[House Hearing, 113 Congress] [From the U.S. Government Publishing Office] AMERICAN COMPETITIVENESS: THE ROLE OF RESEARCH AND DEVELOPMENT ======================================================================= HEARING BEFORE THE COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY HOUSE OF REPRESENTATIVES ONE HUNDRED THIRTEENTH CONGRESS FIRST SESSION __________ WEDNESDAY, FEBRUARY 6, 2013 __________ Serial No. 113-1 __________ Printed for the use of the Committee on Science, Space, and Technology Available via the World Wide Web: http://science.house.gov U.S. GOVERNMENT PRINTING OFFICE 78-823 WASHINGTON : 2013 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office, http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected]. COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY HON. LAMAR S. SMITH, Texas, Chair DANA ROHRABACHER, California EDDIE BERNICE JOHNSON, Texas RALPH M. HALL, Texas ZOE LOFGREN, California F. JAMES SENSENBRENNER, JR., DANIEL LIPINSKI, Illinois Wisconsin DONNA F. EDWARDS, Maryland FRANK D. LUCAS, Oklahoma FREDERICA S. WILSON, Florida RANDY NEUGEBAUER, Texas SUZANNE BONAMICI, Oregon MICHAEL T. McCAUL, Texas ERIC SWALWELL, California PAUL C. BROUN, Georgia DAN MAFFEI, New York STEVEN M. PALAZZO, Mississippi ALAN GRAYSON, Florida MO BROOKS, Alabama JOSEPH KENNEDY III, Massachusetts ANDY HARRIS, Maryland SCOTT PETERS, California RANDY HULTGREN, Illinois DEREK KILMER, Washington LARRY BUCSHON, Indiana AMI BERA, California STEVE STOCKMAN, Texas ELIZABETH ESTY, Connecticut BILL POSEY, Florida MARC VEASEY, Texas CYNTHIA LUMMIS, Wyoming JULIA BROWNLEY, California DAVID SCHWEIKERT, Arizona MARK TAKANO, California THOMAS MASSIE, Kentucky VACANCY KEVIN CRAMER, North Dakota JIM BRIDENSTINE, Oklahoma RANDY WEBER, Texas CHRIS STEWART, Utah C O N T E N T S Wednesday, February 6, 2013 Page Witness List..................................................... 2 Hearing Charter.................................................. 3 Opening Statements Statement by Representative Lamar S. Smith, Chairman, Committee on Science, Space, and Technology, U.S. House of Representatives................................................ 7 Written Statement............................................ 8 Statement by Representative Eddie Bernice Johnson, Ranking Minority Member, Committee on Science, Space, and Technology, U.S. House of Representatives.................................. 8 Written Statement............................................ 10 Witnesses: Mr. Richard Templeton, President and CEO, Texas Instruments Oral Statement............................................... 11 Written Statement............................................ 14 Dr. Shirley Ann Jackson, President, Rensselaer Polytechnic Institute Oral Statement............................................... 24 Written Statement............................................ 26 Dr. Charles Vest, President, National Academy of Engineering Oral Statement............................................... 38 Written Statement............................................ 41 Appendix I: Answers to Post-Hearing Questions Mr. Richard Templeton, President and CEO, Texas Instruments...... 68 Dr. Shirley Ann Jackson, President, Rensselaer Polytechnic Institute...................................................... 72 Dr. Charles Vest, President, National Academy of Engineering..... 77 AMERICAN COMPETITIVENESS: THE ROLE OF RESEARCH AND DEVELOPMENT ---------- WEDNESDAY, FEBRUARY 6, 2013 House of Representatives, Committee on Science, Space, and Technology, Washington, D.C. The Committee met, pursuant to call, at 9:34 a.m., in Room 2318 of the Rayburn House Office Building, Hon. Lamar S. Smith [Chairman of the Committee] presiding. [GRAPHIC] [TIFF OMITTED] T8823.001 [GRAPHIC] [TIFF OMITTED] T8823.002 [GRAPHIC] [TIFF OMITTED] T8823.003 [GRAPHIC] [TIFF OMITTED] T8823.004 [GRAPHIC] [TIFF OMITTED] T8823.005 Chairman Smith. The Science, Space, and Technology Committee will come to order. I will recognize myself for an opening statement, then the Ranking Member for her opening statement. The topic of today's hearing, the first of this Committee in this Congress, is ``American Competitiveness: The Role of Research and Development.'' This is an appropriate hearing because much of the jurisdiction of this Committee relates to keeping America globally competitive. America's ability to compete depends on whether we have the present vision to conduct the science that will define the future. As the wall behind me says, ``Where there is no vision, the people perish''--this Committee's goal, and today's hearing, is to help define that vision and ensure that America continues to be the leader of global innovation. Our first hearing today will begin this process by examining the positive impact of today's R&D and looking forward to potential breakthrough innovations in the future. Americans have always been innovators and explorers. Our ancestors crossed oceans, opened frontiers and ventured to explore a new continent and even traveled to the Moon. From the Lewis and Clark Expedition to the International Space Station, from the telegraph to broadband Internet, Americans have led the exploration of the unknown and developed inventions of the future. In our short history we have produced world-famous scientists and inventors like Benjamin Franklin, Thomas Edison and Jonas Salk. But countless more American scientists who are not world- famous nonetheless have been changing this world. Have you heard of William Burroughs, John Bardeen or Ruth Benerito? According to the National Inventors Hall of Fame, Mr. Burroughs created the electronic calculator. Mr. Bardeen worked with the Nobel prize-winning team that developed the transistor and helped create Silicon Valley in California and Silicon Hills in Austin, Texas. And we can thank chemist Ruth Benerito for developing wrinkle-free cotton, which is in the shirts many Americans wear today, including mine. But is America as innovative as it used to be? Some wonder if America's greatest technological achievements are behind us, and if other nations like China and India will soon surpass us, or perhaps already have. Some nations are creating environments so attractive to global manufacturers that companies have relocated much of their activities on foreign soil. Our global trade imbalance is growing as we export less and import more, and today, this imbalance includes many high-tech products. Other nations are changing their policies to become more competitive, and so should we. Fortunately, blazing trails into new frontiers is what America has always done best. To set the stage for this Congress and to understand where America is heading, we have very knowledgeable witnesses testifying before us today. Each of them thoroughly understands both public and private research and development efforts as well as where our global competitors are headed. Members of this Committee have the opportunity to work together on policies that will help America stay competitive, and today's hearing is a first step. [The prepared statement of Mr. Smith follows:] Prepared Statement of Chairman Lamar Smith The topic of today's hearing, the first for this Committee in this Congress, is ``American Competitiveness: The Role of Research and Development.'' This is an appropriate hearing because much of the jurisdiction of this Committee relates to keeping America globally competitive. America's ability to compete depends on whether we have the present vision to conduct the science that will define the future. As the wall behind me says, ``Where there is no vision, the people perish.'' This Committee's goal--and today's hearing--is to help define that vision and ensure that America continues to be the leader of global innovation. Our first hearing today will begin this process by examining the positive impact of today's R&D and looking forward to potential breakthrough innovations in the future. Americans have always been innovators and explorers. Our ancestors crossed oceans, opened frontiers and ventured to explore a new continent and even travel to the Moon. From the Lewis and Clark Expedition to the International Space Station, from the telegraph to broadband internet, Americans have led the exploration of the unknown and developed inventions of the future. In our short history we have produced world famous scientists and inventors like Benjamin Franklin, Thomas Edison and Jonas Salk. But countless more American scientists who are not world famous nonetheless have been changing the world. Have you heard of William Burroughs, John Bardeen or Ruth Benerito? According to the National Inventors Hall of Fame, Mr. Burroughs created the electronic calculator. Mr. Bardeen worked with the Nobel prize- winning team that developed the transistor and helped create Silicon Valley in California and Silicon Hills in Austin, Texas. And we can thank chemist Ruth Benerito for developing wrinkle-free cotton, which is in the shirts many Americans wear today. But is America as innovative as it used to be? Some wonder if America's greatest technological achievements are behind us, and if other nations--like China and India--will soon surpass us, or perhaps already have. Some nations are creating environments so attractive to global manufacturers that companies have relocated much of their activities to foreign soil. Our global trade imbalance is growing as we export less and import more, and today, this imbalance includes many high-tech products. Other nations are changing their policies to become more competitive, and so should we. Fortunately, blazing trails into new frontiers is what America has always done best. To set the stage for this Congress and to understand where America is heading, we have very knowledgeable witnesses testifying before us today. Each of them thoroughly understands both public and private research and development efforts as well as where our global competitors are headed. Members of this Committee have the opportunity to work together on policies that will help America stay competitive. Today's hearing is a first step. Chairman Smith. That concludes my opening statement, and the gentlewoman from Texas, Ms. Johnson, is recognized for hers. Ms. Johnson. Thank you very much, Chairman Smith, for holding this hearing, and thank you also for yesterday's bipartisan retreat, which was delightful. Chairman Smith. Thank you. Ms. Johnson. I am looking forward to these very distinguished witnesses today and hope that all of us will listen attentively. I know that we will hear from our witnesses about the critical importance of federal research and development investments, and I look forward to their testimony. As the competition for scarce resources has intensified, there have been some who would describe the research community as just another special interest lobbying group to share the pie. I could not disagree more. They should have special interest and self-interest, and I hope they do, whether they are representing universities or high-tech companies. But to label them as nothing more than another special interest group is, at best, misleading. Without dismissing the value of many other investments we make with our limited discretionary budget, there is probably no single investment we make, other than education, that has done more to ensure our Nation's long- term economic vitality than the investment in R&D. This holds true for the very long-term investments that the Federal Government is uniquely suited to make in exploratory research where we have no idea what, if any, applications will result. But it also holds true for the financial and intellectual partnerships we build with the private sector to address more mid-term R&D challenges. All of these investments yield immeasurable benefits to our economy and our society in terms of companies built, jobs created, and a society made healthier, safer, and more secure. They also have the secondary benefit of training the next generation of scientists and engineers who will contribute in all of these ways to their own generation, and I am particularly pleased to see a few of them sitting out there I hope