The American Competitiveness Initiative

1. The American Competitiveness Initiative Dan Byers Deputy Chief of Staff Office of Science and Technology Policy Executive Office of the President BESC-CoFARM – March 14, 2006

2. U.S. Is the World Leader in Science and Technology • By nearly every relevant metric, the U.S. leads the world in science and technology. • President Bush’s FY07 Budget brings the total Federal R&D investment to a record $137 billion, an increase of over 50 percent since 2001. • U.S. R&D spending of over $300 billion is as much as the rest of the G-8 nations combined. • With only about five percent of the world’s population, the U.S. employs nearly one-third of all scientists and engineers and accounts for approximately one-third of global R&D spending.

3. Keeping America Competitive America's economic strength and global leadership depend on our ability to generate and harness scientific and technological developments. A comprehensive strategy of related investments and policies will help to strengthen innovation capacity and economic competitiveness, including: Federal investment in basic research and scientific facilities that enable discovery and development; A system of education that equips each new generation of Americans with the educational foundation for future study in technical subjects, and which inspires and sustains their interest; Institutions of higher education that provide American students access to world-class education and research opportunities in mathematics, science, engineering, and technology; Immigration policies that continue to attract the best and brightest; A favorable environment for private sector investment in research and development; An efficient system that protects intellectual property; and A business environment that stimulates and encourages entrepreneurship.

4. American Competitiveness Initiative (ACI) The American Competitiveness Initiative commits $5.9 billion in FY 2007 for research, education, and tax incentives. Over ten years, the ACI commits to increase funding for research by $50 billion and R&D tax incentives by $86 billion. Specifically, ACI includes: • Doubling, over 10 years, funding for innovation-enabling research at key Federal agencies that support physical science and engineering: the National Science Foundation, the Department of Energy’s Office of Science, and the National Institute for Standards and Technology within the Department of Commerce; • Modernizing the Research and Experimentation tax credit by making it permanent and working with Congress to update its provisions to encourage additional private sector investment in innovation; • Strengthening K-12 math and science education by enhancing our understanding of how students learn and applying that knowledge to train highly-qualified teachers, develop effective curricular materials, and improve student learning; • Promoting workforce training programs that train, retrain, and provide professional development opportunities for the science, engineering, and technology workforce; and • Increasing our ability to retain the best and brightest high-skilled workers from around the world.

5. ACI Research and Development • The centerpiece of the American Competitiveness Initiative is President Bush's commitment to double, over 10 years, investment in key Federal agencies that support basic research programs in the physical sciences and engineering. This amounts to a total of $50 billion in new investments in fundamental research. • For the sixth straight year the budget includes making the Research and Experimentation (R&E) tax credit permanent—an effort that will cost $4.6 billion in FY 2007 and $86.4 billion over ten years.  The President is also committed to working with Congress to simplify and modernize the credit to make it even more effective.

6. The Advanced Energy Initiative “America’s energy challenges require continued action. For the sake of our economic and national security, we must reduce our dependence on foreign sources of energy – including on the natural gas that is a source of electricity for many American homes and the crude oil that supplies gasoline for our cars.” -- President Bush, February 20, 2006 To achieve this objective, we will take advantage of technology by changing the way we fuel our vehicles and changing the way we power homes and businesses. The Advanced Energy Initiative provides for a 22 percent increase in funding for clean-energy technology research at the Department of Energy. Advanced Energy Initiative Goals – Fueling Our Vehicles • Develop advanced battery technologies that allow a plug-in hybrid-electric vehicle to have a 40-mile range operating solely on battery charge. • Foster the breakthrough technologies needed to make cellulosic ethanol cost-competitive with corn-based ethanol by 2012. • Accelerate progress towards the President’s goal of enabling large numbers of Americans to choose hydrogen fuel cell vehicles by 2020.

7. Overall R&D Budget • In the President’s 2007 Budget, total Federal R&D investment is a record $137.2 billion, an increase of $3.4 billion (2.6 percent) over this year’s (2006) R&D funding level and a 50% increase compared to 2001’s $91.3 billion. • Real five-year growth in the conduct of R&D budget has exceeded 40% for each of the last two years, the first time five-year inflation adjusted R&D outlays have topped 40% since 1967 and the Apollo era. • Basic research funding is $28.2 billion in 2007, up from $21.3 billion in 2001 - a 32 percent increase. • While the President’s 2007 Budget does not increase overall non-defense discretionary budget authority, a 1.9% increase in the non-defense R&D budget is requested.

8. Homeland Security Commerce Veterans Affairs Interior Transportation Environmental Protection Agency Education Other Total R&D by Agency FY07 proposed Agriculture NSF Energy NASA Defense HHS

9. Commerce Homeland Security Agriculture NSF HHS Energy Veterans Affairs Interior Transportation Environmental Protection Agency NASA Education Other Total Non-Defense R&D FY07 proposed

12. Interpreting R&D Budgets • Earmarks, accounting changes (re-baselining), and program changes complicate R&D budget comparisons. • For example, while the Federal Science and Technology (FS&T) budget is cut by 1 percent in FY 2007, this figure is distorted by earmarks that are not included in the request ($2.7 billion) and the transition of NASA’s Crew Exploration Vehicle from applied research into development (approx. $450 million). After accounting for earmarks, the FS&T budget is actually increasing by 3.5 percent. • Another way to compare budgets without “earmark distortion” is to use request-to-request levels. Using this method, the FY07 request is 1 percent above the FY06 request. • AAAS estimates that R&D earmarks have increased 63 percent since 2003. The President’s budget states that “earmarking is rarely the most effective use of taxpayer funds. In the case of science programs, the practice signals to potential researchers that there are acceptable alternatives to creating quality research proposals for merit-based consideration.”