[Congressional Record (Bound Edition), Volume 145 (1999), Part 7]
[House]
[Pages 10106-10110]
[From the U.S. Government Publishing Office, www.gpo.gov]



              RESEARCH AND DEVELOPMENT OF THE 21ST CENTURY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 1999, the gentleman from Washington (Mr. Smith) is 
recognized for 60 minutes as the designee of the minority leader.
  Mr. SMITH of Washington. Mr. Speaker, I do not know that I will take 
up that entire 60 minutes.
  I want to briefly respond actually to some of the comments that we 
heard in the previous hour, and then talk about the new economy and how 
we can adopt our government to address the issues that it brings to the 
fore.
  I was interested to hear for an hour, the 2000 campaign is still a 
ways away, and for any of those who are wondering whether or not it is 
going to be positive, I guess the gentlemen who preceded me have 
answered that question in the negative. It is going to be relentlessly 
negative.
  Amongst the charges that we heard tonight, I understand now that Vice 
President Gore wants to get rid of ambulances and fire trucks. If the 
other people are to be believed, that is a core of his policy. Those 
who were not listening to the comments, what they were saying is Mr. 
Gore has concerns about the internal combustion engine and would like 
to replace it. They implied that since these engines are now in 
ambulances and fire trucks, for him to oppose the internal combustion 
engine must mean he wants to get rid of ambulances and fire trucks.
  I think this sort of extreme negative campaigning is bad for our 
entire system of government. I think my colleagues on the other side of 
the aisle, many of their issues I actually agree with. I think we can 
get up and talk about what we stand for and move the country forward, 
instead of relentlessly trying to pummel whoever emerges as the leader 
of the party we are opposed to.
  I do not think that serves democracy and I am somewhat saddened to 
see that, as I said, 20-some months before the campaign even starts we 
are full bore on the ripping apart of the person who we think is going 
to lead the opposite party. Let us talk about a few positive issues, 
what we stand for and the direction we want to take the country in.
  Towards that end, that is what I want to talk about today. I talk as 
a member of the New Democratic Caucus. We try to each week as new 
Democrats to present a message, an issue that we want to talk about, 
that we think the country needs to address and that our government 
needs to address.
  New Democrats are essentially moderate, pro-business, pro-growth 
Democrats within our caucus, and the issue that I want to talk about 
today has to do with the new economy and how our government can 
institute policies that address the changes that that new economy 
brings to our country.
  First of all I want to talk about what I mean by the new economy. 
Everyone has heard about the Information Age, about the global economy. 
It has almost become a cliche to say that we live in a global economy 
that is based far more on technology, but just because it is a cliche 
does not make it any less true. It is the dominant feature of the last 
few years of the 20th century and will be the dominant feature as we 
move into the 21st century, as our economy changes.
  We must adjust to it. We must understand what moves and motivates 
this

[[Page 10107]]

