ok this hearing will come to order good morning i want to thank our witnesses for being here on this very busy morning ralph hall looked over at me when he looked at you and said we've got a good group of folks here today and i agree with them this is a very important hearing on securing the competitive our economic future here in the united states just to remind everyone in two thousand and five i joined the in chairman sherry bowler senators bingham and requesting the national academies to conduct a study assessing the state of our nation's competitiveness resulting report was entitled rising above the gathering storm and foreshadowed a troubling future for our nation one in which  scientific leadership technological technological age and ability to compete effectively in the global economy is uncertain the report maintained that without decisive action our children and grandchildren may very well be the first generation americans to inherit a standard of living lower than their parents the report outlines specific actions to be taken to ensure the future competitors and prosperity of the u s including increasing the federal investment in the long term basic research and improving k to twelve science and mathematics education congress responded in two thousand and seven this committee took the lead in drafting legislation to implement the recommendations including in rising above the gathering storm report this landmark legislation which became known as the american competes act received overwhelming bipartisan support in both chambers of congress passed by vote of three hundred sixty seven to fifty seven in the house  that should be a piece of cake after working with the senate unfortunately despite our best laid plans the american peace act is set to expire tomorrow a little more than nine months ago in this very room we held a hearing with the u s chamber of commerce the national association of manufacturers the business roundtable and the council of competitive and on the reauthorization of the american people say that hearing was one of more than thirty thousand t n in april the bill which continued critical investments in our senate sec knology and renewed our commitment to future competitors and economic security united states passed the house on a bipartisan basis at the end of may the senate version of the bill was reported out of out of the senate commerce committee in july and is currently awaiting floor action last week received a stark reminder about why the reauthorization and full funding of american peet's is so critical the original rising above the gathering storm report committee released an update and its obvious two thousand and five report entitled rising above the gathering storm revisited rapidly approaching category five according to the update the nation's outlook has worsened substantially over the last five years we now face even greater challenges in sustaining our competitive position in the world are marching orders are clear we must continue what we started recommit our say after the ideas we laid out in the original competes act in this report if this report tells us nothing else it tells us that the worst things that  agree that a strong scaled and stem educated workforce is critical to our nation's ability to compete and our ability to remain a leader and innovation is our key to economic success and you almost described the senate properly but my predecessor mr raeburn had a new young rep democrat come in and went to see the speaker he said show me which republican you want me to take care and i'll just leave the chimney burning he said no no son the republican in the house is not the enemy of the democrat the democrat in the house is not the enemy to the republican the enemy is the senate i think you had it figured out almost four years ago we sat in this room with almost the same panel officially kicked off what was to become the america competes act is a shame to say that is everyone here is aware america compete was a culmination of a recommendation from the off quoted rising above the gathering storm report former president bush's american committee and republican leadership and continued you must chairman we all worked in a bipartisan fashion on this endeavor and i'm proud of our accomplishments my message is exactly the same today as it was  future workforce need to get a speechwriter don't have to manage them big words and my message hadn't changed since and seemingly neither has a message of gathering storm committee members before us today unfortunately our economy has changed and i'm pleased to say that together in a storm revisited report acknowledges quote the great difficulty of carrying out the gathering storm recommendation such as dublin research budget in today's  removing an engine that's that's a pretty good line that's no or rather i would suggest that the prudent approach would be to ensure that our current investments are creating a successful return on investment and are particularly when we have already legislated numerous recommendations set forth in the two thousand and five report this reinforces my belief however that other issues beyond funding levels are holding us back much more needs to be done vall of us not just the federal government to keep and in some cases restore the united as to science and technology innovation problem that's across the board everyone has a row the private sector needs to step up our schools and teachers need to step parents they just and the children  distaff i look forward to the testimony of our distinguished panel today because there is no doubt that we still have much to accomplish everyone here knows of my date admiration respect for mr augustine and the other four here some six years ago i suggested that goals and that america competes is just one aspect of improving america's competitiveness i hope to hear them speak at length on the other areas raised in their a bad report a majority of which are not within this committee's jurisdiction that  major contributing factors to our competitiveness encouraging private sector innovation through tax credits a positive regulatory environment tort reform protection of intellectual capital and other such programs will catapult the american economy make us more competitive mr chairman and i know it's not our custom but i wanted to take this moment and i know that the ranking member would do it as well to knowledge that this is probably your last sitting in this in the chair in this committee and i just want you to know how much i really appreciate i know that we all do your leadership and your guidance of our committee it is one of the committees in the congress that operates in the most unified way on so many issues this one included and so i just want to thank you for your leadership and your guidance and your service in the united states congress thank you we look don't bury the corpse quite yet let's let it get cold we've got a lame duck session we've got more work to do we've got to get this competes past but thank you for your  shame that united states has the second highest corporate tax rate in the world and we certainly have to have other changes but all we have is what's on our plate so we want to deal with that and deal with it well and we  there are members who wish to submit additional statements your statements will be added to the report at this point this time i'd like to introduce our witnesses first dr norman augustine a retired chairman and c e o of lockheed martin corporation and former undersecretary of army i think retired is an odd term to be using for him and for dr craig barrett that he also so called retired chairman and c e o of intel i think that they probably would like to go back and get rest running companies rather than all of the volunteer efforts are doing in dr barrett we know that when you leave your beloved montana to come here it's on a mission that you feel strong about and we also is the chairman of the board of the bank of america and the retired chairman of the board and c e o of dupont and once again we know there are other demands but you have made really service to your patriotic service to the country important thank you for that dr the president emeritus university of maryland as well as the glynn l martin institute professor of engineering and i'm sure they would like to see you more the university of maryland but you too have been giving of your time so mr augustine please begin your testimony well mr chairman congressman hall members of the committee thank you for this opportunity to appear on behalf of my colleagues on the gathering storm committee including my three colleagues here at this table  i