Investment in America Act of 2005

Mr. President, today I rise with my colleague Senator Ensign to introduce the National Innovation Act, S. 2105. This Act is about building a new century of progress and prosperity for our Nation by spurring a new wave of American innovation--better known around the world as ``American ingenuity.''

Our Nation was founded by innovators. Washington, Jefferson, Franklin and many of our other Founding Fathers not only created a new republic, but in their spare time were inveterate experimenters and inventors, as well, who believed that innovation would be important to the growth and security of their new nation.

The generations that followed took up the call. Whitney, Bell, Edison, Fulton, Morse, Ford, Colt, the Wrights--I don't even have to say their first names and you know who they are and what they did.

Now we face a new century with new challenges--a global age where competition can come as easily from across an ocean as from across the street. We got a wake up call earlier this week about how tough the challenge is when it was announced that China had overtaken the United States as the world's largest exporter of high-tech products. According to statistics released by the Organization for Economic Cooperation and Development (OECD), China shipped $180 billion worth of such goods worldwide last year, exceeding U.S. exports valued at $149 billion. Even more significant, however, is the fact that the historical paradigm, one that has fueled much of our economic growth in the technology sector in this country, is quickly changing. China now imports far fewer components for tech goods, choosing instead to produce them itself. The OECD noted that between 2000 and 2004, the U.S. and EU shares of China's total imports in such components dropped from 27 to 12 percent. Instead of relying solely on its lower labor and production costs to assemble high-tech goods from components produced in places like the United States and Europe, China increasingly does it all itself now. Chinese scientists now develop many of the newest technologies. Their engineers now design the latest cutting-edge products, and their factories continue to assemble and spit out the goods, all the while steadily lowering costs. Many of the people involved are educated here or in Europe, though even that is changing, in part due to our restrictive immigration policies and technology transfer rules. If this continues unabated, the highest-end and best- paying jobs, key to the innovation-driven economy, could be found in Shanghai and not in American tech centers.

In May of 2004, I released a White Paper on the topic of outsourcing. When I issued that White Paper, I stated that the first thing we should do was to stop blaming others and face the hard facts ourselves. Since that time, there are even more hard facts we need to face, including the statistics I just mentioned, all of which point to the urgent need for action if the American economy is going to adapt to the fundamental changes and growing competition in the global economy. Forrester Research Inc., a Cambridge, MA research firm that has been studying this issue, has estimated that by 2015, 3.3 million high-tech and service industry jobs will move overseas. Deloitte Consulting has estimated that approximately 2 million jobs in the financial services sector, which signifies nearly 15 percent of the industry's total, could move overseas in the next five years. But even more importantly, we are not just losing jobs. I fear we are beginning to lose critical pieces of our innovation infrastructure, and with them, our competitive edge in the global marketplace. What we always believed was our nation's ultimate competitive advantage--our high-end R&D and technological prowess--is increasingly under siege. I said in 2004, the outsourcing of jobs is just the tip of an economic iceberg that America is sailing towards. If the most recent statistics tell us anything, it's that we are even closer to that iceberg than ever before.

Luckily, these developments have not gone unnoticed. Earlier this year, the Council on Competitiveness--drawing on the insights of many experts from industry and academia, and led by Sam Palmisano of IBM and Wayne Clough of Georgia Tech University--circulated a report with detailed recommendations on how to reinvigorate our innovation economy. The National Innovation Act, which Senator Ensign and I are introducing today, is based on the Council's recommendations. This is a strongly bipartisan bill, cosponsored by 16 of our colleagues in the Senate. Further, this bill is wholeheartedly supported by members of the business and academic communities in this country, many of whom are eager to see a reinvigoration of American ingenuity. A few exmples of these supportive statements include the following: George Scalise, President, Semiconductor Industry Association: ``U.S. leadership in technology has been the cornerstone of America's

strategies for driving economic growth and ensuring national security. U.S. leadership is being challenged as never before. The National Innovation Act of 2005 addresses a number of the most critical issues involving technology leadership, especially those related to federal support for basic research. . . . We are especially pleased to support a bipartisan approach to ensuring U.S. technology leadership. The issues at stake--national security and our standard of living in the 21st century--are far too important to become entangled in partisan politics.''

Nicholas M. Donofrio, Executive Vice President, IBM Corporation: ``IBM applauds the introduction of the National Innovation Act of 2005 . . . Innovation underpins American economic growth and national security. In today's era of global opportunity and change, the rewards flow to those who innovate and turn disruptive shifts to their advantage. America has a long, proud history of recognizing when change is required and rising to the challenge. We are at such an inflection point today. The National Innovation Act of 2005 will create synergies among America's academic, business and government communities to ensure the future growth of the United States. I urge all Senators to support this legislation.''

Deborah L. Wince-Smith, President, Council on Competitiveness: ``On behalf of the Council's 180 CEOs, university presidents and labor leaders, I applaud the Senators' efforts and desire to ensure the United States remains the most competitive economic power in the world. We must, as a nation, innovate to compete and to prosper. This legislation is a critical step forward towards that goal.''

Dave McCurdy, CEO, Electronic Industries Association: ``EIA is thrilled by today's introduction of the National Innovation Act of 2005 (NIA), which includes so many measures that can help the U.S. remain an economic leader in the global high-tech economy. It is an ambitious piece of legislation that spans the policy spectrum, but with the commitment and support of policymakers from both sides of the aisle, we hope to see these important provisions quickly begin to take effect and fuel the U.S. innovation engine.''

John J. Castellani, President, Business Roundtable: ``On behalf of Business Roundtable, an association of 160 chief executive officers of America's leading companies, I applaud Senator Ensign and Senator Lieberman for their leadership on this critical issue. Maintaining our competitive edge in today's world economy is a top priority of the business community, and the National Innovation Act of 2005 is an important step in the right direction.''

The list of organizations and companies that have already endorsed this bill includes many of the major players in the field, companies and organizations working to keep America at the cutting edge of technology development, including the following: American Chemical Society, American Mathematical Society, ASTRA (Alliance for Science & Technology Research in America), Athena Alliance, Bell South, Business Roundtable, Center for Accelerating Innovation, Computing Research Association, Council on Competitiveness, Council of Scientific Society Presidents, Electronic Industries Alliance, Federation of American Scientists, IBM, IEEEE-USA, Progressive Policy Institute, Semiconductor Industry Association, SEMI North America, and TechNet. In addition, many academic institutions and organizations support our bill because they recognize the importance of expanding education in science, math, and engineering. We have received strong indications of support from the academic community, including the Association of American Universities (AAU), the Council of Graduate Schools (CGS) and Georgia Institute of Technology.

