Transcripts For CSPAN3 Key Capitol Hill Hearings 20240622

Looking at how do i put encryption and make it so no one can mess with the device other things that might have impact on People Living there. First off we noticed to make sure the government doesnt weaken encryption. Second of all we need to continue to see the growth in the kinds of research around encryption that is in some cases supported by the government. Anyone else . I share his comments. Also going back to the garage door opener. When that was introduced it was primitive, it was a fun thing to do to drive around the neighborhood and open up other peoples garage doors or similarly other peoples telephones. By todays standards it was relatively primitive even though novel then. As weve gotten more sophisticated, memory chips have grown, theres solutions and we dont hear about those problems anymore. It hasnt been an issue. Thank you. The reality is significant investment is made in innovating around privacy and security because its the right thing to do and consumers are demanding it. There shapiro and reed have articulated it. Let me know when you have a device to block my son from changing music. I can help you with that. Did you get to the question of the launching of trade secrets bill today . You didnt. Okay. Mr. Collins will be announcing so hopefully youll get to talk on that next. Im sorry, did i mention that there will be an announcement on the bill today . Did anyone not hear that. Thank you. We go to the gentlelady from california. I recently read about two researchers able to wirelessly hack into a jeep cherokee, first the control system windshield wipers and then the accelerator. They were able to slow down the car to stop on a busy highway. This experience reminds us that connectedness flows in both directions and that hackers could actually manipulate these devices tore evil if they show chose. What specific best practices did the industry have to ensure Something Like this does not come about and how are automobiles being designed to prevent exactly this from happening and what role do you see the federal government playing in this scenario . Can i have five minutes . Great question. The jeep hack of a week or two ago received enormous national attention. Im struck with the need to take the threat seriously, and obviously we do but not to get caught up in sensationalism that sometimes accompanies a story like this. So both stories are true. Our companies are designed in a building to meet security risks from the start. Thats point one. Working with government, academia Third Party Security technologists to address the hack risk. We need to address seriously. Weve performed and isack a year ago. This is a mechanism for the industry to voluntarily share risks and how to address those risks so theres a mechanism in formation specifically for this challenge. The risk here from a governmental side is one we touched on before. Thats whats the touch how heavy a touch. The world in this innovations happen so rapidly, how do you make it work so its not rigid. Thats the challenge. What youve done this far is to facilitate sharing of risk threat. Thats great. We hope that moves forward. Okay. Mr. Garfield. You stated connectivity between vehicles should be reliable especially for safety applications. Thats Something Congress federal trade commission and other government stakeholders should oversee to protect consumers. Youre referring there to the consumers physical safety. When it comes to another kind of safety privacy and Data Security you urge the federal government to take a wait and see approach and asking we should only step in if industry fails at selfgovernance. So what in your mind is the difference between these two kinds of safety that would warrant such a divergent approach . I guess two points. Our suggestion is not that the government do nothing. Our suggestion is that the government exercise restraint. The approach today sectorial driven, includes monitoring and enforcement by the ftc is working. In the first instance a significant market failure that may not be being met. So immediate action is clear. In the second instance less clear. The third and final point weve all made about the innovation taking place not only around iot but around ensure were driving security and design at the beginning of these processes is making significant headway and we worry about the unintended consequences of legislation at this stage. Mr. Shap ir okay you acknowledge several concerns about privacy and collection of data and go on to state Industry Solutions are the best way to promote innovation. How do we rely on the industry to selfgovern and avoid the problems implicit in the fox in the henhouse. I ask the question particularly in the context to one concern you raise who owns the data electric these devices . Isnt the industry incented to claim ownership over the data . Thank you for that question. It is true a lot is going on vertically. We have our own wireless head Company Group that is focusing on creating rules that everyone can live by. In part because its the right thing to do. In part because theres Congress Governance will do if they dont. There are already Free Market Solutions happening in different other verticals. For example, in the automobile, hundreds of thousands if not millions of consumers are already choosing to give up their data to Insurance Companies in turn for lower insurance rate. So Insurance Companies are monitoring how fast they drive, what kind of driving they do because consumers feel it valuable to give up that information, informed consent free market decision, et cetera. Also Solutions Coming up for parents. If they want to give the kid the keys to the car, they have the ability to monitor their children now with plane different Solutions Coming out quickly. My point, it is not a legitimate area for government conversation. Theres so much happening from Innovation Point of view that theres Different Directions we can go. If try goes in the wrong direction were fully confident government will be, this is wrong, consumers will be there trial lawyers will be there even distracted driving area where federal government stepped in vociferously and said you should do everything you can to ban a driving from using any product while in the drivers seat. Theres at least 80 Different Solutions and more developing every day which basically cut down on distracted driving monitoring lanes, head falling asleep, watching your eyes or Even Technology produced locally which monitors your cell phone as a driver and figures out if you are not paying attention to the road. Would the gentlelady yield for a followup question. Certainly. The question, though who owns the data. Wouldnt you agree that, in fact data which comes from an individual inherently government does have a roll in defining what rights they have to retrain, protect, retreat their own identifiable data i think was your question, wasnt it . Thats true. Then i blew the answer. It was a good answer just wasnt quite the question. I would say in terms of obviously a consumer that cease creates data should have some rights. Service provider. This goes into a lot of areas of the internet, not just internet of things. If theres apps et cetera, what is the tradeoff involved. I think its fair to say there should be transparency as to who is using the data, as to who actually owns it and retains it, i would say that depends on the level of personal information and data. Whether or not youre using windshield wipers for example is an example to provide the windshield whether its raining. Thats fine. Something more personal with the Health Sphere where you should own and determine what happens with your data. Thank you. I think that will at least start a dialogue that will continue. The gentleman from texas. Thank you, mr. Chairman. Gentlemen, thank you for being here. Im going to try to break this down and keep whats complex very simple. The issue is privacy. The time of the dick tracy watch is here. In fact, the gentlemen has two dick tracy watches. I dont wear a watch. That will help you in the answer. What time is it . Its up there and i cant see the clock. So anyway, the data that is stored is stored by a provider and its information about an individual. The privacy of that individual is paramount to me. I think the law, constitution right of privacy. It has to be protect bid congress because its a constitutional right, privacy. Congress needs to set the expectation of privacy for individuals who have shared their information with different entities. Im concerned about the privacy of the individual in two ways. One, the Provider Service provider sharing it with other nongovernment agencies. And the Service Provider providing that information to the government. Especially the government. I think there should be we should update the law which right now information stored on the cloud for six months is private. But six months and government can have it of theres no expectation of privacy. Absurd protection of the constitutional right of privacy for 180 days only. Yompk h i dont think we should leave it to the ftc to set guidelines or fcc or fec or any other Government Agency to determine what the right of privacy should be. Im not through asking the question yet. So how do you know the answer already already. Anyway, should not we in Congress Update the epga law to provide whatever rules we think should be provided so that citizens know that the government to get this information, use geo information and all other information what got to have a certainly warrant paved on the 4th amendment of the constitution before they can order to you give the government that information about the citizen out there in the fruited plane plane. Shouldnt we be proactive to do that or are you waiting for Different Things to happen out there, solve them get the lawyers to sue all these things, before we get right of privacy or should congress be proactive . Ive been working on this for years. We havent been able to get anywhere updating the law so people know the expectation of privacy that the government knows you can not get that information without a search warrant, should not we do that, congress do that . Its kind of like a yes or no answer on that. The reason i was coming in there, i wanted to say amen. Yes, the reality is reform is critical, 280 cosponsors this is something the committee has to do. Congressman mareno is here with the leads act you cosponsor. We absolutely need these kinds of legislation to move forward so we know what we can tell our cusses what i will protected how i will protect it and when i will be forced to share it. A person may not be a customer for this very reason. Well, i like all this stuff out there, this is wonderful, but i dont want the government getting. How about the rest of you. Amen on the right. We strongly support i think youre totally right to distinguish what government is a private party to. Weve been burned as an industry seriously to the tune of billions of dollars in sales europe and other countries are using the the fact the government took information as total competitive does advantage to say Cloud Service should not be based in the United States. They are not secure. It can be harmful with Technology Industry and used against us. Under the 4th amendment yes, about as clear as you can get the government must have not unreasonable searches and seizures. I agree with that. The reasonable expectation of privacy as set by the Supreme Court is almost like the definition of obscenity, changes with time, changes with community and changes with technology will i think your reasonable expectation of privacy in some data out in public, use a windshield wiper again is not as much as other data. In the privacy era goes with whether its voluntary you volunteer to give that to another person. Im interested about the government, federal