new economy and adopt the policies that adjust to those changes to best 
serve the people of this country.
  It is a good news/bad news situation. The good news is it creates so 
much opportunity, the advances that we have had in the technology from 
computers to telecommunications to all points in between, to software, 
have created tremendous amounts of choices and tremendous amounts of 
opportunities in a wide variety of fields.
  It also creates challenges. The central challenge that it creates is 
adjusting to change. The world simply changes more rapidly today than 
it did previously. Therefore, we have to be ready to make the 
adjustments as new technologies come on board, as the world changes.
  I am 100 percent confident that we can do this; no question about it. 
We can benefit from the dramatic increase in productivity, in growth, 
that high tech industries give us and adjust to the changes, but not if 
we do not think about the issues in a new light, think about what the 
Information Age, what the global economy means to the policies that we 
need to adopt.
  To strip this to its core, what I am talking about is people. The 
reason I care about technology issues is because of the district I 
represent. The Ninth District of the State of Washington, it is a blue 
collar district, and one of the most important things that the leaders 
in our community, whether they be government or business, can do is 
ensure that a strong economy exists so that the people of districts 
like mine and throughout the country can get good jobs, make enough 
money to take care of their family and pursue their dreams and their 
interests as they see fit.
  Maintaining that economy is what is going to bring it home to 
everybody. Not just the top 5 percent, not just the Bill Gateses of the 
world, but every single person in the country who needs to have a good 
job to support their family or just support themselves can benefit from 
policies that embrace the high tech new economy. It is going to be 
important to real people from one end of this country to the other.
  I think when we talk about the high tech new economy it is important 
to break it down. There are really five areas of the new economy. First 
of all we have computers, and in that I include software and hardware. 
We have the Internet. We have telecommunications; biotech, which is 
primarily health care products that are developed; and lastly we have 
all of the products that those first four things help create.
  I think there is a mistake sometimes that people make, that 
technology is just a certain sector of our economy; there are certain, 
quote, high, unquote companies and then there are low tech companies. 
Every company is affected by technology. Obviously, some are more 
affected by it.
  Intel, Cisco Systems, Microsoft, these are companies directly in high 
tech. But even a company, even a retail store that sells clothing 
apparel is affected by the quality of the software that they have, that 
can track their inventory and track their customers and find out new 
opportunities.
  One of the examples that I think shows this is a small company that 
is actually starting up in my district that is trying to develop, 
coincidentally, back to the internal combustion engine, a new engine 
that will generate power. I have not figured out a way to make it drive 
an automobile, but what it can do is it can generate energy and replace 
some of the old methods of generating that energy.
  The advantage of this new engine that is based on the ram jet 
physics, stuff that I do not even begin to understand except to say 
that it works and it generates energy much more cleanly and much more 
efficiently than current methods, the person who was able to generate 
this product had worked on the technology in the defense sector. He had 
worked on it with jet airplanes but they had never quite made the 
connection down to the more civilian use of generating energy.
  He was able to generate that because of the rapid advancing in 
computers and software that enabled him to test theories more rapidly. 
Stuff that would have taken decades to get through to test, he could 
literally do in a matter of weeks, and that enabled him to test 
theories and move forward and get to the point where he actually 
developed the engine.
  In the biotech sphere, I talked to some folks in the biotech industry 
just last week, and they said from 1985 to today they have been able, 
through the use of computers and software, to reduce the time it takes 
them to analyze data to the point where a project that they did in the 
mid-1980s took them 5 years to analyze, that data today they could do 
in an afternoon.
  This application spreads all across our economy. So those five 
sectors need to be encouraged and fostered to grow because they impact 
all aspects of our business.
  As we get into an increasingly competitive global economy, we want 
our companies in the U.S. to be the ones that advance fastest and 
furthest and do it first so that we can take the advantage and get the 
economic benefit of that for our country. Therefore, we need to adopt 
policies that reflect this. We need to look to the future and say, as 
the world changes, as technology moves forward, what do we need to do 
to be ready for it?
  Certainly we cannot go with policies that we had 50, 20, even 10 
years ago, when technology has changed. Remember 5 years ago the 
Internet was pretty much a nonfactor. It was an idea. It was out there, 
certainly, but the explosive growth in the last five years was not 
foreseen but by the smallest number of people. Now that affects every 
aspect of our economy. We need to be ready for those sorts of changes.
  Towards that end, I have six main policy areas that I want to make 
people aware of, that we in government need to address to try to adjust 
to this high tech economy. The first one has to do with export 
controls, and this is one that actually applies to more than just the 
high tech economy. It just becomes more of a factor because of the 
global nature of our economy that the Information Age makes possible.
  We have a number of policies in this country that restrict the 
exportation of our products, specifically restrict the exportation of 
technology products or create unilateral economic sanctions against the 
export of all products. This creates a problem for one simple fact, and 
for one simple reason: Ninety-six percent of the people of this world 
live someplace other than the United States, yet the United States is 
currently responsible for 20 percent of the world's consumption.