would like to submit a formal statement for the record with the committee's permission that without exception thank you five years ago it was pointed out this chairman this committee together was its counter part in the senate asked the national academies to examine america's future competitiveness outlook and the members of the academy committee quickly interpreted that to mean the ability of all americans to have the opportunity to compete for quality jobs in the new global economy that our conclusion i'm sorry to say at the time was that we were on a path at the time whereby we were likely to suffer sustained unemployment at very high levels because americans simply will be able to commit compete successfully for jobs well the only solution we could see to that was to be among the world's leaders of innovation to do that we pointed to twenty actions that would be required at least as a starting point the two highest priorities of those who are to improve vastly the nation's k through twelve education system and to double the funding for basic research primarily at our nation's research universities we have a size the importance of science and engineering because numerous studies have shown that over half of the growth in g d p for many years has been the state department reassessed the requirements or being opposed for these it applicants who want to be students in this country but there's a problem and the problem is that almost  the good things that have been done been dependent upon funding from the america from the stimulus package and from authorisation from the america competes act and as you know both of those are  to expire momentarily so we stand on a precipice of terms of the accomplishments that have been made there are a number of overarching things that have gone against us during the past five years since this study was first  done others are getting better quickly they're building new universities this year there'll be nave thousand chinese students go to school in america hundred three thousand indian students go to school in america many of them studying engineering and science secondly the stress on the federal budget to people this room would go so well is making it even more difficult to implement maybe the things we need to do to be more competitive as a nation thirdly our universities something that was an thought resulting in other countries universities targeting and picking off some of the finest researchers in professors are universities and finally at the time we met five years ago the bio science is what had been well funded more accurately  health health sciences whereas her since that time they too have suffered the impact of inflation and some reductions i would share just a few statistics with you we're used to thinking of america as being number one today so the fact based from data from respected sources in terms of innovation based competitiveness we've now been ranked number six o the young workforce with a higher high school diploma we rank eleventh in the world our college completion rate we're sixteenth our high school completion rate twentieth the achievement of all the seventeen year olds in science we write twenty first second that's not the america that i like to think of us as being and can you imagine of our lives when our olympic team finished fourth in basketball your call the impact it had and what we did about it my hope is that we can have  even more energetic impact to these these circumstances this isn't a america that i would want to see for my grandchildren and i suspect many in this room which are that do for their children and grandchildren thank you very much thank you dr augustine dr barrett's recognized thank you mr chairman it's pleasure to be invited here to testify today i've also submitted a written testimony i'd like to supplement that kind of presents if you will i do not represent until i worked there for thirty five years and i'm still very proud of that company employees nearly fifty thousand u s citizens  seventy five percent of its manufacturing still here in the united states and eighty five to ninety percent of its r and d budget is spent here in the united states and the r and d budget is substantially greater than that of the national science foundation so intel had the opportunity to speak to business leaders academic leaders in those countries and government leaders and during those conversations i always heard exactly the same thing and i think it's very true here in the united states every one of those countries was interested in increasing its competitiveness competitiveness quotient so to speak was derived by three factors one was the education level of the workforce you can't be number one unless you have the number one education system the investment in new ideas read the investment in research and development its new ideas to create the next generation of products services that create wealth in the third feature they were interested in was the environment the environment simply led smart people get together with smart ideas and do something wonderful and the environment is partially set by society partially set by government rules and regulations tax rates intellectual property protection billeted to start a company bankruptcy laws a whole series of issues rising above the gathering storm the merican competes act focused on those three issues mark people smart ideas and the right environment and five years after the fact the national report was introduced the follow up report that norm augustine mentioned i think we're not batting particularly well on either of those or any of those three topics i would fully support the reauthorization american competes act i do not think it is soley an issue of government as the chairman mentioned it is an issue for society and the private sector to become involved in you mentioned the private sector in the changed equation group which was just announced a week or so ago here in washington d c about one hundred  ten c e o s of major u s corporations involved in science and technology but also involved in consumer goods and many other industries have banded together to do their part to promote science technology engineering and mathematics education and interest in the youth of america i think one of our biggest challenges is getting the younger generation interested in what's going forward change equation group is committed to really three major efforts one is improve the teaching of science and math in k through twelve better science and math teachers secondly it's involved in getting kids interested in science and math out of school such things as robotics competition science fairs a number of activities that private sectors are already involved with we want to amplify those and spread them geographically across the united states back the first year goal is to have programs of that type in a hundred new geographic areas where programs do not exist today over the next year the third thing we're doing is in fact using the c e o s in the private sector is a voice of advocacy for the basic tenets of the american competes act and the rights imply the gathering storm recommendations dealing with state local legislators to in fact mobilize them to focus on stem issues on k through twelve issues on research university issues in one job creation in their local areas i think we're off to a good start in that respect but by golly if i look at what is going on around the world we have a heck of a lot of work in front of us and unless the american competes act is reauthorized going forward and coupling that public sector set of programs with the private sector i think we're going to continue to struggle mr chairman and we appreciate your strong leadership in this regard i have a very specific idea to leave with you today that takes our work of this committee to the next step idea all routes low cost clean energy we believe if we could create that in this country we could do a lot to move those statistics that norm described in a very different way and norm augustine and myself gathered with us people from companies that have a track record of making a step change in technology our slow burn some xerox we don't call it the xerox machine for nothing john doerr who is critical in funding so many of the icon companies now on the west coast a guy named gates has done some things around software jeff e mail from general electric get an tim salsa from cummings and they've done mazing things to take the diesel engine to a different area we say if we were in charge of creating that low cost clean energy how would we do it and we wrote a business plan which would be glad to give you a copy of and