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Government Competitiveness Report: Manufacturing Is America's Biggest Source for Innovation

A new U.S Department of Commerce report delivered to Congress puts forth a number of bipartisan ideas on how to sustain and promote American innovation and economic competitiveness.

"The Competitiveness and Innovative Capacity of the United States" makes three important findings:

  • In the last century, federal investments in research, education and infrastructure were critical building blocks for American economic competitiveness, business expansion and job creation;

  • Failures to properly invest in--and have comprehensive strategies for--those areas have eroded America's competitive position; and

  • In a constrained budgetary environment, prioritizing support for these pillars are imperative for America's economic future, and provide a strong return on investment for U.S. taxpayers

The report, mandated as part of the America COMPETES Reauthorization Act of 2010, addresses diverse topics and policy options. These include: tax policy; the general business climate in America, barriers to setting up new businesses, trade policy, the effectiveness of federal R&D policy; intellectual property "regimes" in the U.S. and abroad, the manufacturing sector's health, and science and technology education.

Other key findings include:

  • Manufacturing The report recognizes that a flourishing U.S. manufacturing sector is crucial to competitive strength, economic growth and job creation as well as to sustaining a strong middle class. It's the biggest source of innovation in our economy, as 67 percent of all business R&D in America is done by manufacturing companies. In 2009 alone manufacturing comprised 11.2 percent of GDP and 9.1 percent of total U.S. employment, and directly employed over 11 million workers.

  • Basic research While private citizens and businesses are the top source of new ideas, the report says government plays a key role in supporting and developing their innovations (e.g., the development of the Internet, satellite communications and semiconductors). The report recommends federal funding be increased for basic research at universities and research centers. It also recommends a tax credit be extended for private-sector R&D to give companies appropriate incentives to innovate and improve the way basic research is transferred from the lab into commercial products.

  • Education In order for our country to succeed in the global economy, the report proposes that our government encourage more citizens to pursue education in science, technology, engineering and mathematics (STEM) fields.

  • Infrastructure The report underscores the need for federal government investment in projects providing robust broadband Internet access in urban and rural communities. Presently, 68 percent of American households have adopted broadband--an almost eight-fold increase since 2001.

The report also delves briefly into other topics, including the benefits of regional clusters, corporate tax reform, intellectual property protection, the Startup America Initiative and the National Export Initiative.

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