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.

Timely, Targeted, Temporary and Transformative: Crafting an Innovation-Based Economic Stimulus Package

October 11, 2008
| Reports

As talk of a possible recession grows, so too does consideration of a second economic fiscal stimulus package. Rather than craft a conventional spending-oriented stimulus package focused solely on tax cuts for individuals and spending increases, Congress should craft a stimulus package of which at least a portion not only gives a quick shot in the arm to the economy but at the same time also boosts investment that spurs productivity growth and innovation, especially in information technology, which has been the engine of U.S. economic growth for the past decade. In an economy which faces key challenges going forward in areas such as the need to increase international competitiveness, raise productivity, and reduce greenhouse gas emissions, any stimulus package should also at least in part help address these challenges.

In a new report, Timely, Targeted, Temporary and Transformative: Crafting an Innovation-Economics Based Stimulus Package, ITIF lays out eight specific proposals that would not only spur spending and economic activity in the short run, but would also help address these challenges going forward. The proposals are:

  • Allow IT Investments to be Completely Expensed in 2009
  • Provide a Tax Credit for Investments in Health IT Made in 2009
  • Provide $2 Billion to Colleges and Universities That Invest in Needed Research
    Infrastructure in 2009
  • Provide a Tax Credit of 50 Percent for Investments in Energy Efficient Equipment in 2009.
  • Provide $735 million for Computers and Broadband For Low-Income Families with Children at Home
  • Provide an $8 Billion One-Time Infusion into the Highway Trust Fund to Spur Ready-to-Go Surface Transportation Infrastructure Investments
  • Allow U.S. Companies to Bring Back Foreign Earnings in 2009 at a Lower Corporate Tax Rate
  • Provide Forgivable Loans to Make Up State Budget Shortfalls, Provided That States Shore Up “Rainy Day Funds in Later Years

Any stimulus package should be timely, targeted and temporary, but there is no reason why at least a portion of it cannot also be transformative.

The Technology Imperative and The Role of Technology Policy In Driving Economic Growth

September 30, 2008 - 9:00am - 10:30am
The Information Technology and Innovation Foundation
1250 Eye Street, NW, Suite 200
Room 2
Washington, DC

Dr. Read more »

An Innovation Economics Agenda for the Next Administration

September 25, 2008 - 8:30am - 12:30pm
555 Pennsylvania Avenue, NW
Knight Conference Center Room 706
Washington, DC

As 2009 approaches with a new administration to take office, questions as to how to spur innovation will by necessity loom large on the policy agenda. Nonetheless, fresh thinking about how to craft an innovation-based economic policy, what innovation policies to implement and how to implement them effectively are in short supply. Read more »

An Innovation Economics Agenda for the Next Administration

September 25, 2008

As 2009 approaches with a new administration to take office, questions as to how to spur innovation will by necessity loom large on the policy agenda. Nonetheless, fresh thinking about how to craft an innovation-based economic policy, what innovation policies to implement and how to implement them effectively are in short supply. In this conference, ITIF and Silicon Flatirons will set forth both the conceptual framework and a set of specific policy proposals to raise the level of debate. Read more »

An Innovation Economics Agenda for the Next Administration

September 24, 2008
| Reports

In today’s economy, innovation – the development and adoption of new products and services, more efficient production process­es, and new business models – is the most important factor driv­ing increases in American standards of living. By putting innovation at the center of our nation’s economic policies, we can ensure robust economic growth and rising standards of living for all Americans. ITIF’s Innovation Economics Agenda for the Next Administration lays out eight key recommendations to spur innovation-led economic growth in the United States. Amongst others, these measures include: significantly expanding the federal R&D tax credit, allowing companies to expense new investments in IT in the first year, creating a National Innovation Foundation, and reforming patent and trade policies.