i will just share with you the five very simple recommendations we said we think this is possible but it's going to take some time it may take a decade it may take more and we need continuity over that period of time and we need a board a strategy board responsible to you but was consistent over a period of time and then change every two to four years and we believe that's possible that's how we would do it inside our company second we must funded to wind amount of money being spent today is important it's not enough in our estimation to get there we think with eleven billion more dollars we think it's the one the best investments our country could ever make to create the kind of jobs we need overtime then we looked at what we've been very successful at in this country and that's creating clusters of technology in business together and that's where our big breakthroughs of come we recommended doing that again we did not say which technologies we want the market to pick those we did not say in which cities are what universities they should be tied with but we think that's a model that's uniquely american that should be taken forward something in the americas competes they has worked very very well is our but if this concept of funding entrepreneurs early on with big step change projects i was out meeting with the departed energy people on this very subject just three weeks ago as it went project by project and you would be very proud of what they're doing the quality of people  team have attracted but also the projects they meet that requirement when they are successful they will be really low cost and really clean energy they have thirty seven m they all be a success if we could just get three or four  success that would be a breakthrough our last recommendation is absolutely critical and we found that in all of our work the national academies is you can have a great technology but let it sit in a shelf late stay on the lab bench and from all of our experience in the seven companies that were involved we all have prototype syllabi we knew we could not go from the lab to scale subtle so we had to have a prototype facility desiree because of the very high cost of this kind of a individual companies will not make that so we take assistance from the federal government in those prototype but still it is critical and this strategy board i described in my recommendation number one is the mechanism for handling that so we  left this work extremely encouraged we think we could put a significant amount of money we're not minimizing what eleven billion dollars is but we believe eleven billion dollars per year over a decade can step change our position and we you'll consider thank you very much thank you mr halliday i will point out in the american piece we do have a cluster program where we can bring those folks together i think it's understood now that there's not that single  thousand and five through the american competes act and other initiatives are funds and stem education initiatives and the like a national wariness is higher now than it was then and rising above the gathering storm has become a household phrase in many places and remarkably it has legs five years later which is in of itself critical but as the revisited report the category five report has come out the united states is relatively less competitive globally today than it was in two thousand and five probably for three reasons one is the report was not fully implemented as an ongoing matter when it started a second is other countries have engaged rather aggressively both those that were engaged then and those that were then in a very determined and purposeful manner and thirdly and possibly most importantly our country has many national priorities today wars national debt sluggish economy unemployment housing health care terrorism and so on and global competitiveness and s and t and innovation is really not near the top in parties among them that is a very principal problem for us if we believe delivering a high quality high paying jobs for americans depends on competitiveness and innovation in science and technology then it should be a high priority today i recently chaired a national research council committee that studied the science and technology strategies of six countries and their implications for the united states those and that's now been printed as matter of fact the six countries are japan brazil india china and singapore now the countries individually or as stated in great detail in terms of why they're succeeding and what their priorities are and how they're progressing and there are but there are a couple findings on the countries themselves and then overall findings as a group the study concluded i think surprisingly for the members of the committee but very importantly that the best predictor of future science and technology competitiveness was the national culture while we commonly use economic and capacity measures to rate s and t innovation capabilities things like percent of p going for research or number of engineering graduates it turns out that the countries that shape their cultures to facilitate their goals receive achieve them predictably and will likely do so in the future of the six countries studied singapore and china stood out in this regard while these two countries have remarkably different goals different drivers of science and technology innovation different population scales to say the least different markets they use similar strategies in shaping their cultures to focus on s and t priorities essentially culture and s m t priorities were hand in hand and they also experienced similar cheeseman and we could go into some detail about how that was done if we had some time however the other four countries that is japan brazil india and russia have been actually held back strikingly in their s and p achievements because of cultural issues that have limited the priority they would afford their s and t goals japan is a good example just very quickly how is japan held back no women in the workforce it's a country that is reluctant to  welcome international people to work in its laboratory labs know immigration universities don't work with industry going to japan and a number of cultural issues which is essentially inhibited its advancement of course it's been in the doldrums for two decades as we all know so well national security in and states is threatened such as after nine eleven or sputnik and so forth our nation has abruptly changed its culture to support a national security priority however these occasions are fortunately rare but they're also widely recognised as nationals requiring national security priority but if we do not recognise the significance of the declining course of us competitiveness and science and technology and innovation our future prosperity and national purity will not will not change or us and tea party need to fix this problem i actually believe that's where we are today we do not see as a nation this is a critical problem i also believe would be instruct e for those in policymaking to visit china and singapore to gain firsthand understanding of why they are succeeding and what changes in cultures they have actually instituted at some cost to themselves to achieve the success i'm confident this would be a stunning experience for all who went there i think only then will we fully understand the seriousness of our national competitor this problem and the priority attention that we really need to apply to this to fix it ran major corporations dr berry pointed out that you had a i had a research budget bigger than n s a off now that you're a retard have your so security and paying taxes like the rest of us you know why should we taxpayers subsidize public research for major corporations i frankly don't think the u s government the taxpayer should subsidize research within the private corporations unless the government has a specific project or objectives such if you want to create an extra scale computer  for government activity and future research the request is really to fund research in the the virtual national laboratory of the united states which is in fact the tier one research institutions is to fund basic research pre competitive research research which is probably at least eight to ten years from any competitive introduction that research is not funded by corporations to any great degree program reasons it is carried out in universities in the public environment that the public has great access to so the demand there the request is not to fund research within corporations it's really to fund research within the us research universities pre competitive research research