ITIF

Congress should increase funding for the Department of Defense Manufacturing Technology (ManTech) program and encourage expanded use of Title III of the Defense Production Act and to help rebuild America’s defense industrial base.

Manufacturing is vital to U.S. national security, but as the U.S. industrial base has moved offshore, so too has the defense industrial base. In response to the country’s inability to reliably manufacture key defense components and to the proliferation of foreign counterfeit parts in the defense supply chain, Congress should double funding for the Department of Defense’s Manufacturing Technology (ManTech) program to approximately $450 million annually. Congress should further encourage federal agencies such as the Department of Defense and Department of Energy to make broader use of Title III of the Defense Production Act, which would help expand U.S. production capabilities to promote national defense while addressing industrial production shortfall issues.

Congress should create a Spurring Commercialization of Our Nation’s Research program that allocates 0.3 percent of agency research budgets to support university, state, and federal laboratory technology commercialization initiatives.

The current federal system for funding research pays too little attention to the commercialization of technology. Accordingly, Congress should establish an automatic set-aside program that takes a modest percentage of federal research budgets and allocate this to a technology commercialization fund. Specifically, Congress should allocate 0.3 percent of agency research budgets—about $250 million per year—to fund university, federal laboratory, and state government technology commercialization and innovation efforts. Half the funds would go to universities and federal laboratories that could use the funds to create a variety of initiatives, including mentoring programs for researcher entrepreneurs, student entrepreneurship clubs and entrepreneurship curriculum, industry outreach programs, seed grants for researchers to develop commercialization plans, etc. and the other half would go to match state technology-based economic development (TBED) programs.

Expand funding for the Engineering Research Center (ERC) and Industry/University Cooperative Research Center (I/UCRC) programs at NSF to spur research commercialization.

Congress should double the National Science Foundation’s funding for ERCs from the current base of $55 million up to $110 million over a three year period and increase funding for the IUCRC program from $7.1 million to $50 million over that time-frame. This would support the creation of additional I/UCRC centers and expand NSF engineering support provided to each center. Further, to ensure that ERCs represent a true joint university-industry research partnership, funding for all ERCs should have at least a 40 percent industry match by 2017.

Congress should enable SMEs to create Manufacturing Reinvestment Accounts.

To help SME manufacturers bootstrap themselves, Congress should establish a 401(k)-like “deferred investment” program for SME manufacturers allowing them to make tax-deferred investments into manufacturing reinvestment accounts, where the funds can be subsequently withdrawn tax-free if used for research and development, workforce training, or capital equipment investments. In 2011, Connecticut put such a program in place for its SME manufacturers.

Congress should create a United States Economic Competitiveness Commission.

One step Congress could take to bolster U.S. traded sector competitiveness would be to create a 13-member United States Economic Competitiveness Commission, which would release a report every other year providing an independent assessment of the competitiveness of the U.S. economy (particularly its traded sectors, including but not limited to manufacturing) in the global marketplace. The report would offer targeted recommendations to improve U.S. competitiveness across key economic sectors. Senate and House Republican and Democrat leaders would each appoint three members and the Administration one member.

Congress should create a new traded sector analysis unit within the federal government.

There is no entity in the federal government tasked with performing competitiveness analysis. The statistical agencies see their job as accumulating facts; not analyzing them. To remedy this, Congress should task the National Institute of Standards and Technology with the creation of a new traded sector analysis unit which prioritizes interpretation and analysis over collection and aggregation. This new entity should have two core functions. The first would be to regularly assess important aspects of overall U.S. traded sector competitiveness (e.g., trends in FDI, growth of traded sector jobs and output, changes in global market share of U.S. traded sectors, etc.). The second would be to focus on select traded sectors that are critical to the United States’ economic future (sectors where the United States has some competitive edge and where value added and wages are higher than average) and develop strategic road maps (by coordinating with DoD, DoE, NSF, and industry leaders) of how the federal government can promote the competitiveness of these sectors.

Congress should restore funding for the International Labor Comparisons (ILC) program at the Bureau of Labor Statistics.

BLS’s International Labor Comparisons program adjusts foreign data to a common framework, allowing one to compare the traded sector health and competitiveness of the United States against that of other countries. The ILC data provides complete and comparable time series for extremely useful indicators including manufacturing output, hours, compensation, and productivity, as well as labor force, employment, price, and industry statistics. Funding for the ILC program was terminated by the 2013 sequestration, yet this data is critical to understanding U.S. economic competitiveness, and should be restored by Congress immediately.

Require Congressional approval of “economically significant regulation.”

Business regulatory compliance costs U.S. businesses tens of billions of dollars annually. To help address this, the Administration should increase industry’s participation in the federal rule-making process, which would likely help reduce the complexity of regulatory compliance, emphasize cost/benefit analysis, and restrict the executive branch’s impulse to “legislate by regulation.” Moreover, Congress should consider passing the “Regulations from the Executive in Need of Scrutiny” (REINS) Act, which would require both houses of Congress to affirmatively approve, and the President to sign, any “economically significant regulation,” defined as any administrative rule with a projected impact to the U.S. economy exceeding $100 million, before it becomes law.

Require the Office of Information and Regulatory Affairs (OIRA) to incorporate a “competitiveness screen” in its review of federal regulations.

In an era when global trade was minimal and the dominance of U.S. competitiveness was largely assured, the nation could afford to impose new regulatory requirements with little thought given to their impact on the competitiveness of traded sectors. But today, regulation can and does increase costs on industries in traded sectors that in turn make them less competitive globally. To the extent federal regulation makes distinctions between companies, it’s often on the basis of size, but it should rather be on whether a firm is in an industry facing global competition or not. To address this, regulatory agencies seeking to impose regulations that affect traded sectors in non-trivial ways should be required to have these regulations undergo a review by OMB’s OIRA for their first-order competitiveness impact. Moreover, given the limited amount of time and attention available for regulatory review, the highest priority should be placed on reviewing those regulations that directly impact traded sectors.

The White House should create an Office of Innovation Review in OMB (i.e., an Office of Information and Regulatory Affairs for Innovation).

All too often federal agencies propose regulations with little consideration given to their effect on innovation. To remedy this, Congress should create within the Office of Management and Budget (OMB) an Office of Innovation Review (OIR) that would have the specific mission of being the “innovation champion” within these processes. OIR would have authority to push agencies to either affirmatively promote innovation or achieve a particular regulatory objective in a manner least damaging to innovation. It would be authorized both to propose new agency action and to respond to existing agency action. OIR would add an important new voice to the regulatory conversation. First, there would now be an entity speaking clearly and forthrightly on the centrality of innovation. Second, and more importantly, OIR would have more than just a voice; it would be able to remand agency actions that harm innovation. It would also propose regulation that benefits innovation as part of its mission. But OIR would not be designed to thwart federal regulation; as a matter of fact, in some cases, the existence of OIR might lead to increased federal regulation (e.g., more Environmental Protection Agency regulations might pass muster under cost-benefit analysis if innovation-related effects were calculated).
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