While I won't describe every provision of this far-reaching bill today, a section-by-section summary accompanies this statement in the Record, I will say that the National Innovation Act addresses three broad categories--talent, investment, and infrastructure--all of which are key to America's regaining our competitive position among our trading partners.

Number one, Talent: Innovation requires the incubation of curious minds. That means we absolutely must educate and train our science and engineering talent base that is essential to our continued global economic leadership.

The number of jobs that require technical training is increasing at five times the rate of other occupations. To encourage more students to enter these technical professions, our legislation increases Federal support for graduate fellowships and trainee programs in science, math, and engineering by more than $800 million over 5 years. Specifically, the legislation expands the National Science Foundation's (NSF) Graduate Research Fellowship Program by 1,250 fellowships and extends the length of each fellowship from 3 to 5 years. These fellowships are portable fellowships which afford students the greatest flexibility in choosing graduate programs that fit their needs and interests. The legislation also expands the NSF Integrated Graduate Education and Research Traineeship (IGERT) program by 1,250 new traineeships. In the IGERT program, grants are awarded to universities to develop cross- disciplinary training programs for students in areas including science, math, engineering, and policy.

The legislation also expands upon existing Department of Defense efforts and creates new programs in order to encourage more students to enter the fields of science, math, and engineering. Specifically, provisions are included to expand the Defense Department Science, Mathematics, and Research for Transformation (SMART) scholarship program by $41.3 million per year over five years and to expand the National Defense Science and Engineering Graduate Fellowship program by $45 million per year over five years. A new competitive traineeship program, which will initially include 80 students, is created to provide interdisciplinary training in science and engineering to students who are encouraged to work for at least ten years in the Department of Defense after graduation.

This legislation also supports new and existing Professional Science Master's degree programs. These Master's programs typically try to provide cross-disciplinary training within the science, math, and engineering disciplines, and also to couple traditional technical disciplines with business, entrepreneurial, and business law training. Graduates of these programs will comprise a cadre of technical professionals with broad skills in both business and science that will give our industry an edge.

If we are to develop talent at the graduate levels, we must also emphasize science, math, and engineering at the K-12 and undergraduate levels. The results from the International Student Assessment of 2003 showed that U.S. 15-year-olds performed below the international average in math and science literacy. In order to bolster our highly-skilled science and engineering workforce, we must improve performance in our elementary, middle, and high schools.

Recognizing that new approaches must be realized, this legislation establishes a grant program of $10 million in 2007 and $20 million in 2008 and 2009 to help primary and secondary schools develop new experientially-based teaching techniques in math and science. It further addresses the issue of improving talent in scientific disciplines by expanding the existing Technology Talent program to the scope originally intended. The Technology Talent program provides competitive grants to undergraduate universities to develop new methods of increasing the number of students earning degrees in science, math, and engineering. It is essential that we increase the number of college graduates with the skills to contribute to the science and technology workforce, yet this program has never been fully funded.

Number two, Investment: Great ideas need research money if they are to move from imagination to market. But, federal R&D spending as a percentage of GDP has been in steady decline since the mid-1960s. It is less than half of what it was then. This bill bolsters the mission of the National Science Foundation (NSF) by more than doubling its research budget from $4.8 billion in 2004 to nearly $10 billion in 2011. Support for NSF is essential as it funds the full range of scientific disciplines and it encourages multidisciplinary approaches to problem solving. When it was created in 1950, Congress envisioned NSF as one of the primary catalysts for research ``to promote the progress of science; to advance the national health, prosperity, and welfare; [and] to secure the national defense.'' In order for NSF to continue to meet our tremendous needs in all these areas, which notably remain as vital today as they did back then, it needs more funding. At the same time, we must recognize that we, as a country,

face difficult choices in how we allocate our resources. Hard choices may have to be made, but we cannot avoid the reality that an investment such as the increase in NSF's research budget that our bill calls for today, is absolutely necessary if we are to generate the talent base we need to remain competitive. It is my belief that this investment will pay vast dividends in the long run for the American people and for the American economy. I also believe we will pay dearly if this investment is not made soon.

Congress is making steady progress toward finding reasonable ways to accommodate the needs of our five major research agencies. Our bill concentrates on two agencies: we double the authorization for NSF and we ask the Department of Defense (DOD) to spend 3 percent of its budget on science and technology, DOD's 6.1, 6.2, and 6.3, programs consistent with Defense Science Board recommendations. The research budget for life sciences at the National Institutes of Health (NIH) has been doubled in recent years and this legislation attempts to bring research in the physical sciences up to the same high level of funding. A major increase for NASA science research is now under consideration in conference and the Congress passed a significant increase in the authorization for Energy Department Science research as part of the energy bill this summer. So, our bill addresses the remaining top R&D agencies--NSF and DOD.

Our bill also creates an ``Innovation Acceleration Grants'' program to stimulate high-risk research by urging federal research agencies to allocate at least 3 percent of their current R&D budget to breakthrough research--the kind of research that gave us fiber optics, the Internet and countless other technologies relied on every day in this country and around the world. We anticipate this funding would be used for ``grand challenges,'' for what is sometimes referred to as ``connected'' or ``translational'' research, which moves from fundamental discoveries through the development and procurement stages. We also anticipate that agencies would step outside the peer review approach, which can be too cautious, and empower talented program managers to drive novel and promising ideas forward. While it doesn't mandate that these agencies spend at least 3 percent of their budgets on high-risk frontier research projects, this provision sets a realistic and reasonable strategic goal. It is our hope and expectation that agencies will view the 3 percent allocation as a starting point and will take the initiative to expand from there. The Innovation Acceleration Grants program is designed to be a streamlined mechanism to support those grants that are making progress and not support those that are floundering. The program has built-in and specially-designed metrics to ensure that granting agencies closely monitor the projects they support, renewing those with strong performance and phasing out those that don't show enough real promise for the types of cutting-edge advancements that are truly innovative. It is important that it is designed in this manner because a cautious approach to these issues cannot work. In order to face the challenge, we need to take risks and be patient. However, in an environment of increasingly tight fiscal pressures, we also must recognize that risk taking can, and often does, lead to dead ends. While many high-risk projects may fail, those that succeed can bring tremendous benefit. The urgency of the threats we face today warrants a balanced approach. We must continue to encourage the groundbreaking experimentation, tinkering and longer-term outlook that made this country great. But we also must continue to take stock of our progress and make sure we are heading toward the ultimate goal of reestablishing the foundational elements of our tremendous successes over the last 50 years, and more.