it might create products services new companies but far in advance not the and he was talking about how we have moved our research effort toward more applied more applications and less basic and he was cautioning me about the problem that my answer was we must depend on the universities to provide that basic research for us and our competitors and he said but what if those universities are there to do it and so that's really what we're talking about today is that basic research that must be at the university level it's better done at the university level or that the labs so all competitors can have access to it and compete to make a success across saying yes i i would be opposed to other government subsidizing  worker activities at a company that could lead to a predictable impact on the individual companies and profitability i would also note that a few decades ago two thirds of the country were funded by the government only one third by industry today industry funds two thirds of the government one third the problem is that the industry largely funds the dea and the problem that we're discussing in the hearing is  don't accrue to the performer or the underwriter of the research being performed because the unpredictability of the applicability of research that sort of is the basic category of things where the government generally steps in and provides that service running educational systems providing national security and so on a second feature of basic research is a very long term very high risk and in many cases very expensive and those factors just don't lend themselves to the sort of things that the marketplace today will will allow companies to invest in with the great short term ethicists of the markets companies by and large are going to have to invest in shorter term things like development so it would seem to me that research is the province of government development as a process province of industry in front of mr holiday in your presentation you mention this business plan for the americans energy future you know we've got health care problems transportation problems you know feeding our public there are lots of different areas where did you pick out energy we saw energy at a low cost could transform across the entire me to make a difference that that was the one thing that we thought was about our national security so we control it ourselves and really have a cost advantage to reinvigorate our manufacturing and overall productive capability of the country the business world probably the most important word in the dictionary other than prayer for that set of young people is probably energy because energy is a cause of most wars or lack of energy is the cause of most wars  has of keeping the successes you have here only show rather than send them off shore and i think all of us appreciate that in your testimony and along that line i think of a parallel there that we all go through here because all of us put youngsters to the cadmus to west point navy air force and all that and usually my board ask them what they're going to make it a lifetime work you know they have the right i think at  the end of four years or maybe five years to come back into the business world and i don't think that's altogether bad because they bring the disciplines they learned there into the business world or discipline for they needed but it's similar to that in your testimony you discuss the importance of investing in research and development to promote new technologies and you say wants and investments have been made in the new technologies and they're ready for the marketplace what incentives are in place to ensure that economies it reap the benefits of federal tax dollars for research and development will stay in the united states and wanted you to well point of fact i said seventy five percent of our manufacturing is still in the u s and i made twenty five percent of it is outside one of the reasons for that to date i could just digress for a moment the net present value of one of our multi billion dollar manufacturing facilities there's a billion dollar difference in its n p v if you put it in the united states or if you put it in a low tax country and the billion dollar n p v difference really not related to wage rates it's related to government incentives and tax rates the reason we have maintained our manufacturing facilities in the us is we have a well trained workforce in the united states time is of the essence if you have to retrain  workforce to do a greenfield manufacturing plant someplace else you can lose valuable time there is no financial incentive to put those plants in the united states today the financial disincentive is the u s tax rate so what you're seeing is perhaps a lasting legacy of the fact that we started in the u s we've built up our major facilities in the u s we have a well trained workforce in the u s we have continuity in the u s but if you start from scratch today there is no incentive to put those plants in the united states maybe your vote wrong committee may be able to go for ways and means  congressman paul i've been to every committee every administration democrat and republican every economic advisor to every president with the same story and we're still where we are are you  four and i thank you i want to ask this additional question of family how do we ensure that students are a man trying to i don't take their knowledge overseas and we keep those people here well and those that come here to seek t bases since they get their education and lead and degrees universities all across the country and then take their now they tell me well over a decade ago i think we were the first to suggest that you just simply staple a green card to every advanced degree in engineering technology mathematics science degree obtain or regardless of nationality if they graduate from the us university with a vast agree staple a green card to that diploma and let them stay there is no way to absolutely ensure that the knowledge base stays here the way you insure it is to in fact make the united states the destination of choice for startups the destination of choice for people who want to get a great education but you have to have the immigration issue and then the tax incentive issues here to create startups and grow them now thank you s you know back my time mr chairman thank you century investment act of two thousand and ten and part of the reason that i did that was really because in my experience in visiting small manufacturing facilities out in my congressional district where they colocated the research and development they were doing with the manufacturing they were doing it was really important to have that factoring line really close to where the r and d was happening and what we do in sixty two and one and i know that's not before this committee though is to actually incentivize both and make permanent the research and development tax credit it's one of the lowest among developing nations in this country increase and make that permanent and also create a substantial raise tax credit that's an incentive for manufacturing when i talk to our manufacturers what they say to me is that it's really important for them both in terms of building and training their their workforce but also then drawing on the local community our local educational institutions our local k to twelve and establishing those relationships because they then know that that's the future ground for their manufacturing and for their research and development and so i've heard you mr hall take a look at that  but all of you because i think that if we're talking about where we're going to go for the twenty first century we have to think not in pockets but across the line from how we're creating the pipeline obviously in a twelve and in our higher education institutions but then you know what's the employee base and what do what do job creators need i mean they're going to do if we invest in their innovation what do they need and not right now i think there's not the sort of seamless line from our k to twelve education and through our higher ed system into the into the workplace and so pretty shape your your comments mr augustine on this question of trying to create a seamless l from k to twelve through to the point when that young person goes into the workforce and what is it that we can do to to knit those together so that they're not in these these  individual streams and then if dr moat i know at the university of maryland and thank you for your service there that your experience in working with our local scientific institution i think the the business community has a obligation which i think doesn't fully carry out