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Chopping at the Roots of Innovation

Proposed Cuts Threaten Our Future

SOURCE: AP/Jeff Chiu

SunPower Corp. CEO Thomas Werner holds a solar panel next to the panels on the roof of SunPower building in San Jose, CA. The Next10 Venture Capital Association found that more than 40 percent of all venture capital investment in clean energy happened in the United States last year. But without continued investment across the technology innovation cycle, we will forfeit whatever leadership we have managed to gain.

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On Thursday, the Republican Study Committee unveiled its Spending Reduction Act, a broad swath of recommendations aimed at cutting trillions of dollars out of the budget. The committee, which includes the vast majority of Republican House members (176 out of 242), claims these cuts are necessary so government does not “rob our children of the opportunity to reach for the American Dream.”

But the American Dream depends on American prosperity and leadership. And several of the committee’s cuts explicitly undermine our future prosperity, especially in the area of clean energy technology.

The global clean energy sector is booming. Global markets in renewable energy and energy efficiency solutions reached more than $240 billion in 2010. So far, America has been a leader in this space: The Next10 Venture Capital Association found that more than 40 percent of all venture capital investment in clean energy happened in the United States last year. But without continued investment across the technology innovation cycle—from invention at the federal labs and publicly sponsored universities, to public-private partnerships aimed at commercializing and licensing new technologies, to technical assistance to make our manufacturers the most advanced and efficient in the world—we will forfeit whatever leadership we have managed to gain.

The Republican Study Committee’s recommendations undermine each of these areas of critical investment. The recommendations go after the Applied Research program at the Department of Energy, cutting $1.27 billion from this core set of activities designed to identify which new innovations in America’s labs and universities is primed for actual commercialization and market-readiness. This is the kind of research that turns theories into profitable ideas, and it is where most innovative American companies are born.

The recommendations slash a further $70 million per year from the Department of Commerce’s Technology Innovation Program, aimed at fostering public-private partnerships to develop high-risk technology—the kind of technology investment rarely made by the private sector—in areas of national interest. Last summer, the program awarded a grant to three companies working on a new way to coat steel “faster, cheaper, and greener” by replacing traditional coatings made of degradable heavy and toxic metals. The technology will make the steel less toxic, less of a health hazard, and less prone to constant (and costly) repair. It is the kind of investment in early-stage, high-risk technology that most private steel companies have no incentive to make, since it affects long-term maintenance costs more than short-term profits.

The committee doesn’t stop at cutting basic research and development. It goes after one of the foundational pieces of America’s economic strength: our advanced manufacturing sector. The Manufacturing Extension Partnership program works with a tiny $125 million budget to help small and midsize manufacturing firms across the country become more efficient and more competitive, including helping firms realize key energy efficiency gains. The U.S. industrial sector consumes about one-third of all our country’s energy, and efficiency gains can be the difference between a manufacturing firm’s survival or demise. The MEP program can also help firms that have been part of traditional supply chains—for instance, in the auto sector—retool to tap into new markets, such as electric drive trains or wind turbine production. The health of our manufacturing sector, so central to our country’s current middle class and our long-term innovation and competitiveness, depends on this kind of targeted assistance.

But the Republican Study Committee doesn’t care. It would slash the MEP budget entirely, saving $125 million each year. The MEP’s current work creates or retains more than 50,000 manufacturing jobs per year according to the Apollo Alliance. The RSC would rather jettison these jobs to save what is, in the context of the overall deficit, a drop in the federal budget bucket.

Last but not least, the RSC goes after the Economic Development Administration. The committee cuts $293 million from this Department of Commerce program responsible for working with states and cities across the country to develop smart, accountable economic development plans that will help America’s regions create jobs today and foster tomorrow’s seeds of innovation. The EDA has many functions but one critical piece of its mission is to leverage scarce public dollars by strategically investing in regional “race to the top” programs that encourage existing firms, universities, and government entities to pool resources and knowledge, and collaborate around shared innovation agendas. One such program, the Energy Regional Innovation Cluster program, focuses on fostering new breakthroughs in invention, commercialization, and deployment of clean energy technologies. This same general strategy brought us Silicon Valley and the Research Triangle’s biotech advances. If the RSC is interested in making federal dollars go further, this is exactly the program to fund, not cut.

The United States has been a leader in innovation and entrepreneurship in the clean energy sector, as in so many industries before it. But our global leadership rests on our continued commitment to strategic public support for research, development, production, and deployment of these technologies. By undercutting the programs that most efficiently and effectively invest in these building blocks of innovation, the RSC will consign America to the role not of global leader but of global consumer. That doesn’t sound like the American Dream to me.

Kate Gordon is the Vice President for Energy Policy at American Progress.

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