Talkin' About My Innovation

The president laid out an ambitious innovation agenda: developing alternative fuels, providing all Americans with electronic health records, and expanding access to broadband technology.

That sounds a lot like what President Barack Obama outlined Monday during a speech at Hudson Valley Community College in Troy, New York, but it actually was the innovation plan that former President George W. Bush unveiled more than five years ago. The main difference was that Bush’s plan for alternative fuels focused on using hydrogen and fuel-cell technologies for automobiles instead of the plug-in hybrids that are the rage today.

Three possible lessons here:

• One, it’s not an innovation to talk about innovation. Presidents have been doing that for years.

• Two, government officials aren’t good predictors of what the innovations of tomorrow will be, as Bush’s championing of hydrogen vehicles shows. True innovations are going to surprise us.

• Three, electronic health records and universal broadband access aren’t really innovations, they’re simply expansions of already-existing technology. The reasons we don’t have them yet isn’t due to lack of innovation in the five years since Bush’s speech, it’s due to economics, resistance to change, and dueling technology standards.

The best parts of Obama’s innovation speech were his commitment to expand government spending on basic research—the building blocks of innovation—and his proposal to make the research-and-experimentation tax credit permanent.

Basic research often doesn’t yield a return on the investment, which is one reason why government, not the private sector, needs to fund it. But occasionally, Obama noted, it does lead to breakthrough technologies, such as solar panels, CAT scans, and global-positioning systems.

One of the reasons the economic stimulus hasn’t been that stimulating so far is that it included billions of dollars for basic research. This money won’t have much effect on the economy in the short run, but it could pay off down the road. This month, for example, the National Institutes of Health will award more than $1 billion in stimulus-funded grants to study what we can learn about treating diseases through mapping the human genome.

The private sector, meanwhile, needs to do more applied research. That’s where the research-and-experimentation tax credit can help.

This tax incentive encourages businesses to invest in research and development projects that could lead to new and better products. Business groups for years have urged Congress to make the tax credit permanent. The problem is that Congress finds it easier to fund the tax credit for a year or two than to pay for the cost of making it permanent. The uncertainty over whether the credit will be available makes it a lot less powerful than it could be.

The president also emphasized that innovation starts in the classroom, and pledged that “by 2020, America will once again have the highest proportion of college graduates in the world.” That line got a lot of applause, as did his goal of putting 3 percent of the nation’s gross domestic product into R&D, “surpassing the commitment we made when President Kennedy challenged this nation to send a man to the moon.”

The problem, of course, is paying for all of this investment in innovation. The president didn’t address that. Alternative energy and electronic health records are nice, but what we really need is for money to grow on trees. Let’s set a goal for that, and check back in five years.

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Kent Hoover is the Washington bureau chief for bizjournals.