Technology and Economic Growth:
Producing Real Results for the American People
The White House
November 8, 1995
Letter from the President
November 8, 1995
The Honorable Laura D'Andrea Tyson
The Honorable John Gibbons
The White House
Washington, D.C. 20500
Dear Laura and Jack:
The White Paper we are releasing today makes clear how investments in
technology drive econoic growth, generate new knowledge, create new
jobs, build new industries, ensure sustained economic and national
security, and improve our quality of life. Indeed, over the past 50
years, innovation has been responsible for as much as half of the
nation's economic growth.
As you well know, spurring public and private investment in technology
has been a key element of my economic strategy. Through deficit
reduction, extension of the R&E tax credit, liberalization of export
controls, investments in educational technologies, increased support for
basic research, continued commitment to mission research and development
(R&D), and expansion of industry-led technology partnerships, this
Administration has enhanced our nation's economic and security interests.
Our country is now on the move. Our economic strategy is working, and our
economy is the strongest in the world. We are seeing continued strong
economic growth with very low inflation. The budget deficit has been cut
nearly in half since I became President and dropped three years in a row
for the first time since the Truman Administration. The American people
should be proud of their accomplishment.
Now is the time to finish the job and balance the budget. But we need to
do so in a way that reflects our core national values and lays a
foundation for strong private sector growth. That is why my
balanced-budget plan maintains vital investments in science and technology.
In contrast, under the guise of balancing the budget, Republicans have
vowed to cut federal spending on non-defense research and development,
including both basic and applied research, by a third over the next seven
years (as calculated by the American Association for the Advancement of
Science) and to gut or eliminate critical technology programs that are
enhancing America's ability to compete and win in the global marketplace.
These actions run counter to the purpose of balancing the budget:
ensuring the foundation of economic growth and prosperity. A pro-growth,
balanced budget should never sacrifice U.S. leadership in science and
technology. It is a foolish choice that does not have to be made but
that, if made, would have adverse consequences for years to come.
For more than 200 years, partnerships among the public and private
sectors have kept this nation at the forefront of technological and
industrial success. The results -- lasers, personal computers, the
Internet, microwave ovens, software, modems, jet aircraft, and
satellites, just to name a few -- play an important part in our daily
lives and our economy.
In the global economy, innovation means jobs, economic growth, and
increased living standards. It means opportunity -- and the opportunity
for families to prosper. That is why I will fight to promote innovation
and why my pln both balances the budget and secures our future. This is
the common ground on which American economic progress and quality of life
Technology Creates Jobs
Congressional Republicans are proposeing unprecedented cuts in critical
research that the nation needs for future economic growth and job
creation, better health, environment, and national security. These cuts
would mean lost jobs, lower wages, and a poorer quality of life for all
Since World War II, America has demonstrated an unwavering, bipartisan
commitment to U.S. leadership in technology. This commitment has paid
rich dividends to the American people, from the development of computing
technologies, like the Internet and personal computers, that are changing
the way we work, learn, and play; to satellites that are helping us
communicate and stay informed; to the delivery of DNA and innovative
technologies, like MRI, that are helping us live longer, healthier lives.
- Over the past 50 years, innovation has been responsible for as much
as half of the nation's economic growth. Economic growth means more jobs
and improved living standards.
- Americans hold millions of jobs in industries that have grown as a
result of wise public and private investment in R&D. These include (as of
1992): Biotechnology (79,000 jobs), Computers (479,000 jobs),
Communications (366,000 jobs), Software (450,000 jobs), Aerospace
(895,000 jobs), Semiconductors (317,000 jobs).
- In 1992, average pay for workers in these and other high-technology
industries was 60 percent higher than the average for all American workers.
The Republicans budget resolution would, as estimated by the American
Association for the Advancement of Science, cut by 30 percent in real
dollars the federal investment in non-defense R&D.
- Under the guise of balancing the budget, Congressional Republicans
would gut or eliminate public-private partnerships like the Department of
Commerce's Advanced Technology Program, the Department of Energy's energy
efficiency and renewable energy R&D programs, and EPA's Environmental
- These cuts could not come at a worse time: Japan will surpass the
United States in total government dollars spent on non-defense R&D by
1997, if the Congressional budget cuts proceed as noted above and the
Japanese government implements its plan to double R&D by 2000.
