Congress should reallocate NSF monies to areas with stronger national economic impacts.

It’s time to clearly recognize that certain research programs the National Science Foundation supports are much more important to our country’s economic well-being and competitiveness than others, and explicitly take this into account when making budgetary allocation decisions. Therefore, Congress should direct, and the Administration should implement, a reallocation of NSF resources toward the kinds of science that has direct economic and industrial benefits for the United States. In particular, this means increasing NSF budgets for four key Directorates: 1) Math and physical sciences; 2) Engineering; 3) Computer and information sciences and engineering (CISE); and 4) Biological sciences, while permitting research budgets for the geosciences and social sciences to shrink. This is not a call to shrink basic science funding (indeed it should be increased), but it is a call to explicitly reorient it in such a way that best promotes U.S. national innovation-based economic competitiveness and the jobs and economic growth that stem from this.

Change the name of the National Science Foundation to the National Science and Engineering Foundation.

If Congress wants to take a step short of standing up a new National Engineering and Innovation Foundation, then at the very least Congress should change the name of the National Science Foundation to the National Science and Engineering Foundation. Doing so would make it clear to NSF leadership and the research community that NSF should give engineering more emphasis and visibility. And Congress should shift more of the new NSEF’s funding toward engineering, even if this has to mean cutting science funding.

Congress should create a National Engineering and Innovation Foundation alongside NSF.

Investments in science create new knowledge that is freely traded around the world, but it’s the application of that knowledge (e.g., engineering) that creates wealth through new products and processes. U.S. federal R&D dollars for basic science generate knowledge that is essentially a non-rival, non-appropriable public good that can be quickly picked up and leveraged by foreign competitors, explaining why many nations invest much less in basic research and more in applied. Unfortunately, the United States invests significantly more in scientific research than it does in engineering. Of the total federal research investments in science and engineering in 2008, approximately 1/7th was allocated to engineering development and 6/7th to the various scientific fields. It’s time to raise the profile of engineering within our national innovation system. While NSF supports phenomenal work, its central purpose is belied by its title. NSF’s primary mission is funding scientific research, its engineering support programs get shorter shrift. Therefore, Congress should create a National Engineering and Innovation Foundation as a separate entity operating alongside the National Science Foundation. The new National Engineering and Innovation Foundation would consolidate the current Engineering Directorate within NSF including the ERC and I/UCRC programs, the functional parts of the National Institute of Standards and Technology, the Department of Defense’s Manufacturing Technology (ManTech) program, and the Department of Energy’s Advanced Manufacturing office into a single entity with an engineering focus.

Congress should create a Deputy Director for Economic Growth and Innovation Position at NSF.

The National Science Foundation needs more resources devoted to assessing the agency’s impact on economic growth and innovation. Accordingly, NSF should create a new position for a Deputy Director of Economic Growth and Innovation. The position should be filled by an individual with professional competence in understanding the design of innovative systems, building rapid learning data systems, linking creative ideas from all disciplines, and organizing needed advisory committees. The Deputy Director should look to articulate policies that can accelerate recovery and sustain a GDP/per capita growth rate that is at least one percent above the pre-crash baseline.

Congress should allow government labs to take an equity stake in start-ups.

A significant barrier to government labs partnering with industry is that small businesses and start-ups often are not capable of working with the labs due to the cost of procuring lab expertise and access to facilities. Yet, in many cases, even a small amount of lab interaction with a small business or start-up could greatly impact a nascent company’s growth and could be the deciding factor between a start-up failing or not. Congress could ameliorate this issue by providing the labs with the ability to take an equity stake in a start-up that is interested in utilizing lab infrastructure to advance development of its proprietary technology. One option would be to allow federal labs to trade use of lab research infrastructure for a small equity stake in start-ups under the strictest of transparency. This would be the equivalent of providing advanced lab services in lieu of payment and, in return, the labs would receive royalties once start-ups advance into the market at very little, if any, risk to the taxpayers.

