Wednesday, March 12, 2008

Gates to Congress: U.S. global innovation leader status 'at risk'

By Kent Hoover

Microsoft Chairman Bill Gates told the House Science Committee Wednesday that America's "position as the global leader in innovation is at risk."

To keep its edge, the U.S. must improve math and science education, change immigration policies to allow more skilled foreigners to work here, increase federal funding for basic research, and make the research and development tax credit permanent, Gates said.

The committee invited Gates to testify to celebrate the 50th anniversary of its founding. Congress created the panel in March 1958 after the Soviet Union beat the U.S. into space by launching the Sputnik satellite.

"Today, with the rapid economic and technological advances of other countries, I fear we are now on the cusp of another Sputnik moment," committee Chairman Bart Gordon, D-Tenn. said. "I fear that our country has coasted on the investments we made 50 years ago."

Fifty years from now, Gates said, "the U.S. may not have the same relative share of innovation" compared with the rest of the world, "but with the right policies, we can have the leading share."

Other countries are working to duplicate America's "magic formula" -- an entrepreneurial culture combined with great universities, he said.

"We're still the envy of the world," he said.

U.S. companies, however, face a shortage of scientists and engineers, and not enough American students are prepared for, or interested in, careers in these fields, he said. The U.S. should insist on higher standards in K-12 education and require three to four years of math in high schools, he said.

Enrollment by U.S. students in science and engineering programs increased in the late 1990s during the Internet boom, but has declined since then.

Now that the credit bubble has burst, "maybe some of the bright minds going into finance will go into science and engineering," Gates said.

In the mean time, Congress needs to raise the cap on H-1B visas, which companies can use to hire highly skilled foreigners for a six-year period. The current limit of 65,000 visas "bears no relation to the U.S. economy's demand for skilled professionals," he said.

Microsoft last year was able to get H-1B visas for only one-third of the foreign-born job candidates it wanted to hire, he said.

The U.S. also needs to significantly increase the number of green cards, which allow foreigners to work permanently in the U.S., he said.

Increased federal spending on basic research is important because it "supports the education of the next generation of scientists and engineers" and "provides the raw material that U.S. companies transform into commercially successful products," Gates said.

To encourage more private-sector research, Congress should reinstate the R&D tax credit, which expired last year, and make it permanent, he said.

"Doing so would help convince American businesses that longer-term R&D investments -- especially those that might take years before they generate any profits -- are worthwhile," he said.

The tax credit is a "powerful incentive," he said, noting that Microsoft spent more than $7 billion last year on R&D.

Gates, who will address the Northern Virginia Technology Council Thursday morning, also said free trade agreements are "a very, very, very good thing for this country" because they have opened more markets for U.S. companies. Microsoft itself, he said, is "a gigantic net exporter" because most of its sales are outside of the U.S. while most of its products are made in the U.S.

As far as federal spending is concerned, Gates noted that he has "personally signed" $5 billion in tax checks to the U.S. government.

"I don't begrudge it in any way," he said.