Investments in technology create high-paying American jobs. To gut or
eliminate these investments is tantamount to unilateral disarmament in
the battle for global economic competitivesness. The longstanding R&D
partnership between the government, industry, and academia must not be
dismantled. America's budget must be balanced in a way that protects and
enhances our future. That is why the President and Congressional
Democrats will fight to preserve investments in technology and America's
Technology and Economic Growth:
"Investing in technology is investing in America's future: a growing
economy with more high-skill, high-wage jobs for American workers, a
cleaner environment where energy
efficiency increases profits and reduces pollution; a stronger, more
competitive private sector able to maintain U.S. leadership in critical
world markets; an education system
where every student is challenged, and an inspired scientific and
technological research community focused on ensuring not just our
national security, but our very quality of life."
Producing Real Results for the American People
President Bill Clinton and Vice President Al Gore
Technology for America's Economic Growth, February 22, 1993
Driving Economic Growth and
Science and technology are powerful drivers of economic growth and
improvements in the quality of life in America. Advances in technology
have created millions of good new jobs, better health and longer lives,
new opportunities for individuals, and enrichment of our lives in ways we
would not have been able to imagine half a century ago. Superior
technology is the cornerstone of U.S. national security, just as U.S.
economic security depends as never before on our ability to master new
technology in areas like information, biotechnology, and advanced materials.
Improving Quality of Life
Because these investments have paid such rich dividends to the nation,
sustaining U.S. leadership in science and technology is a cornerstone of
President Clinton's economic and national security strategy. Put
simply, investments in science and technology produce real results for
the American people. As much as half the nation's economic growth since
World War II can be traced directly to advances in science and technology.
Today, however, America's technological leadership -- and its long
history of bipartisan support for science and technology -- is under
assault. Congressional Republicans propose to cut federal civilian
research and development by one-third over the next seven years --
research cuts unmatched in the history of America. These cuts are not
necessary to balance the budget, and will in fact undermine the economic
prosperity that a balanced budget is designed to ensure.
The Clinton Administration has vigorously supported a diverse portfolio
of investments in science and technology in pursuit of many national
objectives -- defense, environmental protection, health, and education
among them. This issues paper focuses on one of several areas that
would be disproportionately affected by planned Congressional
cuts: long-term R&D investments in the development and application of
new technologies that are enhancing America's ability to compete and win
in the global marketplace.
Investment in Technology Pays Off
Investments in research and development are among the highest-payback
investments a Nation can make. A recent report by the Council of
Economic Advisers notes, for example, that over the past 50 years
technological innovation has been responsible half or more of the
nation's growth in productivity.
We see the fruits of this innovation every day. Many of the
products and services we have come to depend on for our way of life in
America -- lasers, computers, magnetic resonance imaging (MRI), teflon
and other advanced materials and composites, communications satellites,
jet aircraft, microwave ovens, solar-electric cells, modems,
semiconductors, storm windows, human insulin, and others -- are the
product of federal science and technology investments made over the past
These innovations also mean jobs and economic prosperity for
America. It is no accident that our country's most productive and
competitive industries are those that benefited from sustained federal
investments in R&D:
Computers and Communications: Defense-related R&D to provide for
communications in the event of war led to what has become today's
Internet, the backbone of a global electronic communication system.
Federal investments in computing research have driven the evolution of a
$590 billion domestic telecommunications and information technology
industry, which supports more than 3.6 million American jobs. In just
the past 10 years, American employment in the computer and software
industries has almost tripled.
Semiconductors: The U.S. semiconductor industry developed as a
direct result of federal R&D investments and procurement activities.
During the 1980s, however, U.S. companies lost their lead in
semiconductor manufacturing, resulting by some estimates in
the loss of $2 billion in earnings and 27,000 American jobs between 1980
and 1986. Today, American semiconductor manufacturers are back on top
supplying 46 percent of the world's market for microchips while the
Japanese supply 41 percent. Industry experts credit much of this
resurgence to Sematech, a joint industry-government research consortium.
Biotechnology: Federally funded discoveries in biology, food
science, agriculture, genetics, and drugs upon which the private sector
has been able to build and expand a world-class industry today support $7
billion in annual sales and more than 100,000 American jobs.
