching Category 5, a five-year review of the 
state of science education and innovation in the U.S.
    In 2005, the National Academy of Sciences (NAS) released its 
landmark report, Rising Above the Gathering Storm, which recommended 
Congress and the administration immediately invest in science 
education, research, and technology to preserve the U.S. role as the 
world leader in innovation. In response to this report, Congress passed 
the America COMPETES Act with bipartisan support in 2007. However, the 
important programs established by this act, particularly for science, 
engineering, technology, and mathematics (STEM) education, were 
underfunded or unfunded for two years until the passage of the American 
Recovery and Reinvestment Act in 2009. Without sufficient funding, 
COMPETES did not have the impact Congress intended.
    Gathering Storm, Revisited makes clear these efforts unless the 
government makes innovation a priority and provides adequate funding, 
the U.S. remains at risk of falling behind in developing and patenting 
new technology; publishing cutting edge research; training the next 
generation of scientists and engineers; and maintaining the most 
competitive workforce in the world. As this report demonstrates, it 
remains imperative that U.S. students, teachers, businesses and workers 
are prepared to continue leading the world in innovation, research and 
technology.
    I am interested in hearing from our witnesses what steps Congress 
and the administration must take to achieve the original goals of 
Gathering Storm, and what new challenges were identified in reviewing 
this report five years later. In particular, I would like to hear how 
the reauthorization of America COMPETES, which expires at the end of 
this month, may achieve these goals and overcome the roadblocks to 
innovation, especially with shrinking budgets and lower private sector 
investment in research and development.
    Further, I share the concerns of our witnesses regarding the steady 
decline of STEM education in the U.S., particularly in grades K-12, 
particularly with the elimination of several K-12 STEM programs in the 
House reauthorization of COMPETES. Since coming to Congress, I have 
recognized investment in STEM education as key to keeping our economy 
strong and growing. I am interested to hear from our witnesses what 
steps they recommend to strengthen our support for STEM education at 
every grade level.
    Finally, for many students, pursuing a college or advanced degree 
in STEM fields is not feasible, particularly in this economy. These 
students will enter the workforce after completing vocational education 
or receiving an associate degree from a community college. Providing 
these students a strong STEM background is no less important, however, 
than training engineers and researchers, particularly if they enter 
medical or manufacturing careers. As you demonstrate in Gathering the 
Storm, Revisited, one-third of manufacturing companies cannot find 
employees with the appropriate skill sets for innovative manufacturing. 
I am interested in how improvements to STEM programs at community 
colleges, such as the partnership between community colleges and 
Manufacturing Extension Partnerships (MEPS) included in the House 
COMPETES reauthorization, may address this gap.
    I welcome our panel of witnesses, and I look forward to their 
testimony. Thank you again, Mr. Chairman.

    At this time I would like to introduce our witnesses. 
First, Mr. Norm Augustine is the Retired Chairman and CEO of 
Lockheed Martin Corporation and former Undersecretary of Army. 
I think ``retired'' is an odd term to be using for him and for 
Dr. Craig Barrett, the also so-called retired Chairman and CEO 
of Intel. I think that they probably would like to go back and 
get a rest running companies rather than all of the volunteer 
efforts they are doing, and Dr. Barrett, we know that when you 
leave your beloved Montana to come here, it is on a mission 
that you feel strongly about, and we also thank you for taking 
the Chairmanship of Change the Equation, rounding up 100 major 
CEOs that recognize the importance of our STEM education, and 
trying to move that ball forward.
    And Mr. Charles Holliday is the Chairman of the Board of 
Bank of America and the retired Chairman of the Board and CEO 
of DuPont, and once again, we know there are other demands, but 
you have made really service, your patriotic service to the 
country important. Thank you for that. Dr. Dan Mote is the 
President Emeritus of the University of Maryland as well as the 
Glenn L. Martin Institute Professor of Engineering, and I am 
sure they would like to see you more at the University of 
Maryland, but you, too, have been giving of your time.
    So, Mr. Augustine, please begin your testimony.

 STATEMENT OF NORMAN R. AUGUSTINE, RETIRED CHAIRMAN AND CEO OF 
 THE LOCKHEED MARTIN CORPORATION AND FORMER UNDERSECRETARY OF 
                            THE ARMY

    Mr. Augustine. Mr. Chairman, Congressman Hall, and Members 
of the Committee, thank you for this opportunity to appear on 
behalf of my colleagues on the Gathering Storm Committee, 
including my three colleagues here at this table. I would like 
to submit a formal statement for the record with the 
Committee's permission.
    Chairman Gordon. That is without objection.
    Mr. Augustine. Thank you. Five years ago, as you pointed 
out, Mr. Chairman, this committee together with its counterpart 
in the Senate asked the National Academies to examine America's 
future competitiveness outlook. The members of the Academies 
Committee quickly interpreted that to mean the ability of all 
Americans to have the opportunity to compete for quality jobs 
in the new global economy.
    Our conclusion, I am sorry to say, was that we were on a 
path at the time whereby we were likely to suffer sustained 
unemployment at very high levels because Americans simply won't 
be able to compete successfully for jobs. The only solution we 
could see to that was to be among the world's leaders at 
innovation, and to do that we pointed to 20 actions that would 
be required, at least as a starting point. The two highest 
priorities of those were to vastly improve the Nation's K-12 
education system and to double the funding for basic research, 
primarily at our Nation's research universities.
    We emphasized the importance of science and engineering 
because numerous studies have shown that over half the growth 
of the GDP for many years has been attributable directly to 
advancements in science and in engineering.
    We have made progress, thanks to the work of this committee 
to a very large degree. The America COMPETES Act made possible 
a number of important actions that have taken place. The 
research budget, at least, has begun on the new trajectory we 
proposed; ARPA-E [Advanced Research Projects Agency-Energy] is, 
I think, successfully launched and under way; the R&D tax 
credit was continued; the State Department reassessed the 
requirements that were being imposed for visa applicants who 
want to be students in this country. But there is a problem, 
and the problem is that almost all the good things that have 
been done have been dependent upon funding from the stimulus 
package and from authorization from the America COMPETES Act. 
And as you know, both of these are due to expire momentarily. 
So we stand on a precipice in terms of the accomplishments that 
have been made.
    There are a number of things that have gone against us 
during the past five years since the study was first done. 
Others are getting better quickly. They are building new 
universities. This year there will be 98,000 Chinese students 
going to school in America, and 103,000 Indian students going 
to school in America, many of them studying engineering and 
science.
    Secondly, the stress on the federal budget, as the people 
in this room would know so well, is making it even more 
difficult to implement many of the things we need to do to be 
more competitive as a nation.
    Thirdly, our universities, something that was unthought of 
five years ago, today are being very much stressed in the sense 
of reduced financial support from states, reduced endowments. 
And this is resulting in other countries' universities 
targeting and picking off some of the finest researchers and 
professors at our universities.
    And finally, at the time we met five years ago, the 
biosciences had been well funded--more accurately, the health 
sciences--whereas since that time they, too, have suffered the 
impact of inflation and some reductions.
    I would share just a few statistics with you. We are used 
to thinking of America as being number one. Today, some facts 
based on data from respected sources: in terms of innovation-
based competitiveness, we have now been ranked number six; our 
fraction of the young workforce with a high school diploma, we 
rank 11th in the world. Our college completion rate, we are 
16th; our high school completion ranked 20th. In achievement 
among 17 year olds in science, we rank 21st. Broadband internet 
access, we rank 22nd; life expectancy at birth, 24th; 
achievement of 17 year olds in mathematics, 25th; the fraction 
of college graduates who study science and engineering, 27th. 
In rate of improvement in competitiveness, 40th; the quality of 
math and science K-12 education, 48th; and the density of 
mobile telephone subscribers, 72nd.
    Now, that is not the America that I like to think of us as 
being. And can you imagine if our--when our Olympic team 
finished fourth in basketball, you recall the impact it had and 
what we did about it. My hope is that we can have an even more 
energetic impact to these circumstances.
    This isn't the America that I would want to see for my 
grandchildren, and I suspect many in this room will share that 
view for their children and grandchildren.
    Thank you very much.
    [The prepared statement of Mr. Augustine follows:]

               Prepared Statement of Norman R. Augustine

    Chairman Gordon and Members of the Committee, thank you for this 
opportunity to discuss the results of the report prepared for the 
National Academies that was released this past week and is titled, 
``Rising Above the Gathering Storm, Revisited: Rapidly Approaching 
Category 5.'' I would also like to take this opportunity to thank the 
Committee for its key role in supporting science and engineering in 
America and, through those disciplines, improving the quality of life 
of all our nation's citizens.
    The most recent report, ``Rising Above the Gathering Storm, 
Revisited'' traces its origin to a request by this Committee and its 
counterpart in the Senate. That request was made on a bipartisan basis 
some five years ago and resulted in a National Academies study that 
came to be known as the ``Gathering Storm study'' after the first line 
in the title of the report that presented its findings. The request 
from the Congress asked that the Academies address America's future 
competitiveness outlook . . . which the Academies committee quickly 
came to define as the ability for all Americans to compete for quality 
jobs in the new global marketplace. It is those jobs that will largely 
define the quality of life that will be enjoyed by working individuals 
and their families, and it is the income from those jobs that will 
provide the tax resources needed by our government to provide the 
benefits that we all have come to expect, such as homeland security, 
healthcare, social security and much, much more. I believe it is fair 
to state that the report enjoyed strong bipartisan support of the 
members of this body.
    The original National Academies committee was composed of 20 
members having rather diverse professional backgrounds, including then 
present and former CEO's of large firms, presidents of major public and 
private universities, the head of a state public K-12 school system, 
and three Nobel Laureates. The principal result of their deliberations 
was a series of 20 specific, interdependent actions that could be taken 
by the federal government to enhance the ability of Americans to 
compete for jobs in the increasingly competitive world employment 
market. This prioritized list was headed by the imperative to improve 
the nation's K-12 education system and was immediately followed by the 
need to double within seven years the nation's real investment in basic 
research.
    The report placed particular emphasis on science and engineering 
because numerous studies have indicated that at least half the growth 
in the nation's GDP during the past half-century can be attributed to 
advancements in these fields. With the accelerating pace of science and 
engineering one can reasonably expect the creation of jobs in the next 
50 years to exhibit an even greater dependency on developments in such 
disciplines. It should be noted in this regard that the Gathering Storm 
committee considers jobs in science and engineering to be means to an 
end and not an end in themselves . . . that is, only four percent of 
America's workforce is employed in science and engineering--the 
disproportionate importance of these professions stems from the fact 
that they create jobs for a very large number of other citizens.
    In its original report, released exactly five years ago, the 
Gathering Storm committee concluded that America was on a path whereby 
large numbers of its citizens would not be competitive for quality 
jobs--and that chronic built-in unemployment would be a likely 
consequence of structural weaknesses . . . again, most prominently, 
under-investment in education and under-investment in the creation of 
knowledge through research--the underpinnings of innovation.
    A number of important initiatives were undertaken following the 
completion of the work of the Gathering Storm committee as well as that 
of numerous other groups, including the establishment of ARPA-E, 
increasing research funding approximately on the profile the Gathering 
Storm committee recommended, implementing steps to improve K-12 
education, strengthening policies affecting student visa applicants and 
funding for research and development tax credits.
    However, most of the above actions were authorized under the 
America Competes Act and were funded as part of the economic recovery 
package. As you know, the Competes Act requires reauthorization this 
year and the recovery package is approaching its sunset insofar as it 
serves as a source of funding. Thus, the efforts that are now underway 
find themselves on a budgetary precipice.
    Underlying the Gathering Storm committee's findings was such 
evidence as that cited by Frances Cairncross writing in The Economist 
who noted that ``distance is dead'' . . . a victim of the advent of 
modern aircraft and information systems. Distance no longer matters to 
those seeking employees for a large variety of quality jobs. In the 
words of Tom Friedman, in his book, The World is Flat, ``Globalization 
has accidentally made Beijing, Bangalore and Bethesda next door 
neighbors.'' This is particularly true when Americans must compete for 
jobs.
    The report released this past week, ``Rising Above the Gathering 
Storm, Revisited: Rapidly Approaching Category 5,'' was prepared at the 
request of the presidents of the National Academy of Sciences, the 
National Academy of Engineering, and the Institute of Medicine. The 
same Committee that prepared the original Gathering Storm study 
conducted the more recent examination--with the exception of three 
members who were unable to participate. One of these members is our 
much admired colleague and Nobel Laureate, Josh Lederberg, who passed 
away. The other two are currently serving in key roles in the federal 
government. The findings of the remaining 17 Committee members were 
unanimous.
    The Committee focused on events occurring during the past five 
years that have impacted the initial conclusions and recommendations 
and their continued appropriateness. The members found the need to 
continue to support the original proposed actions even more compelling 
and urgent today than at the time they were initially proposed. Both 
specific events as well as overarching matters that occurred during the 
five years since the initial report was prepared led to this 
conclusion. Examples of the former include:

          Six million more American youth have dropped out of 
        high school since the original Gathering Storm report was 
        produced and each of these individuals now faces an 
        extraordinarily high prospect of prolonged unemployment.

          The World Economic Forum has ranked the U.S. 48th in 
        quality of mathematics and science education.

          In 2009, 51 percent of U.S. patents were awarded to 
        non-U.S. companies.

          Federal funding of research in the physical sciences 
        as a fraction of GDP fell by 54 percent in the 25 years after 
        1970. The corresponding decline in engineering funding was 51 
        percent.

          The Information Technology and Innovation Foundation 
        ranked the U.S. in sixth place in global innovation based 
        competitiveness and ranked the U.S. 40th in the rate of 
        improvement over the past decade.

          China has now replaced the United States as the 
        world's number one technology exporter.

          Eight of the 10 global companies with the largest R&D 
        budgets have established R&D facilities in China, India, or 
        both.

          General Electric, like a growing number of other 
        firms, has relocated the majority of its R&D personnel outside 
        the United States.

          Ninety-three percent of U.S. public schools in fifth 
        through eighth grade are taught the physical sciences by a 
        teacher without a degree or certificate in the physical 
        sciences.

          The United States ranks 27th among developed nations 
        in the proportion of college students receiving undergraduate 
        degrees in science or engineering.

          The United States ranks 20th in high school 
        completion rate among industrialized nations and 16th in 
        college completion rate.

          An American company recently opened the world's 
        largest private solar R&D facility . . . in Xian, China.

          Between 1996 and 1999, 157 new drug formulations were 
        approved by the United States. In a corresponding period 10 
        years later, the number dropped to 74.

          Two-thirds of those receiving PhD's in engineering 
        from U.S. universities are foreign-born. These individuals 
        increasingly indicate their intention eventually to return to 
        their home countries.

          All of the National Academies ``Gathering Storm'' 
        Committee's recommendations could have been fully implemented 
        with the sum Americans spent on cigarettes--with $60B a year 
        left over.

    Turning to macroscopic developments, four circumstances warrant 
particular mention. The first of these is that other nations are 
rapidly improving their competitive ability due to a major emphasis on 
education, including the creation of new science- and engineering-
focused universities and very progressive tax policies that favor 
innovation-driven firms.
    Second, the ability of the U.S. to respond to the competitiveness 
challenges it faces has been increasingly hindered by the extraordinary 
budget pressures faced by the federal government as well as state and 
local governments.
    Third, altogether unforeseen at the time of the Gathering Storm 
study five years ago, America's higher education system, long the gold 
standard of the world, is now being severely threatened. The source of 
this challenge is the serious financial condition of many states plus 
the loss of endowments suffered during the recent financial downturn. 
As a result, universities are taking heretofore largely unprecedented 
actions, including mandatory furloughs for faculty, faculty layoffs and 
large increases in tuition. Concurrently, universities in other nations 
are seeing this as an opportunity to attract many of the finest 
researchers and educators from America's educational institutions, 
particularly its research universities.
    Fourth, at the time the original Gathering Storm study was 
conducted, the biosciences, or more precisely the health sciences, had 
just benefitted from a doubling of federal research funding and 
therefore were not given primary consideration in the Academies' work. 
Since that time, however, this upward trend has been reversed and the 
effects of inflation have further taken their toll.
    The underlying dilemma faced by a firm seeking to determine where 
to build a new R&D facility or factory is illustrated by the following 
set of choices comparing two nations from a competitiveness standpoint:
    In Country A, the average non-professional worker ranks in the 
lower quartile of the global high school class and expects to be paid a 
wage of $17 per hour plus an additional third of that amount in 
benefits; the nation's economy is mature in terms of growth potential; 
it has the second highest corporate tax rate in the world; and the 
average firm spends almost three times as much on litigation as on 
research. In Country B, the average non-professional worker ranks in 
the top 10 percent of the global high school class and is eager to work 
for $1.50 per hour with no additional benefits; five-year tax holidays 
are commonly granted to startup high tech firms; five to eight 
professional employees can be hired for the cost of one in Country A; 
and the domestic market for products is growing exponentially.
    Country A is, of course, the United States, and even the most loyal 
CEO's and boards of directors of American firms will, given their 
fiduciary responsibilities, generally elect to move to Country B.
    In summary, the Gathering Storm committee unanimously concluded 
that America's competitive situation is even more perilous today than 
it found it to be five years ago. The recommendations in the initial 
report are deemed still to be entirely appropriate--the task being to 
implement those recommendations on a continuing basis. Doing so will 
require reauthorizing the America Competes Act and providing the 
funding needed to carry out the above-mentioned recommendations.
    It is noted that meeting the competitiveness challenge is a 
marathon, not a sprint, and will thus require our enduring efforts. It 
is the Gathering Storm committee's conviction that this is an endeavor 
in which all Americans can unite since the fundamental issue is the 
quality of life we will leave to our children and our grandchildren.
    Thank you for affording me this opportunity to share with you the 
findings of my colleagues on the Gathering Storm committee. I would be 
pleased to address any questions you might wish to raise.

