Obama Gets Innovation Upside-Down

In his State of the Union speech, President Obama spent a lot of time on innovation, regulation, and jobs–that’s good. Unfortunately, in all three cases he got his priorities upside down.

Let’s start with innovation.  I counted how many words the President devoted to different areas of innovation.

  • 2 words for biomedical research, the area where the U.S. is far ahead of the rest of the world.
  • 68 words devoted to extolling the job-creating virtues of space travel and NASA, an agency which currently has no mission unless it gets a lot more money.
  • 113 words for  highspeed-wireless broadband, a worthy goal.
  • 361 words in favor of clean energy, a technology where the U.S. has little competitive advantage over the rest of the world.

In other words, Obama spent his time lauding our least competitive areas of innovation, while giving the back of his hand to biomedical research, the area where we have the clear global advantage.

If you think I’m exaggerating, take a look at these two charts.  When it comes to life sciences, the U.S. is way ahead. U.S. companies account for 44% of   R&D spending by life sciences companies around the world in 2010, according to estimates by Battelle/R&DMagazine.  And U.S. government support for health research is unsurpassed, accounting for 70% of  global public sector funding.

On the other hand, the U.S. support for  energy research is mediocre, at best. U.S. companies account for only 25% of global energy R&D spending by businesses.  And in 2008, before Obama took over, the U.S. government funding for energy R&D accounted for only 20% of the global public sector spending on energy R&D.  That’s pitiful.  

 Here’s what a recent R&DMagazine piece says about U.S. energy R&D:

the level of R&D spending in the U.S. energy sector is small in absolute terms and as a percent of revenue (0.3%) when compared with other sectors. For example, the total amount of private sector investment in all forms of energy research in our portfolio would likely amount to little more than half of the leading life science R&D investor, Merck, or the leading software/IT R&D investor, Microsoft, both of which invested more than $8.4 billion in R&D in 2009.

Mr. President, every time you talk about clean energy creating jobs, you are placing your bet on the wrong horse.  Communications and biosciences are the best bets we have in the near-term.

Now we come to regulation. I’m afraid once again the President started out right, and ended upside-down. He began by explaining how he would get rid of rules that imposed an unnecessary burden (29 words). But then he spends triple the time ( 102 words) defending his administration’s regulatory efforts.  He should have stopped while he was ahead.

Finally, we come to jobs, which were spread through the whole speech. This is my ‘soft’ count of how many times the word ‘jobs’ were mentioned in connection  with various areas of the economy (your count may differ) 

  • IT-1
  • Space-1
  • Clean energy –2
  • Education–3
  • Infrastructure –2
  • Exports–4

Exports got the most mentions as a source of jobs—-but no mention of imports, and no mention of the fact that our trade deficit in advanced technology products hit an all-time record in November, going into double digits for the first time.  The reason? Imports of advanced technology products have surged, while exports are basically flat.  Before worrying about exports, we should worry about recapturing some of the jobs lost to imports.  

Comments

  1. Isn’t there a higher rate of return if we can get an oil alternative than if we get a Viagra alternative? Energy costs are similar around the world, medical tourism on the other hand points to inefficiencies in the healthcare system itself, not necessarily the cost of drugs or procedures like MRIs or xrays.

    • Mike Mandel says:

      A Viagra alternative? Hardly–but the fact that you use that example points to the real problem: People are minimizing the powerful innovations that could come from the biosciences sector, because the last ten years have been so weak. I’m looking more for an Alzheimer’s treatment than for better sex.

      And the oil alternative is more likely to come from the biosciences sector than from the straight energy research, where we have been underinvesting for years (or maybe even decades). We need to spend more on energy R&D, but the payoff in jobs won’t be immediate.

      • It seems like a lot of effort is being dedicated to “cure”, in this case, a disease that would have just been considered a natural affect of aging, when in a lot of cases, mental stimulation and coffee can do much to prevent it. If health technology stagnates for centuries, we’ll all still be healthier than our ancestors of centuries past. Our energy status quo isn’t as hopeful.

        I read China can make solar panels cheaply, which is cool, but they are among the least complicated things to make. Vinod Khosla is dabbling in biofuels, but even he seems doubtful. The real promise looks to be in maybe (racetrack) battery revolutions (10x storage), something IBM alluded to in their recent “Next Five in Five”, efficiency (ecomotors).

        In the end, AMD Fusion, Nvidia’s Project Denver, Intel’s Many Integrated Core are set to accelerate compute capacity within the next decade. So that will mean better health and energy technologies for all.

  2. To put it bluntly, I think you’re wrong. At the moment, the federal government funds biomedical research (NIH) to all other fields (NSF) on a ratio of about 5 to 1*. Couldn’t we ease that ratio just a little?

    *Yes, if you added DOE/DOD research to the mix, it might get lowered a little.

    • Mike Mandel says:

      actually, I wasn’t thinking about increasing the NIH budget. We do need to spend more on energy and nonhealth research, but the payoff in jobs is off in the future because we’ve been underinvesting so long.

      On the other hand, biosciences is much closer to a jobs payoff, because we’ve been putting so much money and time into it. What we need to do is evolve and sharpen the regulatory framework to encourage more innovation and experimentation at the downstream end, so that the odds of success go up.

      • I’m unconvinced of your statement that “biosciences is much closer to a jobs payoff”, although I’d like to think otherwise.

        Maybe I don’t quite understand the biology jobs market (I am, after all, a chemist), but I’m under the impression that there are a lot of highly trained biology-types who are either out of work or working at relatively low-paying jobs at academic centers. Maybe more regulatory freedom would make that final push towards biotech employment nirvana, but I can say this for certain: it’s not right now, and I don’t see it anytime soon.

      • Mike Mandel says:

        Yes, it’s been a horrible decade in many ways for the biosciences, as hope has outrun results. But that can turn around quickly though–as late as 1995, nobody had any idea that the internet was going to drive job growth.

  3. Don’t get me wrong, BTW. NIH got me my degrees, so that’s nice. But really, we want to be more than just the Mayo Clinic to the world, right? Right?

  4. But should one concentrate on strengths or weaknesses? Strengths are more likely to pay off in the near term, but weaknesses are often more severe and need more attention over the long term. A balanced growth approach offers the possibility of synergistic effects, biofuels in particular.

  5. mike shupp says:

    Look at the bright side. I doubt there’s a kid anywhere in the country who is going to be inspired by that speech to become an aerospace engineer. That ought to delight economists all across the land!

Trackbacks

  1. [...] This piece is cross-posted at Mandel on Innovation and Growth [...]

  2. [...] This post was mentioned on Twitter by Toby Elwin and st ppi, Michael Mandel. Michael Mandel said: Obama stresses exports, but ignores the record trade deficit in advanced technology products http://t.co/pI2TBML [...]

  3. [...] Of the 500 or so words Obama dedicated to innovation in his State of the Union, 360 dealt with clean energy. But that’s just talk. The United States government provides only 20 percent of the OECD’s energy R&D spending. On the other hand, we make up 70 percent of the developed world’s bioscience and medicine research spending, as economist Michael Mandel writes. [...]

  4. [...] piece is cross-posted at Mandel on Innovation and Growth Tagged Communications, Economy, Innovation, Regulatory Reform, [...]

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