AMERICA COMPETES: BIG PICTURE PERSPECTIVES

ON THE NEED FOR INNOVATION,

INVESTMENTS IN R&D, AND A COMMITMENT
TO STEM EDUCATION
HEARING
BEFORE THE

COMMITTEE ON SCIENCE AND

TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION

JANUARY 20, 2010

Serial No. 11170

Printed for the use of the Committee on Science and Technology

(
Available via the World Wide Web: http://www.science.house.gov

U.S. GOVERNMENT PRINTING OFFICE

54450PDF

WASHINGTON

2010

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 5121800; DC area (202) 5121800
Fax: (202) 5122104 Mail: Stop IDCC, Washington, DC 204020001

COMMITTEE ON SCIENCE AND TECHNOLOGY

HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois
RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas
F. JAMES SENSENBRENNER JR.,
LYNN C. WOOLSEY, California
Wisconsin
DAVID WU, Oregon
LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington
DANA ROHRABACHER, California
BRAD MILLER, North Carolina
ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois
VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona
FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland
JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio
W. TODD AKIN, Missouri
N, New Mexico
BEN R. LUJA
RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York
BOB INGLIS, South Carolina
JOHN GARAMENDI, California
MICHAEL T. MCCAUL, Texas
MARIO DIAZ-BALART, Florida
STEVEN R. ROTHMAN, New Jersey
BRIAN P. BILBRAY, California
JIM MATHESON, Utah
ADRIAN SMITH, Nebraska
LINCOLN DAVIS, Tennessee
PAUL C. BROUN, Georgia
BEN CHANDLER, Kentucky
PETE OLSON, Texas
RUSS CARNAHAN, Missouri
BARON P. HILL, Indiana
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
VACANCY

(II)

CONTENTS
January 20, 2010
Page

Hearing Charter ......................................................................................................

Opening Statements
Statement by Representative Bart Gordon, Chairman, Committee on Science
and Technology, U.S. House of Representatives ...............................................
Written Statement ............................................................................................
Statement by Representative Ralph M. Hall, Minority Ranking Member,
Committee on Science and Technology, U.S. House of Representatives .........
Written Statement ............................................................................................
Prepared Statement by Representative Eddie Bernice Johnson, Member, Committee on Science and Technology, U.S. House of Representatives .................

7
8
8
10
11

Witnesses:
Mr. John Castellani, President, Business Roundtable
Oral Statement .................................................................................................
Written Statement ............................................................................................
Biography ..........................................................................................................
Mr. Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce
Oral Statement .................................................................................................
Written Statement ............................................................................................
Biography ..........................................................................................................
Governor John Engler, President and CEO, National Association of Manufacturers
Oral Statement .................................................................................................
Written Statement ............................................................................................
Biography ..........................................................................................................
Ms. Deborah L. Wince-Smith, President and CEO, Council on Competitiveness
Oral Statement .................................................................................................
Written Statement ............................................................................................
Biography ..........................................................................................................

12
14
16
17
19
22
23
24
30
30
32
37

Appendix: Answers to Post-Hearing Questions

John Castellani, President, Business Roundtable ................................................
Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce .............
Governor John Engler, President and CEO, National Association of Manufacturers .....................................................................................................................
Deborah L. Wince-Smith, President and CEO, Council on Competitiveness .....

(III)

68
72
75
81

AMERICA COMPETES: BIG PICTURE PERSPECTIVES ON THE NEED FOR INNOVATION,

INVESTMENTS IN R&D, AND A COMMITMENT TO STEM EDUCATION
WEDNESDAY, JANUARY 20, 2010

HOUSE OF REPRESENTATIVES,
COMMITTEE ON SCIENCE AND TECHNOLOGY,
Washington, DC.
The Committee met, pursuant to call, at 10:06 a.m., in Room
2318 of the Rayburn House Office Building, Hon. Bart Gordon
[Chairman of the Committee] presiding.

(1)

2
HEARING CHARTER

U.S. HOUSE OF REPRESENTATIVES

COMMITTEE ON SCIENCE AND TECHNOLOGY

America COMPETES: Big Picture Perspectives

on the Need for Innovation, Investments in R&D
and a Commitment to STEM Education
WEDNESDAY, JANUARY 20, 2010
10:00 A.M.12:00 P.M.
2318 RAYBURN HOUSE OFFICE BUILDING

1. Purpose
On Wednesday, January 20, 2010, the House Committee on Science and Technology will hold a hearing entitled America COMPETES: Big Picture Perspectives
on the Need for Innovation, Investments in R&D and a Commitment to STEM Education. The purpose of the hearing is to examine the role that science and technology play in promoting economic security and maintaining U.S. competitiveness
and to understand the perspective of the business community on the reauthorization
of the America COMPETES Act.
Witnesses were asked to provide testimony on ways to build upon the America
COMPETES Act to further strengthen U.S. competitiveness. Witnesses were asked
specifically to discuss how the programs authorized in the America COMPETES Act
have affected or will affect innovation and the ability to maintain a skilled workforce in the United States, and whether the priorities and focus of the America
COMPETES Act will put the U.S. on course to maintain its ability to compete successfully in the global economy.
2. Witnesses

Mr. John CastellaniPresident, Business Roundtable

Mr. Tom DonohuePresident, U.S. Chamber of Commerce
Governor John EnglerPresident, National Association of Manufacturers
Ms. Deborah Wince-SmithPresident and CEO, Council on Competitiveness

3. Background
It is widely recognized that scientific advancement and technological innovation
have contributed to economic growth in the United States. In fact, some economists
estimate that about half of economic growth in the United States since World War
II has been the result of technological innovation. At the same time, the
Organisation for Economic Co-operation and Development (OECD) concluded that,
since World War II, leadership in science and engineering in the United States has
driven its dominant strategic position, economic advantages, and quality of life.
Although the United States continues to be a world leader in research and development, technological innovation, and science and mathematics education, there is
indication that this leadership is slipping. For example, between 1990 and 2001, the
United States trade surplus in high technology products turned into a trade deficit.
In addition, in recent years, American students have been performing poorly on
international assessments of math and science proficiency and a growing number
of American companies have moved assets and jobs overseas.
On October 12, 2005, the National Academy of Sciences Committee on Prospering
in the Global Economy of the 21st Century released a report entitled Rising Above
the Gathering Storm: Energizing and Employing America for a Brighter Economic
Future. The report was prompted by a request to the National Academies from
Chairman Bart Gordon, former Chairman Sherwood Boehlert, and Senators Lamar
Alexander and Jeff Bingaman to identify the top 10 actions, in priority order, that
Federal policymakers could take to enhance the science and technology enterprise
so that the United States can successfully compete, prosper, and be secure in the
global community of the 21st century.

3
The Rising Above the Gathering Storm report offered four recommendations, with
specific action items for implementation. The recommendations were:
Recommendation A: Increase Americas talent pool by vastly improving K
12 science and mathematics education.
Recommendation B: Sustain and strengthen the nations traditional commitment to long-term basic research that has the potential to be transformational to maintain the flow of new ideas that fuel the economy, provide
security, and enhance the quality of life.
Recommendation C: Make the United States the most attractive setting in
which to study and perform research so that we can develop, recruit and retain the best and brightest students, scientists, and engineers from within the
United States and throughout the world.
Recommendation D: Ensure that the United States is the premier place in
the world to innovate; invest in downstream activities such as manufacturing
and marketing; and create high-paying jobs based on innovation by such actions as modernizing the patent system, realigning tax policies to encourage
innovation, and ensuring affordable broadband access.
In August of 2007, the America COMPETES Act passed the House of Representatives by a vote of 36757 and was signed into law by President George W. Bush.
The bill, which was the culmination of a lengthy bipartisan effort by Members of
the Science and Technology Committee, implemented many of the recommendations
of the Rising Above the Gathering Storm report. Among other things, it increased
funding for basic research by putting funding for the National Science Foundation,
the National Institute of Standards and Technology, and the Department of Energys Office of Science on a path to doubling and increased investment in science,
technology, engineering and mathematics (STEM) education. The legislation was endorsed by a wide range of stakeholders, including the U.S. Chamber of Commerce,
the National Association of Manufacturers, Business Roundtable, and the Council
on Competitiveness.
Many of the provisions and programs in the America COMPETES Act are set to
expire at the end of Fiscal Year 2010 and must be reauthorized.
4. Summary of America COMPETES Act
TITLE IOffice of Science and Technology Policy (OSTP)/Government Wide Science
The legislation directed the President to convene a National Science and Technology Summit to examine the health and direction of the U.S. STEM enterprise;
required a National Academy of Sciences study on barriers to innovation; changed
the National Technology Medal to the National Technology and Innovation Medal;
established a Presidents Council on Innovation and Competitiveness; required
prioritization of planning for major research facilities and instrumentation nationwide through the National Science and Technology Council; and expressed a sense
of Congress that each Federal research agency should support and promote innovation through funding for high-risk, high-reward research.
TITLE IINational Aeronautics and Space Administration
The legislation established the National Aeronautics and Space Administration
(NASA) as a full participant in all interagency activities to promote competitiveness
and innovation and to enhance science, technology, engineering and mathematics
education. The legislation affirmed the importance of NASAs aeronautics program
to innovation and to the competitiveness of the United States. It urged NASA to
implement a program to address aging workforce issues at NASA and to utilize
NASAs existing Undergraduate Student Research program to support basic research by undergraduates on subjects of relevance to NASA. The legislation also expressed the sense of Congress that the International Space Station (ISS) National
Laboratory offers unique opportunities for educational activities and provides a
unique resource for research and development in science, technology, and engineering which can enhance the global competitiveness of the U.S.
TITLE IIINational Institute of Standards and Technology
The legislation authorized a total of $2.652 billion over fiscal years 20082010 for
NIST.
The legislation established a Manufacturing Extension Partnership (MEP) Advisory Board and required the Board to provide advice on MEP programs, plans, and
policies; assessments of the soundness of the MEP plans and strategies; and assess-

4
ments of current performance against MEP program plans. It also established a program to award competitive grants among MEP Centers, or a consortium of Centers,
for the development of projects to solve new or emerging manufacturing problems.
The legislation authorized a manufacturing research pilot grants program to
make awards to partnerships that foster cost-shared collaborations among firms,
educational and research institutions, state agencies, and nonprofit organizations in
the development of innovative, multidisciplinary manufacturing technologies. It required such partnerships to include at least one manufacturing industry partner
and one non-industry partner, and to conduct applied research to develop new manufacturing processes, techniques, or materials that would contribute to improved
performance, productivity, and competitiveness of U.S. manufacturing.
The legislation established a program to award postdoctoral research fellowships
at NIST for research activities related to manufacturing sciences and senior research fellowships to establish researchers in industry or at institutions of higher
education who wish to pursue studies related to the manufacturing sciences at
NIST.
The legislation created a new initiative called the Technology Innovation Program
(TIP), which is based on the proven success of the Advanced Technology Program
(ATP), but is focused on high-risk, high-reward, pre-competitive technology development through small- and medium-sized companies. TIP allowed for greater industry
input in the operation of the program and allows university participation for the
first time.
TITLE IVNational Oceanic and Atmospheric Administration
The legislation established a coordinated ocean, Great Lakes, coastal and atmospheric research and development program at the National Oceanic and Atmospheric
Administration (NOAA) in consultation with the National Science Foundation (NSF)
and NASA. The bill required NOAA to build upon existing educational programs
and activities to enhance public awareness and understanding of the ocean, Great
Lakes, and atmospheric science, and to develop a science education plan. It required
NOAA to be a full participant in any interagency effort to promote innovation and
economic competitiveness through basic scientific research and development and the
promotion of science, technology, engineering, and mathematics education.
TITLE VDepartment of Energy
The legislation provided nearly $17 billion to Department of Energy (DOE) programs over fiscal years 20082010. It specifically authorized $5.8 billion for the
DOE Office of Science for Fiscal Year 2010.
The legislation also established an Advanced Research Projects Agency for Energy, or ARPAE. ARPAE will address long-term and high-risk technological barriers in energy through collaborative research and development that private industry or the DOE are not likely to undertake alone. ARPAE is specifically structured
to respond very quickly to energy research challenges, as well as terminate or restructure programs just as quickly. A fund is established in the U.S. Treasury, separate and distinct from DOE appropriations, for ARPAE. The legislation authorized
$300 million in FY 2008, and such sums as are necessary thereafter for fiscal years
2009 and 2010.
The legislation provided $150 million for K12 STEM education programs that
capitalize on the unique scientific and engineering resources of the national laboratories. These programs include a pilot program of grants to states to help establish
or expand statewide specialty high schools in STEM education; a program to provide
internship opportunities for middle and high-school students at the national labs,
with priority given to students from high-needs schools; a program at each national
lab to help establish a Center of Excellence in STEM education in at least one highneed public secondary school in each lab region in order to develop and disseminate
best practices in STEM education; and a program to establish or expand summer
institutes at the national labs and partner universities in order to improve the
STEM content knowledge of K12 teachers throughout the country. All of these programs are coordinated by a newly appointed Director for STEM Education at the
Department, who also serves as an interagency liaison for K12 STEM education.
The legislation highlighted the critical role of young investigators working in
areas relevant to the mission of DOE by establishing an early career grant program
for scientists at both universities and the national labs, and a graduate research fellowship program for outstanding graduate students in these fields. The legislation
also brought attention to research and education needs in the nuclear sciences and
hydrocarbon systems sciences by establishing grant programs to universities to establish or expand degree programs in these areas.

5
Finally, the legislation helped DOE recruit distinguished scientists to the national
labs and foster collaboration between universities and the labs by providing competitive grants to support joint appointments between the two.
TITLE VIDepartment of Education
To enhance teacher education in the STEM fields and critical foreign languages,
the legislation authorized two new competitive grant programs. One program specifically enabled partnerships to implement courses of study in STEM fields and
critical foreign language that lead to a baccalaureate degree with concurrent teacher
certification. Another program implemented two- or three-year part-time masters
degree programs in these areas for current teachers to improve their content knowledge and pedagogical skills. The legislation authorized $151,200,000 for the baccalaureate degree program and $125,000,000 for the masters degree program for fiscal
year 2008 and the two succeeding fiscal years.
The legislation authorized competitive grants to increase the number of highly
qualified teachers serving high-need schools and to expand access to AP and IB
classes. It also authorized the Secretary of Education to contract with the National
Academy of Sciences to convene a national panel within a year after the enactment
of this Act to identify promising practices in the teaching of science, technology, engineering and mathematics in elementary and secondary schools.
The legislation authorized grants to states to implement mathematics programs
or initiatives that are research-based, provide professional development and instructional leadership activities for teachers and administrators on the implementation
of mathematics initiatives, and conduct student mathematics progress monitoring
and identify areas in which students need help in learning mathematics. It also established a demonstration program which awards grants to states for the provision
of summer learning grants to disadvantaged students. It also authorized grants to
states to establish new service and activities to improve the overall mathematics
performance of secondary school students.
The legislation also authorized a competitive grant program to increase the number of students studying critical foreign languages, starting in elementary school
and continuing through postsecondary education programs.
The legislation also authorized competitive grants to states to promote better
alignment of elementary and secondary education with the knowledge and skills
needed to succeed in academic credit-bearing coursework in institutions of higher
education, in the 21st century workforce and in the Armed Forces. It also authorized
the Secretary of Education to award grants of $50,000 to three elementary and 3
secondary schools, with a high concentration of low-income students in each state,
whose students demonstrate the largest improvement in mathematics and science.
TITLE VIINational Science Foundation
The legislation provided $22 billion to NSF over fiscal years 20082010. Particularly large increases were provided for K12 STEM education programs. These programs, including the Noyce Teacher Scholarship program and the Math and Science
Partnerships program, are geared to preparing thousands of new STEM teachers
and provide current teachers with content and pedagogical expertise in their area
of teaching.
The legislation increased support for the STEM talent expansion program (STEP)
and the Advanced Technological Education (ATE) program in an effort to help create thousands of new STEM college graduates, including two-year college graduates.
The legislation provided support for young, innovative researchers by expanding
the graduate research fellowships (GRF) and integrative graduate education and research traineeship (IGERT) programs, strengthening the early career grants (CAREER) program, and creating a new pilot program of seed grants for outstanding
new investigators.
Finally, the legislation included provisions to help broaden participation in STEM
fields at all levels. These include several programs of outreach and mentoring for
women and minorities, a request for a National Academy of Sciences report to identify barriers to and opportunities for increasing the number of underrepresented minorities in STEM fields, and an emphasis on inclusion of students and teachers from
high-needs schools.
TITLE VIIIGeneral Provisions
The legislation required the Secretary of Commerce to report to Congress on the
feasibility, cost and potential benefits of establishing a program to collect and study
data on export and import of services; expressed a sense of the Senate that the Securities and Exchange Commission and the Public Company Accounting Oversight

6
Board should promulgate final regulations implementing the section of the Sarbanes-Oxley Act that are designed to reduce burdens on small businesses; directs
the Government Accountability Office, after three years, to assess a representative
sample of programs under this Act and make recommendations to ensure their effectiveness; expressed a sense of the Senate that Federal funds should not be provided
to any organization or entity that advocates against a U.S. tax policy that is internationally competitive; directed a National Academy of Sciences study on the mechanisms and supports needed for an institution of higher education or non-profit organization to develop and maintain a program to provide free access to on-line educational content as part of a degree program, especially in science, technology, engineering, mathematics and foreign languages, without using Federal funds; expressed a sense of the Senate that deemed exports should safeguard U.S. national
security and basic research and that the President and the Congress should consider
the recommendations of the Deemed Exports Advisory Committee; and lastly, expressed a sense of the Senate that U.S. decision-makers should take the necessary
steps for the U.S. to reclaim the preeminent position in the global financial services
marketplace.

7
Chairman GORDON. This Committee will come to order. We
would like to get things started here on time. Governor Engler is
stuck in traffic. We have all had that situation, and he will be joining us shortly. Also, just so that you will know, he also has to leave
at 11:30 and we will try to get everyone out of here by 11:30.
So good morning, and I am sure we will have some more that
will be coming in later. Welcome, everyone. Before we start the
hearing today, I want to quickly take care of a little bit of housekeeping, and I want to thank you all for having a productive last
session and particularly for the subcommittees for all the work that
you did. At your desk you will find an agenda for this coming year.
On it says draft. The reason that it says draft is that, you know,
we welcome your continuing thoughts on that. Much of it reflects
what we have been discussing over the last year.
And this morning we are going to kick off one of the most important efforts of the year, to reauthorize our Committees landmark
legislation, the America COMPETES Act. We will also reauthorize
NASA [National Aeronautics and Space Administration] this year,
setting up a path for the next 10 or 20 years, and Ms. Giffords and
Mr. Olson are going to have their hands full putting that together
for us, and we welcome that.
Among other initiatives, we also expect the Committee to take a
closer look at advancing several energy technologies including
those associated with nuclear energy, carbon capture and sequestration, marine and hydrokinetic energy, as well as energy efficiencies and conservation technologies. These technologies not only
have the potential to help curb climate change, they also are poised
to create new industries and new jobs to go along with them, and
Mr. Ehlers, we are going to take another crack at that organic
NOAA [National Oceanic and Atomospheric Administration] Act.
You worked on that quite a bit and we will continue to work there.
And finally, we need to finish the work that this Committee has
started. Last year, the Committee passed a total of 37 bills and resolutions of the House with strong bipartisan support. We are currently working with the Senate to speed up progress on 21 bills
that are still waiting for action in that chamber. So this year poses
a tall order for this Committee. However, I am optimistic that
through our bipartisan approach we will be able to produce good
legislation for the American people, and I look forward to continuing good counsel with my friend, Ralph Hall, and the Republican Members of this Committee.
Now, thanks to our panelists for being here and for their patience as we took care of some quick housekeeping. Now we move
on to the reason that we are here this morning, and that is the
America COMPETES Act.
As you know, in 2005, I, along with former Chairman Sherry
Boehlert, Senators Lamar Alexander and Jeff Bingaman, requested
that the National Academies conduct a study to assess the state of
the Nations competitiveness, the science and technology infrastructure in the United States and how it would affect future U.S. prosperity. The result was Rising Above the Gathering Storm. This
report included a comprehensive set of recommendations to create
jobs and further U.S. competitiveness in an increasingly global
marketplace. The Committee used these recommendations to create

8
the America COMPETES Act, which was signed into law in August
of 2007.
The bill also established an Advanced Research Project Agency
for Energy, better known as ARPAE. This federal agency has already awarded its first round of $4 million to $5 million grants to
researchers who are conducting high-risk, high-reward research in
the energy field.
The funding process amazed everyone involved. They received a
shocking 3,700 initial concept papers, asked 344 of those to submit
full proposals, and eventually selected 37 proposals for first-round
funding. The speed with which this agency was organized and processed these applications seemed unprecedented in the Federal Government. This efficiency is a direct result of the countless hours
spent by ARPAE Director Arun Majumdar and his dedicated staff
working to achieve the agencys mission. Last month, ARPAE announced that it is accepting applications for a second round of
funding, which will soon go out.
But federal funding can only go so far. Many of the finalists have
projects that are certainly just as deserving for grant funding as
the award winners. That is why I suggested to Secretary Chu that
he set up or create a fair in which these finalists could display
their ideas and meet with potential investors. They agreed, and the
first ARPAE Innovation Summit will be held March 1st through
3rd at the Gaylord Convention Center in nearby National Harbor,
and we are going to be looking for additional ways to try to bring
in private-sector dollars for these good proposals as well as finding
ways to try to get them to market as quickly as possible.
Now, this morning, however, we are here to discuss the need to
reauthorize the America COMPETES Act, which expires at the end
of the current fiscal year. We learned from the Gathering Storm,
in order to create a sustained, well-educated workforce for an innovative economy, we need to establish sustained funding streams for
these programs. Our witnesses this morning will help us to better
understand how critical this Committees commitment is to our
prosperity and to our economic growth. I look forward to hearing
from them about how COMPETES has affected or will affect U.S.
innovation in the workforce and how these programs will help
them sustain a skilled workforce in the future.
Chairman GORDON. Now I would like to I yield to my friend from
Texas, Mr. Hall.
[The prepared statement of Chairman Gordon follows:]
PREPARED STATEMENT

OF

CHAIRMAN BART GORDON

Good morning. Before we start our hearing, I want to quickly talk about the Committees agenda for this year. Members have a draft agenda at their desk. Much of
it reflects what we have already discussed, and I welcome your further thoughts.
This morning, we are kicking off one of most important efforts of the yearto reauthorize our committees landmark legislation, the America COMPETES Act.
We will also reauthorize NASA this yearsetting it on a path for the next 10 to
20 years.
Among our initiatives, I also expect the Committee to take a closer look at advancing several energy technologies including those associated with nuclear energy,
carbon capture and sequestration, marine and hydrokinetic energy, as well as energy efficiency and conservation technologies. These technologies not only have the
potential to help curb climate change, they are also poised to create new industries
and the jobs that go along with them.

9
Finally, we need to finish the work that we started last year. This Committee
passed a total of 37 bills and resolutions out of the House with strong bipartisan
support. We are currently working with the Senate to speed up progress on the 21
bills that are still waiting for action in that chamber.
So, this year poses a tall order for this Committee, however I am optimistic that
through our bipartisan approach we will be able to produce good legislation for the
American people. I look forward to continued good counsel with my friend, Ralph
Hall, and the Republican members during this next year.
Thanks to our panelists for being here and for their patience as we took care of
some quick housekeeping. Now, well move on to the reason were all here this
morningthe America COMPETES Act.
As you all know, in 2005 I, along with our former Chairman Sherry Boehlert and
Senators Lamar Alexander and Jeff Bingaman, requested that the National Academies conduct a study to assess the state of our nations competitiveness, the science
and technology infrastructure in the United States and how it would affect future
U.S. prosperity. The result was Rising Above the Gathering Storm.
This report included a comprehensive set of recommendations to create jobs and
further U.S. competitiveness in an increasingly global marketplace. The Committee
used these recommendations to create the America COMPETES Act which was
signed into law in August 2007.
COMPETES authorized a total of $33.6 billion over fiscal years 20082010 for
science, technology, engineering and math education programs across the Federal
Government. The bill also authorized multiple grant programs to help educate current and future teachers in the areas of science and math education, as well as invested in support for young researchers by expanding early career grant programs.
And, the bill also established the Advanced Research Projects Agency for Energy,
better known as ARPAE. This Federal agency has already awarded its first round
of $4 to 5 million grants to researchers who are conducting high-risk, high-reward
research in the energy field.
The funding process amazed everybody involvedthey received a shocking 3,700
concept papers, asked 334 of those to submit full proposals, and eventually selected
37 proposals for funding.
The speed with which this agency was organized and processed these applications
seems unprecedented in the Federal Government. This efficiency is a direct result
of the countless hours spent by ARPAE director, Arun Majumdar and his dedicated
staff working to achieve the agencys mission.
Last month, the ARPAE announced that it is accepting applications for the second round of funding, and expect to announce those winners soon. With this track
record, I would not be surprised if soon means some time this Spring.
But, Federal funding can only go so far. Many of the finalists have projects that
are certainly just as deserving of grant funding as the award winners. Thats why
I suggested to Secretary Chu and Director Majumdar that they create a fair in
which those finalists could display their ideas and meet with potential investors.
They agreed, and the first ARPAE Innovation Summit will be held March 1st3rd
at the Gaylord Convention Center at nearby National Harbor in Maryland.
This morning, however, we are discussing the need to reauthorize the America
COMPETES Act which expires at the end of the current fiscal year. As we learned
from Gathering Storm, in order to create a sustained, well-educated workforce for
an innovative economy, we need to establish sustained funding streams for these
programs.
Our witnesses this morning will help us better understand how critical this commitment is to our prosperity and our economic growth.I look forward to hearing
from them about how COMPETES has affected or will affect U.S. innovation and
the workforce, and how these programs will help them sustain a skilled workforce
in the future.

Mr. HALL. Mr. Chairman, thank you, and what a panel. Thank
you very much, all of you, for your very valuable time.
You know, it has been nearly three years since we sat in this
room with Norm Augustine and officially kicked off what was to become the America COMPETES Act. As everyone here is aware,
America COMPETES was the culmination of recommendations
from the off-quoted Gathering Storm report, former President
Bushs American Competitiveness Initiative and efforts begun by
this Committee under Republican leadership and continued very
well by this chairman, one of the great chairmen in the history of

10
this committee. We all worked in a bipartisan fashion to get to
where we are today with this measure, and I am very proud of our
accomplishments.
My message hasnt changed much since then. If America is going
to remain on top of the evolving world economy, we have to be
dedicated to encouraging innovation and entrepreneurship while simultaneously cultivating the scientifically and technologically astute future workforce. While my message hasnt changed, unfortunately, our economy has.
America COMPETES was a step in the right direction to accomplish what was needed to be done. In H.R. 2272, we set out to double funding for the National Science Foundation, the National Institutes of Standards and Technology, and the DOEs Office of
Science over a 10-year period. By the time we got through conference, this timetable was accelerated to seven years, plus these
agencies received enormous amounts of stimulus funding, results of
which have yet to be seen. That goes for COMPETES and for the
stimulus funding.
Therefore, I am very much looking forward to the testimony of
our very distinguished panel today because there is no doubt that
we still have a lot to accomplish. At the same time, I would urge
you, Chairman Gordon, to proceed cautiously through this reauthorization process as I believe it is prudent for us to ensure that
we are reaping the benefits of the numerous initiatives already set
forth in America COMPETES before creating others. Furthermore,
and I hope our witnesses will attest to this today, COMPETES is
just one aspect of improving Americas competitiveness. President
Bush once said, The role of government is not to create wealth;
the role of government is to create an environment in which the entrepreneur can flourish, in which minds can expand and which
technologies can reach new frontiers, and I understand that that
is in the Competitive Initiative today, that statement. Encouraging
private-sector innovation through tax credits, a positive regulatory
environment and other such programs will also improve the American economy, make us more competitive globally and bring new
products and jobs to the American people.
I look forward to working closely again with you, Mr. Chairman,
in this reauthorization and hear what our esteemed witnesses have
to say.
With that, I yield back my time.
[The prepared statement of Mr. Hall follows:]
PREPARED STATEMENT

OF

REPRESENTATIVE RALPH M. HALL

Thank you, Mr. Chairman. Its been nearly three years since we sat in this room
with Norm Augustine and officially kicked off what was to become the America
COMPETES Act. As everyone here is aware, America COMPETES was the culmination of recommendations from the oft-quoted Gathering Storm report, former President Bushs American Competitiveness Initiative, and efforts begun by this Committee under Republican leadership and continued by you, Mr. Chairman. We all
worked in a bipartisan fashion to get to where we are today with this measure, and
I am proud of our accomplishments.
My message hasnt changed much since then: If America is going to remain on
top in the evolving world economy, we must be dedicated to encouraging innovation
and entrepreneurship, while simultaneously cultivating a scientifically and technologically astute future workforce. While my message hasnt changed, unfortunately,
our economy has.

