[Congressional Record Volume 141, Number 172 (Thursday, November 2, 1995)]
[Senate]
[Pages S16562-S16563]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   THE IMPORTANCE OF FEDERAL INVESTMENTS IN RESEARCH AND DEVELOPMENT

  Mr. BINGAMAN. Mr. President, I rise this morning to call the Senate's 
attention to a report that was released yesterday by the Council of 
Economic Advisors. The report is entitled, ``Supporting Research and 
Development to Promote Economic Growth: The Federal Government's 
Role.''
  This report eloquently makes the case for the enormous positive 
impact which Federal investments and research and development have in 
promoting economic growth and providing greater opportunities for our 
children and for future generations. Most of the debate we have had, 
Mr. President, about this budget this year has focused on whether 
particular cuts or reductions or particular tax increases have been 
fair to one group or another in our country. For example, are the 
Medicaid cuts too deep? Are the Medicare cuts too deep? Should we be 
putting an additional financial burden on students in schools? Should 
Congress be scaling back the earned-income tax credit on low- and 
moderate-income families while cutting taxes for those who are better 
off?
  But another important part of the debate, the budget debate, needs to 
be about the impact of what is proposed in this budget on the long-term 
economic growth of the country. And that is the issue that I would like 
to focus on here this morning.
  The report that was released yesterday by the Council of Economic 
Advisors makes several crucial points that the congressional majority 
needs to understand as it embarks on what I see as a disastrous course 
of slashing Federal civilian research investments by the year 2002. Let 
me just read a couple sentences from the report.
  It says:

       Increasing the productivity of the American workforce is 
     the key to higher living standards and stronger economic 
     growth in the future. Evidence indicates that investments in 
     research and development have large payoffs in terms of 
     growth. . . . Indeed, investments in--research and 
     development--are estimated to account for half or more of the 
     increase in output per person. Maintaining or increasing this 
     country's research and development effort is essential if 
     we are to increase the rate of productivity growth and 
     improve American living standards.

  The report finds that ``many studies have demonstrated that 
investments in research and development yield high returns to investors 
and even higher returns to society.'' The report points out that it is 
this difference between the returns capturable by a single firm or an 
individual and the returns to the society as a whole that leads the 
private sector to underinvest in research and creates the need for 
public investment in research and development.
  Mr. President, this is a need that has been recognized throughout 
this Nation's history, going back to the first Treasury Secretary of 
this country, Alexander Hamilton. The report points to the $30,000 that 
was appropriated in 1842 to build a telegraph between Washington, DC, 
and Baltimore, to demonstrate the feasibility of Samuel Morse's new 
technology.
  It points to the 1862 Morrill Act, and that is an act, of course, 
that has benefited each of our States--Government funding of 
agricultural research. It points to the enormous benefits that have 
flowed from the expansion of Federal research investments following 
World War II pursuant to the vision that Vannevar Bush described in his 
report ``Science: The Endless Frontier,'' which was submitted to 
President Truman in June 1945 at the end of the war.
  Yet, there are some very disturbing charts in this report. The first 
of these charts I want to refer my colleagues to is a chart of 
nondefense research and development expenditures as a percentage of 
gross domestic product. What you can see here is that the United States 
has been lagging behind Japan and Germany in its nondefense research 
expenditures as a percentage of gross domestic product for more than 
two decades.
  The yellow line is the United States. Japan is now substantially 
above both the United States and Germany in its investment in research 
and development, nondefense research and development, as a percentage 
of its gross domestic product.
  This second chart indicates Federal investments, U.S. investments in 
nondefense research and development and shows very clearly that they 
have been declining substantially since the 1960's as a percentage of 
gross domestic product. You can see from the period 1961 to 1996, there 
was a short period there in the early sixties where there was a 
substantial increase during the heyday of the space program. It began 
to come down. It has continued its downward trend, as a general matter, 
until today, and it is scheduled in this proposed GOP budget for a 
substantial additional decline in the next several years. That Federal 
research investment, as this chart shows, will plummet during the next 
several years.
  As the report that was issued yesterday points out, this is a greatly 
different plan of action from what governments in other parts of the 
world are doing, particularly Japan and Germany, who are our main 
rivals economically and technologically. Those countries around the 
world are seeking to follow the example of the United States, to 
emulate the successful American model of the last century, just at the 
same time that we, as a nation, seem bent on abandoning that model or 
wrecking it. The Council of Economic Advisers' report points out that 
the Japanese Government recently announced its plans to double its 
research and development spending by the year 2000.
  We have a chart here that I think is a very important chart for 
people to focus on. This highlights the effect of our congressional 
budget plan and the effect of the Japanese plan. What you can see is 
that by the year 1997, Japan will overtake the United States in 
Government support for nondefense research and development, and that is 
not as a percentage of our gross domestic product, that is in absolute 
dollars. You can see that by 1997, the Japanese will be spending more 
than we will if we stay on the course that has been 