Comparing the Presidential Candidates' Technology and Innovation Policies

September 11, 2008
| Reports

Innovation drives long-term national economic growth and has in fact been responsible for 80 percent of the growth in the U.S. economy since World War II. This places technology and innovation squarely at the center of the issue – the economy – that voters have identified as the most important in the 2008 Presidential election. Both John McCain and Barack Obama’s campaigns increasingly recognize the central role that science, technology, and innovation play in economic growth and have developed specific policy positions on these issues. This ITIF policy brief compares and assesses the candidates’ technology and innovation policies across a number of specific issues areas, including: taxes, R&D funding, broadband and net neutrality, e-government, digital transformation, education and workforce development, trade, patent and intellectual property, and energy and the environment.

Read a blog version of this report

RAND's Rose-Colored Glasses: How RAND's Report on U.S. Competitiveness in Science and Technology Gets it Wrong

September 10, 2008
| Reports

In recent years a number of reports have raised alarm over the deteriorating state of U.S. science and technology (S&T) competitiveness. But a recent report by the RAND Corporation, U.S. Competitiveness in Science and Technology, argues that the U.S. continues to lead the world. RAND’s report has been interpreted to suggest that the “clarion call” of concern about threats to U.S. S&T competitive­ness is alarmist and overblown. However, RAND’s report contains serious structural and analytic flaws that misread the fundamental position of U.S. S&T competitiveness. In RAND’s Rose-Colored Glasses: How RAND’s Report on U.S. Competitiveness in Science and Technology Gets it Wrong, ITIF presents a detailed critique of the report showing that in contrast to RAND’s rosy assessment, America’s lead on a number of key S&T indicators is eroding rapidly, and in some cases vanishing entirely.

Transformative Technologies in the Past, Present, and Future: Implications for the U.S. Economy and Economic Policy

July 15, 2008 - 9:00am - 10:30am
The Information Technology and Innovation Foundation
1250 Eye Street, NW, Suite 200
Room 2
Washington, DC

ITIF hosted a forum with noted economist Dr. Richard Lipsey, Professor Emeritus of Economics at Simon Fraser University. Dr. Lipsey discussed the findings from his the award winning 2006 book, Economic Transformations: General Purpose Technologies and Long Term Growth. Read more »

Where Do Innovations Come From? Transformations in the U.S. National Innovation System, 1970-2006

July 9, 2008
| Reports

In this report, ITIF finds that the nature of the U.S. innovation system has changed dramatically over the course of the last 40 years. Using an innovative research method, UC Davis scholars Fred Block and Mathew Keller analyze a sample of innovations recognized by R&D Magazine as being among the top 100 innovations of the year over the last four decades. They find that while in the 1970s almost all winners came from corporations acting on their own, more recently over two-thirds of the winners have come from partnerships involving business and government, including federal labs and federally-funded university research. Moreover, in 2006 77 of the 88 U.S. entities that produced award-winning innovations were beneficiaries of federal funding.

These findings suggest that to succeed in the future, U.S. innovation policy must help support and reinforce our natural national advantage in collaboration. Thus, funding for the U.S. government’s technology initiatives should be expanded and made more secure, and the coordination of these technology initiatives across the federal government, particularly those that support partnerships between firms, universities, and federal laboratories, must be improved.

Frequently Asked Questions About the Creation of a National Innovation Foundation (NIF)

July 3, 2008
| Reports

1. How does NIF differ from industrial policy?

NIF is not industrial policy because it is not about picking industrial “winners”. Rather than taking the view that some industries are more important to the U.S. than others, NIF is based on the idea that innovation and productivity growth can happen in any industry and that the nation benefits regardless of the industry in which they occur.

Moreover, NIF decisions about which proposals to fund and which firms to assist would be based on collaboration with industry rather than Washington telling industry what to do. When businesses come to NIF with proposals, NIF would evaluate them with the assistance of knowledgeable experts from the private sector and academia.

Finally, a significant share of NIF funds would go to support states in the kinds of technology-based economic development activities that transcend politics. That is, funding will be available regardless of what party controls the legislature or the governor’s office.