today to make very clear what are the skills it needs from a high school graduate you pointed to that one of the if one looks at college graduates there's a problem of the the gap between what skills abilities knowledge is required to get a high school diploma and what it takes to succeed as a freshman in college and somehow we've got to close that therefore we want to engage the students in the business communities and at various levels but also to be national laboratories where these internships take place so i think thinking of the university as a link to both the k to twelve system and the job  is trying to sell an idea in the congress and not getting very far and then one or more of you would make a comment public that was supported what i was trying to do and i could say well you know so and done for our country and now that i'm joining the ranks of the retired and unemployed i hope i can can contribute as much as you have to just get back to the question that was mentioned about what the federal government should pay for research and private corporations i think a simple straightforward answer is a very good healthy research and development tax credit so the companies are still deciding what to study what do the research on it's entirely their project but at least let the federal government give them tax relief because many of these are high risk ventures and corporations simply can't afford to do  we all have to be working on and not just say well let the utilities take care of that it's a much broader problem than that and dr mote you come in about other nations are trying to catch up we assume we're reddy there and that's fallacious belief in this country the public and i've given speeches all across the land the public simply doesn't believe that there's a problem it simply believes that we are on top we're ahead of the pack we have nothing to worry about and the only reason other countries are making progress is because they have lower wage rates they're totally wrong on that and we have to educate him but i can assure you from my many contacts with the public that this is the general attitude i would be delighted to see some of you running for congress and taking my place it's incredibly hard to persuade scientists and engineers to run for public office and given once again given speeches to engineering and science groups across this country constantly urging them to run for office just doesn't happen fortunately since i arrived the number of physicists have tripled but we could certainly use a few more engineers and chemists as well to help in this task and i really feel very guilty about retiring and leaving because it's not that i'm so wonderful it's just that the knowledge i have is badly needed here and i hope the other two physicists grab hold of it and can take care of it but really we need much better representation here from the scientific and technical community if we're really going to actually reflect and try to solve the nation's problems in this area whether it's education whether it's patent patent law so many different aspects of it  and it's a major part of our country's future but it's not a major part of the agenda the house or the senate pardon me for giving you a sermon i know you already believe all those things but as i said before  the son of a preacher and i can't get out without giving a sermon but i really think that's that's the crux of it dr moats problem of the people assume everything is ok that's because they're not hearing anything else from the congress from the administration and we really have to have the support of the people if we're going to do it so thank you very much for what you're doing you've been great leaders of this nation on these issues and i hope you'll continue to do that and i hope i can assist you when some private citizen gets thank you very much mr chairman i have just a minute i want to thank the carrier for his long service here and i hope we never forget what i told him the first week we were on the same committee together that i had marty but i didn't lacking because he just the type like you for that room to curve for guys like me but he's been a great benefit  been a benefit to me personally and we're losing a great friend then and a great member of this conference and we're going to call on you like we are barred when he's in them baster over in france or england where i want to telephone number and i want y echo the sentiments of dr eyler and others and saying that it's a wonderful the work that you're doing and putting yourselves in a position to use the experience that you've acquired throughout your life with your education and your business experience to help make our lives better and certainly for our next generation so thank q thank you very much and i have few questions i would like to ask and no way per block out of it just to try to get to the point of how we can maybe save some jobs for america and how we can do some of the things here my first is for mr augustine in your written testimony you mentioned that an american company applied materials recently opened the world's largest private solar research development company in china and mr barrett also my understanding that intel has opened research labs on some of conductors and service and server networks in beijing china there are just six to of the many instances of our u s jobs going over to overseas what policies are necessary from the government standpoint that we can use to incentivize companies to keep their jobs on american soil  those we were faced with the kind of decision that the u s should we build a plant united states or should we build it overseas if you build it in the united states your average worker will be a come from the bottom or tile of the world high school graduates you'll be in the country with the second highest tax rate corporate tax rate in the world you'll be in a country was a stagnating a commie her at best a stable open a chemist eight times as much of an engineer for five times as much as in some highly qualified countries if you go to these other countries you got a typical five year tax holiday for you new facility you set up your average high school graduate employ will come from the top tenth of the class engineers will be abundant the you will generally be given free land to build your plant and if you're the strongest american in the world acting as if a new serious possibility for your shareholders will build a plant overseas that's what i've seen over and over and those are the things we need to fix thank you norma mentioned a number of features which some of them are related to manufacturing some of them to or indeed just focus on the r and d side the company i used to work for intel is an international company does about eighty percent of its business outside of the united states that is eighty percent of its revenue comes from foreign customers to be internationally competitive the company has to hire the best and brightest engineers for its r and d laboratories wherever they reside if you look at where they reside today some of them reside in the u s but some of them reside in russia some in china some in malaysia some in india we follow the best and brightest not all of the best and brightest are u s citizens and therefore to be competitive we look around the world as i said eighty five percent or so of our r and d activities are u s domestic located the things you can do would be to in fact follow the program is to get more u s kids interested in r and d or science technology engineering and math follow that through to get more of our young people majoring in those topics at the university level have an immigration policy which allows for nationals who come to our universities comprise the bulk of our stem graduates to stay in the united states have an r permanent r and d tax credit lower the corporate tax rate there are a whole litany of these items but these are the things that government can do you can't expect i think the multinationals to hire all u citizens because we do the great majority of our business outside of the u s we're relatively proud that we still have the great majority of our work going on in the u s to service our international customers but we can't be digital a hundred percent us zero percent foreign nationals mr chairman i realize i'm out of time but if i could just thank you thank you both because really you focused the issue and framed it and that and that's what i what i've been looking for in this hearing this morning and  thank you i have other questions mr chairman but i realize my time is up thank you gentleman mr mccall is recognized for five minutes and mr chairman thank the