                              {time}  2045

  What that means is that if our companies are going to grow, if 
markets are going to increase, they are going to have to have access to 
markets outside of this country. Currently, our policy on unilateral 
economic sanctions places sanctions on dozens of different countries 
that limit our ability to export.
  Now, the reason we place those economic sanctions is because we 
disapprove of something that that country has done, and that makes a 
certain amount of sense, if our action to place those sanctions would 
change the action by that other country that we disapprove of. But the 
reality is it does not. All it means is they go someplace else to buy 
their products. In essence, what we are doing is we are punishing these 
other countries by telling them that we will not take their money and 
that is not much of a punishment. It drives them into the arms of our 
competitors.
  We need to rethink our unilateral economic sanctions policy. 
Multilateral sanctions make sense. If we can get enough people 
together, enough of our allies together to condemn an action, condemn a 
country and place sanctions on them, then that can work. But taking the 
action unilaterally does nothing to advance the policy aims and only 
hurts us economically.
  In the technology realm, we place restrictions on the exportation of 
encryption technology; that is, technology that is used basically to 
protect data on a computer, to make sure that people cannot access it 
who you do not want to access your information. We

[[Page 10108]]

also place restrictions on the exportation of so-called supercomputers. 
The problem with that is because computers are leaping ahead so fast 
and so quickly, a laptop basically could have been, will some day be a 
supercomputer and is close to getting there under the definition that 
we have in policy today.
  We need to understand that in trying to restrict the exportation of 
this technology, the world has changed. I think this is one of the key 
areas that shows how we need to adjust. In the old days, we did not 
want this technology to get out there because it had national security 
implications, and it clearly does. If one has good encryption 
technology, if one has good computing technology, it affects one's 
ability to have weapons basically to commit harm, to do a variety of 
things. It has military significance.
  But the question is, how do we prevent other people from getting that 
technology. Can we simply as the United States put our arms around it 
and say we are not going to let it out and nobody else is going to get 
it? No. Encryption technology in particular. One can download it off 
the Internet, dozens of other countries sell it. It is going to get out 
there. In fact, this is going to hurt our national security. Because if 
we restrict the exportation of encryption technology in this country, 
our companies will slowly fall behind. They will not be able to get the 
customers because they will not be providing the best product. As we 
fall behind and other countries get further ahead of us in this 
technology, we lose our ability to be the leaders in the technology.
  The encryption companies, software companies in this company who 
produce encryption technology cooperate with the FBI and the NSA to 
help them, show them the advances in the technology. That helps us be 
ready to deal with the national security implications. If we lose that 
leadership role, countries in other parts of the world are not going to 
share that information with our National Security Agency or the FBI. We 
need to be sure that we allow the exportation of that encryption 
technology so that we can continue to be the leaders in that area.
  Another important area is education, and that gets to the change 
points. In a rapidly changing world, we need to constantly update our 
skills. We live in a society where all of us are going to need to 
continually be learning. We need to adjust our education system to 
understand that. In the good old days when basically all one needed was 
a high school education and could go out and get a job and probably 
take care of their family; my father did, he had a high school 
education, got a job as a ramp serviceman for an airline and ready did 
not update his skills very much during his 32 years with that airline 
and was able to take care of his family.
  In today's world, we need to update our skills. We need to make sure 
that our education system is ready for that, and that our education 
system is also ready to educate our children in technology issues and 
to enable them to change as rapidly as they need and update their 
skills.
  The Internet is the key to all of this. The way the system basically 
works, what computers and software enable us to do is they enable us to 
generate and store a large amount of data, and that is very valuable, 
as in the engine example I cited earlier. By being able to generate 
that information, they were able to develop a product. That is the 
