Statement of

The Honorable John H. Gibbons

Director, Office of Science and Technology Policy

before the

Joint Economic Committee

United States Congr ess

June 21, 1993



Mr. Chairman, Members of the Committee, thank you for this opportunity todescribe the President's technology initiatives and their potential impact onthe economy. The technology initiatives, introduced February 22 inTechnology for America's Economic Growth: A New Direction to Build EconomicStrength, focus American technology on 3 central goals:

-- Long-term economic growth that creates jobs and protects the environment;

-- Making government more efficient and more responsive;

-- World leadership in basic science, mathematics, and engineering.

We are moving in a new direction t hat recognizes the critical role technologymust play in stimulating and sustaining the long-term economic growth thatcreates high-quality jobs and protects our environment. The traditionalfederal role in technology development has been limited to supp ort of basicscience and mission-oriented research in, primarily, the Defense Department andNASA. This strategy was appropriate for a previous generation, but not fortoday's profound challenges. We cannot rely on the serendipitous applicationof defen se technology to the private sector. We must aim directly at our goalsand focus our efforts on the new opportunities before us, recognizing thatgovernment can play a key role in enabling private firms to develop and profitfrom innovations.

I w ould first like to discuss the initiatives specific to the civilianeconomy. I will then describe our work on defense conversion -- the effort toreinvest defense assets (people, technology, facilities) in the civilianeconomy to stimulate growth and eco nomic strength. Finally, I will summarizeinitiatives designed to spur technological innovation and create a businessclimate hospitable to the opportunities presented by science and technology.

Technology Initiatives for the Civilian Sector

The technology initiatives encompass many efforts to directly aid companiesdeveloping new technologies. This represents a critical change of course forthe United States. Compared to Japan and our other competitors, governmentsupport for ci vilian technology development has been minimal in the UnitedStates. Our focus has been on basic research and the development oftechnologies related to defense and space exploration, which have onlyindirectly led to new technologies for the civilian se ctor.

That is no longer sufficient. In many high-tech fields, foreign companieshave either matched or surpassed the best American companies. In many cases,most notably in Japan, they have done so by working closely with each other andwith their government to accelerate the development and application of newtechnologies.

The Administration intends to dramatically increase funding for development ofcivilian technologies over the next five years. Much of this new funding willgo to small businesses, particularly start-up companies, which play a key rolein developing and commercializing technologies.

The programs designed to strengthen industry-government cooperation and toprovide more federal support for commercial R&am p;D include:

(1) Instructions to Federal laboratories run by the Department of Energy, NASA,and other agencies to devote a growing percentage of their budget to R&Dpartnerships with industry. These partnerships will be designed and partially funded by industry in order to ensure they lead to technology that will beutilized to develop new products and processes.

(2) Dramatic expansion of the Advanced Technology Program. Established byCongress in 1988 and first funded in 1990, the AT P shares the costs withindustry of R&D projects that are defined and led by industry and areselected through merit-based competition. ATP is funded at $68 million thisyear. In his vision statement of February 17, President Clinton set a goal ofr aising that amount tenfold by 1997. This increasing support for the CommerceDepartment's industrial partnerships is an essential feature of the thrust to amore civilian-oriented Federal technology policy.

(3) A new multi-agency program establish ed at EPA to fund development anddiffusion of new environmental technologies. The worldwide market forenvironmental technology is projected to grow from $200 billion today to atleast $300 billion by the year 2000. We want to help American businesses capture as much of this market as possible. For FY94, the Administration isrequesting almost $36 million for this program. Two-thirds of this fundingwould be for contracts with other agencies to develop and promote the use ofnew environmental techno logies. Some of this money would be spent at Federallaboratories, but most of it would probably be awarded as competitive grantsand contracts to industrial and university researchers working on leading-edgetechnologies.

(4) Expansion of the Sma ll Business Innovation Research (SBIR) Program. TheSBIR program has been a real success, helping hundreds of small companiesthroughout the country take good ideas and turn them into new technologies andnew products.

The Technology Initiative i ncludes a number of different programs toaccelerate the commercialization and use of new technologies, including:

(1) Regional Technology Alliances, to promote the commercialization andapplication of critical technologies by bringing together fir ms and researchinstitutions in a particular region to exchange information, share and developtechnology, and develop new products and markets.

