Prioritizing Productivity in Federal R&D Policy to Drive Growth

The greatest driver of economic progress since the dawn of the industrial revolution has been the development and adoption of new technologies, especially technologies that boost productivity. Historically, federal funding for scientific and engineering research has played a key role in this process. But government spending on research and development (R&D) has fallen significantly as a share of GDP over the last 40 years, and current R&D is not focused on advancing technologies that drive productivity. To get back on track, Congress and the administration should make boosting productivity an explicit mission for federal R&D and devote more direct and indirect funding to R&D that is focused on developing technologies for that purpose. Because of the growth it will induce and the tax revenues that will generate, expanding productivity-focused federal research spending will play a key role in reducing the future debt-to-GDP ratio.

On September 12, 2019, the Information Technology and Innovation Foundation (ITIF) held an expert panel discussion in the Rayburn House Office Building to delve into this critical issue. ITIF also released a new report at the event that lays out a productivity-focused agenda for federal science and engineering research and analyzes the effect it will have on GDP growth and the federal budget. This paper was prepared as part of a Concord Coalition project on fiscal responsibility and economic growth.

ITIF President Robert Atkinson opened the conversation by discussing the important role government plays to drive productivity growth. He then introduced Robert Bixby, Executive Director of the Concord Coalition. In his opening remarks, Bixby noted the government often does not devote necessary funds to R&D, which ultimately hinders the nation from enhancing productivity and economic growth.

Atkinson explained how the growth accounting in economics shows that most development comes from technological innovation. It is critical that Congress expand federal funding for R&D and target that increase to areas most likely to boost productivity. Atkinson stressed that robotics, autonomous vehicles, AI, additive manufacturing, material sciences, microelectronics and advanced computing, and life sciences are key areas of research that will drive future productivity.

Then Marcus Peacock, the Chief Operating Officer of the Business Roundtable, spoke about the impact productivity has in relation to both standards of living and economic growth. He discussed how the government should spend more time accelerating innovation, as R&D could be better targeted to benefit society.

Jeff Patterson, Chief Operating Officer of ASME, agreed, noting that safety concerns have a large impact on productivity, and breakthroughs in engineering research can lead to advancements in both safety and productivity.

Then Celia Merzbacher, Associate Director of the Quantum Economic Development Consortium (QED-C) for SRI International, talked about how uniting government, universities, and industry is one way to enhance the output and uptake of research. She added that the United States needs to monitor how export controls are implemented or innovation could stifle.

Gilroy Vandentop, Director of Corporate University Research at Intel Labs, emphasized how the ways in which R&D funding is spent are just as important as how much the nation spends.

The panelists then shifted the conversation to address concerns about how workers will be impacted by increased R&D and thus boosted productivity. Merzbacher noted that community colleges and professional societies must play a role in training and upskilling workers. Patterson acknowledged that even those workers with advance, up-to-date training will now need to be retrained many times throughout their careers.

Overall, the panelists agreed that increasing government spending on R&D is essential to advance technology, boost productivity, and to improve living standards. Congress and the administration must work to prioritize federal R&D in an effort to reduce the future debt-to-GDP ratio.

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