11
America COMPETES was a step in the right direction to accomplish what needs
to be done. In H.R. 2272, we set out to double funding for the National Science
Foundation, the National Institute of Standards and Technology, and the DOEs Office of Science over a 10-year period. But by the time we got through Conference,
this timetable was accelerated to seven years. Plus, these agencies received enormous amounts of stimulus funding, the results of which have yet to be seen. This
goes for COMPETES and for the stimulus funding.
Therefore, Im very much looking forward to the testimony of our distinguished
panel today, because there is no doubt that we still have much to accomplish. At
the same time, I would urge you, Chairman Gordon, to proceed cautiously through
this reauthorization process, as I believe it is prudent for us to ensure that we are
reaping the benefits of the numerous initiatives already set forth in America COMPETES before creating others. Furthermore, and I hope our witnesses will attest to
this today, COMPETES is just one aspect of improving Americas competitiveness.
President Bush once said, The role of government is not to create wealth; the role
of our government is to create an environment in which the entrepreneur can flourish, in which minds can expand, in which technologies can reach new frontiers. 1
Encouraging private sector innovation through tax credits, a positive regulatory environment, and other such programs will also improve the American economy, make
us more competitive globally, and bring new products and jobs to the American people.
I look forward to working closely with you, Mr. Chairman, on this reauthorization
and to hearing what our esteemed witnesses have to say on the subject.
[The prepared statement of Ms. Johnson follows:]
PREPARED STATEMENT

OF

REPRESENTATIVE EDDIE BERNICE JOHNSON

Thank you Mr. Chairman for holding todays hearing. I would like to thank todays witnesses for their commitment to increasing the competitiveness of our Country and sharing their perspectives on the need for innovation and STEM education.
In 2005, Members of this committee learned some startling facts from experts at
the National Academy of Sciences Gathering above the rising storm report. We
learned that children in other developed Nations may be better prepared for the jobs
of the future than our own children here in the States. We learned from the experts
that there are clear signs that the United States has begun to lose its status as a
global economic and technological leader due to an inadequate investment to Research and Development and STEM development.
In response, I along with other Members of Congress, many on this committee
today, worked to draft the America COMPETES Act in a bi-partisan fashion. This
legislation represents a concerted effort to create a more competitive science and
engineeringworkforce.
Today in 2010, as many components of the original COMPETES bill are just now
taking effect, the need for the reauthorization of this act is now more pressing than
ever. Our nations students are still falling behind our international competitors due
to a lack of commitment. We have allowed ourselves to fall behind because we are
not consistently investing in our future. The time to act is now.
In order to achieve these goals, I have always fought to make sure we legislate
effectively in an equitable fashion.
Socioeconomic stature, race, or gender should not stand in the way of a childs
career. I fought for the America COMPETES Act to include special provisions to include and encourage women and under-represented minorities to pursue science and
technology careers. As minorities and women continue to be under-represented in
most STEM fields, we must do more to create opportunities to educate and retain
them, especially at the university faculty level.
Year after year, my colleagues on this committee as well as those on the Congressional Black Caucus, Diversity and Innovation Caucus and others fight to urge support for programs that broaden participation in science, technology, engineering and
mathematics: also called STEM.
A few weeks a go, I attended the Presidents Educate to Innovate, kickoff event
at the White House. One of the goals of this campaign is to expand STEM education
and career opportunities for under-represented groups, including women and girls.
I am pleased the administration is stepping forward to address these challenges.
The United States is slipping in STEM competitiveness worldwide, and it is a
matter of our international standing in the world, and national security that we
maintain adequate funding for science and technology education. Our country bene1 President

George W. Bush, May 2001.

12
fits the most if we ensure all Americans have the skills necessary to compete in the
21st Century.
I would like to commend todays panelists for their hard work. It is consistent
commitment like yours that will help create new jobs, invoke new innovation, and
prepare a strong, diverse STEM workforce for our future.

Chairman GORDON. Thank you, Mr. Hall, and you can be well assured that we are going to move with care as we reauthorize this.
As Mr. Castellani and others have pointed out in their written testimony, there does need to be reviews, evaluations and accountability for COMPETES, and within the original bill there were a
number of reports that were required to be submitted to us concerning accountability. The first one has come in and the others
will be coming in as we go through this authorization.
I also concur with you, and this is a very distinguished panel. We
have been fortunate to have Bill Gates, the Speaker, many Nobel
laureates speak before us, but no panel has been more distinguished than this panel, and I say that sincerely and we welcome
you.
Now it is my pleasure to briefly introduce you so we can get on
with business.
Mr. HALL. Mr. Chairman?
Chairman GORDON. Yes, sir.
Mr. HALL. First, can I tell you, I couldnt help but ask Bill Gates
for some money. I asked him for $300. He said he hasnt had that
little amount of money in his pocket since he was 12.
Chairman GORDON. It is my pleasure to first introduce Mr. John
Castellani. He is the President of the Business Roundtable, an association of chief executive officers of leading U.S. corporations.
These corporations represent a combined workforce of nearly 12
million employees. Second, Mr. Tom Donohue is the President and
CEO of the U.S. Chamber of Commerce. Since assuming the role
in 1997, Mr. Donohue has helped the Chamber grow to represent
more than three million businesses, nearly 3,000 state and local
chambers, 830 associations and over 90 America Chambers of Commerce abroad. Governor John Engler is President and CEO of the
National Association of Manufacturers, the largest manufacturing
industry trade group in America representing small and large manufacturers in every industrial sector in all 50 states. And Ms. Deborah Wince-Smith is President and CEO of the Council on Competitiveness, an association where CEOs, labor leaders and university
presidents work together to ensure that the United States remains
competitive in a global economy.
Your written testimony will be included in the record, and when
you complete your testimony, we will then begin questions. Each
Member will have five minutes to question the panel.
Mr. Castellani, please begin.
STATEMENT OF STATEMENTS OF MR. JOHN CASTELLANI,
PRESIDENT, BUSINESS ROUNDTABLE

Mr. CASTELLANI. Thank you, Mr. Chairman, Ranking Member

Hall, Members of the Committee.
As the Chairman said, the Business Roundtable is an association
of chief executive officers. In addition to the 12 million employees
that they represent, they also represent nearly $6 trillion in annual
revenue, and most relevant for this Committee, they spend more

13
than $111 billion annually in research and development. That is
nearly half of all of the total research and development, private research and development, in the United States.
I welcome the opportunity to appear before you today to address
reauthorizing the America COMPETES Act, which Business
Roundtable views as a fundamental prerequisite to restoring stable, long-term economic growth and job creation.
Americas CEOs are committed to accelerating American innovation and boosting worldwide competitiveness of the United States.
They understand that investments in science research and math
and science education help create the platform for sustained longterm growth.
The formula is simple. Investments in research and education
provide the tools for accelerated technological innovation, which
drives productivity growth. Innovation leads to new products and
processes and even whole new industries, generating high-wage
employment and a higher standard of living for all Americans.
The Business Roundtables commitment to fostering U.S. innovation and competitiveness is not new. In 2005, the Roundtable, together with other national business associations, including my
friends on this panel, created Tapping Americas Potential campaign, or TAP, with the goal of significantly increasing the number
of American science, technology, engineering and mathematics
graduates with bachelors degrees. We believe that expanding the
talent pool is a critical element, perhaps the critical element, of the
innovation agenda that America must pursue to remain competitive in the 21st century.
When Congress passed the America COMPETES Act in 2007, the
United States faced major competition from powerful new economic
rivals. Some were minor competitors only a decade ago. Today,
those rivals have emerged from the economic downturn in an even
stronger position, and while the United States struggles with high
unemployment and crippling budget deficits, China is pouring billions into research and education. Reauthorizing the Act and providing sustained support for its key provisions will help attract
more young Americans into technical fields and expand American
workers employment horizons and earning potential.
The America COMPETES Act authorized significant increases in
research investments that directly enhance Americas ability to innovate and create new jobs. COMPETES also authorized scholarship and training programs to recruit high-performing K12 math
and science teachers to enhance the skills of existing teachers. The
lack of qualified math and science teachers in American public
schools are a major impediment to improved U.S. educational
achievement in math and science. In many respects, the state of
Americas public education system is one of our Nations greatest
weaknesses. Nearly every job created in the United States over the
next ten years will require more math and science fluency than the
average job today. The question is, will America produce the skilled
workers to fill these positions?
Last month, Business Roundtable released the final recommendations from The Springboard Project, which is an independent commission we convened to ensure that American workers
thrive after the economy rebounds. The commission found that the

14
gap between worker skills and the needs of employers is widening,
exactly the opposite of what we would hope to see if every American is to gain fulfilling employment. Strengthening STEM
[Science, Technology, Engineering, and Mathematics] education at
all levels needs focused attention now and in the future.
One of our greatest challenges going forward is securing stable
funding commitments from Congress for the America COMPETES
Act. It is our job to persuade you that nurturing Americas innovations ecosystem, even in the face of severe fiscal constraints, is
necessary for the near term and for the long term.
The Business Roundtable is proud to have been an early supporter of the original America COMPETES Act, and we strongly
support its reauthorization. With the right policy choices, we believe that America will recover from its current economic circumstances and provide prosperity and opportunity for all its citizens.
I want to thank you again, Mr. Chairman and Ranking Member
Hall and the Members of the Committee. Mr. Chairman, under
your leadership, this Committee has been a model for developing
bipartisan solutions that address critical issues. We will miss that
leadership. We look forward to the remainder of your term, and I
would be delighted to answer your questions. Thank you.
[The prepared statement of Mr. Castellani follows:]
PREPARED STATEMENT

OF

JOHN CASTELLANI

Mr. Chairman, Ranking Member Hall, Members of the Committee, good morning.
My name is John Castellani, and I serve as President of the Business Roundtable,
an association of chief executive officers of leading U.S. companies with more than
$5 trillion in annual revenues and more than 12 million employees. Business
Roundtable member companies are technology innovation leaders, with more than
$111 billion in annual research and development spendingnearly half of all total
private R&D spending in the U.S.
I welcome the opportunity to appear before you today to address the vitally important task of reauthorizing the America COMPETES Act, which Business Roundtable
views as a fundamental prerequisite to restoring stable, long-term U.S. economic
growth and job creation.
Americas CEOs are committed to accelerating American innovation and boosting
the worldwide competitiveness of the United States. They understand that investments in scientific research and math and science education help create the platform for sustained, long-term growth.
The formula is simple. Investments in research and education provide the tools
for accelerated technological innovation, which drives productivity growth. Innovation leads to new products and processes-even whole new industries-thereby generating high-wage employment and a higher standard of living for all Americans.
Business Roundtables commitment to fostering U.S. innovation and competitiveness is not new. In 2005, the Roundtable, together with other national business associations, including those on this panel, created the Tapping Americas Potential
campaign, or TAP, with the goal of significantly increasing the number of American
science, technology, engineering and mathematics graduates with bachelors degrees.
We believe that expanding the talent pool is a critical element-perhaps the critical
element-of the innovation agenda that America must pursue in order to remain competitive in the 21st century. The America COMPETES Act is an important tool in
achieving that goal.
When Congress passed the America COMPETES Act in 2007, the United States
faced major competition from powerful new economic rivals, some of which were
minor competitors only a decade ago. Today, those rivals have emerged from the
worldwide economic downturn in an even stronger position. While the United States
struggles with persistent high unemployment and crippling budget deficits at every
level of government, China continues to pour billions intoresearch and education in
a determined effort to move up the value chain and produce more high-value-added
products and services. At a time when Americas ability to finance critical invest-

15
ments in national innovation capacity is constrained, our global competitors are redoubling their efforts to challenge U.S. innovation leadership.
Mr. Chairman, as you know, after you and your colleagues on the Committee led
Congress to pass the America COMPETES Act, it took nearly two years and the
worst economic crisis since the Great Depression before the provisions of the Act
were adequately funded. It is perhaps ironic that as Congress prepares to reauthorize the Act, its original enactment is just nowbeginning to be implemented and the
programs have not yet been rigorously evaluated. Yet we can say with confidence
that reauthorization of the America COMPETES Act is absolutely vital to ensuring
future U.S. innovation leadership and prosperity and security for Americas workers.
Reauthorization of the Act will provide support for the foundations of Americas
innovation system at a time when some question Americas commitment to continued worldwide technological and economic leadership. Reauthorizing the Act and
building on its key provisions will help restore confidence in Americas future, attract more young Americans into technical fields, and expand the employment horizons and earnings potential of millions of new American workers.
The America COMPETES Act authorized significant increases in physical science
and engineering research sponsored by key civilian science agencies, research that
directly enhances Americas ability to innovate and create new jobs. These research
investments will also help America address its energy and sustainability challenges.
In June of last year, Business Roundtable released a major economic study, The
Balancing Act: Climate Change, Energy Security and the U.S. Economy, which outlined six key technology investment pathways that can lead to efficient greenhouse
gas reductions without harming long-term economic growth. Extending the authorized increases for physical sciences and engineering research will provide the knowledge creation necessary to accelerate development of the advanced energy technologies recommended in Business Roundtables report.
Mr. Chairman, you and your colleagues on this Committee have led Congress in
adopting a farsighted approach to energy technology development that focuses on
a balanced, portfolio of research investments that will yield dramatic gains in energy efficiency, renewable energy technology, carbon capture and storage for coalfired power plants, advanced nuclear energy technology, and smart grid and transmission technologies that will enable greater use of electric vehicles and renewable
power. The fact is that we will need every one these new technologies to address
climate change and power our economy. Technology is not a silver bullet, but it does
offer a critical advantage in smoothing the transition to more sustainable economic
growth, greater energy security and a cleaner environment. This is a clear case of
science in service of national need. Reauthorizing the America COMPETES Act is
an essential component of our national effort to address Americas energy and sustainability challenges.
The America COMPETES Act authorized new and expanded scholarship and
training programs to recruit new K12 math and science teachers and enhance the
skills of existing teachers. Business Roundtable has identified the lack of qualified
math and science teachers in Americas public schools as a major impediment to improved U.S. educational achievement in math and science. In 2008, Business Roundtable and our partners released the TAP progress report, Gaining Momentum, Losing Ground, which documented how U.S. student achievement in math and science
continues to fall short compared with students from our global economic competitorsdespite commitments from the White House and Congress to improve U.S.
math and science education. When it comes to innovation, the state of Americas
public education system is our nations greatest weakness. Extending the math and
science education provisions of the America COMPETES Act and evaluating their
effectiveness helps give Americas children the preparation they need to succeed in
the 21st century workplace.
Mr. Chairman, this is a critical issue for America and for this Committee. The
persistent poor performance of U.S. students in math and science threatens our security and long-term prosperity. Over the fast twenty years, occupations that require technical proficiency have grown nearly three times faster than the overall
rate of employment growth. Workers in technical fields earn more and enjoy greater
job security than most other workers. Technical professionals have weathered the
economic downturn better than other workers, and there is some evidence that the
technology-intensive industries that employ these workers are leading Americas
economic recovery. Nearly every job in America requires more math and science proficiency than those same jobs required twenty years ago. Nearly every job created
in the United States over the next 10 years will require more math and science fluency than the average job today. Will America produce the skilled workers to fill
these positions?

16
Last month, Business Roundtable released the final recommendations from The
Springboard Projectan independent commission it convenedto ensure that
American workers thrive after the economy rebounds. Based on surveys of workers
and employers, the commission found that the gap between worker skills and the
needs of employers is widening, exactly the opposite of what we would hope to see
if every American is to find gainful, fulfilling employment. It will come as no surprise to you, Mr. Chairman, that the commission found that improving education
and training in the United States is essential to building a more highly skilled
workforce. The need is pressing. Seventy-three percent of the U.S. Bureau of Labor
Statistics projected fastest growing occupations require some level of postsecondary
credentials, yet the United States ranks second-to-last among developed countries
in postsecondary completion rates.
As you and your colleagues examine the America COMPETES Act, the math and
science education provisions of the Act have the potential to offer the most promise
for beneficial results for the American people. Strengthening K12 math and science
teacher recruitment and training, expanding proven math and science education
programs, and supporting math and science education in the nations community
colleges provide the foundation to advance overall U.S. competitiveness and the individual economic success of Americans. It also is critical for you to coordinate closely
with the Education and Labor Committee during the reauthorization of the Elementary and Secondary Education Act in order to ensure a coherent strategy to improve
science, technology, engineering and math education.
One of our greatest challenges going forward, Mr. Chairman, is one that you are
intimately familiar with and that is securing stable funding commitments from Congress for the programs authorized by the America COMPETES Act. Our nations
science and technology enterprise is a miraculous font of knowledge and wealth creation. The technology that has flowed out of this enterprise over the last century
has transformed our lives, created an ever-rising standard of living for all Americans, and unleashed an astonishing wave of productivity and economic growth. The
economic data are clear. Investments in research and education are among the most
productive investments available to Federal policy makers. It is our job to help persuade Congress that nurturing Americas innovation ecosystem, even in the face of
severe fiscal constraints, is the right policy choice for the near term and the long
term. Our future depends on it.
Business Roundtable is proud to have been an early and robust supporter of the
original America COMPETES Act, and we strongly support its reauthorization. It
embodies a sound, positive agenda for growth that will help lift America out of the
economic doldrums and open up new opportunities for U.S. workers.
Mr. Chairman, it is up to us to ensure that America remains the worlds technological and economic leader for the remainder of this century. With your help, and
the help of all of the Members of the Committee on Science and Technology, Business Roundtable believes that America will recover from its current economic circumstances and continue to lead the world in providing prosperity and opportunity
for its citizens.
Thank you again Mr. Chairman, Ranking Member Hall, and Members of the Committee. Under your leadership, Mr. Chairman, this Committee is a model for developing bipartisan solutions that address critical issues. I appreciate this opportunity
to express Business Roundtables views on this important legislation. I welcome
your questions.
BIOGRAPHY

FOR

JOHN CASTELLANI

John J. Castellani is President of Business Roundtable, an association of chief executive officers of leading U.S. corporations with a combined workforce of nearly 10
million employees and $5 trillion in annual revenues. Business Roundtable has been
cited by the Financial Times as the most influential chief executive lobbying group
in the U.S. and is at the forefront of public policy debates, advocating for a vigorous, dynamic global economy.
Business Roundtable companies give more than $7 billion a year in combined
charitable contributions, representing nearly 60 percent of total corporate giving.
They are technology innovation leaders, with more than $70 billion in annual research and development spendingmore than a third of the total private R&D
spending in the U.S.
Since joining Business Roundtable in May 2001, Castellani has significantly
strengthened the Roundtables reputation in Washington, DC, nationally and internationally and has led the Roundtables efforts on key public policy issues ranging
from trade expansion to civil justice reform to fiscal policy. He has been cited by
Bloomberg as one of Washingtons six most influential lobbyists.

17
Castellani and the Roundtable played vital roles in the adoption of long-awaited
civil justice reform legislation in 2005, approval of the Central America Free Trade
Agreement, and enactment of critically important legislation to lower tax rates and
slash taxes on dividends in 2003. He also has been a leader of the coalition working
in support of Social Security reform. Other significant areas of leadership for
Castellani and the Roundtable include passage of bilateral free trade agreements
with partners including Australia, Chile and Morocco; passage of the SarbanesOxley
corporate governance reforms; organizing the Partnership for Disaster Response to
improve the flow of private sector resources, services and staff following a major disaster; and development of the Business Roundtable Institute for Corporate Ethics,
a first-of-its-kind business ethics center designed to renew and enhance the link between ethical behavior and business practices.
Castellani is called frequently by the news media for comment on business and
public policy issues, and has appeared on such programs as NBCs Meet the Press,
PBS The NewsHour with Jim Lehrer, Fox News Channels Special Report, and
CNBCs Street Signs. He regularly provides testimony before Congress on issues
of key concern to Business Roundtable, and has discussed the Roundtables agenda
for economic growth in speeches to the Detroit Economic Club and the National
Conference of State Legislatures.
Prior to becoming President of Business Roundtable, Castellani was Executive
Vice President of Tenneco Inc., and part of the senior management team that led
the transformation of the ailing conglomerate into seven strong companies.
Castellanis Washington experience includes serving as Vice President for Resources and Technology with the National Association of Manufacturers, and as Vice
President of State, Federal and International Government Relations for TRW Inc.
He started his career at General Electric as an environmental scientist and strategic
planner.
In 2007, Castellani was named one of the 100 most influential people in corporate
governance by Directorship Magazine.
A graduate of Union College (Schenectady, New York), Castellani now serves on
its board of trustees. He is also an Ethics Resource Center Executive Fellow and
a member of the Advisory Council of the Business Roundtable Institute for Corporate Ethics in addition to being a member of The Economic Club of Washington,
D.C. He and his wife, Terry, reside in Washington, DC, and have two sons.

Chairman GORDON. Mr. Donohue is recognized.

STATEMENT OF MR. THOMAS J. DONOHUE, PRESIDENT AND
CEO, U.S. CHAMBER OF COMMERCE

Mr. DONOHUE. Thank you very much, Mr. Chairman, Ranking

Member Hall and Members of the Committee.
As the Chairman indicated, the Chamber is the worlds largest
business federation representing companies of every type. My colleagues here have special relationships with many of those companies and we all are going to testify today in a way that you will
probably find a lot of common spirit and common thought in our
remarks.
In the wake of the worst economic crisis since the Great Depression, our Nation is engaged in a vigorous debate on how to create
jobs, how to force long-term growth and how to enhance our global
competitiveness. There are many different voices and viewpoints
and plans but almost everyone agrees on one thing: the fate of our
economy, the hopes of our children and the viability of the American dream begin and end with education.
There was a time not long ago when America was the unquestioned leader in education. We led in math and science. We led in
the number of post-graduate degrees. Our K12 system was the
envy of the world. Our research fueled tremendous new discoveries
in every field. Those days are gone. The rest of the world is catching up and we are running in place or falling behind in some
places.

18
Our education system still has many great strengths. We have
the best universities and research facilities in the world. We have
many outstanding teachers. We have ambitious students eager to
learn and to realize their potential, but it is not good enough. Our
Nation cant do well by simply doing okay.
The statistics tell a very alarming tale. High school dropout rates
are approaching 30 percent for all students and nearly 50 percent
for minorities. American 15-year-olds rank 21st out of 30 in science
literacy among their peers from developed countries and 25th out
of 30 in math literacy. More than half of the U.S. science and engineering postdoctoral students in the United States are on temporary visas from other countries, and even though IBM topped the
2009 list of new patent awards, only four U.S. companies were in
the top 10. So we cant continue this way and expect to compete
and win in the worldwide economy. We cant continue this way if
we hope to lead the world in science, technology, engineering and
math, and we cant continue this way if we hope to provide better
opportunities and a higher standard of living for our children and
our grandchildren. That is why the U.S. Chamber and the business
community it represents strongly supports the reauthorization of
the COMPETES Act.
This legislation is moving America in the right direction. It is improving the number and quality of STEM teachers, increasing support and access for STEM students, attracting underrepresented
groups to STEM courses, supporting basic research, and establishing programs that will help create new forms of energy and
commercialize these innovations. The COMPETES Act puts the
focus right where it should be, on increasing the number of American students proficient in STEM and ensuring that we have sufficient R&D funding to drive innovation and to propel technological
progress. When it comes to research and development, the Chamber also strongly supports the permanent extension of the R&D tax
credit. It will encourage needed investments in important areas of
the economy such as renewable energy, energy efficiencies technologies, health care and biotechnology. Taken together, these initiatives can move us in the right direction, and I encourage you to
move aggressively on it.
Mr. Chairman, with your permission, there is another area that
I would like to just mention. I spent a good deal of time this morning at Walter Reed with the wounded veterans. We had a big job
fair out there, and there are thousands of these people coming out
of the military both wounded and otherwise who need our support,
and the STEM program can go a long way to do that. One of the
points that I would like to suggest is that many of these veterans
are certified in important skills, and I hope that the Committee
working with the government will look at how that certification can
be done in a way that it is accepted in the private sector when they
leave the military. Clearly it would help us recruit and it would
help us place our veterans who need our support.
So, Mr. Chairman, the time runs short but I want to suggest that
we move forward, and when you do so you vigorously evaluate the
Acts progress as Mr. Hall suggested so that we do the right thing,
get the major bang for the buck, be vigilant about duplicating of
funding of efforts among different departments. I am more inter-

19
ested that they know what each other is doing, and encourage public-private partnerships. This is a very important thing that you
have given much of your skill and energy and the Committee has
as well, and we would do anything we can to help you complete
this progress, complete this reauthorization and get it to work out
in the real world, and I thank you very much for your time and
I hope you will take a special look at the wounded veterans. They
have earned our support.
[The prepared statement of Mr. Donohue follows:]
PREPARED STATEMENT

OF

THOMAS J. DONOHUE

Thank you Chairman Gordon, Ranking Member Hall, and members of the Committee, for inviting me to present this statement on the importance of a robust research and development program and rigorous Science, Technology, Engineering,
and Math (STEM) education programs that will put the U.S. on course to maintain
our ability to compete successfully in the global economy.
I commend Chairman Gordon and the Committee for your foresight in 2005. By
joining Senator Lamar Alexander and Senator Jeff Bingaman in urging the National
Academies to examine the top ten actions that Federal policymakers could take to
enhance the science and technology enterprise, you brought this issue to the forefront of the national debate on American competitiveness.
Your efforts resulted in the 2005 groundbreaking report Rising Above the Gathering Storm. From this report, the American public learned that the Internet had
not only brought the world closer together and created a global marketplace, but
that the Death of Distance had created international competition for jobs.
In the early years of the information age, America led the way in global innovation. We believed that the education system we had and that the research and development investments we had made would keep us in the lead. But Mr. Chairman
as you stated at the 50th anniversary of this committee in March of 2008, I fear
that our country has coasted on the investments we made 50 years ago.
We are faced today with four challenges, a leaky pipeline for future talent; a lack
of a national strategy for research and development; an aging workforce; and a set
of national policies that need to be updated in order for America to regain its competitive edge.
At the heart of the knowledge economy is the notion that we can gather, manipulate, and convey information to create things and solve problems. There was a time
when America topped the list for many key indicators such as: performance of students on international math and science exams, postsecondary degree attainment in
the U.S. workforce, and number of patents awarded to U.S. companies. Todays results on those same indicators reflect a nation that is falling behind. I have seen
these numbers and the trends are moving in the wrong direction.
Our students results on national and international exams are especially troubling
because they give us a glimpse of how deficient in STEM our future workforce will
be. While we know that there are great schools, dedicated teachers, and high-achieving students across the country, we must recognize that our STEM performance has
reached a plateau while other countries have improved dramatically.
High school dropout rates in the United States are approaching 30 percent for all
students and nearly 50 percent for African-American and Hispanic students. Unfortunately, for those who make it to college, 35 percent will need remedial math in
the first year, 23 percent for writing, and 20 percent for reading (NCES 2004).
On the 2009 Nations Report Card, also known as the National Assessment of
Education Progress (NAEP), U.S. 4th graders who took the math test showed no improvement over previous years. Even more troubling, our 8th graders demonstrated
only nominal gains after showing steady increases for years.
In the 2006 Programme for International Student Assessment (PISA) comparison,
American 15-year-old students ranked 21st out of 30 in science literacy among their
peers from developed countries, and 25th out of 30 in math literacy.
The OECDs Education at a Glance 2009 report, shows university-level graduation
rates have virtually doubled from 18 percent in 1995 to 36 percent in 2007 in other
OECD countries with available data. In contrast, the United States dropped from
Rank 2 in 1995 to Rank 14 in 2007.
Our universities are preparing more graduate students from other nations than
our own. Temporary visa holders accounted for 55% of U.S. science and engineering
postdoctoral students in academic institutions in fall 2005.

