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Archive for June, 2012

Real GDP '07 - '10 from Fed Data

When Markets Fail, Do We All Lose? The Evidence Isn’t As Clear As Reported

There is no doubt that the U.S. economy has not performed well in the last few years or even in the last decade as a whole. As ITIF has pointed out, we lost a larger share of our manufacturing jobs in the last decade than we did in the Great Depression and we rank 43rd of 44 nations in the rate of progress in innovation-based competitiveness. So, it may not have come as a surprise that a week ago, the Federal Reserve released a report showing how U.S. family wealth and income declined from 2007 to 2010.  However, most mainstream media sources took a single statistic (changes in median wealth) from the over 80 page bulletin and ran away with the wrong message.

When calculating the median wealth (assets minus liabilities), the Survey of Consumer Finances includes perceived unrealized gains as reported by those surveyed. And though there certainly was a decline in real output and consumption during the ’07-’10 period, the real changes in family wealth did not dropped nearly as far as those who gleaned onto the change in median wealth purport.  The Fed’s bulletin

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Federal Funding for R&D: Further Evidence That It Is Needed More Than Ever Before

Journal of Policy Analysis and Management CoverIn an era of ever tightening budget constraints, some, especially some conservatives now argue that federal funding for research is not critical for innovation. They claim that the private sector will make up for any losses in innovation resulting from a reduction in federal funding of R&D. In the latest edition of the Journal of Policy Analysis and Management (devoted to the examination of science policy and innovation), two scholarly articles clearly rebut this view.

Furman et al. argue that even modest science policy shifts can have a significant influence  on the composition of research as well as the pattern of international R&D collaboration. They find that following the United States’ 2001 policy, which banned the federal funding of human embryonic stem cell research (hESC); U.S. production of hESC scientific research lagged 35 to 40 percent below anticipated levels.  In other words, cutting federal funding for particular areas of science R&D results in significantly less innovation in that area.

At the broader level, Blume-Kohout presents similar results. However, this study relates to the benefits of increasing federal research support to research output. Specifically, it is revealed that increasing NIH funding

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Nellis AFB Solar Panels

The Work to Further Clean Energy Innovation Continues

This was Arun Majumdar’s last week as director of the Advanced Research Projects Agency-Energy (ARPA-E). His leadership will be missed, but he leaves the agency in great shape and also left clean energy stakeholders with some final thoughts via an insightful phone interview with The New York Times.

Majumdar starts by counseling patience in regard to the energy innovation process, noting, “In the energy sector, it takes sometimes a decade or more for new technologies to flourish and scale in size and volume. It’s not just the technology that one has to innovate. There are things like finance and many, many other aspects that are important.” He also makes the important point – one that ITIF has continuously emphasized – that policymakers should not be scared off by failure, pointing out that success in any one of ARPA-E’s investments would be a “game changer” and in any case, the agency now has the “discipline and the process of understanding when to discontinue the project and not waste taxpayer money when we think it’s not panning out.”

ARPA-E’s founding director also touches on the importance of a government role in

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Van Schewick’s View of Net Neutrality and Quality of Service

Network Quality of Service (QoS) is the technical issues that lurks behind the policy issue of net neutrality. While there are many subtle variations of net neutrality, the concept as a whole comes from the idea that the Internet should have a “soft middle” that exerts little or no influence over the behavior of users and applications, and a very robust set of services at the edge that handle all the problems of congestion, charging, and innovation. This distinction is the point of the “end-to-end arguments” that seek to encourage designers of distributed systems to build vague and general systems in which all application-specific features are added as late as possible to the design. If elections were structured according the end-to-end arguments, there would not be any primaries, voters would simply select from a list of 50 candidates in the general (perhaps using some form of multiple-choice voting.)

The earliest papers on net neutrality, most notably Tim Wu’s “Network Neutrality, Broadband Discrimination” and Atkinson and Weiser’s “A Third Way on Net Neutrality” carefully distinguished the Internet’s behavior from the behavior of the individual networks that compose

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ITIF Report on Green Mercantilism Discussed At Senate Hearing on Global Clean Energy Trade

This morning the Senate Energy and Natural Resources Committee held a hearing on the impact of China’s policies on the U.S. clean energy industry. China’s impact is of the utmost importance because as we speak, the United States is in a race for leadership of the rapidly growing clean energy economy and the economic growth and jobs that come with it. But this fierce competition is being undermined by countries that don’t want to play by the rules of global free trade. In a new ITIF report, Green Mercantilism: Threat to the Clean Energy Economy, some countries are adopting policies that give their domestic firms an unfair advantage, undercutting more advanced competitors, stifling innovation, and limiting the global communities ability to mitigate climate change.

The report documents in a first-ever survey how mercantilism is pervading the nascent clean economy, including the use of unfair trade practices like import tariffs, forced technology transfer, IP theft, currency manipulation, export dumping, unfair production subsidies, and limits on government procurement.

