FOR IMMEDIATE RELEASE

WASHINGTON -- Today, the New DLC released a report that reveals that American investment in research and development (R&D) is expected to fall 2.4 percent in 2009 -- marking only the third time in 30 years that the nation has witnessed a decline. However, the report also finds that the Obama administration, in pushing through last February's economic recovery bill, headed off what might have been a much more precipitous decline of as much as 7.4 percent.

The new report, "Brain Freeze: The Downturn's Impact on R&D -- And What We Can Do About It," co-authored by DLC senior fellow Jessica Milano and vice president Marc Dunkelman, makes three principal findings:

1. R&D Investments Are Slated for their Biggest Falloff in 30 Years: Since the beginning of the current economic recession in December of 2007, American R&D spending has fallen an estimated 2.4 percent, marking only the third time since 1980 that the nation's investment in R&D has declined. However, the fall off would have been much worse -- as much as 7.4 percent -- had the federal government not invested heavily in R&D as part of President Obama's economy recovery package, signed into law last February.



2. Sustained R&D Investment Is a Key to Economic Growth: Economic data reveals that an economy's growth is driven, in large part, by the percentage of its output invested in R&D. Unfortunately, when businesses are forced to tighten their belts, R&D funding frequently falls off, making it more difficult for an economy to bounce back.



3. The U.S. Lags Behind Our Competitors when Measuring R&D Intensity: "R&D Intensity" measures the percent of a nation's general economic output invested in research and development. Today, with an R&D intensity just barely over 2.5 percent, the U.S. lags behind several of our foreign competitors -- Japan, Korea, and Sweden among them.

Despite signs of new life, many middle class American families continue to struggle amidst an economy that has yet to create the new jobs that breadwinners need. With an eye toward sparking new growth -- and with the knowledge that research and development is a key ingredient in any effort to sustain long-term growth -- Milano and Dunkelman suggest that the U.S. embrace a series of new policy ideas intended to raise the nation's R&D intensity above three percent.

1. Simplify the R&D Tax Credit and Make it Permanent: Today, businesses eyeing opportunities to direct their R&D investments into the U.S. are discouraged by a tax system that is unnecessarily complex, and subject to expiration. Nations around the globe are striving to win private R&D investment by enacting tax breaks much more generous than those offered by the IRS. To make the U.S. more competitive, Congress should enact, and President Obama should sign, a reconciled version of the bipartisan bills sponsored by Senators Max Baucus (D-Mont.) and Orrin Hatch (R-Utah) and by Rep. Kendrick Meek (D-Fla.) and Kevin Brady (R-Texas), which would significantly simplify the process of applying for the credit, and make it a permanent feature of American tax law.



2. Create a Special 'Green R&D' Credit: As Congress and the administration work to find ways to grow the nation's green economy, companies that invest in R&D intended to generate products that reduce energy consumption and diminish pollution should be given a break. For two years, the first of every five dollars spent on "green R&D" should be subtracted from a company's corporate tax bill.



3. Establish a National Institute of Science and Engineering: The United States is the globe's leader in the life sciences in large part because the federal government has made such a significant investment in the National Institutes of Health. Today, Washington should begin making a similar investment in science and engineering, by establishing a National Institute of Science and Engineering (NISE), whose job it would be to fund basic scientific research at educational institutions around the nation, create a network of university-based venture capital funds, and award fellowships to American students interested in pursuing doctorates in scientific and technical fields.



4. Expand the Work Visa Program Designed to Allow Foreign Scientists and Engineers into the U.S.: Until the U.S. begins producing more homegrown scientists and engineers, domestic businesses will depend on foreign talent to fill jobs that would otherwise migrate overseas. Unfortunately, the H-1B visa program, intended to allow highly-educated foreigners to fill jobs for which there is no eligible American candidate, is over subscribed. In 2008, companies made 163,000 applications for 65,000 slots. The U.S. should expand the number of slots to 200,000.

"Sustained growth tomorrow demands that we invest in innovation today," said Jessica Milano, a co-author of the study, and a senior fellow at the New DLC. "In the long-run, the money we invest in the pursuit of new technologies and products will grow tomorrow's job base."

"The Obama administration deserves credit for having pulled the nation's investment in research and development back from the abyss," said New DLC CEO Bruce Reed, co-author, with White House chief of staff Rahm Emanuel of The Plan: Big Ideas for America. "The president has demanded that efforts to pull the nation out of the recession put us on a glide-path to long-term economic growth, and investing in R&D will be a crucial element of that strategy."

The full text of the report can be found on www.dlc.org. For more information, or to speak with Bruce Reed or Jessica Milano, please contact Marc Dunkelman at mdunkelman@dlc.org.

The Democratic Leadership Council seeks to promote debate within the Democratic Party and the public at large about national and international policy and political issues. For additional information, web users may access the Democratic Leadership Council online at www.dlc.org, or contact the DLC's press office at (202) 546-0007.