Aerospace: The federal government traditionally has funded the
lion's share of aerospace R&D, and this support has made U.S. aerospace
companies the world's most advanced. Aerospace leads all other industry
sectors in net exports. In 1994, the U. S. aerospace industry shipped
nearly $40 billion worth of commercial aircraft and employed more than
Environmental Technologies: The federal government provides
nearly $2 billion a year in support of R&D related to environmental
technologies. Almost unheard of 10 years ago, more than 30,000
environmental technology and services businesses today employ 1 million
Americans in high-growth, high-wage jobs. The environmental
technology industry has annual sales approaching $134 billion in the
United States alone, a number that is expected to grow significantly by
the year 2000.
Energy Efficiency: Today, energy efficiency is a $2-billion
industry led by entrepreneurial private-sector firms and utilities, but
many of the products sold and installed by this industry are the product
of partnerships between the federal government and private industry.
These partnership efforts produced energy-saving light bulbs and other
lighting products, which alone generate $200 million in annual sales and
have saved American consumers $400 million in energy costs. New designs
and materials for windows have saved consumers another $760 million in
energy costs. These savings also decrease U.S. dependence on foreign oil.
These are not isolated examples: U.S. industrial strength in
medical devices, agriculture, manufacturing, transportation, and other
industries can be traced directly to sustained federal support for R&D.
From satellites, to software, to superconductivity, the government has
supported -- and must continue to support -- exploratory research,
experimentation and innovation that would be impossible for individual
companies or even whole industries to afford.
These partnerships in pursuit of innovation enable the private sector to
generate newknowledge and adopt novel technologies that ultimately lead
to commercial success, increased jobs, and healthier and more productive
lives for all Americans.
|Technology: Changing the Way We Live
|The results of public and private investments in science and
technology are deeply embedded in our daily lives and our economy. Here
are just a few examples:
Lasers: Discovered not quite 40 years ago and refined through
government, industry, and university research, today the laser is one of
the most powerful, versatile, and pervasive technologies in our lives.
Each day lasers are used by millions of Americans for high quality
reproduction of music recorded on compact discs and for fast, efficient
checkout in grocery and retail stores. Laser systems carry simultaneously
up to 1.5 million transatlantic phone conversations. Lasers are also used
for guidance and navigation, to print documents, for precision
measurements, for manufacturing, and throughout industry to perform
intricate tasks quickly and accurately. Lasers have become a powerful
tool for eye surgery; especially for the one percent of americans who are
diabetic and for whom laser surgery has decreased blindness by 60 percent.
Computers: Today, more than 70 million personal computers are
installed in the United States and between one-fifth and one-third of
U.S. households have one. Industries as diverse as entertainment,
education, communications, medicine, government, and finance rely on
computers to provide the goods and services that enhance our lives. These
industries use computers for applications from Automated Teller Machines,
to airline reservations, to the design and operation of airplanes and
automobiles, to medical diagnostic equipment, just to name a few.
Magnetic Resonance Imaging (MRI): The development of this
important medical tool depended on basic research and technological
applications. Nuclear physicists and chemists worked out the fundamental
technique of using radio beams and magnetic fields to analyze the
chemical structure of biological and other materials. The technique
initially was too slow for medical use, but modern electronics and
superconducting magnets developed with federal support helped craft the
scanners in use today. MRI is a remarkable diagnostic tool that allows us
to see into the brain, diagnose diseases, and test drugs for control of
the immune system without resorting to surgery or other invasive medical
A Federal Role In Advancing Technology
Private businesses are the principal actors in converting technology to
profits andjobs, and support much of the research needed to develop new
products, processes and technologies. But government has an
indispensable role to play in advancing new technology development -- by
ensuring a strong base of fundamental science, by providing a business
environment that encourages innovation and investment, and in investing
in research that is critical to the economy and social needs of the
nation, but that cannot attract adequate private support.
Investments in R&D have high rates of return, but as much as half the
return on an individual firm's R&D investment goes to other companies and
competitors -- not to the investing company. This "spillover" effect
means that private industry cannot and will not commit the level of
resources to R&D that is best for society. As a consequence,
government support for R&D has been a critical element of federal policy
for more than 200 years, and it has kept our nation at the forefront of
technological and industrial success.