                   Biography for Norman R. Augustine

    NORMAN R. AUGUSTINE was raised in Colorado and attended Princeton 
University where he graduated with a BSE in Aeronautical Engineering, 
magna cum laude, and an MSE. He was elected to Phi Beta Kappa, Tau Beta 
Pi and Sigma Xi.
    In 1958 he joined the Douglas Aircraft Company in California where 
he worked as a Research Engineer, Program Manager and Chief Engineer. 
Beginning in 1965, he served in the Office of the Secretary of Defense 
as Assistant Director of Defense Research and Engineering. He joined 
LTV Missiles and Space Company in 1970, serving as Vice President, 
Advanced Programs and Marketing. In 1973 he returned to the government 
as Assistant Secretary of the Army and in 1975 became Under Secretary 
of the Army, and later Acting Secretary of the Army. Joining Martin 
Marietta Corporation in 1977 as Vice President of Technical Operations, 
he was elected as CEO in 1987 and chairman in 1988, having previously 
been President and COO. He served as president of Lockheed Martin 
Corporation upon the formation of that company in 1995, and became CEO 
later that year. He retired as chairman and CEO of Lockheed Martin in 
August 1997, at which time he became a Lecturer with the Rank of 
Professor on the faculty of Princeton University where he served until 
July 1999.
    Mr. Augustine was Chairman and Principal Officer of the American 
Red Cross for nine years, Chairman of the Council of the National 
Academy of Engineering, President and Chairman of the Association of 
the United States Army, Chairman of the Aerospace Industries 
Association, and Chairman of the Defense Science Board. He is a former 
President of the American Institute of Aeronautics and Astronautics and 
the Boy Scouts of America. He is a current or former member of the 
Board of Directors of ConocoPhillips, Black & Decker, Proctor & Gamble 
and Lockheed Martin, and was a member of the Board of Trustees of 
Colonial Williamsburg. He is a Regent of the University System of 
Maryland, Trustee Emeritus of Johns Hopkins and a former member of the 
Board of Trustees of Princeton and MIT. He is a member of the Advisory 
Board to the Department of Homeland Security, was a member of the Hart/
Rudman Commission on National Security, and served for 16 years on the 
President's Council of Advisors on Science and Technology. He is a 
member of the American Philosophical Society, the National Academy of 
Sciences and the Council on Foreign Affairs, and is a Fellow of the 
National Academy of Arts and Sciences and the Explorers Club.
    Mr. Augustine has been presented the National Medal of Technology 
by the President of the United States and received the Joint Chiefs of 
Staff Distinguished Public Service Award. He has five times received 
the Department of Defense's highest civilian decoration, the 
Distinguished Service Medal. He is co-author of The Defense Revolution 
and Shakespeare in Charge and author of Augustine's Laws and 
Augustine's Travels. He holds 24 honorary degrees and was selected by 
Who's Who in America and the Library of Congress as one of ``Fifty 
Great Americans'' on the occasion of Who's Who's fiftieth anniversary. 
He has traveled in over 100 countries and stood on both the North and 
South Poles of the earth.

    Chairman Gordon. Thank you, Mr. Augustine.
    Dr. Barrett is recognized.

 STATEMENT OF CRAIG BARRETT, RETIRED CHAIRMAN AND CEO OF INTEL 
                          CORPORATION

    Dr. Barrett. Thank you, Mr. Chairman. It is a pleasure to 
be invited here to testify today. I have also submitted a 
written testimony. I would like to supplement that kind of 
`freelance,' if you will.
    I do not represent Intel, although I worked there for 35 
years, and I am still very proud of that company. It employs 
nearly 50,000 U.S. citizens, does 75 percent of its 
manufacturing still here in the United States, and 85 to 90 
percent of its R&D budget is spent here in the United States, 
and the R&D budget is substantially greater than that of the 
National Science Foundation. So it is an appreciable investor 
in R&D here in the U.S.
    While CEO and then Chairman of Intel, I had the privilege 
to travel quite a bit. I probably visited over 100 countries 
for Intel, had the opportunity to speak to business leaders, 
academic leaders in those countries, and government leaders. 
And during those conversations I always heard exactly the same 
thing, and I think it is very true here in the United States: 
every one of those countries was interested in increasing its 
competitiveness.
    The `competitiveness quotient,' so to speak, was derived by 
three factors. One was the education level of the workforce. 
You can't be number one unless you have the number one 
education system. The investment in new ideas, the investment 
in R&D. It is new ideas that create the next generation of 
products, services, and create wealth. And the third feature 
they were interested in was the environment, the environment 
simply to let smart people get together with smart ideas, and 
do something wonderful. And the environment is partially set by 
society, partially set by government rules and regulations, tax 
rates, intellectual property protection, ability to start a 
company, bankruptcy laws, a whole series of issues.
    ``Rising Above the Gathering Storm'' and the America 
COMPETES Act focus on those three issues; smart people, smart 
ideas, and the right environment, and five years after the 
fact--that the initial report was introduced--the follow-up 
report that Norm Augustine mentioned. I think we are not 
batting particularly well on either of those or any of those 
three topics.
    I would fully support the reauthorization of the America 
COMPETES Act. I do not think it is solely an issue of 
government, though, as the Chairman mentioned. It is an issue 
for society and private sector to become involved, and you 
mentioned the private sector in the Change the Equation group, 
which was just announced a week or so ago here in Washington, 
DC. About 110 CEOs of major U.S. corporations involved in 
science and technology, but also involved in consumer goods and 
many other industries, have banded together to do their part to 
promote science, technology, engineering, and mathematics 
education and interest in the youth of America. I think one of 
our biggest challenges is getting the younger generation 
interested in what is going forward.
    The Change the Equation group is committed to really three 
major efforts. One is improve the teaching of science and math 
in K-12, better science and math teachers. Secondly, it is 
involved in getting kids interested in science and math out of 
school. That is such things as robotics competitions, science 
fairs, a number of activities that the private sector is 
already involved with. We want to amplify those and spread them 
geographically across the United States. In fact, the first-
year goal is to have programs of that type in 100 new 
geographic areas where the programs do not exist today over the 
next year.
    The third thing we are interested in doing is, in fact, 
using the CEOs in the private sector as the voice of advocacy 
for the basic tenets of the America COMPETES Act and the 
``Rising Above the Gathering Storm'' recommendations--dealing 
with state, local legislators to, in fact, mobilize them to 
focus on STEM issues, on K-12 issues, on research, university 
issues, and job creation in their local areas.
    I think we are off to a good start in that respect. By 
golly, if I look at what is going on around the world, we have 
a heck of a lot of work in front of us, and unless the America 
COMPETES Act is reauthorized going forward, and coupling that 
public sector set of programs with the private sector, I think 
we are going to continue to struggle.
    Thank you.
    [The prepared statement of Dr. Barrett follows:]

                  Prepared Statement of Craig Barrett

    Thank you, Mr. Chairman, for the opportunity to testify before you 
today. I also want to thank Ranking Member Hall and all the members of 
the Committee on Science and Technology for your support for basic 
research and development and your commitment to improving education 
standards for our children.
    My name is Craig Barrett and I am the former Chairman and CEO of 
Intel Corporation. Intel is the world's largest manufacturer of 
semiconductors, three-quarters of which are manufactured here in the 
United States. Intel employs more than 40,000 people in the United 
States and spends billions of dollars each year on research and 
development, most of which is done in the U.S.
    As a leading information technology company, Intel is dependent on 
highly-skilled engineers, mathematicians and scientists to maintain its 
competitive position in the marketplace. Increasingly, however, it is 
difficult for companies like Intel to find the qualified American 
workers they need to develop new and innovative products. Our 
competitors around the world are investing more in their education 
systems and producing workers who are better prepared for the high-
skilled jobs of the future.
    As a country, we need to re-double our commitment to educating our 
children and investing in basic research that will lead to breakthrough 
technological developments. That is why I support and encourage your 
efforts to reauthorize the America Competes Act.
    I am pleased to be here with you today to examine where we stand on 
the challenge of U.S. Competitiveness five years after the National 
Academy of Engineering issued its Gathering Storm report, which I had 
the honor to contribute to under the direction of our chair Norm 
Augustine.
    As you know, the Gathering Storm report found that as a country we 
need to create high-quality jobs for Americans and develop clean, 
affordable and reliable energy. We made four recommendations designed 
to help us achieve those goals:

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

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

        3.  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.

        4.  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.

    Following the issuance of this report, Congress took steps to 
address many of these recommendations by adopting the America Competes 
Act of 2007. That legislation called for a doubling of the research 
budgets for key agencies like the National Aeronautics and Space 
Administration (NASA), the National Institute of Standards and 
Technology (NIST), the National Oceanic and Atmospheric Administration 
(NOAA), The National Science Foundation (NSF) and the Department of 
Energy (DOE). The Act also directed significant resources to educating 
students in the key areas of science, technology, education and 
mathematics.
    But despite the important first steps taken in 2007, the job is not 
finished. That is why I commend this Committee, and the House of 
Representatives, for this year adopting a reauthorization of the 
Competes Act that builds on the initial legislation. The bill you 
passed would not only improve STEM education efforts to help prepare 
students for the highly technical jobs of the future, but would keep us 
on the path towards efforts to develop transformational new energy 
technologies. These goals are too important to be abandoned and I 
encourage the Senate to follow in your footsteps and pass the America 
Competes reauthorization before this Congress comes to an end.
    The responsibility to better prepare our students for careers in 
the STEM fields falls not just to the government, of course, but to the 
private sector as well. As you may be aware, I recently accepted the 
challenge of serving as Chair of an important initiative called 
``Change the Equation.'' Change the Equation is a private sector effort 
comprised of over 100 companies from all different industry sectors and 
from all across the country. We aim to improve STEM education by:

        1.  Improving STEM teaching at all grade levels.

        2.  Inspiring student appreciation and excitement for STEM 
        programs and careers.

        3.  Achieving a sustained commitment to improving STEM 
        education from business leaders, government officials, STEM 
        educators and other stakeholders through innovation, 
        communication, collaboration and data-based decision making.

    Change the Equation will work with our member companies to identify 
education programs that are successful and spread them to more than 100 
sites across the country. We are also going to assess STEM education 
efforts in the 50 States by building a scorecard to measure their 
performance. And we are going to disseminate principles for how 
businesses can help to improve STEM education.
    We know that STEM literacy is a business imperative for our 
nation's economic excellence, success and citizenship. Our 
collaboration will not only help students, but will revive our economy, 
fuel our industries, strengthen our democracy and ultimately empower 
our nation.
    Every year reports are produced that say the same thing. We need 
action. A recent report projected that by 2018 there will be eight 
million jobs in STEM-related fields. However, the report also indicates 
that the next generation of employees in America will be unprepared and 
unqualified to take advantage of these positions.
    A follow up report to Gathering Storm highlights the many 
challenges we still face. It found that:

          Sixty-nine percent of United States public school 
        students in fifth through eighth grade are taught mathematics 
        by a teacher without a degree or certificate in mathematics.

          Only four of the top ten companies receiving United 
        States patents last year were United States companies.

          United States consumers spend significantly more on 
        potato chips than the government devotes to energy R&D.

    America has an innovation problem. And we need to solve it. The 
America Competes Act of 2007 took steps towards tackling this problem 
and the reauthorization of the Act this year would signal continued 
Congressional support for making the investments we must make.
    But to truly benefit from America's renewed commitment to basic 
research, and to provide American students the STEM skills they need to 
keep America competitive, we need both the government and the private 
sector to further increase their efforts and make the hard choices 
required--investing in our students, in our schools, and in the 
creation of new job opportunities by removing barriers to innovation.
    The commitment of the private sector and the support of government 
are both essential to ensure that American remains competitive in the 
global marketplace. While it is incumbent upon U.S. businesses to make 
smart investments in the technologies they pursue and the people they 
hire, it is equally important that the government adopt policies that 
give American industry a competitive advantage.
    Finally, Mr. Chairman, as you will be retiring at the end of this 
Congress, I want to express my appreciation to you for your 26 years of 
service to our nation. You have always been one of the most passionate 
advocates for investment in science, basic research, STEM education and 
all of the keystones of innovation that are so critical to our future.
    Thank you again, Mr. Chairman, for the opportunity to testify 
before you today. I look forward to answering any questions you may 
have.

                      Biography for Craig Barrett

    Dr. Craig Barrett is a leading advocate for improving education in 
the U.S. and around the world. He is also a vocal spokesman for the 
value technology can provide in raising social and economic standards 
globally. In 2009, he stepped down as Chairman of the Board of Intel 
Corporation, a post he held from May 2005 to May 2009.
    Craig Barrett was born in San Francisco, California. He attended 
Stanford University in Palo Alto, California from 1957 to 1964, 
receiving Bachelor of Science, Master of Science and Ph.D. degrees in 
Materials Science. After graduation, he joined the faculty of Stanford 
University in the Department of Materials Science and Engineering, and 
remained through 1974, rising to the rank of Associate Professor. Dr. 
Barrett was a Fulbright Fellow at Danish Technical University in 
Denmark in 1972 and a NATO Postdoctoral Fellow at the National Physical 
Laboratory in England from 1964 to 1965. He is the author of over 40 
technical papers dealing with the influence of microstructure on the 
properties of materials, and a textbook on materials science, 
Principles of Engineering Materials.
    Dr. Barrett joined Intel Corporation in 1974 and held positions of 
vice president, senior vice president and executive vice president from 
1984 to 1990. In 1992, he was elected to Intel Corporation's Board of 
Directors and was promoted to chief operating officer in 1993. Dr. 
Barrett became Intel's fourth president in 1997, chief executive 
officer in 1998 and chairman of the Board in 2005.
    Dr. Barrett served until June 2009 as Chairman of the United 
Nations Global Alliance for Information and Communication Technologies 
and Development, which works to bring computers and other technology to 
developing parts of the world. He co-chairs Achieve, Inc., is vice 
chairman of the National Forest Foundation, president and chairman of 
the BASIS School, Inc. Board of Directors, and a member of the Board of 
Directors of Society for Science and the Public, Science Foundation 
Arizona, and Dossia. Dr. Barrett serves on the advisory board of the 
Peter G. Peterson Foundation, the Arizona Commerce Authority Board, the 
faculty of Thunderbird School of Global Management, and is Honorary 
Chairman of the Irish Technology Leadership Group. Recently, Dr. 
Barrett has been appointed by the President of the U.S. as one of the 
private sector leaders for a national education science, technology, 
engineering and math (STEM) initiative now known as Change The 
Equation, and he has been appointed by the President of the Russian 
Federation as the International co-chairman to lead the Board of the 
Fund for Development of the Center for Elaboration and 
Commercialization of New Technologies. Dr. Barrett has served on 
numerous boards, policy and government panels, and has been an 
appointee of the President's Advisory Committee for Trade Policy and 
Negotiations and the American Health Information Community. He has co-
chaired the Business Coalition for Student Achievement and the National 
Innovation Initiative Leadership Council, and has served as a member of 
the Board of Trustees for the U.S. Council for International Business 
and the Clinton Global Initiative Education Advisory Board. Dr. Barrett 
has been a member of the National Governors' Association Task Force on 
Innovation America, the National Infrastructure Advisory Council, the 
Committee on Scientific Communication and National Security, the U.S.-
Brazil CEO Forum, past chair of the National Academy of Engineering, 
and formerly served on the Board of Directors of the U.S. Semiconductor 
Industry Association, the National Action Council for Minorities in 
Engineering, and TechNet.

