SOTU: In the Face of Spending Cuts, Making the Case for Investment in Innovation

January 25, 2011 | Devon Swezey, Yael Borofsky,

Tonight, President Obama is prepared to call for renewed federal investment in infrastructure, research, education, and clean energy technology in his State of the Union Address, according to his advisers. He is likely to argue that new productive investments in education and technology are central to generating jobs and laying a new foundation for economic prosperity. Indeed, the long, bipartisan history of American innovation is one of federal investment in new technologies--even in tough economic times.

But as Republicans in Congress continue their campaign to cut everything in sight (except for what might reduce the growing federal debt -- defense and entitlement spending), with seemingly little regard for the difference between spending and smart investment, it may be difficult for Obama to enact policies that could seriously address the deficit by growing the economy.

Yet smart government investments in key growth sectors have consistently formed the bedrock on which the American economy has expanded. As the Breakthrough Institute documented in a recently updated report, "Where Good Technologies Come From: Case Studies in American Innovation," the federal government has historically played a key role, either as initial funder or demanding customer, in developing many of the groundbreaking technologies that fueled America's technological leadership and economic growth. Some of these pivotal innovations include semiconductors, GPS, the Internet, biotechnology, jet engines, and nuclear power, among many others.

As David Leonhardt wrote in yesterday's New York Times, "the Internet is the most obvious product of a successful government research program, but it's hardly the only one." The Atlantic's Derek Thompson agrees, writing, "While Americans like to think of ourselves as independent garage-based innovators, it's clear that Washington money has played a key role in building America's Silicon Valleys."

These investments, made under Presidents both Democrat and Republican have spawned entirely new industries. On the Republican side, the list is long. Abraham Lincoln invested in the railroads, connecting the nation. Dwight D. Eisenhower invested in the nation's highways, paved the way for the development of commercial nuclear power with "Atoms for Peace," and signed the National Defense Education Act after the Soviet's launched Sputnik, fostering a new generation of scientist and engineers that went on to help drive the IT revolution. Nixon invested in early biotech innovation. Ronald Reagan, not content to allow U.S. leadership in semiconductor manufacturing to wither, started SEMATECH, a public-private consortium that helped keep U.S. manufacturers at the cutting edge. And George W. Bush oversaw a doubling in the research budgets of the National Institutes of Health, while championing the government-sponsored National Nanotechnology Initiative.

Ironically, it is these types of investments that today's congressional Republicans are dead set on eliminating. In fact, a recent proposal by the Republican Study Committee, a group of conservative lawmakers, proposed cutting key technology programs like the Manufacturing Extension Partnership, Economic Development Administration, Technology Innovation Program and applied R&D programs at the Department of Energy.

Yet, President Obama and the Democrats are not alone in recognizing that while some spending cuts are prudent, sparking economic growth through targeted investment is critically necessary to overcoming the deficit. In recent weeks, prominent conservatives have spoken out against Congressional Republicans' budget-cutting spree, urging them to exchange their hatchets for scalpels and protect or even increase important investments in key science and technology programs, even while trimming spending elsewhere.

These "innovation conservatives" -- a group that includes Washington Post columnist George Will, New York Times columnist David Brooks, and the American Enterprise Institute's Steven Hayward -- recognize that America cannot cut its way into a budget surplus. Instead, federal investment must, in Will's words, "rev the scientific engine" and lay a new foundation for economic growth.

Real fiscal hawks must look not just to trim the fat from the federal budget, but actually to preserve and even increase the most productive federal investments in areas like science, education and technology. These measures can drive the economic growth that will be essential to return the federal government to fiscal balance. If productive investments boosted economic growth by just one quarter of one percentage point per year, it would increase receipts from current taxes and reduce the federal deficit by $150 billion in 2020, (based on estimates by the CBO) -- and it can do that without raising tax rates at all.

The converse is also true: cutting productive investments would drag the economy back down and imperil the nation's fragile recovery, making it that much harder to get back into the black, let alone pay for the new tax cuts advocated by Republicans.

And let's remember that it was a booming economy -- uplifted by an IT revolution catalyzed by prior federal investments in computing and communications technologies -- that proved essential to generating budget surpluses for the only period in more than four decades.

Republican presidents, from Lincoln to Eisenhower to Reagan, knew that smart, limited, and direct federal investments in areas like science, education, and technology were key to America's economic vitality and a hallmark of true fiscal responsibility. The question now is whether today's Republican leaders will don this mantle, or will continue to recklessly pursue cuts to America's most productive public investments? As the State of the Union begins this evening, that question remains open ended...