20
The 2009 annual report by IFI Patent Intelligence, states that 51 percent of new
patents issued by the U.S. Patent and Trademark Office were awarded to companies
from outside the United States. While IBM was still number one with 4,186 patents,
only four U.S. companies were in the top 10 down from five in 2008 and of the top
35, only 12 are U.S. companies.
I agree with President Obama that we must be makers of things and not just consumers of things. But in order for us to make things whether we are talking about
nanotechnology, green energy, or life-saving medical devices, we must have people
who possess the skills to do this work.
One challenge is that the American workforce is aging across all sectors. The
Aerospace Industries Association reported in 2008 that Lockheed Martin conservatively estimates it will need to hire 140,000 people in the next 10 years, but that
figure could be as high as 190,000 with half of that number being STEM professionals.
The aging of the baby boomer generation means a growing percentage of the industrys workforce will be eligible to retire in coming years. Nearly 6 percent of the
R&D workforce retired in 2008, up from 2 percent the year before. Retirement eligibility remained roughly the same at 13 percent but is forecast to rise to more than
20 percent of the workforce by 2013. (Aviation Week)
The nature of work has evolved with the knowledge economy, and if America is
to remain competitive, we must move from a model where only the elite STEM professionals are trained in these disciplines, to a model where all citizens have a common foundation in these subjects and are STEM-capable.
We must create a new definition of what it means to be a STEM professional.
They are not just doctors, engineers, research scientists and information technology
specialists. They are also electrical line workers, skilled technicians, and allied
health professionals among others.
This means we must invest in an education system that will produce the workers
we need, and invest in R&D so that our universities and private industry can continue to innovate.
The Carnegie Corporation of New York joined with the Institute for Advanced
Study to create a STEM commission that released a report last year entitled the
Opportunity Equation. The report emphasizes the importance of changing the way
that math and science are taught. Learning math and science from textbooks is not
enough: students must also learn by struggling with real-world problems, theorizing
possible answers, and testing solutions.
Through the Math and Science Partnerships at the Department of Education and
the National Science Foundation, there is ample opportunity to improve teaching in
math and science. We are encouraged that there are preliminary efforts to coordinate programs between the Department of Education and the National Science
Foundation. Hopefully this will increase shared learning, provide a framework for
evaluating programs, improve efforts to scale success throughout schools, districts
and states, and reduce duplication of effort when possible.
The Institute for a Competitive Workforce (ICW) at the U.S. Chamber of Commerce is working with Carnegie and others to bring the business community together around these concepts. In November, ICW released the second report in its
Leaders and Laggards series focused on education reform in America. We will encourage our members to support the policies and programs that will help to move
the nation forward.
We must change the attitudes in this country about STEM and create a new paradigm where young people and adults understand the connection between STEM
learning, career opportunities, and improving our society.
We applaud President Obama for advancing the development a national STEM
agenda. The President and Secretary Duncan should be commended on their efforts
to improve STEM learning by making it a priority in the Race to the Top competitive grant applications and through the Investing in Innovation Fund.
In November of 2009, President Obama launched the Educate to Innovate campaign which aims to increase STEM literacy so that all students can learn deeply
and think critically in science, math, engineering, and technology; move American
students from the middle of thepack to top in the next decade; and expand STEM
education and career opportunities for underrepresented groups, including women
and girls.
The business community firmly supports these goals and has pledged to engage
its employees in state and local activities that support teaching and learning in
STEM subjects. Several corporations have aligned their corporate philanthropy programs with these goals as a way to scale successful programs quickly. ExxonMobil
supports the UTeach program and the National Math and Science Initiative. IBM
s transition to teaching program directly addresses the STEM teacher shortage. The

21
Knoxville Chamber of Commerce has launched the Volunteers 4 STEM initiative
that will pair 500 STEM teachers with professionals in relevant fields who can provide them with advice and support.
The America COMPETES Act of 2007 laid the foundation for a revitalization of
a national STEM agenda. In conjunction with the American Recovery and Reinvestment Act, the COMPETES Act addresses the concern about public investments in
STEM education, workforce development, and research.
In relation to Federal research and development much of the American COMPETES Act has yet to be implemented fully which makes it difficult to truly assess
its impact to date. However, progress has been made and the incremental impacts
have largely been positive. The creation of ARPAE represents a, bold step toward
bypassing some of the traditional stovepiping that frequently hinders the efficiency and expediency of research and development at DOE and its National Laboratories. While implementation was initially slow, the $400 million cash infusion
from the Stimulus Bill has already led to significant movement. The projects that
this program supports, ranging from advanced batteries to electricity generation,
are projects that would probably not otherwise receive Federal funding because they
are simply too risky. As the Congress recognized in creating ARPAE, it is vital that
we keep an eye well beyond the horizon and take chances on these high riskhigh
reward projects that might just change the entire landscape of how we produce and
use our energy resources.
While several of the education programs that were authorized through America
COMPETES have not been running long enough to evaluate how well they are
working, we believe that the focus on improving the number and quality of STEM
teachers; increasing support and access for STEM students at the postsecondary
level; attracting underrepresented groups to STEM courses and careers; supporting
basic research; and establishing programs that will help create new forms of energy
and commercialize new innovations moves the right direction.
We encourage the committee to focus on evaluation as a priority when considering
funding for new programs so that we can better understand where resources will
do the most good. We also urge the committee to continue to be vigilant about duplication of funding and efforts among the Department of Education, the National
Science Foundation, NASA, the Department of Energy and other Federal agencies.
Coordination should be encouraged whenever possible to maximize the impact of
government resources for individuals and for communities.
When possible, the committee should look at incentives that lead to public-private
partnerships, the commercialization of new technologies, and regional STEM initiatives. These innovation ecosystems drive job creation, economic development, and
regional stability that will contribute to regaining Americas lead in the global innovation market.
There are thousands of civilians and military personnel who have extensive STEM
education and training. Unfortunately, the certifications that they have often do not
translate from the military to the civilian, world or vice versa. The lack of reciprocity in certifications and licensure creates two problems, it discourages people
from entering or leaving the military due to the need for retraining, and it wastes
time and taxpayer dollars when people must be trained again to do something that
they have already been certified to do. Inova Hospital in Virginia has a created a
joint program with the Army Reserve so that together they can recruit, train, credential, license and certify qualified Soldier candidates who are entering the health
care field. I encourage the committee to find ways to replicate and scale programs
like this one. We must find a way to make skills more transferable if we are going
to expand and strengthen our workforce.
While I realize its not necessarily within the scope of the COMPETES Act or this
Committees jurisdiction, but given the focus of this hearing on innovation and
American competitiveness, I would be remiss if I didnt note perhaps the single most
important policy the Federal Government has for helping the private sector develop
the products and ideas that will continue to keep the U.S. economy competitive for
generations to come. The research and development (R&D) tax credit encourages
businesses of all sizes to undertake cutting-edge research projects in the United
States. Research and development is the very lifeblood of our knowledge economy.
At a time when the American economy is weak, research and development across
industry sectors makes it possible to create and maintain good, high-paying jobs at
home and sharpens the ability of companies to compete in the global marketplace.
The Chamber has long supported the enactment of a permanent and stronger
R&D tax credit. The Chamber believes the R&D credit spurs economic growth and
encourages investments we need to make in important areas of the economy such
as renewable energy and energy efficiency technologies, health care, biotechnology,
manufacturing processes, and information and communications technologies. Mak-

22
ing this credit permanent would bring certainty which would encourage businesses
to make long-term, high risk investments in the United States.
We commend the committee for its work on this issue and its dedication to ensuring that the America COMPETES Act achieves its purpose. Global competitiveness
is a top priority for the business community and we will not be able to compete and
win without strong national policies that support innovation.
BIOGRAPHY

FOR

THOMAS J. DONOHUE

Chairman GORDON. Thank you, Mr. Donohue.

23
Governor Engler, you are recognized, and we also recognize your
time constraint at the end of the hearing too.
STATEMENT OF GOVERNOR JOHN ENGLER, PRESIDENT AND
CEO, NATIONAL ASSOCIATION OF MANUFACTURERS

Governor ENGLER. Thank you, Chairman, Ranking Member Hall,

distinguished Committee Members. It is a pleasure to be here
today and we appreciate the invitation to testify on behalf of the
Nations manufacturers on the America COMPETES Act. The National Association of Manufacturers [NAM] is the Nations largest
industry association representing manufacturers in all 50 states,
every sector. We are also a very proud founding member of the
Task Force on American Innovation formed to support basic research in the physical sciences and engineering, and I want to
begin by thanking the Committee for championing the America
COMPETES Act. I note behind you, Where there is no vision, the
people perish. Well, the bipartisan vision that led to this legislation and its enactment in 2007 and then the funding recently
under the Recovery Act has really worked to fulfill some of the
promise to the country, and I think this panel will be strongly in
support of the issue of federal funding for basic research, and I certainly want to lend strong words of support as well, continued support. I point out, as John Castellani did, that research has long
been a priority for the manufacturing sector in this country.
In December of 2005, the manufacturers joined the Department
of Commerce in sponsoring a competitiveness summit that Deborah
was very much a moving force in as well where basic research in
that meeting was identified as a key contributor to economic
growth and innovation, and so we certainly want to demonstrate
broad support for programs we are addressing today. In the interests of time, let me focus on three other areas quickly: ARPAE,
the Advanced Research Projects Agency for Energy, STEM education, science, technology, engineering and math education, and
the Hollings Manufacturer Extension Partnership, or the MEP.
First, ARPAE. One of the most exciting elements of the America
COMPETES Act was the establishment of ARPAE. Manufacturers
know you cant separate energy from the economy. ARPAE supports research in both while also attempting to usher in new generations of clean, efficient sources of energy. The COMPETES Act
calls for ARPAE to accelerate transformational technological advances in the areas that industry by itself is not likely to undertake because of technical and financial uncertainty. ARPAEs first
funding opportunity released last May produced an outpouring of
applications and award agreements are now being finalized, and
the agency has also announced a second round totaling approximately $100 million, and we want to work with the Committee certainly to evaluate the work of the agency as part of the preparation
for this reauthorization so that ARPAE can continue to encourage
high-risk, high-reward projects and technological innovation, and I
commend the Chair for the mention of the upcoming ARPAE fair
that is coming. It sounds like a very good idea.
Let me talk about STEM, preparing our next generation of manufacturers by improving education. Strong science, technology, engineering and math education is a foundation of a technical work-

24
force, helps students and workers prepare to develop the essential
skills for a competitive manufacturing economy. However, the governments emphasis on STEM skills often begins and ends with the
academic side of science and math. That is essential, of course, but
the best R&D in the world cant go to market without the ability
to produce the product. For manufacturers, the application of
STEM skills for real-world workplaces is critical to developing this
Nations technical workforce. Programs outlined in the America
COMPETES Act take a step toward this integration of skills needed by employers. We can move that integration to the next level
through a series or a system of portable skills certification, not unlike what Mr. Donohue mentioned for our veterans coming back,
recognize these portal skills certification by broad industry partners and implement it in high school and local two- and in some
cases four-year colleges. The National Association of Manufacturers
and our Manufacturing Institute have worked with key partners,
world leaders in skills certification programs to develop a new system of credentials for students in postsecondary education, and Mr.
Hall, the Bill and Melinda Gates Foundation, they did give us a
couple of bucks, about a million and a half dollars, actually, of a
grant to help bring this vision to reality. When the academic and
technical programs are aligned with industry-recognized skill certifications, students can demonstrate and transfer their skills
throughout the country and companies gain access to a richly enhanced pool of skilled workers. The recently introduced H.R. 4072,
the AMERICA Works Act, sponsored by Congressman Minnick but
also cosponsored by Congresswoman Dahlkemper of this very Committee, it elevates these programs such as these to proper standing
and their educational priority. The NAM strongly supports this legislation.
Finally, just on MEP, I will close with that. High-tech manufacturing assistance to small manufacturers, we think it is a key program. It has received increased funding. The Hollings Manufacturing Extension Partnership, or MEP, as we all know it, is a network of not-for-profit centers that provides small and medium-sized
manufacturers with expert advice on an array of business operations, and let me mention that a vast majority of American manufacturers are actually smaller companies, fewer than 500 employees. They account for something like two-thirds of manufacturing
employment, and about half the value of all domestic production.
In 2008, there were 59 of the NIST [National Institute of Standards and Technology] MEP centers serving nearly 32,000 manufacturers, helping them streamline plant operations, improve the bottom line, and that was opportunity then for growth in the market.
In the previous years, just a couple of data points. The partnership
contributed to more than 57,000 manufacturing jobs, helped deliver
in excess of $1.4 billion in cost savings and played a role in generating more than $10.5 billion in sales. So we think that program
pays a big dividend, a great ROI [Return on Investment] for our
economy and helps the next generation of manufacturers.
So Members, we thank you very much for the opportunity to be
here today. We strongly support the reauthorization of the America
COMPETES Act. It is going to pay off for more jobs, more manufacturing and a more competitive U.S. economy.

25
[The prepared statement of Governor Engler follows:]
PREPARED STATEMENT

OF

GOVERNOR JOHN ENGLER

Introduction
Chairman Gordon, Ranking Member Hall, and distinguished members of the
Committee: thank you for inviting me to testify on America COMPETES: Big Picture Perspectives on the Need for Innovation, Investments in R&D and a Commitment to STEM Education.
I am the President and CEO of the National Association of Manufacturers (NAM),
the nations largest industrial trade association, representing small and large manufacturers in every industrial sector and in all 50 states. We are also a member of
the Task Force on American Innovation,1 whose mission it is to support basic research in the physical sciences and engineering. I am pleased to testify on behalf
of our nations manufacturers and all those who wish to preserve our nations competitiveness and prosperity, on a critical issuereauthorizing the America COMPETES Act.
I want to thank you, Mr. Chairman and Ranking Member Hall for championing
and supporting the America COMPETES Act. Although the America COMPETES
Act was signed in 2007, only recently did it achieve the funding necessary to fulfill
its commitment to America.
I can tell you that the programs authorized in the America COMPETES Act are
working to strengthen innovation in the U.S. manufacturing sector, and are helping
us to build a stronger workforce. Today, I would like to highlight four programs that
are of significant interest to Americas manufacturers. They are Federal funding for
basic R&D; the Advanced Research Projects Administration for Energy (ARPAE);
science, technology, engineering and mathematics (STEM) education, and the Hollings Manufacturing Extension Partnership (MEP).
The Connection Between Federal R&D and Innovation in Manufacturing
Technology and the ability to translate innovation into products and services that
meet the needs of businesses and consumers bolster the United States economy and
our standard of living. Just as technology is key to strong economic growth and U.S.
global competitiveness, manufacturing is key to technological advancement. No one
sector has played a more important role in developing new technologies than manufacturers. Similarly, manufacturers lead the way in adopting new technologies to
maximize efficiency and productivity.
Despite these advances, international competition continues to grow and Americas advantage in developing new technology can no longer be taken for granted.
In order for the U.S. to maintain its competitive edge, it must promote forward-looking policies that encourage technology, and by extension, the U.S. economy. Our
global competitiveness, in part, depends upon two important goals: encouraging
growth in technology sectors that benefit U.S. manufacturers, and incentivizing
manufacturers to further embrace advances in technology that will strengthen and
secure the place of American manufacturers in the global economy.
The public sector plays a critical role in innovation. Over the past 60 years, government-funded research has contributed to major breakthroughs in science and
technology. Through the Manhattan Project, we harnessed the atom; through
NASA,2 we unleashed space travel; through ARPA,3 we grew the Internet; and
through SEMATECH,4 we shrunk the microchip.
Federally-funded R&D is what sets the United States apart from the rest of the
world, but it is a distinction that we can lose. In 2008, the U.S. spent $116.5 billion
on federally funded R&D, facilities and fixed equipmentor 2.62% of its Gross Domestic Product (GDP).5 In the same period, Chinas government invested $52.4 billion in R&D (about 1.49% of GDP; up from $29.4 billion in 2005). This does not include R&D expenses at labs owned by foreign companies. If China continues a ratio
1 http://www.InnovationTaskForce.org/
2 National Aeronautics and Space Administration.
3 Advanced Research Projects Agency was the forerunner of DARPA, the Defense Advanced Research Projects Agency, an agency of the United States Department of Defense responsible for
the development of new technology for use by the military.
4 SEMATECH (SEmieonductor MAnufacturing TECHnology) is a non-profit consortium that
performs basic research into semiconductor manufacturing, created to solve common manufacturing problems and regain competitiveness for the U.S. semiconductor industry that had been
surpassed by Japanese industry in the mid-1980s.
5 Federal R&D Support Shows Little Change in 2008. National Science Foundation, Info Brief
September 2009.

26
of R&D spending of about 1.5% of GDP for 2009, its research will total about $72
billion.6 However, China has one of the fastest-growing research budgets in the
world, and by 2020 the governments goal is to invest 2.5% of GDP annually in research, which will cause China to rank third in the world in terms of total annual
investment.7
In order to ensure that ground-breaking achievements continue, it is critical that
policymakers both authorize and appropriate adequate funds for important government research agencies such as the National Science Foundation (NSF), the Department of Energy, the National Institute of Standards and Technology (KIST) and
NASA. The America COMPETES Act put these key research agencies on a glide
path to doubling their 2006-funding levels by 2016. The America COMPETES Act
needs to be reauthorized to ensure that this goal does not fall to the wayside. As
I mentioned earlier, only recently have sufficient funds been appropriated to fulfill
our commitment to the COMPETES Act, funding that has come through the American Reinvestment and Recovery Act, the 2009 Omnibus Appropriations Act, and the
pending passage of the FY 10 appropriations bills. We are greatly encouraged by
the Presidents commitment to fulfilling the promise of the America COMPETES
Act by his pledge to double the funding for these important research agencies
through the Presidents Plan for Science and Innovation.8
The increase in NSF funding to $7 billion in 2010, or 8.5 percent more than the
2009 enacted level, will support many more researchers, students, post-doctoral fellows and technicians contributing to the innovation enterprise. The 2010 DOE Office
of Science Budget of $4.9 billion, 3.5 percent more than the 2009 enacted level, will
help us improve our understanding of climate science, continue the U.S. commitment to international science and energy experiments, and expand Federal support
at the frontiers of energy research. And the 2010 Budget of $652 million for NISTs
intramural laboratories will improve NISTs research capabilities by providing highperformance laboratory research and facilities for a diverse portfolio of basic research in areas such as health information technology, the digital smart grid, and
carbon measurements. Separately, the 2010 Budget also sustains NISTs external
programs, including $125 million in 2010 (a $15 million increase over the 2009 enacted level) for the Hollings Manufacturing Extension Partnership (MEP) to enhance the competitiveness of the nations manufacturers.9
Federal R&D Funding: Creating Jobs, Now and in the Future
The funds authorized by America COMPETES and released by the Recovery Act
are going to help basic R&D create jobs in two ways: building infrastructure necessary to do cutting edge science, and funding grants that will help spur innovation.
Infrastructure building includes completion of bricks and mortar projects at national laboratories, procurement of commodities for major Federally-funded research
programs, purchases of modern scientific instrumentation associated with ongoing
grants at universities and investments in both the scientific workforce and green
energy initiatives. Short term, infrastructure building means that construction
projects can begin in local areas, creating manufacturing and construction jobs and
economic benefits now. Long term, the science done at these new facilities may
bring about whole new industries, which will in turn create new jobs and economic
benefitsas well as enhancing innovation, public safety and environmental protectionwell into our future.
Economists can easily determine job creation numbers from physical infrastructure programs; determining job creation from federally funded R&D research
projects is a bit more speculative. However, from these research projects industries
are created, products are produced, Americans are employed, savings are realized,
and our future is strengthened.
For instance, when the laser was first created using basic research from the Department of Defense, it was dubbed a solution looking for a problem. However,
through other federally sponsored research programs, applications were discovered
and advances made; today, the laser. is a critical component to the U.S. military,
to health care, to consumer and business electronics, and especially to the manufacturing industry. It is just one example of how basic researchwhich may begin with
no specific technology or product in mindcan lead to important discoveries, lifechanging inventions, and economic growth.
6 Engineering

& Research, Plunkett Research, website visited January 14, 2010.

7 Ibid.
8 See

The Presidents Plan for Science and Innovation, Doubling Funding for Key Basic Research Agencies in the 2070 Budget, Office of Science and Technology Policy, Executive Office
of the President, May 7, 2009.
9 Source: Office of Management and Budget, Budget of the United States Government FY 2010.

27
The benefits that can be reaped from federally funded research from the NSF,
NIST and DOE Office of Science also produce ancillary benefits in areas that are
critical to the American manufacturing sector, such as the economic health of the
United States, health care, and energy consumption. Here are a few examples:
Economic Development: According to a joint analysis by the Commerce Departments Bureau of Economic Analysis and NSF, if R&D spending were treated
as investment in the U.S. national income and product accounts, U.S. GDP
would have been nearly 3 percent higher each year between 1959 and 2004. In
2004 alone, the U.S. GDP would have been $284 billion more with the R&D satellite account.10
Health Care: The life expectancy of Americans rose from 47 to 78 between 1900
and 2009, largely due to advances gained from Federal biomedical research conducted with National Science Foundation, National Institute of Health, and
Centers for Disease Control funding.
Energy Consumption: Buildings are the largest energy users in the United
States. Federal research at agencies like the Department of Energy focused on
emerging technologies for components, such as heating, cooling, ventilation, and
refrigeration could lead to energy savings of 3.3 quadrillion BTU, or the equivalent to up to 200 million tons of coal.
Because of the America COMPETES Act, the Recovery Act and the 2009 Omnibus
Appropriations bill, research grants are being awarded that will create jobs, foster
innovation, and help revolutionize current industries and perhaps create new industries. Below is a sample of the dollar amounts of some of the grants that are now
flowing into key research states.

ARPAE and the Future of American Manufacturing

As this country and the manufacturing economy seek to remain competitive in an
ever-evolving global marketplace, we must avail ourselves of every opportunity to
drive economic growth, bolster our domestic energy resources and protect the environment. In order to secure these opportunities, significant and consistent investments must be made; we cannot let American ingenuity and innovation become a
success story in other countries.
I commend the House Science Committee for recognizing the importance of supporting high-risk, high-reward projects by bringing the Advanced Research Projects
AgencyEnergy (ARPAE) online. As the Director for ARPAE, Arun Majumdar,
notes in his open letter of December 15, 2009, the nation that successfully grows
its economy with more efficient energy use, a clean domestic energy supply, and a
smart energy infrastructure will lead the global economy of the 21st Century. 13
ARPAE is designed to ensure that the U.S. can do just that.
10 See Toward Better Measurement of Innovation and Intangibles, BEA Briefing, Ana M.
Aizeorbe, Carol E. Moylan, and Carol A. Robbins, January 2009.
11 Source: National Science Foundation, January 14, 2009.
12 Source: U.S. Department of Energy, January 14, 2009.
13 http://arpa-e.energy.gov/public/dir-ltr.pdf.

28
The NAM has long advocated that, in order to move this country forward, we need
a fundamental transformation in how we produce, distribute, and consume energy.
This transformation should start with a shift in how we view and approach energy
research. While quality research is successfully conducted by U.S. manufacturers
and the DOE, a new approach is needed that will expedite the development and deployment of technological innovations. This approach should leverage the vast intellectual capital throughout our country that we hope will lead to market success, the
building of the necessary infrastructure and high paying jobs. This is the goal of
ARPA- and it presents a unique platform to integrate innovative industry, research
and development, and yield results.
The NAM was pleased to see that ARPAE released its first funding opportunity
announcement in May 2009. After the unprecedented response, award agreements
are now being finalized. Additionally, ARPAE has announced the launch of its second round of opportunities for a total of $100 million. Knowing that demand for
ARPAE resources is so significant, the NAM looks forward to working with this
Committee to ensure that the Agency is reauthorized and its funding remains at
levels that will continue to support high-risk, high-reward projects and technological
innovation.
The goals are simplereduce our reliance on foreign sources of energy, improve
the energy efficiency of all economic sectors, slow and reduce greenhouse gas emissions; and maintain US technological leadership in the world and in the development and deployment of energy technologies. Long term, this research will form the
foundation of new R&D investments that meet the size and complexity of the challenges facing the energy sector.
Preparing our Next Generation Manufacturers by Improving Education
Strong Science, Technology, Engineering, and Math (STEM) education is the foundation for a technical workforce, and provides the fundamental skills necessary for
a vibrant and competitive manufacturing economy. Improving the quality of K12
STEM education and creating stronger educational pathways for graduate students
in these fields, as supported in the America COMPETES Act, will provide employers
with candidates that possess the necessary educational base to drive innovation in
the manufacturing industry.
However, far too often our policies and investments related to the STEM skills
begin and end with a focus on high science and math academic theory. For manufacturers, it is the application of science, technology, engineering, and math skills in
real world workplaces that is critical to developing this nations technical workforce
and preparing an educated and skilled manufacturing workforce for the 21st Century.
It is in this area where we are experiencing a tangible skills gap. In a recent
study by the Manufacturing Institute and Boston Consulting Group, over 1000 manufacturing executives identified a skilled educated workforce as the single most critical element of innovation success.14 In turn, they reported that innovation is the
single most critical element of business success. So, if manufacturers require an
educated and skilled workforce for business success, job creation, and the ability to
compete in a global market, we must ensure we have the policies and investments
in place to train our future workforce in critical STEM skills. The fundamentals developed with a strong STEM education program are not only for use as a pathway
to advanced science research. No company can take R&D to market without the
ability to produce the product. Strong STEM skills create a competitive business environment by contributing to skills on the production line as well as in the research
lab.
As manufacturers, we take pride in measurable successes. Just-in-Time inventory
management and Six Sigma process management defines how manufacturers look
at business. It is therefore important to the manufacturing sector that modifications
to the education system have quantifiable advantages. While many education and
workforce reforms can take many years to have an impact, some reforms yield results much more quickly. For example, there is a direct statistical correlation between quality of workforce and innovation performance.15 Stated more directly,
quality input means quality output. We need to ensure that we continue to train
workers with the right skills to keep pace with the increasingly technical demands
of the productivity-oriented manufacturing sector.
14 The Innovation Imperative in Manufacturing, The Manufacturing Institute, Boston Consulting Group, 2009.
15 Ibid.