    Chairman Gordon. Thank you. Mr. Holliday.

 STATEMENT OF CHARLES HOLLIDAY, JR., CHAIRMAN OF THE BOARD OF 
 BANK OF AMERICA AND RETIRED CHAIRMAN OF THE BOARD AND CEO OF 
                             DUPONT

    Mr. Holliday. Thank you, Mr. Chairman, and we appreciate 
your strong leadership in this regard.
    I have a very specific idea to leave with you today that 
takes the work of this committee to the next step, an idea 
around low-cost, clean energy. We believe if we could create 
that in this country, we could do a lot to move those 
statistics that Norm described in a very different way.
    And Norm Augustine and myself gathered with other people 
from companies that have a track record of making a step change 
in technology. Ursula Burns from Xerox. We don't call it the 
Xerox machine for nothing. John Doerr, who is critical in 
funding so many of the iconic companies now on the west coast; 
a guy named Gates who has done some things around software; 
Jeff Immelt from General Electric; and Tim Solso from Cummins--
and they have done amazing things to take the diesel engine to 
a different area.
    We said if we were in charge of creating that low-cost, 
clean energy, how would we do it, and we wrote a business plan, 
which I would be glad to give you a copy of. And I will just 
share with you the five very simple recommendations.
    We said we think this is possible, but it is going to take 
some time. It may take a decade, it may take more, and we need 
continuity over that period of time, and we need a board, a 
strategy board responsible to you that is consistent over a 
period of time and doesn't change every two to four years. And 
we believe that is possible. That is how we would do it inside 
our company.
    Second, we must fund it to win. The amount of money being 
spent today is important. It is not enough in our estimation. 
To get there we think we need $11 billion more dollars. We 
think it is one of the best investments our country could ever 
make to create the kind of jobs we need over time.
    Then we looked at what we have been very successful at in 
this country, and that is creating clusters of technology and 
business together; that is where our big breakthroughs have 
come. We recommended doing that again. We did not say which 
technologies. We want the market to pick those. We did not say 
in which cities or what universities they should be tied with, 
but we think that is a model that is uniquely American and 
should be taken forward.
    Something in America COMPETES that has worked very, very 
well is ARPA-E. It is this concept of funding entrepreneurs 
early on with big-step change projects. I was out meeting with 
the Department of Energy people on this very subject just three 
weeks ago, went project by project, and you would be very proud 
of what they are doing. The quality of people that Steve Chu 
and his team have attracted, but also the projects. They meet 
that requirement. When they are successful, they will be really 
low cost and really clean energy. They have 37 of them. They 
all won't be a success. If we could just get three or four of 
them to be a success, that would be a breakthrough.
    Our last recommendation is absolutely critical. We found 
that in all of our work with the National Academies, you can't 
have a great technology but let it sit on the shelf, let it sit 
on the lab bench, and from all of our experience in the seven 
companies that we're involved in, we all have prototype 
facilities. We knew we could not go from the lab to scale 
subtly. So we had to have a prototype facility necessary.
    Because of the very high cost of this kind of investment, 
individual companies will not make that. So we think assistance 
from the Federal Government in those prototype facilities is 
critical, and this strategy board I described in recommendation 
number one is the mechanism for handling that.
    So we left this work extremely encouraged. We think we 
could put a significant amount of money--we are not minimizing 
what $11 billion is, but we believe $11 billion per year over a 
decade can step change our position, and we hope you will 
consider it.
    Thank you very much.
    [The prepared statement of Mr. Holliday follows:]

              Prepared Statement of Charles Holliday, Jr.

    Good morning Chairman Gordon and Members of the Committee. As you 
well know, I was involved in the original Gathering Storm report. That 
report made specific policy recommendations on four areas critical to 
American competitiveness:

          Vastly improve K-12 science and mathematics 
        education.

          Sustain and strengthen the nation's commitment to 
        long-term basic research that has the potential to be 
        transformational.

          Make the United States the most attractive setting in 
        which to study and perform research. Attach a green card to the 
        diploma for international students who pursue higher education 
        in science, technology, engineering or math here in the United 
        States.

          Ensure that America is the premier place in the world 
        to innovate; invest in manufacturing and marketing; and create 
        high-paying jobs based on innovation.

    I will let my esteemed colleague, Norm Augustine, describe the 
details of that report and the related progress we've made on those 
issues in more detail. Instead, I will focus my remarks on a subsequent 
effort that Mr. Augustine and I were involved with focusing on energy 
innovation. So, I speak to you today on behalf of the American Energy 
Innovation Council (AEIC), which is comprised of a group of America's 
top business executives who came together earlier this year to 
recommend ways to promote American innovation in clean energy 
technology. Today, I will discuss why America must invest in clean 
energy innovation and how we can achieve a more productive national 
energy innovation system that will improve our prosperity, our security 
and our environment. In particular I will describe the five 
recommendations from our recent report, ``A Business Plan for American 
Energy Innovation.''
    Indeed, technology innovation--especially in energy-- is at the 
heart of many of the central economic, national security, 
competitiveness and environmental challenges facing our nation and I 
commend the Committee on Science and Technology, and especially 
Chairman Gordon, for the thoughtful consideration they are giving these 
issues.
    Before discussing the specific recommendations of our report, I'd 
like to say a little more about the American Energy Innovation Council 
and how we came together. The AEIC was launched in January 2010 and, in 
addition to myself, its members include: Norm Augustine, former 
Chairman and Chief Executive Officer of Lockheed Martin; Ursula Burns, 
Chief Executive Officer of Xerox; John Doerr, Partner at Kleiner 
Perkins Caufield & Byers; Bill Gates, Chairman and former Chief 
Executive Officer of Microsoft; Jeff Immelt, Chairman and Chief 
Executive Officer of General Electric; and Tim Solso, Chairman and 
Chief Executive Officer of Cummins Inc. During our report 
deliberations, the AEIC was advised by a Technical Review panel 
consisting of preeminent energy, science and innovation experts.\1\ The 
AEIC is supported, funded and staffed by the Bipartisan Policy Center 
and the ClimateWorks Foundation.\2\ This group coalesced around the 
mission to foster strong economic growth, create jobs in new 
industries, and reestablish America's energy technology leadership in 
the development of clean energy technologies.
---------------------------------------------------------------------------
    \1\ A list of the Technical Review Panel can be found at the end of 
the document.
    \2\ More information about the Bipartisan Policy Center and the 
ClimateWorks Foundation can also be found at the end of this document.
---------------------------------------------------------------------------
    As business leaders, my AEIC colleagues and I have had the great 
privilege of building companies that lead our respective fields and 
employ hundreds of thousands of American workers. Our experience has 
given each one of us an unshakable belief in the power of innovation. 
Each of our companies achieved prominence because we invested heavily 
and steadily in new ideas, new technologies, new processes and new 
products. Indeed, innovation is the essence of America's economic 
strength, and it has been our nation's economic engine for centuries. 
Our leadership in information technology, medicine, aviation, 
agriculture, biotech and dozens of other fields is the result of our 
enduring commitment to innovation.
    The AEIC, however, came together around the belief that in energy 
investment-- a realm central to America's economic, national security, 
and environmental future-- our commitment to innovation is sorely 
lacking. Investment in energy innovation, from both the public and 
private sectors, is paltry-- less than one-half of one percent of the 
national energy bill-- and this neglect carries serious consequences.
    Due to our constrained energy technology options, our economy is 
vulnerable to price shocks-- in oil, natural gas, and even electricity. 
The United States sends about $1 billion overseas every day for 
imported oil, expenditure that represents the biggest part of the trade 
deficit and often causes economic hardship for American consumers and 
businesses. Our foreign oil reliance undermines national security by 
enriching hostile regimes while our military forces are often deployed 
to protect access to oil. And the environmental costs of limited clean 
energy options are steep and growing, with both conventional pollution 
and climate change harming human health, threatening lives and 
livelihoods, and imperiling the natural systems upon which we rely for 
food, water, and clean air. The scale of these threats, and the wealth 
of opportunities to do better, make the message clear: it is time to 
invent our future.
    We must make a serious commitment to the goal of modernizing our 
energy system with cleaner, more efficient technologies. Such a 
commitment should include both robust, public investments in innovative 
energy technologies as well as policy reforms to deploy these 
technologies on a large scale. I joined with my AEIC colleagues to 
address ways we believe the United States can better meet this 
commitment.
    Although the private sector will be paramount in commercializing 
and deploying clean energy on a national scale, it cannot achieve this 
goal alone. The fundamental differences between energy and most other 
economic sectors limit the ability of the private sector to solve 
large-scale energy problems on its own. For instance, national 
security, national economic strength, and the environment are not 
primary drivers for private sector investments, but they are critical 
to the health of our country. Large scale deployment of many new energy 
technologies requires massive capital expenditures that are often too 
risky for private investors, and the product-- electricity-- is sold 
into a generic market that does not differentiate between clean and 
dirty sources. Additionally, America's long-term corporate R&D budgets, 
especially those run by utilities, have been in decline for several 
decades. Finally, the turnover of our energy infrastructure--
particularly in the electrical generation system-- is very slow.
    Add these elements together, and it becomes clear why private 
sector investments in clean energy technology development have been so 
small. In fact, of all major technology-dependent sectors, the energy 
sector spends the smallest portion of its sales on research and 
development.\3\
---------------------------------------------------------------------------
    \3\ (1) National Science Foundation Data table 36. Federal research 
and development obligations, budget authority, and budget authority for 
basic research, by budget function: FY 1955-2009. http://www.nsf.gov/
statistics/nsf08315/content.cfm?pub-id=3880&id=2
---------------------------------------------------------------------------
  (2) G.F. Nemet, D.M. Kammen, U.S. energy research and development: 
Declining investment, increasing need, and the feasibility of 
expansion, Energy Policy 35 (2007) 746-755.
  (3) Pharmaceutical Research and Manufacturers of America (PhRMA), 
Pharmaceutical Industry Profile 2008. Washington DC. http://
www.phrma.org/files/attachments/2008%20Profile.pdf
  (4) Science and Engineering Indicators 2010, National Science 
Foundation, www.nsf.gov/statistics/seind10/pdf/c04.pdf




    The government must therefore act to spur investments in energy 
innovation and mitigate risk for large scale energy projects. After 
drawing on the large body of work and experts in the field of 
innovation, taking a hard look at what has worked to promote innovation 
in defense, medicine, information technology and other fields, and 
calling upon our experience managing large innovation programs in our 
companies, we developed five recommendations to spark a similar federal 
commitment to energy innovation. By heeding these recommendations, we 
believe the United States can unleash our energy technology potential 
and mobilize the private sector to join in the effort.

Recommendation 1: Create a national Energy Strategy Board

    Mr. Chairman, the United States does not have a realistic, 
technically robust, long-term national energy strategy. Without such a 
strategy, there is no way to assess the effectiveness of energy 
policies, nor is there a coherent framework for the development of new 
energy technologies. The result of this neglect is reflected in our 
nation's history-- with oil-driven recessions, environmental 
degradation, trade deficits, national security problems, increasing 
CO2 emissions, and a deficit in energy innovation.
    We recommend the creation of a congressionally mandated Energy 
Strategy Board charged with (1) developing and monitoring a National 
Energy Plan for Congress and the executive branch, and (2) oversight of 
a New Energy Challenge Program (see Recommendation 5). The Board should 
be external to the U.S. government, should include experts in energy 
technologies and associated markets, and should be politically neutral.

Recommendation 2: Invest $16 billion per year in clean energy 
                    innovation

    In order to maintain America's competitive edge and keep our 
economy strong, the United States needs sizable, sustained investments 
in clean energy innovation. The challenge must be met head on, and we 
believe that $16 billion per year-- an increase of $11 billion over 
current annual investments of $5 billion-- is the minimum level 
required. This funding should be set with multi-year commitments, 
managed according to well-defined performance goals, focused on 
technologies that can achieve significant scale, and be free from 
political interference and earmarking.
    I must note that this second recommendation is critical to the 
success of any real effort to jump start any energy innovation efforts. 
Even in a time of constrained budgets, bold action is required. Our 
other recommendations will not matter much if sufficient funding is not 
realized. Reliance on incrementalism will not do the job.

Recommendation 3: Create Centers of Excellence in energy innovation

    In other high-tech fields, critical technologies have achieved 
large-scale market success through multi-disciplinary collaboration 
between the private and public sectors. Technology innovation requires 
expensive equipment, well-trained scientists, multi-year time horizons 
and flexibility in allocating funds. This can be done most efficiently 
and effectively if the institutions engaged in innovation are located 
in close proximity to each other, share operational objectives and are 
accountable to each other for results.
    To provide the above attributes to the energy industry, we 
recommend the creation of national Centers of Excellence in energy 
innovation. The Department of Energy's newly created Energy Innovation 
Hubs are a good start at such centers, but are not sufficiently funded 
to achieve the desired results. Additional Centers of Excellence need 
to be supported, with recommended annual budgets of $150 to $250 
million each. To function effectively and deliver results, each of 
these Centers will need the flexibility to pursue promising 
developments and eliminate dead-end efforts.

Recommendation 4: Fund ARPA-E at $1 billion per year

    The creation of the Advanced Research Projects Agency-Energy (ARPA-
E) has provided a significant boost to energy innovation. ARPA-E 
focuses exclusively on high-risk, high-payoff technologies that can 
change the way energy is generated, stored, and used; it has challenged 
innovators to come up with truly novel ideas and ``game changers.'' The 
program has high potential for long-term success, but only if it is 
given the autonomy, budget, and clear signals of support to implement 
needed projects. It will need long-horizon funds on a scale 
commensurate with its goals, and a life extension beyond the current 
federal stimulus. We recommend a $1 billion annual commitment to ARPA-
E.

Recommendation 5: Establish and fund a New Energy Challenge Program to 
                    build large-scale pilot projects

    America's energy innovation system lacks a mechanism to turn large-
scale ideas or prototypes into commercial-scale facilities. We 
recommend the creation of a New Energy Challenge Program to fund, build 
and accelerate the commercialization of advanced energy technologies-- 
such as 4th generation nuclear power or carbon capture and storage coal 
plants.
    This program should be structured as a partnership between the 
federal government and the energy industry, and should operate as an 
independent corporation outside of the federal government. It should 
report to the Energy Strategy Board (see Recommendation 1) and focus on 
the transition from pre-commercial, large-scale energy systems to 
integrated, full-size system tests. The public sector should initially 
commit $20 billion to the Program over 10 years through a single 
federal appropriation, which would unleash significant private sector 
resources as particular projects are developed.

Conclusion

    In addition to our specific recommendations, I'd also like to note 
that successful energy innovation programs have three prerequisites: 
the first is a pipeline of new inventions; the second is a suite of 
policy reforms that will stimulate market demand for these new 
inventions; and the third is a highly skilled workforce with the 
ability to create and deploy these inventions. The plan put forth above 
addresses the first and provides a strategy to fill the American energy 
innovation pipeline with new technologies designed to deliver a more 
secure, sustainable future.
    However, we recognize that research, development, and deployment 
all need complementary energy policies to advance innovation and drive 
market adoption of new technologies. Innovation without implementation 
has no value. A strong market signal will increase the intensity of 
energy research, add large private-sector commitments, reduce barriers 
between the lab and market, and ensure technologies perform better and 
cost less over time. Those policies may include some combination of a 
price or cap on CO2, a clean energy or renewable energy 
portfolio requirement, or technology performance standards.
    In sum, I come before the Committee today with a challenge, but 
also with a sense of optimism. In the defense, health, agriculture, and 
information technology industries, this country has made a deliberate 
choice to use intelligent federal investments to unleash profound 
innovation. As a result, our country leads in all those realms. In 
energy, however, the country has failed the grade, and is paying a 
heavy price for that failure. We must change this course.
    The good news is that if the United States invests in its clean 
energy future now, our nation can reap immense benefits. The members of 
the AEIC are optimistic about the potential for dramatic change in the 
energy realm. As business leaders, we know how the private sector can 
be mobilized to attack these problems, but we also know that the 
government must step up to protect the public interest. We have seen 
this work in other sectors, and know it can work in the energy sector, 
as well. Public- and private-sector innovators have made miracles 
happen right here on home soil-- Americans developed the computer and 
the internet, delivered air and space travel, and decoded the human 
genome. The same transformations can happen in energy.
    In closing, we are convinced that America has a great deal to gain 
from smart, ambitious investments in clean energy innovation. The 
recommendations laid out above are specific and affordable. They set 
forth the necessary actions that the public sector must take to unlock 
the ingenuity and capital of the American marketplace in pursuit of the 
nation's clean energy goals. To seize this opportunity, America must 
put aside partisan interests and make a strong, bold commitment. We 
challenge Congress, and indeed the country, to make this commitment. By 
tapping America's entrepreneurial spirit and long-standing leadership 
in technology innovation, we believe our country can set a course for a 
prosperous, sustainable economy-- and take control of our energy 
future.
    Thank you for the opportunity to testify before the Committee 
today.

