How Federal R&D Investments Drive U.S. Economic Prosperity and Productivity

Office of the Press Secretary

For Immediate Release June 15, 2000


"Our passion for discovery, our determination to explore new scientific frontiers, and our can-do spirit of technological innovation have always driven this Nation forward. This report provides concrete evidence that sustained investments in research can ensure that America remains at the forefront of scientific capability, thereby enhancing our ability to shape a more prosperous future for ourselves, our children, and future generations while building a better America for the twenty-first century."

President Bill Clinton
June 15, 2000

The Federal government invests over $80 billion in research and development each year. Our partners in the national S&T enterprise -- industry and academia -- have roots in virtually every community across the nation. That is where we put Federal R&D investments to work. We have long known that publicly-funded R&D activities have enormous payoffs at the national level. These investments enable our nation to compete successfully in the global marketplace, protect our environment and manage our natural resources in a sustainable manner, safeguard our national security from emerging threats, and spur the technological innovation that has contributed so much to our economic prosperity and quality of life.

We see the fruits of Federal R&D innovation every day. Many of the products and services we have come to depend on for our way of life in America -- the Internet, the Global Positioning System (GPS), lasers, computers, magnetic resonance imaging (MRI), teflon and other advanced materials and composites, communications satellites, jet aircraft, microwave ovens, solar-electric cells, modems, semiconductors, storm windows, genetic medicine and biotechnology, and many others -- are the products of Federal R&D investments made over the past 50 years. These innovations also mean jobs and economic prosperity for America.

This unique report provides clear evidence of the payoffs that R&D investments have at the state and local level, as well as how they ripple through regional and local economies and spur the growth of high technology start-up companies and improvements in local schools.

Research and Development in the 50 States. At the request of the White House Office of Science and Technology Policy, RAND has prepared the most comprehensive and detailed information to date on the nature, magnitude, and location of the individual activities that comprise the Federal government’s R&D portfolio. Discovery and Innovation: Federal Research and Development Activities in the Fifty States, District of Columbia, and Puerto Rico is an extraordinarily comprehensive 650 page report that taps the RaDiUS (Research and Development in the United States) database to put a human face on the Federal R&D enterprise. This groundbreaking effort identifies the individual laboratories, R&D centers, universities, and companies where people actually create new knowledge and develop innovative new technologies. It enhances our appreciation of the local and regional significance of Federal R&D activities. To ensure the comparability of all of the data used in the report from the most aggregate to the most detailed level of analysis, the most recent data available is from 1998, the baseline fiscal year used throughout the report. For eight years in a row, President Clinton and Vice President Gore have proposed increased R&D investments. For FY 2001, the civilian R&D request is $43.3 billion, an increase of 6 percent ($2.5 billion) over FY 2000. Civilian R&D now constitutes 51 percent of the overall R&D budget of $85.3 billion -- up 43 percent since 1993. The budget boosts funding for basic research by 7 percent, a $1.3 billion increase -- up 52 percent since 1993. R&D support to universities increases 8 percent, a $1.3 billion increase -- up 53 percent since 1993. Perhaps most important, this budget presents a balanced R&D portfolio which recognizes the interdependence among the scientific disciplines -- gains in one field are often dependent on advances in others. These investments will enable Federal agencies to achieve the President’s goals for science and technology, namely to: promote long-term economic growth that creates high-wage jobs; sustain a healthy, educated citizenry, harness information technology; improve environmental quality; enhance national security and global stability; and maintain world leadership in science, engineering, and mathematics.

What’s new and important in this report:

The value of such new detailed information:

How this report differs from others:

The bottom line:

Stakeholder Interests in this Report

Why R&D Is Important to the Nation

The credit for America’s record-breaking performance in the current world economy really goes to the powerful system we have generated to create new knowledge and develop it into technologies that drive our economy, guarantee our national security, and improve the health and quality of life. We have come to rely on technology and take it for granted in our everyday lives. But the marvels of today are really the fruits of research seeds planted decades ago -- investments that have not only given us new technologies, but have helped educate generations of engineers and scientists who now form an essential component of our workforce. The very fact that these advances required decades of investment stands as a warning against complacency in our future investment strategy. The government and the private sector must work together to ensure that today’s investments in R&D are sufficient to yield similar payoffs to society in the 21st century.

