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Senate dilutes US Innovation and Competition Act of 2021

Senators stripped out billions for a technology directorate in the U.S. Innovation and Competition Act. The bill now heads to the House.

The Biden administration's focus on innovation competition with China has led to the advancement of legislation aimed at bolstering tech investment in the U.S. -- legislation that industry analysts said is a good start but doesn't go far enough.

The $250 billion, 2,400-page U.S. Innovation and Competition Act of 2021 brings together multiple bills, including the Endless Frontier Act, into one bipartisan legislative package that invests in manufacturing, scientific research and semiconductor production. Sponsored by Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Todd Young (R-Ind.), the bill would infuse funding into R&D efforts, technology education in the U.S. and national security measures over the next five years.

On June 8, the Senate adopted the U.S. Innovation and Competition Act of 2021 in a 68-32 vote. It now advances to the House for consideration.

Although it funnels billions into technology innovation, Constellation Research founder and principal analyst Ray Wang believes a crucial piece was significantly cut in the legislation adopted by the Senate, which Wang believes weakens the country's ability to advance tech innovation.

In the original Endless Frontier Act, which has been absorbed by the U.S. Innovation and Competition Act, $100 billion was earmarked to establish a technology and innovation division within the National Science Foundation (NSF). The directorate is tasked with creating a network of regional research hubs focused on advancing technologies prioritized in the legislation and would play an instrumental role in fast-tracking their development. But the Senate stripped out funding for the division, setting aside only $29 billion.   

"We had this opportunity to put $100 billion over five years in a technology directorate at the NSF," Wang said. The directorate would define "what are the grants that are needed, how do we go after some key areas like AI and quantum," he continued. "After the Senate [Commerce] committee went through it, it all got ripped out."

U.S. Innovation and Competition Act of 2021 falls short

The new NSF directorate will be tasked with establishing university technology centers and innovation institutes to improve education in key technology focus areas and speed commercialization of scientific advances.

Jon Cardinal, director of economic development for Schumer, who spoke during a recent webinar hosted by the Information Technology & Innovation Foundation (ITIF), likened the directorate to the Defense Advanced Research Projects Agency (DARPA), which focuses on technology R&D for the U.S. military. 

The Senate's revision still directs billions in funding broadly to the NSF to be used between fiscal years 2022 and 2026 to improve technology education and workforce opportunities, as well as support tech research and development activities. But the specific funding earmarked for the directorate dropping from $100 billion to $29 billion makes the U.S. Innovation and Competition Act "the most watered-down bill I've ever seen," Wang said.

Mark Muro, senior fellow and policy director at the Brookings Institution Metropolitan Policy Program, said during the recent ITIF webinar that the legislation also lacks in total R&D investment for manufacturing and leaves the U.S. well behind in tech investment when compared to international leaders.

However, he added, the bill is a good start at rebuilding needed investment and represents a bipartisan agreement that the U.S. government has a role to play in investing in technology to spur innovation and competition.

"This bill, while imperfect, in some ways is hugely important because it's large -- with 2,400 pages appropriating $250 billion in major innovation and competitiveness measures, a real surge is being contemplated," Muro said. "It's far-reaching; it includes scores of sizable provisions focused on everything from R&D programs, IP protection and 5G to STEM education, workforce development and supply chain deepening."

Impact on competitiveness with China

Still, Wang said the funding set aside for R&D in the U.S. Innovation and Competition Act doesn't come close to the trillions China has outlined in its five-year plan issued in March.

He believes the U.S. not only needs to increase funding to spur competitiveness, but that the country's focus needs to change from competing with China to a "better narrative," such as competing against global crises and enhancing livelihoods of people around the world.  

"What I'd like to see is the U.S. commits $1 trillion over the next 10 years toward technologies for humanity, then that's the mission and that's the conversation point," he said. "Here's how companies can participate, here's the public-private partnerships, here's how IP rights are going to be granted, here's the technology foundation and framework to rebuild those structures to not just connect more people but empower more people and give people more opportunities."

Technology is moving at hyperspeed, and government initiatives typically do not.
Alan Pelz-SharpeFounder, Deep Analysis

Alan Pelz-Sharpe, founder of consulting firm Deep Analysis, said that 20 years ago, China was behind the technology curve compared to other countries in the region like Japan or Korea, but huge investments into its own R&D have closed that gap.

"China no longer relies on the U.S. for technology advances, though I am not sure many in the U.S., including the House and Senate, fully grasp that," he said. "A case in point is BSN, China's massive rollout of affordable blockchain infrastructure, which has truly set a high mark for other nations to match."

Legislators seem to recognize that the U.S. is in catch-up mode due to the push for funding through legislative packages like the U.S. Innovation and Competition Act of 2021 and the push for global alliance through legislation like the Democracy Technology Partnership Act, which establishes a technology partnership among democratic countries.

"How long, though, this will take to have an impact is the question, as technology is moving at hyperspeed, and government initiatives typically do not," Pelz-Sharpe said.

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

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