The American Energy Innovation Council (AEIC) Technical Review 
                    Committee:

          Chair--Maxine Savitz, former General Manager of 
        Technology Partnerships at Honeywell; member of the President's 
        Council of Advisors on Science and Technology; Vice President, 
        National Academy of Engineering

          Ken Caldeira--Department of Global Ecology, Carnegie 
        Institution of Washington

          David Garman--Former Under Secretary of Energy and 
        Assistant Secretary of EERE at DOE

          Rebecca Henderson--Senator John Heinz Professor of 
        Environmental Management, Harvard Business School

          David Keith--Professor and Director of ISEEE Energy 
        and Environmental Systems Group at the University of Calgary

          Richard Lester--Director of the Industrial 
        Performance Center and Professor and Head of the Department of 
        Nuclear Science and Engineering at MIT

          Nate Lewis--George L. Argyros Professor of Chemistry 
        at the California Institute of Technology

          Ernie Moniz--Cecil and Ida Green Professor of Physics 
        and Engineering Systems and Director of the MIT Lab for Energy 
        and Environment and of the MIT Energy Initiative, MIT; member 
        of the President's Council of Advisors on Science and 
        Technology

          Franklin Orr--Professor, Stanford University

          Allen Pfeffer--Vice President of Technology, Alstom 
        Power

          Dan Sarewitz--Director, Consortium for Science, 
        Policy, and Outcomes, Arizona State University

          Chuck Shank--former Director of Lawrence Berkeley 
        National Laboratory

About the Bipartisan Policy Center

    In 2007, former U.S. Senate Majority Leaders Howard Baker, Tom 
Daschle, Bob Dole and George Mitchell formed the Bipartisan Policy 
Center (BPC) to develop and promote solutions that can attract the 
public support and political momentum to achieve real progress. 
Currently, the BPC focuses on issues including health care, energy, 
national and homeland security, transportation, science and economic 
policy. For more information, please visit www.bipartisanpolicy.org

About the ClimateWorks Foundation

    The ClimateWorks Foundation supports public policies that prevent 
dangerous climate change and catalyze sustainable global prosperity. 
The ClimateWorks network includes partner organizations across the 
world, aligned to support smart policies in the regions and sectors 
that have the greatest potential for reducing greenhouse gas emissions. 
For more information, please visit www.climateworks.org

                  Biography for Charles Holliday, Jr.




    Charles O. Holliday, Jr. is chairman of the board of directors of 
Bank of America. He has served as a director since September 2009. He 
is the former chairman of the board of directors of E.I. du Pont de 
Nemours and Co., a position he had held for approximately 10 years. He 
served as chief executive officer of DuPont from 1998 until 2008. He 
joined DuPont in 1970 as an engineer and held various positions 
throughout his tenure.
    Since 2007, Holliday has served as a member of the board of 
directors of Deere & Co. and as a member of the board's audit and 
corporate governance committees. He is chairman emeritus of Catalyst, a 
leading nonprofit organization dedicated to expanding opportunities for 
women and business, and chairman emeritus of the board of the U.S. 
Council on Competitiveness, a nonpartisan, nongovernmental organization 
working to ensure U.S. prosperity.
    Holliday is a founding member of the International Business Council 
and a member of the National Academy of Engineering. He also previously 
served as chairman of the following organizations: the Business 
Roundtable's Task Force for Environment, Technology and Economy, the 
World Business Council for Sustainable Development, The Business 
Council, and the Society of Chemical Industry--American Section.
    He received a bachelor's degree in industrial engineering from the 
University of Tennessee and received honorary doctorates from 
Polytechnic University in Brooklyn, New York and from Washington 
College in Chestertown, Maryland.

    Chairman Gordon. Thank you, Mr. Holliday.
    I will point out in the America COMPETES Act we do have a 
cluster program where we can bring those folks together. I 
think it is understood now that there is not that single--or 
rarely it is that single inventor `eureka' moment, but rather 
it is the collaboration of those folks working together on a 
topic.
    And Dr. Dan Mote is now recognized. Dr. Mote, you need to 
hit your mic there, please.

 STATEMENT OF C.D. (DAN) MOTE, JR., PRESIDENT EMERITUS OF THE 
UNIVERSITY OF MARYLAND AND GLENN L. MARTIN INSTITUTE PROFESSOR 
                         OF ENGINEERING

    Dr. Mote. Thank you very much. I apologize. I thank you for 
this opportunity to make a few remarks.
    Well, first I would just comment that there is no question 
that the country has made progress on its support for science 
and technology since 2005, through the America COMPETES Act and 
other initiatives, ARRA funds and STEM education initiatives 
and the like. National awareness is higher now than it was 
then, and ``Rising Above the Gathering Storm'' has become a 
household phrase in many places. And remarkably it has legs 
five years later, which is, in and of itself, critical.
    But as in the revisited report, the category five report 
that has come out, the United State is relatively less 
competitive globally today than it was in 2005, probably for 
three reasons.
    One is the report was not fully implemented in an ongoing 
manner when it started. Second is other countries have engaged 
rather aggressively, both those that weren't engaged then and 
those that were then, in a very determined and purposeful 
manner. And thirdly and possibly most importantly, our country 
has many national priorities today; wars, national debt, 
sluggish economy, unemployment, housing, healthcare, terrorism, 
and so on, and global competitiveness in S&T and innovation is 
really not near the top in priority among them. That is a very 
principal problem for us.
    If we believe delivering high-quality, high-paying jobs for 
Americans depends on competitiveness and innovation in science 
and technology, then it should be a high priority today.
    I recently chaired a National Research Council committee 
that studied the science and technology strategies of six 
countries and their implications for the United States. Those--
and that has now been printed, as a matter of fact--the six 
countries are Japan, Brazil, India, Russia, China, and 
Singapore. Now, the countries individually were studied in 
great detail in terms of why they are succeeding and what their 
priorities are and how they are progressing, and there are a 
couple of findings on the countries themselves and then overall 
findings as a group.
    The study concluded--I think surprisingly for the Members 
of the Committee, but very importantly--that the best predictor 
of future science and technology competitiveness was the 
national culture. While we commonly use economic and capacity 
measures to rate S&T innovation capabilities, things like 
percentage of GDP going for research or number of engineering 
graduates, it turns out that the countries that shape their 
cultures to facilitate their goals receive--achieve them 
predictably and will likely do so in the future.
    Of the six countries studied, Singapore and China stood out 
in this regard. While these two countries have remarkably 
different goals, different drivers of science and technology 
innovation, different population scales to say the least, 
different markets, they use similar strategies in shaping their 
cultures to focus on S&T priorities. Essentially culture and 
S&T priorities went hand in hand. And they also experienced 
similar achievements. And we could go into some detail about 
how that was done if we had some time.
    However, the other four countries, that is, Japan, Brazil, 
India, and Russia, have been actually held back strikingly in 
their S&T achievements because of cultural issues that have 
limited the priority they would afford their S&T goals.
    Japan is a good example, just very quickly. How is Japan 
held back? No women in the workforce; it is a country that is 
reluctant to welcome international people to work in its labs; 
no immigration; universities don't work with industry. You can 
go down through Japan, and there are a number of cultural 
issues which have essentially inhibited its advancement. And of 
course, it has been in the doldrums for two decades, as we all 
know.
    So when the national security of the United States is 
threatened, such as after 9/11 or Sputnik and so forth, our 
Nation has abruptly changed its culture to support a national 
security priority. However, these occasions are, fortunately, 
rare, but they are also widely recognized as requiring national 
security priority.
    But if we do not recognize the significance of the 
declining course of U.S. competitiveness in science and 
technology and innovation, our future prosperity and national 
security basically will not--we will not change our S&T 
priority [as] needed to fix this problem. Actually, I believe 
that is where we are today. We do not see, as a Nation, that 
this is a critical problem.
    I also believe it would be instructive for those in policy-
making positions to visit China and Singapore to gain a first-
hand understanding of why they are succeeding and what changes 
in culture they have actually instituted, at some cost to 
themselves, to achieve this success. I am confident this would 
be a stunning experience for all who went there. I think only 
then would we fully understand the seriousness of our national 
competitiveness problem and the priority attention that we 
really need to apply to this to fix it.
    Thank you.
    [The prepared statement of Dr. Mote follows:]

                  Prepared Statement of C.D. Mote, Jr.

    Chairman Gordon and members of the House Committee on Science and 
Technology. I appreciate the opportunity to comment on ``Rising Above 
the Gathering Storm, Revisited'' and its implications. I will be 
mindful of your time in making a few take-away points.
    First, there is no question that the country has made progress in 
supporting Science and Technology (S&T) since the ``Rising Above . . . 
'' report in 2005 through the America Competes Act, ARRA, STEM 
education initiatives and the like. National awareness of our 
competitiveness in innovation has increased, Rising Above the Gathering 
Storm has become a household phrase, and remarkably, it has ``legs'' 
today, five years hence. But, regrettably, as this ``Rising Above . . . 
Revisited'' report vividly verifies, the United States is relatively 
less competitive globally today than it was in 2005 for two principal 
reasons: (1) we did not implement sufficiently and in an on-going 
manner the recommendations in the earlier report, and (2) other 
countries have continued their advances in S&T competitiveness with 
determination and purpose. Also our national priorities today are many 
(e.g., wars, debt, economy, jobs, housing, healthcare, terrorism) and 
global competitiveness in S&T and innovation is not near the top among 
them. This is our principal and fundamental problem.
    If we believed that delivering high quality, high paying jobs for 
Americans depends on our competitiveness in innovation, science and 
technology, S&T competitiveness would have very high priority today.
    I recently chaired the ad-hoc National Research Council ``Committee 
on Global Science and Technology Strategies and Their Effect on U.S. 
National Security.'' This committee issued a 2010 report titled the 
``S&T Strategies of Six Countries: Implications for the U.S.'' [http://
www.nap.edu/catalog/12920.html]. The six countries are Japan, Brazil, 
Russia, India, China, and Singapore--JBRICS. This study concluded that 
national culture was the ``best predictor'' of future S&T 
competitiveness. Most countries, including the U.S., use economic and 
capacity measures to rate S&T innovation capability, for example, %GDP 
invested in research or number of engineers graduating from 
universities. However, those countries that shape their cultures to 
facilitate the achievement of their priority S&T goals have predictably 
succeeded in reaching those goals, and will likely do so in the future. 
Of the six countries studied, Singapore and China stood out in this 
regard. While these two countries have remarkably different goals, 
different drivers of S&T and innovation, different population scales, 
and different markets, they used similar strategies in shaping their 
cultures to focus on S&T priorities. And they experienced similar 
achievements against their goals. However, the other four JBRIC 
countries (Japan, Brazil, Russia and India) have been held back 
strikingly in their S&T achievements because cultural issues have 
limited the priority they afforded their S&T goals. The committee 
concluded that their future achievements will likely be similarly 
limited unless changes in cultural priorities are forthcoming. Culture 
has been largely overlooked when predicting national innovation 
capacity.
    When the national security of the U.S. was acutely threatened by 
the attacks of September 11, the nation abruptly changed its culture to 
support the national security priority. However, such occasions are 
rare and widely recognized as national emergencies requiring unusual 
actions. If we do not recognize the significance of the declining 
course of U.S. competitiveness in S&T and innovation to our future 
prosperity and national security, we will not change the culture 
necessary to make S&T a higher priority. I believe this is where we are 
today.
    I strongly encourage leaders in U.S. policy-making positions to 
visit China and Singapore to gain a firsthand understanding of why they 
are succeeding and what changes in culture they have instituted to 
achieve their goals. I am confident that this would literally be a 
``stunning experience'' for all those participating. Only then will we 
fully understand the seriousness of our national competitiveness 
problem and the priority attention required today to fix it.

                      Biography for C.D. Mote, Jr.

    C. D. (Dan) Mote, Jr. began his tenure as president of the 
University of Maryland and Glenn L. Martin Institute Professor of 
Engineering in September 1998. As President from 1998-2010, he 
encouraged an environment of excellence across the University, and 
provided leadership in implementing its 10-year strategic plan to 
elevate Maryland into the top tier of research universities worldwide.
    Academic programs flourished under Dr. Mote with the University 
ranking 18th among U.S. public universities according to U.S. News & 
World Report and 37th in the world according to the Academic Ranking of 
World Universities by Shanghai's Jiao Tong University.
    Dr. Mote sought to draw more of the State's highest-achieving 
students by expanding honors programming, living and learning 
communities and establishing the President's Promise, which offers 
every undergraduate the opportunity for a unique experience outside the 
classroom. He also launched the Maryland Incentive Awards Program in 
2001 to recruit and provide full support to Baltimore and Prince 
George's County high school students of outstanding potential who have 
overcome extraordinary adversity.
    Dr. Mote also spurred the University to become one of the State's 
most valuable economic engines, with a $3.4 billion annual impact. The 
University's research, outreach and education assist the State by 
bringing major federal and private partners to the area's largest 
research park, M Square, growing small businesses, and graduating the 
State's largest number of scientific, business, life science, 
engineering and technology students. He worked to strengthen the 
University's position as a global institution, overseeing substantial 
growth in international partnerships, creating an international 
incubator, study abroad programs, recruitment of international 
undergraduates, and programs for training international government and 
business leaders. Under Dr. Mote's leadership, the University addressed 
today's most pressing scientific and societal challenges, such as 
climate change, the economy, energy, homeland security and public 
health. Its research enterprise raised $550 million in external grants 
and contracts in fiscal year 2010.
    Dr. Mote serves on National Academy of Sciences (NAS) committees 
that address challenges to U.S. leadership in science and technology, 
including the committee that authored the Rising Above the Gathering 
Storm report. He co-chairs The Academies Government-University-
Industry-Research Roundtable and is a member of its Committee on 
Science, Engineering and Public Policy. He is a member and Treasurer of 
the National Academy of Engineering, where he serves on its Council and 
is a Steering Committee member of the Energy Security, Innovation and 
Sustainability Initiative of the Council on Competitiveness.
    Dr. Mote previously served for 31 years on the faculty of the 
University of California, Berkeley, where he earned his three 
engineering degrees, served as vice chancellor, held an endowed chair 
in mechanical systems and was president of the UC Berkeley Foundation. 
He conceived and led a comprehensive capital campaign for Berkeley that 
raised $1.4 billion. He earlier served as chair of Berkeley's 
Department of Mechanical Engineering.