government, local government which all now can seize that information in the cloud without a warrant and the person involved doesnt have notice about it. One more comment. On the government side, as gary indicated on the nongovernmental side that data is necessary to provide Services Consumers want. So whether its the insurance example we plug in, im one of those consumers. I know exactly how my kids drive because i get a report from the Insurance Company that tells me how fast they are driving how much they are breaking, as a parent thats a good thing, a disincentive for them to drive poorly. I wouldnt want to get in the way pro consumer. I yield back. I thank the gentleman. I go to the gentlelady from the first district. Thanks all of you for being here. I want to follow up a little on the Electronic Privacy Communications here. Myself and congressman poe have sponsored legislation that would create a warrant standard for geo Location Information as well as Electronic Communications and when we talk about issues making sure theres a Legal Framework to protect information so consumers understand whats happening with information and Law Enforcement is cloer on how they would access information, what do you think about expanding that to include geo location and International Issues we face in terms of access to information. Anyone. I guess ill start with mr. Reed. First of all, thank you for your support. Thank you for your introduction. Its a very valuable thing to figure out how to move forward. I know were all americans here. One of the things for my members developing applications just how much our opportunities overseas. The issues you raise about u. S. Government access to that data start harping our sales it hurts jobs in the United States. I think youre precisely right. Its an Issue Congress has to step in. Cant be done on industry best practices or standards. The question of geo location is something well have to work both with you and Law Enforcement because Law Enforcement does have a duty to work and protect the citizenry. The problem comes when i have to tell a customer i dont know about the answer to the question of when i have to hand over the information. The difference between the 6th circuit and 9th circuit and this idea i have to tell my customer i dont know is enormous. The other element that should be raised, how countries are looking at bhaes happening. If United States government says we have access any time any person, please, regardless of where the data is store or where its on, we have to expect russia will want the same privileges from our companies. That china will want the same privileges from our companies. So legislation like what youre proposing is what we need because we need to have a strong stance that we can look at that company and say, no i wont hand over that information without some better legal authority. Thank you very much. Mr. Garfield. Your question gives an opportunity to raise something in the air legal redress. Lack of legal redress rights in the United States is something that creates great challenges internationally and this committee has opportunity to do something. These another step to be taken that would help internationally. Folks earlier talking about encryption and weve been having a conversation recently whether or not there should be back door for Law Enforcement to encrypt data and whether that should be mandated. If such a policy were mandated, what would the impact be on consumer data and what would the impact be for your customers . I think the impact would be quite negative both here and internationally for a host of reasons. Its important to keep in mind security is a part of advancing privacy. If you create any kind of door it wont only be used by those you intend it to be used by. So i think in many respects you create a pandoras box of changes that would be highly problematic for privacy and security interest and something that should absolutely not be done. We both worked in the Recording Industry years ago and one of the things we realized rather than fighting technology the best solution is to coin the use of technology. I would suggest for federal agencies in this context those answers may hold some merit in this context as well. We learned hard lessons. I feel like were a little bit of deja vu with clipper chip redux here were facing. The reality is over 40 of the leading Security Experts have come out and said the idea of the government mandating or creating a front door into devices an systems is anathema to the idea we want to create telling our customers and users we have secure systems. So weve done this dance before. It was already figured out to be a mistake. Im disappointed we have to revisit again when we know the answer. That is encryption with as few openings as possible is the best solution we can provide to all citizens in every country. As you may know we have a piece of legislation to prevent there from being a back door. Mr. Shapiro, did you want to add something . I think were all americans. We sympathize with Law Enforcement and what they are trying to do. Its a difficult question, not that black and white. History has shown having given government a back door is not the best approach as technologies evolve quickly. On the other hand as americans when a super crisis evolves, i think youll see Companies Step up and try to help government. Ening we saw it in boston in the bombing where Technology Companies work closely to try to find out who it was that did this dastardly act. I think we have to recognize there are some that dont require of congress onhave a back door. If there is a back door, everyone has to have it. It makes not only technology uncomfortable but consumers uncomfortable. Thank you. Time expired. I yield back to chair. I thank the gentlelady forrer questions. With that we go to the gentleman from georgia. Thank you mr. Chairman. Thank you for hosting this very important hearing. Mr. Garfield, your testimony mentioned the desire of the industry to be free from new Regulation Without becoming a wild west of privacy. Earlier this year federal trade commission reinforced the message staff internet on things where it recommended among other things that companies build privacy and security into the designs of their connected devices. Last congress i introduced the apps act a common sense approach to an urge enproblem that would protect consumers without disrupting functionality or innovation through a safe harbor and other mechanism for trust in regulation. I view these as reinforcing of ftc staff recommendations on privacy and security for connected devices and i plan to reintroduce the apps at this current session of congress. Privacy is an issue that should unite us not drive us apart. In annals on echo system where over 25 billion connected devices store and transmit information about consumers its time we have rules of the road. What steps will private industry take to Keep Congress informed and address legislative concerns regarding security and privacy of these emerging temperatures. Thank you for your question, congressman johnson. The point you made at the beginning about the ftcs recommendations particularly around privacy and security by design i think are, in fact is occurring. The industry is spending billions to invest around privacy and security. It the right thing to do but will because consumers are demanding it. As well, we are advancing as pointed out sector specific principals around privacy and security as well. So there is much action happening right now in this space. Were committed to make sure congress is fully aware of the steps the private sector is taking to advance those issues. The in our best interest to be aligned with both you and consumer interests around these issues issues. Thank you. Mr. Bainwohl, i understand the benefits youre explaining about the systems systems that provide breaking assist and Adaptive Cruise control. I understand newer software will go far beyond just those actions. My concern resolves around the encryption of this technology. If these systems are operated on a broad range of wireless Communication Technologies between vehicles how are these frequencies being protected . I will give you an answer and then come back to you with a vetted engineers answer. B 2 b on src, technology built for the purposes of communications between vehicles. I will come back to you again with the specifics of the security thats embedded in that. Were obviously not at a point of full deployment. This is being tested. Theres been an expansive test in ann arbor tested abroad. And the fundamental point i would make if you do a cost benefit analysis here, the benefit stream is absolutely enormous. Yes, weve got to address cyber risks and security ricks and they are being dealt with from the design phase on up. But in term of the security src. Okay. If end to end encryption is utilized how will Law Enforcement access information stored within a vehicle . Do you have an answer to that question . So we would require a warrant of some sort. This is again this is the point mr. Poe was making. Okay. Im sorry. Go ahead. And so were very careful and principles are specifically that the information will not be shared with any of these unless theres a compelling and specific reason. But there will be an ability to counter the encryption or to kind of a back door, if you will for im not an engineer. This is a zone that im not going to give you a great specific answer on so ill come back and write it in shortly. Thank you. I thank the gentleman. Ive had two of you gentlemen tell me about how youre not engineers. I want to talk about something for a moment thats a little complex and then make it simple. In the aviation space Collision Avoidance of all sorts has been around for a long time. It started with the large commercial scheduled aircraft and then little by little has come down. One of those technologies adsd is, in fact, mandated now in just a few years for all aircraft. And its a cute name. Ive said it forever. Now i have to say its Automatic Dependent Surveillance broadcast, adsb or adsb out. That delegate in support says here is where i am and sends it out to everybody. The faa regulates it. Other aircraft where they are sending out where they are makes for a very exact gpsbased, within a few feet of knowing exactly where you are and, of course, which way youre going, how fast. Making a collision almost an impossible thing to do if youre simply monitoring the product which has alerts. The question, and i want to make sure i asked mr. Bainwol and others. The faa having jurisdiction over this, they made a decision only those who send out a signal can, in fact, receive a signal. So today systems that cost anywhere from 6 at the low end plus installation to hundreds of thousands of dollars equipped in aircraft, they communicate by sending out and receiving information where others are. Mobile devices devices that can be bought for a matter of a few hundred dollars that only receive are blocked from receiving that information meaning that as you roll out a new technology mr. Bainwol, clearly these kinds of technologies is what big auto is looking at rolling out, countly millions of automobiles will not be equipped with those systems for decades to come. The 65 mustang or any classic cars congressman vargas has will not ever be equipped with them. Can you comment on the need to make sure any standard allows for after market retrofitting of products that to the greatest extent possible enjoy the benefits of Newer Technology brought to market in new automobiles purchase i have to comment. There is a challenge in the auto space with penetration average age of a car is 11 years old. When you introduce a new technology it takes an average way to wind its way through a fleet. Not with mr. Shapiros after market products. Analog breaking. It took 30 years to go from introduction to 