Switching gears briefly, I think it is also important to note that the government cannot do this alone. The private sector in this country needs to continue to lead the charge. Private sector investment in research in this country, after a sharp rise in the 90's, has been eroding in recent years in part because companies have moved some R&D operations outside the United States. About $17 billion a year in R&D now flows overseas to nations like China and India. And as that research money leaves our shores, the high-skilled 21st century jobs we need to compete sail away with them.

Our bill tries to help stem the tide by making the current Research and Experimentation (R&E) tax credit permanent and extending it to a greater number of enterprises; the same provision that appears in the Invest in America Act of 2005, sponsored by Senators Hatch and Baucus with 44 bipartisan cosponsors. These two Senators deserve the credit on this. We are simply trying to emphasize their efforts. Making the credit permanent allows our private entrepreneurial spirit to continue to drive the economic growth of this great nation and at the same time ensures that other countries like China do not lure away our talent and investment, and ultimately the innovation that comes from them. It gives our companies a powerful and reliable long-term incentive to include domestic R&D as a significant component of their strategic plans. Since the original enactment of the research credit in 1981, a public-private partnership has developed, through which the federal government has worked with businesses of all sizes to ensure that research expenditures continue to be made here in the United States. The reward has been the creation of many innovative technologies, well- paying jobs, and an increased growth rate in our economy. The importance of this effort cannot be understated.

At the same time that firms are investing more money in R&D, they must improve their ability to manage the technological innovations that result from this research. The emerging area of ``service science'' refers to both research and training regimens that are now starting to develop and to teach individuals how to apply technology to solving complex problems in the service and industrial sector. Eighty percent of our economy is service-based, yet we do very little R&D in this area. We now face intense service competition from countries like India, taking advantage of global IT systems. If we don't improve our services productivity, increasingly we won't be able to compete. This legislation asks the Director of the National Science Foundation to conduct a study for Congress on how the federal government should best support service science through research, education, and training.

Number three, Infrastructure: Once we have helped assure the education foundation to give people the basic skills they need to use their creativity, and the resources they need to support their experimentation, we must then reinvent and transform our manufacturing processes and technologies so that we can secure the gains from the fruits of all this labor. In this era of tough international competition, if we don't manufacture the goods we innovate here in the U.S., we will forfeit our global economic leadership and our children's prosperity to other nations who can. To help facilitate this important goal, our legislation takes several steps.

First, the bill authorizes creates federally-funded and complementary advanced manufacturing programs at the Departments of Commerce and Defense. The development and implementation of state-of-the-art advanced manufacturing systems does not happen overnight, nor can it be done alone. The goal of this new program is to, again, establish a public-private R&D partnership which enables risk taking and creativity to generate new processes and technologies. These new processes and technologies will give us the productivity breakthroughs we need to maintain our manufacturing competitiveness. I continue to believe in the spirit of American ingenuity--if given the chance and the tools to succeed, we will. This legislation also creates the Test Beds of Excellence program, which is designed test and refine these new processes and technologies in a real manufacturing setting once they have been developed. Then, we ask the Manufacturing Extension Program to help disseminate this new innovative knowledge throughout to manufacturing base, including to the many small and mid-sized companies that will be key to our growth. The Test Beds program is a competitive one and, as in the case of the Innovation Acceleration Grants program and other important features of this legislation, it

is designed to self-scrutinize and adapt to the constantly changing needs of our manufacturing sector.

In addition to the effort at the Department of Commerce, our bill asks the Department of Defense to work with the private sector to identify and accelerate the transition of advanced manufacturing technologies and processes that will enable us to maintain our technological edge on the battlefield. The Department of Defense relies on innovation, and the bill seeks to expand the Department's traditional manufacturing sector work in this area. An additional motivating factor within the Department of Defense is the inherent security risk associated with using certain overseas suppliers. American manufacturing must remain competitive in order to meet the needs of our military in a timely fashion.

These steps will go a long way toward revitalizing our manufacturing system into a system that is seamlessly integrated with our other efforts to boost American innovation through education and research.

Our bill goes further, recognizing that innovation fundamentally occurs not at the national level, but at the local and regional levels. Certainly there are many lessons to be learned from the rise of Silicon Valley and other similar regions that have sprung up all over this country as centers for high-tech growth. Our competitors, China, India, Israel and many others, have already begun to emulate the success we have achieved in this way. These clusters have developed in areas of the country where educational and research institutions, together with creative elements of the private sector, have partnered to create an environment conducive to innovation. Our bill encourages the development of more regional clusters (``hot spots'') of technology innovation throughout the United States. These hot spots spur growth in local economies and also contribute to progress on a national scale. We don't try to impose these from above, from the national level. These must start at the local level to work. But, the federal government can help local communities identify successful models and the right metrics. The Secretary of Commerce will publish a ``Guide to Developing Successful Regional Innovation Hot Spots'' in order to share successful strategies in the formation and development of regional clusters.

Finally, it is imperative that the executive branch take a strong role in leading and coordinating the broad initiative outlined in this legislation. To help guide progress in all three of the important areas I have outlined, this bill creates a President's Council on Innovation. The goal of the President's Council is to develop a comprehensive national innovation agenda and coordinate all federal efforts related to this agenda. In consultation with the Office of Management and Budget, this Council would develop and use metrics to assess the impact of existing and proposed laws that affect innovation in the United States. In addition, the Council would help to coordinate the various federal efforts that must be spread among many agencies that support innovation, and it would submit an annual report to the President and to the Congress on how the Federal Government can best support innovation. This effort cries out for much better coordination and collaboration than exist now. Why the White House? These issues must be addressed at the highest levels and in a decisive and organized way to achieve success.

The National Innovation Act is organized into five titles, intentionally reflecting the Senate committees of jurisdiction in the subject areas of each title. Title I, ``Innovation Promotion'' falls within the purview of the Commerce Committee. Title II, dealing with science, education and healthcare programs, covers subjects within the jurisdiction of the Health Education Labor and Pensions Committee. Title III, providing tax incentives to promote innovation, comes within the Finance Committee jurisdiction. Title IV covers Department of Defense programs and would fall within the Armed Services Committee jurisdiction. Title V, which touches on immigration, patent reform, and possible barriers to innovation, would be within the Judiciary Committee purview. The issues of immigration, health care information technology, and patent reform are reflected in this bill as Sense of Congress provisions, because we recognize that the committees of jurisdiction are already working on and moving in these areas and we don't want to get in their way. However, the bill cites these moving issues to mark the importance of considering how legislation on these issues may affect our economy's ability to remain competitive. The provision for an objective National Academy study on barriers to innovation would allow Congress to understand how legal and numerous other structural aspects of the U.S. economy may affect our ability to be innovative.