    Chairman Gordon. Thank you, Dr. Mote.
    We will now begin our first round of questions, and I 
recognize myself for that first five minutes.
    To the three former CEOs: you each ran major corporations. 
Dr. Barrett pointed out that you had a research budget bigger 
than NSF. Now that you are retired, have your Social Security, 
and paying taxes like the rest of us, you know, why should we 
taxpayers subsidize public research for major corporations?
    Dr. Barrett.
    Dr. Barrett. I frankly don't think the U.S. government and 
the taxpayers should subsidize research within the private 
corporations unless the government has a specific project or 
objective, such as if you would want to create an X-scale 
computer for government activity and future research. The 
request is really to fund research in the virtual `National 
Laboratory' of the United States--which is, in fact, the tier 
one research institutions--is to fund basic research, pre-
competitiveness research, research which is probably at least 
eight to ten years from any competitiveness introduction. That 
research is not funded by corporations to any great degree for 
a variety of reasons. It is carried out in universities and the 
public environment that the public has great access to.
    So the demand or the request is not to fund research within 
corporations. It is really to fund research within the U.S. 
research universities, pre-competitiveness research, research 
that might create products, services, new companies, but far in 
advance, not the sort of research that an Intel and IBM, 
DuPont, Lockheed Martin would do, which is directed towards 
products of tomorrow or within a few years.
    Chairman Gordon. Anyone else want to--Mr. Holliday?
    Mr. Holliday. I agree totally. I would just add a short 
vignette. I was at the DuPont annual patent dinner sitting next 
to an individual who was winning his 100th patent that night, 
and he was talking about how we had moved our research effort 
toward more applied, more applications and less basic. And he 
was cautioning me about the problem of that. My answer was, we 
must depend on the universities to provide that basic research 
for us and our competitors. And he said, but what if those 
universities aren't there to do it?
    And so that is really what we are talking about today, is 
that basic research that must be at the university level. It is 
better done at the university level, or the National Labs, so 
all competitors can have access to it and compete to make it a 
success.
    Chairman Gordon. Mr. Augustine.
    Mr. Augustine. Yes. I would be opposed to the government 
subsidizing work or activities at a company that could lead to 
a predicable impact on the individual company's profitability. 
I would also note that a few decades ago 2/3rds of the R&D in 
this country was funded by the government and only 1/3 by 
industry. Today industry funds 2/3rds and the government 1/3. 
The problem is that industry largely funds the ``D,'' and the 
problem that we are, of course, discussing in the hearing is 
``R'': research, basic research.
    Basic research has a couple problems that make it not very 
amenable for work by industry. One of these is that the 
benefits of basic research often don't accrue to the performer 
or the underwriter of the research being performed because of 
the unpredictability of the applicability of research.
    That, sort of, is the basic category of things where the 
government generally steps in and provides that service--of 
running an education system, providing national security, and 
so on.
    The second feature of basic research is it is very long-
term, very high--risk, and in many cases very expensive. And 
those factors just don't lend themselves to the sort of things 
that the marketplace today will allow companies to invest in. 
With the great short-term emphasis of the markets, companies by 
and large are going to have to invest in shorter-term things, 
like development.
    So it would seem to me that research is the province of 
government, [funding] development is a province of industry.
    Chairman Gordon. And finally, Mr. Holliday, in your 
presentation you mentioned this business plan for America's 
energy future. You know, we have got healthcare problems, 
transportation problems, you know, feeding our public. There 
are lots of different areas. Why did you pick out energy?
    Mr. Holliday. We saw that energy at a low cost could 
transform across the entire economy to make a difference. That 
was the one thing that we thought was about our national 
security, so we control it ourselves and really have a cost 
advantage to reinvigorate our manufacturing and the overall 
productive capacity of the country.
    Chairman Gordon. Thank you, sir.
    Mr. Hall is recognized for five minutes.
    Mr. Hall. Mr. Holliday, I sure agree with you on the energy 
situation. For a youngster that is graduating from high school 
or college or beginning their life in the business world, 
probably the most important word in the dictionary other than 
`prayer' for that set of young people is probably `energy,' 
because energy is the cause of most wars or lack of energy is 
the cause of most wars, and Japan didn't hate us. They didn't 
bomb Pearl Harbor because they hated us. They bombed us because 
we cut them off of absolutely all of their oil. We were their 
sole supplier, and they had about maybe a year of national 
existence, so you could expect that to happen.
    But I thank you for suggesting that because it reminded me 
again of yesterday.
    Dr. Barrett, you alluded to keeping our jobs here and the 
good record that your company has of keeping the successes you 
have here on shore rather than send them offshore, and I think 
all of us appreciate that.
    In your testimony, and along that line, I think of a 
parallel there that we all go through up here, because all of 
us appoint youngsters to the Academies, to West Point, to Navy, 
Air Force, and all that, and usually my board asks them if they 
are going to make it a lifetime work, you know. They have the 
right to, I think, at the end of four years, maybe five years, 
to come back into the business world, and I don't think that is 
altogether bad because they bring the disciplines they learn 
there into the business world where discipline is really 
needed.
    But it is similar to that, in your testimony--you discussed 
the importance of investing in research and development to 
promote new technologies, and you say once investments have 
been made in the new technologies and they are ready for the 
marketplace, what incentives are in place to ensure that the 
companies that reap the benefits of federal tax dollars for 
research and development will stay in the United States?
    Well, how did you do it?
    Dr. Barrett. Well, I would--point of fact, I said that 75 
percent of our manufacturing is still in the U.S., and that 
means 25 percent of it is outside. One of the reasons for that 
to date, if I could just digress for a moment: the net present 
value [NPV] of one of our multi-billion-dollar manufacturing 
facilities--there is a $1 billion difference in its NPV if you 
put it in the United States or if you put it in a low-tax 
country. And the billion dollar NPV difference is really not 
related to wage rates. It is related to government incentives 
and tax rates.
    The reason we have maintained our manufacturing facilities 
in the U.S. is we have a well-trained workforce in the United 
States. Time is of the essence. If you have to retrain a 
workforce to do a green field manufacturing plant some place 
else, you can lose valuable time.
    There is no financial incentive to put those plants in the 
United States today. The financial disincentive is the U.S. tax 
rate. So what you are seeing is perhaps a lasting legacy of the 
fact that we started in the U.S., we have built up our major 
facilities in the U.S., we have a well-trained workforce in the 
U.S., we have continuity in the U.S., but if you start from 
scratch today, there is no incentive to put those plants in the 
United States.
    Mr. Hall. Maybe you are before the wrong committee. Maybe 
you ought to go before Ways and Means.
    Dr. Barrett. Congressman Hall, I have been through every 
committee, every Administration, Democrat and Republican, every 
economic advisor, to every President with the same story, and 
we are still where we are.
    Mr. Hall. I admire you for it, and I thank you.
    I want to ask this additional question, though. Similarly, 
how do we insure that students who are being trained in the 
U.S. don't take their knowledge overseas? How can we keep those 
people here?
    Dr. Barrett. Well----
    Mr. Hall. And those that come here seek to be citizens, to 
get their education and leave in degrees, all the universities 
all across the country, and then take their knowledge home.
    Dr. Barrett. Well over a decade ago I think we were the 
first to suggest that you should just simply staple a green 
card to every advanced degree, engineering, technology, 
mathematics, science degree obtainer, regardless of 
nationality. If they graduate from a U.S. university with an 
advanced degree, staple a green card to that diploma and let 
them stay.
    There is no way to absolutely ensure that that knowledge 
base stays here. The way you ensure it is to, in fact, make the 
United States the destination of choice for start-ups, the 
destination of choice for people who want to get a great 
education, but you have to have the visa issue, the immigration 
issue, and then the tax and incentive issues here to create 
start-ups and grow them.
    Mr. Hall. I thank you, sir.
    I yield back my time, Mr. Chairman. Thank you.
    Chairman Gordon. Ms. Johnson is recognized.
    I think over the last--or excuse me. I was wrong, Ms. 
Johnson. Ms. Edwards was here first. Each of you wins the 
attendance award for this session, and I thank you for that.
    Ms. Edwards, you are recognized for five minutes.
    Ms. Edwards. Thank you, Mr. Chairman.
    I just have a question. First of all, I want to say on the, 
you know, the one point regarding research and development, I 
actually introduced last week H.R. 6201, the 21st Century 
Investment Act of 2010, and part of the reason that I did that 
was really because of my experience in visiting small 
manufacturing facilities out in my Congressional district where 
they co-located the research and development that they were 
doing with the manufacturing they were doing. It was really 
important to have that manufacturing line really close to where 
the R&D was happening, and what we do in 6201--and I know 
that's not before this committee, though--is to actually 
incentivize and make permanent the research and development tax 
credit. It is one of the lowest among developed nations, in 
this country. Increase and make that permanent, and [H.R. 6201] 
also created a substantial tax credit that is an incentive for 
co-locating manufacturing.
    When I talk to our manufacturers, what they say to me is 
that it is really important for them, both in terms of building 
and training their workforce but also then drawing on the local 
community, our local educational institutions, our local K-12, 
and establishing those relationships because they then know 
that that is the feeder ground for their manufacturing and for 
their research and development.
    And so I'd urge you, Mr. Hall, take a look at that. But all 
of you, because I think that if we are talking about where we 
are going to go for the 21st century, we have to think not in 
pockets, but across the line from how we are creating the 
pipeline, obviously in K-12 and in our higher education 
institutions but then, you know, what is the employee base, and 
what do job creators need. I mean, they are going to do--if we 
invest in their innovation, what do they need, and right now I 
think there is not this sort of seamless line from our K-12 
education and through our higher ed system into the workplace.
    And so I appreciate your comments, Mr. Augustine, on this 
question of trying to create a seamless line from K-12 through 
the point when that young person goes into the workforce, and 
what is it that we can do to knit those together so that they 
are not in these individual strings?
    And then if, Dr. Mote, I know that at the University of 
Maryland, and thank you for your service there, that your 
experience in working with our local scientific institutions in 
Maryland with our education institutions so that they feed into 
the workplace, and if you can do it in two minutes and 13 
seconds, that would be great.
    Mr. Augustine. Well, I think the business community has an 
obligation which it, I think, doesn't fully carry out today: to 
make very clear what are the skills it needs from a high school 
graduate. You pointed to that.
    If one looks at college graduates, there is a significant 
problem of the gap between what skills and abilities and 
knowledge is required to get a high school diploma and what it 
takes to succeed as a freshman in college. And somehow we have 
got to close that gap. I would give that very high priority.
    Dr. Mote. Congresswoman Edwards, two things. One is in 
terms of the K-12 students, bringing them to the university for 
special programs, educational programs, research and 
laboratories that is a part of the mission of the university. 
And secondly, on the output end, we essentially guarantee 
internships for every student at the university. We have an 
office which basically creates internships, and in this area 
since there are so many internships in the area, it is fairly 
easy to accomplish this.
    And so, therefore, we want to engage the students in the 
business communities and at various levels, but it also could 
be National Laboratories where these internships take place. 
So, I think, thinking of the university as a link to both the 
K-12 system and the jobs and post-graduate opportunities as 
well, is essentially the way we see ourselves. We see ourselves 
really as a most important asset that the state has in 
developing its future.
    Chairman Gordon. Thank you, Ms. Edwards.
    Ms. Edwards. Thank you.
    Chairman Gordon. And Dr. Ehlers is recognized for five 
minutes.
    Mr. Ehlers. Thank you, Mr. Chairman, and thank you very 
much for the panel for being here. I can't--you know, now that 
I am leaving here, I just want to commend you for--you have no 
idea how often I was trying to sell an idea in the Congress and 
not getting very far and then one or more of you would make a 
comment that was--supported what I was trying to do, and I 
could say, well, you know, so and so said this. ``Oh, okay.''
    You know, Christ was right when he said a prophet is not 
without honor in the same assembly, and I found that over and 
over. I really appreciate what you have done for our country, 
and now that I am joining the ranks of the retired and 
unemployed, I hope I can contribute as much as you have.
    I want to just get back to the question that was mentioned 
about what the Federal Government should pay for research in 
private corporations. I think a simple, straightforward answer 
is a very good healthy research and development tax credit, so 
the companies are still deciding what to study, what to do the 
research on. It is entirely their project, but at least let the 
Federal Government give them tax relief, because many of these 
are high-risk ventures, and corporations simply can't afford to 
do them if they don't get some assistance, preferably a tax 
credit.
    I appreciate Mr. Holliday's comment about low-cost, clean 
energy. You are right on. That is totally correct, and that is 
something we all have to be working on and not just say, well, 
let the utilities take care of that. It is a much broader 
problem than that.
    And Dr. Mote, you commented about--other nations are trying 
to catch up. We assume we are already there, and that is a 
fallacious belief in this country. The public, and I have given 
speeches all across the land, the public simply doesn't believe 
that there is a problem. They simply believe that we are on 
top, we are ahead of the pack, we have nothing to worry about, 
and the only reason other countries are making progress is 
because they have lower wage rates. They are totally wrong on 
that, and we have to educate them, but I can assure you from my 
many contacts with the public that this is the general 
attitude.
    I would be delighted to see some of you running for 
Congress and taking my place. It is incredibly hard to persuade 
scientists and engineers to run for public office, and I have 
given, once again, given speeches to engineering and science 
groups across this country constantly urging them to run for 
office. It just doesn't happen.
    Fortunately, since I arrived, the number of physicists have 
tripled, but we could certainly use a few more engineers as 
well to help in this task, and I really feel very guilty about 
retiring and leaving because it is not that I am so wonderful, 
it is just that the knowledge I have is badly needed here, and 
I hope the other two physicists grab hold of it and can take 
care of it.
    But, really, we need much better representation here from 
the scientific and technical community if we are really going 
to accurately reflect and try to solve the Nation's problems in 
this area, whether it is education, whether it is patent law, 
so many different aspects of it. And it is a major part of our 
country's future, but it is not a major part of the agenda of 
either the House or the Senate.
    Pardon me for giving you a sermon. I know you already 
believe all these things, but as I said before, I am the son of 
a preacher, and I can't get out without giving a sermon. But I 
really think that is the crux of it. Dr. Mote's problem of the 
people assuming everything is okay, that is because they are 
not hearing anything else from the Congress, from the 
Administration, and we really have to have the support of the 
people if we are going to do it.
    So thank you so very much for what you are doing. You have 
been great leaders of this Nation on these issues, and I hope 
you will continue to do that, and I hope I can assist you once 
I am a private citizen again. Thank you very much.
    Mr. Hall. Mr. Chairman, may I have just a minute?
    I want to thank Dr. Ehlers, too, for his long service here, 
and I hope he never forgets what I told him the first week we 
were on the same committee together, that I admired him, but I 
didn't like him because he is just the type, like you four, 
that ruined the curve for guys like me.
    But he has been a great benefit to this committee. He has 
been a benefit to me personally, and we are losing a great 
friend and a great Member of this conference, and we are going 
to call on you like we are Bart when he is an ambassador over 
in France or England, wherever he is. I want his telephone 
number, and I want yours.
    I yield back.
    Mr. Ehlers. Thank you very much.
    Chairman Gordon. Thank you, Mr. Hall. Dr. Ehlers has been 
the conscience of the scientific community for us, and we thank 
you.
    Mr. Wilson is recognized for five minutes.
    Mr. Wilson. Thank you, Mr. Chairman, and gentlemen, I would 
like to echo the sentiments of Dr. Ehlers and others in saying 
that it is wonderful the work that you are doing and putting 
yourselves in a position to use the experience that you have 
acquired throughout your life, and your education, and your 
business experience, to help make our lives better and 
certainly for our next generation. So thank you. Thank you very 
much.
    And I have a few questions I would like to ask, in no way 
provocative but just to try to get to the point of how we can 
maybe save some jobs for America and how we can do some of the 
things here.
    My first is for Mr. Augustine. In your written testimony 
you mentioned that an American company, Applied Materials, 
recently opened the world's largest private solar research 
development company in China, and Dr. Barrett, also, my 
understanding that Intel has opened research labs on 
semiconductors and server networks in Beijing, China.
    There are just two of the many instances of our U.S. jobs 
going overseas. What policies are necessary, from the 
government's standpoint, that we can use to incentivize 
companies to keep their jobs on American soil and employ 
American workers?
    Mr. Augustine. Congressman Wilson, if I might answer that 
with a little story. I, in a moment of boredom, figured out 
that I have attended over 500 Fortune 100 board meetings, and 
in many of those we were faced with the kind of decision about 
which you ask. Should we build a plant in the United States, or 
should we build it overseas? If you build it in the United 
States, your average worker will come from the bottom quartile 
of the world's high school graduates. You will be in the 
country with the second highest tax rate, corporate tax rate, 
in the world. You will be in a country with a stagnating 
economy, or at best a stable economy. You will be in a country 
where you pay an assembly worker between four and 20 times what 
you would pay in many other countries. You will pay a chemist 
eight times as much and an engineer five times as much as in 
some highly qualified countries.
    If you go to these other countries, you get, typically, a 
five-year tax holiday for the new facility you set up. Your 
average high school graduate employee will come from the top 
tenth of the [global] class. Engineers will be abundant. You 
will generally be given free land to build your plant. And if 
you are the strongest American in the world, acting as the 
fiduciary responsibility for your shareholders, you will build 
the plant overseas.
    Now, that is what I have seen over and over, and those are 
the things we need to fix.
    Mr. Wilson. Thank you.
    Dr. Barrett. Norm mentioned a number of features which--
some of them are related to manufacturing, and some of them to 
R&D. I will just focus on the R&D side. The company I used to 
work for, Intel, is an international company, does about 80 
percent of its business outside of the United States. That is, 
80 percent of its revenue comes from foreign customers. To be 
internationally competitive, the company has to hire the best 
and brightest engineers for its R&D laboratories wherever they 
reside.
    If you look at where they reside today, some of them reside 
in the U.S., but some of them reside in Russia, some in China, 
some in Malaysia, some in India. We follow the best and 
brightest. Not all of the best and brightest are U.S. citizens. 
Therefore, to be competitive, we look around the world. As I 
said, 85 percent or so of our R&D activities are U.S. domestic 
located.
    The things you can do would be to, in fact, follow the 
programs to get more U.S. kids interested in R&D or science, 
technology, engineering, and math, follow that through to get 
more of our young people majoring in those topics at the 
university level, have an immigration policy which allows 
foreign nationals who come to our universities and comprise the 
bulk of our STEM graduates to stay in the United States. Have a 
permanent R&D tax credit. Lower the corporate tax rate.
    There are a whole litany of these items, but these are the 
things the government can do. You can't expect, I think, the 
multi-nationals to hire all U.S. citizens, because we do the 
great majority of our business outside of the U.S. We are 
relatively proud that we still have the great majority of our 
work going on in the U.S. to service our international 
customers, but we can't be digital, 100 percent U.S., 0 percent 
foreign nationals.
    Mr. Wilson. Mr. Chairman, I realize I am out of time, but 
if I could just thank them. Thank you both because really you 
focused the issue and framed it, and that is what I have been 
looking for in this hearing this morning.
    And so thank you. I have other questions, Mr. Chairman, but 
I realize my time is up. Thank you, gentlemen.
    Chairman Gordon. Mr. McCaul is recognized for five minutes.
    Mr. McCaul. Thank you, Mr. Chairman, and thank the 
witnesses for being here today. I--as the Chairman knows, I 
have been a strong advocate and supporter of the COMPETES Act. 
My district has a research and development arm at the 
University of Texas in Austin. The high tech, all the companies 
you mentioned are in some form or fashion in my district, and 
it is a federal investment that, while I am against a lot of 
the current spending in the Congress, I think this is one of 
those investments that we can't afford not to do. And the 
return on the investment, like with the NASA Program, has been 
extraordinary.
    We talked about the Gathering Storm. I agree, Dr. Mote, 
that this is a national security issue as well, but I see a 
`gathering storm' occurring right now in the Congress as the 
COMPETES Act stagnates in the Senate, the possibility that it 
may not pass, in combination with the tax cuts expiring. And 
then we have an extraordinarily large tax increase, and I know 
the R&D tax credit is huge, I know the penalizing companies 
that do business overseas, and I think we need to incentive 
through the tax code businesses to locate here and create jobs 
here in the United States. And I think that is something we can 
do.
    But the storm I see, though, is a combination of these two 
events, COMPETES not passing and then the tax cuts expiring, 
and I just--that is really the reality right now that we are 
looking at in the Congress, and I just wanted to get the panel 
to comment on those two events colliding at the same time.
    Mr. Holliday. First, I agree that these are very important 
issues. One thing I would like you to possibly consider is in 
the way you give credits for companies to locate here. Think 
about it project by project, not as an across-the-board issue. 
And Dan's summary of the six countries that were doing a good 
job, China and Singapore came to the top, and let me assure you 
they will sit down with any major company in the U.S. and talk 
about a project you want to put there and what do you need to 
accomplish it.
    Norm described some of those kind of concessions about land 
and trading and so forth. We have that on the state level here. 
We don't have it on the national level, and I would urge you to 
think about some kind of an objective where it could not be 
politically motivated, but in the interest of the country to 
allow companies to come forward and make that case.
    Mr. McCaul. That is a good point. Yes, sir.
    Dr. Barrett. Briefly, I use the example of the net present 
value of one of our manufacturing facilities. It is like a 
Texas Instruments. When Texas Instruments did a lot of 
manufacturing in the U.S., it was a multi-billion-dollar 
facility, employed a couple of thousand people at 
extraordinarily high manufacturing salaries. The disincentive 
in the United States to locate those facilities is the 
corporate tax rate and the lack of any incentives at the 
national level. State by state can give some incentives, but 
those are second-tier incentives relative to the federal tax 
rate.
    The biggest disincentive is--to locating those facilities, 
ongoing, is in fact--essentially the highest corporate tax rate 
in the world, in fact, drives people to make the logical 
financial investment to locate those facilities outside of the 
U.S. into a low or zero tax rate environment.
    Mr. McCaul. If I could just--because the companies I talk 
to in my district, they want to stay here in the United States, 
but we are not providing the incentives, and bottom line it is 
about making a profit. You have a duty to your shareholders, 
and if we can't incentive them to stay here, they are not going 
to, although they want to. They are patriotic, but . . . Dr. 
Augustine.
    Mr. Augustine. I just wanted to add to your comments that I 
can't think of a stronger signal that this Congress could send, 
in a negative fashion, than to not pass the America COMPETES 
Act. The members of the science and engineering community and 
the business community I suspect might conclude that it is 
``over.'' I realize those are strong words, but they are 
considered words.
    Just as an example, the sort of framework, as Congressman 
Wilson said--America has always been the leading country in 
particle physics. This country has always had the most powerful 
accelerator in the world. Now, for the first time, the most 
powerful accelerator is in France and Switzerland. The 
physicists from around the world are moving to France and 
Switzerland. They are leaving America and going there because 
that is where the work is, that is where the excitement is, 
that is where the promise is.
    And that is the challenge I think we face.