29
The P16 program outlined in the America COMPETES Act takes a step toward
integration of the skills needed by employers and education systems calling for education alignments with the private sector. Driving students toward advanced degrees in STEM areas is critical for competitive success; however, so is continuing
the education for those who may not follow the traditional educational path. Preparing students and transitioning workers with applied STEM education to real
world skills is just as important, and engages a sector of the workforce without a
four-year college or graduate degree.
A portable skills certification system 16 developed and recognized by broad industry partners, and implemented in high school and local two- and four-year college
programs, moves the integration to the next level. When academic and technical
programs are aligned with industry needs and standards, students gain recognized
credentials and companies gain skilled workers. By creating more STEM pathways
for secondary and post-secondary education, and aligning education with industryrecognized skills credentials, the United States can create the kind of manufacturing workforce that will facilitate ever-needed product and process innovations in
an evolving global business climate. In fact, the recently introduced H.R. 4072, The
America Works Act, sponsored by Rep. Minnick and co-sponsored by Rep.
Dahlkemper who sits on this Committee, takes programs like these and prioritizes
them within current educational programs.
The Hollings Manufacturing Extension Partnership: Bringing High-Tech to
Small Manufacturers
Another key program in the America COMPETES Act that has received increased
funding is the Hollings Manufacturing Extension Partnership (MEP). The MEP is
a nationwide network of not-for-profit centers that provide small- and medium-sized
manufacturers with services ranging from process improvements and worker training, to business practices and information technology.
Small manufacturing enterprisesdefined by the Federal Government as companies with fewer than 500 employeesare critical to the U.S. manufacturing base as
well as to the national economy. Over 99 percent of American manufacturers are
smaller companies, and these manufacturers account for two-thirds of manufacturing employment and half of the value of all domestic production. Faced with
steep downward cost pressures as a result of the global business environment, efficiency and innovation are critically important to these companies. The MEP provides small- and medium-sized manufacturers affordable access to technical expertise, so that they can create more high-paying manufacturing jobsdespite todays
daunting economic cost pressures.
MEPs mission is to support, strengthen, and grow U.S. manufacturing. To do
this, it provides customized and direct assistance to manufacturers through its nationwide network of MEP centers, with nearly 392 locations across the country, and
more than 1600 field staff working every day with companies in their plants and
offices. The nations manufacturers, thanks to MEP assistance, have streamlined
their plant operations and improved their bottomlineand as a result, have been
able to create opportunities for growth via new sales, new markets, and new products. In 2008, MEP served 31,961 manufacturers.17
The impact of the MEP program on the U.S. economy is truly impressive. In FY
07 alone (from projects completed in 2007), the MEP helped to:
create or retain more than 57,000 jobs;
deliver $1.44 billion in cost savings annually;
generate more than $10.5 billion in sales; and
stimulate more than $2.19 billion in economic growth.18
Thanks to the vision of this Committee, Congressional Leadership, and the Administration, the MEP program received increased funding this year, authorizing
and appropriating $122 million for its parent agency, the National Institute of
Standards and TechnologyUnfortunately, due to an uncertain economy, the future
of this important program is in jeopardy. The NAM greatly supports the NIST MEP
16 Nationally portable, industry-recognized certifications validate that workers have the skill
sets necessary to perform in a manufacturing environment and provide flexibility for the employee to take those skills anywhere in the marketplace, while also providing a streamlined hiring process for the employer.
17 Source: NIST MEP Website, January 14, 2009.
18 See Making a Difference for Americas Manufacturers, NIST MEP Publication, February
11, 2009.

30
as it is a program that consistently reaps an enormous return on investment for our
economy and fosters the next generation of American manufacturers.
Conclusion
Chairman Gordon, Ranking Member Hall, and other members of the Committee,
thank you for the opportunity to testify today and represent our nations manufacturing industries. We strongly support the reauthorization of the America COMPETES Act as the small investment in its critical componentsdoubling Federal
R&D funding for the NSF, NIST and DOE Office of Science, reauthorizing ARPA
E, strengthening STEM education, and renewing our commitment to the Hollings
Manufacturing Extension Partnershipwill reap considerable returns by helping to
create jobs today, and ensure our economic security in the future.
BIOGRAPHY

FOR

GOVERNOR JOHN ENGLER

John Engler is president and CEO of the National Association of Manufacturers

(NAM), the largest industry trade group in America, representing small and large
manufacturers in every industrial sector and in all 50 states.
Mr. Engler is a leading advocate for the 12 million American manufacturing workers. He promotes a broad-based agenda for maintaining U.S. competitiveness by lifting unnecessary burdens on manufacturing: excessive taxation and regulation, the
high cost of health care, expensive litigation and soaring energy costs.
Recognizing that manufacturing provides the bulk of U.S. exports, Mr. Engler promotes opening foreign markets to this countrys manufactured goods. He also has
emerged as one of the nations top advocates for developing the abundant domestic
energy supplies in the U.S. He strongly supports expanding renewable energy and
clean-coal technology and revitalizing Americas nuclear power industry.
Mr. Engler sees the looming shortage of skilled manufacturing employees as a
growing threat to American competitiveness in the 21st centurys high-tech global
economy. A former three-term governor of Michigan, he signed 32 tax cuts into law
and helped create more than 800,000 new jobs during his tenure.
Prior to becoming Michigans 46th governor in 1991, Mr. Engler served for 20
years in the Michigan legislature, including seven years as state Senate majority
leader.

Chairman GORDON. Thank you, Governor.

Ms. Wince-Smith, you are up to bat.
STATEMENT OF MS. DEBORAH L. WINCE-SMITH, PRESIDENT
AND CEO, COUNCIL ON COMPETITIVENESS

Ms. WINCE-SMITH. Chairman Gordon, Ranking Member Hall and

distinguished Members of the Committee, thank you for the opportunity to provide testimony on the reauthorization of the America
COMPETES Act. This landmark legislation was a turning point in
the effort by government and private-sector leaders to refocus
Americas attention on the critical importance of innovation as the
driver of economic growth. Your leadership and that of the Committee was crucial to its success. The Council fully supports its reauthorization.
Mr. Chairman, when the Council on Competitiveness was founded in 1986, our country was facing its most dire economic challenge
since the end of World War II. Today we face new and grave challenges to our competitiveness. U.S. companies must retool their
business strategies to remain competitive and the U.S. government
must support policies to grow high-paying jobs here and investment. STEM education, investment in R&D and a skilled workforce
are at the heart of that challenge.
The Councils 2004 National Innovation Initiative responded to
these emerging challenges by bringing together more than 400 public and private-sector leaders to shape a national agenda to drive
talent, investment and infrastructure and we were pleased to work

31
with our colleagues around this table. The Council strongly supported the America COMPETES Act as it mirrored many of these
recommendations and it is also consistent with our next-generation
initiatives in technology leadership, energy security and sustainability, and 21st century manufacturing.
Among those provisions that were included and should be included in future authorizations are strength in STEM education for
all Americans irrespective of their future careers, steady and predictable increases in federal research funding for long-term basic
research across all agencies, greater coordination across federal
agencies for innovation policy and very important new models for
public-private partnerships such as ARPAE.
As the Committee looks to reauthorize the America COMPETES
Act, let me emphasize that the importance of these provisions has
increased, further compounded by the global economic crisis and
the highest unemployment levels in America since the Great Depression. During these years, the world has not stood still. Global
competition has accelerated, especially the rapid advancement of
emerging economies all competing for high-value investment, manufacturing jobs and market success. In just one generation, emerging economies shares of global imports, exports and foreign direct
investment have nearly doubled. In a decade, Chinas R&D has
grown from $12 billion to $102 billion, now placing China third in
R&D spending behind only the United States and Japan, and
China is now poised to surpass Japan as the worlds second largest
economy.
As companies have evolved from multinationals to global enterprises, they are building global talent networks for R&D for design,
for manufacturing and service hubs to meet growing global consumer-driven demand. Additionally, the real-time global trade in
tasks has also accelerated. Information, knowledge and technology
are increasingly commodities, and the economic rewards are going
to go to those nations who are prepared to invest in their people,
take risks to develop and deploy products and services and create
entirely new industries.
If we want to see investments, jobs, and growth in the United
States, we must have a vibrant and diversified high-tech manufacturing sector. Our national security and competitiveness demand a
strong industrial base. Under the leadership of our new chairman,
Sam Allen, the CEO of John Deere and Company, the Councils
Competitiveness Initiative is going to redefine the manufacturing
enterprise as a value creation system, not just a product fabrication
process. We will focus on productivity drivers and lifecycle cost
structures to enable us to rise above the rising bar. We will benchmark the policy, regulatory and capital incentives our competitor
nations are using to attract manufacturing investments at the forefront of science and technology ranging from the atomic world to
large-scale extreme systems. We will also utilize our leadership
technology initiative, bringing together the CTOs [Chief Technology
Officer] across Americas companies, led by the CTOs of Lockheed
Martin and of General Electric, to create a roadmap for our science
and technology leadership.
Clearly, energy and environmental issues and their impact on
U.S. competitiveness in a low-carbon world are at the heart of

32
these challenges. Our new work, released in a recent summit,
called Drive is really going to push a tremendous generation of
innovation that will transform the world. We have to also ensure
that we build on our strengths and use our innovation accelerators
such as modeling, simulation and high-performance computing in
which we still lead the world, to leapfrog our competitors.
Mr. Chairman, Ranking Member Hall and Members of the Committee, the America COMPETES Act was and is an urgent wakeup
call for America. The need for Congressional bipartisan legislation
and the involvement of all stakeholders in our society has not diminished. It has accelerated. The rest of the world is not waiting
for us to act or to lead. We must act and lead. And Mr. Chairman,
thank you for your tremendous leadership on this Committee and
your service to our Nation. Thank you.
[The prepared statement of Ms. Wince-Smith follows:]
PREPARED STATEMENT

OF

DEBORAH L. WINCE-SMITH

Chairman Gordon, Ranking Member Hall and members of the Committee, thank
you for the opportunity to provide testimony on the reauthorization of the America
COMPETES Act. This landmark legislation signed into law in 2007 was a turning
point in the effort by many people inside and outside of government to refocus
Americas attention on the critical importance of innovation as the driver of economic growth. Your leadership and that of the Committee was crucial to the legislations success and I hope the effort to reauthorize the legislation will be similarly
successful.
In my testimony today, I would like to share with the Committee a brief history
of the impetus and outcome of the Councils work on a national innovation agenda
and how critical parts of this agenda related to the legislation passed in 2007. Then,
I want to highlight some transformational changes in the national and global economy that have occurred in the past few years and how those shifts are impacting
where and how innovations occurs; and, as a result, what issues this committee
should consider as it seeks to reauthorize the America COMPETES Act.
THE COUNCIL ON COMPETITIVENESS AND THE NEED FOR AN INNOVATION AGENDA
The Council on Competitiveness is a non-partisan and non-governmental organization of CEOs, university presidents and labor leaders working to ensure U.S. prosperity. To achieve this mission we convene top private and public sector leaders to
address Americas long-term. competitiveness challenges by generating innovative
public policy solutions and galvanizing our unique coalition to translate ideas into
action. We also seek to measure U.S. performance in the global marketplace to identify key obstacles and opportunities facing the nation.
The Council on Competitiveness was founded in 1986 during a time when the
United States was facing its most dire economic challenges since the end of World
War H. The country had slid from being the worlds largest creditor to its largest
debtor, its position as a global leader in technology and innovation was being challenged and American industries were losing market share to international competitors. To meet these mounting challenges, two-dozen industrial, university and labor
leaders joined together to found the Council, a forum for elevating national competitiveness to the forefront of national consciousness.
The 21st century poses new challenges to American competitiveness
globalization, high-speed communications, enterprise resilience and energy sustainability issues are forcing organizations at all levels to rethink how U.S. companies
will remain competitive and how we will sustain and grow high paying jobs. After
two decades, the Council on Competitiveness continues to set an action agenda to
drive U.S. productivity and leadership in world markets and to raise the standard
of living for all Americans.
The Councils work on innovation dates back to the late-1990s when we held a
major innovation summit at MIT. This summit brought together private sector and
government leaders to begin the conversation around where the United States stood
with regard to its long term role as the worlds innovator. By 2003, it was clear that
America could no longer assume that its past leadership in innovation would ensure
its future prosperity. The world had changed.

33
The United States was now competing and collaborating globally to attract
the best and brightest minds to develop new knowledge and create the disruptive technologies that will launch new industries and products and create
jobs.
The United States was now competing and collaborating in a world in which
the power of networked communications, the extended manufacturing enterprise and access to low-wage talent has enabled the outsourcing of both low
and highskilled jobs.
And the United States was now competing and collaborating in a post-Cold
War security environment in which the United States must protect its citizens and homeland from threats from terrorist groups and rogue nations
which have the technological means to wreak havoc on advanced economies.
The Council also recognized that the very nature of how innovation occurs, where
it occurs and who the innovators are were changing as well.
It was diffusing at ever-increasing rates. It took the radio 38 years to reach
a market audience of 50 million people, but only 13 years for television, four
years for the Internet, three years for the I-pod and one year for Facebook.
It was multidisciplinary and technologically complex arising from the intersections of different fields or spheres of activity encompassing physical and
biological sciences as well as social sciences and the humanities.
It was becoming global in scopewith advances coming from centers of excellence around the world and driven by the demands of billions of new consumers.
What became clear as the Council prepared to launch its innovation initiative
back in 2003 was that the innovation economy is fundamentally different from the
industrial or even the information economy. It requires a new vision, new approaches and a new action agenda. The United States must create the conditions
that will stimulate individuals and enterprises to innovate and take the lead in the
next generation of knowledge creation, technologies, business models, dynamic management systems and high value job creation. A new relationship among companies,
government, educators and workers is needed to ensure a 21st century innovation
ecosystem that can successfully adapt and compete in the global economy.
NATIONAL INNOVATION INITIATIVE
This is why the Council launched the National Innovation Initiative (NIT) under
the leadership of Duane Ackerman, the CEO of BellSouth and Chairman of the
Council from 20032005 and co-chaired by Sam Palrnisano the CEO of IBM, and
Wayne Clough, the President of the Georgia Institute of Technology and now the
Secretary of the Smithsonian Institution. We relied on the input of more than 400
public and private sector leaders including my colleagues testifying with me today
and other leaders such as Norm Augustine, Craig Barrett, Chuck Vest and Bill
Brody from the private sector as well as a bipartisan Honorary Committee of Members of Congress and Governors.
The 2005 NII report, Innovate America was downloaded more than 300,000 times
and coupled with subsequent reports from the National Academies, the Business
Roundtable, the National Governors Association and many others, helped build the
momentum for congressional action on an innovation agenda for the country. It also
created interest around the world with countries like China, Korea, Brazil and Turkey fashioning innovation agendas modeled on the NII.
Innovate America had three foundational platforms Talent, Investment and Infrastructurethe building blocks for an integrated, resilient innovation ecosystem and
the subsequent legislation in many ways mirrored this structure.
In brief, Innovate America called for:
Talent
Ensuring all Americans have the skills necessary to compete and prosper in
the 215E Century with a strong emphasis on science, technology, engineering
and math education (STEM).
Increased support for multidisciplinary education and research.
Attracting the best and brightest from around the world to study and work
in the United States.
Investment
Increased national investment in a balanced basic research portfolio.
A focus on high risk/high reward research.

34
A move toward regional economic development and a transition to an advanced manufacturing infrastructure.
Infrastructure
Accelerating the deployment of 21St Century innovation infrastructures from
broadband and high performance computing networks to a 21St Century patent system.
A manufacturing infrastructure that will enable America to capture the economic value from our investments in research and our people.
Tax incentives to encourage research and risk taking.
THE AMERICA COMPETES ACT
Needless to say, the Council strongly supported the America COMPETES Act as
it mirrored many of the recommendations included in Innovate America as well as
our 2006 Competitiveness Index. Among those provisions that were included and
should be included in any future authorizations were strengthened SlEM education
for all Americans regardless of their career aspirations; steady and predictable increases in Federal research funding for long term basic research across all agencies;
and greater coordination across Federal agencies and with the states on innovation
policy.
Without going into great detail, I would like to highlight a few of the provisions
from the 2007 legislation that I think remain critical and should be supported by
the Members of the Committee.
1. The Council on Competitiveness strongly urged the creation of a Presidents
Council on Innovation and the legislation included such a provision, yet the reality has not matched the intent. What became clear as we sought the input
and advice from leaders within government and the private sector was that the
governments innovation policy was fragmented, poorly coordinated and often
running at cross purposes between agencies and departments. We would urge
a fresh look at this provision.
2. Predictable and steady support for long-term research across Federal agencies including the National Science Foundation, DoE Office of Science, NIST
and NASA is a vital first step toward an innovation-based economy. America
COMPETES made great strides in this area. Any authorization should continue
this commitment.
3. Support for the National Institutes of Standards and Technologys (NIST)
work in the area of manufacturing is critical to many small and medium sized
manufacturers. These companies are key job producers in Americas economy.
NIST has made strides toward embracing innovation in manufacturing and this
trend is worthy of the Committee and Congresss support.
4. Strengthening STEM education through programs at the Department of Education, the National Science Foundation and other R&D agencies and departments is important. I realize there are multiple programs that touch upon this
issue across the Federal Government and I will not try to analyze each one separately here. I only urge the Committee to recognize that almost every career
today requires some grasp of or skill in science, technology, engineering and
mathematics and we must ensure that all Americans have a solid grounding in
these fields.
Before turning to where we go from here, I want to highlight a couple of items
that were important parts of the Councils report, but were not included in the legislation. I recognize that not all of these issues fall under the Science Committees
jurisdiction, but any comprehensive innovation bill is going to touch multiple committee jurisdictions.
Attracting the best and brightest from around the world to study, work and
innovate in the United States would benefit our economy, but our high skilled
immigration system continues to fail in this regard. This is a competitiveness
issue as much as if not more than an immigration issue and should be addressed as such. A green card should be given to any foreigner who passes
appropriate security screening and receives an advanced degree in science or
engineering.
Innovate America called for the creation of and support for regional innovation hot spotslocally developed and federally incentivized regions that bring
together the public and private sectors to capitalize on local competitive as-

35
sets to create new jobs and new industries. The Administration is currently
looking at ways to achieve this goal and those efforts should be supported.
Innovate America also sought to focus attention on the importance of critical
technologies and processes that need to remain viable in the United States
if we are to generate value from our investments and continue to create jobs
in the United States.
Innovate America also identified over-the-horizon issues like energy security
and sustainability that led to our recent Energy Security, Innovation and Sustainability initiative and summit last fall.
As the Committee looks to reauthorize the America COMPETES Act, I can only
emphasize that the importance of these provisions has not waned with the passage
of time and the deterioration of the global economy-they are critical to Americas
prosperity.
GLOBALIZATION CONTINUES TO CHANGE THE WORLD IN WHICH WE
COMPETE
We knew the global economy was changing when the America COMPETES Act
was first debated. Now, we know the global economy has fundamentally shifted.
Global competition has acceleratedespecially the rapid advancement of emerging
economies:
Because of their large and rapidly growing markets and relatively low wage
labor, they are the favored location for foreign direct investment
In just one generation, emerging economies shares of global imports, global
exports and foreign direct investment have nearly doubled
And some are advancing rapidly as R&D performing countries. In about a
decade, Chinas R&D grew from $12 billion to $86 billion. In 2008 Chinas
R&D spending was $102 billion, placing China in third place in R&D spending, behind only the United States and Japan. China is now poised to surpass
Japan as the worlds second largest economy.
The integrated global enterprise has developed rapidly. These enterprises use
global networks for developing products and services, and for serving customers.
For example, sales from foreign affiliates of U.S. companies are more than
three times greater than U.S. exports of goods and services.
These global enterprises are building global talent networks for innovation.
And it is vital for regions to enter these networks.
Global trade in tasks has grown rapidly. If work is routine, rule-based, or if it
can be digitized, theres a low cost source of labor somewhere in the world to compete for that work and those jobs.
Information, knowledge and technology are increasingly commodities. And rewards do not necessarily go to those who have a great deal of these things, but to
those nations who are prepared to create new industries and deploy new products
and services. Besides, many nations have rapidly built-up their own science and
technology assets, so having those alone does not ensure success.
Instead, rewards go to those who know what to do with knowledge, information
and technology once they get it. This has created an innovation imperative for the
United States that is, if anything, more urgent today than it was four years ago.
BEYOND AMERICA COMPETES
America still has the best innovation system in the world, but if we want to see
investments, jobs and growth in the United States, we need a vibrant and diversified manufacturing sector. Our national security, energy security and economic competitiveness demand it.
America lacks a strategy for manufacturing competitiveness. We need policies
that make America a really attractive place to investa pro-innovation, pro-investment, pro-growth, pro-opportunity environment.
And that means we need to look at manufacturing as a value chain that spans
ideas to delivered products, including cutting-edge science and technology, sustainable design and systems engineering, supply chain excellence and smart services
as well as lean and green production. The integration of these systems and services
creates the value premium that captures global market share.
The Council is launching a major initiative in this area that will seek to:
Redefine manufacturing as a value creation system, not product fabrication
Focus on productivity drivers that enable us to rise above a rising bar

36
Benchmark policy incentives and strategies competitor nations use to attract
manufacturing investment
Develop an integrated action agenda for 21St century competitive success.
A successful manufacturing strategy will exploit the leading edge of
nanotechnology, biotechnology and digital technology. Advances in these fields will
increase technological possibilities exponentially, unleashing a flood of innovation
creating new industries, companies, products, services and markets.
This ability to move quickly to deploy and capture value is a focus of the Councils
Technology Leadership and Strategy Initiative, chaired by Dr. Ray Johnson, Senior
Vice President and Chief Technology Officer for Lockheed Martin Corporation and
Dr. Mark M. Little, Senior Vice President and Director of Global Research for the
General Electric Company.
There is a great and growing need to solve global grand challenges-food and water
shortages, pandemics, security threats, the needs of aging populations worldwide,
climate change and meeting the global need for cheap, clean energy.
Energy and environmental challenges alone have created a perfect storm for energy innovation. As detailed in the Councils recent call to action on energy security,
innovation and sustainabilityDriveenergy and energy efficiency innovations are
needed in transportation, appliances, green buildings, materials, fuels, power generation, industrial processes and more. I am pleased to enclose the full report for
the Committees review.
The environment for innovation is target rich, but we also need innovation accelerators. Modeling and simulation with high performance computing can be a force
multiplier for innovation. These tools offer an extraordinary opportunity for U.S.
manufacturers to design products and ancillary services:

Faster
To minimize the time to create and test prototypes
To streamline production processes
Lower the cost of innovation, and
Develop high-value innovations that would otherwise be impossible.

Driving HPC, modeling and simulation throughout the supply chain would put
these powerful tools into the hands of companies of all sizes, entrepreneurs,
innovators and inventors to transform what they do.
CONCLUSION
Mr. Chairman, Ranking Member Hall and Members of the Committee, the America COMPETES Act was not a perfect bill, but it was an urgent wake up call. The
bill included some provisions we did not recommend and left some out we felt were
critical. Yet, there was no question of the need for action, by Congress. That need
for action has not diminished and, if anything, the need is greater. Other countries
are making investments in their science and technology infrastructure. They are
educating and training their people. They are attracting investment and talent from
around the world. To prosper, America must compete.
Thank you.

37
BIOGRAPHY

FOR

DEBORAH L. WINCE-SMITH

Chairman GORDON. Thank you. It is good to have a good committee to work with.

38
Mr. Donohue, you mentioned your time there at the military, or
at Walter Reed this morning. Within the COMPETES bill, we set
up a program where the National Science Foundation fast tracks
STEM professionals into teaching, and I will talk with Chairman
Skelton today about trying to partner with the DOD [Department
of Defense], at least in that area. Hopefully we will be able to accomplish something. And you also mentioned, or cautioned, about
duplication of programs. One of the themes of this Committee has
been how do we stretch $2 into $3 rather than having to spend an
extra dollar, and what we have tried to do is look at the various
research programs within our jurisdiction and create an umbrella
to coordinate that. We have done that in nanotechnology, in water
research, and we are also now looking into the STEM areas, and
we will continue to do that.
You also mentioned public-private partnerships, and I think
what we have done here, again, is a theme in that much of our legislation when we set up research programs, we ask that there be
a private-sector component or an advisory group set up to advise,
not for all the research, but for a portion of the research, where
should we be going with that? And I think today really is an example of a private-public relationship in that it was the public sector
that asked the private sector, what do we need to do to make ourselves more competitive. You gave us recommendations. We put
that into legislation. You helped us to pass it. And so what I would
like to do now is really ask the panel what additional public-private partnerships might be necessary, and Mr. Donohue, I know
that in a recent speech to the Chamber, you wanted to do 10 million jobs in 10 years, and is there a role there? I suspect that probably the whole panel would concur that less government is better
but the question now, though, is there appropriate role for publicprivate partnerships? And I welcome your recommendations.
Mr. DONOHUE. Thank you, Mr. Chairman. We want to do 20 million jobs in 10 years.
Chairman GORDON. Oh, good.
Mr. DONOHUE. We need seven to replace the people that are out
of work. We need 13 for all of those people who will be coming into
the economy. And as was mentioned by a number of the speakers
this morning, many of these jobs are going to be technologically
based or far more technologically based than they were years before, and therefore the work that your Committee is leading here
are preparing people for those jobs is critical. Our suggestion on
how to drive those 20 million jobs we made in that speech is first
of all expand our efforts because 95 percent of the people we want
to sell things to live somewhere else, and we have the opportunity
to do that right now, and if we would double it in five and double
it again, you would create many of those jobs. And by the way, that
is a public-private partnership because we need the help of the government to build the trade agreements and the trade arrangement
that allow the private sector to compete against 150 other countries
around the world that are trying to sell in and out of those markets.
The second thing we suggested and that I will focus on here for
a minute is the issue of infrastructure. Now, we always think about
infrastructure as roads and bridges and we have a highway bill for

39
that and we ought to hurry up and reauthorize it, but there is an
extraordinary opportunity and a great deal of money waiting
around for infrastructure issues on water, on questions of power
generation, power lines, ports, railroads. Much of that money would
come from the private sector. Had we not had this recession, it is
my opinion we would have bumped up against the wall when we
would have more business than we had infrastructure to support
it, and I think you can find in those areas an extraordinary opportunity for public-private partnership both on the technological side,
on the planning and development side, and particularly on the financing side, and I would call to your attention and keep you posted on the material that we are putting together on that. There are
a whole series of other issues but I have already taken more time
than you expected, and I thank you very much.
Chairman GORDON. Does anyone else want to comment there?
Governor ENGLER. Let me pick up on the STEM issue because
I know that is of great concern to many Committee Members, and
I think that is really obvious because it is the longest standing
public-private partnership. Public education is part of the fabric of
the Nation. I always say this when you ask me what should be
done in public education: I have got a simple plan, that every child
leave high school either prepared to go to college without needing
remediation when they get there or prepared to go to the workforce
with skills that have hopefully been measured and even certified,
and the dropout rate has to be zero. That alone would of course
transform the people coming into the workforce and would stretch
$2 into probably $5. I am not sure. But I think the ability to link
and we have formed a first ever for us, a council of community college leaders to work with the manufacturers to talk about how we
make this transition because there is, I think, for many people who
dont know what they want to do, the need for them to become prepared. We have specific needs in manufacturing but there are other
needs in other parts of the economy. Tom would have a lot of members that arent our members that have maybe financial services
needs or whatever but people need to be prepared, and we think
that STEM education has a great value, and some of it is less traditional than the K12 pre-college curriculum, and we think that
there are programs, and I think if you look across America we have
solved all of our education problems somewhere. We just are terrible at replicating it. And if we could simply replicate what works
and if everybody used best practices that are available today, no
new research, you would get a quantum improvement in STEM
specifically, we think that the community college system and that
integration has to go much further. I think some of the steps that
you have laid out, some of the efforts that are underway are very
powerful but we probably need to measure more and report more
because we still have a problem. As Tom mentioned, there are a
lot of people who are aging out of the workforce but they are aging
out with 30 years of experience. The people who are coming in to
replace them cant just walk in off the street and hope to do these
jobs. They have to have preparation.
Chairman GORDON. Ms. Wince-Smith?
Ms. WINCE-SMITH. Well, I would just add and pick up on what
Governor Engler just said about the material workforce. One of the

40
things that the Council is doing under our Tapping Mature Workers Initiative with Atlantic Philanthropy is to identify this tremendous pool of workers that have skills, and to work with them across
communities as part of an innovation strategy to ensure that they
can be redeployed into new occupations.
But I really wanted to mention the R&D partnership model and
the importance of bringing the power of modeling, simulation and
supercomputing down into the hands of our entrepreneurs and
throughout the supply chain. This is something where the data and
the productivity gains are huge, and if we can get this tool to do
advanced design and prototyping, moving beyond traditional ways
products are designed and deployed, I think it will have a tremendous impact. Excitngly, the capability for this exists in our national
labs, it exists in our universities, and we have leading companies
that are working with the Council to really spur this partnership
along. It is also something that will be embedded into the new
ARPAE programs as well. So that is one in particular I want to
highlight as very strategic for the future.
Chairman GORDON. Mr. Castellani?
Mr. CASTELLANI. Briefly, Mr. Chairman, let me suggest three
areas. One, to reiterate what John Engler said, the private sector
spends, we have added it up sometimes, somewhere between $800
million and $900 million a year trying to support education improvement, and learning from our mistakes, learning from what
has worked I think is very important to avoid replication of those
mistakes, so I think that is very much an opportunityand that
is $900 billion. I am sorry. I didnt mean to shortchange it. Learning what we found has worked, learning within the government
what has worked and sharing that information would be very helpful.
Secondly, the selection of the technologies that are supported in
the research. Clearly what would be most desirable are making
sure that those that are supported are ones that can track private
capital to be able to become commercialized that had broad appeal
within the private sector and have an opportunity for return so
that the private capital can be applied to it.
And third, related to that, focusing on broad-based projects, technologies that meet both critical national needs but also are
deployable and useable in a number of different sectors of the economy would be valuable, so those are three things that we would
suggest.
Chairman GORDON. Thank you. I dont want to impose on the
Committees time any longer. But Mr. Hall, before I yield to you,
let me just quickly say to this panel that your staff has been very
good to work with as we have gone through this bill. We are going
to have several more hearings in a few more months that are going
to be dealing with this. We want to continue to work with you, and
we will probably send you questions, and I am not going to ask for
an answer now but I want one later. Mr. Engler and Ms. WinceSmith, you have both talked about the manufacturing sector, and
we are interested in authorizing comprehensive manufacturing research and development programs and we would like to see your
suggestions on that.
So now, Mr. Hall, I apologize for the overtime and I yield to you.