will be some of those in the future. Some specific examples of groundbreaking innovations and companies that would not have been possible without federal R&D investments include the Internet, GPS, Google, the iPhone, and God, what we would do without barcodes? I expect that we will hear more examples from the witnesses, and we could probably spend our entire two hour hearing reading off such a list. And yet, I fear, some of my colleagues in Congress would still be unimpressed. We will still hear arguments that the Federal Government's role should be restricted to so-called basic research because the private sector can do the rest alone, that everybody has to take a cut, that the 8.2 percent cuts looming on March 1 may hurt a bit but are better for the country in the long run. I happen to believe personally that we can invest it in unemployment and food stamps or we can invest it in our future that would eliminate the need for both. So let me attempt to briefly preempt some of these arguments. R&D is not a simple, linear process from basic to applied to development and so on to a final commercial product. It also doesn't go in only one direction. R&D is part of a complex innovation process with many feedback loops. There is no clear line at which the public role ends and the private role begins and there has not been in any of our lifetimes. That is why partnerships between the public sector, namely our federal agencies, and the private sector, such as Mr. Templeton's company, Texas Instruments, are so important. Second, I would like to say a word about the consequences of sequestration. At the risk of repeating myself, we would not just be turning off the lights on many groundbreaking research facilities and experiments today, we would be eating our seed corn for tomorrow. We would know that at the end of the tunnel, the lights are out. What talented young person would see a future in scientific research after sequestration does its damage? Our witnesses were asked in their testimony to speculate on what kind of breakthrough technologies we might see in the next 5 to 20 years. I think if any of us knew the answer to that, we would really be rich. That is the point. We don't know what directions our research might take, what unknown applications and innovations will be developed, and nor did our predecessors when they invested in what we have today. We cannot afford to overestimate what the private sector is prepared to do on its own, and we cannot afford to underestimate the negative consequences for the Nation's R&D enterprise of letting sequestration go forward. With that, Mr. Chair, I yield back. [The prepared statement of Ms. Johnson follows:] Prepared Statement of RAnking Member Eddie Bernice Johnson Thank you Chairman Smith for holding this hearing, and thank you to our distinguished witnesses for taking the time to appear before the Committee this morning. I know that we will hear from all of our witnesses about the critical importance of federal research and development investments, and I look forward to your testimony. As the competition for scarce resources has intensified, there have been some who would describe the research community as just another special interest group lobbying for their share of the pie. I could not disagree more. Yes, they have some self-interest, whether they are representing universities or high-tech companies. But to label them as nothing more than another special interest group is, at best, misleading. Without dismissing the value of many other investments we make with our limited discretionary budget, there is probably no single investment we make, other than education, that has done more to ensure our nation's long-term economic vitality than our investment in R&D. This holds true for the very long term investments that the federal government is uniquely suited to make in exploratory research--where we have no idea what, if any, applications will result. But it also holds true for the financial and intellectual partnerships we build with the private sector to address more mid-term R&D challenges. All of these investments yield immeasurable benefits to our economy and our society in terms of companies built, jobs created, and a society made healthier, safer, and more secure. They also have the secondary benefit of training the next generation of scientists and engineers who will contribute in all of these ways to their own generation, and so on. Some specific examples of the groundbreaking innovations and companies that would not have been possible without federal R&D investments include the internet, GPS, Google, the iPhone, and barcodes. I expect we will hear more examples from the witnesses. We could probably spend our entire two-hour hearing reading off such a list. And yet, I fear, some of my colleagues in Congress would still be unimpressed. We will still hear arguments that the federal government's role should be restricted to so-called basic research because the private sector can do the rest alone. That everybody has to take a cut. That the 8.2 percent cuts looming on March 1 may hurt a bit but are better for the country in the long run. So let me attempt to briefly preempt those arguments. R&D is not a simple, linear process from basic to applied to development and so on to a final commercial product. It also doesn't go in only one direction. R&D is part of a complex innovation process with many feedback loops. There is no clear line at which the public role ends and the private role begins and there has not been in any of our lifetimes. That is why partnerships between the public sector, namely our federal agencies, and the private sector, such as Mr. Templeton's company, are so important. Second, I'd like to say a word about the consequences of sequestration. At the risk of repeating myself, we would not just be turning off the lights on many groundbreaking research facilities and experiments today, we would be eating our seed corn for tomorrow. What talented young person would see a future in scientific research after sequestration does its damage? Our witnesses were asked in their testimony to speculate on what kind of breakthrough technologies we might see in the next 5-20 years. I think if any of us knew the answer to that, we'd be rich. That's the point--we don't know what directions our research may take, what unknown applications and innovations will be developed. We cannot afford to overestimate what the private sector is prepared to do on its own. And we cannot afford to underestimate the negative consequences for the nation's R&D enterprise of letting sequestration go forward. Chairman Smith. Thank you, Ms. Johnson. Let me introduce our witnesses. Our first witness is Mr. Richard Templeton, Chairman, President and CEO of Texas Instruments. Mr. Templeton has served as Texas Instruments' Chairman of the Board since April 2008 and President and Chief Executive Officer since May 2004. In addition to his work with Texas Instruments, Mr. Templeton also serves as the Chair of the Task Force on American Innovation, a broad group of stakeholders that support scientific research. Mr. Templeton earned his B.S. in electrical engineering from Union College in New York. Our next witness is Dr. Shirley Ann Jackson, President of Rensselaer Polytechnic Institute since 1999. Prior to her tenure, Dr. Jackson served as the Chair of the U.S. Nuclear Regulatory Commission. She also has had an extensive career working in several prestigious physics laboratories researching subatomic parties. Dr. Jackson earned her Ph.D. in theoretical elementary particle physics from MIT. Our final witness is Dr. Charles Vest, President of the National Academy of Engineering. He was elected to this position in 2007 and is serving a six-year term. Dr. Vest also is the President Emeritus of the Massachusetts Institute of Technology and earned his Ph.D. in mechanical engineering from the University of Michigan. Prior to his time in the academic world, Dr. Vest was Vice Chair of the U.S. Council of Competitiveness for eight years and a member of the President's Committee of Advisors on Science and Technology during the Bush and Clinton Administrations. Both Dr. Vest and Dr. Jackson were also distinguished members of the panel that authored the original 2005 National Academy study Rising Above the Gathering Storm. This study recommended ways to keep American economically prosperous. Before I recognize Mr. Templeton, I just want to call attention to Members on their desk, they should have an op-ed from today's Politico that was written by two of our witnesses today and which is well worth reading. It is called ``A Critical Role in Innovation'' by Richard Templeton and Shirley Ann Jackson. Chairman Smith. Mr. Templeton, we will begin with you. TESTIMONY OF MR. RICHARD TEMPLETON, PRESIDENT AND CEO, TEXAS INSTRUMENTS Mr. Templeton. I want to thank Chairman Smith, Ranking Member Johnson and of course all the Members of the Committee for convening this hearing so early in the new Congress on such an important topic. I really am honored to be here today with Dr. Jackson and Dr. Vest, really well-known innovators with great, keen insight into policy. Over the last 50 years, scientific and technological innovation has been responsible for as much as half of our economic growth. The United States has been a clear net global winner during this time, and while there are a number of factors that can explain that, I actually believe the investments by the Federal Government in basic research at our universities and at our federal labs were a critical factor in determining our success. I would point out as we think about this topic, this phrase of research and development, or R&D, is used inseparably many times, and I think it is important to point out that inside of research and development, there is something called basic research, and to get a sense of that, it is really something that is done to discover basic principles without necessarily having a commercial purpose in mind. It could take 5 to as much as 15 years for that to pay off, or perhaps never. But when those basic principles are discovered and successful, they can have enormous dividends. For example, the Space Program and the Defense Department propelled many of the advancements in the semiconductor industry where today U.S.-headquartered firms hold nearly half of the worldwide market and support nearly 250,000 direct jobs. The Internet is another wonderful example. Basic research requires significant funding from the Federal Government because it can take the long-term view and make the scope of investment needed. This funding goes to universities, not to companies. I offer the Committee four points to consider when you think about research funding. First, the United States was a clear winner of the first round of the innovation game. We are home, as was noted in the opening comments, to some of those most innovative companies in the world, names like Apple, names like Google, names like Intel, and we of course like the name of Texas Instruments on that list. The United States is the net winner economically because these companies are headquartered here in the United States and they are not headquartered somewhere else. They are here in many ways because the basic research many years ago was done in the United States. We had the best research universities, which in turn attracted the smartest people from around the world to want to go practice at those best institutions. Second point, that this game is changing in round two. The relative advantages that the United States has had over the last 50 years have significantly weakened. Today we risk that the next generation of these companies will in fact be started up and headquartered somewhere else. So there is really a few simple reasons as to why that could take place. First, other countries have seen the United States playbook and they are very interested in being able to replicate it. They see the benefits that it has yielded and they are busy putting in place programs to provide incentives for companies to try and start in their countries. The second element that has weakened the