(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)
President Biden’s American Jobs Plan promises dramatically increased federal investments—to the tune of $2 trillion over the coming decade—in the foundational underpinnings of America’s innovation economy, notably research and development (R&D), innovation, and manufacturing. But while Biden’s plan contains many laudable proposals, they will only succeed if complemented by other elements of America’s innovation ecosystem, including maintaining strong intellectual property (IP) rights and strengthening workforce skills and education.
Most importantly, the plan calls for dramatically increasing federal investments in R&D, which matters tremendously because federal R&D investment as a share of GDP has fallen to pre-Sputnik levels, and the United States has slipped to 10th place among Organization for Economic Cooperation and Development (OECD) countries in national R&D intensity. The plan calls for $30 billion in additional R&D funding, $40 billion for upgrading research infrastructure in laboratories across the country (in both universities and federal agencies), and $50 billion for R&D into advanced and emerging technologies including semiconductors and advanced computing, advanced communications technology, advanced energy technologies, and biotechnology. To put this in context, current annual federal R&D investment stands at approximately $150 billion (with about half that for nondefense R&D), so if this were implemented as the president has proposed it would represent a plus-up of $12 billion annually for 10 years.
America has long led the world in funding basic science. That’s great, but it also creates knowledge that becomes a global public good freely appropriable to countries throughout the world. America has focused less on investments in applied or translational R&D, engineering, or technology commercialization activities that enable basic discoveries to be turned into innovative products that can be manufactured at scale in the United States. To address this, the Biden plan joins the bipartisan Endless Frontier Act, co-sponsored in the Senate by Majority Leader Chuck Schumer (D-NY) and Sen. Todd Young (R-IN) and in the House by Reps. Ro Khanna (D-CA) and Mile Gallagher (R-WI), in calling for the establishment of a technology directorate at the National Science Foundation (NSF) with responsibility for turning American scientific discoveries into technologies, and ultimately products and services, made in the United States. This represents a long-overdue enhancement of America’s innovation system.
America’s manufacturing economy has faltered considerably over the past decade (for instance, inflation-adjusted U.S. manufacturing output as a share of GDP actually declined by 3.5 percent from 2009 to 2019), so Biden’s “Make It In All of America” approach advances several much-needed provisions. As ITIF and Brookings have advocated, it allocates $20 billion for investment in at least 10 regional innovation hubs, helping promising metro areas transform themselves into self-sustaining innovation centers. Broadening opportunity to participate in America’s innovation economy is vital when nearly one-third of innovation jobs are concentrated in just 14 counties across the United States, and nearly one-half are found in just 40 counties.
Biden’s plan further calls for investing $14 billion in the National Institute of Standards and Technology (NIST) “to bring together industry, academia, and government to advance technologies and capabilities critical to future competitiveness.” This is quite positive and a significant increase, especially considering NIST’s budget now stands at about $1 billion a year. However, one weakness of the Biden plan is that it does not unequivocally call for expanding the scope of the Manufacturing USA network, an ecosystem of 16 institutes of manufacturing innovation focused on advanced-manufacturing product and process innovation in areas such as digital manufacturing, robotics, photonics, lightweight composites, etc. Standing up the Manufacturing USA network represented one of the most significant technology policy achievements of the Obama administration. It’s an effective network whose structure is already in place. Some of the $14 billion proposed for NIST may well be targeted toward Manufacturing USA, but it is lamentable that the American Jobs Plan does not clearly call for expanding the Manufacturing USA program.
Building on the president’s recent supply chain review executive order, the American Jobs Plan appropriately calls for $300 billion of total investment toward bolstering manufacturing supply chains and to supporting specific manufacturing sectors. As ITIF has advocated, it includes $50 billion in funding to make real provisions in the bipartisan Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act that would support the competitiveness of America’s semiconductor industry. It would also invest $50 billion to create a new office at the Commerce Department dedicated to monitoring domestic industrial capacity and funding investments to support production of critical goods as well as $30 billion over four years to counteract pandemic-induced job losses through new investments in medical countermeasures manufacturing and bio-preparedness and security. While certainly these are all good proposals, the Biden administration should specifically identify opportunities to invest in pharmaceutical R&D and innovation, as ITIF recommended in “Ensuring U.S. Biopharmaceutical Competitiveness,” such as by creating more biomedical focused Manufacturing USA centers and expanding funding for NSF-supported university-industry research centers.
