Invest in research now to ensure future prosperity

When the Council on Competitiveness issued its first Clarion Call for Competitiveness in 2012, we stated, “Federal taxes and regulatory policies are outright counterproductive to investment in the United States.”

It was imperative to reform and simplify the tax code to stimulate investment and attract global capital. We suggested lowering the corporate tax rate to 23 percent, in line with other Organization for Economic Cooperation and Development (OECD) economies and reducing taxes on repatriated earnings to less than 5 percent.

{mosads}Every year since then, up to and including the most recent Clarion Call released last December, we urged Congress to act to help create a sense that the United States is open for investment.

With passage of the Tax Cuts and Jobs Act, we are now seeing the tangible effects of a more competitive tax code. Companies are committing to investments in U.S. manufacturing that will generate jobs. Billions of dollars left stranded overseas are returning.

Competitive advantages the United States holds in abundant low-cost energy, skilled workers and unparalleled leadership in science, technology and higher education are being leveraged by industry to further expand the economic impact of these new investments.

Combined with low unemployment, we are likely to see wages increase and/or workforce participation rates rise over the next several months. But now comes the hard part — and possibly the most important.

Many of the companies, products and jobs we are celebrating today can trace their genesis to the federal investment in research and early technology development made over the prior decades.

The scientific and technical foundations of the internet, smartphones, GPS and gene editing, among others, began as scientific exploration, research and development supported by agencies such as the National Science Foundation, NASA, the National Institutes of Health, the Defense Advanced Research Projects Agency and the Department of Energy.

It is incumbent on policymakers today to ensure that the citizens of United States of five, 10 and 20 years from now do not look back and ask why we cut back on the seed corn of innovation, rather than double down during a time of economic expansion.

Making this sustained commitment will not be easy. Financing the tax cuts through higher deficits risked shrinking the resources available for a sustained federal commitment to research, but if not now, when? During an economic slowdown? That seems an unlikely recipe for success.

Investments in research cannot be turned on and off like spigots. Students enter exciting new disciplines in anticipation of exploring research questions often requiring years of study.

Mission-critical agencies such as the Department of Defense and Department of Energy need long-term budget certainty to tackle grand challenges, develop game-changing technologies and keep the best and brightest researchers.

To underfund the federal commitment to research now is to create an innovation gap later that cannot easily be filled. The U.S. risks losing global leadership to countries like China in critical technologies from artificial intelligence to big data to automation, because other countries are making the necessary investments.

Those nations are implementing a range of policies and programs to maximize the impact. “Made in China” is a 10-year, $500 billion plan to make China a global advanced manufacturing leader.

In its Industrial Leadership segment, the EU’s Horizon 2020 research program commits more than $14 billion annually to advance enabling and industrial technologies. Through its Industry 4.0 initiative, Germany aims to invest $200 million for smart factories. South Korea intends to spend $2.7 billion on robotics alone.

The corporate tax rate reduction has successfully created an environment for investment by the private sector. Now, the government must do its part and commit to exploratory research to ensure the impact of the tax cut is the beginning of long term, sustained economic growth and not a short-term partial solution.

Deborah Wince-Smith is the president and CEO of the Council on Competitiveness, which has a membership consisting of CEOs of major corporations, university presidents and the heads of national labor organizations.