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Rob Preston
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10 Government Ideas To Spur Innovation

More investment in basic research, STEM education, and entrepreneurship "clusters" are among the proposals in a 160-page Commerce Department report.

A new Commerce Department report makes the case for aggressive federal government investment in the "innovative capacity of the United States" to stimulate economic growth and, ultimately, create high-paying, sustainable jobs. It's an exhaustive, well researched report, and one whose recommendations deserve further scrutiny.

The 160-page report notes how government investments in "the building blocks of innovation"--basic research, education, and infrastructure--have laid the groundwork for advances in information technology, science, medicine, transportation, agriculture, and many other areas over the years. The report clangs six "alarms," arguing that the U.S. is slipping when it comes to job creation, middle class incomes, manufacturing, innovation, education, and infrastructure. In his 2011 State of the Union address, President Obama touched on the themes the report delves into. "We need to out-innovate, out-educate, and out-build the rest of the world," Obama said, while also acknowledging that we must do so in a fiscally responsible way.

Building on those themes, the report makes the following 10 policy proposals:

1. Support continued, stable funding for basic research--the experimental or theoretical research with no direct ties to business applications or outcomes. Breaking down the federal government's total R&D spending, about 17% now goes to basic research, 22% to applied research, and 60% to development work. (Federal R&D spending is forecast to reach about $141 billion in fiscal year 2012, a slight decline from the year earlier.)

The Commerce Department's report notes, for example, that the biopharmaceutical industry continues to draw upon "exceptionally large" publicly funded basic research at the National Institutes of Health and elsewhere, leading to breakthroughs in the fights against heart disease, diabetes, cancer, and AIDS. U.S. public-private research partnerships were also instrumental in the development of the transistor and Internet, as well as the semiconductor industry and search engines.

A prominent sidebar in the Commerce report focuses not on basic research, but on the fruits of an Army-funded project in the early 1940s to develop ENIAC, or Electronic Numerical Integrator And Computer, to calculate information related to the firing of artillery. Subsequent collaboration between the U.S. military, universities, and the private sector led to at least 19 projects related to the development of computers, the report notes.

2. Enhance and extend the R&D tax credit to incent private industry to invest for the long term. This is sound policy, as it leaves R&D investment decisions to the private-sector companies that take on the risk, not to public-sector central planners with no skin in the game. (Beware the next Solyndra.)

Those two recommendations jibe with the findings of InformationWeek's Innovation Mandate survey, conducted two years ago with 624 business technology pros. When we asked in that survey what the U.S. government's role should be in supporting technology innovation, most respondents--as well as scores of experts we interviewed separately--gravitated to R&D: 63% said the feds should provide R&D tax credits to companies, 60% said they should fund university basic and applied research, and 58% said they should support basic and applied research at federal institutions (such as the National Institutes of Health and NASA).

3. Speed the movement of ideas from basic science labs to commercial applications. Here, we need to be careful that the feds don't try to pick commercial winners (and by default losers) by designating which specific ideas are worthy of a government kick in the pants.

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For instance, the administration says it's committed to working with industry and academia on "proof of concept centers" that promote development of green and "advanced manufacturing" technologies. (More on manufacturing later.) But who determines whether those technologies are more worthy of federal investment than, say, wireless broadband or analytics? If U.S. companies themselves aren't driving ideas from basic science labs to commercial applications, we need to ask why.

4. Address the country's shortcomings in STEM (science, technology, engineering, and math) education. U.S. colleges continue to lead the world, but this country's elementary and high school students are falling behind those in other countries, particularly in science and math, as measured by global testing programs. The Obama administration proposes funding more grants and organizing more public-private partnerships to extend STEM education to disadvantaged and "underrepresented" groups of students. It also wants to boost funding for STEM teacher training.

As I argued in a previous column, in response to those who say government officials and employers are exaggerating the urgency of boosting STEM education, STEM is about much more than job training. It's about preparing people to function in an increasingly technical society. It's critical to this country's future. But throwing taxpayer money at STEM education isn't necessarily the solution. The U.S. already spends almost twice as much money per student--across the primary, secondary, and tertiary levels--as the average developed country. So Obama's call for fiscal responsibility applies as much here as anywhere else.

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