U.S. position is that federal investment in basic research, in physical sciences and engineering, as a percent of GDP has fallen to less than half the level since 1970. If you contrast that by some very key competitors, key competitors meaning countries like Korea or China, they are actually increasing their R&D in physical sciences as a percent of GDP. Lastly is skills. Our industry works because we have great minds, and there are two issues here. First, our immigration policies do not encourage today the best minds to come to the United States and in fact stay in the United States, and also the best minds have got other choices around the world. In fact, today we educate some of these best minds and then we show them the door to return home. Secondarily is our own K-12 STEM systems are faltering and we have to get that turned around. The third point that I would like to point out is that the stakes in the next round, the next 50 years, are even higher than they were for the last 50 years. Leadership in nanoelectronics will impact many aspects of our economy: health care, energy, transportation, safety, security and much more. China and Korea understand that the country that leads in nanoelectronics will reap the economic benefits the way the United States has dominated the last 50 years, or the microelectronics era. Fourth point: I think there are four areas that changes in policies need to be focused to change the outcome. First, the federal funding in basic research. Even in tough economic times, we must protect the investments in the future. Second, we must make a priority for world-class STEM education, that is K-12, in the United States. This needs to be a national imperative, implemented on a local basis. Three, high-skilled immigration reform. I appreciate the leadership that, Mr. Chairman, you have shown, Ms. Lofgren, on the issues, and we look forward, hopefully, to a resolution to that. And then fourth is comprehensive tax reform for U.S. companies to build to compete globally. The world has changed considerably since 1986, the last time taxes were reformed. We must have an environment where U.S.-headquartered companies can compete effectively on a global basis because that is where 95 percent of the world's population is. So my conclusion, investing in basic research at our universities has been critical to America's success over the past 50 years, and I believe it will be more important going forward, and I am certainly happy to answer any questions. [The prepared statement of Mr. Templeton follows:] [GRAPHIC] [TIFF OMITTED] T8823.006 [GRAPHIC] [TIFF OMITTED] T8823.007 [GRAPHIC] [TIFF OMITTED] T8823.008 [GRAPHIC] [TIFF OMITTED] T8823.009 [GRAPHIC] [TIFF OMITTED] T8823.010 [GRAPHIC] [TIFF OMITTED] T8823.011 [GRAPHIC] [TIFF OMITTED] T8823.012 [GRAPHIC] [TIFF OMITTED] T8823.013 [GRAPHIC] [TIFF OMITTED] T8823.014 [GRAPHIC] [TIFF OMITTED] T8823.015 Chairman Smith. Thank you, Mr. Templeton. Dr. Jackson. TESTIMONY OF DR. SHIRLEY ANN JACKSON, PRESIDENT, RENSSELAER POLYTECHNIC INSTITUTE Dr. Jackson. Chairman Smith, Ranking Member Johnson, distinguished Members of the Committee, thank you for the opportunity to testify before you on American competitiveness, the role of research and development. I have to say that Rensselaer Polytechnic Institute graduates have been an integral part of America's promise through discovery and innovation since the university was founded in 1824. More importantly, America's health, prosperity, security and global leadership depend upon our strength, as you have heard, in science and technology. Our investments in scientific research and education have made a difference in people's lives. Let me illustrate. The New York Times reported that in October 2004, in Afghanistan, a mortar severely injured a U.S. Marine corporal, Isaias Hernandez. He is an example of so many of our wounded warriors. Shrapnel tore away 70 percent of the muscle in his thigh and fractured his femur. He endured four years of surgeries and physical therapy to little effect until Dr. Stephen Badylak of the McGowan Institute of Regenerative Medicine at the University of Pittsburgh implanted in the corporal's thigh a new gel-based therapy called the extracellular matrix derived from pig bladders. After about 6 weeks, the implanted mixture spurred the growth of muscle tissue, tendons and vasculature and restored physical strength. This work is part of a government-supported regenerative medicine research program at Pittsburgh. Now, this and much more is the kind of work that faculty and students at Rensselaer do, at MIT do, understanding the role of the extracellular matrix in cell signaling and tissue regeneration, developing enzyme-based coatings that kill antibiotic-resistant bacteria on contact, bioengineering synthetic heparin, all dependent upon federal support of research across the life and physical sciences, chemical and biological engineering, industrial engineering, nanotechnology and data analytics. Life-changing, job-creating, security- sustaining, scientific discoveries and technological innovations have rested on strong collaboration among business, government and academia. This three-way partnership has created an innovation ecosystem that has driven our economy, prosperity and well-being for decades. Federal investments in scientific research and development built the foundations for a broad range of industries. Many leading U.S.-based global companies including Texas Instruments, Genentech, Google and Cisco Systems all trace their roots to federal research investments. As you have heard, China, India and other nations are emulating our model by making concomitant investments to gain the benefits we enjoy. If we are to remain globally competitive, we must sustain and enhance the U.S. innovation ecosystem. This requires four things: first, strategic focus to choose important and promising areas to explore and develop and match them to the talent, resources and opportunities we have or can attract; second, game-changing idea generation that arises out of basic research that pushes the boundaries of human knowledge; third, translational pathways that bring discoveries into commercial or societal use; fourth--capital, financial, infrastructural and human capital to support the development and exploitation of promising new technologies. We need a new financial model for technology-based startups that overcomes the so-called valley of death. We need tax reform. We need physical capital including shared infrastructure, which allows new technologies to be improved and scaled for the marketplace. For example, the Computational Center for Nanotechnology Innovations, a joint effort of IBM, New York State and Rensselaer, holds one of the world's most powerful university-based supercomputers, used for research by our faculty and students and by companies of all sizes to perform research and development and to tap the expertise of Rensselaer scientists and engineers. We must draw more young Americans into STEM fields. We must improve science and mathematics education for all of our children. Retaining high- caliber talent from abroad is important, especially those obtaining advanced degrees in science and engineering from American universities. Advanced manufacturing requires that we make comprehensive education and retraining a priority. Now, we remain the world leader in scientific discovery and technological innovation but the health of our innovation ecosystem is in jeopardy. As the Congress debates funding for research in these austere times, we know that there are significant challenges, but the nations that invest in research, educate the next generations and make commitments to build effective innovation ecosystems will be the global leaders of tomorrow. Thank you, Mr. Chairman. I look forward to your questions. [The prepared statement of Dr. Jackson follows:] [GRAPHIC] [TIFF OMITTED] T8823.016 [GRAPHIC] [TIFF OMITTED] T8823.017 [GRAPHIC] [TIFF OMITTED] T8823.018 [GRAPHIC] [TIFF OMITTED] T8823.019 [GRAPHIC] [TIFF OMITTED] T8823.020 [GRAPHIC] [TIFF OMITTED] T8823.021 [GRAPHIC] [TIFF OMITTED] T8823.022 [GRAPHIC] [TIFF OMITTED] T8823.023 [GRAPHIC] [TIFF OMITTED] T8823.024 [GRAPHIC] [TIFF OMITTED] T8823.025 [GRAPHIC] [TIFF OMITTED] T8823.026 [GRAPHIC] [TIFF OMITTED] T8823.027 Chairman Smith. Thank you, Dr. Jackson. Dr. Vest. TESTIMONY OF DR. CHARLES VEST, PRESIDENT, NATIONAL ACADEMY OF ENGINEERING Dr. Vest. Chairman Smith, Ranking Member Johnson, honorable Members, it is a privilege to be here today. Today, the process of R&D that we have been discussing moves new scientific knowledge and new technology developments to marketed products and services at an ever-accelerating speed. It is an increasingly complicated process. It is a globalized process that is at once both highly competitive and cooperative, and it is a process driven by basic research--and one that would ultimately die without basic research. Some examples of 20th-century innovations that all began primarily with university research include computers, lasers, the Internet, the deployment of the Worldwide Web, the basics of the GPS system, numerically controlled machining for manufacturing, the genomic revolution and most of modern medicine. I contend that there is not a job in America today that does not depend directly on one or more of just these six examples. Now, predictions of future technologies are very difficult. When I graduated from undergraduate school at West Virginia University as a mechanical engineer in 1963, none of us talked about going into the information technology industry because the IT industry did not exist, but our generation invented it and it became the dominant source of employment for engineers in the intervening years. So I am a true believer that if we invest well in basic research and education, we undoubtedly will be surprised by what the new innovations are that actually arise. Let me say three barriers to continued success of our wonderful American innovation system. Our K-12 system is failing far too many of our young people. Our current federal policies, as has been said, make it difficult for brilliant foreign graduate students to stay on in the United States yet such immigrants from the recent decades have contributed hugely as professors and especially as entrepreneurs to our system. And our federal R&D tax credit, among other things, needs to be made permanent. I was asked to comment on National Academy's reports, and I want to cite three that are particularly relevant to the topic of this hearing. I start with our 2005 baseline report, Rising Above the Gathering Storm, and thank this Committee for supporting the authorization, passage and reauthorization of the America COMPETES Act that is largely based on it. Our findings and recommendations in Rising Above the Gathering Storm are as relevant today as they were when they were drafted, and indeed, you heard that from Mr. Templeton. This report offered four broad recommendations, each backed by specific evidence and 20 specific action items, but the big- picture items were four: move K-12 STEM education in the U.S. to a leading position by global standards, double federal investments in basic research in physical sciences and engineering over seven years, encourage more U.S. students to pursue science and engineering careers, and rebuild the competitive ecosystem through reform and tax, patent, immigrant and litigation policies. The second report I would note just came out this last June titled Research Universities and the Future of America, a group that was chaired by Chad Holliday, former CEO of Dupont. It presented a bipartisan congressional group that requested it with 10 breakthrough actions vital to our Nation's prosperity and security. Now, one of the things that is somewhat unique about this report, and we are very proud of it, is that it proposes actions not just by the Federal Government but by state governments, business and universities themselves as well. The report recommends that the Federal Government should adopt stable and effective policies, practices and funding for university-performed research and graduate