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Bad Policy Choices Are Worrisome for U.S. Economy’s Future

I recently returned from nearly two weeks in Asia, interacting with people from across the continent at a conference in Cambodia and traveling to Vietnam and other places in the region. The vibrancy in Asia is staggering, as is the combination of rising nationalism and a growing sense of continental identity. [IMGCAP(1)]

But it is Asia’s economic dynamism that stands out the most. Of course, Americans feel the results of that economic dynamism daily, in rising gasoline prices driven in part by the insatiable demand for energy in China and India. And the impact is lurking in another arena — the Asian central banks that hold three-fourths of the dollars outstanding, financing our budget and trade deficits and maintaining some considerable control over our economic well-being.

It is not just India and China that represent the future of Asian growth and power. Japan seems finally to have turned a corner after a decade of stagnation, although it still faces relatively modest economic growth. Other countries have major assets and robust futures as well, including Vietnam, South Korea, Taiwan and Singapore. All are expanding their economic bases; all are turning out impressive numbers of scientists and engineers to take advantage of the cutting-edge technologies that will help drive the economies of the future.

Unlike many observers, I did not come back to the United States believing that China will leave us in the dust, or that the American economy faces a bleak future. We have heard that story before — about Japan, just to name one rival — and it has proved false. The United States has strengths — in infrastructure, culture, education, freedom, rule of law, environmental protection, size and heterogeneity — that no one else can match or approach.

But I am growing increasingly alarmed, less because of the dynamism in Asia and more because of our blindness and obtuseness when it comes to our crown jewel: our overwhelming lead in basic research and our position as home to the best scientists in the world.

Basic research is the real building block of economic growth, and here we have had the franchise; just look at the number of Nobel Prize winners from the United States compared to the rest of the world combined. Our academic institutions and research labs have been magnets attracting, and often keeping, the best and the brightest. Our academic openness and our culture of freedom have encouraged good research and challenges to orthodoxy. Our politicians have recognized that most basic research has to be funded by the government because there is scant short-term economic benefit for most businesses to do it themselves.

But now, in a variety of ways, we are frittering away this asset, and for no good reason. Start with the federal budget. Basic research has been concentrated in a few key institutions: the National Institutes of Health, the National Science Foundation, the National Institute of Standards and Technology, and the Defense Advanced Research Projects Agency at the Pentagon. After a series of pledges to double the NIH budget and then keep it on a growth path, NIH has stagnated. Budget growth for next year is one-half of 1 percent, which will be below inflation for the first time since the 1980s, at a time when the need for more biomedical research is obvious.

The NSF budget is slated to grow by 2 percent, leaving it $3 billion below the funding level Congress promised in 2002. At NIST, the Bush administration is trying to eliminate the Advanced Technology Program and to slash the Manufacturing Extension Partnership by 57 percent. At DARPA, which originated the Internet but where computer science research has been flat for several years, the money going to university researchers has fallen precipitously, along with a larger focus on applied research for the here and now.

To quote my colleague, former Speaker Newt Gingrich (R-Ga.), this set of budget priorities is insane. But the budget is only a part of it. Our visa policies, understandable as they are after Sept. 11, 2001, are keeping out the best and brightest foreign students and driving out some of the best international scholars, leading other countries, such as Australia, France and Germany, to seize the opportunity to enhance their own research capabilities.

Our decisions to curtail much research on stem cells is creating opportunities elsewhere: Some of our best scientists are headed for Singapore. The new NIH ethics rules are driving out top scientists and causing others to reconsider their willingness to go to NIH.

A half-century ago, we could count on the private sector to finance crown jewels like Bell Labs and do a great deal of the basic research that made America the world’s leader. No more. To be sure, Silicon Valley still steps up to the plate, and our pharmaceutical industry does nearly all the cutting-edge drug research for the world. But much of the information-technology and drug research has been heavily subsidized by the federal government. And other heavy-handed government policies may drain pharmaceutical company revenues enough to cut their research and development.

It is gut check time. The foolish fiscal policies that keep big entitlements off the table, won’t consider revenues along with spending, and have turned the one-sixth of the budget that is discretionary into a vicious, zero-sum game, are truly eating our seed corn in this critical area. Somebody needs to get the White House to wake up, and Congress to understand what it is mindlessly doing.

Norman Ornstein is a resident scholar at the American Enterprise Institute.

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