From the 18th century Franklin stove to the 20th century personal computer, the United States has long been the leader in the technology and innovation that created jobs, wealth, and an ever-increasing standard of living for our people. We call it American ingenuity. It's time to take that native ingenuity and build a new century of progress for America.

I ask unanimous consent that a section-by-section analysis of the National Innovation Act, a short summary of the legislation, and statements of support for this legislation be printed in the Record.

Mr. President, I rise today to introduce the Paiute Indian Tribe Land Conveyance Act of 2005.

This bill would authorize the Secretary of the Interior to convey or transfer four small Paiute trust land parcels to the city of Richfield.

The Paiute Indian Tribe Land Conveyance Act of 2005 would allow the Secretary of the Interior to transfer three acres of land held in trust for the Paiute Indian Tribe of Utah to the city of Richfield, UT. The city of Richfield would provide fair market value compensation directly to the tribe, and pay any costs incurred in this transaction. This land transfer would allow expansion of the Richfield Municipal Airport and provide the Tribe with proceeds to purchase land that has economic development potential. This bill passed the House last year and I introduced it in the Senate, but the Senate bill did not make it through the legislative process prior the end of the 108th Congress.

This proposal has support from all sides. The city of Richfield approached the Tribe about acquiring this parcel of land adjacent to the airport runway. The Tribe agreed and the Paiute Tribal Council passed Resolution 01-36, unanimously agreeing to the conveyance of this parcel of land to the City. The land in question has not been used by the Tribe for more than 20 years. It is not contiguous to the Paiute's Reservation and for nearly 30 years now has had no economic development potential. The tribal resolution expresses the Paiute's desire to accept the city's offer to purchase the land at fair market value and serves as the request to the Secretary of the Interior to convey the trust land. However, only an act of Congress may authorize this land conveyance.

The Paiute Indian Tribe Land Conveyance Act of 2005 would also transfer three trust land parcels, each an acre or less in size, from the Tribe to its Kanosh and Shivwits Bands. All parcels would remain in trust status. The first parcel of one acre would be transferred from land held in trust by the United States for the Paiute Tribe to land held in trust for the Kanosh Band. This parcel is surrounded by 279 acres of land that is either owned by the Kanosh Band or held in trust for the Kanosh Band. For more than twenty years, the sole use of this land has been for the Kanosh Band Community Center. The second parcel, two-thirds of an acre in size, would also be transferred from the Tribe to the Kanosh Band. The land has been used exclusively by the Kanosh Band. It was originally intended that the land be taken in trust for the Kanosh Band in 1981 under the Paiute Indian Tribe of Utah Restoration Act. However, through an administrative error, the land was mistakenly placed in trust for the Tribe. By way of several Band resolutions, the Kanosh Band has formally requested correction of this error.

The third parcel of land, less than an acre in size, would be transferred from the Tribe to be held in trust for the Shivwits Band. The land already is surrounded by several thousand acres of land held in trust for the Shivwits band, and its sole use has been for the Shivwits Band Community Center.

Finally, the bill would eliminate the word ``City'' from the current official name of the ``Cedar City Band of Paiute Indians,'' a name which has never been used by the Band of residents of southwestern Utah. Thus, the bill makes clear that any reference in a law, map, regulation, document, paper, or other record, of the United States to the ``Cedar City Band of Paiute Indians'' shall be deemed to be reference to the ``Cedar Band of Paiute Indians.''

I would like to make some clarifications as part of the record. This bill has language that would allow the city of Richfield to purchase land from the Tribe and provide payment directly to the Tribe without the funds being funneled through the Department of the Interior. I support that provision. The bill also has a provision that would make lands which were acquired by the United States in trust for the Tribe, after February 17, 1984 and prior to the date of the enactment of this legislation, a part of the reservation. this clarifies the intent that lands already in possession of the tribe should be part of the reservation. I would also like to clarify that nothing in this legislation authorizes the Secretary of the Interior to make land conveyances for any tribe or band without their official consent to such a conveyance.

This bill will cost U.S. taxpayers nothing, but it will solve the dilemma that the city of Richfield faces as it works to make its airport meet the needs of the citizens of southwestern Utah. Equally important is the fact that this bill will allow the Paiute Tribe to use the proceeds from the land sale to acquire land with economic development potential to facilitate the well-being of the Tribe. The bill also takes care of non-controversial land adjustments and technical corrections. The bill is supported by the Paiute Tribe, its Bands, and the people of southwestern Utah residing nearby. That is why I am introducing this legislation that would convey or transfer small Paiute trust land parcels.

I thank the Senate for the opportunity to address this issue today, and I urge my colleagues to support the passage of the Paiute Indian Tribe Land Conveyance Act of 2005.

Mr. President, I am very pleased to join with my friend and colleague Senator Baucus and several of our Finance Committee colleagues

from both sides of the aisle today in introducing legislation that would permanently extend and improve the research tax credit.

Extending the research credit is an important step for the future economic growth of the United States. A permanent credit can help our economy develop the new technologies that will enhance existing capital inputs and make workers more productive. The result will be a stronger economy at home, and a more competitive nation abroad. As many of our colleagues are aware, the current research credit is set to expire on December 31, 2005.

I believe that if we allow the research credit to expire, we will see the negative effects manifest in lower economic growth, fewer jobs created, fewer innovative products, and lost opportunities as research activities move to other countries with more attractive incentives. We should never forget that our Nation's future economic health is dependent on the innovations of today.

In assessing the health of our economy, we find an important correlation between economic growth and inflationary pressures. One sure way to have strong economic growth without the pain of inflation is to increase productivity. And most productivity gains are derived from technological advances, which reduce the cost of producing goods and services, and thereby help maintain low consumer prices.

An additional benefit of productivity growth is a corresponding increase in corporate profits. Such increases lead to higher returns on savings and investment, and higher wages for workers. I believe the greatest benefit of increased R&D is productivity growth, which in turn forms the foundation of higher living standards.

Productivity growth also largely determines our society's long-term economic welfare. Our ability to deal with budgetary challenges, such as Social Security, Medicare, and other entitlements, depends critically on the future direction of our productivity.

From 1995 through 2003, average annual productivity growth was three percent, double the 1.5 percent growth rate that prevailed between 1973 and 1995. According to economists, this surge in productivity is the result of businesses beginning to efficiently integrate computer and information technology into day-to-day operations. We need a strong and permanent research credit in order to continue these gains in productivity growth.

My home State of Utah is a good example of how State economies currently benefit from the research credit. Utah is home to various firms that invest a high percentage of their revenue in R&D. There are thousands of employees working in Utah's technology based companies, with thousands more working in other sectors that engage in R&D. Approximately 5 percent of the State's non-agricultural workforce is employed in research-intensive, high technology sectors.