education. It also recommends reducing or eliminating regulations on university- sponsored research that increase cost and impede productivity. We are very grateful to Representative Mo Brooks, who has requested the GAO to determine ways in which this regulatory burden might be reduced. Now, what actions are other countries taking? A couple of years ago, the then-Premier of China, Wen Jaibao, said flatly, ``I believe firmly that science is the ultimate revolution.'' China's policies, investments and rapid progress derive from such beliefs of their political leaders. Just in January of this year, the European Union announced that it would fund two huge science projects, each at 1 billion euros, to ``keep Europe competitive, to keep Europe as the home of scientific excellence.'' And looked at broadly, R&D investments by both industry and governments use to be totally dominated by the United States. Today, worldwide R&D investments are about a third in North America, about a third in Europe and about a third in Asia. This is a sea change. A final report at the request of the Department of Defense, the National Academies recently issued a report, ``The S&T Strategies of Six Countries: Implications for the United States. It provides an overview and analysis of programs of China, Singapore, Russia, India, Japan and Brazil. Finally, I would like to comment that in a lot of these discussions, and Ranking Member Johnson really headed me off at the pass because she clearly understands it very well, there is a lot of confusion of terminology of basic research, applied research and so forth, and I would like to use with the Chairman's permission, just a little bit of time to give you a perspective on this. Basic research is the search for knowledge by scientists of the natural world and how it works. Applied research, often conducted by engineers, suggests taking that knowledge, scientific knowledge, and conducting further investigations to forge into a useful application. Development moves the actual design to a mockup of a real product. So basic research gave us the electron and the structure of DNA, applied research gave us high-strength steel and the original Internet, development allows us to produce and market a new aircraft or a new computer system. But things are changing. Today, much of what we do, I like to use the term ``use-inspired basic research.'' This is work that is driven for--driven by the quest for an ultimate application goal but requires new fundamental, scientific and technological knowledge to get there. Use-inspired basic research gave us the transistor but it also gave us a lot of new discoveries about materials and quantum physics. Today, use-inspired basic research is giving us applications of new genomic understandings to medical treatment. Now, 50 years ago, most R&D was conducted in big companies in the United States and it followed a sequential, linear process that you did a lot of basic research, got a lot of ideas. You sort of let the market figure out which one of these would be important. You then moved it to applied research, then you did development, finding the market of the product. Today, industry focuses primarily on development and it most certainly does not use this sequential linear process because technology moves too fast. It can't afford to do--industry can't afford to do much basic research where it is not clear that company will receive the payoff, and finally, the results of what we use to call applied research and development feeds so rapidly into the basic research itself that you just can't ignore it and follow the simple linear path. Now, one of these two European projects I mentioned is to try to build the most sophisticated computer model in the world of how the brain works. Now, when you work on a problem like that, as we do in the United States, though will perhaps not at the scale the EU will--we will find out--you learn not only more things about the brain but you learn how to build better computers and it just circles around and all boats rise. But the one message I want to leave you with is that basic research is still done in universities primarily, including this new world of use-inspired basic research, with good interaction with companies and so forth produces the indispensable feedstock for companies and especially for young entrepreneurial companies that increasingly drive innovation, new products and jobs. Mr. Chairman, Ranking Member Johnson, thank you so much for the opportunity to be here. I will be happy to answer any questions. [The prepared statement of Dr. Vest follows:] [GRAPHIC] [TIFF OMITTED] T8823.028 [GRAPHIC] [TIFF OMITTED] T8823.029 [GRAPHIC] [TIFF OMITTED] T8823.030 [GRAPHIC] [TIFF OMITTED] T8823.031 [GRAPHIC] [TIFF OMITTED] T8823.032 [GRAPHIC] [TIFF OMITTED] T8823.033 [GRAPHIC] [TIFF OMITTED] T8823.034 [GRAPHIC] [TIFF OMITTED] T8823.035 Chairman Smith. Thank you, Dr. Vest, and thank you all for your testimonies today, and I will recognize myself for five minutes to ask questions. And Mr. Templeton, I would like to address my first question to you, and let me preface it by saying this, that in the United States every year, $400 billion is spent on research and development. About $140 billion comes from the Federal Government. Those are huge amounts of money but they also have the potential to do a huge amount of good. So my question is, where would you target the government's research and development funds to get the best returns, and what might those returns be? Mr. Templeton. Well, Chairman Smith, I guess the way I would describe it is, if you take a look at the innovations that Dr. Vest just described, investment in physical sciences has really been diminishing over the past 30 years as a percent of GDP. A lot of the studies, like in 2007 with Rising Above the Gathering Storm talked about doubling that over the next seven years. So I think that direction is the correct direction, and then to the question which is an important one, how do you shape that or how do you make decisions of where to apply it, I think we have got some good examples that have worked well in both federal agencies as well with universities, and with public companies to have peer-review processes to understand where are the most promising ideas, and if we had-- someone had noted, if we had an exact view of what the future was, we would be magical. We are not going to get that but what we want to do is use our best minds to try to shape that in the peer-review process. I think that is going to be the best line. Chairman Smith. Thank you, Mr. Templeton. Dr. Jackson, you mentioned in your testimony a few minutes ago, STEM education--science, technology, engineering and math--the Federal Government spends more than $3 billion a year to improve STEM education in our country but we have yet to see significant results from this investment. Do you have any suggestions as to what we should do to improve that record? Dr. Jackson. I do have a few. Thank you. First, I would say that there are three areas we need to focus on. One is improvement in K-12 education, the second is stemming losses in the undergraduate pipeline in STEM education, and the third, creating appropriate bridges to the next level. With respect to K-12 education, believe it or not, I fundamentally am one that says let us get back to basics. I am a theoretical physicist by background, and one cannot do that without a very strong, sophisticated math background, but to do that, one has to be able to do calculus and partial differential equations and all of that, but one can't do that without understanding geometry, trigonometry, algebra, etc. One cannot do those things if one cannot add, subtract, multiply, divide, understand a little bit about logarithms, fractions, percentages, etc. So the point is, it is cumulative, so we have to think about that, as we think about how K-12 education is structured. Secondly, we need it to be outcomes focused, not just in terms of testing but in terms of the ability to use concepts, to use what is learned. Third, we have to strengthen the teacher corps, and I am one who happens to believe that at least for upper-level secondary science and math subjects, that having discipline-based teachers is useful. And finally, we need to be able to use technology itself in a smart way. We are educating digital natives. I am a digital immigrant, latecomer, but we need to be able to use technology to create the right kind of immersive experiences, to educate those in science and technology. The point about the undergraduate pipeline is that there is a much larger dropout rate than people might realize in the first two years of undergraduate education, generally, but including in STEM subjects where students opt--out of those subjects. So there are beginning to be discussions about looking at how science is taught in the first two years of the universities and colleges. And third, when I speak of bridges to the next level, there really needs to be work that puts the basics and applications together. That is how we can draw in young people and they are learning things without even knowing they are learning. Thank you. Chairman Smith. Thank you, Dr. Jackson. Dr. Vest, in your testimony you said if we invest well in basic research and in education, we undoubtedly will be surprised by what new innovations arise. What are some of those new innovations? Dr. Vest. Well, ``surprise'' is the keyword, but since this is one of the questions that was forwarded to us prior to the hearing, I tried to give it a little bit of thought, and as Mr. Templeton was reminding us earlier today, it has been often said that the best way to find out what the future is, is to invent it, and I guess that is what we are all about. But I would point out a few areas that I think are likely. One is new materials. Investment in material science and engineering works on everything from smaller, faster computer circuits to better highways to better bridges. Mr. Templeton's company is actually driven by a philosophy on what is happening in materials available for semiconductors, for example. The second area is the combination of so-called big data and the new generation of artificial intelligence that if we use it well is going to help us understand the world better, make better decisions and probably give us dramatic improvements in areas like medical diagnosis and working together with humans, by the way, computers plus humans doing better medical diagnoses and better policy and decision making. Then it is likely that this rapidly advancing new generation of advanced robotics is going to affect everything. For manufacturing, not just on the big fancy, high-tech company side but on the small manufacturing side as well and also obviously has implications to areas like defense and highway safety. We are already seeing controversial--though it may be this growing--importance of drones, which is a form of robotics, and a new generation of self-driving cars. There is lots of reasons to sort of intuitively be worried about that but there is lots of data that is showing that it could build us ultimately in a couple of decades a much safer highway system. And finally, these really unexpected things, there are these very esoteric fields like quantum computing and biological computing that just may pop up as reality one of these days, giving us much better computer security, which we all know is a big issue, and allowing us to solve more complex problems than we currently can. But surprise is the big thing, and I want to just underscore what my good friend Dr. Jackson said: all this work today by the young people crosses all the traditional disciplines and it is really these unusual or used to be unusual combinations of scientific and technological input that will give us the real surprise innovations. Thank you. Chairman Smith. Thank you, Dr. Vest. The gentlewoman from Texas, the Ranking Member, Ms. Johnson, is recognized for her questions. Ms. Johnson. Thank you very much. And let me express my appreciation for all of the witnesses. My question is pretty basic. I was around during the Rising Storm. We are in the midst of