Joint public and private cooperation in research and development dates
back to the birth of the Republic. It led to the invention of the
American system of manufacturing -- interchangeable parts and the machine
tools to make them -- by the government's Connecticut River and Harper's
Ferry armories and civilian inventors like Eli Whitney. Half a century
later, in 1863, it was a public-private partnership that guided the
federal establishment of land-grant universities to improve
the practice of agriculture and engineering, and supported further
investments after the turn of the century in agricultural extension
services and cooperative research. These government investments have
made it possible for American farmers to increase productivity a dozen times
over, feeding the United States -- and much of the rest of the world --
well and profitably.
As we move into a new information-age economy, the federal role in advancing
technology will be increasingly critical. The accelerating pace of
technological advance, shorter product cycles, and rapid worldwide
diffusion of technologies mean that many companies are finding it harder
to invest in long-term R&D than in the past. Moreover, many in industry
are undertaking a critical review of their R&D programs and are scaling
back R&D growth (chart 1, below). Since 1992, even premier companies
like AT&T, General Electric, IBM, Kodak, Texaco, and Xerox -- world
renowned for their investment in long-term R&D -- have dramatically
reduced their R&D spending.
Supporters of a reduced federal role in supporting R&D maintain that if the
government cuts back on R&D support, the private sector will fill the
resulting gap. Recent independent empirical analysis, however, shows
that over the past 30 years a decrease in federal funding for R&D has
been followed on average by a decrease in industry support for R&D. The
- ". . . there is little in the recent historical record to
suggest that industry will pick up the slack if government cuts back on
R&D spending. Only a radical change in the beliefs and behaviors of
industry would yield that result. In view of the contemporary sharp
reductions in R&D funding by many leading American corporations, such an
outcome seems unlikely."
That is why American businesses and the government must work together to
leverage their resources and ensure adequate investment in the
technologies that will fuel and sustain economic growth and job
creation. The Administration is committed to these programs.
Key Federal partnership programs in technology include:
- The Technology Reinvestment Project is designed to increase
Department of Defense access to affordable, leading-edge technology by
leveraging commercial know-how, investments and markets for military
use. For example, the Global Positioning System that guided American
troops during Desert Storm took advantage of commercial advances in GPS
- The Advanced Technology Program aims at developing high-risk,
high-payoff enabling technologies that otherwise would not be pursued.
Government supplies the catalyst. Industry conceives and executes each
project. ATP is accelerating development of electronics, new materials,
advanced manufacturing processes,information technology, and other areas
critical to future U.S. economic competitiveness.
- The Manufacturing Extension Program helps the nation's 381,000
smaller manufacturers battle foreign competition by adopting modern
technologies and production techniques. Survey data of companies served
by the MEP indicate an 8-to-1 payoff on federal investment in terms of
increased productivity, better paying jobs, and enhanced competitiveness.
- The Partnership for a New Generation of Vehicles is an alliance
between automobile manufacturers and the government to design and build
a vehicle that will be more fuel efficient and better for the
environment. Manufacturers are experimenting with alternative engines,
new aerodynamic designs, alternative fuels and new materials to build a
cleaner and safer car of the future.
- The Environmental Technology Initiative (ETI), a multi-agency
program, stimulates private sector investment in innovative
environmental technologies that reduce pollution and clean up the
environment. Streamlining activities alone from ETI can reduce
regulatory compliance costs by $700 million or more throughout the economy.
- Education Technology programs include creative partnerships such
as the Technology Learning Challenge Grant (TLC) program and the Star
Schools program, both at the Department of Education, which stimulate
R&D aimed a helping Americans acquire the skills and technological
proficiency they need to work and prosper in the 21st century. For
example, one TLC grant in Baltimore to a consortium of business and
academia will employ electronic networks to link high-school students
with employers in real work environments to strengthen the
school-to-work transition in an enterprise zone.
- Telecommunications Information Infrastructure Assistance Program
(TIIAP) is working to leverage private sector investments in
innovative telecommunications applications that demonstrating early,
concrete benefits in the areas of health, education, and community
Leadership Under Challenge
Since World War II, each President and every Congress has maintained an
unwavering, bipartisan commitment to U.S. leadership in science and
technology. This commitment has helped to stock the nation's storehouse
of innovative ideas, to create economic opportunities for the American
people, and to ensure that the United States remains the largest, most
vibrant and advanced economy in the world.
Today, the United States is undisputed as the leader in the emerging global
marketplace, but our lead is neither comfortable nor certain.