start of it. The Internet basically is the step that enables one to 
transmit that data.
  Back to the example of a retail clothing shop, if it is a chain, if 
they have 25 or 30 stores spread throughout the country, they can share 
data. Basically being in any one of those stores is like being in the 
home office and by being able to share that data enables the company to 
move forward, or, if they are designing something, they can trade the 
design back and forth and not have to be in the same place.
  What we need to do is we need to encourage the Internet. 
Overregulating the Internet would be one of the biggest mistakes our 
government could make. It would put us in a position of restricting its 
ability to grow, and it is very important that we allow the Internet to 
grow and prosper and do the things for our economy that it has already 
started to do.
  There is also an issue, and this is primarily in the area of biotech, 
but also in other areas of patents. We need patent reform so that 
people have the incentives necessary to develop new products, secure in 
the knowledge that they will be able to keep the patents on those 
products and benefit from them. Otherwise, they will not get into the 
field and try to develop them.
  Research and development is also a critical element. We have in this 
country the research and development tax credit. Unfortunately, it is 
only good for one year and every year we have to come back and renew 
it. Well, we need to make that permanent. The reason is because if one 
is a company planning for the future and deciding how much to put into 
research, a lot of these products are not developed in one year, and if 
one does not know if the resources are going to be able to be there for 
more than one year, it hampers one's ability to make that investment. 
We have the opportunity to permanently extend the R&D tax credit this 
year and give companies that incentive to go out there and continue to 
develop the new products that they need to develop.
  Lastly, and this is tied into the Internet, we have the issue of 
broad band, basically access to the Internet. The Internet is great, 
but currently only about 20 percent of households in this country have 
access to it, and a much smaller number, very minute number, have 
access to so-called broad band Internet access.
  Put simply, broad band means that the Internet moves more quickly for 
us. Now, if one is just sending e-mail or simply surfing the net, that 
may not be such a big issue, but if one is trying to send data, if one 
is developing that new design, if one is in the automobile industry, 
one develops a new design for an automobile and one wants to send it 
out to one's top 25 executives throughout the world, to be able to send 
that much data over the Internet requires a larger pipe. Otherwise, it 
will take forever to send the data out and to download it to whoever 
has received it.
  The most important thing in this area is we need to build the 
infrastructure. Think of the Internet today in the same way that the 
railroad was in the 20th century. In the 20th century, the railroad 
gave us the ability to connect our country, but first, we had to build 
the track, and it was very expensive to build that track, so we gave 
incentives to go out there and build it, and it made a lot of sense 
because it helped grow our economy rapidly.
  We need to do the exact same thing with broad band technology. We 
need to give companies ever incentive out there to go out there and 
build the infrastructure. Lay the fiber, lay the cable, put in the 
phone lines, do whatever is necessary to connect as many people in this 
country as possible, not just to Internet access, but to fast, broad 
band Internet access.
  Overregulation can kill this. If we regulate companies too much so 
that they do not have the proper economic incentives to go out there 
and build the infrastructure, it will not happen. Because yes, there is 
a pot of gold at the end of the rainbow if you are the company that 
best develops Internet access, but you have to make a major investment 
up front to get there and you may not be willing to do that if the 
environment is too regulated.
  Those are just six issues that I think we need to touch on, but the 
important thing is simply to embrace change, understand the new 
economy. We cannot fight it. It is not an option. It is here. We need 
to understand it and try to make sure it works. I think one of the 
greatest challenges for this country is to make sure that it works for 
everybody. Because right now, it works fairly well for the top 20 
percent, but the potential is there to make it work for everybody, and 
we need to understand it and go about addressing the issues in a way 
that make it available to the entire country, because it has the 
massive potential to keep our economy moving forward, to keep 
productivity high, and to create good jobs. That is why I think that 
the new economy and