(2) Manufacturing Extension Centers, which work in much the same way as theagricultural extension prog rams. Existing state and federal manufacturingextension centers managed through the Department of Commerce help small- andmedium-sized businesses evaluate and adopt new, advanced manufacturing methodsand technology. To date the Commerce Department ha s been able to fund onlyseven Manufacturing Technology Centers, which can reach only a small fractionof the firms that could benefit from their testing facilities and technologyprograms. However, over $100 million in FY93 funding was provided to supp ortthese types of programs as part of the defense conversion program establishedby Congress last year. The Administration is committed to building upon theseprograms and plans to work with state and local governments and universities tocreate a nati onal network of over 100 extension centers.

Technology Initiatives for Defense Conversion

Defense conversion, broadly defined, is an integral part of PresidentClinton's vision for using science and technology as engines of economic growth. The President's technology initiatives call for a bold advance fromthe tradition that limited Federal support to mission-oriented research indefense and a few nondefense areas, mainly health and space. With the end ofthe Cold War, the bigges t challenge for our country is no longer the threat ofglobal military conflict, but the economic challenge to restore U.S.competitiveness and raise living standards for all Americans. We no longerneed to justify government investments in technology so lely on the grounds ofmilitary necessity. At least as important are government/industry partnershipsto improve industrial performance and to serve critical human needs -- health,education, environmental quality.

The technology initiatives refl ect a two-fold -- short- and long-term --approach to defense conversion. Much as we welcome the end of the Cold War,some of our people and communities are having a very tough time with thetransition to a post-Cold War world. Workers and communities t hat have losttheir economic lifeblood deserve first class help in the form of retraining,reemployment, and community economic redevelopment programs. The ClintonAdministration's defense conversion package includes over $600 million intransition assis tance, much of it directed to ex-service men and women foreducation and career change opportunities. Help is also available to workerslaid off from defense plants, and to communities affected by military baseclosings and cutbacks in the defense indust ry. But without healthy growth inthe local and national economies, there is a limit to what even the bestretraining and community redevelopment planning can do. In the long run, thebest conversion strategy is the broadest -- investment in programs th at canpromote technology advance, support the growth of high-performance,knowledge-intensive industries, and ultimately create high-wage jobs.

R&D programs that support dual use technologies have an important place inPresident Clinton's vis ion. He has announced his intention to shift from thepresent ratio in Federal R&D spending, which is 41 percent civilian and 59percent military, to more than 50 percent civilian and dual use by 1998.

The Advanced Research Projects Agency (A RPA) has been given the responsibilityfor most of the technology programs in the defense conversion package Congresspassed last year, which the Clinton Administration is now aggressivelyimplementing. The package includes over $900 million in FY93 for investmentsin dual use technology. The Technology Reinvestment Project (TRP), jointlyoperated by ARPA and four other agencies, accounts for most of this -- nearly$500 million in FY93. The TRP consists of programs to improve manufacturingengineering education; support industry-led-partnerships to developtechnologies with the potential to become commercial products and processeswithin five years; fund regional technology alliances that encourage companiesto share information and technology, and thu s develop new products and markets;and support manufacturing extension programs run by States and universities tohelp small firms make better use of technology. All the programs requirematching funds and merit-based selection. The most unusual featur e of TRP isthat the agencies are acting as a unit. They are accepting proposals for allthe component programs at the same time, will evaluate the proposals together,and will parcel out management of each of the resulting agreements to theagency with the best capability and most experience in that field. This effortembodies a second goal of the President's technology plan -- increasinggovernment efficiency and responsiveness.

Fiscal and Regulatory Policies

While Federal tech nology programs are important, they cannot succeed unlesscoupled with government policies that encourage American businesses to developand apply new technologies. Unfortunately, many of our current fiscal andregulatory policies stymie rather than enco urage investment in new technologiesand new products. The Administration intends to change that by:

(1) Making the Research and Experimentation (R&E) Tax Credit permanent. Inthe past, the effectiveness of this credit has been undermined bec ause it hasbeen extended one year at a time. This means that companies cannot accuratelyproject the real costs of a given R&D project. Research and development,by its nature, requires long-term investment, and businesses will be reluctantto make such commitments without a permanent R&E tax credit.