witnesses for being here today i as a chairman knows i've been a strong advocate and supporter of the competes act my district has a research and development arm of the university of texas in austin the high tech all the companies you mentioned are in some form or fashion in my district and it's a federal investment why i'm against a lot a lot of the current spending in the congress i think this is one of those investments that we can't afford not to do and the return on the investment like with the nasa program has been extraordinary we talk about the gathering storm i agree dr mote that this is a national security issue as well but i see a gathering storm occurring right now in the congress as the competes act stagnates in the senate is huge i know the generalizing companies are to do business overseas and i think we need to incentivize through the tax code businesses to locate here and create jobs here in the united states and i think that's something we can do but the storm i see though is a combination of these two events competes not passing and then the tax cuts expiring and i just that's real the reality right now that we're looking at the congress and i just want to get the panel to to comment on those two events colliding at the same time first i agree that these are very important issues one thing i would like you to possibly consider is in the way you give credit for companies to locate here think about it project by project not as across the board issues in dan's summary of the six countries  doing a good job china and singapore came the top and let me assure you they will sit down with any major company in the u s and talk about a project you want to put there and what do you need to accomplish it the norm describes some of those kind of concessions about land and training and so forth we we have that on the state level here we don't have it on the national level and i urge you to think about some kind of a very very objective where it could not be politically motivated the right interest of the instruments did a lot of manufacture in the us but it's a multi billion dollar facility employs a couple of thousand people at extraordinarily manufacturing salaries the disincentive in the united states to locate those facilities is the corporate tax rate and the lack of any incentives at the national level state by state can give some incentives but those are second tier incentives relative to the federal tax rate the biggest disincentive is to locating those facilities ongoing is in fact the century the highest corporate tax rate in the world in fact drives people to make the logical financial investment to locate those facilities outside of the u s into a low or zero tax rate environment if i just can't because the companies i talk to my do they want to stay here in the united states but we're not providing the incentives and bottom line it's about making a profit you have a duty to your shareholders and if we can incentivize them to stay here they're not going to although they may want to they're patriotic but dr augustine i just want to add to your comments that i can't think of a stronger signal that this congress could send  physicists from around the world are moving to france or switzerland they're leaving america going there because that's where the work that's where the excitement is that's where the promises and that's the challenge i think we face and that's compelling testimony mr chairman  to say if it doesn't pass that it's over and i think that i will love to see nothing more than this passing out of the senate and being really the legacy of the chairman who is trying to advance the ball and  i hope that this will have some impact on deliberations in the senate so we can move forward in this conversation and thank you but you must because you know i think a common nominator here is that intel argued whoever might be dupont if they're looking to relocate is not between tennessee and texas it's between the united states and somewhere else and that we have to recognize that ms johnson the patient ms johnson is recognized for five minutes thank you i'm really at a loss i want to thank dr ellis for being on this committee and offering his leadership for eighteen years i've been talking about the same thing and i don't know whether we're gaining any ground or not and listening to and reading your testimony it seems to me that we're going back with i really wish you had knew what else i could do i was sitting here thinking that maybe we need to have a summit with many of our business leaders and many of our leaders here in congress so they could come to understand what we are facing really pretty frustrated with the where we are and getting at cape through twelve education and water we hear a lot of talk about it i haven't seen much of an in improvement as well is the basic college we have a lot of scholarships offered and we're trying to do all the things that could lend itself to making the strides but it does not seem that we are making them  does give me all of you could just give me an idea of how you think we could go about educating our leadership here and the right committees so that we can move a little faster i think the members of this committee understand that but i'm not sure whether we have that understanding across the board where we needed them our leadership  if i might just touch on the issue of education for one minute i think all of us have been leading advocates for improving k through twelve education united states and all the statistics as you correctly point out seventeen year olds understanding of math and science says not budged in three or four decades it's absolutely flat while the rest of the world has come up and we've gone from number one to in the bottom more tile the o e c d countries as much as a pessimist i am i actually do see a couple of awesome optimistic things happening one is we now have thirty seven states signed up for the common core curriculum k through twelve subject matter by subject matter now signing up for something and doing something as you well know are two different things but getting thirty seven states to sign up for a common core curriculum so first up there's also a consortium of state that it providing a state driven internationally benchmarked common assessment tool that is do away with the fifty different state assessments and have a common internationally best marked assessment tool for k twelve education i frankly think those two things plus the private sector getting involved in change equates in some other areas give a sense of hope the race to the top a program of secretary duncan has cause over thirty states to change their legislative rules and regulations about charter schools paper performance all of these things are building blocks they have not changed the bottom line yet the results the kids a get out of school this year are probably going to have the same results as the kids got out of school last year but at least we are finally attacking the basic fundamental building blocks in fact and share one example i served for five years china's development board where a group of business leaders and academics came to three days to beijing to share with the highest levels of government what we thought chavez should do differently if you could make the mirror image of that  business leaders academic leaders from these growing countries in the world to come here and share their experiences of what the u s could do differently it might change things my footnote would be that  if you could have more hearings in committees other than this one were letters of fraud understanding i think of the issues where you had business people come in and explain why why they put their plants with other countries and what it means of jobs in the standard of living and national security in this country i suspect that the three companies that we work for probably employ around the half million people somewhere close to that and i think we just need to get more people to come in to speak  h members to make clear what the consequences are i just like to comment on this i think it's a first hand experience is really necessary to really understand the depth of our problem and i would say that the leadership could actually get firsthand experience in  china for example and really understand how it works and what the competitive level actually is it would be stunning for them and it would change the whole perspective on all the issues that would come subsequently i don't think this can be learned out of books and out of hearing it's a it's a sort of cultural issue and singapore as china has basically taken singapore's playbook basically china's