41
Mr. HALL. If you think 20 million jobs in 10 years is tough, you
ought to have 10 questions in just five minutes. Bear with me.
As recommended in Mr. Donohues testimony, this Committee
should be, quote, vigilant about duplication of funding of efforts
among the Department of Education, the National Science Foundation, NASA and the Department of Energy and other federal agencies. This was a major concern of ours when this Committee considered ARPAE. Likewise, we felt that some of the STEM programs established within DOE [Department of Energy] are repetitious of existing programs. I would ask you all to share with me
those programs that you consider to be duplicative in the current
version of COMPETES or may have the potential for duplication in
the reauthorization, and because I dont have time to get from each
of you, I will send each of you that question and with the chairmans good agreement we will put those into the record. I will go
to the other question that I have. I am trying to save time.
In 2008, the U.S. trade deficit in high-technology products was
$55 billion, up from $16 billion in 2002. The U.S. trade balance in
high-technology products was last in surplus in 2001. So a portion
of this deficit is from U.S. companies that manufacture overseas
and bring the products back to the United States. Even if we invest
in STEM education programs and attract more professionals into
high-technology fields, how do we encourage companies from taking
production outside the United States other than treat them right
when they are here. Thank you, Governor.
Governor ENGLER. I will be glad to start on that. There are several factors in that question. One that many Members of Congress
are now focusing on, the Administration I think is focused on, is
reform of our antiquated export control laws which have actually
cost us high-technology exports in this country while our allies
have been happy to fill the gap, and we have got Cold War language in the statute and we really think that while you protect national security, you also need to recognize that national security ultimately is harmed if we end up with our manufacturers going out
of those lines of business because they cant compete with the British company or the Germany company, so that is a factor.
A second is one that Mr. Donohue mentioned is on export promotion. We think that a lot of this technology in the hands of small
or medium-sized companies, if we looked at exports in a macro
sense, agriculture annually exports what manufacturing exports
each month, so we are roughly 10 to 12 times the size, yet the agriculture export promotion budget dwarfs the Commerce Department
export promotion budget, so there is an imbalance. I am happy to
support and have an ag background. I am happy to support agricultural exports but we need to level that up. Again, that is something
that Tom Donohue talked about.
The other factor that I would say in terms of yourand I think
there has been a lot of confusion on the way the tax laws work but
I believe that we today have policies that inadvertently have resulted in almost disincenting the location here. In effect, we have
chosen not to make the R&D tax credit permanent. It has now fallen toit is about the 17th most useful R&D credit out there in the
world today. We were in the 1980s far and away the leaders there.
So we are losing that competition. In addition, there are a number

42
of other incentives that countries offer that sort of are added on to
that and then when you look at the ability of other countries to impose in their countries territorial tax structures, we try to do a
worldwide one and in effect punish you if you try to bring the capital back home. We are in effect creating an incentive to keep capital offshore and that desperately needs to be addressed and I
think all of that would lead to more investment at home and additional export opportunities, so that would be the view of our manufacturers.
Mr. HALL. Governor, that is very great and being specific on
other regulatory barriers that you all see that we can correct. Anyone else want to address that?
Ms. WINCE-SMITH. Building on what Governor Engler said, I
want to emphasize the importance of the entire capital cost structure and the regulatory environment for manufacturing, taking
into consideration that our tremendous standards on safety and
health really are the best in the world, and we want to maintain
those standards. We have a collective set of permitting and regulation that makes it very hard for some of the advanced technologies
that we dont want to deploy in the United States to be done here.
Product liability is a perfect example. I mean, if we want to do the
R&D for next-generation batteries, are we going to be able to actually manufacture these here? I will also give you the example of the
flat-panel display industry. We invented every technology path for
displays in the United States, and we did not make them here, and
a lot of work can go back and show why. It was a combination. But
the rest of the world is creating policies to attract and keep this
manufacturing. In fact, Sweden has a lower capital cost structure
than we do for manufacturing and we think of the Nordic counties
as having one of the highest in the world.
Mr. HALL. I thank you.
Mr. Castellani, do you have
Mr. CASTELLANI. Just two things briefly. One, let me reemphasize what has been said. We have a tax structure in this country
that acts as a disincentive for U.S. companies to participate in
world-wide markets from a U.S. base. Even countries like Japan
and the United Kingdom last year recognized that they had to
change and did change to a territorial system. We are uncompetitive with our tax structure.
Secondly, because of the political environment around trade and
trade agreements, the rest of the world is continuing to negotiate
market opening opportunities for activity from their countries in
other countries while we have not been able to forward a trade
agenda. We need appropriate trade agreements to be able to invest,
to be able to export, to be able to participate in those economies
around the world.
Mr. HALL. I thank you. I think that is all the time I have. But
your answers will got to every Member of Congress because they
are being printed and taken down byMr. Donohue, did you want
to say a word or so?
Mr. DONOHUE. My colleagues have done such a good job on this,
I would just say amen.
Mr. HALL. Thank you. I yield back my time.
Chairman GORDON. Thank you, Mr. Hall.

43
This Committee is going to do what we can for competitiveness.
I think you are going to have to go by and have a talk with Ways
and Means, though, to take care of those other issues.
Ms. Fudge, you are recognized for five minutes.
Ms. FUDGE. Thank you, Mr. Chairman, and thank all of you for
being here.
My first question is to Ms. Wince-Smith. You mentioned in your
written testimony that Innovate America called for the creation of
regional innovation hotspots. I am very interested in this concept
as I represent a district that has the potential to do so much. I
mean, we have great research universities, an extensive biotech industry, biomedical research facilities, NASA Center and STEM
high school as well many other stakeholders. Could you just elaborate for me briefly on some of the criteria that you would designate
a region as an innovation hotspot?
Ms. WINCE-SMITH. Thank you. Well, of course, this concept of regional innovation hotspots has been at the heart of the Councils
work now for many years because people live and work and innovate in regions. We can set national policies, but the actual delivery of the goods and services occurs where people live. Clearly having world-class universities and the network of community colleges
around them are critical to this because this is where the knowledge and the talent generation occurs. Then of course, having a set
of policies that support investment and keep investment as part of
this menu for the regional innovation hotspots is also important
and the thing I would emphasize most importantly in regions such
as yours where there is a lot of success and movement is that the
different stakeholders have come together in leadership networks.
So if you have foundations in regions, they are coinvesting around
their particular strengths and assets. If you think of places like the
Midwest, the heartland of our manufacturing, they are now moving
to create the green manufacturing clusters and ensuring that all of
their investments and their skills are aligned around that. And one
of the things we should be proud of in the United States is that
the rest of world does come to look and see how we have done this
in our regions. We need to take it to the next generation, and many
of the things we are talking about here will be part of that process.
Companies stay and go and invest in places where there is a dynamic economy of creativity and talent and infrastructure to build
on.
Ms. FUDGE. Thank you very much. And by the way, I am from
Cleveland, Ohio, so
Ms. WINCE-SMITH. And I am from Akron.
Ms. FUDGE. And you did raise something that I would really like
for all of you to respond to, and that is, the question is, what is
the role that community colleges should play in workforce training.
We have sent a lot of money to community colleges through our
stimulus package. We have looked at how we increase getting students involved. What do you think that role should be across the
country for community colleges?
Governor ENGLER. Congresswoman, I think that community colleges have a vital role to play because they are by their nature regional and by their hiring ability able to bring the right personnel
in quickly when things change or when they are shifting. I person-

44
ally think that community colleges need to be sort of looking down
the line. Community colleges over the years have had visions in
their head and they will become a four-year institution by becoming a college. Well, what they need to bethey need to look at the
11th and the 12th grades. I think there is a wasted senior year in
a lot of programs for the non-college-bound and I think there is the
possibility in this country to take the 11th grade and 12th grade,
year one, year two that are the normal associate degree, look at
four years becoming threethat is a big cost savings, reallyand
allow for that specialization to come earlier with these young people choosing because again, back to the point. Everybody needs to
leave prepared either to go to college without needing remediation
or to go to the workplace with something that has been measured
and certified, and we ought to move them more quickly, and as
Deborah indicated, regions have different characteristics, different
industries, and that needs to be developed. That way there is no
cookie-cutter approach. That needs to be thought through, and that
was the whole promise of WIA [Workforce Investment Act] at one
time was to try to do that and to integrate that, and I think that
there is an areawith Mr. Halls question about where there is duplication in the workforce area, they are falling all over each other
and we can sort that outsimplify it, and I actually think that one
of the problems we have got people thinking about workforce is
that the peer pressure to go to college is so great. Well, they need
to also look at all education is pre-work and so how am I prepared
to do some work, and we maybe can make working more attractive
if they can realize I can get a higher income if I get prepared earlier, and guess what, you can still go to college. This is America.
You can go later if you want to go on and then get a different kind
of degree or you can become a Ph.D. in physics like Congressman
Ehlers.
Ms. FUDGE. Thank you.
Mr. CASTELLANI. We would certainly agree that community colleges have a critical role. If you look at workforce skills right now,
their half-life is becoming increasingly shorter. So as we have to
move our economy and as a people that need to learn to accept lifelong learning and need to develop what is going to be critical basic
analytical skills for all jobs, community colleges play a very critical
role in that and they should be looked on to play that role.
Chairman GORDON. Thank you, Ms. Fudge.
Ms. FUDGE. Thank you so much. I yield back, Mr. Chairman.
Chairman GORDON. We could have a three-day seminar on this,
it is such an interesting topic, but I will ask our witnesses to be
a little more crisp and we will try to get back on time. Comrade
Rohrabacher, you are recognized for five minutes.
Mr. ROHRABACHER. Comrade Rohrabacher? All right. Well, thank
you very much. After what happened in Massachusetts last night,
I understand.
A couple things. First and foremost, when we are talking about
innovation and especially STEM education, et cetera, but are we
not dependent on patent protection for our innovators? And I cant
help but have noticed that the patent legislation that was passed
by this Congress that is now waiting action over in the Senate has
been applauded in India and China as favoring infringers, espe-

45
cially in the sense that we are trying to take out triple damages
that have some major companies intentionally infringe on a small
inventor. We are trying to take away that right of having triple
damages against that company. How do you stand on that particular issue, if you could just very quickly?
Ms. WINCE-SMITH. I think that protection of intellectual property
is one of our most critical issues and that we have to be very, very
vigilant across every sector: I have many concerns in that legislation, and indeed the rest of the world, is going to continue to use
our intellectual property as a building block and this requires
change.
Mr. ROHRABACHER. And the triple damages, you are not in favor
of taking that out of the current law?
Ms. WINCE-SMITH. My personal opinion is that taking it out
should be very carefully considered.
Governor ENGLER. If you are going down the line, I think we
have tried towe think patent reform is useful but there is clearly
two different philosophies with the tech community on one hand
and they are going to invent it quickly, use it quickly and move on
to the new, new thing. Manufacturingand I would include pharmaceuticals and others in therehave much, much steeper upfront
costs and then need a longer time to recover. That is true with a
lot of manufacturing processes and a lot ofso we are hoping that
Congress in its wisdom, and this has been a debate that has been
raging for too many years, perhaps, is going to be able to divine
a way to deal with that so that we have protections. The other
thing we need
Mr. ROHRABACHER. Before you go on, because we only have a
limited time, let me just note, the electronics industry does have
a different interest in mind but that is against intellectual property
protection. As you were just stating, they want to move on. They
want to use something and move it on without paying royalties,
and they have a different interest than other major scientific industries. So are you in favor or opposed to the triple damages?
Governor ENGLER. We have not supported the effort that passed
the House hoping that there was a way to find a more effective
compromise on this.
Mr. ROHRABACHER. Well, specifically about triple damages. That
is what the House is trying to take out. Our bill tried to take that
out.
Governor ENGLER. I dontI am not
Mr. ROHRABACHER. Uncertain?
Governor ENGLER. I want to check on what I have actually said
before, before I say it again and wrongly.
Mr. ROHRABACHER. Okay. Mr. Donohue?
Chairman GORDON. That is good advice for all of us.
Mr. DONOHUE. Congressman, we have all walked on a tightrope
on this issue. The pressure over in the Senate on some of the industries not to try and cut a deal with other industries has been
difficult. The bottom line is simple: both groups of industries can
agree on a series of common interests and then they have some
specific interests, and we have got to get together and put together
in this Congress and in this Senate and with this White House a
system that works because we are being disadvantaged around the

46
world and we need to do it, and I dont have anything to say about
the triple damages because then I would put myself in the deal
about sooner or later the three of us are going to end up in that
deal.
Mr. ROHRABACHER. Okay. Well, let us just note again it has been
applauded, what we passed in favor so that whatever interest the
electronics industry has had here to win favor by them has won applause in China and India while they are just waiting to be able
to have a great chance to infringe upon our innovators. That is not
a way to build trust and to build an economy.
Mr. DONOHUE. That I agree with?
Mr. ROHRABACHER. Triple damages?
Mr. DONOHUE. No. I agree that it is not the way to build trust
and to build our economy. We need a piece of legislation. We need
to put the common interests and then the individual interests into
one bill and we need to get it done because we are losing without
it.
Governor ENGLER. And we need to support a Customs and Border Patrol that thinks this is part of their job too, which they at
present do not.
Chairman GORDON. Thank you, Mr. Rohrabacher. I think you got
lost on your way to the Judiciary Committee this morning.
Mr. ROHRABACHER. Well, I should note, Mr. Chairman, that
when we are talking about innovation, it is a lot wider than just
we need more money here on various bureaucratic research
projects.
Chairman GORDON. Mr. Costello is recognized for five minutes.
Mr. COSTELLO. Mr. Chairman, thank you, and thank you and Mr.
Hall for your leadership on this issue and for calling this hearing
today.
A question for each one of our witnesses. We often hear that
there is a shortage of highly trained American scientists and engineers. I wonder what the track record has been from your member
companies in hiring scientists and engineers over the past few
years or let us say the past five years.
Mr. CASTELLANI. We have to divide it between the current economic situation and, shall we say, normal times. But indeed, there
has been a shortage, lack of critical skills. Particularly, engineering
and scientific skills have been a problem that our companies have
pointed to regularly. Even now at the height of the recession, unemployment among engineers is 3.9 percent, which would be the
envy of any other skill set. So it remains a problem, particularly
in the future as the workforce that has those skills ages and retires.
Mr. DONOHUE. Congressman, we will continue to have serious
shortage of skills because the demand curve is going up faster than
the supply curve. The suggestions that have been put in and implemented in this legislation have started at the bottom, bringing people along who will eventually get into that curve. We must continue H1B and related visas, and we have a new problem. For
years we have brought people to the United States to train at our
universities from countries around the world and then after they
became very skilled we were able to talk them into staying. We
would get them a different visa, they would go to work in impor-

47
tant companies or universities, and now they want to go home because the extraordinaryfor example, in India, to go home, work
for three years for one of the big companies over there, maybe even
one of our companies, and then they all want to start their own
business. It is very, very hard to keep the people that just a few
years ago we were able to encourage to stay.
Governor ENGLER. I agree with everything Tom said and would
add to it that the other complicating factor is, it is the competition
for the best talent. It is like the NBA. It is our basketball league
but they will take the best players wherever they can find them in
the world. That is true in science and engineering, and if we cant
find them here or we cant bring them here or we cant keep them
here, then they are going to go elsewhere, and as Tom testified earlier, 95 percent of the markets in other places in the world, it is
a rare company today that isnt getting 50, 60, 65 percent of their
sales from foreign sales and so the idea that we will make it all
here, we will invent it all here and sell it all there is not going to
hold up and so we are going to have to, I think, recognize what are
the competitive factors that allow us to make sure we can develop
our own but then keep the best of theirs if we can.
Ms. WINCE-SMITH. I would just add to that, that in addition to
the science and technology skills, this concept of having an engineer that is not a commodity engineer is very important for our
competitiveness. While we havent talked about it here, ensuring
our STEM initiatives should also be coupled in our education to
make sure that our young people have languages, they understand
history, the humanities and the arts because bringing those things
together creates a future worker that is going to have the creative
capacity in the next stage of innovation. And one place that does
this, and I am prejudiced but I want to share it, is at the U.S.
Naval Academy. I think it is the only place in the country where
no matter what your major is, history, Arabic, whatever, you also
end up with a full engineering degree and that is an incredible set
of skills for going forward in the 21st century economy.
Mr. COSTELLO. I thank you.
Thank you, Mr. Chairman.
Chairman GORDON. Dr. Ehlers is recognized.
Mr. EHLERS. Thank you, Mr. Chairman, and thank you so much
for holding this hearing and I hope we have many more that are
this good. I thank the panel too for their expertise. But I was reflecting here while I was waiting for my turn to speak. Next Sunday will mark the 16th year that I have been in this body. I am
the son of a preacher and I inherited his characteristics so I have
been preaching to my colleagues, to the country, to the world for
16 years precisely the things that you are saying. Frankly, having
you here and saying these things, I feel as Billy Graham did when
he had a successful altar call. You are really right on target. What
is discouraging is that has taken 16 years to reach this point, and
even with the America COMPETES Act. I worked on that issue for
a number of years. Fortunately, it all came together when I managed to convince the Bush Administration over with Sherry Boehlert and Frank Wolf at a breakfast meeting in the White House
that they take this on, and the President fortunately was eager to
do it and the America COMPETES Act resulted with a lot of col-

48
laboration. But so much of what you said indicates the problem.
Governor Engler, for example, you mentioned STEM issues, the
MEP and so forth, and your example of agriculture versus manufacturing is a very important one because I have used an example
from that in all my years of arguing to get more money for MEP,
and strenuous arguing and lots of time and we just managed to
keep it stable, and that is absurd. We have had a cooperative extensive service in agriculture since about 1860, somewhere in
there. At that time, 80 percent of the workforce was on the farms
and so it made sense to have a very strong activity there. Today,
less than 2 percent is on the farm and we spent roughly $400 million a year on the Agriculture Cooperative Extension Service. I
dont regret that. I think it is valuable. But we are spending less
than that on the Manufacturing Extension Partnership, which is
the manufacturing cooperative extension service, and I have been
unable to bring that up, even though I point out less than 2 percent of the workforce is in agriculture and 14 to 15 percent of the
workforce is in manufacturing. Why havent we changed that ratio
yet in terms of MEP? And hours and hours of discussion, I convince
people one by one, but it shouldnt be that hard. And if we have
as much support from all the manufacturers and their sector and
as much support from the schools, school boards and faculty as we
have from the four of you, we would be far, far further ahead in
solving this problem.
In the meantime, our country, I am afraid, continues to go downhill in manufacturing as evidenced during the time I have been
here, particularly the last 10 years. You are right on in your responses. The chairman and ranking member were right on in saying what has to be done. The problem is not in this Committee. At
one time it was in the Education and Labor Committee, and Newt
Gingrich, who is one of the most farsighted individuals I have
worked with in the Congress, deliberately stuck me on the Education Committee to try to resolve that problem. Again, we made
a lot of progress. But somehow you have to be engaged and your
colleagues, and by that, I mean all of manufacturing have to be engaged with the other Members of Congress to let them know what
is really going on in the world and what we have to do if we as
a Nation are going to survive and continue to be leaders of the
world in research, in education, in manufacturing, and most people
simply dont realize that. I come from a manufacturing state. A lot
of people in Michigan recognize that. But in many parts of the
country, that is simply not true and so thank you so much for being
here.
I dont really have any questions except one extremely trivial one
for Mr. Castellani, and that is, do you really own a roundtable?
Mr. CASTELLANI. Indeed we do.
Mr. EHLERS. And is it circular or spherical?
Mr. CASTELLANI. It is circular.
Mr. EHLERS. Then it should work. But thank you very much for
being here and thank you for your testimony.
Chairman GORDON. Thank you, Dr. Ehlers.
Mr. Smith, you will have an opportunity to rebut the agriculture
issues a little bit later, but right now Mr. Wu is recognized.
Mr. WU. Thank you very much, Mr. Chairman.

49
Ms. Wince-Smith, you might be the lead person to address this
inquiry but perhaps the rest of the panel would be interested also.
A couple of organizations, I believe the Information Technology and
Innovation Foundation and Brookings, have surfaced the idea of
taking a systematic look and work in innovation, perhaps setting
up a national innovation foundation or such organization, not so
much to engage in the individual innovative ideas process but to
look at the process overall, to understand it better and then to advocate for it at local government, national government and to work
with the private sector on setting up better conditions for innovation where apparently other nations have been focusing on this
process, and while we have been great innovators in individual
ideas, we are in the process of developing an overall approach
which I believe your organization has been working on for some
time now. Could the panel address whether we can make some
gains in our capacity to innovate by setting up basically an organization to do for innovation what perhaps NIH [National institutes
of Health] does for the life science enterprise and other organizations do for other parts of our technology and science enterprises?
Ms. WINCE-SMITH. Thank you, Congressman. Well, let me just
start by saying that as we are hearing today, innovation is an ecosystem that involves everything from the R&D, tax, regulatory,
workforce issues, to manufacturing and national security. I think
the biggest challenge for the United States both in the government
and also in the private sector is that we dont look at it in the systemic way and we still operate in stovepipes. Even in the Federal
Governmentand I served in the Federal Government myself and
it is still goingwhile we have committees, we dont really pull together the pieces, so if it is an antitrust, a product liability issue,
just as one example, that stays in the Justice Department, it is not
brought in at a systemic level, and similarly on trade and other
matters. And so I think one of the first things, which was a recommendation of the Councils and is in America COMPETES, in
the Federal Government, let us get the White House to pull together the Cabinet officers to focus on a systemic innovation policy.
In the private sector, the council and our colleagues around the
table, we can all do that together but we need to connect the dots,
and Brookings and other groups are very wise in talking about
this. Whether the foundation is the optimal mechanism or not. I
wouldnt perhaps want to comment as much, but we need to do this
in the Federal Government and we need to have private-sector
groups that also come together to look at the system of innovation,
and that is what our competitors are doing.
Mr. WU. Thank you very much. Would anyone else like to comment?
Governor ENGLER. I would add this, that what Deborah WinceSmith said about an ecosystem is really important, and I think
markets are beautiful things. I think they drive the dollars where
they need to be, but I worry thattake nuclear power, for example.
That is all our technology and it is being implemented around the
world. There is a great need for reprocessing, waste minimization
there. Other countries have stepped way ahead because we backed
way off. Clearly, I think envisioning a low-carbon future, nuclear
power has got a big role to play but we havent let that go forward.

50
Medical tools and devices, we were talking earlier. I look at that.
We are clearly the world leaders. In every other nation where there
might be a department of innovation, they would probably be really
promoting that, how can we grow that industry? We are debating
whether or not there should be several hundred million dollars in
new taxes applied to that as opposed to what the export strategy
might be to grow our dominance. So I am not sure centralizing it
is the answer but I do think that the right incentives where we
want to be, and I think one thing that has been done well here is
battery technology. Congressman Peters knows. Right in his own
district there has been significant investments there to try to catch
up. There are some really big things where I think the Federal
Government through the old DARPA [Defense Advanced Research
Projects Agency] programs, you know, under defense or much of,
you know, science programs through universities, those are great,
but whether we centralize it or not, I would be a skeptic preferring
maybe the markets to work.
Mr. WU. Well, I dont think the concept is a centralizing one so
much as to try to understand it and promote it elsewhere.
Chairman GORDON. Thank you, Mr. Wu.
Ms. Biggert is recognized for five minutes.
Ms. BIGGERT. Thank you, Mr. Chairman.
There is so much I want to ask but I dont have time so I am
going to try get as much in, but thank you all. I have a great district and I have a district that really has a lot of development, a
lot of innovation and creativity and companies and a lot of these
are startup companies and they will come in and say they have
this great concept. They maybe have a demonstration program but
they need help and they need help in funding, and particularly in
this economy where there isnt the venture capital available and so
they come in and say what can you do. Well, they are in what we
call the valley of death. They are in between demonstration and
commercialization so investors dont want to take a chance, that is
this really going to go or not. Is there anythingyou know, we talk
about the America COMPETES, ARPAE is a possibility. We have
got a couple of them we have sent to DOE and actually DARPA has
been available for them. Is there anything that you could recommend that should go into the America COMPETES Act that
would help as far as that investment or what to do within the private sector? We are missing so many, you know, really great concepts that take so long to develop that we could be using right now.
Ms. WINCE-SMITH. I would just add one that is very important,
and some states are doing this, and I dont know if it is across the
board yet in the Federal Government, but that is, extending the
Small Business Innovation Research [SBIR] provisions beyond
stage two into stage three that takes a company farther in to the
commercial prototype demonstration phase. I remember years ago
when the Japanese were investing in our startups. They used to
say let us look for those companies that have SBIR phase one and
two because they dont have the capital to go to the next phase, we
will come in and swoop up that innovation. Let us invest farther
along on SBIR, and that is something that the federal agencies
could contribute to.

