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Remarks Unveiling COMPETES Report, Center for American Progress

Friday, January 6, 2012

Commerce Secretary John Bryson
Remarks Unveiling COMPETES Report, Center for American Progress

Thank you, everyone–it’s great to be here. Thank you, Neera [Tanden], for those kind words.

Thank you, also, to the Center for American Progress for not only hosting this wonderful event, but for the useful advice they provided as we drafted this report.

One year ago this week, President Obama signed into law the America COMPETES Act. This was an important bill that called on the federal government to look inwardly at our economic model, find areas of improvement and track down solutions. Among other requirements, the law instructed the Commerce Department to study the country’s economic competitiveness and innovative capacity.

That study was no easy task. I’d like to ask all members of the Commerce team who worked on drafting this report to please stand and be recognized. . . . Thank you.

The topic of this report is a matter of pivotal importance. Our ability to innovate as a nation will determine what kind of economy–what kind of country–our children and grandchildren will inherit, and whether it’s a country that holds the same promise for them as is did for our parents and grandparents.

After all, history tells us what happens when we don’t innovate, when we’re not focused on boosting economic competitiveness, when tax dollars and manpower are not wisely invested in good schools or new information technologies.

It impacts jobs and economic growth.

In fact, a 2009 report from the Information Technology and Innovation Foundation concluded that no advanced economy in the world has done less than the United States to improve its competitive position over the previous decade.

And that’s reflected in the lives of many American families today. Even before the recession, most families since 2000 saw their wages stagnate or decline while prices for some of the key necessities of life–health care, gas and tuition–all went up.

So America’s challenge isn’t just to strengthen the recovery; it’s to lay a new foundation for sustainable long-term economic growth.

The COMPETES report proposes an investment strategy that makes sense, a path forward that will lay down that critical foundation.

Innovation remains the key driver of competitiveness and job growth–and this report looks to the past to examine the factors that have helped unleash the tremendous innovative potential of the private sector.
Our study has found three major areas to target for strong federal support.

First, basic research. While private citizens and businesses are the top source of new ideas, the government plays a key role in supporting and developing their innovations.

Basic research is under-provided by the private sector, and governments around the world are recognizing the need for public support at universities and research institutions.

The U.S. has a proud tradition of supporting the work of federal and university labs. And it has helped change our world. The Internet, satellite communications, and aeronautics, among other job-creating advances, would not have been possible without the use of wisely spent tax dollars.

But our energies have dropped off. In 1980, the federal government funded more than 70 percent of basic research, most of which went to universities and university-based federal research centers. Since then, the government’s share of basic research funding has fallen to 57 percent. This trend must be reversed.

What’s more, the government must take an active role in protecting the intellectual property of entrepreneurs through patents, copyrights and other enforcement mechanisms. After all, intellectual property and innovation keep our entire economic engine humming. When companies are more confident that their ideas will be protected, they have more incentive to pursue advances that push costs down and employment up.

All in all a total of 40 million jobs. . . or 27.7 percent of all jobs in the U.S. economy. . . are attributable to industries that rely on robust intellectual property protections.

The second pillar highlighted by this report is education. For the last two centuries America has led the world in pioneering public education, first in elementary schools, then by providing public high schools throughout the country, and finally by establishing a system of public universities that were broadly available to all citizens.

We know now that highly skilled workers boost innovation and economic competitiveness. But assuring that our children have the skills employers need for the jobs of tomorrow requires dedicated government attention and resources at the state, local and federal levels.

Of critical importance are the science, technology, engineering and mathematics fields, or STEM fields. In 2009, about 12.8 percent of U.S. college graduates were in STEM fields, far fewer than the 40 percent of foreign students in the United States majoring in a STEM field. Significant economic competitors—such as South Korea with 26.3 percent and Germany with 24.5 percent–are on the long list of countries producing a much higher percentage of STEM graduates than our 12.8 percent. This must change.

The third area of investment is infrastructure. The infrastructure needed to support a modern economy relies on publicly provided resources. This goes beyond traditional infrastructure like highways, rail lines and ports, though these developments do help businesses compete by opening up markets and keeping costs low.

But the COMPETES report finds that we must do more to grow out a truly modern electrical grid with broadband Internet access in both urban and rural communities.

Here in America, 68 percent of households have adopted broadband, an almost eight-fold increase since 2001. And yet, a 68 percent adoption rate still leaves about a third of American homes cut off from the digital economy.

It’s worth noting that in particular, small- and medium-sized enterprises (SMEs) have benefitted hugely from the Internet. SMEs with a strong online presence created more than twice the number of jobs as firms not on the Web, creating 2.6 jobs for each one eliminated.

Education. . . innovation. . . and infrastructure. These are the areas where we cannot afford to cut the role of government. Indeed, investments in these areas will lead to a more competitive economy and higher growth.

Unfortunately, this report unearths the sad truth that federal funding for basic research, education and infrastructure has failed to keep pace with economic growth–and the innovative performance of the U.S. has severely slipped during the past decade.

To reverse these trends, the report finds the following actions as necessary:

We must increase and sustain the levels of funding for basic research by the federal government. Also:

  • A tax credit must be made permanent for private-sector R&D to give companies appropriate incentives to innovate and improve the way basic research is transferred from the lab into commercial products.
  • And we must follow President Obama’s lead and bring government support for R&D back to a level not seen since the Kennedy Administration, thus reversing the decades-long decline in federal funding of basic research.

As to education, we simply must invest in the skills and knowledge necessary to compete in an increasingly competitive worldwide economy where other countries are now surpassing us in the percentage of young people with college degrees.

Ongoing and new administration initiatives are addressing these challenges by making college more affordable, spurring classroom innovation at all levels and expanding the size and quality of STEM teacher ranks. To succeed in the global economy, government must encourage students and workers toward continued STEM education.

And for infrastructure, it’s clear that we have to invest in 21st century networks, including fostering access to high-speed internet for citizens and businesses no matter where they are located. The federal government must continue its strides forward toward a smart electricity grid and a robust network of broadband Internet access.

A fourth area of economic competitiveness mentioned in the COMPETES report also deserves our attention. A flourishing manufacturing sector in the U.S. is crucial to our competitive strength, and will continue to be a key source of economic growth and job creation.

Manufacturing pays higher-than-average wages, provides the bulk of U.S. exports, contributes substantially to our R&D, and protects national security.

Manufacturing’s role in our economy isn’t going away any time soon. In 2009, manufacturing made up 11.2 percent of GDP and 9.1 percent of total U.S. employment, directly employing over 11 million workers. Manufacturing is also the biggest source of innovation in our economy. Sixty-seven percent of all the business R&D in America is done by manufacturing companies.

Ultimately, without a strong manufacturing base, we can’t create enough good jobs to sustain a strong middle class. And without a strong middle class, we cannot be a strong country. If we build it here and sell it everywhere, we can become the world’s unquestioned greatest economic power yet again.

This administration does not believe government has all the answers. But it does believe it has a role to play in creating the conditions that make inspiration, innovation and invention more likely to happen.

This means providing support through the government that the private sector needs

  • To grow;
  • To create new products and services; and most importantly,
  • To generate jobs that offer good wages.

Ultimately, job growth is the metric that is most important. And long-term job growth will only occur in a world where entrepreneurs and researchers find it easy to pursue new ideas and to turn them into new products and successful new businesses.

These are the building blocks for fulfilling America's truest potential, and the conclusions in our COMPETES Act report can make that promise a reality.

Now I’d be happy to answer any questions you might have.