[[Page 10109]]

the high tech aspects of that new economy is so critical.
  I am pleased to have with me the gentleman from New Jersey (Mr. 
Holt), who is going to address these issues as well.
  Mr. HOLT. Mr. Speaker, I would like to thank the gentleman from 
Washington (Mr. Smith) for highlighting these issues. Of course, the 
gentleman has made very clear that what we are talking about here is 
not just a sector of the economy. We are talking about the economic 
growth for all people. In fact, to borrow from a campaign slogan of a 
few years ago and modify it, rather than saying it is the economy, 
stupid, I think we would say, it is the productivity, stupid. In order 
to have the kind of productivity growth we have had in recent years, it 
calls for just what the gentleman has been laying out.
  The gentleman and some of our colleagues here may have heard a speech 
by the Chairman of the Fed, Chairman Greenspan a week or so ago 
marveling at the productivity growth of the United States. We know to 
have good growth in productivity we need a well-trained workforce and 
we need new ideas, and we need to have systems for exchanging ideas 
rapidly. We need the kind of openness that the gentleman from 
Washington (Mr. Smith) has been calling for. We need the kind of high 
technology that is not, as the gentleman says, just one sector of the 
economy, but that is found throughout the economy and throughout all 
sectors. And, we need training and education to make it work. The 
gentleman has laid out the ingredients, no doubt about it.
  High technology has fueled so much of our Nation's economic growth in 
recent years, and whether it is in New Jersey or in Washington or in 
Michigan or in California; in fact, in all of the States of this 
country, it explains why our economy is doing so well compared to many 
other countries around the world. In order to keep it going, we need to 
maintain an education system that is as good as the technology demands.
  There are no unskilled jobs in today's economy in America. The car 
one drives no doubt has more computing power than an Apollo spacecraft. 
It demands good education; it demands openness of ideas and exchange of 
ideas, freedom of exchange; and it also demands an investment in 
research and development.
  The gentleman spoke about the R&D tax credit. It was created nearly 
two decades ago in 1981. It has been extended nine times, but it has 
only been extended year by year. An R&D investment decision, a research 
and development investment decision requires years of advanced 
planning. If a company cannot count on an R&D tax credit in the future, 
it is hard to do the necessary planning.
  So I wanted to join with my friend here and commend him for 
highlighting these points and join him in talking about the importance 
of these issues for all people in America.
  Mr. SMITH of Washington. Mr. Speaker, I thank the gentleman. 
Actually, I should point out that the gentleman from New Jersey is not 
just a Congressman, he is also a physicist, which means he actually 
understands the details of a lot of this stuff a lot better than I do, 
and I am wondering if the gentleman could offer us any perspective, 
because research in dealing with high technology is something that the 
gentleman has some background on in his work as a physicist. I wonder 
if the gentleman could apply that in some of the work that he has done 
and how important it is and what can be developed, particularly 
concerning research and development, and how that can be applied.
  Mr. HOLT. Mr. Speaker, I spent much of my career in research and 
development and there is no question, one has to take a long-term 
perspective. We cannot lose sight of the day-to-day activities, but one 
has to take a long-term perspective. A permanent extension of the R&D 
tax credit would be very valuable to industries that engage in research 
and development.
  I should say that as a scientist I do understand, in fact, the jet 
engine concept that the gentleman was describing earlier. In fact, it 
is becoming widely used now in so-called cogeneration plants to 
generate both heat and electricity that can be used for powering say a 
research campus or a cluster of apartment buildings or a small 
community, and it came about because of research in an area that was 
not directly related to energy generation. It was research in 
aerospace. And as a result, in fact, we were talking about it today in 
connection with the NASA authorization.

                              {time}  2100

  There is a need for investment in research in such things as jet 
engines. In this case, the benefit came not only in providing better 
commercial aircraft, better military aircraft, but it also turned out 
to be a more efficient way of generating electricity. That is providing 
savings throughout the country, throughout the economy. So research and 
development does not always pay off the most in the area where you 
expect it to.
  Mr. SMITH of Washington. I think that is a very important point.
  When we look at a lot of the products out in the market today, it 
would be very interesting for everybody in society to sort of track one 
of those products, how it came into being, the steps that were taken, 
the investment that was necessary, the people power that was involved, 
and it makes us understand the importance of research and development.
  I think biotech is a great area to look at this. Everyone is aware of 
the drugs that have come out that have generated tremendous amounts of 
money, but we also have to look at the process that these companies had 
to go through to get to that product.
  Basically they were working for sometimes as much as 8 or 15 years 
without ever generating any revenue, without ever getting any return on 
the product that they were trying to develop. I am not talking about 
not making a profit, I am talking about not generating any revenue, 
because their product was not yet developed and being sold.
  If you have that type of situation, who is going to spend money for 8 
years and not have any revenue? We need incentives, we need incentives 
for investors and incentives for the companies to make that sort of 
long-term commitment. It is not just biotech products, but the engine 
we are talking about was researched for years before someone generated 
one and they could generate the electricity that they were looking for.
  Mr. HOLT. If the gentleman will yield, Mr. Speaker, my district in 
New Jersey, and as the gentleman knows, New Jersey is indeed a research 
State, going from Thomas Edison to Albert Einstein to the biotech 
companies of today, I have two biotech companies in my district, of the 
many, many dozens around the country, two that have actually started to 
generate a profit.
  They have started to generate a profit after, one is 18 years and the 
other is about 14 years, and they have some very clever, I think 
probably very desirable, and ultimately very successful products. But 
it took a long time and a lot of work to develop those, and there are 
many, many biotech companies that are not turning a profit, they are 
living on hope and investment at this point.
  Mr. SMITH of Washington. And there are many that never will turn a 
profit.
  Mr. HOLT. But those that do can change our lives.
  Mr. SMITH of Washington. Exactly. So we need to set up a system that 
gives the incentives to invest in these sorts of products. It is not 
just biotech, it is in every single aspect of the high-tech community, 
giving the incentive to put the money into research helps us move 
forward.
  Mr. Speaker, I thank the gentleman very much.
  Mr. HOLT. I thank the gentleman. It is my pleasure to join him in 
this special order, and I thank the gentleman for doing it.
  Mr. SMITH of Washington. The gentleman is quite welcome. It is nice 
to have a physicist in Congress to help out with these very difficult 
issues.
  I just want to wrap up this topic by emphasizing how important it is 
and how it touches our lives. I think one of