51
Mr. DONOHUE. You know, that is exactly how private equity people look at sound investments. You are exactly right. This is a valley where it is hard to get capital and funding and there are all
sorts of people with great ideas. One caution I would make to the
Members of Congress, while it looks like a wonderful idea to go out
in need of money and drive up the taxes on individuals, that is
where the greatest amount of investment capital comes for
startups. You know, if you go talk to people that are entrepreneurs
and say how did you get started? they didnt do it in a bank. The
banks lend money to people that have money. That is the way the
structure is. So we have got to be very careful that we keep individuals in a position to support innovation and to support folks
they know, and then of course, the second place for money is from
larger companies who find this as a great place for their own research and development and it is often cheaper for them to buy it
than it is for them to develop it.
Mr. CASTELLANI. One of the things the Chairman mentioned before the hearing began is something that I think this Committee
can look at and certainly is within the purview of this Committee,
other things are outside, obviously the tax code and some other
support programs, but one of the difficulties that we see in this
area is making the connection between those who develop the technologies and those who could see an application for those technologies, and finding a way to protect the intellectual property but
get more information out more broadly to both potential users and
investors about what technologies and their attributes might be
available, what their time horizons are, what it would cost, what
their advantages are, is something more of a national exchange opportunity and something that would benefit those companies.
Governor ENGLER. I would just add a couple quick things. I
mean, that is what the R&D credit in part was for, and probably
this is where your capital gains treatment and some type of accelerated write-offs so you can encourage investor pools. There is private capital out there. I think we need to try to make this more
attractive. Again, I am not sure that I would trust an agency to do
the selecting there. States will do it if they view it as critical sometimes to existing but those are very limited funds and so Iit is
11:30, Mr. Chairman. I need to step out and make a quick call. I
will come back and rejoin if you are still in session. I dont know
long it will be.
Chairman GORDON. Thank you, Ms. Biggert. I will point out that
the old ATP [Advanced Technology Program] program was a vehicle for that and that has been changed now and it is called the TIP
[Technology Innovation Program] program, and it will be a part of
this authorization.
Another thing that we mentioned earlier about how there will be
a fair around the ARPAEtype proposals. The problem with bringing private-sector dollars in, and we are really looking at that, is
obviously they want to come at different levels, venture capital at
one place, private equity another place, but that iswe will have
some hearings on that, how we bring more private-sector dollars in.
Mr. Peters, you are recognized for five minutes.
Mr. PETERS. Thank you, Mr. Chairman. It is too bad Governor
Engler had to step out because I actually had a couple of questions

52
related to MEP. Bad timing there, but we will have an opportunity
to follow up.
I just want to concur with my colleague, Congressman Ehlers, on
the Manufacturing Extension Partnership and how important that
is, and for the panelists, we have actually introduced some legislation together, both Congressman Ehlers and myself, dealing with
the funding issues related to MEP. As you know, the states have
been stressed, particularly our State of Michigan. It is a critical
program for us in that State to help our small manufacturers as
we continue to hemorrhage manufacturing jobs, and the bill
changes some of the contributions. Right now two-thirds of the contribution for MEP comes from states and yet those states that are
hit the very hardest and need the services of the MEP are having
difficulty coming up with those matching funds. It would change
that to a 50/50 match, which would allow these critical programs
to continue and certainly hope that your organizations would be
supportive of that effort and are supportive of MEP. I assume in
addition to Governor Engler, all three of you are also very supportive of MEP? All are nodding, so for the record, please reflect
that all three are nodding in strong support for the program and
will continue to move.
Chairman GORDON. And Mr. Peters, we will be reauthorizing
MEP in the COMPETES bill.
Mr. PETERS. Right.
Chairman GORDON. And we will be having hearings to see how
it can be fine-tuned for what we might call the 21st century in contrast to when it was originally authorized.
Mr. PETERS. Great. Thank you, Mr. Chairman.
I want to ask a little broader question of all three there, and we
have had some discussions, and Ms. Wince-Smith has addressed
this as well, but kind of get your reaction to R&D investments generally and whether or not government investments in research and
development are going to have the same kind of impact that we
have seen in the past. Certainly as we are talking about
globalization, technology transfer is extremely rapid, and as soon
as technology is developed in one place in innovation, it is quickly
picked up somewhere else in the world due to other cost structures
that existlabor, technology, regulations, things that you have
brought up. How should we be thinking as COMPETES Act, how
effective will this be given that kind of rapid transfer and do we
need to be really talking about manufacturing policy in total in addition to COMPETES because we are simply not going to get the
same kind of bang for our dollar as we have done in the past. What
should we be thinking about?
Ms. WINCE-SMITH. I think, Congressman, you just stated in your
last comment very much we have to think of a national manufacturing strategy that encompasses all the things in COMPETES but
also takes us into some of these other spheres that relate to capital
cost structures, regulatory environment, exports and trade and look
at that as something that is systemic. But in terms of R&D, we
must invest in R&D, we must invest in the frontiers and we must
link the private sector to these tremendous investments in the
frontiers of knowledge.

53
Mr. DONOHUE. I believe that government gets a significant return on the frontier investments. I mean, going to the moon, running the space shuttle, very forward-thinking activities at NIH,
those kinds of investments are fundamental.
The second thing that I would comment briefly on, you are exactly right that as soon as we come up with an innovation, everybody all over the world is trying to figure out a way if not to borrow it, to use it as a leader for their own innovation. But Americans are beginning to be able to look around the world now and
find things as well that they are able to inculcate into their businesses and their processes.
The third point I would make while we are talking about manufacturing, the often overlooked competitive issues here are supply
chain, are transportation, are all of the technology and software
around that. The greatest increaseone of the great increases in
productivity in this country came during the Clinton Administration when we put together information technology and supply chain
management, and it is one of the things that keeps us somewhat
competitive in the manufacturing area, even though as the governor indicated, we have serious disadvantages in tax policy and
regulatory policy. You know, competition drives innovation. Regulation stifles innovation. Now, we need regulation for safety and all
of that but we have to be very, very careful when we are looking
at competing around the world that, you know, it is always a great
idea to start a new group, but let us go back and look at what we
do to help the process or to hurt the process, and you can change
a lot of things by simply getting rid of the hurt and maximizing
the help.
Mr. CASTELLANI. Two quick comments. One, focusing on those
technologies that are broadly applicable within the economy is key.
That way you dont have to pick winners and losers, although the
normal process of development will produce more losers than winners. Secondly, as important as the manufacturing sector is, and it
is very important as high-value-added activity, these technologies
and these activities also have beneficial impact within the services
sector, within the transportation sector, within the hospitality sector. Tom mentioned one that has been the single biggest driver of
productivity improvement in this country over the last 10 years,
and that has been information technology.
Chairman GORDON. Thank you, and Mr. McCaul is recognized for
five minutes.
Mr. MCCAUL. Thank you, Mr. Chairman. I, as you know, supported this, the COMPETES Act. It was really a response to the
Rising Above the Gathering Storm report, which was a bit of an
eye opener, and I support the idea of federal investments in R&D
and public-private partnerships with universities. Certainly NASA,
close to my district, has been a beneficiary of this. NIH has done
a fantastic job. But I want to follow up on Mr. Donohues comments.
You know, the President signed a stimulus bill into law. It is
about 5.4 percent of our GDP. Unemployment has gone up over 10
percent. The federal debt is above $12 trillion. And there comes a
point where we get overleveraged in the Federal Government. Any
private-sector business that overleveraged wouldnt be able to stay

54
in business. And I think there is a healthy balance between the
federal investment of dollars and public-private partnerships
versus what we can do at the federal level to incentivize the private sector, and I think that is the philosophical debate we are
having in the Congress right now. And so in terms of job creation,
because both sides, we want the same thing, both Democratic and
Republican. We want the economy to rebound. We want to create
more jobs and good jobs in the United States and so with all of
your experience in the private sector in the business world and for
the panel as well, I would be interested in your take on this balance, if you will, that we have to provide up here in the Congress.
Mr. DONOHUE. Congressman, if I might just comment a minute
about this. There is no question that the federal deficit is a serious
matter, growing and compounded in a significant way, a lot of it
being driven by programs that are entitlements that just grow
themselves and these are serious matters. It is not a Democrat or
Republican issue. So everybody says we ought to deal with that but
trying to deal with that issue without first dealing with the questions of employment, as you indicated, is counterproductive because
you are just going to keep driving up federal support programs. So
our issue here is to say here is a plan to create jobs. Hopefully as
we go forward, we will be careful not to be adding unnecessary federal spending, and as the economy grows we are going to be in a
much better shape to attack this deficit. You ask a fundamental
question: when can the governmentwhen should the government
stop investing in significant ways and hope the private sector will
take a larger role. And I think if you look at the suggestions of expanding trade, expanding infrastructure, being very, very careful
on our re-regulation of the capital markets that we could move efficiently in that direction. There is one crippling issue keeping us
from creating more private-sector jobs: it is uncertainty, uncertainty about what tax policy is what going to be, uncertainty about
health care policy, uncertainty about climate policy, and if I walked
into Johns office when he was back in the private sector and said
let us create 500 new jobs, he would throw me out because he
would say I am uncertain about this, I am uncertain about that;
until I get some amount of certainty, I am going to keep my cash
in my jeans and I am going to hold off.
Mr. MCCAUL. I couldnt agree with you more. I think the uncertainty here in Washington with a lot of the policies coming out is
that uncertainly is keeping a lot of capital on the sidelines and not
investing in the private sector. Any of the other two witnesses like
to comment?
Mr. CASTELLANI. One of the thingsI mean, certainly I agree
with what Tom said, although I never wore jeans to the office. The
uncertainty is certainly a big part of it. Obviously there is a role
for the government. The government needs to do those things that
the private sector cannot do, and a lot of what is in the America
COMPETES Act are things that the private sector cannot do without government help. But one of the things that we face day in and
day out in terms of making decisions on where to invest and in
what to invest is the needs of our shareholders, and that is, getting
them a fair return for the money that they have given us to be
stewards of. The United States is suffering from what we all recog-

55
nize, and that is that we have the second highest corporate tax rate
in the industrialized world. That has an effect. We have a tax
structure that disincentivizes exports and participation in an international marketplace where 95 percent of the world lives. That has
an effect. We have a start and stop incentive system for research
and development where other countries in the world do not have
it. That has an effect. All of those things have an effect on where
the capital goes. Our shareholders are not nationalistic. They want
a return for their investment. Our obligation is to give them that
return and so addressing those fundamental issues is as fundamental to being able to be competitive as what you are talking
about in the America COMPETES Act.
Chairman GORDON. Thank you, Mr. McCaul.
Mr. DONOHUE. And John, you would say you have global shareholders.
Mr. CASTELLANI. Absolutely.
Chairman GORDON. And thank you, Mr. McCaul.
With no objection, we are going to move forward with those
Members that havent had a first question. If there is a request for
a second question, later we will do that. I am also going to request
that Members try to hold their questions to about three minutes
so that we can try to get through everyone, and that will encourage
you to get here earlier next time.
Mr. Matheson, you are recognized.
Mr. MATHESON. Thank you, Mr. Chairman.
You know, one of the issues that is interesting is, we look at the
government role in promoting research and development of new
technologies, and after that we want to figure out a way to transfer
those technologies so the private sector runs with it. And there has
been a lot of talk about technology transfer for decades in this
town, and over 30 years ago we had Bayh-Dole and StevensonWilder, for example, that tried to pursue this goal. I am curious
what your assessment is of how our technology transfer regimen
that we have got today works in terms of getting these technologies
out to the private sector and how it actually manifests itself and
what the ultimate goal is we are trying to achieve, which is not
just doing research here but actually creating jobs in America.
Ms. WINCE-SMITH. I will comment on that. Certainly, you know,
with the creation of Bayh-Dole and the whole legislative framework, we again led the world in these new public-private partnerships to capitalize on the R&D invested by the taxpayer. Intellectual property issues have become a challenge in that rather than
making the intellectual property a baseline for establishing these
partnerships, they often become the hurdle and slows up the process, and that is something that across the board I think the community would say is an issue.
The other challenge we are seeing in different parts of the country with our national labs and universities is how they bring companies and partners in from the beginning to work with them, as
opposed to waiting until you throw something over the fence which
has emerged as the best practice to create the strategic R&D partnerships such as ARPAE is going to do as opposed to treating this
as a linear sequential process. Certainly, U.S. companies and chief
technology officers in the Council on Competitiveness are very com-

56
mitted to working on this very topic, and we have formed a working group under our Technology Leadership and Strategy Initiative
to address that, and would like to report back to this Committee
on our findings.
Mr. DONOHUE. I just have one very quick comment. There isnt
a bright line between the government and the private sector. When
a government agency whether it is NASA or it is the military or
whoever it happens to be, NIH, standards, bureaus, others, when
they are doing the work that is being pushed by the money that
is used in the government, they are doing it in partnership with
the private sector. They are already transferring technology and
know-how by the people they contract with to get this work. The
perfect world wouldnt have the obstructions we have but in the
perfect would we wouldnt have so many lawyers, except in the
Congress.
Chairman GORDON. Thank you, Mr. Matheson.
Now we have a real live small-business owner, Ms. Dahlkemper.
Ms. DAHLKEMPER. Thank you very much, Mr. Chairman. I was
hoping to have Governor Engler here. I appreciate his mentioning
my cosponsorship of the AMERICA Works bill, which I think is a
great piece of legislation. In his testimony, he mentioned the need
to ensure that STEM education spurs the interest of students in
manufacturing careers, so I guess I just want to ask the three of
you, because I agree with this, but how do we build that bridge between the STEM classroom to a career choice in manufacturing
and innovation, some concrete ways if you could give us some suggestions how we can make that environment.
Mr. CASTELLANI. One of the things that we have found that has
worked very well is where there is real-world examples on how
those disciplines can be applied to something that is exciting. You
want to capture the imagination of a young person in college. That
is how I ended up going into the sciences. I got psyched by looking
at some of the research that was being done down the road in
Schenectady, New York, and that got me very excited about it. It
is role models. I mean, clearly young people want to see people who
are successful in those fields. They want to see things that are exciting in those fields. Some of the best programs that have worked
is where promising students at the high school level are mentored,
are given internships in research labs, in manufacturing facilities,
in businesses so they get excited about it and they see people like
them, which is one of the most difficult things that we face in what
has been unfortunately male-dominated disciplines. We need young
ladies to see women who are successful in the STEM disciplines.
We need minorities to see minorities that are successful in the
STEM disciplines and are excited about it. Those programs tend to
work best where they have a real-life example of something that
is cool, quite frankly.
Ms. DAHLKEMPER. Do you think we need to do more on the high
school level? Because I wonder, you know, how many of
our
Mr. CASTELLANI. Absolutely. If you dont capture them at the
high school levelyou know, there is an institute, the Committee
for Excellence in Education, that looks at the other end of the spectrum, which takes the brightest high school students and does ev-

57
erything you can to encourage them to be in the STEM disciplines,
and what they found that worked best is getting them associated
with a lab, with a research facility, with a manufacturer, with a
business, with scientists, with engineers in high school so that they
are excited about that as something to pursue.
Ms. DAHLKEMPER. Mr. Donohue?
Mr. DONOHUE. You know, this is also a cultural issue. After the
second World War and the Korean War, there was this tremendous, you know, Sputnik and then go to the moon and there was
this massive effort for people to go into engineering. It was the way
to a better life and to a great job. Well, we have matured. I will
use that world. And now it is hard in high schools, in many high
schools to convince people they ought to put all their time and energy into the most complicated subjects. It hasfor a while it was
hard to have people see a great career there but there is a resurgence of demand and of need. The computer, the tech revolution got
that started. People saw that as a way. I think demand and need
have a great deal to do to show people where they can do well and
where they can do things that they can achieve, not only on a personal basis but a financial basis and there needs to be some of that
cultural goings-on. That is what John was talking about. What
happened to him, he was in college. He went down the
street
Mr. CASTELLANI. Actually high school.
Mr. DONOHUE. Well, in high school. Good. He went down the
street and he got motivated, and he wasnt only motivated because
of what he saw, he was motivated because of what people convinced him he could do. I think there is a soft-goods part of this
that is as essential as the actual teaching
Ms. DAHLKEMPER. My time is almost up. Is there a connection
with business in this?
Mr. CASTELLANI. Absolutely.
Mr. DONOHUE. Of course.
Ms. DAHLKEMPER. And Ms. Wince-Smith, I will give you my last
two seconds here.
Ms. WINCE-SMITH. Well, just building on my colleagues, the Japanese used to say manufacturing is not dirty, dumb, dangerous and
disappearing, but that is what we think in our country in many
cases, and I like your idea of bringing this to high schools and providing opportunities for young people to actually go into manufacturing operations because the modern ones are extremely high-tech
and exciting. I mean, how many have been in a clean room, for instance? And that is something we could all do in our communities
and it is something that would have a big cultural shift.
Ms. DAHLKEMPER. Thank you very much.
Chairman GORDON. Thank you, Ms. Dahlkemper.
Governor Garamendi, you are recognized for three minutes.
Mr. GARAMENDI. I thank you very much, Mr. Chairman, and to
this Committee, it is a great pleasure to be here and particularly
to be listening to this particular discussion, the COMPETES Act
and the work that it has done and the good that it has done.
My question really goes to the preparation of these skills, and I
am going to go back to California issues and ask the witnesses a
specific question, but first let me set the stage here. California uni-

58
versities, the state universities of California, are in serious financial trouble as are many of the universities across the Nation, particularly the public universities. In California last year and this
year, 40,000 students are not able to enter for lack of money to
fund the universities. So my question to you is, what can be done
about that? All of the talk is good but if there is no money, there
is no action, and are your organizations willing to have the tax increases necessarily? Specifically, University of California is short
$1 billion. The state university is short $1 billion. That is twotenths, together two-tenths of one percent of the states economy to
find that $2 billion. What is your view on raising taxes to fund
higher education?
Mr. DONOHUE. I got the short straw. Just three quick things.
Number one, yes, there are those serious problems in California as
well as in other states, and what we are seeing, and I was going
to make the point before when we were talking about the community colleges, more and more peopleand this is another pressure
on the community collegesare going to the community colleges for
the first two years and families find that they can afford that and
then might be able along with some federal and state help to get
into the universities for the last two years. Now, this creates a
problem for the universities because, you know, they sort of make
money on the first couple of years where they dont make it on the
back years. To the question, would we increase taxes, my view is,
first of all, California has a hell of a lot of problems that havent
got anything to do with the education system.
Mr. GARAMENDI. No, in fact, they do because more than half the
budget is education.
Mr. DONOHUE. Well, that isI am thinking about the college
education system. I would agree with you because when you teach
in the California system and you can retire at 51 years of age at
half pay and full medical, whatever the exact numerics are, you
have got real serious issues. My deal is, you know, I always
thought the issue by saying what dont we have to spend and then
how do we get additional revenue and how does that come, some
of it should be from the students, some of it should be from the
community, some of it from contributions because there are major
efforts there, and then if you are down to taxes, that is up to the
community. Would I support them? Wait until they are proposed.
Now, I mean, look, our deal is everybody, everybody has got a new
tax. The President has a whole set of new taxes. All the states have
new taxes. All the states, particularly the big states are coming to
the Federal Government for money. If you buy everybodys proposal
on a tax, we are going to be in serious problems. We need to look
at it in totality. We need to do what we need to make this country
work. But by the way, we can spend money like nobody you ever
saw.
Chairman GORDON. Does any other witness want to address that
quickly?
Mr. CASTELLANI. Just very quickly. I mean, business has always
been willing to invest in things that pay off but before that investment comes, we have to make sure that we are operating efficiently, and even in the higher education system there are opportunities to overhaul the delivery system through greater use of tech-

59
nology. You know, I have the honor of serving on the board of
trustees in my alma mater in Schenectady, Mr. Tonko, and the inefficiencies that we apply in the higher education structure, to be
very blunt about it, would be unsustainable in the private sector.
So we need to do a better job of doing that. Then if that is done
and we need to invest more, then, yes, we always support those investments if they will pay off.
Chairman GORDON. I think it is appropriate now that we go to
a professor, a university professor, Dr. Lipinski.
Mr. LIPINSKI. Thank you, Chairman Gordon. Yes, I was a professor of political science but before that I was an engineer, so Mr.
Donohue, I would say yes, we do need to have fewer lawyers in
Congress and probably some more scientists and engineers. One
thing I agree with you, Mr. Donohue, is on the multi-year highway
funding bill. Definitely, we need to do that.
So I think the one thing, since we have limited time here, I want
to focus on is sort of playing off of what Mrs. Dahlkemper had said
earlier talking about what business can do in partnering, in helping out with STEM education. In my subcommittee, Research and
Science Education, we have had a couple of hearings on informal
science education, and I think this is an area where it is important
also for businesses to get involved. We saw some of the best informal education taking place where business would get together, say,
with a science museum or many other ways that they can get together with other organizations to promote informal science education. As you probably know, a couple weeks ago President Obama
announced the Educate to Innovate campaign, which highlighted
over $250 million in private-sector STEM education partnerships.
These involve universities, large corporations, foundations and nonprofits and government agencies. Now, is there anything more that
you think the Federal Government should be doing to be an effective collaborator in these partnerships or to better support privatesector STEM education initiatives, especially in informal education? Whoever wants to start out here.
Ms. WINCE-SMITH. One innovative model that is emerging is that
many companies are creating summer STEM camps in their regions and cities to bring in 7th, 8th graders, women and minorities
across the board to be exposed to math and science through projectbased learning, and, you know, just as companies often sponsor a
school, doing these STEM summer camps or something, that is a
really exciting private-sector initiative across the country.
Mr. LIPINSKI. And how can government in generalas we move
on here, how can government be involved in this? Mr. Castellani,
Mr. Donohue, do you have any
Mr. CASTELLANI. Well, one of the things that I think government
ought to consider because it does a lot of this good work also,
whether it be at NASA or the national labs is doing the kinds of
things that are being pioneered in the private sector. Deborah mentioned a STEM camp but also highlighting the technology. I think
Tom mentioned earlier and it was one of the reasons I went into
the sciences, I mean in the 1950s and the 1960sI am giving away
my age, 50sthe excitement of the Space Race was what stimulated a lot of people. A lot of what is done in government, particularly in the science areas, not just within the Department of De-

60
fense but outside of it, NIH, NASA, the national labs, is something
that should be looked at as being like what the private sector does,
a stimulation, excitement, a point of excitement to get young people
interested in, highlight it more, participate more in it.
Chairman GORDON. Thank you, Dr. Lipinski.
I dont want to take time now, but many of those things you are
advocating are in this bill, whether it be through the national labs,
in a variety of different ways, and sobut we want to continue to
do better.
Now Mr. Lujan, you are recognized for three minutes.
Mr. LUJA N. Thank you, Mr. Chairman, and I really appreciate
you bringing this hearing, Mr. Chairman, because as we talk about
moving forward and spurring economic opportunity and realizing
where we have fallen further and further behind in this country,
the lack of our ability to get more students in engineering fields
and science fields, the creativity, the innovation, the problem solvers that are going to be key to moving us ahead and keeping us
ahead are all important policy decisions we have to make and I certainly hope that as we embark upon education reform later on this
year that we have an emphasis in creativity, making sure that we
are educating problem solvers and that we have a structure that
looks like that.
Now, with that being said, with the commitment that it sounds
like we all have with creating a systemic innovation policy and
moving forward along those lines, and looking to investments that
we have made, national treasures in our national laboratoriesI
come from a state and a district that has one. We have two NNSA
[National Nuclear Security Administration] laboratories in New
Mexico, Sandia National Labs, Los Alamos National Labs. We have
Whit Sands with NASA down in southern New Mexico. And to
truly see how we can bridge those opportunities with tech transfer,
making sure that we are bringing our universities in and we are
looking to our national laboratories to create those public-private
collaboratives and partnerships, the investment that is required for
the R&D to allow for that modeling, to allow for the simulation to
get into the hands of the private sector all sound like things that
we agree upon. It sounds like we have support from all business
entities, from those of you that are responsible for making sure
that we are sometimes representing interests that sometimes compete with one another. But this is certainly an issue that we all can
agree upon.
And just to hear quickly from you, from a tech transfer perspective with the problems that you hear from companies that are
working with laboratories to get the modeling and simulation in
their hands, ideas that you may have on what we can do eliminate
some of those barriers, bring that forward and build upon that, and
Mr. Chairman, I know we are out of time so I would like to also
make these questions for the record, and also to hear your
thoughtsNew Mexico with Los Alamos National Laboratories, a
program has been created where our scientists, engineers and researchers are working with local school districts and teachers,
teaching teachers, if you will, bringing them in and then getting
those programs back into the school districts. The school districts
that have been beneficiaries of these programs have seen their

61
math scores increase dramatically through the roof, again, teaching
kids how to be problem solvers, and I certainly hope, Mr. Chairman, that as we build upon all that COMPETES has to offer,
which it is in there, that we look to see how we can incorporate
these other ideas and programs that are working and make the investments necessary and truly see the partnership that can come
from the government, from the public sector and working collaboratively with our private sector and with our education system to
get us moving ahead. Thank you, Mr. Chairman.
Chairman GORDON. Thank you, Mr. Lujan. You know, really the
basis of much of the COMPETES Act was not trying to create new
programs but rather it was to look at the National Science Foundation and elsewhere, what are the programs that are working and
scale those out, so that really was the foundation of this.
Mr. Tonko is recognized for three minutes.
Mr. TONKO. Thank you, Mr. Chair. First, let me thank John
Castellani for a couple of shout-outs for Schenectady, New York. I
know we appreciate that, and I appreciate the panel and their
input today.
Let me frame my question first with a couple of comments I
heard a couple times over from the panel: uncertainty. I couldnt
agree with you more. The certainty is a major factor, but the certainty of an American clean energy opportunity here in this House
was passed and we are still fighting the science of having to have
a clean energy economy. I dont know how we resolve that. And
then also when you speak, Mr. Donohue, about the global space
race, we have a global race that we are supposed to be entering
now because if we dont, we are going to be letting down generations of American workers. We are still struggling with that issue
here. I dont know what it takes. Maybe more engineers in the
process. My question is about the role of the clean energy economy.
Do you see that bearing great relevance? Is it growing more important as a sector of our economy? And will government funds be required, at least in the short term, to advance that effort?
Mr. DONOHUE. Two points about the clean energy economy. First
of all, there are great opportunities there to create jobs through advanced science and to engage people in the process, a significant
expansion of the clean coal efforts that people are engaged in on
a scientific basis and carbon capture, the issues of nuclear power
whereas Governor Engler indicated we have let a lot of that capacity go elsewhere. We now have 26 potential sites there. We can get
a lot of money for that. It wont have to come from the government,
a little backstop, but you are going to have to assure that after I
build it, I can open it and not be stopped by 30 environmental lawsuits because otherwise you are not going to get any money to do
that. There are all sorts of issues in a green economy that will create jobs.
There is one other thing to understand, though. if I buy a green
refrigerator, I am not going to buy the other refrigerator I was
going to buy, so there is some activities that are significant increases in economic activity, some that are substitutes, and one
also has to understand that much of the green economy to date has
depended on a good deal of federal subsidies or incentives, particularly in alternate fuels and so on. We are going to have to work