95 penetration. Your point about fleet penetration, i think, is a valid one. The case of technologies that offer such value to society, i think you raise a legitimate point to fill the gap now. Truth of the matter is in part that gap is filled with this phone phone. Just to give an example. Im not sure gary wants to be called a peddler but appreciates calling many of his members. So waves is a wonderful app, crowd sourcebased and provides many of the benefits it provides but not with the same absolute standard of certainty. So weve got to find a way to fulfill the marketplace. I think the app world does a good job of bridge thanksgiving and ultimately fill the fleet. I think your point is a valid one and weve got to find a way to make it work. Thank you. Gary, mr. Shapiro, the question more was as new innovative items come out of the oem market and new fleet, theres an ability to get perhaps some but not all of those benefits government at least in the age of aviation has blocked the ability of thousands of small pilots pilots with a piper cub made before you and eye were born in which a mobile device can be put on board today are blocked from knowing theres a fast mover heading for them because the faa has seen fit to block it, unless youre sending a signal. Thats really the question of enabling as much benefit from potentially low cost handheld devices. Mr. Chairman, as a member of the flying public, i never quite understood that decision and im glad its being rectified albeit after dozens of years. It is being rectified all aircraft in the matter of a few years will have abs im sorry, abs out. However, today somebody can carry a few hundred dollar product. If it were allowed to receive the signal they would be part of knowing where a fast mover is and avoiding it even if they arent putting out that signal. Im thrilled to hear you as i fly Everybody Needs to know. The reason ive been so excited for years about driverless cars, the level of death and industry caused by cars is so huge. We all drive. It can be avoided. This technology. It would be an absolute tragedy if it was delayed in any way because an after market was not allowed to develop to move it along. I think you are absolutely correct in indicating that well get there in two different ways. One, the Car Manufacturers themselves will do everything they can to get this technology in public hands along the way as weve seen with almost every other Technology Including security the after market is quicker. They can get greater penetration and provide competition. My concerns about some of the privacy discussions when it comes to matters of losing your limb and losing your life which is what were talking about with collisions in cars, its a little less important to have privacy than it is in some other areas. So the privacy discussion is important. I dont want to denigrate it but when it comes to our physical safety it takes a back seat. Mr. Bainwol remember, you two did take a picture earlier smiling. This not to contradict gary but just to clarify. So you saw the words about fatalities and cars, cars are killing people. Just want to clarify 95 , 98 , maybe 99 of fatalities on the road are the result of environmental challenges and human error. The car itself works rather beautifully. And the critical point that we would both embrace i certainly think mr. Shapiro was talking about antilock brakes traction control all the items that have come out and reduced the death rate in all too flawed drivers. We are very proud of those technologies, we want to see them move in as rapidly as possible. Those technologies are the answer to human error which is a huge problem. Thank you. Mr. Reed since you were given credit for these apps your mens wanting to develop apps depend on either an open standard or in the alternative being able to hack in order to create interfaces. In other words youre locked out of interfaces with automobiles and other products. Isnt that true . Open standards is a significant part of how this moves forward. Published standards. I think youll end up with published standards and what i believe will be interfaces where i wont have to hack it. A little odd. Published by Car Manufacturers that will allow me to tie into the existing system or ill do it through the phone and phone manufacturer has done a deal with auto deal because secure safe apl platform i can build apps on. Im hopeful about the connected car. I think thats a place where youll see an explosion of apps that will be helpful and beneficial especially for those of us with kids in the back seat. In this study jurisdiction over bandwidth necessary for any of your products. We do have mandated seat at the table and consultation with the ways and means sometime and administration in trade under trade Promotion Authority for both european trade and tpp and pacific. Id like any of you that want to comment on the importance of Global Standards of getting the internet of things to in fact be embraced in a way around the world that allows either for economy of scale or consistency of service. Ill go right down the line on that mr. Shapiro. Global centers are nice but not essential. Weve seen in Technology Politico and ego play to whose countries standards. Wasnt necessarily only talking about standards. I was talking about the access, trade promotion intended to have. The acceptance without terror for barrier of american products. Okay. Standards is one issue. Trade promotion is good. Ita is great, the mast lont, its positive. Obviously to the extent these devices get out there and are saving lives is an important thing. If there is an intention approach thats always referred to one country by country high tariff. I think the opportunity that you highlighted that trade agreements provide for driving global consensusbased standards that help to advance scalability and interoperability are net positive. Hence, our stlong support for trade Promotion Authority and ultimately trade deals that will emanate as a result of that. With the complex blend of memberships sometimes trade gets tricky for me. Some of your members are for it and some are against it. Are you with your members . Its more complicated than that. Its been around 100 years as a concept but were building the different standards all around the globe. That ends up in the cost of products for consumers all over. A new car is safer than an old car. We can reduce cost of products getting more people in newer cars. Thats safer and good for everybody. Two quick points. Every Single Member of this community has a district selling apps overseas. We see 20 of all the apps in china were actually from u. S. Companies, which is huge if you Pay Attention to the china market. Its hard which brings me to the second part. Our one concern about standards we are finding some countries are dipping their toe into the yfd creating quote, unquote, domestic open standards that are slightly tweaked from the United States and these are strictly barriers they are putting up to protect domestic developers, app developers. Weve seen it in the wifi space around the globe. Tweet standards protect domestic production. We would support your perspective on improving trade and improving standards so they are available to all. Thank you. On that note, with no further questions, this will conclude todays hearing. I want to thank all our witnesses. Without obltion members will have five additional days to submit questions for witnesses, additional materials for the record. That also leaves our witnesses five days if you could please to provide additional material including that which some of you promised to give to our members. With that we stand adjourned. On the next washington journal, senator tom udall of new mexico on efforts to overhaul toxic chemical regulations. Narcotic senator hoeven on energy and Climate Change and reports the administration will reject proposed keystone pipeline. Washington journal live each morning at 7 00 a. M. Eastern on cspan. Phone into the program or connect with us on twitter or facebook. This week owned cspan networks politics looks and American History saturday night 8 00 eastern on cspan, a discussion on Illegal Immigrants and enforcement of arizonas immigration laws. Sunday evening at 6 30. New jersey governor and republican president ial candidate Chris Christie on National Security. He speaks at the university of New Hampshire at manchester. Cspan 2 saturday night 6 00 eastern on book tvs afterwards, Michael Tanner talks about the growing National Debt and looks at reinstructuring entitlement programs as a solution. And saturday afternoon at 3 00 glenn beck presents his thoughts on islamic extremism. American history tv on cspan3 saturday morning at 10 00 eastern, commemorate the 50th anniversary of Lyndon Johnsons signing of the 1965 Voting Rights act. Our coverage includes white house phone conversations between johnson and his aides civil rights leader Martin Luther king jr. And civil rights leaders about strategy how to enact and enforce the law and the signing of the bill. This weekend saturday night at 7 10 berkeley history professor brian delay looks at the history of gun production in europe and arms trading contributed to victory during the american revolution. Get our complete schedule at cspan. Org. Massachusetts senator and maryland congressman cummings host a forum on federal investments and Scientific Research. Well hear from former House Speaker Newt Gingrich and panel of academics. Part of a group, middle class prosperity project. Middle class project forum. So why is the middle school prosperity project holding a hearing on the importance of federal funding for research . The reasons are three and deeply interrelated and related to the future of americas middle class. Investments in research produce good jobs right here in america. Breakthroughs in research are our best chance to keep from bankrupting our country and from bankrupting the entire middle class. Keeping us from going broke over alzheimers, diabetes and all of the other costs of medical care. And research will give us a chance to live better lives. American innovation has changed the world. Scientific advances like super computers, internet sequencing the human genome and treatments for polio, cancer and hiv have saved lives and created good jobs for middle class america. Economists agree that advances in science and technology have been, quote, the predominant driver of gdp growth over the past half century. Today 2. 7 million americans work in jobs focused on Scientific Research. Many many more on Companies New discoveries and technological innovations. Companies like google and facebook. For every dollar enforced in National Institutes of health for example, 2. 20 back in immediate economic activity. Private industry is great generating new Development Based on scientific developments that have a clear application but basic research, the kind whose applications arent clear yet doesnt get so much investment. Thats where we need government. Government provides patient capital, the kind that can wait for longterm results. An american president once said quote, although basic research does not begin with a particular practical goal when you look at the results over the years it turns out being one of the most practical thing government does. That president was ronald reagan, a fiscal conservative who understood the value of investing in american in vagz. For decades investing in science has been a bipartisan priority. Today washington has lost sight of that priority. Everyone, republicans and democrats say investing in science and innovation is a good idea but talk is cheap. We need action and we havent had any in a very long time. One proposal moving through congress is 20th century cures act which includes 1. 9 billion a year for five years in new funding for nih. Now, that sounds like a good start and it is but not enough. Todays nih budget adjusted for inflation is 12. 