Remarks by Sandy K. Baruah Assistant Secretary of Commerce for Economic Development Rensselaer Polytechnic Institute Troy, New York

Friday, February 3, 2006 – 10:00 am

(As Prepared for Delivery)

Thank you, President Jackson, for that kind introduction, and let me thank you for your impressive record of public service and for your strong leadership of Rensselaer.

On behalf of President Bush and Commerce Secretary Carlos Gutierrez, it is my honor to be here today at one of America’s leading institutions for higher learning. I greatly appreciate President Jackson and her fine team here at RPI – especially Alison Newman – for gathering this distinguished group.

As the nation’s oldest technological university, you understand well President Bush’s focus on confronting today’s global economy by focusing on innovation. And, as I was reminded this morning during a tour of some of your key research facilities, RPI is an excellent example of the type of world-class institution that helps make America the world’s leading innovator.

You have come together today for this event, and I know that you will be working together in the future to build public and private partnerships that will continue your progress towards regional innovation and prosperity. We all know that for innovation-led economic growth to occur, the private sector must be ready, willing and able to invest its capital in a community. While the government can play an important supporting role, at the end-of-the-day, it is America’s private sector that provides the jobs that put food on the table, and pays the mortgages and college tuition for most Americans.

As we meet here today, we have good reason to be optimistic about the environment in which we do our jobs. The U.S. economy is sound, and all the evidence shows that President Bush’s policies are working. The economy is growing and creating good jobs for America’s workers.

The American economy has grown for 11 consecutive quarters. Last year's growth rate of 3.5 % demonstrates that, despite the challenges of record-breaking hurricanes and high energy costs, the American economy is strong, growing and resilient.

The Wall Street Journal reported yesterday positive news on the manufacturing, construction and inflation fronts. Businesses are thriving, investing, and hiring. The economy has created 2 million jobs in the last year, and nearly 5 million since May 2003 – more than Japan and the European Union combined. And, just announced this morning, unemployment stands at just 4.7%, what many economists consider full employment.

But, as President Bush said in his State of the Union Address to Congress on Tuesday – and as President Jackson so eloquently outlined in her January 25, 2006 letter to the President, we cannot be complacent.

Other countries – China and India come to mind – are rapidly catching up in areas where we have traditionally been strong. They are opening their markets, strengthening their financial, legal and other public institutions and making both public and private investments that are making them more competitive. In the 21st century, change will come faster, cycle times for products and trends will accelerate, and the nations, regions, organizations, and individuals that succeed will be those best able to innovate and continually adapt.

And the way to do this in new era of intense worldwide competition is through regional collaboration. In our global economy, our competition is not next door. The areas around us are our strength, not our competitors. Regional competitiveness is simply the Tom Friedman, The World Flat, 21st century version of what we all learned on the school playgrounds of our youth: There is no “I” in T – E – A – M and we are stronger working together than when we stand alone.

By thinking of ourselves as part of a broader economic region, we can build on our strengths to better align a critical mass of local resources to spur innovation.

Innovation drives our economy. Economists calculate that approximately 50% of

U.S. annual GDP growth is attributed to increases in innovation. Innovation drives productivity, and a nation’s productivity directly impacts its economic growth and overall standard of living.

America is clearly the world’s leader in innovation. This country has generated more technological breakthroughs and brought them to the marketplace than any other nation. And, the U.S. spent two-and-a-half times more on R&D in 2005 ($320 billion) than China and Japan put together.

But our competitors are coming on strong, and they are hungry. Even yesterday’s Wall Street Journal noted that a World Economic Forum Survey of executives listed America as only the 2nd most competitive nation behind Finland.

We are still the world leader in venture capital and we are home to many of the finest research labs and universities, such as RPI. We possess one of the most open economies for trade and investment; a stable government, which is exceptionally led in my humble opinion; and a culture uniquely supportive of risk-taking, which must not be underestimated.

What we all agree on is that we cannot rest on our past success. There is much more work to do to maintain our position as the world leader in innovation, especially as the nature of innovation changes. As the Council on Competitiveness’ National Innovation Initiative reports, “The forces of global economic integration and advances in technology are creating different and more complex challenges… the capacity for innovation is going global – and we must pick up the pace…”

The U.S. must ensure that an environment continues to exist in this nation that fosters innovation and allows American entrepreneurs to rapidly adapt to the changing global economy.

In Tuesday’s State of the Union Address, President Bush announced the American Competitiveness Initiative, ambitious strategy that commits $5.9 billion federal dollars in 2007, and more than $136 billion over 10 years, to increase investments in research and development, strengthen education, and encourage entrepreneurship and innovation.

President Bush’s innovation agenda is framed within two “buckets” – an “R&D bucket” that bolsters Federal funding in basic research, and a “talent bucket” – that addresses the growing shortage of scientists, engineers, and other technically skilled workers.

The “R&D bucket,” the centerpiece of the American Competitiveness Initiative, is the President's commitment to double – over 10 years – investment in key Federal agencies that support basic research programs in the physical sciences and engineering.