Moreover, high technology jobs pay substantially more than the Utah average. In 2004, high technology payrolls accounted for 9.2 percent of Utah's total payrolls. This is a significant proportion considering technology jobs make up only 5 percent of the workforce.

Utah's largest technology segment is in computer systems design, which accounts for more than 20 percent of the State's technology employment with approximately 10,700 workers. Furthermore, this sector is Utah's second highest exporter of merchandise. This is a prime example of an industry group contributing directly to the productivity expansion I mentioned earlier.

The medical equipment manufacturing industry makes up another substantial R&D industry group employing nearly 8,000 Utahns. This industry has been an important and relatively stable component of the technology sector for many years.

Utah profits from, and also imparts, many ``spill-over'' benefits from the innovations developed both within and outside of the state. To give one example, more than 7,000 people work in Utah's chemical industry. This industry is the State's fourth-largest exporter. It benefits greatly from R&D taking place in Utah and throughout the country, and it shares the benefits with its trade partners. Research and development is clearly the lifeblood of Utah's economy.

Since 1981, when the research credit was first enacted, the Federal Government has joined in partnership with large and small businesses to ensure that research expenditures are made in the United States. This enhances domestic job creation, and helps the United States to internalize more of the economic benefits from the research credit.

It seems clear that to grow our economy we must enhance our position as the world leader in technological advances. Consequently, robust R&D spending should permeate our economy. We simply must continue to invest in research and development, and the Federal Government needs to reaffirm its role as a partner with the private sector. To achieve this, I have long advocated a permanent credit, and this body is overwhelmingly on record in favor of that proposition. During the Senate's debate on the 2001 tax cut bill, I offered, and the Senate adopted, an amendment to provide for such a permanent credit. Unfortunately, that provision was dropped in conference and we lost a great opportunity.

Once again, I want to ask my colleagues to make this credit permanent. I think we all know that this credit is going to be extended, again and again, every few years. It takes time and energy for my colleagues to revisit this issue every few years. Can we not just, once and for all, make this provision permanent? We know this is good policy, and it is one of the most effective tax incentives in the code. Even under today's permanently temporary credit, every dollar of tax credit is estimated to increase R&D spending by one dollar in the short run and by up to two dollars in the long run. And if we make this permanent, those incentives will only improve.

While the research credit has proven to be a powerful incentive for companies to increase research and development activities, it unfortunately does not work perfectly. One reason is that the credit is incremental, and was designed to reward additional research efforts, not just what a company might have done otherwise. From a tax policy perspective, I believe this is the best way to provide an incentive tax credit. Nevertheless, it is difficult to craft an incremental credit that works flawlessly in every case.

While the credit works well for many companies, it does not help some firms that still incur significant research expenditures. This is because the credit's base period of 1984 through 1988 is growing more distant and some firms' business models have changed.

To address this problem, we have added a third way to qualify for the credit, an elective ``alternative simplified credit.'' We propose to base this new alternative credit on how much a company has increased its R&D spending compared to the last three years. Companies will average their R&D spending over the previous three years, and cut that number in half. For every dollar they spend over that amount, they get a 12 percent tax credit. If they spend less than that amount, they get no credit at all. This is why this credit is so effective--it gives benefits to companies that do more, and gives no benefits to companies that do less. That is good tax policy, and good growth policy.

The United States needs to continue to be the world's leader in innovation. We cannot afford to allow other countries to lure away the research that has always been done here. We cannot afford to have the lapses in the research pipeline that would result if we do not take care of extending this credit before it expires on December 31.

In conclusion, making the research tax credit permanent will increase the growth rate of our economy. It will mean more and better jobs for American workers. Making the tax credit permanent will speed economic growth. And new technology resulting from American research and development will continue to improve the standard of living for every person in the U.S. and around the world. I look forward to working with my colleagues to create a permanent, improved research credit.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, this week marks the first national ``Sunshine Week.'' The centerpiece of this week is Freedom of Information Day, which falls on March 16, the anniversary of James Madison's birthday. A firm believer in the need for open and accountable government, Madison said, ``A popular government, without popular information, or the means of acquiring it, is but a prologue to a farce or tragedy or perhaps both.'' Each generation of Americans should heed James Madison's warning, and it is fitting and proper that today's generations of Americans use this week to revisit the potentially damaging limitations placed on access to government information in just the last few years.

The Freedom of Information Act (FOIA) has been the centerpiece of open government for the 38 years since it came into force in 1967. It enables citizens to obtain information on how their government is protecting the Nation, spending their tax dollars, and implementing the laws their officeholders enact. FOIA helps hold our government accountable. It was through FOIA requests that the St. Petersburg Times uncovered information showing that since the 1991 Gulf War, and due in part to lax security at military bases, thousands of pounds of weapons have been lost or stolen from U.S. stockpiles, and some remains unaccounted for. The Bremerton Sun newspaper in Washington State used FOIA to confirm the mishandling of a nuclear missile at a Navy submarine facility. These are examples of the day-to-day importance of FOIA in helping Americans safeguard our security infrastructure. There are countless other examples of FOIA enabling citizens to obtain information relating to health and safety concerns in their cities and neighborhoods.

In 2002, when I voted to support passage of the Homeland Security Act (HSA), I voiced concerns about several flaws in the legislation. I called for the Administration and my colleagues on both sides of the aisle to monitor implementation of the new law and to craft corrective legislation. One of my chief concerns with the HSA was a subtitle of the act that granted an extraordinarily broad exemption to FOIA in exchange for the cooperation of private companies in sharing information with the government regarding vulnerabilities in the nation's critical infrastructure.

Unfortunately, the law that was enacted undermines Federal and State sunshine laws permitting the American people to know what their government is doing. Rather than increasing security by encouraging private sector disclosure to the government, it guts FOIA at the expense of our national security and the safety and health of the American people.

Today, with my distinguished colleagues Senators Levin, Feingold, and Lieberman I reintroduce legislation to restore the integrity of FOIA. I thank my colleagues for working with me on this important issue of public oversight. We first offered this bill, which we call the Restoration of Freedom of Information Act, or ``Restore FOIA,'' in the 108th Congress.

``Restore FOIA'' protects Americans' right to know while simultaneously providing security to those in the private sector who voluntarily submit critical infrastructure records to the Department of Homeland Security (DHS).

Encouraging cooperation between the private sector and the government to keep our critical infrastructure systems safe from terrorist attacks is a goal we all support. But the appropriate way to meet this goal is a source of great debate a debate that has been all but ignored since the enactment of the HSA.