Small manufacturers account for nearly 98 percent of all U.S. manufacturers, making them the backbone of America’s manufacturing economy; thus, helping them better compete is imperative. Here, the Biden plan calls for quadrupling to nearly $600 million annually support for the Manufacturing Extension Partnership, a program that bolsters the innovation and productivity potential of small manufacturers, and for which America invests a fraction the amount peer nations do. A recent study found a return on investment of $13.60 for every $1 the federal government invests in the MEP.
A range of modern digital manufacturing technologies are poised help make America’s manufacturers more productive and innovative, with return-on-investment timeframes as quick as one year. But with as many as one-quarter of small U.S. manufacturers struggling to even cover their weekly working capital costs, they often lack the resources to invest in such technologies. To overcome this gap, the Biden plan smartly calls for expanding existing capital access programs and creating a new financing program to support debt and equity investments for manufacturing. Another nice element of the plan is its call to in effect expand the tremendously successful State Small Business Credit Initiative (SSBCI), originally stood up by the Obama administration in the wake of the Great Recession, which leveraged $1.5 billion in federal investment into $8.4 billion in new capital in small business loans and investments from 2011 to 2015. Here, Biden would invest $31 billion in related programs giving small businesses access to credit and venture capital.
While these investments to stimulate American innovation and manufacturing are laudable, they’ll amount to little if America lacks the skilled workforce needed to produce advanced-technology goods. The challenge is magnified by the fact that federal investment in workforce training has fallen by 50 percent as share of GDP over past 30 years, while private investment has fallen 30 percent over the last 10 years. Moreover, the United States invests about one-sixth the OECD average, and one-twelfth the amount of leaders like Sweden, in active labor-market retraining programs. Accordingly, the Biden plan calls for $100 billion in workforce development programs, including $48 billion in American workforce development infrastructure and worker protection and $40 billion worth of investment into sector-based training along with a new Dislocated Workers Program. Another important aspect is supporting investments in science, technology, engineering, and mathematics (STEM) education, especially in minority and underserved communities, which matters immensely because, as ITIF writes in “The Demographics of Innovation in the United States,” both women and African-American and Hispanic minorities are dramatically underrepresented among American innovators.
Indeed, it’s important to recognize that while all these investment proposals are grand, if they are to succeed it will only occur within the context of America’s broader innovation system. In particular, robust IP rights incentivize innovation and ensure both that American discoveries can be protected against those that would pilfer them and that they can be commercialized in the United States. As such, the Biden administration must recognize that these investments will be for naught if well-working systems like the Bayh-Dole Act are not preserved. Accordingly, the Biden administration should complete the work initiated by its predecessor as part of NIST’s Return on Investment Initiative to unleash American innovation. That review arrived at a set of policy recommendations clarifying rights to federally funded inventions and licensing of government-owned inventions. Among the recommendations is one clarifying the scope of Bayh-Dole Act march-in rights. The NIST review calls for adding a provision that “march-in rights shall not be exercised by an agency exclusively on the basis of business decisions of a contractor regarding the pricing of commercial goods and services arising from the practical application of the invention.” As ITIF has written, this represents an important clarification, although it could be further improved by removing the words “exclusively” and “of the contractor” from the current language so that the intent is made clearer.
Lastly, the Biden administration must continue to resist calls for the forced disclosure of American enterprises’ IP, as some nations have called for as part of their request before the World Trade Organization TRIPS Council for a waiver of all IP rights for COVID-19-related products and technologies. While the United States certainly has a moral responsibility to facilitate the availability of needed COVID-19 vaccines and therapeutics to citizens of developing nations, as ITIF has written the central challenge here is scaling manufacturing, and there is absolutely no reason why abrogating IP rights is necessary to meet that challenge. In contrast, not only would such a weakening of IP rights undermine the conditions that were instrumental in America’s exceptionally rapid innovation of COVID-19 vaccines and therapeutics in the first place, it also would allow competitors such as China to get free access to IP and technologies (such as for mRNA-based vaccines and therapeutics) that American enterprises and government agencies like DARPA have spent billions of dollars developing over the course of decades. China has unrepentantly stolen American life-sciences (and all other industries’) IP for decades; to freely hand it over now by indulging in an unnecessary and misguided assault on global IP rights would represent an unmitigated catastrophe for American innovation.
Overall, President Biden’s American Jobs Plan proposes many laudable and much-needed investments and programmatic improvements to America’s innovation system. But they will only succeed if they are part of a holistic approach that’s complemented by other equally necessary policies, such as investments in workforce training and STEM education, and maintaining robust IP protections.