designed as plan for infrastructure development and for market competitiveness following singapore's model and it is really frightening to see as so effective was german thank you very much mr chairman so i was like and i really think at this point here we ought to point out that a problem for the past and our mistakes of the past i may be the only one here that remembers the supergirl that are probably remembers it i remember when we got to the crossroads i think they needed and i'm not very good on math but i think they the needed six hundred million or six million and we offered them either two million or two hundred million i can't remember which it was didn't make much difference namco that's no money today and i hope nobody ever tells this president how much  but we we turned him down and we lost that we went up with a giant hole from loxahatchee texas halfway to dallas and we lost our chance to go ahead in the world of science and  we have a history of not being practical and not savage in great want to cern with others here maybe some here with us or even talk a lot of those people and to come in to the united states to work in the help us get supercollider kicked off and it's hard to say goodbye to them when they left to go back there to their jobs but that's something we can look back on a grave mistake that was made and it's made because we didn't we didn't have sense enough to do what you manners suggested to at that time i yield back thank you most of all we try to follow regular order here which means that a lot of the  work in this committee falls upon the subcommittees and the subcommittee chairman and ranking members have to put really an exceptional amount of time into that and mr inglis has been one of those excellent ranking members on one of most active sub opportunity for us and so let me ask you whether the challenge there is that we haven't yet unleash the power of free enterprise to fix the problem i agree that some of the things we can do in this committee are important very important to provide some research and that sort of thing if we could combine that effort with a way to make money out of inventing and commercializing the new fuels then we'd have something going but our challenge is that the incumbent fuels particular transportation fuels being petroleum and coal in the case of electricity the negative externalities are not recognized the government is failing in its function to force the recognition of those negative action analogies and as long as they get freebies then how do you compete if you've got this better technology how do you compete cap and trade is just it's we can give it a death certificate now so how about an alternative which is a revenue neutral carbon tax basically reduce payroll taxes in an equal amount shift the tax to carbon dioxide start at fifteen dollars a ton and up one hundred dollars a ton over a thirty year period make it a border just full of tax w t o compliant so that you remove it on export you impose it on import and then watch the free enterprise system say oh you wanted a an alternative to petroleum we got it and we can make it and deliver it to the customer at a price point by golly i can make a buck doing that i can deliver to a desiring customer a useful product when you get that things start happening so that's my little commercial for  fifteen page alternative to the twelve hundred page monstrosity of cap and trade and it's something that i think that conservatives thinking straight and liberals thinking straight should come together and say that  works because you know this idea i've just described al gore and art laffer agree on it and if al gore and art laffer can agree can we get the country to agree but do you think we can we get the can we get folks to say yes free enterprise is going to deliver the companies that you will have so effectively lead can deliver the solutions here right and that is that correct i agree totally if we could have certainty around the energy environment and you prescribe one way there are other ways would unleash creativity in this country we cannot imagine and i think we are better positioned than even china and singapore to take advantage of that because we can respond quicker to a market force than they ever ca one simple example is playing out today we didn't talk about unconventional natural gas three or four years ago nobody understood what it meant when natural gas spiked and we people had confidence the price was going to be higher we started raising all new questions we had before and now there's an opportunity in energy that's going to be very amazing not the answer but amazing so i agree with you totally we've got to let the market system work and you can play a role in that industries around ten eleven percent the energy companies the traditional companies it's three tenths of a percent and that's the correct thing to do for their short holders of the bottle that we've built today and so we need a new bottle well thank you very much you know i do have some different thoughts on this i would suggest that perhaps the fundamental problem that we have is that we don't have any one watching out for the american people hear a lot of suggestions and in fact a lot of them are detached from what's good for the american people as a people and what you know i don't think that we should have as many foreigners coming here getting those graduate student position slots and then asking them to stay here i don't think that's a good idea i think it's a good idea to have american students even if they're just the b plus students instead of the a plus students from india and china it's better to have them in those in those positions this whole idea of what could follow that right on through we have acquiesced the united states acquiesced to a policy of a one way free trade policy w china for thirty years and now let me ask the panel when a solar panel company sets up manufacturing in china is that not because they cannot sell their panels in china unless they're manufactured there so we let them get away with policies like that rather than having to say look you have access to our market we've got to max us two years we're not watching out for the american people our people are going to lose prevented the wholesale theft of our intellectual property for the last thirty years not only to china but elsewhere and i don't hear anything about that the pharmaceutical companies that we just heard mention they spend billions of dollars of research money and what happens the chinese steal it they go over there and they're selling knockoffs so what do they do they have to pass on that price the american people we end up having the american people paying more or for their medicine in order to subsidize the chinese people whose medicine is being paid for by us the chairman of the ranking member mentioned the supercollider all right we didn't pay for it has china put any money into the super collider has a pal they put money into super collider research no because they want us to put our money in so they can take the benefits so they can get the benefit of the research who's watching out for the american people i mean i'm sorry i hear you know what i'm hearing today is not something that gets to the point of of how this average joe out there who is unemployed is going to find himself in a job or at least a well paying job what i'm hearing is you know for example we education education education i've sat through probably five of these hearings and each time we bring up the idea with one of the major problems in education is that we have unions that are basically protecting mediocre teachers add we got unions that are protecting people who teach courses that are not essential and they have to be paid the same amount of money as someone who teaches engineering and science well of course we're not going to get any high quality engineers and science teachers if they have to get paid the same people who teach as teach basket weaving well the bottom line is unless we're really to address these things and watch out for the american people the american people are going to suffer and i think that's what's happening right now especially in terms of china by the way these graduate students that we to keep here why do we want to have chinese students swarming into these graduate positions teaching them information that cost us billions of dollars of research to do so they can go back to china they go back to china and they can vent utilize that information to outcompete us they realize they're our adversary we don't realize their their adversary and we're treating them as if it's ok to give them the edge on the american