The President's 2007 Budget includes $137 billion for Federal research and development, an increase of more than 50% over 2001. In total, the federal commitments represent 13.5% of discretionary spending – matching the level during the Apollo Program. The budgets of the National Science Foundation, the Department of Energy's Office of Science, and the Department of Commerce's National Institute of Standards and Technology will double over 10 years, a total commitment of $50 billion of new funding.

Federally-funded research in the past has helped to spawn vital technologies such as personal computers, the Internet, medical imaging devices, balloon catheters, hearing aids, laser eye surgery, air bags, global positioning devices, satellite telecommunications systems, and my personal favorite, Velcro.

To spur private-sector investment in technology, the President continues to support making the Research and Development Tax Credit permanent. A permanent R&D tax credit would enable companies to have certainty in their tax planning and reduce impediments to R&D investment.

Within the “talent bucket,” the President – and all of you I suspect – believe that education is the gateway to opportunity and the foundation of a knowledge-based, innovation-driven economy.

To prepare our citizens to compete more effectively in the global marketplace, the American Competitiveness Initiative proposes $380 million in new Federal support to improve the quality of math, science, and technical education in our K-12 schools and engage every child in rigorous courses that teach important analytical, technical, and problem-solving skills.

Building on the successes of the No Child Left Behind Act, the American Competitiveness Initiative seeks to raise student achievement in math and science through testing and accountability, providing grants for targeted interventions, and developing curricula based on proven methods of instruction.

The American Competitiveness Initiative includes specific new and expanded programs focused on education:

• An Advanced Placement/International Baccalaureate Program to expand access for low-income students to AP coursework by training 70,000 additional teachers over five years to lead AP math and science courses.

• An Adjunct Teacher Corps to encourage up to 30,000 math and science professionals over eight years to become adjunct high school teachers.

• A program called Math Now for Elementary School and Middle School students to promote promising and research-based practices in math instruction, prepare students for more rigorous math courses, and diagnose and remedy the deficiencies of students who lack math proficiency.

Beyond K-through-12 education, the President knows that education, training, and retraining provide the nation's workforce with better career options, opportunities for advancement, and the ability to compete in a global economy.

As part of the American Competitiveness Initiative, the President's 2007 Budget introduces Career Advancement Accounts. CAAs will be self-managed accounts of up to $3,000 that workers and people looking for work can use to obtain training and other employment services. The CAA initiative will offer training opportunities to 800,000 workers annually, more than tripling the number trained under the current system, and give America's workers the resources they need to increase their skills and compete for the jobs of the 21st century economy.

And, finally, the President is committed to pro-growth economic policies that work hand-in-hand with investments in innovation. For our investments in innovation to produce a return our competitiveness and prosperity, we must continue to pursue pro-growth economic policies and foster a culture of entrepreneurship. The President's economic agenda, including reducing taxes, will help create a business environment where innovators expand boundaries and entrepreneurs are rewarded.

The President’s American Competitiveness Initiative will ensure that America will lead the world in opportunity and innovation for the generations to come, and I am looking forward to working aggressively to help implement the Initiative.

The Department of Commerce and the Economic Development Administration will play an important role in supporting the President’s American Competitiveness Initiative. Our focus on innovation will include support for, among other things, high-performance computing, next generation manufacturing, upgrading communication systems to ensure that we are all linked to the 21st century economy, and business innovations focused on new technologies and new markets, and more.

Some examples of the direction that EDA is headed with its investment program can be seen right here in New York state:

• The Albany Center for Economic Success, a high-tech business incubator that I’m looking forward to visiting this afternoon, in which EDA invested over $1.8 million in 2005 to help construct a 26,000 square foot addition for light manufacturing and high-tech start-ups. This investment is expected to help create or save 154 jobs, and generate over $25 million in private sector investment.

And

• The Central New York Initiative, a 17-point comprehensive economic development plan in the Central New York region, in which EDA invested $2 million in 2005. The Initiative will establish a regional technology commercialization center, activities to promote industry clusters, expansion of workforce development programs, and activities to increase university research in areas helpful to the region’s clusters.

EDA is also placing a particular emphasis on helping to build connections between universities, national labs, and the communities within their regions. Universities like RPI, and national labs like Sandia National Lab in New Mexico, where I recently visited, can be important parts of the fabric for innovative regional economic development. They expand human capital through education and training, they create knowledge, and they drive technological breakthroughs. They work to diversify regional economies by generating new opportunities out of the old—new opportunities for entrepreneurship, new industries, and new jobs. EDA is committed to helping America’s regions tap into these valuable economic development assets.

As President Bush has said, “the role of government is not to create jobs, but to create the environment where jobs can be created.” As he outlined to Congress on Tuesday night, President Bush has a vision for doing so. An important part of that vision is to enhance the innovative capacity that has made the U.S. economy the envy of the world, and has made American workers the most productive and prosperous in history.

On behalf of the President and Commerce Secretary Carlos Gutierrez, thank you again for allowing me to be here today, and I look forward to our further discussion.

END