62
our way through this, and it is a long way from start to finish.
There are clear benefits if we can rally around it. At the same
time, we have to be careful. One of the major issues with the bill
that came out of the House, it starts a global trade war, you know,
by saying that all we have to do is decide we dont like this country
or that countrys environmental position and we can put taxes on
the products they sell in the United States. We need to take a
broader look at these issues. We want a domestic bill and we want
a global bill but we want one that keeps people working, that uses
technology that we have a lot of engagement in, and that is global
in nature. We have got to get people around the world involved. If
we dont, were not taking advantage of it.
Chairman GORDON. Mr. Castellani, do you want to briefly comment?
Mr. CASTELLANI. Yes. In my written testimony, and I am sorry
I didnt have time to bring it in the oral testimony, last year we
convened a large number of our CEOs to address the issue of what
do we do about global climate change, and they divided themselves
up into technology sectors and pathways, and our report, the Balancing Act: Climate Change, Energy Security and the U.S. economy, highlights exactly what you are talking about, and that is, irrespective of your position on the regime that is going to be necessary, any regime is going to require substantial investment in
technologies, and if we do it smart and we do the whole array of
technologies, we can minimize the impact on the economy. So it is
absolutely vital to the United States, to this country and to the
world for two reasons, the two very important reasons. One, is to
have the energy to continue to drive our economy. The other, is to
be responsible in alleviating global climate change and global
warning.
Mr. TONKO. And perhaps even drive our own energy security.
Chairman GORDON. And if you have something compelling to say,
Ms. Smith?
Ms. WINCE-SMITH. I would just say that the clean energy revolution, in addition to energy security and climate, is going to drive
how things are made, and that is a tremendous opportunity that
needs to be embedded in our manufacturing initiative.
Chairman GORDON. Mr. Carnahan, thank you for your patience,
and you are recognized for three minutes.
Mr. CARNAHAN. Thank you, Mr. Chairman.
I thank the panel for being a part of this great national conversation to move us forward. I am from St. Louis and we have got a
great science infrastructure there from great companies, great institutions of higher education, and we have seen kind of a tale of
two different industries there in terms of innovation. Aviation industry based there has been right on the cutting edge of innovation. Not only do they produce great products for our country but
also opened up a lot of markets overseas whereas the auto industry, we have seen the auto industry to be slow to innovate. I think
they are coming around but they have been slow and lost a lot of
markets overseas. So we also have seen really a disconnect between
those great companies and institutions of higher education with
some of our K12 education has not been producing, you know,
that new generation, hasnt been capturing them early enough and

63
our companies are beginning to see that connection, and many are
partnering. So really I am pleased to see some efforts there in
terms of partnering companies directly with our schools. But I really think, you know, we have seen innovation, you know, the estimates are about half the economic growth in our country from
World War II to present was from innovation in new technology.
I think we have got to get back to these basics of making things
again, and making things that matter, new innovative products
that attract people that want to be involved, that can grow jobs
here at home but also grow markets around the world, and I think
it is certainly key in the energy sector, and also keeping that talent
pool here and attracting the best talent from all over the world. I
appreciate what you said earlier about that.
One of the ideas that has been put out by Craig Nassey with
NIST, he has advocated for establishment of a coordinated national
innovation policy infrastructure, that he has said the United States
is the only major industrialized nation without an institutionalized
science, technology, innovation and diffusion policy development
and management infrastructure and that such concepts as a national innovation foundation that have been jointly proposed by
Brookings and the ITIF [Information Technology and Innovation
Foundation] have not received enough attention in terms of our
policy development. I guess I wanted to ask the panel, how do you
see that kind of a coordinated national effort really going forward
from here?
Ms. WINCE-SMITH. I would just reiterate, Congressman, that the
White House needs to take
Chairman GORDON. Your microphone.
Ms. WINCE-SMITH. Excuse me. The White House should take the
leadership to do this; take cross-agency coordination for a national
innovation strategy, and I think they are making progress, and the
private sector and the groups at the table today; we all work very
closely and look forward to working on that issue.
Mr. CARNAHAN. Thank you.
Mr. DONOHUE. Coordination is essential to maximizing investment and competition is absolutely essential to creating the products that make us a leader around the world, and coordination and
competition occasionally bump into each other.
Mr. CARNAHAN. Very diplomatically said.
Mr. CASTELLANI. Just like we had in this country for a long time
looked at the comprehensive environmental impact of everything
that we do from a policy standpoint, it is vitally important to look
at the impact on economic activity on the different policy initiatives
that we bring on the innovation process and our ability to compete
and to win, quite frankly, so that is a very important concept.
Chairman GORDON. Thank you, Mr. Carnahan.
Mr. CARNAHAN. Thank you.
Chairman GORDON. Mr. Rohrabacher, do you have some concluding wisdom for us?
Mr. ROHRABACHER. Well, thank you very much, Mr. Chairman.
I want to thank you for your leadership in holding this hearing and
I want to thank the witnesses. This has been a very valuable exchange of ideas. Just for the record, I am going to throw out some
things that werent covered just so people can know that that was

64
part of the discussion, even though it is right here at the end. My
belief is that policies that lower the compensation for those people,
especially young people, who go into the sciences, technology and
engineering eventually work against us by discouraging high-quality people from getting into these areas, so I imagine you would all
agree with that.
Let me just throw out for the record, Mr. Chairman, H1B visas
bring down wages. H1B visas, I have had people in my district
come to me and give lots of examples where businessmen are telling them to take a lower wage because they can get some H1B visa
person from India to do the job. This is not good for encouraging
more young people and other people to get into the professions of
engineering. We need to drive up the wages for people who are engineers and scientists rather than bring them down, and one of the
most effective is, we talked about education, but again, let us bring
the wages up of people who are involved in this. There is never a
mention in education of paying teachers who teach math and
science more money than people who teach poetry and physical
education, and that would have a tremendous impact on our students by bringing higher-quality teachers because you are paying
them more money. More pay will get you higher quality and better
people involved.
And last, when we are talking about graduate students in our
universities, let us just remember, when we see that 55 percent of
our graduate students in these high-tech area are foreigners, that
this too is damaging to our country. The fact is, we should be focusing on educating our own young people and filling those slots rather than going to foreigners who by the way subsidize their young
people. They come over, they learn a great deal about important
scientific endeavors and then they go back and they use that
knowledge against us in their own countries, and that is not good.
And one last issue, technology transfer. Any technology transfer,
any controls that we have, if loosen those and it results in technology going overseas that will eventually be used to helping their
manufacturing to compete with ours is working against our interest and especially it works against us if it puts us in jeopardy and
endangers our national security.
Those are just a few thoughts and I thought I would throw them
out here at the end of the hearing. My time is up. Thank you.
Chairman GORDON. Thank you, Mr. Rohrabacher. This is a great
country, isnt it?
Dr. Ehlers, you can close us out.
Mr. EHLERS. Thank you very much, and thank you, Mr. Chairman, for holding this hearing and especially for putting together
such a super panel. I really appreciate the testimony that was offered and the wisdom that all four of you have displayed.
I just want to make two points. Based on my educational career,
which was 22 years long, the most important thing is to educate
for the jobs of the future. Too often we tend to be educating for the
jobs of the past or perhaps the present but we have to anticipate
what the jobs of the future are going to be and educate accordingly.
That is not easy but it has to be done.
Secondly, math and science education has to be done properly in
the early elementary grades. If you really want someone to become

65
an engineer, that means they have to do well in math and science
in elementary school. To the extent that they like it when they get
to high school, they will take the advanced math and science
courses there, and when they go to the university they will slip
right into the program. Too often, and I learned this from my colleagues at the universities, too often someone who would make a
good scientist or a good engineer was not excited by science in the
early years, in high school took the easiest courses possible, then
went to the university and said I would like to be an engineer or
a physicist or whatever. They say oh, sure, we would love to have
you do that but first of all youll have to take two more years at
the university in order to get up to speed with the math and
science that you need. Well, obviously, very few of them are going
to say well, yes, I would love to spend two more years here and
spend another $80,000 of my parents money. They are just going
to say well, okay, I will take something else. And so we really have
to be farsighted enough to recognize the key role that the elementary schools will play in this as well.
Thank you very much. You were right on target and I really appreciate your testimony and your time and your wisdom. Thank
you very much.
Chairman GORDON. Thank you, Dr. Ehlers.
Mr. Tonko, Mr. Carnahan, any final conclusions?
Mr. Hall is recognized.
Mr. HALL. Mr. Chairman, thank you. I had to go to Energy and
Commerce and I had some other questions, but we have a reporter
that is taking down everything and the rest of Congress will get
to hear your answers and I will review that. I was just thinking
back as I listened to my friend from California here back when I
was on a church board, the word was that the Lord kept the
preacher humble and the board kept him broke. Rohrabacher has
the same effect on this committee. He is the last word of the rest
of the story and he is a very good member of this committee.
I yield back my time and I thank this good panel.
Chairman GORDON. Thank you, Mr. Hall. I think Dr. Ehlers said
it very well. This was a superb panel. We appreciate you altering
your schedules. I know, Ms. Wince-Smith, you have to get going out
of the country. Both your testimony and your presence was a very
strong way to kick off this important reauthorization. We thank
you. One thing I took away from this is that I need to talk to Mr.
Rangel, Oberstar, Berman, Miller, Obey and Waxman this afternoon and see if they will share some of their jurisdiction, and we
could really make some real progress there. Thank you.
The record will remain open for two weeks for additional statements from Members and answers to any follow-up questions Members may ask the witnesses. The witnesses are excused.
[Whereupon, at 12:19 p.m., the Committee was adjourned.]

Appendix:

ANSWERS

TO

POST-HEARING QUESTIONS

(67)

68
ANSWERS

TO

POST-HEARING QUESTIONS

Responses by John Castellani, President, Business Roundtable

Questions submitted by Representative Ralph M. Hall
Q1. As recommended in Mr. Donohues testimony, this Committee should be vigilant
about duplication of funding and efforts among the Department of Education,
the National Science Foundation, NASA, the Department of Energy, and other
Federal agencies. This was a major concern of ours when this Committee considered ARPAE. Likewise, we felt that some of the STEM programs established
within DOE are repetitious of existing programs. Please share with us those programs that you consider to be duplicative in the current version of COMPETES
or may have the potential for duplication in the reauthorization.
A1. Business Roundtable is concerned about Federal spending and ballooning budget deficits. We believe Congress has a responsibility to root out waste, inefficiency
and duplication in Federal programs.
When it comes to STEM education, which represents a fundamental investment
in future U.S. innovation capacity, a diversified portfolio of programs that address
different STEM education needs and experiment with different ways of motivating
students probably makes sense. Business Roundtable does not have the knowledge
or expertise to render a judgment on every single Federal STEM education program
but our impression is that the programs at different agencies operate in silos and
are not well aligned.
Q2. Taking into consideration the current economic environment and the fact that
we may need to make some tough funding decisions, are there any provisions
in the currentCOMPETES Act that could be scaled back or that you feel are unnecessary? Are there programs that you feel are vital and must be preserved?
A2. Although America COMPETES programs were authorized in August 2007, they
were not funded until early 2009. It is too soon for Business Roundtable to judge
which provisions are least effective. We can say with confidence, however, that
STEM education and funding for physical sciences and engineering research are the
most vital elements of the Act. They are the building blocks of U.S. innovation and
competitiveness.
Question submitted by Representative Daniel Lipinski
Q1. In response to a question asked by Congressman Garamendi, you referred to inefficiencies in the higher education system and stated that these inefficiencies
would be unsustainable in the business sector. Could you elaborate on these
comments or provide examples of such inefficiencies? Are there any specific steps
you would suggest to eliminate them or to improve how our higher education
system uses Federal money?
A1. Over the past three decades, higher education costs skyrocketed and tuition and
fee increases dramatically exceeded the rate of inflation. Two-year public college
costs more than quadrupled, and four-year public and private colleges saw costs increase 691 percent. Yet the number of associate degrees conferred increased by 70
percent and bachelors degrees by 68 percent. Community colleges clearly are a better bargain.
If we are to meet the growing demand for a better educated and trained workforce, our institutions of higher education must find creative ways to do more with
less. On-line learning is a promising approach that frees education from a physical
plant. Some institutions are using flexible scheduling and experimenting with classes 24/7, offering options to earn course credits and degrees over shorter, more concentrated periods of time. Perhaps most important for Federal policy, incentives
should be built into both institutional and student aid that reward timely completion of degrees and other credentials valued in the marketplace.
Question submitted by Representative Ben R. Lujan
Q1. Key components of Federal technology transfer policy are the Bayh-Dole and Stevenson-Wydler Acts passed 30 years ago. What is your assessment of these Acts
on innovation and competitiveness of American companies? Also, after 30 years,
what recommendations, if any, on how the implementation of these Acts could
be improves given the current focus on innovation policy?

69
A1. The Bayh-Dole and Stevenson-Wydler Acts were important policy innovations
that strengthened Americas capacity to innovate. They remain important contributors to U.S. economic competitiveness. Americas innovation systems could be further improved by speeding processing of patent applications, enacting reforms that
reduce patent litigation and strengthening international intellectual property protection.
Question submitted by Representative Kathleen A. Dahlkemper
Q1. What types of skills do you expect bachelor, masters and Ph.D. level graduates
to have when entering your workforce, beyond just content knowledge in a particular STEM field? Are our colleges and universities today providing students
the training and opportunities they need to develop those skills? How can industry work more closely with colleges and universities to ensure that the students
are being educated appropriately for todays workforce needs?
A1. Last December, Business Roundtable released the final recommendations from
The Springboard Projectan independent commission it convenedto ensure that
American workers thrive after the economy rebounds. While the commission found
that the gap between worker skills and the needs of employers is widening, the
skills gap is primarily an education gap as employers increasingly require postsecondary degrees beyond a high school diploma. In addition to content knowledge at
the college and advanced degree levels, industry has worked closely with engineering and science departments to influence the curriculum and identify the need for
written and oral communication skills, team problem solving and collaboration.
In terms of college and post-graduate preparation, many Business Roundtable
companies also work directly with U.S. colleges and universities to sponsor scholarships and fellowships and offer workplace experience through internships and
traineeships to help ensure that U.S. higher education remains relevant to the
workplace.
Question submitted by Representative Judy Biggert
Q1. How have your companies reacted to the economic downturn in terms of investments in R&D and new technologies? How do your members balance the recognized value of R&D in driving long-term success with the pressures to improve
short-term balance sheets by potentially cutting back on such investments?
A1. According to a report released last December by the Battelle Memorial Institute
and R&D Magazine, private-sector R&D investments fell by an estimated 5.5 percent in 2009, compared to 2008. The same report, however, projects a robust recovery in industrial R&D spending in 2010. Battelle estimates that industrial R&D will
account for nearly 65 percent of all R&D investment in the United States this year.
Business Roundtable companies invested more than $110 billion in R&D last year,
nearly half the total private-sector investment in 2009. Despite the enormous pressure to reduce costs, Business Roundtable CEOs have maintained healthy R&D activities because they understand the competitive advantage conferred by in-house
innovation. As the economy recovers and demand and revenues grow, R&D investments by Business Roundtable companies also will grow.
Questions submitted by Representative Brian P. Bilbray
Q1. The American COMPETES Act focuses on the much needed problem of underinvestment of basic science research. However, many of the small biotech companies in my San Diego district are just as concerned with commercialization of
technology. As Venture Capital money dries up, how can we best bridge this
valley of death. Do you think ideas such as proof of concept grants/programs
would work? What about changes to the SBIR/STTR programs. What other
changes do you think the Federal Government should consider in order to address this issue?
A1. The U.S. venture capital system remains the best in the world in identifying
and promoting promising commercial innovation. No other country performs as well
as the United States in terms of nurturing nascent technology companies. The U.S.
venture capital sector was hit hard by last years credit and liquidity crisis. For the
better part of year, venture capital all but disappeared. As capital markets have recovered, so too has the venture capital market, but less rapidly than other markets.

70
Government can play a useful role in venture capital markets by reducing risk,
which is what Small Business Innovation Research (SBIR) and Small Business
Technology Transfer (SBTT) programs are designed to help with, but government
cannot replace private venture capital. U.S. venture capitals history of success
rests, in part, on its ability to cut its losses and move on to new investments in the
face of failure. Government has no such ability. The political pressure to continue
funding underperforming enterprises would be too great to resist in many instances.
Q2. Overall Federal funding for basic research has been flat or declining on a realdollar basis since fiscal year 2005. What implications does this trend have for
the U.S. science enterprise?
A2. Flat or declining Federal research investments, particularly in physical sciences
and engineering research, have been a serious drag on U.S. innovation for more
than twenty years. Last year, however, witnessed a dramatic turn around with significant new research investments enacted in the American Recovery and Reinvestment Act (ARRA), which Business Roundtable endorsed. If last years trend is maintained, it will have a significant, positive effect on the long-term economic competitiveness of the United States.
Q3. The America COMPETES Act established specific funding authorization levels
for both NSF and the Dept. of Energy Office of Sciencealthough appropriations for both agencies have not yet reached those recommended levels. Should
the America COMPETES Act reauthorization establish revised specific funding
levels for NSF and the DOE Office of Science? What are the advantages and disadvantages of Congress setting targeted funding levels?
A3. The Science and Technology Committee of the U.S. House of Representatives
established important guidelines for Congress and the Administration in the America COMPETES Act and its authorization levels for Federal civilian science agencies. Those authorization levels led directly to the generous funding levels for basic
research in ARRA and in the Presidents budget requests to Congress. The National
Science Foundation and the Office of Science in the Department of Energy are two
of the most important Federal agencies when it comes to investments that foster
U.S. innovation and competitiveness. The Science and Technology Committee has
knowledge and expertise related to how these agencies function that Congress and
the Administration rely on. Specific authorization levels proved particularly valuable in the America COMPETES Act and likely would be valuable in any reauthorization.
Q4. NSF received a significant infusion of funds through the American Recovery and
Reinvestment Act (ARRA). Are you concerned about what will happen to the
NSF budget once the ARRA money has been spent? What should Congress do
to sustain the momentum created by ARRA?
A4. Business Roundtable has consistently advocated for stable, long-term funding
commitments for Federal investments in fundamental physical science and engineering research. While the Roundtable endorsed ARRA and was pleased to see
Congress fund the research investment priorities embodied in the America COMPETES Act, we remain concerned about the long-term health of the U.S. science and
technology enterprise. We are encouraged, however, by the Presidents Fiscal Year
2011 budget request for the National Science Foundation and other Federal civilian
science agencies that sponsor physical science and engineering research. Congress
can sustain momentum by reauthorizing the America COMPETES Act and appropriating funds for Federal science agencies consistent with the authorization levels
specified in the Act.
Q5. According to 2010 Science and Engineering Indicators released by the National
Science Board (NSB) last week, the Federal share of the Nations research and
development (R&D) funding was an estimated 26 percent in 2008down from
30 percent in 2004. Does the fact that the Federal share of R&D funding is declining concern you? What is the impact of this declining finding trend?
A5. Business Roundtable has been concerned about the long-term decline in Federal
R&D investments as a percentage of gross domestic product (GDP) for many years.
Federal R&D spending is an investment in future economic growth and should track
the overall size of the economy. ARRA included a significant short-term boost to
Federal R&D spending and, as indicated in my answer to the previous question,
Business Roundtable believes this momentum must be sustained.
The declining Federal share of national R&D investment is only a concern to the
extent that it reflects stagnating Federal R&D budgets and a decline in Federal
R&D relative to the size of the economy. Private-sector R&D investments have

71
grown over the last decade, both in absolute terms and relative to Federal investments. Increased private-sector R&D investments are a good thing. As I mentioned
earlier in response to a question from another Committee member, Business Roundtable companies invested more than $110 billion in R&D last year, which represented nearly half of all private-sector R&D investments in 2009.
In short, Business Roundtable believes that Federal R&D investments relative to
GDP are a more meaningful indicator of U.S. innovation performance than the Federal share of R&D spending.

72
ANSWERS

TO

POST-HEARING QUESTIONS

Responses by Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce

Questions submitted by Representative Ralph M. Hall
Q1. As recommended in Mr. Donohues testimony, this Committee should be vigilant
about duplication of funding and efforts among the Department of Education,
the National Science Foundation, NASA, the Department of Energy, and other
Federal agencies. This was a major concern of ours when this Committee considered ARPAE. Likewise, we felt that some of the STEM programs established
within DOE are repetitious of existing programs. Please share with us those programs that you consider to be duplicative in the current version of COMPETES
or may have the potential for duplication in the reauthorization.
A1. The U.S. Chamber of Commerce believes that every effort should be made to
prevent Federal spending from resulting in massive budget deficits. Congress must
be particularly vigilant to avoid duplication of effort or funding when it comes to
Federal programs. The U.S. Chamber has not undertaken a comprehensive evaluation of all Federal STEM programs supported by the America COMPETES Act. Our
concern is that the Federal agencies operating and funding programs have not optimized alignment thereby limiting the scale and lessons learned from the programs
as well as limiting the impact of the available funds.
In relation to ARPAE reauthorization, we believe that while there exists the very
real potential . for duplicative efforts between ARPAE and the Department of Energys (DOE) Office of Science, we believe such duplications are not inherently automatic. As such, we support adequate funding for ARPAE as it provides a particular
focus on deployable technologies that has historically not been fully met by the Office of Science, while at the same time we encourage diligent oversight by Congress
and DOE to ensure funding of the two offices does not become duplicative.
Q2. Taking into consideration the current economic environment and the fact that
we may need to make some tough funding decisions, are there any provisions
in the current COMPETES Act that could be scaled back or that you feel are
unnecessary? Are there programs that you feel are vital and must be preserved?
A2. As a result of the America COMPETES programs not receiving funding until
early 2009, we believe that an insufficient amount of time has passed to ascertain
program efficacy with any amount of certainty. With that in mind, we urge the committee to support STEM education and funding for physical sciences and engineering research. These are the programs that fuel U.S. innovation and preserve our
competitiveness.
Question submitted by Representative Ben R. Lujan
Q1. Key components of Federal technology transfer policy are the Bayh-Dole and Stevenson-Wydler Acts passed 30 years ago. What is your assessment of these Acts
on innovation and competitiveness of American companies? Also, after 30 years,
what recommendations, if any, on how the implementation of these Acts could
be improves given the current focus on innovation policy?
A1. The Bayh-Dole and Stevenson-Wydler Acts play a significant role in creating
incentives for government contractors, universities and other beneficiaries of Federal agency support to commercialize their innovations thereby driving competitiveness. There are some key areas where improvements to the intellectual property environment could be made both domestically and abroad. This committee can play
a critical role in bringing attention to these areas. The backlog of patents must be
reduced by speeding up the processing of patent applications. Work must be done
to enhance pro-IP positioning of the Organization for Economic Co-operation and.
Development (OECD) so that it advances research, policy positions, and other products that promote IP as key to innovation and creativity and calls for the protection
of IP and the enforcement of IP rights globally.
Question submitted by Representative Kathleen A. Dahlkemper
Q1. What types of skills do you expect bachelor, masters and Ph.D. level graduates
to have when entering your workforce, beyond just content knowledge in a particular STEM field? Are our colleges and universities today providing students
the training and opportunities they need to develop those skills? How can indus-

73
try work more closely with colleges and universities to ensure that the students
are being educated appropriately for todays workforce needs?
A1. The skills that are commonly referred to as 21st century skills are now required
for success in the workplace for STEM and all other professionals. They can be summarized in four groups: critical thinking and problem solving, communication, collaboration, and creativity and innovation. These are the areas where U.S. secondary
students begin to fall short on the international exams. Students in the United
States fare less well when they are asked to apply knowledge that they possess to
solve a problem or to explain a problem. This is one factor that has resulted in U.S.
15 year olds ranking 24th out of 29 participating OECD countries on the Math Literacy portion of the PISA exam. The lack of these skills persists through post-secondary education and into the workforce. Many of the U.S. Chambers members
work closely with colleges and universities from which they recruit employees to improve the programs offered by those institutions and the success rates of the students they prepare.
Question submitted by Representative Judy Biggert
Q1. How have your companies reacted to the economic downturn in terms of investments in R&D and new technologies? How do your members balance the recognized value of R&D in driving long-term success with the pressures to improve
short-term balance sheets by potentially cutting back on such investments?
A1. There is insufficient data available to render a definitive response to this questions at this time. Each company balances the short term and long term demands
differently. Research and Development is essential and has beneficial effects over
the long haul. Economic theory supports this analysis.
Questions submitted by Representative Brian P. Bilbray
Q1. The American COMPETES Act focuses on the much needed problem of underinvestment of basic science research. However, many of the small biotech companies in my San Diego district are just as concerned with commercialization
of technology. As Venture Capital money dries up, how can we best bridge this
valley of death. Do you think ideas such as proof of concept grants/programs
would work? What about changes to the SBIR/STTR programs. What other
changes do you think the Federal Government should consider in order to address this issue?
A1. The U.S. venture capital system is unparalleled. No other nation has a system
as successful at identifying and developing new technology companies. The downturn in the economy had a negative effect on all markets and particularly the venture capital markets. While recovery has been slow, it is on the rise.
Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (SBTT) programs can help to reduce risk which is an appropriate role for
the Government. Flexibility, efficiency, agility, and resistance to political pressure
when determining the length and level of investments account for the success of the
U.S. venture capital system.
Within the energy sector we recognize that many nascent technologies find it extremely difficult to secure adequate capital to bridge the valley of death between
development and deployment, hindering our pursuit of a more secure energy future.
We strongly support the creation of an independent Federal entity empowered to
provide concessionary financial products such as loans, loan guarantees, and risk insurance in support of new energy technology deployment. This entity would operate
in a manner similar to the Export-Import bank, but focused on domestic deployment
of new energy technologies.
Q2. Overall Federal funding for basic research has been flat or declining on a realdollar basis since fiscal year 2005. What implications does this trend have for
the U.S. science enterprise?
A2. Federal research investments have decreased in real dollars for the past 5
years. Many would argue that the trend started much earlier and that the United
States has coasted on investments made as long as 50 years ago. Last year, the
Chamber endorsed the American Recovery and Reinvestment Act (ARRA) which included significant new research investments. The passage of ARRA signified the recommitment of America to innovation through research and development. We believe that the R&D investments in ARRA will help us regain our lead in innovation
among our global peers.

74
Q3. The America COMPETES Act established specific funding authorization levels
for both NSF and the Dept. of Energy Office of Sciencealthough appropriations for both agencies have not yet reached those recommended levels. Should
the America COMPETES Act reauthorization establish revised specific funding
levels for NSF and the DOE Office of Science? What are the advantages and
disadvantages of Congress setting targeted funding levels?
A3. The funding recommendations set by the Science and Technology Committee of
the U.S. House of Representatives for the National Science Foundation and the Office of Science in the Department of Energy translated into significant investments
in these two agencies through ARRA and subsequent budget requests from the
White House. With increased demand for government transparency and efficiency,
the committees funding recommendations will surely be valuable to the general
public, Members of Congress, and the Administration in during the reauthorization
process.
Q4. NSF received a significant infusion of funds through the American Recovery and
Reinvestment Act (ARRA). Are you concerned about what will happen to the
NSF budget once the ARRA money has been spent? What should Congress do
to sustain the momentum created by ARRA?
A4. The U.S. Chamber stated in our 2010 Policy Priorities that we will work to
promote ways to better value long-term investment, entrepreneurial risk taking,
revolutionary research and development, and intangible assets. We believe that the
America COMPETES Act coupled with ARRA provided necessary investments and
focus on the U.S. science and technology enterprise. Greater effort must now be
placed by Congress on creating a sustainable the level of funds for the Federal agencies that are responsible for the bulk of science and engineering innovations. If
America is serious about its competitiveness, we must reauthorize the America
COMPETES Act and appropriate the funds required to accomplish the goals set
forth in the Act.
Q5. According to 2010 Science and Engineering Indicators released by the National
Science Board (NSB) last week, the Federal share of the nations research and
development (R&D) funding was an estimated 26 percent in 2008down from
30 percent in 2004. Does the fact that the Federal share of R&D funding is declining concern you? What is the impact of this declining funding trend?
A5. The Chamber is concerned about the downward trend in Federal R&D investments, however, over the same period, from 200408, private sector investments increased as a share of GDP. While we are not fully aware yet how much private sector investment in R&D may have declined over the recent economic downturn, it
is important to note that ARRA is providing a significant boost in both Federal and
private sector R&D that may help put the country back on the right track. in the
long term, we believe that Federal R&D spending should be considered in the context of the larger economy as a percentage of GDP. Our challenge going forward will
be to increase and stabilize the level of investments needed to keep Americas competitiveness strong.