The HSA created a new FOIA exemption for ``critical infrastructure information.'' That broadly defined term applies to information covering a wide variety of facilities such as privately operated power plants, bridges, dams, ports, or chemical plants that might be targeted for a terrorist attack. In HSA negotiations in 2002, House Republicans and the Administration promoted language that they described as necessary to encourage owners of such facilities to identify vulnerabilities in their operations and share that information with DHS. The stated goal was to ensure that steps could be taken to ensure the facilities' protection and proper functioning.

In fact, such descriptions of the legislation were disingenuous. These provisions, which were eventually enacted in the HSA, shield from FOIA almost any voluntarily submitted document stamped by the facility owner as ``critical infrastructure.'' This is true no matter how tangential the content of that document may be to the actual security of a facility. The law effectively allows companies to hide information about public health and safety from the American people even from neighbors of such a facility in its local community--simply by submitting it to DHS. The enacted provisions were called ``deeply flawed'' by Mark Tapscott of the Heritage Foundation in a November 20, 2002, Washington Post op-ed. He argued that the ``loophole'' created by the law ``could be manipulated by clever corporate and government operators to hide endless varieties of potentially embarrassing and/or criminal information from public view.''

In addition, under the HSA, disclosure by private facilities to DHS neither obligates the private company to address the vulnerability, nor requires DHS to fix the problem. For example, in the case of a chemical spill, the law bars the government from disclosing information without the written consent of the company that caused the pollution. As the Washington Post pointed out in an editorial on February 10, 2003, ``A company might preempt environmental regulators by 'voluntarily' divulging incriminating material, thereby making it unavailable to anyone else.''

The law also 1. shields the companies from lawsuits to compel disclosure, 2. criminalizes otherwise legitimate whistleblower activity by DHS employees, and 3. preempts any state or local disclosure laws.

Finally, the HSA requires no reporting whatsoever to the Congress or the public on critical infrastructure submissions to DHS. As a result, it is nearly impossible for the public to learn whether this law is being followed in good faith, whether it is being manipulated by submitters, and whether DHS is conducting due diligence on submissions. It also places hurdles before those of us in Congress who believe in effective oversight.

In an effort to obtain some basic data on the treatment of ``critical infrastructure information'' at DHS, two organizations filed a FOIA request in 2004. OMB Watch and the Electronic Privacy Information Center sought public release of the number of submissions and rejections under the law, and of any communications between DHS and submitters. They also requested the Department's program procedures for handling information. DHS did not provide answers. The groups filed a complaint, and the D.C. District Court ordered DHS to respond. We learned that as of February 2005, the critical infrastructure program received 29 submissions and rejected seven of those. We know nothing of the substance of the accepted submissions, what vulnerabilities they may describe, or what is being done to address them.

Most businesses are good citizens and take seriously their obligations to the government and the public, but this ``disclose-and- immunize'' provision is subject to abuse by those businesses that want to exploit legal technicalities to avoid regulatory guidelines that are designed to protect the public's health and safety. The HSA lays out the perfect blueprint to avoid legal liability: funnel damaging information into this voluntary disclosure system and preempt the government or others harmed by the company's actions from being able to use it against the company. This is not the kind of two-way public- private cooperation that serves the public interest.

The HSA FOIA exemption goes so far in exempting such a large amount of material from FOIA's disclosure requirements that it undermines government openness without making any real gains in safety for families in Vermont and across America. We do not keep America safer by chilling federal officials from warning the public about threats to their health and safety. We do not ensure our nation's security by refusing to tell the American people whether or not their federal agencies are doing their jobs, or whether their government is spending their hard-earned tax dollars wisely. We do not encourage real cooperation by giving companies protection from civil liability when they break the law. We do not respect the spirit of our democracy when we cloak in secrecy the workings of our government from the public we are elected to serve.

The Restore FOIA bill I introduce today with Senators Levin, Feingold and Lieberman is identical to language I negotiated with Senators Levin and Bennett in the summer of 2002 when the HSA charter was debated by the Governmental Affairs Committee. Senator Bennett stated in the Committee's July 25, 2002, markup that the Administration had endorsed the compromise. He also said that industry groups had reported to him that the compromise language would make it possible for them to share information with the government without fear of the information being released to competitors or to other agencies that might accidentally reveal it. The Governmental Affairs Committee reported out the compromise language that day. Unfortunately, much more restrictive House language was eventually signed into law.

The Restore FOIA bill would correct the problems in the HSA in several ways. First, it limits the FOIA exemption to relevant ``records'' submitted by the private sector, such that only those that actually pertain to critical infrastructure safety are protected. ``Records'' is the standard category referred to in FOIA. This corrects the effective free pass given to regulated industries by the HSA for any information it labels ``critical infrastructure.''

Second, unlike the HSA, the Restore FOIA bill allows for government oversight, including the ability to use and share the records within and between agencies. It does not limit the use of such information by the government, except to prohibit public disclosure where such information is appropriately exempted under FOIA.

Third, it protects the actions of legitimate whistleblowers rather than criminalizing their acts.

Fourth, it does not provide civil immunity to companies that voluntarily submit information. This corrects a flaw in the current law, which would prohibit such information from being used directly in civil suits by government or private parties.

Fifth, unlike the HSA, the Restore FOIA bill allows local authorities to apply their own sunshine laws. The Restore FOIA bill does not preempt any state or local disclosure laws for information obtained outside the Department of Homeland Security. It also does not restrict the use of such information by state agencies.

Finally, the Restore FOIA bill does not restrict congressional use or disclosure of voluntarily submitted critical infrastructure information.

These changes to the HSA would accomplish the stated goals of the critical infrastructure provisions in the HSA--without tying the hands of the government in its efforts to protect Americans and without cutting the public out of the loop.

Restore FOIA is supported by the American Library Association, Common Cause, the Freedom of Information Center, OMB Watch, Association of Research Libraries, the Project on Government Oversight, and OpenTheGovernment.org, among other leading open government organizations.

The argument over the scope of the FOIA and unilateral Executive power to shield matters from public scrutiny goes to the heart of our fundamental right to be an educated electorate aware of what our government is doing. The Rutland Herald got it right in a November 26, 2002, editorial that explained: ``The battle was not over the right of the government to hold sensitive, classified information secret. The government has that right. Rather, the battle was over whether the government would be required to release anything it sought to withhold.''

We need to fix this troubling restriction on public accountability. James Madison's warning is a clear warning to us, and it is our generation's duty to heed it. I urge my colleagues to support the Restoration of Freedom of Information Act of 2005.