a storm, and I am not sure how much change we have made, though we try. But the most recent research that I have read about students getting into college and then changing from the STEM interest concerns me greatly. It concerns me because the students who seem to leave those fields more frequently are the women and minorities, the growing population. What storm do we need to get gathering here to see if we can change the course of this? Because I really sincerely feel this is the future of our Nation and competitiveness. Anybody who wants to try? Dr. Jackson. Well, since I do educate a few of them, as I said, I think we are finding that the first two years seem to be very seminal in terms of how students are educated, how they are nurtured. At Rensselaer, we actually have a multigenerational approach for women in engineering. We have faculty who mentor postdocs who mentor graduate students who mentor undergraduates, and what we find is that once the women--and this is women across all ethnic groups, by the way-- opt truly into science or engineering. They actually graduate at higher rates than the men. So I think there are subtleties to how this all works. There remains a problem with respect to underrepresented minority males, but it is actually embedded in an issue that has to do with the fact that young men overall are not graduating at the same rates as women. So we are undertaking a special task force at the university to look at this question about how do we create more stickiness for students in the first two years, and looking at our teaching methodologies while at the same time undertaking a particular study about male students and what is happening with them; and we do think there are lots of issues having to do with cognition and learning, how we structure courses. And in fact, I am a member of PCAST and we in fact issued a report discussing some of these things. Dr. Vest. I would only like to add to that that we need to move our perspective back, not to make an excuse, but we need to move it back to the K-12 system and build a good continuum from K-12 through the kinds of things that RPI and MIT and so many other schools are now trying to do, and I would add to the very, in my view, correct list that Dr. Jackson gave earlier. I want to emphasize one of her points and add one thing to it. I really believe that exposing kids from inner city to countryside to suburbs to science and math teachers who have actually graduated in the field they teach. We can do this. This is the primary A number one recommendation of the Gathering Storm report and very little happened to it. So the idea is very simple. We need to deploy a set of scholarships to attract young men and women to go to college, to major in computer science or electrical engineering or physics or chemistry and at the same time be certifiable as K-12 teachers. Secondly, and I hope I am not getting a little too much to the political side, I am a big believer that we need to adopt voluntary standards, voluntary standards across our states in STEM fields just as we have in mathematics and in English, and these standards need to emphasize learning science by doing it, project based, bringing the excitement, the sense of discovery. This is what is going to attract more kids. Just look at things like the Maker movement. It attracts kids from all over the socioeconomic spectrum. Look at Dean Kamen's first project that is in every inner city in the country as well as the wealthy suburbs. This is the way kids today get excited. They get excited by doing. And I think if we could sort of focus on those two things, we could get more people in a more dedicated way into the pipeline, and then if we can top that off by improving the way we teach in universities somewhat along similar directions, maybe we can get there, but this--to me, this division between where kids come from and what their chances are to succeed, it is not America. We really have to get at this. Chairman Smith. Thank you, Ms. Johnson. The gentleman---- Ms. Johnson. Well, I think Mr. Templeton---- Chairman Smith. Mr. Templeton? Mr. Templeton. I was going to say amen. Ms. Johnson. Thank you very much. Chairman Smith. Thank you, Ms. Johnson. The gentleman from California, Mr. Rohrabacher, is recognized for his questions. Mr. Rohrabacher. Thank you very much, Mr. Chairman. Let me ask Mr. Templeton, does your company benefit directly from federal research projects? Do you actually get direct money from the Federal Government to do research for your company? Mr. Templeton. And that was one of my comments. To be very clear, this is about funding going into university systems for basic research, not our company, so a very simple answer. Mr. Rohrabacher. Okay. So there is a certain amount of money that your company is supporting going to a direct research project for a university which then your company, as other companies, then benefit from that research? Mr. Templeton. No, we have a choice and we do choose to participate alongside the Federal Government in long-term basic research as well. Very much some of the same vehicles could be the Nanoelectronics Research Initiative, NRI, or focus centers, so this will be TI putting funding into universities for long- term basic research, and we will do a small percentage of that, so we are at the table and helping to shape an opinion of where that---- Mr. Rohrabacher. How much money does your company actually invest in this type of long-term future investment? Mr. Templeton. It would be tens of millions on an annual basis, so it is not a trivial amount. Mr. Rohrabacher. Okay, tens of millions. Now, let me ask you this. Your company manufactures chips? Mr. Templeton. Yes, sir. Mr. Rohrabacher. Okay. What percentage of your production is in the United States, and do you manufacture in China? Mr. Templeton. The majority of our production today is in the United States. We opened our most recent wafer fab, and in our industry, 300-millimeter wafers or 12-inch-diameter wafers are leading edge. We opened that facility in Richardson, Texas, back in 2007, broke ground, put it online in 2010. I would estimate that probably 40 percent of our chips are manufactured in the United States but we also, to your direct question, manufacture some chips in Europe. We have a facility in China. We have facilities in Japan as well, so we are a global manufacturer. Mr. Rohrabacher. What percentage of your chips are manufactured in China? Mr. Templeton. It would be a very small percentage right now. Mr. Rohrabacher. Ten percent? Mr. Templeton. Oh less, significantly less. Mr. Rohrabacher. But your industry, there are major components of your industry that are engaged in manufacturing these types of things in China. Mr. Templeton. There are other parts of the industry that do manufacture in China, yes. Mr. Rohrabacher. Well, we appreciate the fact that your company is doing a lot of manufacturing here, and we appreciate that investment. It says here we have $400 billion in this type of research that is going on. Does that figure, $400 billion annually, does that calculate in what individual inventors put in to the mix or are they just not part of the calculation? Mr. Templeton. I don't know if they are. They are probably not going to be a significant percentage, okay, as measured by dollars but about 60 percent of that would come from private or companies and 40 percent of that, as Chairman Smith commented, would be federal funding. Mr. Rohrabacher. When we are talking about private inventors and their impact on new discoveries, how would you place them in terms of government programs coming up with something new, corporations coming up with something new versus the individual inventor community coming up with something new? Mr. Templeton. I think if you look at and take Dr. Vest's list of the types of breakthroughs over the past 50 years, the invention of the transistor or ARPANET, which led to the Internet, these tended to be very significant basic research programs that weren't in the minds of any one individual, even at a university but typically a network of universities and a network of people. Mr. Rohrabacher. So the foundation, but we do know that some very significant fortunes have been made utilizing that information and creating something that really was put to use in the marketplace, and my time is running here, but just in terms of the inventors, yesterday we heard about the investment again and government provided the money for the direct research that ended up with somebody in the very end of the process was the MRI. Well, I happen to know the guy who has the patent for the MRI, and, you know, without him, there wouldn't have been an MRI as well. Do you think that there has been--do you think our patent protection for these innovators, the inventors, is going in the right direction or the wrong direction? Mr. Templeton. I think in general it has moved in a positive direction over the past five years, trying to find that very careful balance of what is good to protect invention but not, you know, move off into where patent trolls and many debates go around that topic. Depending on who you are, you have a strong opinion one way or the other. Mr. Rohrabacher. The Chairman and I have differences of opinion on this. Thank you very much for sharing your views with us today, and thank you, Mr. Chairman. Chairman Smith. Thank you, Mr. Rohrabacher. The gentlewoman from Oregon, Ms. Bonamici, is recognized for her questions. Ms. Bonamici. Thank you very much, Mr. Chairman, and thank you so much for scheduling this hearing. Thank you to all the witnesses, panelists. I really appreciated the article in the Politico, Mr. Templeton and Dr. Jackson. The testimony that you all presented to the Committee contains many common elements, and indeed, they are topics that are frequently discussed in this room, especially the importance of promoting STEM education and the role of creativity and innovation in maintaining America's leadership position in the global economy. Now, when I am out talking with constituents and industry leaders about this topic in my district in Oregon, especially about the role that creativity and innovation play in driving our economy forward, many of them express the importance of STEAM education, which is integrating arts and design in traditional STEM fields. Innovative companies across my district from companies like Nike and tech giants like Intel rely on employees with a mind for science but an eye for design, and we have discussed how integrating arts and design education into traditional science education can yield the sort of creative, innovative workforce that many of you identify as essential. And beyond just the benefit for the industry, bringing arts and design into STEM classrooms can help keep students engaged, and I know, Dr. Jackson, you talked about drawing students in. I want to tell you, I visited a STEAM elementary school in my district that took STEM and added arts and design. Those kids were engaged. They were acting things out. They were studying soil erosion and graphing things and drawing charts and planting a garden and playing with worms. I mean, they were really, really engaged in everything that they were doing. So in order to keep students engaged, I want to have a discussion about STEAM. And Mr. Templeton, you affirmed that government primarily conducts basic research while industry focuses on the D side of R&D, developing products for commercial application. In your experience at Texas Instruments, can you discuss the importance of creativity and design to this product development process? Dr. Vest, you discussed improving learning in the STEM fields for students and suggested promoting exciting learning through projects and experiences rather than just boring memorization of facts, and as you see it, could arts and design play a role in STEM education, especially in the learning atmosphere you envision with your comments? Thank you. Mr. Templeton. Well, on the aspect of creativity, the simple answer on that is yes. It is one thing to have numbers and concepts. If they cannot be brought together and visualized and