Presentation at the National Academy of Engineering

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Good morning. W ell it's nice to be back among friends, not that Idon't have some friends in the White House, but I've been up on Capitol Hillyesterday where I used to work and I sometimes think they've forgotten I usedto work for them.

I want to share with yo u some of the experiences I've had over the past eightmonths. I will give you my perspective on the Administration's science andtechnology policy, it's basis and what we hope it will do.

I think this is the first time I've been on this podium, Bob, first or second,since I took this new job, and I sometimes wonder about the trauma of a newexperience and whether or not the old experiences aren't perhaps more to bedesired. This is illustrated by the story of a person who was walking down ther oad and saw in front of him a small frog. The frog looked up and spoke tothis person, and the frog said, "Sir, I'm a fairy princess, I've beenenchanted, and if you would but pick me up and kiss me, I will turn back intothe enchanted princess and we ca n have a totally new life together." And so hereached down and picked up the frog and put it in his pocket and proceeded towalk on down the road. And this plaintive voice came up from the pocket, "Sir,don't you understand? I'm an enchanted princess. If you would but kiss me, wecould have a new life together, an entire new life." So he reached back in thepocket and picked up the frog, looked at it for a moment and said, "Wellfrankly, at this point in my life, I think I would rather have a talkin g frog."

Now I don't want Dan Greenberg to take any lesson from that for his column,but it is a poignant tale that I think of frequently.

When I joined the new Administration, I was grateful that the Presidentdecided early on to make that decision. It was much earlier than mypredecessors have had the opportunity to join a new Administration, and itmeant that I was able to participate more directly in some of the earlyconsiderations of people to be chosen for key science and techno logy positions,and also to assist in the preparation for the technology initiatives that weredelivered at San Jose in February by the President. I think most of you arefamiliar with the paper that came out at that time on technology and economicgrowt h. This was in response to what we perceive as a really tough andprotracted economic condition that we're in, a great uneasiness about whetherour sluggishness is more fundamental than cyclical. I know that's been anissue before many of you of recent times. We have a mounting, if notaccelerating, federal deficit, driven inexorably by programs of entitlement andother things, especially our health care problems and costs. The mountingdeficit squeezes our capital markets, squeezes the flexibility of discretionaryFederal spending, which includes the science and technology portions. Ahistory extends well over a decade, if not nearly two decades, of at best breakeven -- and for most people a loss -- on real income in the United States. Atthe same time ever rising competitiveness of non-U.S. producers for worldmarkets. Not a whole lot of good news in that part of our universe.

The response this Administration has decided on is to try to help lead thenation away from the pretense that we can indefinitely borrow from futuregenerations or from other nations to pay for today's bills. There is what'sbeen called a first rule of holes: that is, if you're in one, you ought to stopdigging.

So that decision led naturally, inescapably to a very serious effort to try tocut our budget, to trim our sails, and also to try to increase revenues insteadof just borrowing and spending. Simultaneously, we must tackle head on thehealth care and other major issues that were driving our out year pr ojecteddeficits.

But we also understood that you cannot solve the kinds of issues that we facesimply by cutting. Investment will have to be the counterpart of thatstrategy, the

other half of the strategy. And I want to talk a little bit about thatinvestment side of the ledger today.

We expressed in San Jose three positions on investment. First, we wouldinvest in those things that would enable long term economic growth with anemphasis on jobs and on environmental protection. Of course the dilemma isthat we see now corporate profits rising again, but in no small measure due todownsizing. Downsizing means that we have a better economy but not more andbetter jobs. And jobs are a central concern for public policy. We want tomake investments in the fundamentals required to achieve the basis for longterm economic growth, and I will return to that in a moment.

Second we would start the lessons at home. We would make government moreefficient and more responsive. T hird, we would commit the U.S. to continuingin world leadership in engineering, math and science because we see that as thewellspring, the engine for the new options that will in turn enable oureconomic growth and resilience.

Now let me return to science and technology investments as a strategy for longterm economic growth and describe to half a dozen tactics that emerge from thatstrategy. First of all, we know that the traditional hot and cold war paradigmthat dominated federal support of science and the government's role intechnology development is no longer seen as appropriate or even realistic intoday's world. That paradigm was driven by the notion that our investments inour federal infrastructure in defense would result in a consta nt cornucopia ofideas that would in turn spill out to the civilian sector, somewhatserendipitously but assuredly. We were convinced that this in turn wouldindirectly feed the civil sector. Our agencies and our federal laboratoriesfocused on mission oriented research and would distance themselves in a sensefrom the civilian marketplace.

We were overwhelmingly focused in other words on our national defense issues.That strategy, however appropriate for preceding generations, is increasingly less relevant to today's concerns. You well know, and many other people arenow recognizing, that as we move out of the 1980s and into the 1990s theparadigm of spin out from defense research and activities in the civil sectoris now flipped. Civil sec tor technology developed for civil markets now spinsin as relevant to our defense needs. In other words, the old idea of spinoutas a way to feed our civil sector, spinout of defense, is not appropriate forthe 1990s or the turn of the century.

So what kind of policies derive from this orientation? First, a policy toshift our defense dominated federal R&D that obtained in the 80s, typicallya 60/40 or greater split favoring defense-oriented research over civiliansector oriented research, back to the more historic ratio of about 50/50 orperhaps even further towards the civil sector. As the ratio shifts, there willbe a greater emphasis on dual use even in our military sector of work.

A second policy is to assist directly in def ense conversion, to ease regionalimpacts of conversion, of changes in economic activities driven not by marketforces but by government decisions and world events. The policy includessupport for joint ventures, for instance the Technology Reinvestment Project(TRP). ARPA leads four other federal agencies in the TRP, which is spendingsome $500 million in this fiscal year on defense conversion cooperation withindustry. The policy also includes the advanced technology program at the NISTand an EPA le <