[[Page S 16563]]

laid out in this budget resolution. Obviously, this gets even worse in 
the years ahead, as you go to the year 2000.
  The Council of Economic Advisers' report also points out that there 
is no basis in historical data to believe that cuts in Federal research 
and development spending will be compensated for through additional 
private sector investments. I think this is a very important point, Mr. 
President.
  This next chart, which I really do commend to everybody because I 
think it has a very important message about how history works, it makes 
it very clear that there is a correlation between changes in Federal 
research and development expenditures and changes in private sector 
research and development expenditures 1 year later. The private sector 
follows the Federal Government lead in investing in research and 
development.
  The report concludes the correlation means that if Federal research 
and development support is cut, the Nation is likely to lose future 
rewards not only from the federally supported research and development 
that will not be undertaken, but also from the industrial research and 
development that will not be undertaken as the private sector scales 
back in response to Federal cuts.
  Stated very simply, when the Federal Government spends more on 
research and development, the private sector follows its lead. When the 
Federal Government spends less on research and development, the private 
sector follows its lead and spends less.
  Mr. President, this is a horrible position for our country to place 
itself in as we approach the beginning of the 21st century. These cuts 
in Federal civilian research and development are not just theoretical 
numbers out there. These are cuts that are being made in many of the 
appropriations bills that we are passing on the floor of this Senate.
  The energy and water appropriations bill, which we passed on Tuesday, 
cuts civilian energy research by 17 percent, $637 million. That was 17 
percent from the President's request and it was cut 13 percent, or $462 
million, from the last year's level of funding. Some research and 
development activity, such as solar and renewable energy research and 
development, were cut an even larger percentage, 35 percent, in that 
particular bill.
  The same is true in the transportation appropriations bill that we 
passed on Tuesday. The conference report cut the Transportation 
Department's R&D budget request by 30 percent from the President's 
level of request and by 8 percent from last year's level.
  In these two bills alone, civilian research and development is cut by 
almost $1 billion from the President's request, by over $500,000 from 
the fiscal year 1995 level.
  Far deeper cuts are coming in the Commerce, State, Justice 
appropriations bill, in the VA-HUD appropriations bill and in the 
Labor-HHS appropriations bill.
  This is not what we should be doing to our country as we approach the 
21st century. If we do not change from this path, I believe that we 
will condemn future generations and our own children to a less 
prosperous and less productive America.
  I urge my colleagues to read the Council of Economic Advisers' report 
and think about the consequences, the long-term consequences, of eating 
the seed corn of our future prosperity.
  I urge my colleagues to think about the consequences of falling 
behind other industrialized nations in research and development and 
ultimately in productivity and standard of living. There is a clear and 
a constructive role for the Federal Government in investing in 
research. It has been carried out since the beginning of our Republic 
and, on a very large scale, it has been carried out since the Second 
World War. It has served our Nation well. It should not be lightly 
discarded as a collateral casualty of the effort to balance the budget.

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