75
ANSWERS

TO

POST-HEARING QUESTIONS

Responses by Governor John Engler, President and CEO, National Association of

Manufacturers

Questions submitted by Chairman Bart Gordon

Q1. Both of you touch on the importance of strong manufacturing programs in the
Federal Government. One area that we hope to include in a COMPETES Act
reauthorization is a comprehensive manufacturing research and development
program across agencies. We want to take a look at what is currently being done
and what we might be able to do better. Wed be very interested in your specific
thoughts on this effort and any concrete suggestions you might have.
A1. Chairman Gordon, I want to thank you once again for the opportunity to offer
the National Association of Manufacturers (NAM) thoughts on the reauthorization
of the America COMPETES Act.
A comprehensive cross-agency strategy to quantify, assess and coordinate all federally-funded R&D is an excellent idea. Just as the Comprehensive National
Cybersecurity Initiative is working to unify Federal agencies approaches to protecting our national cybersecurity interests, a similar effort should/be aimed at protecting the future of our national economic security, which relies on the ability of
American manufacturing to innovate. Federally funded R&D is the seed corn that
will produce the next harvest of benefits for our economy, with much of the bounty
coming from the manufacturing sector. Such an effort will enable policymakers to
determine what Federal R&D efforts are successful, which efforts are duplicative,
and where our finite resources can best be used.
As the Committee contemplates this strategy, it is our recommendation that any
efforts keep in mind and coordinate with private sector efforts. U.S. manufacturers
perform half (49 percent) of all R&D in the nationor roughly equal to the combined R&D activities of the rest of the private sector, universities and colleges, Federal Government non-profits and federally-funded R&D centers. Manufacturers,
however, who claim the bulk of all R&D credits (71 percent), saw the cost of performing domestic R&D increase at the beginning of 2010 due to the 14th expiration
of the Federal R&D tax credit since it was created in 1981. Any such Congressional
effort to create a cross-agency R&D program should make part of its focus supporting a permanent, strengthened R&D tax credit, as R&D is the fuel for innovation that drives new product development and increased productivity, two key factors necessary for growth in manufacturing.
Questions submitted by Representative Ralph M. Hall
Q1. As recommended in Mr. Donohues testimony, this Committee should be vigilant
about duplication of fielding and efforts among the Department of Education,
the National Science Foundation, NASA, the Department of Energy, and other
Federal agencies. This was a major concern of ours when this Committee considered ARPAE. Likewise, we felt that some of the STEM programs established
within DOE are repetitious of existing programs. Please share with us those programs that you consider to be duplicative in the current version of COMPETES
or may have the potential for duplication in the reauthorization.
A1. With regards to STEM education, there may be programs that should be combined, but just as important, existing programs should be streamlined and refined
to better meet the needs of students. It is possible to create better value within existing Departments of Labor and Education programs without creating new programs. For example, by looking at specific programs such as Trade Adjustment Assistance (TAA), the Federal Perkins Loans Program and the Workforce Investment
Act (WIA), we can create priorities that improve education by linking it to employer
needs. Looking at these programs to make them more effective before creating new
programs will streamline government process.
Q2. Taking into consideration the current economic environment and the fact that
we may need to make some tough funding decisions, are there any provisions
in the current COMPETES Act that could be scaled back or that you feel are
unnecessary? Are there programs that you feel are vital and must be preserved?
A2. The P16 program outlined in the America COMPETES Act takes a step toward integrating the skills needed by employers and education systems by calling

76
for education alignments with the private sector. Driving students toward advanced
degrees in STEM areas is critical for competitive success; however, so is continuing
education for those who may not follow the traditional degree path.
Question submitted by Representative Ben R. Lujan
Q1. Key components of Federal technology transfer policy are the Bayh-Dole and Stevenson-Wydler Acts passed 30 years ago. What is your assessment of these Acts
on innovation and competitiveness of American companies? Also, after 30 years,
what recommendations, if any, on how the implementation of these Acts could
be improves given the current focus on innovation policy?
A1. The NAM recognizes the critical success the Bayh-Dole Act represents: a major
effort on behalf of the Federal Government to aid the rapid commercialization of scientific discovery. At this time, however, the NAM has not developed policy recommendations on how the Bayh-Dole Act can be improved to strengthen our nations innovation policy.
Question submitted by Representative Kathleen A. Dahlkemper
Q1. What types of skills do you expect bachelor, masters and Ph.D. level graduates
to have when entering your workforce, beyond just content knowledge in a particular STEM field? Are our colleges and universities today providing students
the training and opportunities they need to develop those skills? How can industry work more closely with colleges and universities to ensure that the students
are being educated appropriately for todays workforce needs?
A1. Nearly every day I hear from employers who have available positions but cannot find qualified candidates to fill the slots. It is imperative that students have the
applicable knowledge necessary to succeed in the workforce. Too many times students graduate, not just from graduate school and college, but also from high school,
with skills that cannot be practically applied in the workforce. Basic and advanced
STEM education should be directly related to the skills and competencies required
by employers. For example, the NAM-Endorsed Skills Certification system is an organized system of nationally portable, industry-recognized credentials implemented
in coordination with community colleges to educate students in the skills relevant
to the demands of advanced manufacturing. By making programs such as these a
priority within Perkins, TAA and WIA, we can align the needs of students with the
needs of employers.
Question submitted by Representative Gary C. Peters
Q1. You mention in your written testimony that the MEP program, despite receiving
an increase in funding in FY10, still faces an uncertain future. Can you expand
on that? What do you hear from your membership regarding the future of the
program?
A1. The Manufacturing Extension Partnership (MEP) has for years been a critical
program for small- and medium-sized manufacturers, helping them streamline plant
operations and improve their bottom lines. Despite the MEPs benefits to American
manufacturing, its budget has been relatively flat since its inception in 1999 and
imperiled more than once due to cost-cutting efforts. For instance, the proposed
budget for FY 2004 would have cut its funding from $106 million to $12.6 million.
Most recently in 2008, an attempt was made to cut its funding even morea full
$87 million below the level needed to maintain its existing services, to a proposed
budget of only $4 million.
We are heartened to see that the Obama Administration has reversed this trend,
especially with the increased funding the MEP received through the American Recovery and Reinvestment Act. The MEP is very important to NAM members as it
provides small- and medium-sized manufacturers affordable access to technical expertise so that they can create more high-paying manufacturing jobsdespite todays daunting economic cost pressures. We will work with Congress and the Administration to ensure that the MEP continues to get the attentionand funding
it deserves.
Q2. I have introduced a bill with Rep. Ehlers to reduce the participant matching requirement in the MEP program to 50%, and give the Secretary of Commerce the
authority to further reduce the match where necessary. Would this change help

77
manufacturers continue to access the program in the face of state budge cuts and
difficult economic times?
A2. As you note, this is an increasingly difficult time not only for manufacturers,
but for state governments as well, especially as they face deeper and deeper budget
cuts. H.R. 4394, which authorizes the Secretary of Commerce to reduce the matching requirement for MEP participants, will go a long way to ensure that states continue to fund MEP centers and that smaller manufacturers will be able to take advantage of this critical program.
Under the current MEP cost-sharing ratio, the Federal Government covers onethird of the cost, with the states taking up the remaining two-thirds. This is the
highest cost-sharing ratio in the Dept. of Commerce, according to its staff. Because
of the economic downturn, 23 state MEP centers reported a decrease or elimination
of state funding. Those that remain are now forced to shift the cost-share burden
to small manufacturers who are unlikely to be able to afford increased contributions
due to the current economic conditions. The end result is that in many areas, the
availability of MEP services is in jeopardy.
H.R. 4394 relieves the states of a large part of this burden, by allowing the Federal Government and the states to share the costs equally so that local MEP centers
can focus on making mission-based decisions, such as increasing program management capabilities. Reducing the state matching requirement from 66 percent to 50
percent will reduce the pressure on state budgets, allowing small manufacturers
continued access to critical MEP services and helping them decrease costs, increase
sales and create much-needed jobs.
Question submitted by Representative Judy Biggert
Q1. How have your companies reacted to the economic downturn in terms of investments in R&D and new technologies? How do your members balance the recognized value of R&D in driving long-term success with the pressures to improve
short-term balance sheets by potentially cutting back on such investments?
A1. The economic downturn has hurt every sector across the board, not the least
of which are manufacturers. Many manufacturers have been forced to hunker down
to weather the economic uncertainty, trying to make due with less. Manufacturers
understand, however, that investment in R&D and new technologies has to be made
if they are to have new products, services and processes in place for when the economy rebounds. An important factor in deciding on how much to invest in R&D is
how that investment will be treated on their balance sheet. Key to that decision is
whether their investments will be protected by a strengthened, permanent Federal
R&D tax credit.
To that point, Id like to take this opportunity to thank you for your long-time,
continued support of a strengthened, permanent Federal R&D tax credit and your
co-sponsorship of bipartisan legislation. H.R. 422, sponsored by Representatives
Meeks and Brady. This bill will help keep R&D jobs in the United States. For manufacturers, who claim 71 percent of all R&D tax credits, this tax incentive helps reduce the cost of R&D done in the United States by lowering the cost of keeping and
hiring R&D employees. Only R&D performed in the United States qualifies for the
credit.
Also, R&D is inherently risky and, for manufacturers, R&D projects typically span
5 to 10 years. A strengthened, permanent credit would assure companies that the
credit will be available during the life of an R&D project. More than 500,000 jobs
would be created within a decade if the R&D credit were strengthened and made
permanent according to the Milken Institute report released January 2010.1
Questions submitted by Representative Brian P. Bilbray
Q1. The American COMPETES Act focuses on the much needed problem of underinvestment of basic science research. However, many of the small biotech companies in my San Diego district are just as concerned with commercialization
of technology. As Venture Capital money dries up, how can we best bridge this
valley of death. Do you think ideas such as proof of concept grants/programs
would work? What about changes to the SBIR/STTR programs. What other
changes do you think the Federal Government should consider in order to address this issue?
1 Jobs for America: Investments and Policies for Economic Growth and Competitiveness,
Milken Institute, January 2010. www.milkeninstitute.org/jobsforamerica.

78
A1. The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs represent a critical effort on behalf of the Federal
Government in which to aid the rapid commercialization of scientific discovery, especially in the biotechnology field. At this time, however, the NAM has not developed
policy recommendations on how the SBIR/STTR programs can be improved to
strengthen our nations innovation policy.
Q2. Overall Federal funding for basic research has been flat or declining on a realdollar basis since fiscal year 2005. What implications does this trend have for
the U.S. science enterprise?
A2. The fact that overall Federal funding for basic research has been flat or declining for the past five years poses a significant issue for the future of innovation in
America. Even when one incorporates the doubling of Federal R&D dollars in the
America COMPETES Act into the equation, Federal efforts are just keeping at a
constant pacenot very heartening news when China increased its R&D investment
to $52.4 billion in 2008 (about 1.49 percent of GDP, up from $29.4 billion in 2005).
In that same period, the U.S. spent $116.5 billion on federally funded R&D, facilities and fixed equipmentor 2.62 percent of our GDP.2 As I mentioned in my written testimony, this does not include R&D expenses at labs owned by foreign companies. If China continues R&D spending of about 1.5 percent of GDP for 2009, its
research will total about $72 billion.3 However, China has one of the fastest-growing
research budgets in the world, and by 2020 the governments goal is to invest 2.5
percent of GDP annually in research, which will rank China third in the world in
terms of total annual investment.4 As the R&D innovation gap between the U.S.
and China shrinks, so does our global competitive advantage.
The future of American innovation requires a commitment to investing in R&D,
from both the public and private sector. The fortunes of the U.S. manufacturing and
science sectors are closely entwined, as successes in one area usually benefit the
other, with the end beneficiary being American workers and consumers. We commend Congress for having the foresight in creating the America COMPETES Act
to ensure that successes in innovation continue to benefit our global competitiveness. As I mentioned, the private sector has a role to play as well, and the Federal
R&D tax credit is a proven tool for spurring R&D jobs in the United States; the
credits incentive value would be enhanced if a permanent, strengthened credit were
enacted into law.
Q3. The America COMPETES Act established specific funding authorization levels
for both NSF and the Dept. of Energy Office of Sciencealthough appropriations for both agencies have not yet reached those recommended levels. Should
the America COMPETES Act reauthorization establish revised specific funding
levels for NSF and the DoE Office of Science? What are the advantages and
disadvantages of Congress setting targeted funding levels?
A3. As pointed out by your previous question, even when adjusted to a real-dollar
basis, Federal funding for basic R&D has largely been flat. As noted in the recent
Congressional Research Service (CRS) report, Federal Funding and Development
Funding: FY 2010,5 increasing the amount spent on basic R&D will be dependent
upon two large issues: how much the Federal Government can afford in light of increasing pressure on discretionary spending, and how those funds will be prioritized.
As our economic security and global competitiveness are dependent upon how much
we as a nation are willing to do to invest in our future success, Congress may very
well have to revise spending levels for the NSF and the DOE Office of Science.
That answer may also be impacted by how our emerging competitorsChina,
India, Russiaramp up investment in their future. Although we may lead the world
in funding basic R&D, we need to be cognizant of how our competitors close the innovation gap. We are confident, however, that the ultimate answer on how much
we need to revise spending levels will be revealed as the Committee continues its
inquiry into the reauthorization of the America COMPETES Act through the many
hearings scheduled through the remaining Congressional session.
Q4. NSF received a significant infusion of funds through the American Recovery and
Reinvestment Act (ARRA). Are you concerned about what will happen to the
2 Federal R&D Support Shows Little Change in 2008, National Science Foundation, Info
Brief September 2009.
3 Engineering & Research, Plunkett Research, website visited January 14, 2010.
4 Ibid.
5 U.S. Congressional Research Service. Federal Research and Development Funding: FY 2010
(R40710; Jan. 12, 2010), by John F. Sargent, Jr.

79
NSF budget once the ARRA money has been spent? What should Congress do
to sustain the momentum created by ARRA?
A4. Increased funding for basic R&D at the NSF, along with the DOEs Office of
Science and the NIST, has been a key priority for manufacturers because the work
they do leads to advances in areas critical to American manufacturers, such as energy efficiency, advanced materials design, nanotechnology and more powerful computer chips. The funds appropriated to the NSF through ARRA increased the NSFs
FY 2009 funding by approximately $3 billion and were critical in ensuring that the
funding amounts promised by the America COMPETES Act were fulfilled, While we
applauded this outcome, the goal set out in America COMPETESto double Federal
basic R&D funding for key research agencies such as the NSF by 2012may be put
in jeopardy by the demands of the appropriations process.
For instance, on June 18, 2009, the House Committee on Appropriations passed
H.R. 2847, the Commerce, Justice, Science, and Related Agencies (CJS) Appropriations Bill, 2010.6 The bill would have provided a total of $6.937 billion for the NSF
in FY 2010, $108.5 million below the Presidents request. The Senate Appropriations
Committee reported the bill on June 25, 2009,7 and the Senate passed the bill on
November 5, 2009. The Senate measure would have provided $6.917 billion for the
NSF, $19.7 million below the House passed bill and $128.2 million below the Administrations request. Finally, on December 16, 2009, the President signed into law
the Consolidated Appropriations Act of 2010.8 The omnibus act includes funding for
six appropriations for FY 2010, including the CJS appropriation, providing a total
of $6.927 billion for the NSF, approximately $118.0 million below the Presidents request.
While the appropriations process is never as fast or as uncomplicated as many
would hope, it is our concern that funding of critical basic R&D programs such as
those at the NSF will be lost in the shuffle as Congressional appropriators wrestle
with an uncertain economy, attempt to heed cries for constrained spending, and
work to comply with the new pay-as-you-go rules. Perhaps the best way to sustain
the momentum created by ARRA is to highlight the direct successes achieved by increased R&D funding to each agency, including jobs and opportunities created. For
example, the above-mentioned CRS report highlights that on May 27, 2009, the NSF
announced its first major award made with funding from ARRAfor construction
of the Alaska Region Research Vessel ($148.0 million). This dual-purpose vessel has
been designed to operate as both an icebreaker and a research ship, has the ability
to carry as many as 500 people, stay at sea for as many as 300 days a year, and
has an operational life span of 30 years. The NSF states that, The three-year construction phase of the project will support 4,350 total jobs, 750 directly at the shipyard and as many as 3,600 in the broader economy. 9 The award announcement
noted that the NSF intends to ensure that the vessel will be built in a U.S. shipyard. It is this very type of good newsjobs and opportunities for American workersthat will bring continued support for the federally-funded R&D envisioned in
the America COMPETES Act.
Q5. According to 2010 Science and Engineering Indicators released by the National
Science Board (NSB) last week, the Federal share of the nations research and
development (R&D) funding was an estimated 26 percent in 2008down from
30 percent in 2004. Does the fact that the Federal share of R&D funding is declining concern you? What is the impact of this declining funding trend?
A5. This concerns the NAM because its impact, as noted above, is to put our nation
at a competitive disadvantage with our global competition as they increase their
spending. Of course, it should also be noted that the business community has greatly expanded its share of R&D spending over the past five years, which would impact
the numbers in the above report. Further, only recently has the government picked
up its pace in funding federal R&D, as highlighted above with regards to fulfilling
the promise of the America COMPETES Act in doubling Federal funding for key research agencies by 2012.
6 H.Rept.

111149 (2009).
11134 (2009).
8 P.L. 111117 (2009).
9 National Science Foundation, NSF Announces First Major Award Under American Recovery
and Reinvestment Act to the Alaska Region Research Vessel (ARRV), press release, May 27,
2009.
7 S.Rept.

80
Additional Note:
During the hearing, Representative Rohrabacher asked me whether the NAM had
opposed the elimination of treble damages in H.R. 1908, the Patent Reform Act of
2007. The NAM sent a letter to Judiciary Chairman Conyers and Ranking Member
Smith on May 18, 2007, commenting on a number of aspects of H.R. 1908. In that
letter, we raised concerns with proposed changes to how damages for an infringement would be calculated. However, with his reference to treble damages, I assume
Representative Rohrabacher was referring to the issue of willful infringement,
which provides extra-compensatory damages as a form of punitive damages when
a defendant knowingly infringed on a patent the defendant knew was owned by the
plaintiff. In our letter, we did mention our support for the provision in H.R. 1908
that would reform the standard by which a court would determine whether a defendant willfully infringed on a plaintiffs patent rights. It is our understanding that
the treble damages would still be available as compensation for a finding of willful
patent infringement. I have attached a copy of the letter for your files.

81
ANSWERS

TO

POST-HEARING QUESTIONS

Responses by Deborah L. Wince-Smith, President and CEO, Council on Competitiveness

Questions submitted by Chairman Bart Gordon
Q1. Both of you touch on the importance of strong manufacturing programs in the
Federal Government. One area that we hope to include in a COMPETES Act
reauthorization is a comprehensive manufacturing research and development
program across agencies. We want to take a look at what is, currently being done
and what we might be able to do better. Wed be very interested in your specific
thoughts on this effort and any concrete suggestions you might have.
A1. Greater focus on research and development of manufacturing processes is a critical component to any overall manufacturing agenda. Not only can innovation bring
new ideas to market, but innovative solution to how those ideas are brought to market are equally as important. Further, in the Council on Competitiveness report Innovate America, we highlighted a collaborative program in upstate New York where
multiple companies, the state and the Federal Government partnered to create an
early stage manufacturing facility that enables companies small and large to demonstrate a products viability before proceeding to full-scale manufacturing. This
concept is worth further consideration.
Questions submitted by Representative Ralph M. Hall
Q1. As recommended in Mr. Donohues testimony, this Committee should be vigilant
about duplication of funding and efforts among the Department of Education,
the National Science Foundation, NASA, the Department of Energy, and other
Federal agencies. This was a major concern of ours when this Committee considered ARPAE. Likewise, we felt that some of the STEM programs established
within DOE are repetitious of existing programs. Please share with us those programs that you consider to be duplicative in the current version of COMPETES
or may have the potential for duplication in the reauthorization.
A1. The Council on Competitiveness shares the concerns expressed by Congressman
Hall regarding unnecessary duplication in STEM education programs, but unfortunately I am not able to cite specific programs we believe should be eliminated or
strengthened. The Council has argued strenuously for greater focus on STEM education, as it is the foundation for job skills required by the growth sectors of our
economy.
Q2. Taking into consideration the current economic environment and the fact that
we may need to make some tough funding decisions, are there any provisions
in the current COMPETES Act that could be scaled back or that you feel are
unnecessary? Are there programs that you feel are vital and must be preserved?
A2. As I detailed in my testimony, there are a number of critical provisions in the
America COMPETES Act that must be a part of any reauthorization. These include:
1. The Council on Competitiveness strongly urged the creation of a Presidents
Council on Innovation and the legislation included such a provision, yet the
reality has not matched the intent. What became clear as we sought the
input and advice from leaders within government and the private sector was
that the governments innovation policy was fragmented, poorly coordinated
and often running at cross purposes between agencies and departments. We
would urge a fresh look at this provision.
2. Predictable and steady support for long-term research across Federal agencies including the National Science Foundation, DOE Office of Science, NIST
and NASA is a vital first step toward an innovation-based economy. America
COMPETES made great strides in this area. Any authorization should continue this commitment.
3. Support for the National Institutes of Standards and Technologys (NIST)
work in the area of manufacturing is critical to many small and medium
sized manufacturers. These companies are key job producers in Americas
economy. NIST has made strides toward embracing innovation in manufacturing and this trend is worthy of the Committee and Congresss support.
4. Strengthening STEM education through programs at the Department of
Education, the National Science Foundation and other R&D agencies and de-

82
partments is important. I realize there are multiple programs that touch
upon this issue across the Federal Government and I will not try to analyze
each one separately here. I only urge the Committee to recognize that almost
every career today requires some grasp of or skill in science, technology, engineering and mathematics and we must ensure that all Americans have a
solid grounding in these fields.
As with any major piece of legislation, a number of provisions were added to the
bill as it moved through the Congress. Many of these were valuable additions, but
many also were never funded including, as I understand it, several reports. I would
urge the Committee to focus of actions rather than reports and on solutions rather
than meetings or summits, which inevitably focus on the problems.
Question submitted by Representative Ben R. Lujan
Q1. Key components of Federal technology transfer policy are the Bayh-Dole and Stevenson-Wydler Acts passed 30 years ago. What is your assessment of these Acts
on innovation and competitiveness of American companies? Also, after 30 years,
what recommendations, if any, on how the implementation of these Acts could
be improves given the current focus on innovation policy?
A1. While far from the being the perfect solutions, these Acts have helped move
ideas from the laboratory to the marketplace. The greatest ongoing challenge I hear
about in conversations with CEOs and university leaders is the widely disparate approach taken to intellectual property. Every university, every company tackles this
challenge differently (often differently within departments and/or divisions). Im not
sure this is a problem that can be solved by Federal Government action.
Question submitted by Representative Kathleen A. Dahlkemper
Q1. What types of skills do you expect bachelor, masters and Ph.D. level graduates
to have when entering your workforce, beyond just content knowledge in a particular STEM field? Are our colleges and universities today providing students
the training and opportunities they need to develop those skills? How can industry work more closely with colleges and universities to ensure that the students
are being educated appropriately for todays workforce needs?
A1. The best answer I can give is to reiterate an example I highlighted during the
question period at the hearingthe U.S. Naval Academy graduates all its students
with an engineering degree, but that is just the baseline. They also have language
skills, communications or business degrees, history, government, and writing
etc. . .. Success in the job market for American students will not be determined by
a single discipline, but at the intersection of disciplineswith a strong foundation
in STEM.
Question submitted by Representative Judy Biggert
Q1. How have your companies reacted to the economic downturn in terms of investments in R&D and new technologies? How do your members balance the recognized value of R&D in driving long-term success with the pressures to improve
short-term balance sheets by potentially cutting back on such investments?
A1. Its impossible to generalize across all companies as to their reaction to the recession. However, I will say that the leading edge companies are the ones that
maintained their investment in R&D during the downturn. They will be the ones
that emerge stronger and better positioned to capture market share in the months
ahead.
Questions submitted by Representative Brian P. Bilbray
Q1. The American COMPETES Act focuses on the much needed problem of underinvestment of basic science research. However, many of the small biotech companies in my San Diego district are just as concerned with commercialization of
technology. As Venture Capital money dries up, how can we best bridge this
valley of death. Do you think ideas such as proof of concept grants/programs
would work? What about changes to the SBIR/STTR programs. What other
changes do you think the Federal Government should consider in order to address this issue?

83
A1. Augmenting current project funding models is a key factor in bridging the valley of death. Increasing access to funding for later stages of product development
is essential in getting products to market. As I indicated in my testimony, many foreign investment groups are stepping in to fund late-stage projects that have stalled
in the absence of domestic funding sources. In these cases, the foreign investors are
reaping the benefits of both the initial U.S. investment as well as the revenues generated from a product in the market. Our approach to supporting investors needs
to be more comprehensive and focus on all stages of development. Doing so will certainly help put more American technologies in the market, and do it faster.
With regard to SBIR, I would strongly recommend expanding that program to
cover stage III funding, so we do not lose the potential job creation on investments
we have already made.
Q2. Overall Federal funding for basic research has been flat or declining on a realdollar basis since fiscal year 2005. What implications does this trend have for
the U.S. science enterprise?
A2. Americas economic viability is inextricably linked with our capacity as a nation
to develop and commercialize innovative goods and services for consumption at
home and abroad. Federal dollars are a catalyzing force in the development of the
groundbreaking technologies which allow America to remain competitive against foreign rivals. Declining Federal funding means fewer high-risk, high-high reward,
long-term projects will receive funding at a time when it is needed the most. Without Federal support, Americas science enterprises can and will be overtaken by foreign competitors whose governments are willing to invest heavily in R&D. Investing
Federal dollars in American science enterprises is an investment in the nations
economy and will help our nation remain the global leader in innovation and technology development.
Q3. The America COMPETES Act established specific funding authorization levels
for both NSF and the Dept. of Energy Office of Sciencealthough appropriations. for both agencies have not yet reached those recommended levels. Should
the America COMPETES Act reauthorization establish revised specific funding
levels for NSF and the DOE Office of Science? What are the advantages and disadvantages of Congress setting targeted funding levels?
A3. I would strongly recommend that the levels be maintained and that supporters
inside and outside of Congress work to bring the Appropriations funding up to those
authorized levels. Long term research requires stable predictable funding levels.
Q4. NSF received a significant infusion of funds through the American Recovery and
Reinvestment Act (ARRA). Are you concerned about what will happen to the
NSF budget once the ARRA money has been spent? What should Congress do
to sustain the momentum created by ARRA?
A4. The best thing Congress can do to maintain the momentum created by ARRA,
is to fund these agencies with steady predictable increases as authorized in America
COMPETES.
Q5. According to 2010 Science and Engineering Indicators released by the National
Science Board (NSB) last week, the Federal share of the nations research and
development (R&D) funding was an estimated 26 percent in 2008down from
30 percent in 2004. Does the fact that the Federal share of R&D funding is declining concern you? What is the impact of this declining funding trend?
A5. R&D is a key innovation pillar and encouraging the development of technologies, supporting nascent industries and funding groundbreaking research
through R&D investment is integral to Americas innovation strategy. Trends showing a reduction in Federal R&D funding are indeed alarming. Federal R&D dollars
have historically supported high-risk, far-horizon investments, the variety unlikely
to see the same level of support from the private sector. Diminishing Federal R&D
investment will directly impact Americas ability to retain its competitive advantage
in the global arena, and adversely impact the development of advanced marketable
technologies and services.