Op Ed / Essays
The Next Step in Stimulus: Long-Term Economic Growth
Congress has agreed on a package of short-term stimulus; now it must turn its attention to the next step. Innovation-based industries arising from scientific research have been central to the remarkable rise in US living standards since World War II. The federal government must now make research investments that will put the nation on the road to rapid long-term economic growth.
The US experience in the Great Depression and World War II provides an important lesson for today. From 1933 to 1938, Franklin Roosevelt funded short-term, Keynesian job creation policies. Intensive spending on wartime production provided even greater economic stimulus. Importantly, wartime spending also laid the groundwork for long-term economic growth: To meet the battlefield demand for a host of new technologies, in the early 1940s the federal government invested aggressively in innovation.
Research and development funding exploded, large-scale research sprang up at universities, new federal agencies emerged and academic researchers worked with industry to swiftly deploy the latest ideas. By war's end, the modern research university and institutionalized federal funding of early-stage research had been launched. Half a decade of wartime training, amplified by the GI Bill, supplied a huge pool of skilled engineers and scientists. Together, these developments powered successive innovation waves – in electronics, nuclear power, aerospace, communications and computing – that drove decades of post-war prosperity.
With stimulus plans now in place, Congress and the Obama administration must plant the seeds of longer-term economic growth. Economists broadly agree that more than half of US economic growth since World War II has come from technological innovation, much of it stemming from federally funded, fundamental research. In the late 1990s, for example, US productivity grew at more than 3 percent per year. The revolution in information technology – a direct outgrowth of federally funded research – was pivotal to this extraordinary growth.
When the economy emerges from the recession, long-term productivity growth will, once again, become the priority. We must anticipate that now and create new, permanent jobs through new innovations and new industries.
Happily, we do not lack technology frontiers. An accelerating convergence of the life sciences with the engineering and physical sciences has produced a host of biomedical innovations. We also stand poised for a revolution in new energy technologies. Research in these and other areas can help lay the foundation for the strong, steady economic growth we need.
Finding new energy answers may be the most pressing concern, given the implications of the current energy mix for the economy, national security and climate change. To help unleash an innovation wave in energy technology, the United States must go beyond the priorities of the stimulus package, which aims to create tens of thousands of "green jobs"; it must now invest in the kind of research and innovation that will ultimately spin-off millions of jobs by building a new economy. This includes investing in early- and later-stage research on the most promising technologies; funding new R&D centers to accelerate critical breakthroughs; equipping research labs with state-of-the-art instrumentation for advanced research, prototyping and demonstration of emerging technologies; and training a new energy talent base. President Obama has championed the crucial links between research, innovation and growth; it's essential that when he presents his FY2010 budget to Congress on Feb. 24, it includes such far-sighted investments in research.
The cost of near-term stimulus will produce a federal debt burden higher than in decades. The best route to repaying that debt is to pave a path back to rapid economic growth and rising incomes.
The United States led the innovation revolutions of the 20th century, but it is far from certain that it will lead the next. Nations around the world are racing to develop next-generation energy technologies. Aggressive investment in research and innovation now will position the United States to invent, produce and sell new energy technologies globally; otherwise, we will be consigned to buy them from others. A sound growth path out of this recession demands not only a stimulus bill that meets short-term needs, but further investments that will fuel the nation's long-term economic success.