Congress should improve accounting rules for national laboratories overhead.

Congress could increase technology transfer out of U.S. federal laboratories by providing the laboratories additional overhead flexibility in two ways. First, Congress could remove the rigid accounting buckets from lab overhead and instead simply provide accounting rules for what the single tranche of overhead funds can be used for. Second, to increase support for technology transfer, Congress should take this reform a step forward by explicitly defining technology transfer to include early-stage technology maturation. In practice, this means the labs are capable of investing in lab overhead in early stage demonstrations that either removes technology barriers limiting private sector interest or re-purposes original research for new problems. In either case, these funds would leverage publicly funded research results that would normally sit on the lab shelf and instead move it closer to potentially successful market outcomes.

Congress should add more weight for technology transfer measures in the Department of Energy’s National Laboratories Performance and Evaluation Measurement Plans.

Despite the Congressional mandate to promote technology transfer and economic outcomes, the Department of Energy (DOE) holds technology transfer as a relatively low priority on the National Laboratories Performance Evaluation and Measurement Plans (PEMPs), otherwise known as the labs’ report card. In fact, technology transfer is not even one of the main eight criteria used for evaluation and is instead listed as the fifth bullet point underneath the sixth criteria on the list, carrying scant weight. As a result, the national labs are not incentivized to invest time, energy, or resources in facilitating technology transfer, despite potential financial upsides. Elevating this important function to its own category would have significant impacts on the management of the labs, and help to reverse the buildup of decades of skepticism and intransigence toward commercialization. Congress could quickly change the lack of incentive for technology transfer by requiring DOE to rank it as one of the key mission accomplishments under Section 1.0 of the National Laboratories’ PEMP.

Congress should fund the Regional Innovation Program.

Regional innovation clusters (RICs) are geographic concentrations of firms and industries that do business with each other and have common needs for talent, technology, or infrastructure that they aren’t always able to meet on their own. Moreover, because the benefits of geographic clustering spill over beyond the boundaries of a firm, market forces produce less geographic clustering than society needs. Thus, there’s a strong role for public policy to play in supporting regional innovation clusters. Regional innovation programs have proven a highly successful form of economic development for communities across the United States. Programs such as the i6 Challenge and the Jobs and Innovation Accelerator Challenge have helped local, regional, and state entities leverage existing resources, spur regional collaboration, and support economic recovery and job creation in high-growth industries, but more needs to be done. The 2010 Reauthorization of the America COMPETES Act authorized the Department of Commerce “to establish a regional innovation program to encourage and support the development of regional innovation strategies,” but this was never funded. The 2013 Reauthorization of the COMPETES Act should include at least $100 million for the regional innovation strategies program.

Congress should fund a pilot program supporting experimental approaches to technology transfer and commercialization.

A number of organizations throughout the United States are experimenting with novel approaches to bolster technology transfer from universities (and national laboratories) to industry and to accelerate the commercialization of university-developed technologies. The 2013 Reauthorization of the America COMPETES Act should support these types of novel approaches by including $5 million to fund experimental programs exploring new approaches to university and federal laboratory technology transfer programs. The program should be managed by the Department of Commerce’s Office of Innovation and Entrepreneurship. Organizations would apply for the grants and winning proposals would be selected on criteria such as: 1) how innovative they are in demonstrating a new model; 2) recent documented success of their program; and 3) willingness to publicly disclose best practices learned from their programs.

Congress should expand foreign trade zones to include a value-added tax (VAT) incentive.

Congress should include a value-added tax (VAT) incentive for investing in foreign trade zones. At least 143 nations have VATs, which have the advantage of being border adjustable, meaning that exports are not taxed whereas imports are, thus improving U.S. competitive advantage. If Congress created a VAT in foreign trade zones, establishments in the foreign trade zones would be eligible to pay VAT taxes instead of corporate income taxes and these taxes would be waived on all foreign exports.
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