    Mr. McCaul. Right, and that is compelling testimony, Mr. 
Chairman, to say if it doesn't pass, it is over, and I think 
that--I would love to see nothing more than this passing out of 
the Senate and being really the legacy of the Chairman who has 
tried to advance this and advance the ball, and I hope that 
this will have some impact on deliberations in the Senate so we 
can move forward in this Congress.
    Thank you.
    Chairman Gordon. Thank you, Mr. McCaul. You know, I think a 
common denominator here is that Intel, Lockheed, whoever it 
might be, DuPont, if they are looking to relocate, it is not 
between Tennessee and Texas. It is between the United States 
and somewhere else, and that we have to recognize that.
    Ms. Johnson, the patient Ms. Johnson is recognized for five 
minutes.
    Ms. Johnson. Thank you very much, Mr. Chairman. I apologize 
for being a little late. I was in the Senate testifying. There 
are people in the Senate who are trying to move this 
legislation. I don't know how successful they will be.
    Let me say one of my questions was just answered. I was 
going to ask Mr. Augustine about how the businesses would see 
it if we did not pass the bill, and you answered very 
appropriately.
    I am really at a loss. I want to thank Dr. Ehlers for being 
on this committee and offering his leadership. For 18 years I 
have been talking about the same thing, and I don't know 
whether we are gaining any ground or not, and listening to and 
reading your testimony it seems to me that we are going 
backwards. I really wish I knew what else I could do. I was 
sitting here thinking that maybe we need to have a summit with 
many of our business leaders and many of our leaders here in 
Congress so they could come to understand what we are facing. I 
am really pretty frustrated with where we are and getting our 
K-12 education in order. We hear a lot of talk about it. I 
haven't seen much of an improvement. As well as our basic 
college. We have a lot of scholarships offered, and we are 
trying to do all the things that could lend itself to making 
these strides, but it does not seem that we are making them.
    Just give me--if all of you could just give me an idea of 
how you think we could go about educating our leadership here 
in the right committees so that we can move a little faster. I 
think Members of this committee understand that, but I am not 
sure whether we have that understanding across the board where 
we need it in our leadership here.
    Dr. Barrett. If I might just touch on the issue of 
education for one minute, I think all of us have been leading 
advocates for improving K-12 education in the United States, 
and all the statistics, as you correctly point out--17 year 
olds' understanding of math and science has not budged in three 
or four decades. It is absolutely flat while the rest of the 
world has come up, and we have gone from number one to the 
bottom quartile of the OECD countries.
    As much of a pessimist as I am, I actually do see a couple 
of optimistic things happening. One is, we now have 37 states 
signed up for common core curriculum K-12 subject matter by 
subject matter. Now, signing up for something and doing 
something as you well know are two different things, but 
getting 37 states to sign up for a common core curriculum is 
the first step.
    There is also a consortium of states that are providing a 
state-driven internationally benchmark common assessment tool. 
That is, do away with the 50 different state assessments and 
have a common internationally benchmarked assessment tool for 
K-12 education.
    I frankly think those two things plus the private sector 
getting involved in Change the Equation and some other areas 
give a sense of hope. The Race to the Top Program of Secretary 
Duncan has caused over 30 states to change their legislative 
rules and regulations about charter schools, pay for 
performance.
    All of these things are building blocks. They have not 
changed the bottom line yet. The results--the kids that get out 
of school this year are probably going to have the same results 
as the kids that got out of school last year, but at least we 
are finally attacking the basic fundamental building blocks.
    Mr. Holliday. If I could share an example, I served for 
five years on China's Development Board where a group of 
business leaders and academics came to three days in Beijing to 
share with the highest levels of government what we thought 
China should do differently. If you could make the mirror image 
of that in the U.S. and invite business leaders and academic 
leaders from these growing countries in the world to come here 
and share their experiences of what the U.S. could do 
differently, it might change things.
    Ms. Johnson. Thank you.
    Mr. Augustine. My footnote would be that if you could have 
more hearings in committees other than this one where there is 
a strong understanding, I think, of the issues--where you had 
business people come in and explain why they put their plants 
in other countries, and what it means to jobs, and the standard 
of living, and national security in this country--I suspect 
that the three companies that we worked for are probably 
employing around a half million people, somewhere close to 
that--and I think we just need to get more people to come in 
and speak with Members to make clear what the consequences are.
    Ms. Johnson. Thank you very much. Does anybody else have--
--
    Dr. Mote. Well, I would just like to comment on this. I 
think firsthand experience is really necessary to really 
understand the depth of our problem, and I would say that if 
the leadership could actually get first-hand experience in 
China, for example, and really understand how it works and what 
the competitive level actually is, it would be stunning for 
them. And it would change their whole perspective on all the 
issues that would come subsequently.
    I don't think this can be learned out of books and out of 
hearings. It is a sort of cultural issue, and Singapore--as 
China has basically taken Singapore's play book--basically, 
China has designed its plan for infrastructure development and 
for market competitiveness following Singapore's model, and it 
is really frightening to see. It is so effective.
    Mr. Hall. Mr. Chairman.
    Ms. Johnson. Thank you very much.
    Mr. Hall. Mr. Chairman.
    Chairman Gordon. Mr. Hall is recognized.
    Mr. Hall. I really think at this point we ought to point 
out our problems of the past and our mistakes of the past. I 
may be the only one here that remembers the super collider. 
Eddie Bernice probably remembers it. I remember when we got to 
the crossroads there, I think they either needed--I am not very 
good on math, but I think they either needed $600 million or $6 
million, and we offered them either $2 million or $200 million. 
I can't remember which it was. It doesn't make much difference 
now because that is no money today, and I hope nobody ever 
tells this President how much a gagillion is.
    But we turned them down, and we lost that. We wound up with 
a giant hole from Waxahachie, Texas, halfway to Dallas, and we 
lost our chance to go ahead in the world of science.
    And so we have a history of not being practical and not 
salvaging a great--I went to Cern with others here, maybe some 
here were with us there. I even talked a lot of those people 
into coming to the United States to work and to help us get the 
super collider kicked off, and it was hard to say goodbye to 
them when they left to go back there to their old jobs.
    But that is something we can look back on, a grave mistake 
that was made, and it was made because we didn't have sense 
enough to do what you men are suggesting to us to do at that 
time.
    I yield back.
    Chairman Gordon. Thank you, Mr. Hall.
    We try to follow regular order here, which means that a lot 
of the work in this committee falls upon the subcommittees and 
the subcommittee chairmen and ranking members have to put 
really an exceptional amount of time into that, and Mr. Inglis 
has been one of those excellent ranking members on one of the 
most active subcommittees that we have, and I thank you for 
that contribution and also recognize you for five minutes.
    Mr. Inglis. Thank you, Mr. Chairman, and I want to join you 
and Ranking Member Hall in thanking the panel for focusing on 
energy as an opportunity for us, and so let me ask you whether 
the challenge there is that we haven't yet unleashed the power 
of free enterprise to fix the problem. I agree that some of the 
things we can do in this committee are important, very 
important to provide some research and that sort of thing.
    If we could combine that effort with a way to make money 
out of inventing and commercializing the new fuels, then we 
would have something going. But our challenge is that the 
incumbent fuels, particularly transportation fuels being 
petroleum and coal in the case of electricity, the negative 
externalities are not recognized, the government is failing in 
its function to force the recognition of those negative 
externalities, and as long as they get freebies, then how do 
you compete? If you have got this better technology, how do you 
compete?
    Cap and trade has just died, so we can give it a death 
certificate now. So how about an alternative which is a 
revenant or neutral carbon tax? Basically reduce payroll taxes 
and then an equal amount, shift the tax to carbon dioxide. 
Start out at $15 a ton, end up at $100 a ton over a 30-year 
period. Make it a border adjustable tax, WTO [World Trade 
Organization] compliant so that if you would move it on export, 
you impose it on import.
    And then watch the free enterprise system say, oh, you 
wanted an alternative to petroleum? We got it, and we can make 
it and deliver it to the customer at a price point that can 
beat petroleum. But until we do that, take that action, it 
seems to me we are never going to get--we are going to continue 
to do these research things, which are fabulous, but until you 
get the lift of the free enterprise system saying, by golly, I 
can make a buck doing that, I can deliver it to a desiring 
customer, a useful product. When you get that, things start 
happening. So that is my little commercial for a 15-page 
alternative to the 1,200 page monstrosity of cap and trade.
    And it is something that I think that conservatives 
thinking straight and liberals thinking straight should come 
together and say, that works, because, you know, this idea I 
have just described, Al Gore and Art Laffer agree on it, and if 
Al Gore and Art Laffer can agree, can't we get the country to 
agree? What do you think? Can we get folks to say, yes, free 
enterprise is going to deliver. The companies that you all have 
so effectively led can deliver the solutions here. Right? I 
mean, is that correct?
    Mr. Holliday. I agree totally if we could have certainty 
around the energy environment--and you have described one way, 
there are other ways--it would unleash creativity in this 
country we cannot imagine. And I think we are better positioned 
than even China and Singapore to take advantage of that, 
because we can respond quicker to a market force than they ever 
can.
    One simple example is playing out today. We didn't talk 
about unconventional natural gas three or four years ago. 
Nobody understood what it meant. Then natural gas spiked and 
people had confidence the price was going to be higher, we 
started raising all new questions we hadn't before, and now 
there is an opportunity in energy that is going to be very 
amazing. Not the answer, but amazing.
    So I agree with you totally. We have got to let the market 
system work, and you can play a role in that.
    Mr. Inglis. Anybody else want to take a shot at that? 
Unleashing the power of the free enterprise system to solve it.
    Mr. Augustine. Well, I suspect all four of us are great 
believers in the free enterprise system, but the market, of 
course, is reacting to the incentives that it sees today. And 
the study that Chad chaired, that I had the privilege of 
serving on, pointed out that the pharmaceutical companies, I 
believe, spent something like 15 percent of their revenues on 
R&D, aerospace industries around 10, 11 percent. The energy 
companies, the traditional companies, it is 3/10ths of a 
percent. And that is the ``correct'' thing to do for their 
shareholders in the model that we've built today. And so we 
need a new model.
    Mr. Inglis. Thank you, Mr. Chairman. Appreciate the 
opportunity.
    Chairman Gordon. Thank you, Mr. Inglis, and I think we can 
probably expect a different view on something from Mr. 
Rohrabacher, who is recognized for five minutes.
    Mr. Rohrabacher. Not Comrade Rohrabacher? Well, thank you 
very much. Yeah. I do have some different thoughts on this.
    I would suggest that perhaps the fundamental problem that 
we have is that we don't have anyone watching out for the 
American people. Hear a lot of suggestions, in fact, a lot of 
them are detached from what is good for the American people as 
a people and what--you know, I don't think that we should have 
as many foreigners coming here, getting those graduate student 
slots, and then asking them to stay here. I don't think that is 
a good idea. I think it is a good idea to have American 
students, even if they are just the B+ students instead of the 
A+ students from India and China, it is better to have them in 
those positions.
    This whole idea of--well, you could follow that right on 
through. We have acquiesced---the United States has acquiesced 
to a policy of a one-way free trade policy with China for 30 
years.
    Now, let me ask the panel. When a solar panel company sets 
up manufacturing in China, is that not because they cannot sell 
their panels in China unless they are manufactured there? So we 
let them get away with policies like that rather than having 
say, look, you have access to our market, we have got to have 
access to yours. We are not watching out for the American 
people. Our people are going to lose.
    We have permitted the wholesale theft of our intellectual 
property for the last 30 years, not only to China but 
elsewhere, and I don't hear anything about that. The 
pharmaceutical companies that we just heard mentioned, they 
spent billions of dollars of research money, and what happens? 
The Chinese steal it, they go over there, and they are selling 
knockoffs. So what do they do? They have to pass on that price 
to the American people. We end up having the American people 
paying more for their medicine in order to subsidize the 
Chinese people whose medicine is being paid for by us.
    The Chairman or the Ranking Member mentioned the super 
collider. All right. We didn't pay for it. Has China put any 
money into the super collider? Have they, panel? They put money 
into the super collider research? No, because they want us to 
put our money in so that they can take the benefits. So they 
can get the benefit of the research. Who is watching out for 
the American people?
    I mean, I am sorry. I hear, you know, what I am hearing 
today is not something that gets to the point of how this 
average Joe out there who is unemployed is going to find 
himself in a job, or at least a well-paying job. What I am 
hearing is, you know, for example, we have heard education, 
education, education. I have sat through probably five of these 
hearings, and each time we bring up the idea that one of the 
major problems in education is that we have unions that are 
basically protecting mediocre teachers, and we got unions that 
are protecting people who teach courses that are not essential, 
and they have to be paid the same amount of money as someone 
who teaches engineering and science. Well, of course we are not 
going to get any high-quality engineering and science teachers 
if they have to get paid the same people who teach--as teach 
basket weaving. Well, the bottom line is unless we are willing 
to address these things and watch out for the American people, 
the American people are going to suffer, and I think that this 
is what is happening right now, especially in terms of China.
    By the way, these graduate students that we want to keep 
here, why do we want to have Chinese students swarming into 
these graduate positions, teaching them information that costs 
us billions of dollars of research to do, so they can go back 
to China, and they can then utilize that information to out 
compete us? They realize they are our adversary. We don't 
realize they are our adversary, and we are treating them as if 
it is okay to give them the edge on the American people.
    And I am sorry if I sound a little bit wild here today, 
because I always do, but the fact is I feel--but I feel 
strongly, I feel totally strongly about this. Unless we start 
protecting the intellectual property rights of our people, of 
our companies from China and elsewhere--they got the biggest 
cyber spy network in the world at play in China right now, 
trying to glean anything they can from us--until we start 
protecting our intellectual property rights from outright theft 
and spying and having an equal trade relationship, our people 
are going to continue to suffer, and I think that is the basis 
of the problem, Mr. Chairman.
    So with that said, please, you got four seconds to comment 
on my comment.
    Dr. Barrett. The best thing you can do for the--watching 
out for the American people is give the next generation of the 
American workforce the best education in the world. That is the 
only way they are going to compete. There is not a person on 
this panel who is not a parent and a grandparent who has 
grandkids, who want to have the same opportunity they did, and 
that means we want the United States to succeed.
    Let me just offer a slight rebuttal to your comment about 
who wants Chinese students here, the A+ students. We have got 
plenty of B+ students. It is an A+ world. If you want to 
compete internationally, you need A+ students. We hire the best 
students we can. I wish they were American students. The matter 
of the fact is we have failed at getting our younger generation 
proficient and interested in the subject matter which is going 
to be the basis for the 21st century economy. We have to do a 
better job at that, and the private sector is stepping up.
    I was just at the NBC Education Summit in New York City 
yesterday, where this topic was addressed for two full days--
government reps, private reps. This is the challenge we have, 
and it is a uniquely American challenge. We have to educate our 
children to be successful in the international marketplace. You 
cannot have a Microsoft, a Cisco, an Intel, a DuPont with just 
B+ players. You cannot. You need the best talent from around 
the world to have those companies successful in the 
international marketplace.
    Mr. Rohrabacher. Even if the trading rules are set up so 
that their trading rules favor the Chinese?
    Dr. Barrett. I am, and as I think everyone on this panel 
would all be, for fair and legal trade, balance trade back and 
forth, protection of intellectual property. All of us would be 
proponents of those comments that you made, but the basic 
challenge that you have for the United States is, in fact, 
having a workforce which can be internationally competitive and 
then setting the playing field level in the United States with 
international companies.
    That leveling of the playing field is, let's be legal with 
intellectual property and trade policies, but at the same time 
let us also recognize what the government's responsibility is: 
to set the playing field level for companies to operate here, 
to invest here. Why penalize U.S. companies to make investments 
in the United States? That is exactly what we are doing today.
    Chairman Gordon. The gentleman's time has expired. As you 
can see, we are a committee of a big tent.
    Mrs. Biggert is recognized, and will be our last questioner 
in that we are going to be having votes here very shortly.
    Mrs. Biggert. Thank you, Mr. Chairman, and I am sorry that 
I missed all of your testimony. You are all my heroes. I think 
what you are doing to really bring us back where we are--we 
just have to have the education of our kids, and we have got to 
move forward so much in the science and research.
    And Mr. Augustine and Mr. Holliday, I know you both served 
on the Gathering Storm, which I thought--and Dr. Barrett. I am 
sorry. This was such an important thing, I think, for science 
in this country, and for us moving forward in this committee. 
And I also--then the American Energy Innovation Council, and I 
had the opportunity to go to the dinner before the press 
announcement of that, and this was really, I think, such an 
important, you know, step forward, too, as well as the revised 
Gathering Storm, but you just have to keep it up, because we 
really have to move forward, and I think we have, you know, in 
Congress, as far as our colleagues and knowing how much the 
research and development is.
    I just want--I wanted to ask you that, you know, we have 
got still a limited amount of money. We are certainly not doing 
so well right now where we--but, you know, the COMPETES Act to 
me was really important, that we move forward with that.
    But the Gathering Storm report says that we should double 
the funding for basic research, and then the Energy Innovation 
Council report I believe says that we should spend an 
additional $11 billion on energy, technology, development, 
demonstration, and commercialization. So I think now, in the 
economic times that we are in, it is really hard to do 
everything that we want to do, and so if you were in Congress 
and you had to prioritize, which--how would you start with 
these areas and which would go first, and which would you give 
your first dollars to, the early-stage benefit, basic research, 
or the late-stage development and commercialization activities?
    Mr. Augustine.
    Mr. Augustine. That is a terrific question that we have all 
thought about a lot, of course. And it is a little bit like 
asking, do I want to give up water, or food? I think that we 
just can't afford not to do these things, and I think we can 
afford to do them. And I say that, for example, if Americans 
spent more on legal tobacco during these five years--we could 
have done every--all of the 20 recommendations, every one of 
them from the Gathering Storm study, for what the Americans 
spent on legal tobacco during that period of time, and had $60 
billion a year left over.
    So we can afford it. And I realize that is a little 
different from the Federal Government's budget, but I think the 
things that Congressman Hall said--he had a little bit of fun 
with my comment at another event that I am an aeronautical 
engineer, and during my career I worked on many airplanes that 
were overweight, and I pointed out that we never solved that 
problem by taking off an engine. And what we are talking here 
about are the engines, and I think we just have to do these 
things.
    Mr. Holliday. Just to add, totally supportive of what Norm 
said, but as we met with the American Energy Innovation 
Council, we basically asked ourselves the question, how would 
we fund this? And if it was inside our companies, we would go 
through and take the lowest priority things we are currently 
doing and shift those funds to this. We would not create more 
funds for it. We would make choices. All of our experiences at 
a time like this forces you to make choices. You shouldn't miss 
that opportunity.
    Mrs. Biggert. I was just on the Floor speaking about You 
Cut, and that is where we, you know, doing away with some of 
these program that we--have been in existence for a long time, 
and as Ronald Reagan said, the closest thing to eternal life is 
a federal program.
    So we really do need to reprioritize our--whatever we are 
doing, but--and then just going back to the STEM education 
things, how can we really ask, you know, the people really 
realize that they are being shortchanged on the education, and 
we really have to improve that. We hear, you know, like with 
the Japanese that they are studying all the time or the 
Chinese, and, you know, their focus is on that education. I 
don't think that we want to have our students have to go to 
school seven days a week and things, but we have to find a way 
that we can really ramp that up.
    Anybody like to address that?
    Dr. Barrett. Well, the priority of items there is, first 
and foremost, to get certified math and science teachers in our 
public education system, K-12, and there are a number of 
programs which have been started in that direction, and I 
heartily endorse them and push them forward.
    The private sector has recently gotten involved. We were 
discussing before you were here something called Change the 
Equation with 100 plus companies trying to get kids more 
excited about studying STEM topics rather than, oh, wanting to 
be a lawyer or a doctor, but to focus on math and engineering 
as well.
    But first and foremost, if you don't have good teachers in 
our K-12 system, you are certainly not going to get children 
enthused about studying math and science if they don't respect 
and they don't learn from the teachers in the classroom, and 
the teacher is not going to do a good job if he is afraid the 
kids know more than they do.
    Chairman Gordon. I am sorry to say, but the gentlelady's 
time has expired.
    As I mentioned earlier, we follow regular order here which 
puts a lot of work on our subcommittees and those chairmen. The 
subcommittees put in a great deal of time. Dr. Baird, working 
with Mr. Inglis, they have been good partners in bringing us 
good legislation, and I recognize you here for the--for now the 
final word.
    Mr. Baird. Well, I thank the Chairman and mostly wanted to 
just thank you all. I believe that the work you did and that 
the Chairman did and this committee did may be central to the 
future of this country, without any exaggeration at all. This 
is an institution that feeds on hyperbole, but I don't think it 
is hyperbole here. I actually think ARPA-E and the various 
things you have recommended that we have enacted, thanks to 
this Chairman and this committee, are profound game changers, 
and somewhere in this country there are some scientists who are 
going to be successful at finding those solutions to our energy 
problems that wouldn't be there without them.
    And we put, you know--when in doubt, throw a commission at 
a problem around here--but this is a commission that really did 
something, and I just want to thank you for your years of 
service to our country and for your service on this commission, 
and since I have the privilege of the last word, I would like 
to ask my colleagues to join me in thanking this fantastic 
Chairman we have of this committee, who not only wrote that 
bill but has stewarded this committee in a fair, bipartisan, 
wise, and constructive manner and made a profound difference 
not only on the Committee but on the House of Representatives 
and his state and his country. And it has been a privilege to 
serve, and I would like people to join me in thanking Chairman 
Bart Gordon for his service.
    Chairman Gordon. Thank you, Dr. Baird. I wish that I could 
yield more time to you, but time is coming to a close. Before 
we bring the hearing to a close I want to sincerely thank our 
witnesses, not just for being here today but for your 
continuing commitment to these issues that we are all very 
committed to also.
    The record will remain open for two weeks for additional 
statements from the Members and for answers to any follow-up 
questions the Committee may ask of the witnesses.
    Now I would like to turn the gavel over to Mr. Hall.
    Mr. Baird. That is a bit premature, Mr. Chairman.
    Mr. Hall. Now I would like to yield myself one hour. I join 
in thanking you, and I thank this fine Chairman here. I hope I 
am the Chairman almost a year from now, but I couldn't ask for 
a better Chairman than you have been, Republican, Democrat, or 
third party. He has been totally, completely fair, and I never 
knew a person from Tennessee that I didn't admire because but 
for Tennessee it wouldn't be a Texas, and Bart always says, 
well, there wouldn't have been a Texas anyway if there was a 
backdoor in the Alamo.
    So--but these men and women that are leaving us, I 
appreciate them. Dr. Baird, we will really miss you and your 
knowledge and background and genuine interest in what Jeremy 
Bentham called ``the greatest good for the greatest number.'' 
We appreciate all of you.
    With that do I hear a motion to adjourn.
    Voice. Motion to adjourn.
    Mr. Hall. We are adjourned.
    [Whereupon, at 11:54 a.m., the Committee was adjourned.]