[[Page 10110]]

the biggest challenges we have right now as a society is to make sure 
that the message gets out that technology is for all of us, that it 
affects all of us in a variety of different levels.
  I think there is a tendency, and in fact, I was never that computer 
literate until a few years ago, and I always thought, you know, of 
first computers and then the Internet that that is just not something 
that I deal with.
  Well, it is something that everybody is going to have to deal with, 
and it is a good thing. It is a positive change in our lives. Yes, it 
is change and change is difficult, but it will open up windows of 
opportunity that we could never imagine if we simply understand that 
change, understand what the information economy has brought to us, and 
how our society needs to adjust to it.
  I think in the long run it is going to give us a better society and a 
stronger society, but it is not only a matter of embracing it but 
understanding it, and advancing the policies that are going to make 
sure that we all benefit from it.
  The Internet has the ability to connect people, just for example. I 
have heard some people say, well, they are worried that the Internet is 
going to divide our society even more between the haves and have nots, 
those that have technology, those that do not.
  I see the Internet just the opposite. The Internet basically enables 
anybody, for the ever-decreasing price of a laptop and the ability to 
hook up a telephone line, to get access to information that was 
previously the exclusive purview of the few. You would have to go off 
to institutes of higher learning or know people who were highly 
educated in order to get access to this information. Now it is right 
there on our computers, virtually anything we could imagine, for us to 
access for a very cheap price.
  That has the possibility, I think, to really broaden the opportunity 
of this country, to make it more inclusive and bring more people along 
on these issues.
  Government has a role to play. Sometimes that role is getting out of 
the way. As I mentioned, do not regulate the Internet, and do not 
overregulate the telecommunications industry so people do not have the 
incentives necessary to build that all-important infrastructure.
  Ms. SANCHEZ. Mr. Speaker, there is no question that the United States 
is a leader in the development of new technology. Historically, the R&E 
tax credit has played a major role in elevating this great Nation to 
such a significant and influential leadership position.
  However, with greater market challenges in the future, we will have 
to fight hard to maintain the U.S. lead in new technology and 
innovation.
  Simply put, the tax credit is an investment for economic growth and 
the creation of new jobs.
  It strengthens our international position, and often results in an 
enhanced quality of life for consumers.
  Mr. Speaker, the R and E tax credit has been on the books for many 
years, and there is no doubt that it has proved beneficial to our 
Nation's technology enterprise.
  But, there is also no doubt that its benefits could be even greater 
if the credit were made permanent and the perennial uncertainty were 
eliminated.
  I urge my colleagues to support this concept of a permanent R&E 
credit and support the type of research activities that will maintain 
American technological leadership into the 21st century.
  Mr. SMITH of Washington. Mr. Speaker, sometimes it has a more 
positive role to play, like in education, giving people access to 
higher education, continuing education, through grants, loans, 
incentives to companies, whatever. That is an active role the 
government can play.
  So it is a matter of balancing between those two things. Sometimes 
government needs to get out of the way, sometimes it needs to help, but 
more than anything, it needs to understand, needs to understand what 
the new economy is and how to make it best work for all of our 
citizens.

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