While mercantilism is present in nearly all economic industries, the rise of “green mercantilism” is troubling because it impacts a key growth

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Two Children Sharing

We Have a Sharing Problem

The United States has a decentralized statistical system with agencies such as the Census Bureau, Bureau of Labor Statistics (BLS), and Bureau of Economic Analysis (BEA) each producing their own economic metrics. There are advantages to this system; however, there is currently one big flaw: the agencies do not work from an internally-consistent set of data. In fact, they are barred by law from sharing important microdata with one another, and this leads to statistics on the U.S. economy that are badly inaccurate. These accuracy problems affect everything from the BEA’s national and state GDP statistics, to the BLS’s and the Census Bureau’s (separate) employment, payroll and establishment statistics, to statistics on the productivity growth and trade balances in strategic sectors such as manufacturing. And because these statistics are used by the federal government to make fiscal and monetary policy decisions, this data sharing problem leads to misdiagnosis of economic problems and ineffective policies. Moreover, the lack of data sharing leads to work redundancy (many agencies procuring their own data to produce similar statistics), increasing budget costs while also increasing the reporting burden on private businesses. The resolution to this problem is rather simple. Congress should amend the Internal Revenue Code such that statistical agencies such as the BEA and BLS gain access to the Census Bureau’s Business Register (which is derived from IRS data). ... Read the rest

Public Investment in Innovation Central to A123 Advanced Battery Breakthrough

Today A123 – a leading U.S. vehicle battery firm – announced it has developed a breakthrough lithium-ion battery that could potentially make electric vehicle (EV) battery packs lighter by not requiring a heating and cooling system while also extending the battery packs lifetime. This advance is a notable step towards addressing some of the central performance issues plaguing EVs. But while the battery innovation is an important milestone in EV development, it’s also a good example of how government investing in research, development and deployment (RD&D) is more important to making EVs competitive with gasoline vehicles than subsidizing the deployment of existing technologies.

A123’s new technology called the Nanophosphate EXT lithium-ion battery was developed with key support from the U.S. Advanced Battery Consortium (USABC), a public-private partnership among the National Labs, DOE, Ford, General Motors, and Chrysler. The consortium invests in pre-competitive R&D projects to develop higher-energy, better performing, and cheaper energy storage options for fuel cell, hybrid, and electric vehicles. USABMC is funded through a 50/50 cost share between the DOE and the private sector firm contracting the R&D.  Projects are chosen on a competitive basis through a cooperative

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Genius Loves Company

Useful comment by Suzy Khimm about the source of innovation and Perry Rotella about how innovation happens in companies.  Solitary genius is only part of the innovation ecosystem. That has always been true. It’s especially true now. As anyone who has been to the lab at Menlo Park can attest, Thomas Edison’s intensity was imparted on a team, who often slept on cots in the lab along with their boss, when working toward what seemed like a breakthrough.  In today’s world, how we do things is as much innovation as the products themselves.  The U.S. tax code needs to better reflect that. When Congress takes up corporate tax reform, lawmakers should consider a few ideas from ITIF. First, make clear that process R&D qualifies for the R&D tax credit. Currently, the way Treasury interprets the law can make it difficult for companies to take the credit for process innovation. In addition, it is easy for process innovation to spill into the market.  If we make it easier and more economically worthwhile to try new ways of producing, the more firms will invest in ways to improve productivity, and the more competitive they will be. It might also make the U.S. a more attractive place to expand manufacturing operations. Second, Congress should use the tax code to promote more collaboration between companies as well as non-corporate entities. ... Read the rest

ARPA-E Energy Innovation Summit 2011, Washington,DC

ARPA-E Has Found Its Footing Just Fine

Yesterday, the U.S. House of Representatives passed the FY2013 Energy and Water Appropriations Bill (H.R. 5325), which, as was previously observed on ITIF’s blog, curbs several renewable energy programs in comparison to FY2012 levels and the FY2013 presidential request. These potential cuts could not come at a worse time, seeing as how federal clean tech policy support is already set to dramatically decline.

The bill’s cut to the budget of the Advanced Research Projects Agency-Energy (ARPA-E), however, is of particular concern. If the House has its way, the agency would only get $200 million, in stark contrast with the $275 million it received for FY2012, the $312 million set out by the corresponding Senate bill, and the $350 million proposed by President Obama. As Politico reports (subscription article), the House Energy and Water Appropriations subcommittee chairman, Rodney Frelinghuysen (R-NJ), “has opposed attempts to increase funding for ARPA-E because the 3-year-old program, while promising, he says, still needs to find its footing.”

Nevertheless, as ITIF has pointed out, departing ARPA-E director Arun Majumdar is leaving the agency with a very impressive track record.

“We have to cut back somewhere,”

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Ed Luce and Rob Atkinson

Time to Start Thinking And/Or Drinking

I had the pleasure to host a discussion yesterday at ITIF with Ed Luce of the Financial Times who is also author of a great new book “Time to Start Thinking: America in the Age of Decline.” There is much in the book worth reading, including how he documents the U.S. losing its competitive edge. But I want to focus on one thing Ed discussed: the lack of real action in Washington to effectively respond to the competitiveness challenge. The standard response is to blame Washington. But Ed, in my view, rightly talked about the responsibility that needs to be borne by Americans themselves. They don’t want to pay the higher taxes needed to fund investments in science, training and infrastructure and to pay for significant cuts in the effective corporate tax rate. And they certainly don’t want to have their entitlements cut, especially to have to hear that they will need to retire later than they would like. We are becoming like the Greeks! As Ed so eloquently wrote, “it’s time to start thinking.”