(2) Reforming procurement policies. In many areas, Federal procurementregulations make it difficult for agencies to buy the most modern equipment andsupplies. Because specifications are often written with existing products inmind, agencies cannot purchase a newer, superior product. An even largerproblem is the reluctance of many companies to deal with the government, or thealternate tendency to segregate their civilian and defense op erations, becauseof the heavy burden imposed by government recordkeeping, audit, and reviewregulations. These practices have cost the government dearly and our goal isto create incentives for companies to integrate their civilian and defenseoperation s. As part of the National Performance Review, the Administration islooking at ways to be a better customer and thus encourage American industry todevelop and market new technologies.

(3) Encouraging patient capital. There are recurring concern s about the lackof patient capital for investment in new technologies. The Administration isexploring a number of other ways to provide low-cost capital to enable bothlarge and small companies to invest in new technologies. The private-sectorCouncil on Competitiveness recently proposed a sweeping set of reforms toencourage long-term corporate investment. These proposals and others arepresently being carefully considered by a multi-agency group working under theaegis of the National Economic Coun cil.

Education and Training

Business leaders will tell you their companies' most important resourceis their people. Productivity and profits depend upon having well-educated,well-trained employees. For that reason, the Administration is committed tohelping all Americans have access to world-class educational and workertraining programs.

Technology has a key role to play in this area. Computer software, computernetworks, and distance learning are just a few of the tools that are being usedto improve education and training. Unfortunately, many companies have not beenable to take advantage of these technologies. The Clinton Administrationbelieves the Federal government needs to do more with the deve lopment andapplication of cost effective technologies. For that reason, we intend to:

(1) Expand access to the Internet computer network to connect moreuniversities, community colleges, and high schools to each other and to a broadrange of info rmation resources. This will enable teachers at one college toteach courses at schools and colleges throughout the country. In addition,companies that connect to the Internet will be able to take advantage ofeducation and training programs offered ov er the Internet as well. They willalso be able to locate and use training software for their in-house trainingprograms.

(2) Create an interagency task force to (i) establish software andcommunications standards for education and training, (ii) coordinate thedevelopment of critical software elements, (iii) support innovative softwarepackages and (iv) collect information resources in a standardized format andmake them available to schools and teaching centers through the nation usingcommunica tions networks.

(3) Transfer some of the education and training technology developed by themilitary to the civilian sector so that it can be used in our schools,factories, and offices. Last year, the Navy Training Systems Center and theArmy Sim ulation, Training, and Instrumentation Command together spent about $1billion on training systems. The same technology they have developed to trainengine mechanics could be used to train factory workers as well.

Information Infrastructure

The President has repeatedly emphasized the need to improve this country'sinfrastructure. Today, that means not only roads and bridges and airports, butalso high-speed telecommunications networks and computer systems that form a"National Inf ormation Infrastructure." This National InformationInfrastructure will soon provide almost all Americans with access tounprecedented amounts of information, when they want it, where they want it.

This infrastructure will enable dramatic improve ments in education, healthcare, education, entertainment, and other sectors of the economy. Forinstance, using advanced networking technology, a doctor who needs a secondopinion could transmit a patient's entire medical record--x-rays and ultrasounds cans included--to a colleague thousands of miles away, in less time than ittakes to send a fax today. A school child in a small town could come home andthrough a personal computer, reach into an electronic Library ofCongress--thousands of books, recor ds, videos, and photographs, all storedelectronically.

Without this information infrastructure, American business will find ithard to compete in the 21st Century. Other countries are moving aheadaggressively to deploy high -speed telecommunications networks. Our companiesneed to have faster, better access to information, which will enable them tomake higher-quality products and provide superior service.

The information infrastructure will be built and run primari ly by the privatesector. But the government has a key role to play in: (1) working withindustry to develop and demonstrate the technology needed for the informationinfrastructure and (2) formulating forward-looking telecommunications andinformation p olicies that promote competition and investment while ensuring theinformation infrastructure benefits all Americans. The Administration will usea number of mechanisms to implement the information infrastructure,including:

(1) The High-Performan ce Computing and Communications Program established bythe High-Performance Computing Act of 1991. Research and development funded bythis program is creating (1) more powerful supercomputers, (2) faster computernetworks, and (3) more sophisticated soft ware, needed to help build theNational Information Infrastructure. The Congress appropriated almost $795million in funding for FY93 and the Administration is requesting a total of $1billion for FY94.