5 billion less than it was in 2003. That is a 25 reduction in federal investment in nih alone. Even worse the bill doesnt include maintenance of effort provision which means theres nothing to stop congress from cutting nihs base budget at the same time that it adds new money on top. If that happened instead of expanding our investment in the nih under this bill could actually shrink. Earlier this year i introduced medical innovation act which would help rebuild nih budget. It could boost nih funding by 20 . It achieves the increase without raising taxes without gutting vital programs and without adding to the deficit. Dozens of doctor organizations of patient groups and scientific associations have supported it and theres no reason that every republican, every democrat and every independent in congress couldnt support it too. Members of congress are responsible deciding whether to make these investments in our future or whether we just talk, talk, talk about them of the American People deserve better from congress. Thats why were holding this forum today, to have a real discussion about what we can and should do to get money into research. Im very pleased we have speaker beginning rich here to talk about his work and help Science Research and talk about what it takes to make real effectiv bipartisan progress. There are many things the speaker and i disagree on but we strongly agree investment and research is fundamental responsibility of our elected leaders and it is long pastime to meet that responsibility. We also have a distinguished panel of researchers, economists and innovators who will talk about how increased funding creates jobs and strengthens the economy and how congress can do a better job prioritizing federal investment in science. Dr. Wilson, doctors thank you, im very good you are here and i look forward to todays conversation. Congressman cummings, would you like to make some remarks . Thank you very much. It an honor to join this six forum part of the middle class prosperity project. Today we will for the middle class prospect. Today well talk about how research and development have chartered the path for progress for our economy over several decades since the end of world war ii creating jobs in the pros e. Well examine how cuts to the process and research and development threaten our future progress. American ingenuity is unmatched in the history of the world. The United States harness creativity and we help discoveries leap from the lab to the market place in a way that is the envy of countries all over the globe. According to the Congressional Research service the federal government is the nations largest supporter of basic research. Funded more than half of basic research in the United States in 2012. As a result of funding appropriated by congress the National Science foundation, the National Institutes of health the department of energy and the department of defense and other agencies award tens of thousands of Research Grants every year. The federal funding through programs like the Small Business innovation research, the programs have been critical to help researchers and entrepreneurs convert basic Scientific Research into new products and technologies that improve the lives of millions of people while creating entirely new industries and jobs that come with them. In 1961 president kennedy called money americans to make a Major National commitm of scientific and man power and facility and material and as a result of that commitment the United States became the first and only nation to put astronauts on the moon. We reap the benefits of the discoveries made through the Space Program in the form of technologies and products that were never imagined when we began the Lunar Exploration effort. Similarly our nations leading role in the 13year effort to decode the human genome has led to new treatments for some of the most devastating diseases. This advancement also created enormous benefits. According to battal memorial institute, our governments investment in 3. 8 billion in the human genome project helped generate Economic Impact of 796 billion between 1998 and 2010. This is a massive return on investment of 14 to 1. The question before our nation now is what story will we write in the 21st century . Will it be one of studying new accomplishment . Scientific progress and continued Economic Growth or one which we decide we can no longer afford the next big discovery . Will we remain the worlds leader in Scientific Research and development or will we summock to a culture of mediocrity and watch as other nations out pace our investments, our discoveries and our progress. In 2009 the american recovery and reinvestment act contributed 213 million to the budget but sequestration held steep cuts after it was passed. According to the advancement of science our nations federal research and Development Budget declined by more than 26 billion from 2010 to 2015. That is a drop of 16 . These cuts in the uncertainty in the Research Institutions face have had deaf tating impact on research initiatives. These cuts are shrinking the pipeline from which discoveries and inventions will emerge 10 or even 20 years from now. The decisions we are making from the shortterm perspective from the annual budget cycle are shaping the nation and the economy, we will leave to our children. We need to make sure that they inherit a country that continues to lead in scientific innovation that creates a better world and a stronger economy and that promotes a broad and prosperous middle class. Im pleased to join senator warren in welcoming speaker gingrich to todays forum. I serve with speaker gingrich during my first terms in congress and i thank him for his leadership on the issue of in vesting in biomedical research. I also welcome our distinguish members of the second panel. We have an Extraordinary Group of experts aseambled today and it is an honor to have this opportunity to hear from each of you. I yield back. Thank you, congressman. We are honored to welcome the former speaker of the house of representatives Newt Gingrich to todays forum. Please come down. Congressman gingrich. [ applause ] it is good to see you here. Congressman gingrich represents georgias sixth Congressional District from 1979 to 1999. From 1995 to 1999 he was the 58th speaker of the house of representatives. Madam, i just want to make one note, i join you senator warren in welcoming speaker gingrich to todays forum. Not only did i serve with speaker gingrich but i failed to say that he gave my parents one of the greatest thrills of their life. Both of my parents having less than a sixth grade education having been forrer share croppers from manning south carolina, you speaker gingrich, swore me in in a special election and you took a moment after the swearing in to speak to my parents and i will shall forever forever be grateful. Thank you and welcome. Would you like to start. Hes going to start. Hes going to start. Good. Speaker gingrich. Well, let me thank both of you. And let me say. As a fellow member of the house congressman cummings, im delighted to have had the opportunity and i appreciate your bringing your parents. I think it is one of those magic moments, the first time you get sworn in and the whole family is there. It means a whole lot. And thank you senator warren and thank you for rushing back. I can appreciate how hectic your schedule is. When you first called me i was frankly surprised and delighted and im glad to be here. Im really delighted to be here to discuss federal funding for research and development. A topic that has the potential to transform the lives of millions of americans of all backgrounds and clearly to bring together liberal democrats and conservative republicans. Before i offer a few general principals for how to think about federal research and Development Funding let me start with something close to my heart and that is finding cures for the most common and Serious Health problems. This is a challenge important, urgent and now there is great hope it is doable. It is important because every one of us has been touched by the devastating effects of problems like alzheimers disease, dementia, cancer Kidney Disease and parkinsons. We know how debilitating they can be how they absorb the energy of family members and caretakers, how they strain the finances of even well off families. From a fiscal as well as a human perspective, funding finding cures for these diseases is urgent urgent. Bob kerry and i chaired the alzheimers study group for three years and learned over the next four decades americans will spend 20 trillion on always and other dementias. That is more than a full years gross domestic product. So imagine all of the money in a year would go just to this. The taxpayers are on the hook for much of it, including an estimated 420 increase in costs to medicare and 330 increase in cost to medicaid and these of course are just two out manufacture programs. The federal funding for research to cure alzheimers is only a tiny fraction of the money the government is already spending to treat alzheimers every year. The nih spent 731 million on Dementia Research this year, less than one half of 1 of the 154 billion medicare and medicaid are spending to treat it in the same period. Part of the reason for the imbalance is that National Institute of Health Funding has been cut more than 20 in real terms since 2003, the end of the fiveyear doubling of the nih budget which we achieved in a bipartisan basis in the 1990s. Given the cost are coming boosting Research Funding may be the most fiscally responsible step we can take. And i want to emphasis this for a second. This is where i do bring a unique back ground. We balanced the federal budget for four straight years. The only time in your lifetime the federal budget has been balanced for four straight years and we did it by doubling the nih budget. Because we set priorities. But with the baby boomers aging, if we do not find a researchbased solution, we will never balance the federal budget because we will never impose the level of regulatory pain it would take to balance the budget which means people not getting treated, people being in miserable circumstances. And remember with alzheimers, caretakers are twice as likely to be sick as noncaretakers. So you have the always population and the caretaker population both at risk because of this. And the good news is curing alzheimers and other diseases appears more doable today than at any other time in history based to funding by the government and break throughs in biology, genetics and computation and materials. The National Institute and tom in general have shown initiative with the Brain Initiative and today nih is pioneering therapies that are spurring patients immune systems to attack diseases like cancer rather than relying on surgery chemotherapy or radiation. To allow Research Funding to languish at a time of historic opportunity when we could be saving lives and saving money takes a special kind of stupidity that is reserved for the city. I should note as an exception of this criticism the work of chairman upton, and congresswoman degget and those in the house whose cured initiative is one of the most important and bipartisan efforts in congress in recent years and over here in addition to Senate Warren and ron johnson and others are working hard in the same direction. In addition to the drastic increases in Research Funding, ive called for doubling the nih budget and i would by the way include a substantial increase in the National Science foundation which i think was the one mistake we made in Research Funding. We should have tripled at nsf when we doubled nih. Let me quickly offer two bold big ideas for research at the federal level. The first is research bonds. For a large, very expensive projects with the potential to generate huge savings if they