Gates testimony before Senate panel

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As with H-1B visas, the demand for green cards far exceeds the supply. Today, only 140,000 permanent employment-based visas are available each year, which must cover both key employees and their family members. There is a massive backlog in many of the employment-based green card categories, and wait times routinely reach five years. Ironically, waiting periods are even longer for nationals of India and China -- the very countries that are key recruiting grounds for the professionals desperately needed in many innovative fields.

In the past, we have succeeded in attracting the world's best and brightest to study and work in the United States, and we can and must do it again. We must move beyond the debate about numbers, quotas and caps. Rather, I urge Congress to ask, "How do we create a system that supports and sustains the innovation that drives American growth, economic opportunity and prosperity?" Congress can answer that question by acting immediately in two significant ways.

First, we need to encourage the best students from abroad to enroll in our colleges and universities, and to remain in the United States when their studies are completed. Today, we take exactly the opposite approach. Foreign students who apply for a student visa to the United States today must prove that they do not intend to remain here once they receive their degrees. This makes no sense. If we are going to invest in educating foreign students -- which we should and must continue to do -- why drive them away just when this investment starts to pay off for the American economy?

Barring high-skilled immigrants from entry to the U.S., and forcing the ones that are here to leave because they cannot obtain a visa, ultimately forces U.S. employers to shift development work and other critical projects offshore. This can also force U.S. companies to fill related management, design and business positions with foreign workers, thereby causing further lost U.S. job opportunities even in areas where America is strong, allowing other countries to "bootstrap" themselves into these areas, and further weakening our global competitive strength. If we can retain these research projects in the United States, by contrast, we can stimulate domestic job and economic growth. In short, where innovation and innovators go, jobs are soon to follow.

Second, Congress should expedite the path to permanent resident status for highly skilled workers. The reality for Microsoft and many other U.S. employers is that the H-1B visa program is temporary only in the sense that it is the visa we use while working assiduously to make our H-1B hires -- whether educated in the U.S. or abroad -- permanent U.S. residents. Rather than pretend that we want these highly skilled, well-trained innovators to remain for only a temporary period, we should accept and indeed embrace the fact that we want them to become permanent U.S. residents so that they can drive innovation and economic growth alongside America's native born talent.

These reforms do not pit U.S. workers against those foreign born. They do not seek to make or perpetuate distinctions among the best and brightest on the basis of national origin. They simply recognize the fact that America's need for highly skilled workers has never been greater, and that broad-based prosperity in America depends on having enough such workers to satisfy our demand. Far from displacing U.S. workers, highly skilled, foreign-born workers will continue to function as they always have: as net job creators.

III. Investing in research, rewarding innovation

A. Investments in research and development

America's current technology leadership is a direct result of investments that previous generations made in basic scientific research, especially publicly funded projects undertaken in government and university research labs. For instance, research in the 1970s by the Defense Department's Advanced Research Projects Agency (ARPA, later known as DARPA) led directly to many of the technologies that underlie today's Internet. As another example, grants from the U.S. Navy and the National Science Foundation helped fund the development of public key encryption systems, which we now use daily in everything from ATM machines to e-mail and electronic commerce.

American companies were able to capitalize on these innovations and turn them into globally successful products because of our world-class universities, innovative policies on technology transfer and pro-investment tax rules. These policies have driven a surge in private sector R&D investment. Since the mid-1970s, U.S. industry investment in R&D has more than quadrupled. Today, industry is responsible for two-thirds of total R&D in the United States, and as of the early part of this decade, industry R&D investments were growing faster than the economy as a whole. Microsoft, in many ways, exemplifies this trend. We annually invest over $6 billion in R&D, which ranks among the highest R&D expenditures in the world by a major technology provider, both in absolute terms and as a percentage of revenues.

As important as private sector R&D investment is, federal research funding is equally vital to America's technology leadership. Federally funded research enriches the commons of knowledge and provides the raw material for U.S. industry to transform into commercially successful products. Federal funding for university-based R&D also helps educate the next generation of scientists and engineers -- those who will largely determine whether America remains innovative and globally competitive.