(2) An Information Infrastructure Technology and Applications Program to assistindustry in the development of the hardware and software needed to fully applyadvanced computing and networking technology in manufacturing, in health care,in life-long learning, and in libraries. This multi-agency p rogram willinvolve the National Science Foundation, NASA, the National Institutes ofHealth, the National Institute of Standards and Technology, and other agencies.The Administration requested $96 million for FY94 for this effort.

(3) Networking pilot projects through the National Telecommunications andInformation Administration (NTIA) of the Department of Commerce. NTIA's PublicTelecommunications Facilities Program will provide matching grants to states,school districts, libraries, and other non-profit entities so that they canpurchase the computers and networking connections needed for distance educationand for hooking into computer networks like the Internet. These pilot projectswill demonstrate the benefits of networking to the educat ional and librarycommunities. The Administration has requested $54 million for FY94.

(4) Dissemination of Federal information. Every year, the Federal governmentspends billions of dollars collecting and processing information (e.g. economicdat a, environmental data, and technical information). Unfortunately, whilemuch of this information is very valuable, many potential users either do notknow that it exists or do not know how to access it. The ClintonAdministration is committed to using n ew computer and networking technology tomake this information more available to the taxpayers who paid for it. Thiswill require upgrading computer systems at dozens of Federal agencies anddevelopment of consistent Federal information policies designed to ensure thatFederal information is made available at a fair price to as many users aspossible.

(5) Reforming Telecommunications Policy. Government telecommunication policyhas struggled to keep pace with new developments in telecommunicatio ns andcomputer technology. As a result, government regulations have tended toinhibit competition and delay deployment of new technology. Without aconsistent, stable regulatory environment, the private sector will be hesitantto invest the hundreds of billions of dollars needed to build the high-speednational telecommunications network that this country needs to competesuccessfully in the 21st Century. To create a consistent Federaltelecommunications policy, the Clinton Administration will create a high-levelinter-agency White House task force which will work with Congress and theprivate sector to find consensus on issues like the Modified Final Judgment,spectrum reallocation, the cable television regulation, and the evolution ofthe Internet.< p>

Nurturing the Seed Bed of Technology

This testimony emphasizes the President's proposals to create a businessclimate more hospitable to technological innovation. I have also alluded toanother goal the President has established fo r Federal science and technologyprograms: making government more efficient and more responsive. Beforeconcluding my remarks, I would like, just briefly, to review the President'scommitment to world leadership in basic science, mathematics, and engine ering-- the fields in which technology grows.

Our basic science program provides an ongoing sense of adventure andexploration while improving the knowledge base. It also lays the foundationfor new technologies. The federal government has inve sted heavily in basicresearch since the Second World War, and this support has paid enormousdividends. Our research universities are the best in the world; our nationallaboratories and the research facilities they house attract scientists andengineer s from around the globe. In almost every field, U.S. researchers leadtheir foreign colleagues in scientific citations, in Nobel Prizes, and in mostother measures of scientific excellence.

None of the innovations in technology proposed in our in itiative will befunded at the expense of basic science. Our budget proposal ensures thatsupport for basic science remains strong and that stable funding is providedfor projects that require continuity. We will not allow short termfluctuations in fun ding levels to destroy critical research teams that havetaken years to assemble.

But stable funding requires setting clear priorities. In recent years, ratherthan canceling less important projects when research budgets have been tight,Federal agencies have tended to spread the pain, resulting in disruptive cutsand associated schedule delays in hundreds of programs. Improved management ofbasic science can ensure sustained support for high-priority programs


A s you can see, the Administration has a comprehensive, pro-active technologypolicy that will provide huge benefits to American business. And by doing so,it will provide huge benefits to all Americans--in terms of new, high-payingjobs, a cleaner enviro nment, and a higher quality of life for all of us and ourchildren. I look forward to working with this Committee to ensure that ourtechnology programs meet the needs of American business.

Thank you again for this opportunity to testify. I woul v