work, it is worth exploring issuing bonds to finance the research which would then pay out some fraction of the savings. This would have the benefit of taking important projects off budget and raising much larger sums of money than the federal government is likely to appropriate. We are developing this idea for Brain Research bonds with gar an stag lan and pete correlly at one mine and steve high man at harvard. They have proposed a version of the idea with the mind act for Alzheimers Research bonds. Similar models could apply to large Infrastructure Investments as governors daniels, schwarzenegger and levity has demonstrates with innovative for financing major roadways in their state. Philip howard has argued if we rationalize the infrastructure we could create 3 million more jobs with the same appropriation. Finally. For research and development, the return is less obvious savings to the taxpayer but might be worthwhile. Im a big supporter of surprises. First taxpayers dont pay a thing until the goal is achieved and they never pay more than the prize amount. Second you get a lot of competing strategies for solving the problem when you have multiple groups workingin independently to get the prize and you get better results far more efficient and you may end up with several working designs. I would radically reorient our efforts in space and transportation and procurement around prizes to celebrate competition and procurement. With that sweeping over view i look forward to your questions. Speaker gingrich i want to thank you for your insightful presentation. You know you argue and i quote that this irresponsible and short sighted not prudent to let financing for basic research dwindle. What do you think are the main reasons we have let financing for basic research dwindle . Well i think there are probably two or three big reasons. One is the past has lobbyist and the future has publicists and in this city lobbyists beat publicists. So resource allocation, some jobs not as important have better lobbying and they survive and that is a subjective fact. And second i think there are those fiscal conservatives who are antigovernment in a way that makes no sense. It is like the woman who once wrote verner von brown and said quit trying to go to the moon and stay home and watch television the way god intended. There is people who have no notion of the government. Whether it is the passenger train ride or the internet or a thought Different Things. Government investment from the very beginning, we created a Patent Office in the constitution. We were founded by people who believe in the future and there is a branch of government that doesnt get it. And third to be candid, i think we have allowed welfare and bureaucratic spending to crowd out investment. If you go back and look at the percent of the size of the government that we were spending on investment and research and investment and infrastructure, 30 or 40 years ago it was bigger than now. All of this has to be changed and one of the reasons im for alzheimers bonds is i dont think were going to win the fight well make some incremental progress but compared to the size of the title wave of illness coming down the road as people age we are not going to get ahead of it within the traditional incremental appropriations process and that is why ive looked for ways to break out as i suggested with taking it off budget and issuing bond thats would be retired as we gain the savings of people not getting sick. I want to come back to alzheimers in a minute. But didnt some of the things that you just stated exist back then when you were able to double the the budget with regard to research . I mean, just some significant thing to change. The reason im asking is how i can get back to where you want us to get back to. I think something sort of magic happened. When we were in the first stages of trying to balance the budget and john kasich had the lead on the project and john porter who spent his career on nih problems and senator connie mack who had a family based concern with cancer through his entire Family History both came to see us and they brought with them every Vice President for research of every pharmaceutical in the country. And we had a meeting of about 70 people. And they said look, this is a function of jobs, as senator warren said. You want high value american jobs, you invest in basic research. You want a really have the most competitive economy in the planet, you invest in basic research. You want the best security, you invest in basic research. These things have carried us for 150 years and it is a period of utter foolishness to walk away from the things that have walked and that also means candidly, those who are conservative as i am have to win the argument with other conservatives about the centralize of government investment. I point out to people that the Transcontinental Railroad was built with a huge government incentive. And it didnt happen randomly. And even adam smith and the wealth of nations argues there are times and places for National Security reasons when government should be basically shaping the market and i would argue that the areas you and you are talking about are a key part of that. And i begin john parter and connie mack a great deal of credit for making it possible to build the momentum to double nih budget. As federal funding has dwindled, has private sector funding increases to fill the gap. Sometimes you hear that argument, that private sector should be doing more. Look, there are some areas of private sector activity that you can see where there has been an investment but there are two things that operate against that. The first is the that wall street is very very one quarter at a time minded. So the analysts dont look at the grade age of bell labs, the analysts would not look at a 20 Year Investment strategy and give you a good mark. So most ceos are driven by the finance system toward shortterm optimization in a way that undermines the investment you are describing. But there is a second part to this. And most economist agrees with this, i dont think there is much doubt when you are talking about fundamental breakthroughs, everybody has an in sentive to hope somebody else will pay for it. That is just an objective of reality. And frankly, if it is a break through, the jet engine is as good of an example as any. And they were complicated and experimental in 1949 to 45. You wouldnt get them. Once we built good enough jet engines for the b 47 and the b52 it was easy to build the boeing. But without that capability, you couldnt have the transfer into commercial activities. Sow have to be honest about what will the private sector really invest in and when you start to think longterm things and by the way weve had a wonderful history of philanthropy founded by private citizens and still funded by private citizens and that is terrific but if you are talking about the scale of science that we need particularly in National Security and in dealing with health, youre not going to get that either from philanthropy or from forprofit companies. Just one more question. I was stunned to read in the m. I. T. Report in the past two years the fda has approved 19 new cancer drugs but over the past decade and i quote, not a single new drug for alzheimers degrees has been approved. And i guess i would based on what you just said, i guess it would be almost impossible for the private sector to make that breakthrough with regard to alzheimers without a lot of government help is that a that is partially true. The other thing i would say to go out on a limb here for a second, is i think we need to rethink how the fda works. Example. If you are dealing with a lifetime condition you cant afford to test the drug that takes 20 years to figure out whether or not youre going to legalize it. You never raise the capital to investment in a drug that has a invest in a drug with a 20 or 30 year horizon to be approved and in brian science, the fda is not today scientifically prepared to deal with the complexities and this is true for Regenerative Medicine that we are not prepared to understand. So it is a dual thing. The government has to make the investment but candidly we could accelerate getting investment in new drugs and accelerate in getting particularly alzheimers related things many of which will have to be conditional. If you are dealing with a 20 or 30 year process, you have to say we dont see any immediate safety problem, those of you who want to have informed consent do it because the truth is we arent going to know for a generation whether or not it works. Thank you very much. Senator warren. Thank you congressman cummings and thank you speaker gingrich for being here thank you for your remarks. I could have given your testimony on the importance of public support for basic research and im delighted to hear you talk about tripling the nih budget and i strongly agree with you. But i want to focus on the National Institute of health. This is the crown jewel of medical Research Supporting the work of more than 300,000 researchers, including 145 nobel Prize Winners at more than 2500 institutions. This work expands our understanding of biomedical science, leads to new drugs, new technologies saves money and saves lives. For Decades Congress increases the nih budget year over year over year and then in the late 1990s both parties worked together to double that budget. You were the architect of that historic achievement. Now i think it should be a lesson for today as congress. A lot of people think that we are far too partisan to get anything done but i dont think anybody would describe the 1990s as the golden age of nonpartisanship. But despite that you supported nih funding and you got it done and that is what i want to ask about. Despite the deep divides why was it that both members of parties decided that nih funding was so important in the late 1990s . I think there were three things involved. Partially thinking through it is a good question. First thing as Hillary Clinton said on the campaign trail, her husband and i had a technique where we could fight all morning and negotiate all evening. And i think it is really important. It is not that you get to a nonpartisan Perfect World but you have to place the country above whatever your fights are and and reagan and oneill did this perfectly. Now that weve gotten it out of our system, what can we do. Lets not talk about what we condition do, but what can we do. And clinton and i had a buy as in favor of finding solutions. Second, we did have remarkably strong corporate support. And that allowed us to overcome a lot of the conservator bias conservative bias against government. Can you imagine today if you took the biological companies in san diego and around harvard and every one of the ceos showed up around here and forget big pharma for a second but you would have so many hundred ceos with ph. Ds or mds and you want us to solve problems, we have to do this. So we brought prief Sector Energy to get more money for the sector. An the third thing was we were able to engage the constituency groups that have a direct immediate interest. I remember when bob kerry and i spent the three years on a bipartisan basis on the alzheimers study group and we were here in the senate, we had 15 or 18 senators come to a hearing and i think all but two of them had a personal relationship with alzheimers. Wul suddenly well suddenly people said let me get this straight. It is going to create jobs, it is the right thing to do for disease and the only possible treat to balance the federal budget and somehow that conversation broke through. Im frankly trying to figure out how we get it into the president ial Campaign Next year because i would love the candidates to have to answer the question are you going to try to get to a balanced budget by bureaucratically depriving people of goods and services or are you going to try