I ask unanimous consent that the text of the bill and a sectional analysis be printed in the Record.

Mr. President, I am pleased to again join with my friend, Senator Hatch, in introducing legislation to make a permanent commitment to research-intensive businesses in the United States. This legislation is bipartisan and bicameral. A companion bill will be introduced in the House of Representatives by Congresswoman Nancy Johnson and Congressman Ben Cardin.

Every morning we hear news of some new product or discovery that promises to make our jobs easier or our lives better. Many of these innovations started with a business decision to hire needed researchers and finance the expensive and long process of research and experimentation. Since 1981, when the R&D tax credit was first enacted, the Federal Government was a partner in that business endeavor because of the potential spillover benefits to society overall from additional research spending.

Research has shown that a tax credit is a cost-effective way to promote R&D. The Government Accountability Office, the Bureau of Labor Statistics, the National Bureau of Economic Research, and others have all found significant evidence that a tax credit stimulates additional domestic R&D spending by U.S. companies. A report by the Congressional Research Service, CRS, indicates that economists generally agree that, without government support, firm investment in R&D would fall short of the socially optimal amount and thus CRS advocates government policies to boost private sector R&D.

R&D is linked to broader economic and labor benefits. R&D lays the foundation for technological innovation, which, in turn, is an important driving force in long-term economic growth--mainly through its impact on the productivity of capital and labor. We have many times heard testimony from economists, including Federal Reserve Board Chairman Alan Greenspan, that the reason our economy grew at such breakneck speed during the 1990s stemmed from the productivity growth we realized thanks to technological innovations.

There has been a belief that companies would continue to increase their research spending and that the benefits of these investments on the economy and labor markets would continue without end. Unfortunately, that is not the case. According to Battelle's 2005 funding forecast, industrial R&D spending will increase only 1.9 percent above last year, to an estimated $191 billion, which is less than the expected rate of inflation of 2.5 percent. For the fifth year in a row, industrial R&D spending growth has been essentially flat.

Over recent years, industry-financed R&D declined from 1.88 percent to 1.65 percent of GDP in the United States between 2000 and 2003, while R&D performed by the business sector declined from 2.04 percent to 1.81 percent of GDP. Japan, in contrast, saw a steep increase in business-performed R&D--from 2.12 percent to 2.32 percent of GDP between 2000 and 2002--and modest gains were posted in the EU.

Moreover, just last week, the World Economic Forum released its annual Global Information Technology Report. The rankings, which measure the propensity for countries to exploit the opportunities offered by information and communications technology, ICT, revealed that Singapore has displaced the United States as the top economy in information technology competitiveness. As a matter of fact, the United States has dropped from first to fifth place in this ranking. Iceland, Finland and Denmark are the countries ranked two, three and four out of the 104 countries surveyed. Iceland moved up from tenth last year.

These numbers should be a wake up call for all of us. As research spending falls, so too will the level of future economic growth.

It is also important to recognize that many of our foreign competitors are offering permanent and generous incentives to firms that attract research dollars to those countries. A 2001 study by the Organization of Economic Cooperation and Development, OECD, ranked the U.S. ninth behind other nations in terms of its incentives for business R&D spending. Countries that provide more generous R&D incentives include Spain, Canada, Portugal, Austria, Australia, Netherlands, France, and Korea. The United Kingdom was added to this list in 2002 when it further expanded its existing R&D incentives program. The continued absence of a long-term U.S. government R&D policy that encourages U.S.-based R&D will undermine the ability of American companies to remain competitive in U.S. and foreign markets. This disparity could limit U.S. competitiveness relative to its trading partners in the long-run.

Also, U.S. workers who are engaged in R&D activities currently benefit from some of the most intellectually stimulating, high-paying, high-skilled

jobs in the economy. My own State of Montana is an excellent example of this economic activity. During the 1990s, about 400 establishments provided high-technology services, at an average wage of about $35,000 per year. These jobs paid nearly 80 percent more than the average private sector wage of less than $20,000 per year during the same year. Many of these jobs would never have been created without the assistance of the R&D credit. While there may not be an immediate rush to move all projects and jobs offshore, there has been movement at the margins on those projects that are most cost-sensitive. Once those projects and jobs are gone, it will be many years before companies will have any incentive to bring them back to the United States.

We continue to grapple with the need to stimulate economic growth and advance policies that represent solid long-term investments that will reap benefits for many years to come. Senator Hatch and I repeatedly have pointed to the R&D tax credit as a measure that gives us a good ``bang for our buck.'' I hope this year we can enact a permanent tax credit that is effective and more widely available. I encourage my colleagues to join us in this effort.

As we have in years past, our proposal would make the current research and experimentation tax credit permanent and increase the Alternative Incremental Research Credit, AIRC, rates. And, in this legislation we take one additional but necessary step.

We propose a new alternative simplified credit that will allow taxpayers to elect to calculate the R&D credit under new computational rules that will eliminate the present-law distortions caused by gross receipts. This revised and improved R&D credit did pass the Senate last year on a 93-0 vote, but a straight short-term extension of current law was enacted instead.

There is no good policy reason to make research more expensive for some industries than for others. While the regular R&D tax credit works very well for many companies, as the credit's base period recedes and business cycles change, the current credit is out of reach for some other firms that still incur significant research expenditures. To help solve part of this problem Congress enacted the AIRC in 1996 and now we propose a way to address the rest of that problem.

Under current law, both the regular credit and the AIRC are calculated by reference to a taxpayer's gross receipts, a benchmark that can produce inequities and anomalous results. For example, many taxpayers are no longer able to qualify for the regular credit, despite substantial R&D investments, because their R&D spending relative to gross receipts has not kept pace with the ratio set in the 1984-88 base period, which governs calculation of the regular credit. This can happen, for example, simply where a company's sales increase significantly in the intervening years, where a company enters into an additional line of business that generates additional gross receipts but involves little R&D, or where a company becomes more efficient in its R&D processes.

Our proposal would correct this by allowing taxpayers a straightforward alternative research credit election. Taxpayers could elect, in lieu of the regular credit or the AIRC, a credit that would equal 12 percent of the excess of the taxpayer's current year qualified research expenditures, QREs, over 50 percent of the taxpayer's average QREs for the 3 preceding years. Unlike the regular credit and the AIRC, this credit calculation does not involve gross receipts.

The R&D tax credit has proven it can be an effective incentive. We need to act to make it a permanent part of the tax code that U.S. businesses can rely on. The best thing we can do for our long-term economic well-being is to stoke the engine of growth--technology, high- wage jobs and productivity. I look forward to working with Senator Hatch and all my colleagues on this important issue.

