The U.S. Gets Serious About Catching Up to China in R&D

(Bloomberg Opinion) -- For a few years now, commentators (including myself) have been calling for a big boost in research spending by the U.S. federal government. In their book “Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream,” economists Jonathan Gruber and Simon Johnson called for devoting $100 billion a year to develop a network of new research centers around the country. A team at the Brookings Institution came up with a more modest but still substantial plan for $10 billion a year, funneled through universities.

Big ideas like this often tend to languish for years or decades before legislators decide to take a stab at implementing them — if they ever do. In this era of partisan posturing, that seems especially likely to happen. But amazingly, a bipartisan group of legislators is acting on the idea of major new research spending. The Endless Frontier Act would spend more than $20 billion a year on upgrading the National Science Foundation, to be renamed the National Science and Technology Foundation, with greatly expanded missions, powers and facilities.

Drawing on plans like those of Brookings and Gruber and Johnson, the agency's new technology directorate would create a series of research centers, based at existing universities, focusing on 10 key areas of technology. This is a great move because leveraging existing universities will yield much more bang for the buck than trying to build new research parks.

It will also help preserve research universities and the college towns around them. For the past few decades, universities have counted on increasing tuition to fund faculty salaries, graduate-student stipends, new research facilities and other research inputs. But enrollment of high-paying foreign students and state university funding both probably are in long-term decline. So federal funding needs to step in to sustain the research that in turn sustains both U.S. technological leadership and regional economies. One thing that's encouraging is that the Endless Frontier Act also budgets $2 billion a year for creating technology hubs in economically distressed regions (though it's not clear yet what form those hubs would take).

The new bill also recognizes that simply throwing money at research problems isn't always the best way to make progress. Many of the key government-funded innovations over the past few decades, including the internet itself, have come from the legendary Defense Advanced Research Projects Agency. DARPA uses a unique model for organizing research projects: giving free rein to powerful program directors, pulling in researchers from across different institutions and fields, and focusing on specific goals. The technology directorate of the proposed NSTF would have the ability to organize DARPA-like projects in addition to traditional research efforts.

If enacted, the Endless Frontier Act would help revitalize the U.S. economy at the national and regional levels and preserve institutions of higher education. But it has one more important goal: keeping the U.S. ahead of its new rival China in the emerging technology race. The U.S. cannot maintain its technological lead simply by kneecapping China with export restrictions or by putting a halt to Chinese espionage; it also needs to invest vigorously in its own capabilities, just as China has done. Big investments in research were one of the key ways that the U.S. won the original Cold War against the Soviet Union, and this contest will be no different. Many of the areas of research named in the act are either things China has invested aggressively in or things that would help U.S. industry stay ahead of Chinese competition — artificial intelligence, advanced manufacturing, semiconductors, biotechnology and so on.

There are two possible concerns about the plan. First, even with more than $20 billion a year, it isn't enough to restore U.S. technological leadership — at least, not if the Cold War is any guide. Federal research spending has declined from 1.2% of gross domestic product to only 0.8% since the late 1980s, and $20 billion is only 0.1% of GDP.

Ideally, the Endless Frontier Act will be only the start. The initial spending, although substantial, will actually be a proof of concept that can be scaled up later once the new directorate is created and researchers learn how to put the new flows of money to productive use.

Second, some scientists worry that a greater focus on technology and mission-oriented, DARPA-style research will detract from the NSF's traditional pursuit of basic research. But this probably isn't something worth agonizing over. The Endless Frontier Act would actually boost the budgets of the NSF's existing science directorates, which work on basic research and traditional approaches. Investing in applicable technologies and mission-oriented projects is a complement to traditional basic research, not a substitute. In fact, accidental discoveries made by scientists working on applied technologies can even create new directions for fundamental research.

A big push for federal research spending is one of the most obvious things the U.S. government could do to both benefit the U.S. economy and restore U.S. tech dominance. This bipartisan plan is a very encouraging sign that the U.S. isn't content to slip grumpily into decline.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.