In my view, America's ability to remain a technological powerhouse will depend in large part on the extent to which the federal government invests in basic research. Unfortunately, federal research spending is not keeping pace with our nation's needs. According to the Task Force on the Future of American Innovation, "[a]s a share of GDP, the U.S. federal investment in both physical sciences and engineering research has dropped by half since 1970. In inflation-adjusted dollars, federal funding for physical sciences research has been flat for two decades. ..." This stagnation in spending comes at a time when other countries and regions, such as China and the EU, are increasing their public investments in R&D.

To ensure that our federal and university research labs continue to serve as sources of innovation and expertly trained scientists, and that industry has incentives to continue investing heavily in R&D, it is critical that Congress take the following steps:

First, the federal government needs to increase funding for basic scientific research significantly. While recent increases in the research budgets of the Department of Energy and the National Science Foundation are commendable, more must be done. As federal research priorities expand into new areas, we should seek to increase funding for basic research by 10% annually over the next seven years. Congress should consider other innovative ideas as well, such as (1) new research grants of $500,000 each annually to 200 of the most outstanding early career researchers; (2) a new National Coordination Office for Research Infrastructure to manage a centralized research infrastructure fund of $500 million per year; (3) establishing and providing funding for Advanced Research Projects Agencies in various departments, similar to DARPA of the 1970s; and (4) ensuring that research projects are communicated to the private sector so that companies can collaborate more effectively with recipients of public research funds.

Second, Congress should permanently extend the R&D tax credit, which expires again at the end of the 2007. Each year, Microsoft creates thousands of new R&D jobs throughout the world. As we continue to look for opportunities to reduce costs across our business, the R&D tax credit provides an important incentive to encourage Microsoft and other U.S. companies to continue to increase R&D investment in the United States. The credit is a positive stimulus to U.S. investment, innovation, wage growth, consumption and exports, all contributing to a stronger economy and a higher standard of living. As other countries recognize the long-term value of R&D and offer permanent and generous incentives to attract R&D projects, the United States must renew its commitment to U.S.-based R&D by making the tax credit permanent so businesses may rely on it when making decisions on where to source R&D projects.

B. Rewarding innovation

In addition to investing in innovation, we must also reward innovators. This means giving inventors the ability to obtain intellectual property protection for their innovations and to enforce these rights in the marketplace. America is fortunate that our leaders recognize the importance of intellectual property rights and the need for these rights to be respected, both at home and abroad. I know I join many other Americans in thanking this Congress and this administration for their tireless efforts to promote intellectual property protection.

In this regard, I would briefly note Microsoft's support for current efforts in Congress to reform the U.S. patent system to meet the needs of the 21st century. Microsoft and other technology companies are working closely with Chairman Leahy and Sen. Hatch on the Senate Judiciary Committee, and with the leadership of the House Judiciary Committee, to advance legislation on needed reforms. Although I will not delve into the details here, the reforms supported by Microsoft and many others will improve patent quality, reduce excessive litigation and promote international patent harmonization -- reforms that are vital if America is to retain its pre-eminence in technology innovation.

In my view, the challenges confronting America's global competitiveness and technological leadership are among the greatest we have faced in our lifetime. Frankly, we have not been the careful stewards of our own "innovation account" that our children and grandchildren have a right to expect of us. It is time to revisit our game plan in this regard.

I recognize that implementing these solutions will not be easy and will take strong political will and courageous leadership. But I firmly believe that our efforts, if we succeed, will pay rich dividends for our nation's next generation. We have had the amazing good fortune to live through one of the most prosperous and innovative periods in history. We must not squander this opportunity to secure America's continued competitiveness and prosperity.

Thank you again for this opportunity to testify. I welcome your questions on these topics.

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  • Copyright © 2007 IDG Communications, Inc.

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