to invest in the research that lets us break free because the truth is it if you postpone alzheimers on set by five years you cut the projection in half. Now that is 10 trillion. So there are not many places you can say i can take 10 trillion out of the spending stream to keep you healthier. Let me follow up on this now speaker gingrich. You are a conservative and as a result may have credibility than i do in some circumstances on the question on the role of government here. Why isnt it enough to count on private industry to do this . Why do we have to have a substantial investment from the federal government . Its a question about American History. [ inaudible ] and i are developing a project on why George Washington matters. And people dont often notice that the Founding Fathers wrote into the constitute a Patent Office because they so deeply believed in the future. They made investments. The First Federal highway was built during washingtons lifetime. They believed in improving things. They talked about them as improvements. Jefferson launched an expedition to the west and there was a Childrens Book on this called from sea to shining sea it was supposed to cost 2,800 and it cost 38,000. And there are patterns that dont ever change. But the idea of jeffersons era of taking people and senting them to the pacific is comparable of going to mars today but jefferson understood we needed the knowledge and most of is stored up in the academy of Natural Sciences in philadelphia. So we have had a long history of investment. Congress passed the money to enable the first telegraph to be built between the capitol and baltimore. That was a congressional investment. Now i think that we have to recognize lincoln, he was the only president to hold a patent and lincoln was totally fascinated with technology and brought a lot of it into the civil war to the benefit of the union. So i think there is a long history of america being a company of Technology Advance and willing to invest in a Better Future and recognizing the government had a significant role to play in that. And let me ask that with a little bit more shortness to the point right now on health care in particular. Given that the taxpayers are on the hook for medicare, for the veterans administration, for other health care costs, if we fail to make the investments in nih and discover the cures that we need, who is ultimately going to pay for this . Well, let me try to paint a picture for a second because it is worse than your question. Anybody that goes out and talks to cuttingedge scientists know we are right at the edge of break throughs that are so extraordinary. Im at the age where i have several friends who have unique difficult problems and when i can help them find the best two or three people in the country their lives are suddenly transformed because the best two or three people in the country are 20 years ahead and are doing things in laboratories and doing things in hospitals that are like magic. And were having breakthroughs at every single level of health. To know that exists and this close in Regenerative Medicine and within a generation we could help you regrow your own liver rather than have a transplant. To help you re grow your kidney so you dont have to have insulin injected for the rest of your life, to help you re grow if you are in a car wreck, to re grow your nervous system that we have experiments with and we see things in the lab and look at a Wounded Warrior because the science we are applying is 20 years behind the science that is in the laboratory and then you look at the failure to fund this and frankly it is probably the thing which comes closest to driving me nuts because and i say this all to my fiscal conservative friends you have trillions of dollars of guaranteed expense sitting on the table and youll never get away from it and never have enough to my liberal friends youll never have nur bureaucracy to rationally spend this money because in the end you have to cut off services. That is what happens. So if you dont want to cut off services to people with long problems to people like alzheimers or autism, if you want the break thinks you have to solve this. And being creative and honest about it i can get us to a federal budget almost in perpetuity and there is no other strategy with the baby boomers aging that gets you to a sustainable balanced budget. And one and by the way which you hinted at us and by the way, while were saving trillions of dollars well create hundreds of thousands of high paying american jobs and strengthen our balance of payments. So if congress boosted nih funding again and if we could come together and get an agreement to do that, how would you recommend we structure this funding . Well, first of all, without putting him absurdly on the spot, i would try to get Francis Collins to really reflect on the lessons from the human genome project. Im not a big fan of the peer review small grant model. I think it leads to incrementalism and extraordinary caution and not made progress on the scale and i think this is one of the challenges we have in selling nih to people. When you double it you want to see so what is the rhythm and the excitement. It is a similar particular that nasa has. I mean boredom is not a good device for getting people to be involved. The human genome project was stunningly exciting and done outside of the traditional patterns so i would look at three key areas. One is to what degree can we design much larger grant projects that are driven toward goals, the way the human genome project was. The second is to what degree can a modest amount of money be put into prizes of a variety of forms and if you look at the history of aviation it is amazing how much activity was stimulated by modest prizes. Lindbergh flu the atlantic for 25,000. And a lot of people were trying simultaneously. And third, i would say, we need to find a way to guarantee that a significant part of that money goes to younger researchers so that they have a chance to become principal researchers not just surfs working for seniors. And also and i hesitate to do this because you represent the state most effected but i would love to have someone to question the scale of money we give to the universities for administering these stuff. If you look at the money of harvard or Johns Hopkins both of you in one look, just to look at that and say come on cant more of that go into research. And let me ask you on the funding part of this, should we be doing, should we be doing Capital Budgeting as a way to increase the funding substantially for nih . In order to fund nih, do we have to cut shortterm spending in other areas . We dont have to cut shortterm spending in other areas. I would take it off budget an issue of alzheimers bonds because i think the longterm title tidal wave it coming that the most fiscally prudent thing you could do is cut that wave through research. And im happy to cut that notion in terms of talking to conservatives because there is no other alternative that works. Second if you look at how the navy builds aircraft carriers they cant put the money in because of the nature of the federal appropriations process so they cant buy the whole carrier but they can sign a contract making it prohibitive of buying the carrier. It is slight prohibitive. I think we can Fund Projects over a four or five or six year period and i understand again im a constitutional conservative. I think congress should have control over things but i think there are practicalities. The transcontinental could not have been built on an annual budget so they had to design an innentive plan over a multiyear period. And i challenge this and this puts some of my Close Friends in a bind because they have to get this through omb and the white house and i would challenge nih to come back and say give us some project so large and so exciting that it justifies a Capital Budget and lets go fight for the Capital Budget. Sir thank you very much. Mr. Speaker, i feel like im standing or pitching low and slow over the plate. But i am very pleased to hear your answers. We have a gaping hole in the nih budget. Right now it is 12. 5 billion. We need a serious plan to fix it. And if we really want to dream big about what we can create then we need to get out here and fight for more funding for nih. I proposed a bill called the medical innovation act which would increase nih funding by 20 without raising taxes, without cutting critical programs and it doesnt have to go off budget. If there are other ideas folks should put them on the table but it is time to get this done. I think that it goes without saying that you and i have fundamental disagreements in some areas but it is clear that one thing we agree on is what Congress Must do and i hope that well be able to follow your example, double the funding for nih as you did in the 1990s and bring home some of the promises of medical research in this country right now. Thank you. You had another comment. Just one comment. Speaker gingrich i want to again thank you and going back to some comments we were making before we started today. Im hoping that youll use your influence to help us achieve the things that we have to achieve. As i was listening to you i dont want something to go unnoticed. You talked about key people who play significant roles in making sure that we had appropriate funding for research and particularly medical research. And i often say that out of our pain comes our passion to do our purpose. And you know i think that the people that you talked about obviously had pain that they had experienced in their families and they were able to take it to the halls of congress and make a difference not only perhaps for their families, but also for many others all around the world. An then i thought about what you said about how important senator warren said about how important this research is. I have a family member, ten years ago they said well they thought she had a terminal type cancer but because of work at nih it is now chronic. And so those are the things that we dont necessarily talk about when people when we are looking at dollars and cents but those things mean so much to so many people. And so i want to thank you again for being with us and im hoping that you will join us on our crusade to lift up all americans so they can live the very best lives they can. Thank you. Let me just thank you both for your leadership in doing this. These are the kind of conversations that ultimately in a fro society allow it to talk to it selfand find dramatically higher Value Solution and you two are doing is very important and you have my commitment that anything you need to help in this project, anything i can do you can call me. Thank you. Let this be the start of a new alliance. Thank you, speaker gingrich. I would like to ask our folks to set up for the second panel and we invite the members of the second panel to take their places. Our first panelist is dr. Carol espy wilson. Professor of electrical and Computer Engineering at the university of marylands a. James clark school of engineering. Dr. Espy wilson received her ph. D from the Massachusetts Institute of technology. An expert in speech communication, the doctor is a member of the National Advisory board of medical rehabilitation at the National Institute of health. She is already the founder of the omni speech, a company that is commercializing for youths in cell phones a Software Technology to separate speech from background noise that was created through dr. Epsy wilsons research. Welcome. And im very proud to have a chance to introduce our witness from massachusetts, dr. Aaron kesselheim is an associate professor of medicine at harvard and a faculty member in the division of i do this, pharm aco epidemiology at the bringham Womens Hospital where he brings regulation on therapeutics and law and he earned his bachelors from harvard and his medical