I urge my colleagues to support this important piece of legislation.

Mr. President, I am pleased to again join with my friend, Senator Hatch, in introducing legislation to make a permanent commitment to research-intensive businesses in the United States. This legislation is bipartisan and bicameral. A companion bill will be introduced in the House of Representatives by Congresswoman Nancy Johnson and Congressman Ben Cardin.

Every morning we hear news of some new product or discovery that promises to make our jobs easier or our lives better. Many of these innovations started with a business decision to hire needed researchers and finance the expensive and long process of research and experimentation. Since 1981, when the R&D tax credit was first enacted, the Federal Government was a partner in that business endeavor because of the potential spillover benefits to society overall from additional research spending.

Research has shown that a tax credit is a cost-effective way to promote R&D. The Government Accountability Office, the Bureau of Labor Statistics, the National Bureau of Economic Research, and others have all found significant evidence that a tax credit stimulates additional domestic R&D spending by U.S. companies. A report by the Congressional Research Service, CRS, indicates that economists generally agree that, without government support, firm investment in R&D would fall short of the socially optimal amount and thus CRS advocates government policies to boost private sector R&D.

R&D is linked to broader economic and labor benefits. R&D lays the foundation for technological innovation, which, in turn, is an important driving force in long-term economic growth--mainly through its impact on the productivity of capital and labor. We have many times heard testimony from economists, including Federal Reserve Board Chairman Alan Greenspan, that the reason our economy grew at such breakneck speed during the 1990s stemmed from the productivity growth we realized thanks to technological innovations.

There has been a belief that companies would continue to increase their research spending and that the benefits of these investments on the economy and labor markets would continue without end. Unfortunately, that is not the case. According to Battelle's 2005 funding forecast, industrial R&D spending will increase only 1.9 percent above last year, to an estimated $191 billion, which is less than the expected rate of inflation of 2.5 percent. For the fifth year in a row, industrial R&D spending growth has been essentially flat.

Over recent years, industry-financed R&D declined from 1.88 percent to 1.65 percent of GDP in the United States between 2000 and 2003, while R&D performed by the business sector declined from 2.04 percent to 1.81 percent of GDP. Japan, in contrast, saw a steep increase in business-performed R&D--from 2.12 percent to 2.32 percent of GDP between 2000 and 2002--and modest gains were posted in the EU.

Moreover, just last week, the World Economic Forum released its annual Global Information Technology Report. The rankings, which measure the propensity for countries to exploit the opportunities offered by information and communications technology, ICT, revealed that Singapore has displaced the United States as the top economy in information technology competitiveness. As a matter of fact, the United States has dropped from first to fifth place in this ranking. Iceland, Finland and Denmark are the countries ranked two, three and four out of the 104 countries surveyed. Iceland moved up from tenth last year.

These numbers should be a wake up call for all of us. As research spending falls, so too will the level of future economic growth.

It is also important to recognize that many of our foreign competitors are offering permanent and generous incentives to firms that attract research dollars to those countries. A 2001 study by the Organization of Economic Cooperation and Development, OECD, ranked the U.S. ninth behind other nations in terms of its incentives for business R&D spending. Countries that provide more generous R&D incentives include Spain, Canada, Portugal, Austria, Australia, Netherlands, France, and Korea. The United Kingdom was added to this list in 2002 when it further expanded its existing R&D incentives program. The continued absence of a long-term U.S. government R&D policy that encourages U.S.-based R&D will undermine the ability of American companies to remain competitive in U.S. and foreign markets. This disparity could limit U.S. competitiveness relative to its trading partners in the long-run.

Also, U.S. workers who are engaged in R&D activities currently benefit from some of the most intellectually stimulating, high-paying, high-skilled

jobs in the economy. My own State of Montana is an excellent example of this economic activity. During the 1990s, about 400 establishments provided high-technology services, at an average wage of about $35,000 per year. These jobs paid nearly 80 percent more than the average private sector wage of less than $20,000 per year during the same year. Many of these jobs would never have been created without the assistance of the R&D credit. While there may not be an immediate rush to move all projects and jobs offshore, there has been movement at the margins on those projects that are most cost-sensitive. Once those projects and jobs are gone, it will be many years before companies will have any incentive to bring them back to the United States.

We continue to grapple with the need to stimulate economic growth and advance policies that represent solid long-term investments that will reap benefits for many years to come. Senator Hatch and I repeatedly have pointed to the R&D tax credit as a measure that gives us a good ``bang for our buck.'' I hope this year we can enact a permanent tax credit that is effective and more widely available. I encourage my colleagues to join us in this effort.

As we have in years past, our proposal would make the current research and experimentation tax credit permanent and increase the Alternative Incremental Research Credit, AIRC, rates. And, in this legislation we take one additional but necessary step.

We propose a new alternative simplified credit that will allow taxpayers to elect to calculate the R&D credit under new computational rules that will eliminate the present-law distortions caused by gross receipts. This revised and improved R&D credit did pass the Senate last year on a 93-0 vote, but a straight short-term extension of current law was enacted instead.

There is no good policy reason to make research more expensive for some industries than for others. While the regular R&D tax credit works very well for many companies, as the credit's base period recedes and business cycles change, the current credit is out of reach for some other firms that still incur significant research expenditures. To help solve part of this problem Congress enacted the AIRC in 1996 and now we propose a way to address the rest of that problem.

Under current law, both the regular credit and the AIRC are calculated by reference to a taxpayer's gross receipts, a benchmark that can produce inequities and anomalous results. For example, many taxpayers are no longer able to qualify for the regular credit, despite substantial R&D investments, because their R&D spending relative to gross receipts has not kept pace with the ratio set in the 1984-88 base period, which governs calculation of the regular credit. This can happen, for example, simply where a company's sales increase significantly in the intervening years, where a company enters into an additional line of business that generates additional gross receipts but involves little R&D, or where a company becomes more efficient in its R&D processes.

Our proposal would correct this by allowing taxpayers a straightforward alternative research credit election. Taxpayers could elect, in lieu of the regular credit or the AIRC, a credit that would equal 12 percent of the excess of the taxpayer's current year qualified research expenditures, QREs, over 50 percent of the taxpayer's average QREs for the 3 preceding years. Unlike the regular credit and the AIRC, this credit calculation does not involve gross receipts.

The R&D tax credit has proven it can be an effective incentive. We need to act to make it a permanent part of the tax code that U.S. businesses can rely on. The best thing we can do for our long-term economic well-being is to stoke the engine of growth--technology, high- wage jobs and productivity. I look forward to working with Senator Hatch and all my colleagues on this important issue.

I urge my colleagues to support this important piece of legislation.