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resources to ventures with uncertain futures. The R&D tax credit is due to expire in less than three years, which makes long term

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positive influence that has developed will evaporate and we are

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conscious decision to take away a useful incentive in spite of

its demonstrated value.

The result could be a decreasing rate of

R&D expenditures that would be contrary to the best interests of

0.8. industrial policy and national security.

It is far too soon to quantify the full effect of the


The incentive was enacted in 1981 but the implementing

regulations were not issued for 17 months after enactment. It is not possible to quantify the cost/benefit relationship at this point in time, and it may never be

never be possible to do so. It is surely not possible to use the data from 1982 tax returns to argue that

the cost (in lost revenue) outweighs the public benefits. To the contrary, we believe that the public policy benefits of the tax credit outweigh the revenue costs.

In sum, Mr. Chairman, we believe that the R&D tax credit is an invitation from the Federal government to companies like ours to reinvest our revenues in America's industrial future through research and development. We have accepted that

invitation, and ask only that you continue it by enacting s.738.


OF CALIFORNIA Congressman ZSCHAU. Good morning, Mr. Chairman, Senator Heinz. I appreciate the opportunity to appear before this distinguished subcommittee to talk about my views on the proper role for the Federal Government in promoting high technology and to comment specifically, on Senate bills S. 738, S. 1194, and S. 1195.

I have prepared a statement that I would like to submit for the record. Also, I brought with me a statement from my colleague from Pennsylvania, Congressman Don Ritter, who serves as vice chairman of the Republican Task Force on High Technology Initiatives, which I have the privilege of chairing. I would like permission to submit both statements for the record.

Senator DANFORTH. They will be made a part of the record. Thank you.

[The prepared statements of Congressmen Zschau and Ritter follow:]




s. 738, s.1194, s.1195, ana

"Proper Government Policy to Promote High Technology"

Mr. Chairman, I appreciate the opportunity to appear

before this distinguished subcommittee to present my views

about proper government policy to promote high technology.

This issue is particularly important to me since I represent

the part of Northern California that has become known

worldwide as Silicon Valley.

There are more than 700 high

technology companies, many of them small, start-up firms, in

and around my congressional district.

On January 25, 1983 President Ronald Reagan in his

State of the Union message announced that "This

Administration is committed to keeping America the
technological leader of the world now and into the 21st

century." These were welcome words indeed to those of us

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Over that past several years, a variety of studies have documented the importance of technological innovation on our economic growth, productivity, job opportunities, and trade

competitiveness. A study by the Massachusetts Institute of

Technology estimated that 80 percent of the growth in GNP of the United States between 1909 and 1949 was due to technical change.

Further, a recent Brookings Institution study

determined that more than one-half of the productivity

increases in the Uniteå States between 1948 and 1969 were

the direct result of technological innovation.

In recent

years, while the overall export performance of the United

States has been mediocre, exports of research and

development-intensive products have shown excellent growth.

From 1960 to 1979, these industries increased their export surplus from $5.9 billion to $29.3 billion. During the same period, the trade balance of industries without

technological bases declined from near zero to a negative

$16.5 billion.

It is clear that our technological

leadership in the past has enabled the United States to

create many new jobs to employ our growing work force.

The President's commitment to spur technology may have come just in the nick of time. Despite its importance to

our economy, U.S. technological leadership has eroạea in

recent years. It hasn't been squandereá like some other resources through overuse and waste. It's been fritterea

away through neglect.

Over the past 20 years, research-and-development

expenditures as percent of GNP have declineà in the United States. During the same period, our two most aggressive

trading partners -- Japan and West Germany

were incresing

these expenditures.

With the decreasing intensity of our research efforts,

it is not surprising that our leadership in technical

contributions has fallen as well. In the 1950's, the United States was credited with 80 percent of the major inventions

made during that period.

During the 1970's, our share of

major inventions dropped to 60 percent.

In addition, from

1974 to 1979, the U.S. patents granted to u.s. citizens

rather than to foreign inventors dropped from 88 percent to

62 percent.

Government's Alternative Approaches to High Technology

Due to the outstanding performance of America's high technology industries in job creation, productivity

improvements, and exports, plus the recognition that our

leadership in technology is being challenged by foreign

competitors, high technology has recently begun to receive

considerable attention in the United States Congress.


the first months of 1983, more than one hundred bills have

been introduced to promote high technology.

It is reassuring that a resource so valuable is finally getting proper attention, but all this attention may be a mixed blessing. Some of those who have jumped on the high

technology bandwagon appear to be exaggerating its

capabilities for restoring our economic growth.


suggest that high technology can create enough jobs to

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