TR: Has this begun affecting the U.S. economy?
PO: It is so hard to tell. If we didn’t have this giant recession, you might be able to measure [the effect] more accurately. But you can surmise that if the quality of skills of the workforce is eroding, it’s a huge productivity loss.
TR: What government policies would help?
PO: Governments are best positioned to fund basic research. But there’s been a decade-long erosion in the amount of that funding. It’s now on a path to grow, and eventually the goal is to double it. But it takes a long time to do that. Secondly, we would like to see the R&D tax credit made permanent and returned to levels that are competitive with the rest of the world. Lastly, we have corporate tax rates that today are the second highest in the industrialized world.
TR: Aren’t there dangers when governments get involved in supporting innovation?
PO: One potential pitfall is government picking industries and technologies. The job of government is to fund basic research and let scientists do their work and let the innovation fall where it may. I just think there has been insufficient funding, and we need to get it back to levels that are much more consistent with our historical norms.
TR: Investing in startups is what venture capitalists are supposed to be doing. Why did they need encouragement?
PO: Yes, it is their business, but the narrowness of the focus [on clean tech and high tech] and the narrowness of the investment period was also important. We wanted to show [startup companies] that the venture capital industry was open for business.
TR: One of your recent speeches was titled “Reinventing America’s Economic Future.” What did you mean?
PO: The fifty-thousand-foot view is, it’s all about competitiveness. It is something that, as a country, we too often take for granted. We take for granted that capital will flow in, we take for granted that we will have the best workforce in the world, we take for granted that capital formation is there, that startups can have an exit through the IPO [initial public offering] market. None [of that] is to be taken for granted anymore. It was nurtured over 30 to 40 years, and for a variety of reasons it has either atrophied or been constrained. If we refocus our energies on competitiveness as a country, then other good things accrue: capital accrues, jobs accrue, investments accrue. It’s really a recipe for what makes nations prosperous.