Last spring, Federal Reserve Chairman Alan Greenspan repeatedly cited an unexpected leap in technology as primarily responsible for the nation’s sparkling economic performance. In particular, a technology-based surge in productivity appears to be contributing substantially to our economic success. Our military strength -- built on a foundation of high technology -- has enabled the United States to keep America safe from aggression, defend our allies, and foster democracies across the globe. New technologies also improve the quality of our lives. Medical research in pharmaceuticals, biotechnology, and medical devices promises us a healthier life. Environmental research offers cleaner air, water, and soil through better monitoring, prevention, and remediation technologies. Advanced monitoring and forecasting technologies -- from satellites to simulation -- help save lives and minimize property damage cause by hurricanes, blizzards, and other severe weather. Agricultural research yields a cornucopia of safer, healthier, and tastier food products. Automobile research leads to cars that are safer, cleaner, more energy-efficient, and more intelligent. Energy research delivers cleaner fuels and reduces American dependence on foreign resources. Information and telecommunications technologies enable instantaneous communications across the globe.

The largest R&D budget in history for FY2001. President Clinton’s FY2001 S&T budget includes a $2.9 billion increase in the "Twenty-First Century Research Fund," including a $1 billion increase in biomedical research at the National Institutes of Health and double the largest dollar increase for the National Science Foundation in its 50 year history. These investments will ensure that science and technology will continue to fuel economic growth and allow Americans to lead longer, healthier lives. These investments also will enable America to continue to lead in the 21st century by increasing support in all scientific and engineering disciplines, including biomedical research, nanotechnology, information technology, clean energy, and university-based research.

Fully half of our economic productivity in the last century is attributable to technological innovation and the scientific research that supported it. The knowledge-based society of the 21st century only increases the importance of research, innovation, and human capital as our principal strengths. By sustaining our investments in research, we ensure that America remains at the forefront of scientific capability, thereby enhancing our ability to shape and improve our nation’s and the world’s future.

R&D investments pay rich dividends to the Nation. It is no accident that our country’s most productive and competitive industries are those that benefited from sustained Federal investments in R&D -- computers and communications, semiconductors, biotechnology, aerospace, environmental technologies, energy efficiency. From satellites, to software, to superconductivity, the Federal government has supported -- and must continue to support -- exploratory research, experimentation and innovation that would be impossible for individual companies or even whole industries to afford. These partnerships in pursuit of innovation enable the private sector to generate new knowledge and adopt novel technologies that ultimately lead to commercial success, increased jobs, and healthier and more productive lives for all Americans.

Investments in Federal R&D have extraordinarily high rates of return. Economists estimate that private rates of return on R&D spending average about 24 percent. But societal rates of return on R&D spending -- the economic benefits that accrue to the entire society -- are about 66 percent! As much as half the return on an individual firm’s R&D investment goes to other companies and competitors -- not to the investing company. This "spillover" effect means that private industry cannot and will not commit the level of resources to R&D that is best for society. As a consequence, public support for R&D had been a critical element of Federal policy for more than 200 years, and it has kept our nation at the forefront of technological and industrial success.

American prosperity in the 21st Century. With rapid growth, increased productivity, and rising standards of living, the U.S. economy is thriving, in large part because of our technological leadership. Science and technology have become the engine of America’s economic growth: information technology alone accounts for 1/3 of U.S. economic growth, and is creating jobs that pay almost 80 percent more than the average private-sector wage. Many of the technologies (such as the Internet) that are fueling today's economy are the result of government investments in the 1960s and 1970s.

Longer, healthier lives for all Americans. In the last 100 years, the life expectancy of the average American has increased by almost 30 years, as a result of breakthroughs such as antibiotics. Today, we are on the verge of even greater scientific advances, and continued investment in health-related research could lead to greater life expectancies and better quality of life.

Educating America's high-tech workforce. The President’s investment in university-based research will help spur innovations in new technologies and treatment, while preparing the next generation of leaders in science, engineering and technology.

Cleaner energy for a cleaner environment. Research can help America create cleaner sources of energy and energy-efficient technologies, such as fuel cells that emit only water, cars that get 80 miles per gallon, and bioenergy derived from new cash crops.

New insights into the world around us. Increases in funding for science-based research can lead to amazing breakthroughs in our understanding of the world around us and beyond.

Discovery and Innovation: Federal Research and Development Activities in the Fifty States, District of Columbia, and Puerto Rico is available at: and at:

For questions about the R&D report, please contact Donna Fossum at RAND at 703/413-1100, Ext. 5602.

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