Science and R&D

In an economy powered by innovation and technology, more proactive R&D policies are key to success.

R&D Tax Credits: They Work! Will Policy Maker’s Listen to the Evidence?

October 15, 2012
| Blogs & Op-eds

R&D Tax Credits do increase innovative activity. With no policy currently in place, will the United States become even less competitive by failing to create an environment that properly induces firms to innovate? Policy makers must act by making increasing and making permanent the R&D tax credit, or we will all pay the price.

Cuts to R&D from sequestration will result in job losses of approximately 200,000 in 2013.

ITIF estimates that sequestration of R&D would result in the U.S. economy having approximately 200,000 fewer jobs per year between 2013 and 2016. This would result in the U.S. unemployment rate being 0.2 percentage points higher than it otherwise would be.

Research Advocates Raise Alarm as Sequester of Federal Budget Funds Nears Deadline

The Chronicle of Higher Education
ITIF issued a report concluding that the threatened cuts in federally sponsored research would reduce U.S. economic output by $203-billion to $860-billion over nine years.

Eroding Our Foundation: Sequestration, R&D, Innovation and U.S. Economic Growth

September 20, 2012 - 12:45pm - 1:45pm
Russell Senate Office Building
Constitution Avenue and 1st Street NE
485
Washington
District of Columbia
20001

The Budget Control Act enacted in the summer of 2011 requires automatic cuts in discretionary spending to occur starting in January of 2013, commonly known as the sequestration, in order to achieve $1.2 trillion in savings through 2021. Read more »

Eroding Our Foundation: Sequestration, R&D, Innovation and U.S. Economic Growth

September 20, 2012
| Reports

Because of the Budget Control Act, budget enforcement procedures known as sequestration will commence January, 2013 unless Congress and the Obama Administration act otherwise. The sequester requires cuts in discretionary spending to achieve $1.2 trillion in savings from 2013- 2021. When compared to 2011 spending levels, this will lead to a cut of 8.8 percent (or $12.5 billion) of federally-funded research and development (R&D) in 2013. Because of the key role federal R&D plays in driving U.S. innovation, productivity, and economic growth; we estimate that the projected decline in R&D will reduce GDP by between $203 billion and $860 billion over the nine year period, depending on the baseline used. At $203 billion, the loss is equivalent to taking away from U.S. consumers all the new motor vehicles purchase over six months, over two years of airline travel, or six years of attendance at professional sporting events.

These R&D cuts will also result in job losses of approximately 200,000 in 2013. Reducing the budget deficit is important, but it should not and does not have to come at the expense of growth-inducing investments in areas like federal support for R&D. In fact, undermining growth capability is disruptive of a deficit control policy.

The report first explains how sequestration will impact R&D expenditures and the U.S. innovation system. Next, the report presents the conceptual model and previous research explaining how R&D funding impacts the economy at large. Subsequently, based on the latest academic research, we estimate the effects of the R&D expenditure cuts on: productivity and GDP, the knowledge base (patents and publications), the U.S. standings in the global innovation system, and finally employment. While ensuring that the federal budget crisis comes under control is critical, everything should not be “on the table” when doing this. Cutting federal support R&D, a key “fuel” for the U.S. innovation economy engine, would not only lead to a relatively smaller U.S. economy and higher unemployment , it would reduce U.S. global competitiveness precisely at a time when the U.S. economy is struggling to stay in the race for global innovation advantage.

Sequestration's Effect on Federal R&D Will Reduce GDP by Hundreds of Billions

WASHINGTON (September 20, 2012) - If Congress and the Obama Administration cannot agree on a long-term debt reduction plan later this year, across-the-board spending cuts required by law will hit R&D especially hard, resulting in GDP being at least $203 billion smaller in 2021 than it otherwise would be; according to Eroding Our Foundation: Sequestration, R&D, Innovation and U.S. Economic Growth, a report released today by the Information Technology and Innovation Foundation. Read more »

Eroding Our Foundation: Sequestration, R&D, Innovation and U.S. Economic Growth

September 20, 2012
The Budget Control Act would be a hard hit to federal R&D investments in life sciences, aerospace, defense and more, with significant long-term consequences to economic growth.

The Budget Control Act enacted in the summer of 2011 requires automatic cuts in discretionary spending to occur starting in January of 2013, commonly known as the sequestration, in order to achieve $1.2 trillion in savings through 2021. Among the areas that would be hardest hit are federal R&D investments in life sciences, aerospace, defense and more, with significant long-term consequences to economic growth. In an upcoming ITIF report, Eroding Our Foundation: Sequestration, R&D, Innovation, and U.S. Economic Growth, Drs. Read more »

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Impact of Sequestration on Technology and Innovation

September 17, 2012
| Blogs & Op-eds

Overall, it is abundandly clear that the across-the-board cuts are bad policy and should be avoided if possible. As ITIF wrote in Taking on the Three Deficits, while budget cuts are a necessary piece of debt reduction, indiscriminate budget cuts that harms America’s ability to innovation and grow are far from rational economic policy. Hopefully, as the impact of the potential sequestration cuts becomes more clear, this will provide Congress the motivation it needs to act and create a more innovation-friendly budget.

Winning the Race 2012 Memos

September 5, 2012
| Reports

As the 2012 presidential campaign moves in the final stage, ITIF is presenting general principles and specific recommendation ideas across several policy areas we believe the next President and Congress should adopt to restore U.S. global competiveness and prosperity.

As chronicled in Innovation Economic: The Race for Global Advantage, the United States is losing its once formidable edge as an innovator. Many other nations are putting in place better tax, talent, technology and trade policies, and reaping the rewards in terms of faster growth, more jobs, and faster income growth. It’s not too late for the United States to regain its lead but it will need to act boldly and with resolve.

Week by week until the November election, the Winning the Race series will put forward creative yet pragmatic ideas in policies affecting taxes, trade, education, broadband, the digital economy, clean energy, science and technology and other areas. Taken as a whole, the series represents a new Innovation Consensus to replace the outdated Washington Consensus.

Memo One (September 3, 2012): Boosting Innovation, Competitiveness, and Productivity

Memo Two (September 10, 2012): Trade and Globalization

Memo Three (September 17, 2012): Corporate Tax

Memo Four (September 24, 2012): Digital Communication Networks

Memo Five (October 1, 2012): Traded Sector Industries

Memo Six (October 9, 2012): Digital Economy

Memo Seven (October 15, 2012): STEM Skills

Memo Eight (October 22, 2012): Clean Energy

Memo Nine (October 29, 2012): Science and Technology

Memo Ten (November 5, 2012): Overcoming the Barriers 

Complete List of Policy Recommendations: Top Policy Recommendations for the Obama Administration to Help the United States Win the Race for Global Advantage

India leads the world in R&D tax generosity for both small- and medium-sized enterprises (SMEs).

India leads the world in R&D tax generosity for both small- and medium-sized enterprises (SMEs) and large firms by allowing a 200 percent super deduction for in-house R&D expenditures, a super deduction of 125 percent to 200 percent for payments made to contractors carrying out R&D in India, and a 100 percent deduction for R&D expenses that do not otherwise qualify for the other deductions. The United States, meanwhile, has allowed to the R&D tax credit expire with uncertain chances for renewal. Read more »

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