A recent report by the Office of Science and Technology Policy points out that, while we lead the world in 25 of 27
technologies critical to economic and national security, our lead in
virtually every one is stagnant or slipping. By contrast, the growth
curve in these same technologies is rising sharply in many other countries.
Meanwhile, foreign competitors are increasing federal support for
R&D. As a percentage of Gross Domestic Product, Japan and Germany
consistently out invest the United States in non-defense research and
development (chart 4 below). The Japanese government recently announced
plans to double its R&D spending by the year 2000. Recent analysis by
the Council of Economic Advisers suggests that the effect of the
Congress' plan to cut research funding and the Japanese
plan would be that by 1997, Japan will overtake the United States in
government support of non-defense R&D -- in total dollars, not just as a
share of Gross Domestic Product (chart 2, below).
Japan is not alone. Traditional economic powers such as Germany,
and emerging economies such as China, India, Taiwan, Singapore, and South
Korea are aggressively promoting investment in R&D and deployment of
technology (chart 3, below). Earlier this year, China announced that it
will increase publicly supported R&D by nearly 1 percent of GDP by the
The Congressional response to these aggressive moves by other countries
has been to propose cutting U.S. investments in non-defense R&D by a
third over the next seven years and gutting or eliminating technology
programs that enhance America's ability to compete and win in the global
marketplace. Rather than support a historically successful technology
policy with clear benefits to the American people, the 104th Congress has
targeted R&D for immediate elimination or crippling cuts, as seen in
the table below:
R&D Appropriations Action in Illustrative Technology Programs
| ||FY 1995|
|Department of Commerce|
|Advanced Technology Program
|National Info. Infrastructure
|Department of Energy|
|Partnership for New Gen.
|Environmental Protection Agency|
|Enviro. Technology Initiative||72||127||0
|Department of Education|
|Technology Learning Challenge||10||70||25
|Department of Defense|
These proposed Congressional cuts could not come at a worse time for America.
They jeopardize our economic and national security, and threaten to undo
the work of generations that has kept America strong and prosperous.
Source: National Science Foundation/SRS
Source: National Science Foundation/SRS
Building Partnerships for the Future
|"I've given the Congress a balanced budget that cuts all kinds of
spending; it eliminates hundreds of programs. But it increases our
investment in education, in technology, in research."|
--President Bill Clinton
October 23, 1995
The investments this country has made in education, science, and technology
have benefitted all Americans, regardless of political stripe, and
continue to bear a rich harvest of goods and services that keep our economy
growing. Continuing these investments is part of the President's overall
strategy for bringing this country into the 21st century, a strategy
that includes a strong education for America's children; a cleaner
environment where energy efficiency increases profits and reduces
pollution; a robust, more competitive private sector freed from
unnecessary regulatory burdens; and an inspired scientific and
technological research community.
This strategy is working -- in 1995, the economy is growing, inflation is
low, employment is high. New business starts are at an all-time high.
More than 7 million new jobs have been added to the U.S. economy since
this Administration came into office -- many of them in the high-skill,
Continued gains will require balancing the budget. And we've made
great strides: for the first time since the Truman Presidency, we've cut
the federal deficit for three years in a row. The annual deficit is
about half what it was in 1992.
But cutting investments in R&D is not the way to balance the budget;
such cuts not only run counter to our national history, they undermine
the true purpose of balancing the budget in the first place -- namely,
ensuring the foundation of economic growth and prosperity.
The Clinton Administration has initiated or expanded industry-led
partnerships in order to spur private-sector investment in innovations
with broad economic impact that are necessary to our nation's future.
Together these partnerships are a small fraction of our overall federal
R&D spending. But they provide a crucial link between the $70 billion
federally funded technology base and industry's own investments in
With careful choice and firm management, these modest investments
will yield new medicines, new forms of transportation, better educations,
a strong national defense, and other benefits. It is partnerships like
these that enable the private sector to pursue novel ideas or adopt novel
technologies that ultimately lead to commercial success, more jobs and a
better quality of life for all Americans.
 Supporting Research and Development to Promote
Economic Growth: The Federal Government's Role," The Council of
Economic Advisers, October 1995.
 "Private Funds Are Unlikely to Replace Cuts in Public
Funds for R&D in the U.S.," Christopher Hill, Professor of Public Policy
and Technology at George Mason University, June 19, 1995.
 National Critical Technologies Report, Office of
Science and Technology Policy, March, 1995.
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