On Feb. 6, a star panel testified before the House Committee on Science and Technology, chaired by Rep. Lamar Smith, R-Texas, on the role of research and development (R&D) in maintaining American competitiveness in the global market. The hearing related to the discussions at Securities and Exchange Commission forums about the plight of small public companies as they struggle to establish themselves and pursue innovation.

In his opening statement, Smith observed that U.S. companies have moved many activities offshore; therefore, Smith proclaimed, the United States must institute policy changes in order to avoid losing its lead in innovation.

In her remarks as ranking Democrat, Rep. Eddie Bernice Johnson, D-Texas, defended the role of government as financier of basic research by universities that is later applied by private companies, and she criticized opponents of R&D funding who treat the research community as “just another special interest group to share the pie.”

The panel consisted of the following noted experts:

• Richard Templeton, CEO of Texas Instruments.

• Shirley Ann Johnson, president of the Rensselaer Polytechnic Institute.

• Charles Vest, president of the National Academy of Engineering

Unlike some panels, where witnesses express contradictory views, these witnesses have worked together and conveyed essentially the same message, which is that the United States’ lead in innovation is in jeopardy, and it is going to have to reform various aspects of its governance and culture in order to maintain a leading position, because other countries have entered the game and made major commitments.

Templeton put this message in terms of the United States leading round one of the game but seeing its advantage diminish in round two. Meanwhile, U.S. investment has fallen by half since 1970, whereas Korea and China have increased their level of investment. In addition, U.S. “stem” education, K-12, has been faltering, and foreign students who study in the United States are no longer allowed to stay here.

Whereas micro-electronics dominated the period of U.S. leadership, nano-electronics will dominate the future. Templeton called for investment in basic research, improvement in education, immigration reform and comprehensive tax reform.

Jackson told of a Marine corporal who had lost 70 percent of his thigh muscle for whom no treatment was working until the University of Pittsburgh Hospital implanted an “extra-cellular matrix” that allowed his muscle to regenerate. She also cited the development of enzymes that have the ability to fight bacterial infections that are resistant to antibiotics.

She sounded a similar warning to that of the other witnesses, but specifically stressed the need for “a new financial model for technology-based startups that overcomes the so-called ‘valley of death.’”

Vest based his testimony on recommendations from reports by commissions that studied the questions surrounding the state of U.S. investment in innovation. In addition to reforms discussed above, the recommendations were for the United States to achieve global leadership in K-12 education, double basic research over seven years, get more students to undertake careers in science and engineering and rebuild the competitive ecosystem through reform of tax, patent, immigration and litigation policies.

He referred to a Government Accountability Office study commissioned to identify costs and regulations that impede innovation. He quoted a past Chinese premier as saying, ”Science is the ultimate revolution.” Also, he noted that the European Union has funded two large science projects, including one that is modeling the human brain and will produce results that will inform its computer enterprise.

There is a sea change in the location of R&D formerly dominated by the United States, as it is now relatively evenly divided among the United States, Europe and Asia. Vest explained that R&D is no longer a linear process, because companies need to move more directly from basic research to product development. He used the term “use-inspired basic research” to denote research that is basic in seeking the understanding of a problem, but at the same time seeks to be beneficial to society.

I believe the message of the panel poses a challenge to conservatives, because it envisions a more formalized government policy of planning and funding investment policies in close cooperation with universities and corporations than people who adhere to the constitutional concept of limited government would favor, at least before the extraordinary interventions that bankers were able to induce government to provide in conjunction with the financial crisis.