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The Payoff of Federal R&D: iPod, Google, and Human Genome Project

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With the U.S. budget under intense pressure, lawmakers increasingly are looking to save money by cutting federal spending on research and development. But at two Capitol Hill briefings, experts offered compelling evidence that that federal investment can yield enormous dividends and warned that cuts to R&D could hinder future economic growth.

At the briefings, co-organized by AAAS, they pointed to the Google search engine, iPod technology, and the Human Genome Project as examples of how federal funding has aided transformational innovation and economic growth. Especially when economic stresses are acute, they said, the nation must maintain its longstanding commitment to invest in future prosperity.

“We have very powerful evidence of the productivity” of R&D spending, said University of California-Davis sociologist Fred Block. “When we’re cutting back on that R&D spending, we are eating our seed corn, and upsetting the possibilities of future economic growth and development.”

Block joined a panel of experts at the 16 March briefings, organized by the University Corporation for Atmospheric Research and AAAS, and cosponsored by eight other scientific societies. In discussions moderated by Vijay Vaitheeswaran, a senior correspondent for The Economist, they grappled with some of the challenges facing the United States as stress on R&D budgets and competition from abroad increases.

Under President Barack Obama’s 2013 budget proposal, R&D investment would increase by 1.2% over 2012 funding levels. Nondefense R&D spending would increase by 5.1% over last year’s budget, according to the AAAS R&D Budget and Policy Program, while the proposed defense R&D budget would shrink by 1.9%. The House of Representatives’ 2013 budget resolution would reduce discretionary spending further, according to analyses by AAAS. The House proposal would cut nondefense R&D spending by 8% compared to the president’s budget request, or 5% below the funding levels approved for 2012.

The prospect of tighter federal funding comes as the focus of U.S. innovation is shifting away from large corporations to universities and smaller start-up companies, and technologies are converging in unexpected ways across disparate fields. These trends point to an increasingly important role for federal R&D spending, the panelists said, since federal programs already support significant cross-disciplinary work at public laboratories and universities.

While they agreed that it is difficult to come up with clear-cut quantitative measures of the impact of federal R&D, data compiled by the U.S. Bureau of Labor Statistics offer some perspective. The data show that the output per unit of labor in the U.S. economy from 1948 to 2007 grew at an annual rate of 2.5%, with 58% of the growth attributed to the increase in knowledge that comes from R&D investment.

The investment in knowledge represented by the federally funded Human Genome Project had a $796.3 billion economic impact from 1998 to 2010, according to a 2011 study by Battelle Memorial Institute. Simon Tripp, senior director of Battelle’s Technology Partnership Practice, said that CEOs of major bioscience companies interviewed for the study agreed that without the federal project, “we would be nowhere near where we are today.”

This decade’s equivalent of the genome project may be the renewed federal investment in energy innovation. Catherine T. “Katie” Hunt, the R&D director for innovation sourcing and sustainable technologies at The Dow Chemical Company, described several Dow projects that have benefited from federal funding, including solar shingles, lithium-ion batteries for electric and hybrid cars, and lightweight carbon fiber blades for next-generation wind turbines.

History suggests that great countries, like great companies, invest during an economic downturn, Vaitheeswaran said. The United States can reap future economic benefits, he suggested, by building on historical strengths in science and technology education and “reinvesting in our base of R&D that fuels the innovation fire.”