2. Reorganizing existing agencies into the Department of Homeland Security (DHS) was difficult and complicated. Wouldn’t the creation of NIF involve similar problems?

DHS involved bringing together a large number of long-established agencies from many different parts of the federal government with very different agency cultures and missions. By contrast, NIF would bring together the activities of just six small programs—including some that are less than a decade old—from only three federal agencies. These would be the Manufacturing Extension Program (MEP) and the Technology Innovation Program (TIP) currently in the Commerce Department; the Workforce Innovation in Regional Economic Development (WIRED) in the Labor Department; and three commercial innovation programs in the National Science Foundation (NSF). These existing programs already have much in common in their institutional cultures and missions. In NIF, they would be combined with several complementary activities that are new to the federal government

Precisely because of the DHS experience, NIF is designed not to include every federal program that remotely contributes to innovation, but only a small core of complementary activities that directly contribute to non-farm commercial innovation.

3. Why not just coordinate existing federal innovation-related activities rather than create NIF as a new entity?

A loose coordinating structure for existing programs would not achieve a federal innovation policy. As it is, existing activities are fragmented and diffuse, underfunded, pay little attention to innovation in services, and do not take advantage of state-level expertise in promoting innovation. Even if additional funding, expanded missions, and better coordination could fix these problems, there would still be no person, program, or agency with the mandate and ability to improve the nation’s capacity to innovate. As a separate entity, NIF would have the responsibility for formulating innovation policy and carrying it out through assistance to businesses.

4. Couldn’t NIF become one, big political target?

Activities that have been threatened with elimination in the past could certainly become more visible targets for budget slashers if they were all brought under one agency. But this is a risk worth taking. Under the status quo, MEP, TIP, and the other programs whose activities would be folded into NIF will remain small, underfunded, neglected, and unable to realize their full potential to contribute to the nation’s economic well being. And they would still periodically be in danger of elimination. Right now, each program has its own constituency and none of these constituencies is powerful enough to guarantee that their program continues to receive funding or to play an increasingly prominent role. If brought together by NIF, however, all these separate constituencies would have a shared stake in the new entity and could conceivably speak with one voice. In this way, NIF could actually be less politically vulnerable than the separate programs and activities that now exist.

5. Why not just fund America COMPETES?

Congress should fund America COMPETES, but funding America COMPETES is not a prerequisite for creating and funding NIF. The main emphasis of America COMPETES is on improving some of the inputs to the innovation process, including educating more scientists and engineers and funding more scientific research. NIF is about improving the way those inputs are put together at the firm level to create more new products, services, technologies, business models, and ultimately jobs. Although we should strive for both goals – more inputs to innovation and a better functioning commercial innovation process — the nation would benefit enormously if we could have the latter even without the former.

6. Can we afford NIF?

NIF would have an initial budget of $1 billion per year and an eventual budget of $2 billion per year (about one-third of NSF’s budget). We could fund NIF by using funds that are currently slated to be spent on the programs that NIF would incorporate or replace (around $400 million in FY 2010), eliminating wasteful oil and gas subsidies (estimated at $1.7 billion in FY 2010), and using general revenue. General revenue financing is justified, even at the risk of increasing the budget deficit, because NIF is an investment in the nation’s economic future. Even if we funded NIF entirely from general revenue, NIF’s eventual $2 billion budget would be less than one-twelfth of one percent of the entire federal budget.

7. Why focus on and invest in innovation at all?

Innovation is the main driver of economic growth and ultimately determines the American standard of living. To maintain the high and rapidly growing standard of living that most Americans desire (and that is within the nation’s capacity to achieve), we cannot depend solely on the private economy to produce the required degree of innovation. At a time when America’s innovation leadership is slipping in comparison to other countries, we cannot continue to rely only on our strong market environment and our public support for research and education to ensure our global competitive edge. Other nations with advanced economies, including Britain, Japan and Finland, have recognized the need for government to work in collaboration with the private sector to boost innovation. It is time for the U.S. to do the same.

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