turned into a product, it is knowledge that will not lead to productive things. It is also the case then if you look at STEAM efforts, we have very recently done something with one of the school districts in North Texas, and I think it has got great potential for the creativity that brings along. I do think it is important while we look at that, back to Dr. Jackson's comments, we have to be mindful of the basics, be it the math and science principles, because if we don't have that foundation in place, you can never get to some of the higher- level concepts as well, so I think keeping those in balance is a wonderful thing. Ms. Bonamici. Thank you. Dr. Vest? Dr. Vest. It is a very perceptive question, in my view, and one I get pretty excited about, so you may have to shut me off, Mr. Chairman. But I cannot imagine MIT without its visual and performing arts component. It would not be MIT. We would not attract the same kind of kids. And it is very much a part, in my opinion, of what has to happen at both K-12 and in undergraduate and even graduate education in our universities. Rising Above the Gathering Storm tried to emphasize, we are not telling all kids we want them to become professional scientists and engineers but everybody needs to know some fundamentals today about science and engineering. My experience, if you look at virtually any of the real good high schools that are succeeding, High Tech High in San Diego and so forth, the integration of arts into their curriculum is a very important part. I commented on the Maker movement. This attracts kids from left brain, right brain, everything in between, and I am frankly a big believer in the STEAM movement. There is a hearing somewhere in Congress coming up over the next several weeks that my wonderful friend John Maeda from RISD, the Rhode Island School of Design, is helping to organize. So I am a big believer in this, but it always leaves me in an odd position because I also know that we are failing in our core STEM areas, so it is difficult to talk about the breadth, but yes, arts and the humanities are a very important part of building creativity. Ms. Bonamici. Thank you. And I am afraid I am out of time, but Dr. Jackson, if you wanted to---- Dr. Jackson. You didn't pose the question to me, but we believe so much in it that we have built an experimental media and performing arts center at Rensselaer, and it is both a very high-end cultural and performing arts platform and it is a research platform at the same time. It brings the arts, engineering, the sciences, computer sciences all together, and we have various venues within it, but one in particular allows us to do visualization, animation, simulation, acoustics, haptics, haptics where you can simulate touch. All of this requires bringing all of the disciplines together, including in the arts. We have a games and simulation arts and sciences curriculum, and it uses that whole structure to animate what students do, but at the same time, we feel that fundamental studies in certain fields of the humanities, arts and social sciences are critically important and so we have built those up as well. But you know, it is funny, we have gotten into these buckets about what constitutes the liberal arts versus what constitutes science and engineering, but if you go all the way back to Cardinal Newman about the original definition of the liberal arts, they were in fact together. Ms. Bonamici. Thank you very much. And I am out of time, and that meeting is a week from tomorrow, and we will let the Committee Members know if they would like to attend. Chairman Smith. Thank you, Ms. Bonamici. The Chairman Emeritus, the gentleman from Texas, Mr. Hall, is recognized. Mr. Hall. Mr. Chairman, thank you very much, and this is a very unusual and talented group that are giving us your time, the time it took you to get here, the time it took you to appear before us, give us your testimony, get back to your place of occupation. I know Rich Templeton very well and admire him. Eddie Bernice and I, I am sure Eddie helped to ask you to come here, Rich. We are proud of TI. Erik Jonsson, Gene McDermott, Cecil Green, all those people created the University of Texas at Dallas and were very generous in giving around 1,100 acres to that university. I was the Senate sponsor of that with a guy from the House and I am very proud of the university that you all have created. And Mr. Rohrabacher asked about your support. I could talk all day about the support of that university. I will ask you this one question about STEM graduates. And I know that your dream of Dallas Engineering School finally became a reality in 1986 and the students that you have and you have been a part of TI's history. What about the STEM graduates? Are there enough available in the United States to meet your current and future needs? Mr. Templeton. Well, Mr. Hall, first, thank you for the very complimentary statements about many of our founders, who also had deep histories at both MIT and at RPI. If you look in many ways, the percentage or the amount of people that we hire on an annual basis, we are fortunate because of our reputation that there is enough available. The danger is, that does not apply, I believe, to all industries as you go down through that and I think that supply will be under continued pressure if we don't get K-12 STEM education turned and moving in the correct direction. Mr. Hall. What are some of the key factors in motivating students to pursue STEM degrees? Mr. Templeton. Well, I think it has been touched on by both---- Mr. Hall. Well, I had to leave, and I have to leave soon to go back to another Committee to vote. I am sorry to touch on it a second time if it has already been asked. Mr. Templeton. Oh, no, I will make it very simple. I think it has been talked about. Make the business come alive. If you look at many high school students, especially if you look at women trying to consider a career in science and technology, if you get to the undergraduate level that Dr. Jackson had talked about, and you see nothing but four years of math and science classes ahead of you before you can apply it to something that makes it come to life, you lose a lot of people during that time. When we look at the world of bioengineering to where you really can't see the impact you can make in lives and it really brings the potential career and the impact that you can have alive in young people's minds, then I think that is the secret to grow or to turn that trend around. Mr. Hall. The best practices that the Federal Government could implement to strength our Nation's R&D and maximize the use of taxpayers' dollars, are you a witness to that? Mr. Templeton. Well, I pay attention more to results, and right now if I look at the results coming out of K-12 STEM education in the United States, we continue to be ranked very low on most national or most global ranks, so I think the work that we have as a Nation is still in front of us on that. Mr. Hall. All right. I thank you, and I thank you, Mr. Chairman. Chairman Smith. Thank you, Mr. Hall. The gentleman from Massachusetts, Mr. Kennedy, is recognized. Mr. Kennedy. Mr. Chairman, thank you, Madam Ranking Member, thank you very much for calling this important hearing. To the witnesses, thank you all very much for your testimony. As a resident of Massachusetts, we are acutely aware of the importance of R&D and greatly appreciate your time in coming here today. Mr. Templeton, I actually have a quick question for you that is slightly off topic but of important interest back in my district in Massachusetts and so, Mr. Chairman, I hope you will forgive a quick diversion. As I am sure you are aware, Mr. Templeton, Texas Instruments operated a manufacturing facility in Attleboro, Massachusetts, for several decades. Until it was sold in 2006, the company was a major employer in the area and an active member of the local community. It remains well respected in the city and in the surrounding areas still today. That being said, in the years since the Attleboro plant was closed, the cancer rate amongst former employees has been alarming. Specifically affected are those men and women who were employed by the company between 1953 and 1968 when TI was involved in the federal nuclear program. As part of the Energy Employees' Occupational Illness Compensation Program through the Department of Labor, money has thankfully been made available to those workers who are now suffering from crippling illness. I know that TI has designated an internal point person for the former workers who are seeking information from EEOIC, and I commend you and TI for doing so. But what I am hearing from many residents back in the district is that very few of the thousands of former employees in the Attleboro area are even aware that this program exists and that there are benefits available to them at all. They have seen minimal outreach efforts to ensure that those in need know how to get the help they so deserve. I read this week about Steve Foster from Taunton in the local newspaper. He is suffering from thyroid cancer. His brother also has cancer. His wife and father both died of cancer. All four worked in the Attleboro plant. Yesterday I spoke to Larry Darcy, a resident of Rehoboth, Massachusetts, who was diagnosed with kidney cancer in 1992. Larry went out of his way to credit your company for the opportunities that it gave him and his coworkers. Over 180 of those coworkers from the Attleboro plant that he is aware of have contracted some type of cancer. I tell this story, sir, not to cast blame. The human cost of this country's nuclear development in the 1950s and 1960s is not unique to Texas Instruments or to Attleboro, but I do believe that TI along with the Federal Government has a responsibility to the men and women that we put in harm's way. While we can't take back the exposure to the radioactive or toxic material that so many suffered, what we can do is absolutely everything in our power to make sure that we ease their pain today. So, sir, I would like your opinion on how my office can work with your company and the Department of Labor and Department of Energy to ensure that we are doing all that we can to get the compensation for those who need it. To start, I am wondering if, one, there is any light you can shed on the process that TI goes through to redoubt the former employees in this situation or similar situations, and two, what my office or the Federal Government can do to assist you in this process? The money is there, the program is there and the need, tragically, is also there. The communication is not, and we need to try to fix that. Mr. Templeton. I think, Mr. Kennedy, first, as you know, we have been in very close contact with the DOL, or Department of Labor, as well as the Department of Energy, and I think you described the actions we need to take which is, we need to stay in contact both between the appropriate government agencies and your office. We have been very active with the Departments to make sure any information we could help with was available. We need to continue that and take a look. If there is more than can be done, we should be doing it with you. Mr. Kennedy. Thank you, Mr. President. Which--is there--I would appreciate further communication with you and the designated point person from your office to try to understand if there are employee lists that go back to that time. I understand you have a very generous pension plan, that there are still health care benefits that are being paid to your employees, which your employees went out of the way to credit Texas Instruments for, but if we can somehow facilitate that transfer of information to the government so that they can reach out to those individuals, many of whom don't even know that there is benefits there to cover medical bills that are now soaring into the thousands of dollars? Mr. Templeton. We can certainly get the right contacts to you so that can be done. Mr. Kennedy. Thank you, sir. I yield the balance of my time, Mr. Chairman. Thank you. Chairman Smith. Thank you, Mr. Kennedy. The gentleman from Georgia, Mr. Broun, is recognized. Mr. Broun. Our