                               Appendix:

                              ----------                              


                   Answers to Post-Hearing Questions
Responses by Mr. Norman R. Augustine, Retired Chairman and CEO of the 
        Lockheed Martin Corporation and Former Undersecretary of the 
        Army

Questions submitted by Chairman Bart Gordon

Q1.  I began my questions by asking you and the other witnesses to 
comment on the appropriate public and private sector roles in fostering 
innovation. In response, the witnesses appeared to agree that the 
federal government should sponsor activities primarily in the area of 
basic research. However there was not a clear consensus among the 
witnesses on what ``basic research'' might include, and therefore, what 
the appropriate government role should be in supporting a wide array of 
innovation mechanisms.

     I also asked why energy warrants a particular focus. The recent 
report by the American Energy Innovation Council (AEIC), which includes 
Mr. Augustine and Mr. Holliday, called for federal investment in clean 
energy innovation (including research and development through finance 
and deployment) to more than triple to $16 billion annually. Mr. 
Holliday asserted that such an investment in energy innovation could 
transform the entire economy, strengthen our national security, and 
reinvigorate the manufacturing sector along with the overall productive 
capacity of the country.

     Using ARPA-E as an example, to date this new agency has selected a 
total of 121 projects based in 30 states, with approximately 39% of 
projects led by universities, 33% by small businesses, and 20% by large 
businesses. Almost all projects also have multiple partners. Both the 
Gathering Storm report and the AEIC report strongly recommend 
additional funding for ARPA-E to build on its progress to date. Given 
the shifting landscape of global competitiveness, is it appropriate and 
important for innovative programs, such as ARPA-E, to support a wide 
range of activities, including by continuing to leverage nascent 
private sector efforts and investment in emerging technologies?

A1. It is my belief, having spent nearly a third of my career in 
government and most of the remainder in the private sector, that 
government in a free enterprise system should do only those things that 
cannot be done well by the private sector. As it happens, there are a 
number of examples of such circumstances, including undertakings the 
results of which are beneficial to society as a whole but may not 
return commensurate benefits to the pursuers of those undertakings.
    Basic research is one such example. I would define basic research 
as the effort to understand the fundamentals of nature; that is, 
curiosity-driven scientific exploration. Basic research entails 
substantial risk, produces often unexpected benefits, frequently takes 
a long time to convert into financially rewarding products and 
services, and often rewards individuals or organizations other than the 
investors or performers themselves. This seems to be an example of the 
category of effort that government should fund . . . but not 
necessarily perform.
    The need for government support of innovation goes well beyond the 
funding of basic research itself. In addition to creating an 
innovation-friendly environment (tax policy, intellectual property 
protection, education . . .), there are hurdles in the knowledge-to-
the-marketplace progression wherein government assistance is also 
needed if they are to be overcome. I like to think of this spectrum of 
activities as including at least two segments . . . sometimes referred 
to as the ``Valleys of Death'' . . . that are particularly unattractive 
from the standpoint of commercial investors.
    The first of these Valleys often follows the discovery of new 
phenomena offering promising applications. Unfortunately, it is not 
uncommon in this circumstance that there remains significant risk and 
uncertainty that deters individual and corporate investors--even 
though, if successful, the product sought would be of substantial 
benefit to society as a whole or at least some large segment of 
society.
    The second Valley occurs after a prototype has been built that 
seems to confirm the underlying feasibility of the product being sought 
but does not provide convincing evidence that the prototype can be 
``scaled-up'' to a degree useful for commercial application. In some 
cases these barriers are not unduly high--in which case no government 
involvement is needed. But, in other cases, particularly in the field 
of energy-provision, this step can represent investments of hundreds of 
millions of dollars--and take many years. This is thus the sort of 
activity that I believe it is appropriate for the government to 
underwrite.
    ARPA-E is intended to aid in transiting the first of these 
Valleys--and one of the recommendations offered by the American Energy 
Innovation Council was intended to address the second.
    Based on my own experience it is very appropriate for organizations 
such as ARPA-E to take ideas and new knowledge that may have been 
generated in the private sector or our research universities and 
nurture them to the point that the private sector can, while also 
carrying out its fiduciary responsibilities to its investors, pursue 
them until they become marketable or at least potentially capable of 
scalability. In doing this, it is important that to the degree possible 
the government seek to assure that no individual firm receives 
advantage beyond that which may result from investments the firm itself 
may have made or competitively accrued.

