Innovation, including the diffusion of information technology throughout the economy, is key to boosting productivity, which in turn is at the heart of increasing living standards.

Understanding U.S. S&T Competitiveness: Rethinking NSF's S&E Indicators Report

April 7, 2014
| Reports

For 42 years the U.S. National Science Foundation has been producing its biennial "Science and Engineering Indicators" report, and since 1998 it has included a chapter “Industry, Technology and the Global Marketplace.” The NSF report is seen by many as an unbiased source for where the United States stands in technology-based competitiveness. The media reports the findings and many in the economic and technology policy communities look to the report to assess how United States global technology-based competitiveness. So when the report concludes that, “The strong competitive position of the U.S. economy overall is tied to continued U.S. global leadership in many KTI [knowledge- and technology-intensive] industries,” and “The US has the highest KTI share of GDP of any large economy,” it is not unreasonable for official Washington to take this as a good housekeeping seal of approval that all is well and to view any calls of alarm regarding the state of U.S. tech-based competitiveness as the “boy crying wolf.” 

But while the NSF report contains valuable information, its analysis of U.S. technology-based economic competitiveness is seriously flawed and misleading. There are a number of problems. First, the report relies on an overbroad definition of KTI industries, most of which are neither in global competition or technology-based. For example, the fact that the health care and financial services industries have grown much faster in the United States than in our competitor nations is seen by NSF as evidence of U.S. economic competitiveness, when in fact it is just the opposite. Second, the report conflates the absolute size of sectors with U.S. national competitiveness. Third, the report measures output using dollar denominated exchange rates which makes accurate international comparisons difficult. And fourth, the report fails to provide sufficient transparency for much of its key data, preventing outside analysts from knowing exactly what is included and excluded in the NSF analysis.When these first three limitations are controlled for the result is actually quite different than the official NSF findings. In fact, U.S. science and technology-based (S&T) competitiveness has declined significantly as other nations have put in place policies to make gains while the United States has not.

If the NSF is going to provide accurate and useful analysis of science and technology data related to U.S. competitiveness, it would be well served to significantly restructure the makeup and structure of the analysis in this key chapter to focus solely on science and technology-based, globally traded sectors. Doing so will provide policy makers with a more accurate assessment of the true competitive position of the U.S. S&T-based economy

Assessing U.S. Corporate Tax Reform in an Age of Global Competition

March 24, 2014
| Reports

Over the past two decades other nations have steadily lowered their corporate tax rates to the point where the United States now has the highest statutory rate in the world.  But we also have a very high effective rate relative to our competitors.  Moreover, unlike most nations, the United States taxes companies on world-wide income. To top it off, we ranks 27th in the generosity of our research and development tax credit. This report explains the basic issues involved in tax reform and documents how the United States has fallen behind in the global competition to attract and retain business activity. It summarizes the growing literature on the link between tax rates and investment and economic growth as well as the effectiveness of the R&D tax credit in incentivizing additional private research with large social spill-over benefits. Corporate tax reform is one of the most important things Congress can do to grow the economy.

The report makes the following points and recommendations:

  • The United States faces intense competitive pressure in keeping and attracting corporate investment and the jobs that come with it. This new competition limits the degrees of freedom policymakers have in crafting corporate tax policy.

  • Both U.S. statutory and effective corporate tax rates are significantly higher than those of most other countries.

  • The current policy of taxing the worldwide profits of U.S. companies puts them at a disadvantage when competing for world markets.

  • Although lowering the statutory rate is important, it is even more important to lower the effective rate. This is best done by expanding the few tax provisions, such as the R&D tax credit and accelerated depreciation, which clearly cause companies to expand investment, while also lowering the statutory rates.

  • Congress can pay for a reduction in the effective corporate tax by raising taxes on the individual side, through means such as a carbon tax, a value added tax, and/or taxing dividends, carried interest, and capital gains as normal income.

Reforming U.S. Corporate Taxes for a Globally Competitive Age

The President's FY 2015 Budget Underinvests in U.S. Competitiveness and Innovation

March 7, 2014
| Blogs & Op-eds

While there's much to like in the President's FY 2015 budget, it still underinvests significantly in U.S. competitiveness and innovation.

ITIF Debate: Is There is a STEM Worker Shortage?

Break the Budget Impasse? Push Growth.

February 1, 2014
| Blogs & Op-eds

Republicans and Democrats, fiscal hawks and doves can rally around a growth budget, which cuts taxes that impede growth and increases spending on federal programs that encourage it.


New National Lab reform bill introduced by Senators Coons and Rubio is based in part on report co-authored by ITIF.

Fed Stimulus Blunted as Software Replaces Hardware: Economy (1)

Bloomberg Businessweek
Given the cloudy economic outlook and lack of policy consensus in Washington, “businesses are trying to avoid long-term bets on fixed assets,” says Joe Kennedy.

Is Moore's Law Dead?

Latin America and the Caribbean trail other nations in productivity growth.

Manufacturing productivity growth in LAC countries over the past two decades has significantly trailed both that of developed economies and other developing nations (particularly Southeast Asian nations), in large part due to the slow rate of productivity growth among small and medium sized enterprises (SMEs). To address this, nations need to specifically improve innovation assistance services for SMEs which have been shown to positively impact productivity growth.