government is broke. Many Members of Congress are either oblivious or in denial of that fact. We are spending more money than we are bringing in. We are headed towards a total economic meltdown of America if we don't make some changes. Now, both parties have been guilty of uncontrolled spending here in Washington. Promoting science as well as research and development is extremely important for America to get back on a sustainable fiscal course. We must start making responsible decisions and choices here in Congress. With that said, Mr. Templeton, it is well known that the United States has the highest corporate tax rates in the world. It is 35 percent at the federal level. When you add state and local taxes, it is much higher than that for employers and job creators here in America. Please discuss how the rate impacts businesses and how it affects those investment decisions, including how it can be factored into decisions regarding where to locate manufacturing facilities or how much to invest in R&D. How would business investment, hiring and overall U.S. competitiveness be impacted if we eliminated corporate taxes altogether such as my JOBS Act does? The JOBS Act will permanently reduce corporate taxes to zero and capital gains taxes to zero, and I think personally it would be a huge economic boon, and instead of raising taxes would raise taxpayers with good-paying jobs. Could you please discuss that, Mr. Templeton? Mr. Templeton. I will not disagree with your final conclusion. I also know it brings the double taxation dialog that many debate, especially in difficult budget times. But I think the conclusion that you are leading to in the question is very clear. We compete against companies that could be headquartered in Taiwan, for example, and some of them because of government policy virtually have a zero tax rate, and so if we try to operate in the United States market or work against some number incrementally at the 35 percent level and you have got shareholders that have an expectation for a company in Taiwan that operate at zero, it puts a very difficult situation in place for the long term, and even further to the point, and you have seen some of it where companies are faced with, should they move their corporate headquarters to different countries if they are trying to be responsible to their shareholders. I think that is a really dangerous slope to end up on as a country. So I think that the conclusion of your points is very accurate on that. I think it also does come back to by investing in university research, by having those ideas being developed here, we do give advantages to being U.S. headquartered and what we need to do is not be uncompetitive against some of these other countries and then I think we can get great gains from where we are today. Mr. Broun. Mr. Templeton, I believe that the high tax rate and the regulatory burden that the Federal Government has put on business and industry is what is driving manufacturing jobs offshore, and I believe very firmly that we have to bring those jobs back to America because that is what is going to get our economy going again, create those good-paying jobs, particularly in areas of science, technology and engineering, medical science. I am a physician. Do you have any suggestions about how we can look at the regulatory burden and tax burden, besides passing my JOBS bill, which I think is critical to bring those manufacturing jobs back to America? Can you give us some suggestions about what we can do to look at the regulatory burden as well as the tax burden and give us help in getting these shackles off of business and industry, our job creators, so that we can start having a strong manufacturing industry here in this country? And thank you for--I want to thank you for Texas Instruments having the manufacturing that you all do here in this country. Mr. Templeton. Mr. Broun, you know, the simplest way that I think about this is, we have five percent of the world's population, which says 95 percent of it is somewhere else. So when we think about economic growth for our country and for companies that are headquartered in the United States, we have to have policies and plans that let U.S.-headquartered companies compete globally because it ends up creating great opportunities and great economic growth in the United States. I think therein lies the beginning of that policy on how can our U.S.-headquartered companies be highly competitive. That then brings in issues of tax. That brings in issues like today's hearing on research and investment into basic universities. It brings into scope, you know, issues on regulation. We want to be able to operate well but we need to also be able to operate competitively on a global basis, and when that frame is in place, I think you can get to those points or those conclusions pretty quickly. Mr. Broun. Thank you, Mr. Templeton. I yield back. Chairman Smith. Thank you, Mr. Broun. The gentleman from California, Mr. Bera, is recognized. Mr. Bera. Mr. Chairman, thank you for convening this hearing. I will make a quick comment. As a former Associate Dean at the University of California Medical School, we did look extensively at the loss of undergraduate talent, and that clearly is tied to our K-12 system, particularly in lower- income communities and students just not being prepared. If we can hold on to those students when they get to their junior year, they do make up the gap, but we lose far too many of our students there. My question, I will direct it at Dr. Jackson. You are also coming out of a research university background. A key element that we need to focus on is that technology transfer issue, how academia and industry partner, and if you could give us some specific recommendations, and I would open it up to any of the panelists, how we can do that better, how we can work on that partnership? Dr. Jackson. Thank you. I would say a couple of things. First, there are many mechanisms. This whole question about technology transfer, how ideas go from the university into the marketplace is a complex one and it happens within multiple groups. They are public. They are university-industry partnerships, industrial liaison programs. There are entrepreneurs who take the intellectual property they develop in the university, out of the university. The university licenses out intellectual property. All of these things are pathways for that. I think there is a balance that one has to strike, as a university president, in terms of the focus on the basic research and the fundamental learning that goes along with that, and the exploitation of the intellectual property to move it into the marketplace and fundamentally we are focused on both. We actually have a 1,250-acre technology park that is actually home to about 70 enterprises, primary technology based. We have what is called the Emerging Ventures Ecosystem, which specifically seeks into the research, work with our faculty, find where there is exploitable, important intellectual property, and then look for the right translational pathway, whether that pathway has to do with licensing, with helping the faculty member launch a company, joint venturing, etc. We also operate, as part of, that an incubation program, but in our case, we went from having one fixed incubator to having kind of a virtual incubator where we broker the right space for companies. This is very important. And I spoke in my oral remarks about shared infrastructure. A big problem for many startup companies, particularly in areas of new technology, has to do with the so-called valley of death where they go from the sort of very initial startup phase and they may get angel investors for that, to be able to scale what they do, to do prototyping and then ultimately get larger investment. And so there has to be a way for that to happen. It is interesting that we, in some ways, do that through certain mechanisms like OPIC and the Ex-Im Bank when it comes to companies doing things out of the country. But we need something that relates to that kind of thing inside the country. So these are some of the things I would say. The other has to do with patent policies, and on the one hand, the new patent legislation is very helpful. It is very helpful to companies in particular. But it has caused universities to rethink, particularly the piece having to do with ``First to File.'' On the other hand, in terms of the kind of domain within which to operate and how to ensure that, it has been helpful. So all of these kinds of mechanisms exist. I also believe that--and Chuck talked about making the R&D tax credit permanent. That has an effect that spurs, I think, companies to do more, but it also, in an interesting way because of that spur can increase the interest of companies in working with universities in more basic areas. Mr. Bera. Great. Thank you. Chairman Smith. Thank you, Mr. Bera. Dr. Vest. Mr. Chairman, may I add to that? Chairman Smith. Yes, Dr. Vest. Dr. Vest. Just very quickly, I learned four things about this in 14 years as President of MIT and two of them have been greatly supplemented by what I have learned at the National Academies. First of all, we need a simplified policy patent, and I am not talking about federal policy now; I am talking about agreements between universities and companies, at least for modest-scale projects. It should be a boilerplate, no negotiation kind of package, and we are making some progress toward that. Second, what we most need with big companies, long-term strategic partnerships, sticking with it in ways that honestly the Federal Government frequently can't do. There is a great example of Mr. Templeton's company and a few faculty at MIT in the area of signal processing. It has been running for decades, not at a terribly high financial level but it has been really productive. Third, and not every university can do this, I would admit, but we need some large-scale partnerships by which I mean significant multimillion-dollar partnerships between the university and a company because only then do you get real interaction with the thought-leaders in the company. You can't do many of them but a few of them are important. And finally, on the entrepreneurial side, which is so much of what is ``technology transfer'' today at an RPI or an MIT or virtually any of our great public or private universities, creating opportunities for young people to get coached. Hands- on coaching by real entrepreneurs and real VCs is just worth its weight in platinum. It is the real key to building up that ecostructure. Thank you. Chairman Smith. Thank you, Dr. Vest. Thank you, Dr. Bera. The gentleman from Mississippi, Mr. Palazzo, is recognized for questions. Mr. Palazzo. Thank you, Mr. Chairman, and I thank our witnesses for being here today. There has been some very good discussion. You know, there is no doubt that foreign competitors present a substantial challenge to U.S. economic competitiveness and some of those reasons why they are doing well is some of the self-inflicted wounds that we have caused to ourselves such as having an antiquated tax code that really is punishing our corporate job creators in America as well as the job-killing regulatory regime that is pushing a lot of American jobs overseas and actually pushing a lot of businesses just out of business, killing small business as well. One field of endeavor for American competition is still space. So my question is going to be space-specific. I am pretty much a one-trick pony when it comes to this Committee, and anything space and aeronautics is what I like to talk about. America used to be in a space race with the Soviet Union, and today, unfortunately, NASA purchases seats on the Russian Soyuz rockets at $16 million per astronaut to launch to the International Space Station that we built with the now-retired space shuttle. So my question is for everyone. How do you think America's ceding leadership in space like that translates to the sense among many Americans that we are no longer a technology leader? And we will start with Mr. Templeton. Mr. Templeton. You know, I think in many ways, as many on this Committee probably know, the space