people and i'm sorry if i sound a little bit wild here because i always do but the fact is i feel i feel but i feel strongly i feel totally strongly about this unless we start protecting the intellectual property rights of our people of our companies from china and elsewhere they've got the biggest cyber spying network in the world at play in china right now trying to glean anything they can so with that said please just four seconds to comment on  question the best thing you can do for the watch out for the american people is give the next generation of the american workforce the best education the world that's the only way they're going to compete there's not a person on this who's not a parent and a grandparent who has grand kids who want to have the same opportunity we did and that means we want the united states to succeed let me just offer a slight rebuttal to your comment about who wants chinese students here a plus two does we've got plenty of b plus students it's an a plus world if you want to compete internationally you need a plus students we hire the best students we can i wish they were american students the matter of fact is we have failed at getting our younger generate ition pro fish and and interested in the subject matter which is going to be the basis for the twenty first century economy we have to do a better job at that and the private sector is stepping up i was just at the n b c education summit in new york city yesterday and where this topic was addressed for two full days government reps private reps this is the challenge we have and it is a uniquely american challenge we have to educate our children to be successful in the marketplace you cannot have microsoft cisco and intel dupont with just be plus players you cannot you need the best talent from around the world to have those companies successful in the international marketplace even if the trading rules are set up so that they are the rules favor the chinese i am and i think everyone on this panel would all be all be for  fair and legal trade balance trade back and forth protection of intellectual property all of us would be proponents of those comments that you made  but the basic challenge that you have for the united states is in fact having a workforce which can be internationally competitive and then setting the playing field level in the united states with international companies that leveling to the playing field is let's be legal with intellectual property and trade policies but at the same time let's also recognize what the government's responsibility is to set the playing field level for companies to operate here to invest here why penalize companies to make investments in the united states that's exactly what we're doing today i'm sorry that i missed all of your testimony you are all my heroes i think but what you are doing to really bring us back where we are we just have to have the education of our kids and we've got to move forward so much in the science and  research and mr augustine and mr holiday and i know you both served on the gathering storm which i thought and and dr burns i'm sorry this was such an important thing i think for for science in this country and for us moving forward in this committee and i also then the american energy innovation council i had the opportunity to go to the dinner before the press  answer that and this was was really i think such an important step forward to it as well as the revised gathering storm but you just have to keep it up because we really have to move forward and i think we have you know in in in congress as far as our colleagues and knowing how much research and development is just what i wanted to ask you that you know we've got we've got to fill a limited amount of money we're certainly not doing so well right now where we but you know that can be said to me was really important that we move forward with that but the gathering storm report says that we should double the funding for basic research and then the energy innovation council report i believe says that we should spend an additional eleven billion dollars energy technology development demonstration and commercialization so i think now in the economic times that we're in it's really hard to to do everything that we want to do and so if you were in congress and you had to prioritize which of which how would you start with these areas and which would go first and and which would you give think it's a little bit like asking do i want to go with water or food i think that we just can't afford not to do these things and i think we can afford to do them and i say that  for example if america spent more on legal tobacco during this five years we could have done every all of the twenty recommendations every one of the gathering storm study for what  americans spent on legal tobacco during that period of time and had sixty billion dollars a year left over so we can afford it and i realize that's a little different from the federal government's budget but i think these things that  congressman the hall had a little bit of fun with my comment on another vet that i'm an aeronautical engineer and during my career i've worked on many airplanes are overweight and i pointed out that we never solve that problem by taking off an engine and what we're talking about are the engines and i think we just have to do these things   those opposed to this we would not create more funds for it we would make choices all of our experiences time like this forces you to make choices you should miss that opportunity i just on the floor speaking about you cut and that's where we you know doing away with some of these programs that we have been in existence for a long time as ronald reagan said the closest thing to eternal life is a federal program so we really do need to to to we prioritize  shortchanged on the education and we really have to improve that we hear you know like with the japanese that there is studying all the time or the chinese and you know their focus is on education i don't i don't think that we want to have our students have to go to school seven days a week  but we have to find a way that we can really ramp that up and i made like to address that the priority of items there is first and foremost to get certified math and science teachers in our public education system k through twelve and there are a number of programs which are been started in that direction and i'd hardly endorse them and push them forward the private sector has recently gotten involved we were discussing before you were here something called change equation with one hundred plus companies trying to get kids more excited about studying stem topics rather than all wanting to be a lawyer or a doctor  to focus on math and engineering as well but first and foremost if you don't have good teachers in our case through twelve system you're certainly not going to get children enthused about studying math and science if they do respect and they don't learn from the teachers in subcommittees and those chairman committees put in a great deal of time dr baird working with mr inglis they've been good partners in bringing us good legislation and i recognize you here for the for now the final word well i thank the chairman and mostly wanted to just thank you all i believe that the work you did and that the chairman did and this committee did may be central to the future of this country without any and somewhere in this country there are some scientists who are going to be successful at finding those solutions to our energy problems that wouldn't be there without you and we put you know when when in doubt through a commission of a problem around here but this is a commission that really did something and i just want to thank you for your years of service to our country and for your service on this commission and since i have the privilege of the last word i would like to ask my colleagues to join me in thanking this fantastic chairman we have of this committee who not only wrote that bill but has stewarded this committee and fair bipartisan wise and constructive manner and made a profound difference not only on the committee but on the house of representatives and his state   very committed to also the record will remain open for two weeks for additional statements from the members and for answers to any follow up questions that the committee may ask either way just now i'd like to turn the gavel over to mr hall from now but i couldn't ask for a better camera and you've been republican democrat a third party he's been totally completely fair and i never knew the person from tennessee that i didn't admire because but for tennessee it wouldn't be texas