and law degrees from the university of pennsylvania and he also earned his masters in Public Health from the Harvard School of Public Health. He is certified in internal medicine and he serves as a primary care physician at the phil is gen center at bringham Womens Hospital. Welcome, doctor kesselheim we are pleased to have you today and thank you for linding your lending your expertise to this panel. And im honored to welcome dr. Mariana mazzucato from the chair of the economics of innovation at the Science Policy Research unit of the university of sussex. The doctor completed her ph. D in economies at the new school for Search Research in new york. She is the author of the entrepreneurial state debunking public versus private sector myths which was included in the 2013 book of the year list issued by the financial times. So thank each of you for being here. And if you could each just provide some opening remarks and well get started with questions. Dr. Espy wilson. Good afternoon. Thank you for the opportunity. Sorry. Good afternoon. Thank you for the opportunity to be with you today to share my experience with federal investment and research in innovation. Ive been a professor now for almost 25 years and ive been able to sustain a Research Program with the support from the National Science foundation and the National Institute of health and im in the process of commercializing technology that originated from this Research Program and that effort too has been funded through Small Business innovative Research Grants from the National Science foundation and a Small Business Technology Transfer Research Grant from the National Institutes of health. I think it would be informative for this hearing to start by describing typically that the academic career track will start for some as a post doc and then on to an assistant professor and then five or six years and then to an associate professor with ten year and then another five years one may become a full professor. Now if you are at a Major Research university, a significant part of your time as a professor is spent conducting research which includes the training of graduate students at independent researchers, possibly some training of undergraduates and this is becoming more and more important as we want to build the pipeline of graduate students ready for graduate school in the stem fields and collaborations with colleagues inside and outside of your university to address problems that may expand several disciplines. Even the combination of research in teaching is important because professors can share their research in the classroom to help students understand how the subject matter they are learning can be applied to do analysis or solve useful problems and to motivate them to seek a research career. As many have said here today, conducting basic Research Helps us to build a understanding of all sorts of matters, helps us to solve significant problems, develop useful technology that can be transformative and all the while training the next generation of scientists and engineers. The funding of research should be of highest priority, basic research that provides the advances that will benefit our children and grandchildren and it is supported almost exclusively by the federal government. Both basic and applied research are vauluable but there are alternative sources of support for applied research. Without basic research there is no applied research and innovation. And federal cutbacks in this funding has been huge. Excellent Innovative Research is not being funded. Nor example at the nih and we have talked about them today the funding percentile is as low as 9 in some schools whereas in 2001 it was as high as 29 . And this reduction in the number of proposals that are funded has had a significant negative impact on the morale of investigators, not just the one applying for the grants but the peers who are seeing the proposals not being funded. It also of course has a significant negative impact on the training of students and the degree to which fundamental Research Gets done. Young scientists and engineers are making other choices. Career choices. And these are the very people we should encourage the most to do research because they are the next generation of drivers of innovation. For some particularly like computer scientists and engineers, they can find interesting jobs Even Research jobs in industry however many of our young scientists are headed into underemployment. Also Program Offices are cutting budgets significantly because they are trying to spread the wealth but that causes considerable disruption in the research and the training of students and in particular one of the first things you cut is your travel budget but that doesnt allow you to send students to conference to develop the job prospects they need. Cutting back in funding also is having a negative impact of making agencies more conservative in the research they support as a result there are no incentives and encouragement and Financial Support of faculty and students toward out of the box and creative ways of thinks. In real terms, while Government Supported Research is shrinking here in the u. S. It is growing in most of europe and asia and were seeing this based on the sort of Research Presented at conferences. This trend begs the question of where will the big breakthroughs in the future come from. Finally im sure youre aware of the existing problem of too few u. S. Students going into stem fields. I fear that federal cutbacks will only make this problem worse. And i feel confident in saying that Much Research universities it is already the case that our graduate student population, particularly in the ph. D level in stem areas, consist of mainly mostly foreign students, not americans. And we need to look for ways to turn this deficit around. So investments in research and education have a huge return but only over a long time span. These investments we make not necessarily for ourselves in the shortterm but for our children and grandchildren. It is sometimes not easy to think that far ahead but it is impair pairive imperative that we do so. Now i would like to address the strans legislation of lab to a startup for commercialization. The research being translated at my company omni speech was supported by nsf and multi Research Grants as part of the grant at the university of maryland. I did not conduct this research with an eye toward commercialization. After disclosing it to the Patent Office and giving some talks at Research Review days, i got a lot of feedback and encouragement to do a company and that began my foray into entrepreneurship. In addition to the fact that the university of maryland at college park has a very active Entrepreneurship Incubation program, it was of the utmost importance to me that the Small Business research and Small Business Technology Transfer program exists. For omni speech the grant was the critical catalyst for beginning the effort to transform original Research Code into a commercially viable solution. It enabled me to hire the virs engineers and to reach out to prospective partners for evaluation and more over as a tiny start up it was critical for establishing credibility. And finally through matching funds through the Phase Two Program was critical in the Angel Investment to further expand the team as we prepared for commercialization. The government must continue to provide incentives to spur innovation and support the development of new technology as the efforts in turn lead to expanded employment and the growth of the middle class and the improvement of our quality of life. The programs are doing well. Nsf has raised in the last couple of years the Funding Amount for the phase two awards from 500,000 to 750,000 and this is significant and will help start us considerably. Especially since commercializing technology can take a lot of effort, resources and time. In my case given it was Research Code that we were starting with that code was computationablely very expensive and we had to optimize the code to make it run many times faster to fit on a dsp chip so it took us a lot longer to do this task because we never had to commercialize code before. So i also want to point out that the nsf has developed the i core program and this program is to foster entrepreneurship preparing engineers and scientists to extend their focus beyond the laboratory in the commercialization of technology supported previously by nsf funded research and this program has been shown to make a significant difference in the success rate of these companies. Because they also are fostering an ecosystem where they are surrounding or wrapping around these companies mentors, angel investors, venture capitalists and marrying these scientists and engineers with ceos, people with a lot of business acumen and can help them get to the next level in their company. Some of the companies this program only exists for two or three years and people have achieved success where they are licensing technologies or their companies have been bought out by google or doctor, can i ask you to wrap up. That was the last part. This is really great. On the entrepreneurship side, the federal government is doing well, but just remembering that we have to start with the basic research to get to that point. Good. Thank you. Dr. Kesselheim. Thanks. Excuse me. Thank you. It is my pleasure to talk about my research in the sources of transformative medicines. The wholly grail of Drug Research and development are transformative medicines. Innovative drug with ground raek breaking drug and care. Patients have worried about the reduction of new products despite a Drug Development process there is controversy over therapeutic of new medicines. Arguing public ins tucsons niegs nih support medical innovation that is distinct from the process of Drug Development. While this Drug Development remains vital i want to focus my comments on the valuable yet under recognized role played by public investment. I led a survey of clinical leaders in a dozen different medical specialties to determine what they thought were the most transformative drugs approved by the fda in the last 25 years. The experts came to a consensus of 26 drugs and drug classes an then i examined the Development History of each of the drugs. A full result of the investigation are available in papers published in Health Affairs and among others but one of the major themes was publicly funded academic and scientists with a therapeutic approach about disease mechanisms and going so far as to demonstrate proof of concept. For example the red blood stimulator was first purified at the university of Chicago Laboratory of eugene gold wasser in 1971 who also proved the potential therapeutic effect. When with his help as a consultant, am gen produce the large quantities of come edgen and leading to a rare type of leukemia was the very First Successful targeted cancer therapy. It arose of Dana Farber Cancer institute that set out to [ inaudible ]. He and his colleagues developed he identified an active agent. Or [ inaudible ] the first product to demonstrateinibof hiv at the Cancer Institute in michigan but with the rising threat of hiv they submitted drugs for possible candidates. [ inaudible ] was submitted among hundreds of other drugs and it was submitted far higher than any other compound. Clinitians at Duke University and [ inaudible ] was approved a scant three years later. One variation, the seminole scientific concept arose in University Settings and later followed up in the [ inaudible ] ssri antidepressants. The university of lubt in sweden investigated the role in sweden and they showedize effect and efficacy in treating depression and a Research Team at lilly started treating [ to be fda approved. The transformative medications treated Different Things and one thing emerges the centrally of government funded and academic basino