Business Impact

End R&D "Welfare"

Misguided federal largesse has created an R&D welfare state that does little to promote innovation. It’s time for a revolution.

The system is broken and needs to be scrapped. The system I have in mind is the one for federal funding of research and development. Make no mistake, it was a great system in its time. Formed in the cauldron of World War II, public funding of research and development delivered an impressive bounty well into the 1970s. Many contemporary technologies, notably electronics and computing, were essentially created by military patronage. And modern medicine is a creature of federal largesse.

But for the past 25 years, special interests have wasted a big share of government monies for innovation. With the exception of biomedical engineering, the government isn’t a significant player in any critical field of technology. The reason is simple: To succeed today, innovations must spawn entire industries. This means private-sector sponsorship is crucial to whether a breakthrough turns into a real winner.

This isn’t news to anyone in Washington. And yet the leadership needed to act on the new reality is lacking. This failure starts at the very top. Despite his political alliance with high-tech entrepreneurs, Bill Clinton has no original ideas about innovation. He has simply perpetuated the spent policies of the past. No one in Congress-and I mean no one-understands technological issues either.

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But change is possible. The United States is the world’s acknowledged technological leader, and our economy is humming. There will never be a better time to “reinvent” the $68 billion federal R&D “welfare state.” First, let’s look at how much some selected agencies received for fiscal year 1997.

A few questions about this list will send us in the right direction. Does NASA, with its utopian engineering projects such as the space station, deserve to be one of the biggest recipients of government research funds? Should the Department of Defense (DOD) grab nearly half of all federal research spending? Why does the Department of Energy (DOE), mismanaged even by the standards of the public sector, spend billions of dollars on projects far removed from its core mission of building and safeguarding nuclear weapons? Is there any reason for the Commerce Department’s Advanced Technology Program to duplicate efforts of venture capitalists?

Now let’s answer some of those questions-and sketch a blueprint for turning the government into a stronger ally of innovation:

Make the national laboratories, run by the DOE, stick to their knitting. Defense technologies ought to be their own reward, and not sold as an indirect means of stimulating civilian technologies.
n Kill NASA. Take space exploration off the dole by drastically reducing public subsidies. Hand over what remains to private entrepreneurs, who are more likely to display the vitality NASA so evidently lacks.Streamline the DOD’s defense empire, putting its scores of labs and programs on a strict diet. Perform or die. Prune the mega-projects. According to the National Academy of Sciences, about $25 billion of the annual federal R&D budget funds “major systems,” such as space stations and linear accelerators. Many of these systems are strictly pork-barrel. Get rid of them.Scrap the Advanced Technology Program. When it comes to setting priorities for innovation, the private sector is on a roll. Bureaucrats in Washington can’t compete.

These cuts, according to my back-of-the-envelope calculations, would save the federal treasury $20 billion. Plow those savings into new R&D programs that will show why government must still support this critical area:

Expand the research tax credit, so private companies are rewarded for taking on laid-off government researchers or pushing into fields too risky for investors.Fund a national network of citizens’ councils to discuss how new technologies might better meet human needs. For too long academic brahmins have monopolized such debates. Let’s hear from ordinary people.Invest more in R&D in developing countries. For decades, the United States has skimmed the cream from the world’s crop of scientists, engineers and inventors. We should give more back. At the very least, a multiyear pledge to fund five elite labs around the world would send a strong message that the United States, while glad to attract foreign talent, realizes that some stars must play for the home team.

You may not like my list of R&D white elephants or my pet projects. If not, go ahead and make your own. But, whatever you propose, keep a few principles in mind. End pork-barrel funding of science and technology. Scrap programs that retain the aroma of the Cold War. Finally, build political support for valuable technologies that the market ignores or misunderstands. This is a revolution that is long overdue.

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