race was a very polarizing, very inspiring challenge back in the 1960s and provided tremendous investments that led to things like the semiconductor industry. I suspect when the space race was underway there was no one sitting around in federal labs or at an agency planning out semiconductor industry leadership 30 years from when they began that race. So, you know, I am not qualified to comment about the specifics of space or not, but I think wonderfully challenging goals, okay, really help this country, really bring energy and inspiration to invest and go try to do great things, and whether that is a space objective or things in the biomedical field that were talked about, I think those have, you know, great potential when we think about this challenge in front of us. Mr. Palazzo. Dr. Jackson? Dr. Jackson. Thank you. You know, it turns out that one of my predecessors as President of RPI, Rensselaer, was George Lowe, who basically was the operations director who ran the Apollo program that put man on the moon. As well, a number of our graduates have been involved in more recent work in designing and launching the Mars Rover. So it is a big part of our history and tradition. But what I would say is the following. There are a number of pieces, some having to do with basic research, and I will mention just a couple of things with that, some having to do with infrastructural questions, and then the third having to do with the overall industrial capability to do these things. On the basic research, if you think about space missions, they depend on fundamental science and people want to explore space for that reason. The knowledge of it, as well, is particularly important for various kinds of missions including potential manned missions. It requires computational capability. It requires strength in material science and engineering. It requires strength in aerospace and thinking about new propulsion systems. You mentioned our having to use other people's rockets to get people to the International Space Station. We also use other people's rockets to launch our satellites and so that is an infrastructural question. And then, you know, there is an overall question about overall industrial and manufacturing capacity to continue to make and develop these sorts of technologies, and I am sure Mr. Templeton can speak more directly to that, but these are areas that concern me as we go forward. Mr. Palazzo. Before I go to Dr. Vest, I do want to ask one more question because I know we are getting short on time. Dr. Jackson, does the space exploration, American space exploration, still excite children to study science, math, engineering and technology? Dr. Jackson. It sure does. We had a presentation at Rensselaer and it was during one of our alumni weekends of the landing of the Mars Rover, and that is because our Dean of Science, in fact, had two experiments on the Rover and was there the day the latest Rover landed. We also had some of the engineers in who were involved with the design and development of the latest Rover, and frankly, half the space, and we had it in a concert hall in our experimental media and performing arts center that holds about 1,200 people and half the people were young people and they were so excited. So absolutely, but I think it relates to Mr. Templeton's point that a big idea, something that we galvanize around, we rally around is really what captures people's imagination. Mr. Palazzo. Thank you. Dr. Vest. I am going to speak out of both sides of my mouth, first by saying this generation has its own great challenges that it needs to be and is excited about, sustainability and energy security and resilience, provision of health care. It has got big challenges of its own that are even more important than the space race was, and we need to give some focus to that. Having said that, I will admit I am a space cadet. I grew up in the 1950s and 1960s and lived through all this wonderful period. It is still--when we survey incoming freshmen at MIT, space is still the largest single motivator among these kids of why they went into science and engineering. That is the reason we need to keep at it. But having said that, these programs are so big and so expensive that I think we need to find the right way to do them internationally. At one level it hurts me, but my logic, it doesn't bother me too much that at least for a period of time we are launching humans with a Russian rocket. We need this kind of synergy and integration. But I will tell you, nobody has done anything as exciting as this Mars lander. I mean, it was unbelievable. And very quickly, you may know the story of the guy who managed the actual engineering of that project and that landing was a drop-out from high school who became a rock musician and eventually decided he wasn't going to make it with that and one night literally was driving home and looked up in the sky and saw Venus and he started thinking about this and he got more and more excited, and he said, you know, this is my destiny is to get out there somewhere, and I apologize for not having his name at my fingertips. He went back to community college, got a technology degree, started to work, eventually went to university and became an engineer and ran that project. You know, that is the kind of excitement we need, and we can kind of duplicate that with what we do in education. But I was very disappointed by the short time scale of America's attention to that program because I can't imagine anything more exciting. I have to---- Chairman Smith. I am afraid to interrupt you all. Votes have been called and I am going to try to squeeze in one more Member to ask questions. Mr. Palazzo, thank you for your questions. And also, let me sort of explain the situation to everyone who is here. The series of votes will mean we will not be able to come back for about an hour. Our Democratic friends are getting on buses immediately after these votes to go to an out- of-town retreat, and I am just wondering how many Members really would come back in an hour and if they might consider submitting questions in writing, and if that is not acceptable, we will come back, but if that is acceptable, I just apologize to you for not having time for Members. Does that sound all right? Okay. Thank you for your consideration. The gentleman from California, Mr. Swalwell, is recognized for his questions. Mr. Swalwell. Thank you, Chairman Smith and Madam Ranking Member Johnson, and thank you, Mr. Templeton, Dr. Jackson and Dr. Vest. We have talked a lot about startups today, and I am a startup Member of Congress, having just arrived here. I came to Congress wanting to support the innovation agenda, and as a freshman and a new Member in Congress, and a new Member to this Committee, I am encouraged that our first hearing is on research and development. I represent California's East Bay, where people understand that to do big things, you have to take big risks, and I am excited to be on this Committee because I truly do believe in science, and I believe in what science can do, and as our Ranking Member mentioned, the number of innovations that have come out of the Federal Government's role in science is very important to me. I wanted to talk to you a little bit about Dr. Jackson and her testimony about collaboration between government and business and also Mr. Templeton discussed good examples of public R&D partnerships in the semiconductor industry. In Livermore, California, we have what is called IGATE, Innovation for Green Advanced Transportation Excellence. It is a regional public-private partnership designed to support small businesses and maximize the economic potential of green transportation and clean energy technologies. It is a partnership with the cities in the surrounding communities, Sandia and Lawrence Livermore National Laboratories and also the University of California, the Berkeley and Davis campuses. And so my question is, we are just starting to see this project get off the ground, but as you can imagine, one of the biggest challenges is access to capital, to have an incubator- type setting where you can have small startups, medium-size startups come in and do the work that they need to do to create local made in America jobs. And so a couple questions. One, is there still a role for the Federal Government to play? Because I believe you need a federal partner if you are ever going to activate a region like that. Two, what can we do to increase access to capital as a Congress so that we can see those startups get going and create jobs? And three, how do we--and when we talk about the ecosystems of innovation, how do we also find those pipelines to the students where we have those businesses not just working on creating jobs but also transferring their knowledge to high school and college students who are going to be the next generation in those industries? So is there a role, how do we get the access to capital, how do we educate our children? Dr. Jackson. I will try to be succinct. I would say absolutely, there is a role. Now, we have talked about one element of that role having to do with support for basic research, support for students, both at the undergraduate level and importantly where we have not talked about it for graduate education and its linkage to research. But importantly, you mentioned energy, green energy technologies. Energy tends to be a huge kind of--there are any number of demonstration projects early in kinds of things people can do but it is the kind of activity that requires a certain degree of activity at scale, and so that kind of infrastructural support is very important, and the Federal Government can do any number of things, but one is simply to provide a safe harbor for corporate partners to come together, not unlike SEMATECH, to bring them together with universities, particularly in precompetitive research including applied research areas, to help support shared infrastructure and that is where smaller companies that really need to do prototyping. Some of the national labs are providing their major computational facilities to help companies with modeling and simulation, to be able to improve and begin to think about how to scale what they do. So it is kind of a daisy chain going from the fundamental research to creating the kind of safe harbors and partnerships that can allow roadmaps to be developed and people to move along, with the shared infrastructure as well. I am sure I have left something out, but these are some of the things that we try to do, and we don't have the benefit of being in Silicon Valley, we are in upstate New York, and so we don't have a big national lab. So the state has stepped in and done a lot of things, and then the universities themselves have come together. Thank you. Mr. Swalwell. Thank you. I yield back the balance of my time. Chairman Smith. Thank you. We have got about four minutes left to go vote. I thank you for yielding back. Let me thank our witnesses today for their just wonderfully inspiring testimony. It has been very helpful, very informative, and I hope those who are watching this hearing either in person or on C-SPAN recognize that we are talking about a wonderful future for them and their children and grandchildren if we make the kind of investments in research and technology that we should. It is just going to pay a vast amount of rewards. It will improve productivity. It will improve people's standard of living, and that will benefit us all, but thank you all for your participation today. [Whereupon, at 11:12 a.m., the Committee was adjourned.] Appendix I ---------- Answers to Post-Hearing Questions Responses by Mr. Richard Templeton [GRAPHIC] [TIFF OMITTED] T8823.036 [GRAPHIC] [TIFF OMITTED] T8823.037 [GRAPHIC] [TIFF OMITTED] T8823.038 [GRAPHIC] [TIFF OMITTED] T8823.039 Responses by Dr. Shirley Ann Jackson [GRAPHIC] [TIFF OMITTED] T8823.040 [GRAPHIC] [TIFF OMITTED] T8823.041 [GRAPHIC] [TIFF OMITTED] T8823.042 [GRAPHIC] [TIFF OMITTED] T8823.043 [GRAPHIC] [TIFF OMITTED] T8823.044 Responses by Dr. Charles Vest [GRAPHIC] [TIFF OMITTED] T8823.045 [GRAPHIC] [TIFF OMITTED] T8823.046 [GRAPHIC] [TIFF OMITTED] T8823.047