vators. Drug companies play a vital role in collaborators who provide drug samples to move forward, but our findings do not support the concept of the Pharmaceutical Company as the Single Source of [ inaudible ] Drug Development. Further reports can be found in a story behind sof usaa fill and other [ inaudible ]. Has made in understanding hiv since the discovery with grants to build labs and discover labs and conduct trials and one of the [ inaudible ] was pharmaceutical at emory and a Senior Research scientist at the v. A. Who formed a startup called farm asset to treat hepatitis c eventually hitting on [ inaudible ]. As for the concept of viral inhibitors many of the key insights identified in the survey arose in academic or governmentsponsored settings but these are pattened and generally used for products. The products based on insights and the result of the intellectual property occurs with the Pharmaceutical Company and this leads to misperception of the products. So one of the out comes of the miss perception is drugs focus on providing great erin sentives for drug producer by extended patents and as an example you can see the bad half of the recent 21st century cures legislation passed by the house of representatives. In contrast reductions for nih funding have threatened sources that we found did support most transformative drug innovation so i firmly believe that policies that support federal investment in scienceno vase will produce more transformative drugs in the future. But the high risk high cost aspects of basic research may need to new therapies that have raised concern as to whether this could lead to the socialization of risk and privatization of Drug Development. And we should think of returning a small share of the revenue of the infrastructure by being plowed back into the [ inaudible ] funded research. But creating transformative drugs, we hold great promise for further advancing transformative development. Thank you. Thank you very much dr. Kesselheim. And dr. Mazzucato. Thank you for inviting me here. This is one of the only topics economists agree about. So it is agreed that spending on r d which we should remember is one of the inputs into the innovation process have an absolutely very important effect on long run Economic Growth. But the real issue and that is where we get back into the debates between economists is how do we talk about this and what is the example of the role of the Public Sector, when it interacts with the private sector in nurturing the innovation of economy and there we have a problem and i think i want to focus on the limited way that economists have talked about this and also limited the way that policymakers have have feels enabled or increase the budget whether of the nih, nsf or nasa. And it is not a coincidence that i work at the policy Research Institute in sussex founded in 1965 because it was the only places that headon confronted the notion that the economists have the role of the Public Sector in financing innovation is to fix market failures. Of course weve heard a lot about basic research but its not just about basic research. The Public Sector has been slooud absolutely fundamental for financing innovation across the whole innovation change and i was really happy to hear speaker gingrich say the word get shaping. If you look at what nih nas is, svr have enabled in the u. S. , has been market creation and market shaping. Through a decentralized network through action oriented agencies. In economies, we dont even have the words to talk about market shaping and market creating, so we talk about public good and of course, basic research is a public good. Why is it a public good . Because the spillovers when it happens, are just so hey its hard for a private firm to appropriate the returns from that and hence you get underinvestment. So the developed hazard to stul in so the government has to step in. You see Different Actors across the whole innovation chain applied research and as we were hearing before in the patient finance that Early Stage Companies require because if you know anything about venture capital, you know theyre very exit driven. They want their returns in three maximum five years. That exit tends to happen through a buyout or an ipo and, you know, thats fine maybe for n some gadgets but its not going to get the nano Tech Revolution, or todays clean Tech Revolution that so many people are hoping for. So i really want to focus on those points and how the inability the talk about this, we have a problem as tony used to say has, again, really hurt policy making in this area. Lots of these agencies have been Mission Oriented, right . The most obvious mission is going to the moon. But if you read the website today, they clearly have a mission to nurture out of the box thinking around Renewable Energy innovation. If you look at the nih website, its absolutely Mission Oriented and how do we include missions and visions and econometric models . We dont. Also, if you look at the three big problems that we have today, which is first of all the cuts that were witnessing in research altogether, so you know, the latest figure is that federal percentage as a total r d was 60 and its dropped to 20 to 25 in the years in the 2000s recently its gone back up to 30 because of ara, which is great. However, this is a massive fall. Its also increasingly focused just on basic research. While its wonderful that we, again, are talking about basic research and the importance of it today, we have to remember that the big successes in the past came from nurturing these linkages, fundamental dynamic link aenls between basic and applied research. If you look at the aggregate sector, it looks like the private sector is making up for that. However, that has been increasingly around applied research. So the private sector used to spend Something Like 35 of total basic Research Spending was in the private sector. Now it has fallen to about 20 and its increasingly narrow in scope. This is actuallyco evolved alongside a real dysfunctionlty we have today in unfortunately, the many countries but especially the u. S. Which is increasing utilization of companies so spending more on things like shared buybacks and r d. This is fundamental because if we look at those times when we had an active private sector engaging with an active Mission Oriented strategic Public Sector, you have to ask yourself, why were they doing that . So bell labs, as we often hear about, it came from a deal with government, right . At t was a big monopoly. Government said, fine you can retain your monopoly status as long as you reinvest your profits. Bell labs was the answer to that provocation. We really dont have if you want that kind of deal making today between the public and private actors, and partly i think this is because weve allowed this narrative to be so pervasive, thats the only thing that the Public Sector has to do is sort of facilitate, derisk, to rate the conditions for innovation and all the really cool stuff is going to happen within business. And the problem is that that is a historically incorrect. Weve always required a dynamic creative strategic Public Sector alongside business and i really hope we get to talking about that. Because as long as we just talk about basic research, we kind of miss that whole wider story. Excellent. Thank you very much, doctor. So let me start with the question about where innovation comes from. If we want medical innovation we have to understand where the discoveries come from. Twothirds of the highest drugs with the most tlaep Therapeutic Research stem directly from discoveries made through publiclyfunded research. Doctor, you found in a recent study that most of our truly transformative drugs are based on insights gained through publicly funded research something youve summarized in your testimony here today. But a 2001 health fair study found that its often cited by the drug industry found that 91 of drug patents are owned by the private sector and the industry says this is evidence that innovation comes straight from the Drug Companies. So, doctor i want you to help us understand the discrepancy in these two descriptions of where innovation comes from. Well, i mean, i think there are a number of explanations as to why it is that health fair study might sound bad. First of all as i said in my comments, a lot of the key insights such as the you know, use of tumor necrosis factors to block disease that inspire a whole field of therapeutics are not necessarily patentsble insights, but nonetheless arise from decades in the case of the inhibitors and a vastin story. Decades of a governmentfunded research. And those kinds of key insights that then catliez the Subsequent Development of products are not patentable, although the products are. On the other hand, pharmaceutical companies do an excellent job of trying to build a patent ticket around their invasions and will subsequently patent changes in incremental innovations. And so well build a you know a we did one study showing, you know, over 200 patents around one particular drug. So i think that on the one hand its the case that a lot of the key innovations that come from public money are not patentable. On the other hand, its the case that pharmaceutical companies pursue patents to excess. We did a study looking at all of these patents that are held in the Health Care Sector and found that the small sliver of patents that were held by academic institutions and government were actually much more important in terms of being cited more in subsequent patents than had much more impact on the field in terms of their generalized ability and value than the patents on average held by the pharmaceutical sector. So the federal government invests a lot of money in research. The Drug Companies use that research to develop new drugs and then when those drugs earn money, sometimes billions of dollars, the taxpayers dont necessarily reap the reward. Thats how im hearing you describe this change. Now, some Drug Companies argue that the government recoups its investment in basic research because the Drug Companies pay corporate taxes on their profit. Do you believe that the taxpayers are being adequately compensated for their investment in the Drug Companies, dr. Kesselhime . Well, i mean i think we could do a lot more to try to invest some of the you know, the positive profites and outcomes that come from these products into the biomedical enterprise specifically. You know when you look at pharmaceutical manufacturers and you look at how much money they doe vote to research and development, only 20 of pharmaceutical manufacturers sales are devoted to research and development, the amount that they spend on administration and advertising is actually far more. So i think what we need to be doing is taking some of the enormous profits that emerge from the pharmaceutical industry and plowing them back into the buy your medical enterprise that in many cases provided the underlying discoveries that loud those profits to be made. Well in fact, though, i think theres much conversation about that going in the opposite direction with drug company profits. Perhaps i could get you involved in this dr. Mazacato. Theres a lot of talk about cut corporate taxes from companies that can trace their profit back to patents or other forms of intellectual property. So i want to know what you think about this sort of Innovation Box tax cut. Would it spur innovation or increase federal investments in research . Doctor, do you have a point of view about this . First of all, i think its very important to remember that we remember what a patent is. And a patent is a monopoly pore 20 years, right . So as a policymaker, the goal should not be to increase, you know, the profits of companies. It should be actually to increase the research if you want the leads to those patents. This is what policymakers are trying to do all around the