Budget 2012: Innovation Despite Everything

With budget chaos deepening in Washington and the politics of gesture ascendant, it’s hard to know how seriously to take President Obama’s FY 2012 budget proposals–released against the backdrop of budget melodramas and the massive proposed program cuts being pushed by the House GOP.

Still, as a statement of priorities, the new outline must be taken seriously, especially where it advances an expansive and important agenda for new investment in U.S. economic transformation.

Such an agenda is exactly what the 2012 documents released this week (and foreshadowed in Obama’s highly thematic State of the Union address last month) advance. On multiple fronts the Obama administration appears to be doubling down on innovation as the linchpin of a two-step strategy to acknowledge fiscal austerity with trims across many programs while embracing the need to invest in innovation so as to transcend the current budget crisis through growth.

The new push–even if strongly rhetorical–is significant. As initially introduced a week ago in the White House’s updated “Strategy for American Innovation,” at least five new initiatives propose to extend preexisting administration efforts to invest in the basics of American innovation, promote market-based innovation, and catalyze breakthroughs on themes of national significance:

  • A new wireless initiative will help businesses reach 98 percent of Americans with high-speed wireless access within five years and also facilitate the creation of a nationwide interoperable public safety network.  The initiative will substantially expand the development of new commercial spectrum available for wireless broadband, by freeing up 500 MHz over 10 years. Expanding new commercial spectrum is necessary to avoid “spectrum crunch” and facilitate the rapidly growing wireless technology revolution. Paid for through voluntary incentive auction, the initiative will make available $3 billion for R&D investment in emerging wireless technologies and applications while reducing the deficit by nearly $10 billion.
  • A patent reform agenda calls for reducing the enormous backlog of patent applications at the U.S. Patent & Trademark Office (USPTO). By stalling the delivery of innovative goods and services to market, this backlog impedes economic growth and the creation of high-paying jobs. Once implemented, the USPTO’s proposed three-track model will allow applicants to prioritize applications, enabling the most valuable patents to come to market within 12 months.
  • Several new initiatives focus on improving K-12 education with an emphasis on graduating every student from high school ready for college and a career. For example, the new budget proposal calls for launching the Advanced Research Projects Agency-Education (ARPA-ED) with $90 million to support research on breakthrough technologies to enhance learning. The budget also supports continuation of the successful Race to the Top education reform challenge, with an expanded focus on school districts prepared to implement and sustain comprehensive reforms. And the budget seeks to encourage public-private partnerships that inspire more students–including girls and other currently underrepresented groups–to excel in science, technology, engineering, and mathematics (STEM). Finally, the budget request also seeks resources to support the preparation of 100,000 STEM teachers over the next decade with a $100 million down payment in the FY 2012 cycle to recruit STEM teachers and improve teacher training.
  • On clean energy acceleration, the administration is proposing a Clean Energy Standard that will help the nation reach a goal of delivering 80 percent of the nation’s electricity from low carbon sources by 2035. At the same time, the budget request proposes to expand the funding of the already game-changing start-up Advanced Research Projects Agency-Energy (ARPA-E) to $550 million and to create three more Energy Innovation Hubs (at a cost of $65 million or so) to solve challenges in critical areas in much the way Brookings has recommended. Beyond that, the budget also proposes a reauthorization of the Clean Energy Manufacturing Tax Credit (cost: $284 million) and provides funding for research, development, and deployment to help the U.S. reach the goal of one million advanced technology vehicles on the road by 2015.
  • And finally, the “Startup America” initiative–announced separately last month–seeks to facilitate entrepreneurship across the country, increasing the success of high-growth startups that create broad economic growth and quality jobs. The administration launched the Startup America initiative with new agency efforts that accelerate the transfer of research breakthroughs from university labs; create two $1 billion initiatives for impact investing and early-stage seed financing, among other incentives to invest in high-growth startups; improve the regulatory environment for starting and growing new businesses; and increase connections between entrepreneurs and high-quality business mentors. Private-sector leaders are independently committing significant new resources to catalyze and develop entrepreneurial ecosystems across the country.

These new initiatives, meanwhile, form a thematic front porch to the new budget’s continued maintenance of effort on growing the nation’s basic science and applied research enterprise. On this front, the new budget manages–barely!–to keep the nation on a path toward boosting U.S. public- and private-sector R&D to 3 percent of gross domestic product–the goal President Obama set out last spring.

To be sure, the top-line R&D request of $148 billion for defense and civilian R&D reflects a minimalist 0.5 percent uptick above enacted FY 2010 levels. (See a useful Office of Science and Technology Policy press release here). However, because the new outline trims defense-related research by nearly 5 percent, the document manages to propose a robust 6.5 percent ($4.1 billion) boost on the non-defense side that brings the nation’s civilian R&D enterprise to $66.8 billion. Thanks to that boost, moreover, the 2012 request at least in theory manages to stick to the Obama administration’s commitment to double the funding for the nation’s three most crucial basic research agencies: the National Science Foundation (NSF); the Commerce Department’s National Institutes of Standards and Technology (NIST); and the Department of Energy’s Office of Science.

All three of these important agencies would grow if the White House had its way. The NSF’s budget would grow 13.0 percent to $7.8 billion, with expanded focus on clean energy research, advanced manufacturing, and other emerging technologies. The Energy Department’s Office of Science would grow 10.7 percent to $5.4 billion, which includes funding for a new Energy Innovation Hub on Batteries and Energy Storage. And NIST will receive a 15.1 percent boost to $764 million for its research and facilities in advanced manufacturing, cyber security, smart grid, and nanotech.

In sum, whether slightly surreal or not, given the uncertainty of the present environment, it is important and appropriate that the White House has put down a strong marker for investment and growth through innovation even though the 2012 budget dialogue will be focused on cost cutting. In the long run, no better route to a balanced budget exists than strong economic growth through smart investments supported by entitlement reform. The reassertion of that basic fact at the outset of the 2012 budget cycle represents an important development.