Trump 'skinny budget' too heavy on cuts to innovation engines
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President Trump’s budget cuts may reflect his campaign promise to lower federal spending, but it fails to recognize the need to maintain America’s competitive edge in technology and innovation. By reducing support for programs that nurture technological innovation, his budget threatens to undermine the foundation of the nation’s long-term economic growth and military superiority.

The budget would make steep cuts to the National Institutes of Health, a net economic contributor, and eliminate the Small Business Administration’s 14 Regional Innovation Clusters, which support small, high-tech innovators, including some specifically dedicated to defense technology.

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The budget also would cut funding to the Manufacturing Extension Partnership, which assists small manufacturers seeking to implement advanced technology and improve export opportunities. The MEP, for example, helped a Pennsylvania metal components company, South Erie Manufacturing Co., come up with a strategy to automate its operations without cutting jobs.

 

Examining programs to ensure they are efficient is appropriate, but these cuts appear to run counter to economic reality and, in some cases, political reality. For example, Erie County, a long-time Democratic stronghold, went to Trump with the support of white, blue-collar voters.

Any long-term economic plan must recognize that innovation, rooted in science and technology, has been the key driver of prosperity for decades. Cuts that erode the research and development base — and undermine entrepreneurial drive — will ultimately erode the technological edge that has created highly-paid jobs and provided products with the potential to make us healthier, safer and more efficient.

The Regional Innovation Clusters bring together startups, nearby academic programs and service providers — primarily in areas outside Silicon Valley and other major technology centers — to create local networks of tech-oriented businesses.

The reliance on technology on the modern battlefield makes any threat to technological research or a technically-skilled workforce a concern. Among the clusters that would lose federal support are three devoted exclusively to research and development of robotics, cybersecurity, energy technology and reconnaissance tools used by the military. 

The defense-focused centers, located in Alabama, Minnesota and California, may comprise a tiny part of military R&D, but the risk they might disappear highlights the logic that once you start to erode the base of innovation contributors, innovation eventually will erode as well.

The opposite is equally is true. Small investments in innovative startups can lead to remarkable economic success. A similar SBA program that provides investment in small, privately-held businesses helped launch Apple, Intel, Federal Express and other companies which have not only created thousands of new jobs, but changed the way we live.

The new budget would also take a $6 billion, 20-percent cut from the NIH in 2018. While it may sound like an exercise in bureaucratic liposuction, Milken Institute research shows that each dollar invested in NIH generates $3.20 of output in the bioscience industry. So, every NIH dollar that goes into the biosciences not only advances crucial health research, but benefits the broader economy.

This multiplier effect shows up across tech-related industries. The Milken Institute’s State Technology and Science Index, published every other year, measures economic growth against the level of expertise science, technology and entrepreneurship in each state. For every 10 percent increase in a state's STSI score, the real high-tech GDP per capita of the working-age population rises nearly 15 percent.

The effect on earnings is dramatic as well. Average annual income for the holder of a two-year tech degree is about $66,000. Graduates with a general education degree can expect to make about $33,500 a year, according to data compiled by California Community Colleges.

In the long term, preparing Americans to work in state-of-the-art factories will have more to do with the future of manufacturing than strong-arming trading partners such as Germany and China. 

The president’s “skinny budget” may be nothing more than a negotiating position for the administration’s coming battles with Congress, but targeting programs that support the innovation economy is the wrong place to start.

 

Ross DeVol is the chief research officer at the Milken Institutean independent economic think tank based in Santa Monica, Calif.


The views expressed by contributors are their own and not the views of The Hill.