Questions submitted by Representative Ben R. Lujan

Q1.  The original report called for an expanded role for national 
laboratories, that they can help fill the gap left behind now that 
corporations have moved away from long term R&D and they can transition 
new discoveries to commercially viable technologies. I believe the 
national labs are a great resource, not only for fundamental science 
and national security, but also for spurring innovation through 
partnerships with businesses. I'd like to get your impression on 
promoting the ability of national lab scientists and engineers to 
provide technical assistance to small businesses. As an example, there 
is a program in New Mexico, the New Mexico Small Business Assistance 
Program, in which the state pays for personnel at either Los Alamos or 
Sandia national labs to spend a small amount of time to assist New 
Mexico businesses on some of their technical problems. It has become 
very popular and I think proves the value of the skilled personnel at 
national labs, not just the technology or user facilities, for helping 
businesses to be more competitive and innovative. So I'd like to hear 
of your opinion on this issue, on promoting ways for businesses to make 
use of the technical expertise at the national laboratories.

A1. I believe that national laboratories play an important role in the 
innovation cycle . . . but that one of their roles is to support 
industry, not to compete with it. The dilemma faced, of course, is that 
in pursuing the work of the laboratories it is important that, to the 
extent possible, they not favor any particular firm. Yet it is 
essential that the laboratories work cooperatively with the private 
sector since it is only the latter that can reasonably be expected to 
take products into the marketplace and create jobs . . . at least this 
is the case in the free enterprise system upon which this nation is in 
part built.
    These considerations and others lead me to believe that the 
national laboratories should focus on the creation of new knowledge 
through basic research and assist industry in translating that 
knowledge into products and service for the marketplace. This 
necessitates a close working relationship between industry and the 
government laboratories. It also indicates that the work pursued by the 
national laboratories should offer major breakthroughs--an outcome 
often accompanied by significant risks, high costs and long-term 
endeavors--not just marginal improvements. The use of nuclear fusion as 
an energy source would be an extreme example of such a circumstance. 
Successful nuclear fusion could, in my opinion, be of extraordinary 
importance to our citizenry--but it is extraordinarily expensive, still 
entails significant technical risk in terms of viability, is extremely 
costly to carry to the application phase, and is still distant in time.
    In summary, I believe there is an important role for the 
laboratories to support our nation through promoting ways by which 
businesses can apply the results of the laboratories' work.

Q2.  Your written testimony states that six million more American youth 
have dropped out of high school since the original Gathering Storm 
report was produced. I believe this highlights a very serious problem 
facing America's youth and the future of our workforce. My home state 
of New Mexico suffers from public school graduation rates that are 
consistently below 70 percent. As you know, this is particularly 
alarming because these students will be cut off from opportunities to 
obtain a college education and become part of the robust high-tech 
workforce America so desperately needs.

     Can you discuss how Congress can make the necessary investments in 
K-12 STEM education, tutoring or mentoring programs to combat dropout 
rates and ensure that our students are successfully graduating from 
high school?

A2. Thank you for that question. I might begin by noting that the high 
school ``drop-out'' rate you cite for New Mexico, while altogether 
unacceptable, is only slightly below that of the nation as a whole. The 
problem you describe is, based on the various studies in which I have 
participated, the most important single challenge currently facing our 
country. As you know, education in America is principally the province 
of states and localities . . . resulting in some 14,000 independent 
school districts bearing responsibility for educating our children.
    But there is much that Congress can, and in my opinion should, do 
to facilitate better educating our nation's young people. One of these 
is to offer competitive scholarships for U.S. high school graduates to 
attend U.S. universities and pursue degrees in engineering, math or 
science while simultaneously receiving training in pedagogy. In return, 
the recipients would agree to teach in our nation's public schools for 
a prescribed period of years.
    It is also important that we create opportunities in the early 
grades, and even before students enter the public school system, to 
prepare them for the academic rigors they will soon face. This could be 
done through funding of pre-school and after-school programs, and the 
use of technology for learning at home.
    The matter of assuring that students graduate from high school can 
be assisted by providing formal mentoring and financial aid to students 
who may be otherwise be highly qualified but are obliged to withdraw 
from school for family financial reasons.
    Further, we should create a system of rewards for extraordinary 
teachers: we should pay physics teachers more than phys-ed teachers and 
we should pay good physics teachers more than poor physics teachers--
and we should not tolerate inept physics teachers. The teaching 
profession should be revered, given its importance to our nation's 
future. We should have standards for our students to meet and we should 
test against those standards. We should take special steps to assist 
economically deprived young people.
    Given that the black and Hispanic communities are badly under-
represented among graduates from, for example, engineering schools, and 
the fact that these communities are the fastest growing segments of our 
nation's population, portend a worsening competitiveness picture unless 
we take decisive action. If we remain on the current path, in just 15 
years the U.S. will be in last place among all the world's 
industrialized nations in terms of the fraction of our graduates 
receiving degrees in engineering. Given the importance of engineering 
to growth in the Gross Domestic Product and the creation of jobs, this 
is not a formula for an attractive quality of life for either our 
children or our grandchildren.
                   Answers to Post-Hearing Questions
Responses by Dr. Craig Barrett, Retired Chairman and CEO of Intel 
        Corporation

Questions submitted by Chairman Bart Gordon

Q1.  I began my questions by asking you and the other witnesses to 
comment on the appropriate public and private sector roles in fostering 
innovation. In response, the witnesses appeared to agree that the 
federal government should sponsor activities primarily in the area of 
basic research. However there was not a clear consensus among the 
witnesses on what ``basic research'' might include, and therefore, what 
the appropriate government role should be in supporting a wide array of 
innovation mechanisms.

     I also asked why energy warrants a particular focus. The recent 
report by the American Energy Innovation Council (AEIC), which includes 
Mr. Augustine and Mr. Holliday, called for federal investment in clean 
energy innovation (including research and development through finance 
and deployment) to more than triple to $16 billion annually. Mr. 
Holliday asserted that such an investment in energy innovation could 
transform the entire economy, strengthen our national security, and 
reinvigorate the manufacturing sector along with the overall productive 
capacity of the country.

     Using ARPA-E as an example, to date this new agency has selected a 
total of 121 projects based in 30 states, with approximately 39% of 
projects led by universities, 33% by small businesses, and 20% by large 
businesses. Almost all projects also have multiple partners. Both the 
Gathering Storm report and the AEIC report strongly recommend 
additional funding for ARPA-E to build on its progress to date. Given 
the shifting landscape of global competitiveness, is it appropriate and 
important for innovative programs, such as ARPA-E, to support a wide 
range of activities, including by continuing to leverage nascent 
private sector efforts and investment in emerging technologies?

A1. I believe the role of government financing of research should be 
primarily limited to basic research--that is research in the pre-
competitive phase, many years from commercialization. This is the sort 
of research that would be carried out in tier 1 research universities 
with occasional partnership with industry. I am not in favor of massive 
investment by the government designed to commercialize research 
topics--when someone speaks of a $16B investment it strikes me that 
this is asking the government to pick between winners and losers rather 
than in developing the next generation of technology. So I am in favor 
of expanding on the good work done by the NSF and equivalent agencies 
(doubling the NSF budget would be my goal) but I would not favor the 
massive investment of government funds to commercialize technology. Re: 
the issue of `why energy research', I believe the answer is mere the 
pragmatic realization that alternative energy is the Sputnik of the 
21st Century. The need is obvious, everyone can associate with the 
bottom line result, the geopolitical issues are profound, and the 
opportunity for world leadership is apparent.

Questions submitted by Representative Ben R. Lujan

Q1.  I am encouraged by the great strides Intel and other large tech 
companies have taken to partner with educators to support STEM 
education programs. In New Mexico, our local Intel has been a committed 
partner in recent STEM initiatives that are designed to give students 
hands-on experience with real-world technology projects.

        a.  As public-private STEM partnerships continue to grow, how 
        can we ensure that corporate investments in STEM are 
        benefitting our neediest students, especially low-income and 
        minority students? These students are too often 
        underrepresented in science and technology fields, and we must 
        make sure that they are included in emerging high-tech 
        industries.

        b.  My district in NM is largely rural. Oftentimes rural 
        classrooms face teacher shortages, or are not equipped with the 
        most up-to-date computer equipment or access to broadband. Can 
        you comment on how we can utilize public-private partnerships 
        to overcome challenges associated with STEM education in rural 
        communities?

A1. I believe the current private effort ``Change the Equation'' 
provides the appropriate response to both the issue of minority 
involvement in STEM and the association of the private sector with 
economically depressed regions. This effort of over 110 companies has 
within its charter working with minorities and having companies work in 
their local environments to help bring technology to all regions of the 
US. The issue of New Mexico and Intel is a perfect example of how such 
a partnership can work. The fact that 110 companies have committed to 
this effort is an indication that they are serious in following up on 
this important issue.

                   Answers to Post-Hearing Questions
Responses by Mr. Charles Holliday, Jr., Chairman of the Board of Bank 
        of America and Retired Chairman of the Board and CEO of DuPont

Questions submitted by Chairman Bart Gordon

Q1.  I began my questions by asking you and the other witnesses to 
comment on the appropriate public and private sector roles in fostering 
innovation. In response, the witnesses appeared to agree that the 
federal government should sponsor activities primarily in the area of 
basic research. However there was not a clear consensus among the 
witnesses on what ``basic research'' might include, and therefore, what 
the appropriate government role should be in supporting a wide array of 
innovation mechanisms.

     I also asked why energy warrants a particular focus. The recent 
report by the American Energy Innovation Council (AEIC), which includes 
Mr. Augustine and Mr. Holliday, called for federal investment in clean 
energy innovation (including research and development through finance 
and deployment) to more than triple to $16 billion annually. Mr. 
Holliday asserted that such an investment in energy innovation could 
transform the entire economy, strengthen our national security, and 
reinvigorate the manufacturing sector along with the overall productive 
capacity of the country.

     Using ARPA-E as an example, to date this new agency has selected a 
total of 121 projects based in 30 states, with approximately 39% of 
projects led by universities, 33% by small businesses, and 20% by large 
businesses. Almost all projects also have multiple partners. Both the 
Gathering Storm report and the AEIC report strongly recommend 
additional funding for ARPA-E to build on its progress to date. Given 
the shifting landscape of global competitiveness, is it appropriate and 
important for innovative programs, such as ARPA-E, to support a wide 
range of activities, including by continuing to leverage nascent 
private sector efforts and investment in emerging technologies?

A1. It is of the utmost importance for the U.S. to support highly 
innovative, highly subscribed, and high potential programs like ARPA-E 
that are fostering game-changing energy technology developments and 
will help the U.S. become a technologic leader in clean energy 
technologies in the 21st century. Both the Gathering Storm report and 
the American Energy Innovation Council recommendations make it quite 
clear that ARPA-E represents a successful model framework that will 
enable the nation's best innovators to pursue truly novel ideas. 
Supporting ARPA-E--and other institutional frameworks like it--should 
be a national priority.
    Innovative programs such as ARPA-E are critically important 
precisely because they focus on high-risk, high-payoff emerging 
technologies. ARPA-E, for example, does not fund discovery science, nor 
does it support incremental improvements to current technologies. 
Rather, projects are selected and supported because they represent the 
potential to fundamentally shift technology in a different direction. 
By definition, then, these technologies are highly risky, which largely 
means that private sector firms can't or won't support them alone. This 
is where the role of ARPA-E is pivotal: the agency solicits innovative 
proposals from companies, laboratories, and universities and supports 
the best ideas through early product development and testing to the 
point when private sector players are willing come in and make 
additional investments to scale up and broadly commercialize successful 
technologies. By supporting a diverse portfolio of the most innovative 
proposals in clean energy, public investments made by ARPA-E will 
ultimately leverage private sector investments many times over. Only 
ideas that have strong potential to make rapid progress toward market 
commercialization are supported, and funds are not extended without 
demonstrable progress within two or three years. In short, there is no 
other government agency or private sector entity that can support the 
early stage development of such a wide range of promising energy 
technologies.
    As my AEIC colleagues and I noted in our report, A Business Plan 
for America's Energy Future, ARPA-E has high potential for long-term 
success, but only if it is given the autonomy and budget to support the 
game changing technologies the U.S., and the world, critically needs. 
In our global, ultra-competitive world, programs such as ARPA-E that 
enable U.S. businesses to pursue the most innovative technologies 
conceived are not just important; they are essential if the U.S. is to 
maintain its place as home to the world's leading innovators.
                   Answers to Post-Hearing Questions
Responses by Dr. C.D. (Dan) Mote, Jr., President Emeritus of the 
        University of Maryland and Glenn L. Martin Institute Professor 
        of Engineering

Questions submitted by Chairman Bart Gordon

Q1.  I began my questions by asking you and the other witnesses to 
comment on the appropriate public and private sector roles in fostering 
innovation.

A1. Regarding fostering innovation, a complete innovation system has 
both a top-down (government driven) and a bottom-up (private sector 
drive) component. No fully complete innovation system currently exists 
in the world. Singapore and China have relatively strong top-down 
components and are working to build their bottom-up components to 
become the first complete system in the world. They have a way to go to 
be certain, but they know where they are going and are on the road. The 
U.S. has yet to recognize that a top-down component is necessary.
    The current U.S. government role is to be indirectly supportive of 
private sector developments by supporting pre-competitive, openly 
available, basic research functions at national laboratories and 
research universities. As important to U.S. competitiveness, 
universities simultaneously prepare/educate the pipeline of the future 
research leadership for industry, government and universities. Basic, 
pre-competitive, publicly available research contributions no longer 
come from industry. Industry develops proprietary products, which are 
not basic research and no federal support is sought for these purposes. 
Either government laboratories or universities undertake basic research 
for the United States, or it is not done in this country at any large 
scale. If the centers of basic research move elsewhere in the world, 
U.S. dominance in science and engineering, a national hallmark for half 
a century, will move with it.
    Federal government support for research facilities is a critically 
important part of government support for modern research. Support for 
facilities in universities is not available through research grants, 
and States and industry do not support facilities. It is Catch 22. 
Without adequate facilities, universities cannot compete for grants to 
undertake research and train/educate students. Without the grants for 
research, funds to build facilities are not available because of 
competing needs.

     In response, the witnesses appeared to agree that the federal 
government should sponsor activities primarily in the area of basic 
research. However there was not a clear consensus among the witnesses 
on what ``basic research'' might include, and therefore, what the 
appropriate government role should be in supporting a wide array of 
innovation mechanisms.

    What is Basic Research here? Basic research is the systematic study 
of fundamental questions in physical, engineering, mathematical, 
computer, and life sciences that can lead to greater knowledge or 
understanding and to potentially broad and/or path-breaking 
applications in the future. History verifies that far-sighted, high-
payoff research has provided the bases for the technological progress 
that has built this nation. Basic research may lead to applied research 
for development of commercial products, security-center technologies 
and other technologies, to development of new functional capabilities, 
or to the discovery of additional new knowledge with its concomitant 
values thereby renewing the process.

     I also asked why energy warrants a particular focus. The recent 
report by the American Energy Innovation Council (AEIC), which includes 
Mr. Augustine and Mr. Holliday, called for federal investment in clean 
energy innovation (including research and development through finance 
and deployment) to more than triple to $16 billion annually. Mr. 
Holliday asserted that such an investment in energy innovation could 
transform the entire economy, strengthen our national security, and 
reinvigorate the manufacturing sector along with the overall productive 
capacity of the country.

     Using ARPA-E as an example, to date this new agency has selected a 
total of 121 projects based in 30 states, with approximately 39% of 
projects led by universities, 33% by small businesses, and 20% by large 
businesses. Almost all projects also have multiple partners. Both the 
Gathering Storm report and the AEIC report strongly recommend 
additional funding for ARPA-E to build on its progress to date. Given 
the shifting landscape of global competitiveness, is it appropriate and 
important for innovative programs, such as ARPA-E, to support a wide 
range of activities, including by continuing to leverage nascent 
private sector efforts and investment in emerging technologies?

    A sufficient supply of clean and affordable energy is a ubiquitous 
security and prosperity problem for the nation. The problem can only 
worsen without the development of new technologies relying on basic 
research. Because ``the energy problem'' spans all national interests, 
it is an important one to address. ARPA-E, modeled after the Defense 
Advance Research Projects Agency, is an element of a top-down 
innovation environment, and an important one for that reason as well as 
for its contributions to the energy problem. The decade old In-Q-Tel is 
another top-down entity. So other targeted, top-down innovation centers 
can also be effective if structured like ARPA-E.

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