U.S. aiming to ensure that the 'next big thing' originates here

America’s economic problems are complex and they defy easy explanation.

For years to come, we can argue about the precise role that over-aggressive lenders, over-leveraged homeowners and poor government regulation played in causing this historic recession.

Or, we could spend our time more productively by rediscovering the traits that have long made America’s economy the envy of the world.

Scientific research. Innovation. New technology and new modes of commerce.

From the advent of the phone to the automobile to new drug therapies and the Internet, America’s strength has always been our ability to invent and make products and services that help people around the world lead healthier, wealthier and more productive lives. This spirit of invention fuels the creation of new businesses and new jobs.

But by the middle of this decade, the American growth engine was running on fumes. Too many of our brightest minds were engineering mortgage-backed securities and credit default swaps instead of advanced car batteries. By 2005, almost $4 out of every $10 in corporate profits was coming from the financial industry — which was double the postwar average.

Meanwhile, housing was consuming a share of American GDP unseen since returning GIs fueled the 1950s housing boom.

As more of America’s resources were funneled into creating an economic bubble, other promising avenues of growth were either taken for granted or ignored.

In 2000, the United States led the world in Internet speed and access. Today, Japanese consumers enjoy broadband that is anywhere from eight to 30 times faster than the United States. And it’s cheaper.

In the mid-1990s, the U.S. produced over 40 percent of the world’s photovoltaic solar cells, more then Japan, China or all of Europe. Today, we produce just 7 percent. Venture capitalist John Doerr noted in recent congressional testimony that only six of the top 30 companies involved in solar, wind and advanced batteries are American.

Meanwhile, the basic government research that has spawned private-sector innovations ranging from the Internet to memory foam mattresses, have been slashed drastically. As a share of GDP, American federal investment in the physical sciences and engineering research has dropped by half since 1970.

With the housing and finance sectors shrinking, America must recommit to the technological innovation that is vital to spur long-term growth and job creation.

We can’t predict what the “next big thing” will be. But if the government rejuvenates federally backed research and creates the right incentives for innovators to thrive, we can ensure that the “next big thing” is born and raised here in America.

And that is precisely what the Obama administration is doing.

Both the recently passed stimulus package and the president’s 2010 budget feature unprecedented investments to revitalize America’s technological prowess, especially in promising areas like sustainable energy.

Energy is a $6 trillion global market that has justifiably been dubbed the “mother of all markets.” And the fastest growing energy market is of the cleaner, greener kind.

That is why the recent stimulus package allocated $112 billion in “green” investments over the next two years, including $11 billion to help create a national smart electricity grid and $2 billion for the development of advanced lithium-ion batteries.

The president’s 2010 budget proposes spending $15 billion annually over the next 10 years* in renewable energy research and development. The administration also supports creating a national cap-and-trade system for carbon emissions, which will not only mitigate climate change — but will, for the first time, provide a clear market signal to entrepreneurs across America that clean energy can be profitable over the long term.

These renewable energy investments are emblematic of this administration’s fundamental commitment to innovation and technology development. In May, the president went even further. In a speech before the National Academy of Sciences, he set a national goal to commit more than 3 percent of America’s GDP to research and development, which would represent the biggest such investment since John F. Kennedy’s administration.

Beyond direct government R&D, America has to ease the way for all of its entrepreneurs to innovate wherever they are located. The Commerce Department and the Agriculture Department have just launched a $7 billion nationwide effort to increase broadband access in rural and other underserved areas of the country. You can find bright American minds and determined entrepreneurs in Silicon Valley and South Hill, Va., and we need to make sure they can connect and create with one another.

With problems from climate change to an aging population looming, we’re going to need every bright mind we can find to push the envelope in technological innovation and business creation.

I have no doubt America can meet these challenges. Despite our current problems, America still employs 70 percent of the world’s Nobel Prize winners and is home to three-quarters of the world’s top 40 universities. We have a culture of capital formation and entrepreneurship unequaled anywhere else in the world.

I believe the gravest threat to American technological advancement is not our capacity to innovate, but may be our will to commit the necessary resources. R&D investments have long-term time horizons and uncertain prospects for success. With public- and private-sector debt exploding, it will be tempting for legislators and corporate leaders to cut vital research funding in the name of fiscal discipline.

Those are cuts America can’t afford. The seeds for our next economic expansion are being sown in research and development laboratories across America. We need to give them what they need to grow.

* President Obama’s FY2010 budget calls for renewable R&D funding to begin 2012.