Last week, the U.S. House of Representatives passed the America COMPETES Act, a wide-ranging bill intended to bolster U.S. innovation and secure a technological edge over China. The legislation now proceeds to a conference committee that will attempt to reconcile it with a similar bill—the U.S. Innovation and Competition Act—passed by the Senate last year. The two bills are largely aligned on topics such as supporting American semiconductor manufacturing but diverge on the most controversial and potentially transformative aspect: the creation of a new “technology directorate” within the National Science Foundation (NSF).

China’s emergence as a technological competitor that thrives on applied research has led many policymakers to rethink the NSF’s historic focus on advancing fundamental science, pushing instead for more application- and technology-driven work. However, the NSF has been reluctant to deviate from its core mission, and the House and Senate bills reflect this tension. The NSF hopes to carefully weave more applied research and commercialization into its existing work, and the House version largely adopts that approach, proposing a modestly funded tech directorate whose programs would be determined by the NSF. The Senate bill authorizes far more funding for the new directorate and dictates how that money must be spent—an attempt to insulate the directorate from interference by other parts of the NSF.

Jacob Feldgoise
Jacob Feldgoise is a James C. Gaither Junior Fellow in the Carnegie Asia Program.
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Among the hundreds of provisions in the two bills, the proposals for a tech directorate present perhaps the greatest opportunity to accelerate U.S. technological development. So when Congress reconciles these two bills, it should keep the strengths of each approach: the Senate’s high levels of funding and the House’s institutional flexibility.

U.S. institutions lead the world in basic scientific research, but that is just one core competency that a country requires to innovate at scale. U.S. engineers and entrepreneurs must also determine the practical use cases for scientific discoveries and then fashion those technologies into new products. In recent decades, the United States has struggled to maintain these competencies, particularly as globalization moved manufacturing overseas and hollowed out American technical expertise. One of China’s greatest innovative strengths has been commercializing scientific discovery, and to compete in this arena the United States must reinforce the pipeline from basic science to real-world uses. A tech directorate would aim to do that by funding entrepreneurial fellowships, building multidisciplinary technology research centers, and expanding universities’ capacity to patent and commercialize research—key areas where the U.S. pipeline often stalls out. But the effectiveness of a tech directorate now depends on how Congress chooses to merge the divergent approaches in the House and Senate bills.

Matt Sheehan
Matt Sheehan is a fellow at the Carnegie Endowment for International Peace, where his research focuses on global technology issues, with a specialization in China’s artificial intelligence ecosystem.

The House has proposed a small tech directorate that is woven into the larger NSF and gives it the flexibility to experiment with different programs as it gets off the ground. House policymakers worked closely with the research community to construct a tech directorate that would win the NSF’s trust by collaborating closely with existing programs. The drafters worried that a highly independent new organization would sow hostility among existing NSF divisions and siphon off congressional funding from other research activities. As a result, the House approach authorizes $13 billion to its tech directorate over the next five years, but also includes an even larger increase to the NSF’s existing portfolio, keeping the tech directorate under 20 percent of NSF’s total funding.

Senate policymakers designed a more robust and independent tech directorate that doesn’t cater to the NSF’s concerns. Its version would be larger, more heavily funded, and given a carefully prescribed set of programs, such as hands-on STEM education and test beds to demonstrate and scale new technologies. These detailed program requirements and funding authorizations appear to be an attempt to insulate the tech directorate from the main NSF, preventing the larger institution from diverting the new funding toward its traditional lines of work. The Senate approach authorizes $29 billion over the next five years—more than double the House’s proposal—and would make the tech directorate 44 percent of the NSF’s total budget by 2026.

The difference in these approaches stems in part from contrasting visions for the NSF itself. While both the House and Senate bills agree that the tech directorate should help push the NSF toward more applied research, they differ on the motivation for that shift. The Senate sees this move primarily as a way to gain a leg up in technological competition with China. In contrast, the House sees it as a way to get the NSF more engaged in solving real-world problems that markets have neglected, such as climate change and public health issues. Both of these motivations have real merits, and the final bill should leave room for both.

While merging the House’s flexibility with the Senate’s funding offers a glimpse of a powerful tech directorate, adopting the weaker aspects—a stifling structure and lack of financial firepower—could derail it. The Senate carefully specified the details of its tech directorate to prevent mission creep, but that runs the risk of creating a brittle structure that will crack on expansion. A flexible tech directorate would still go to waste if it lacks the financial strength to grow quickly and experiment—a situation that the House’s low authorizations risk. The compromise bill should also incorporate the House’s higher funding for the existing NSF, to minimize internal conflict over new appropriations (and to bolster its important mission).

America’s innovation system needs a major tune-up to compete with China, and the new tech directorate can be a catalyst for this. The two proposals present an exciting opportunity to bolster the United States’ competencies in applied research and commercialization, and it could serve as the proof-of-concept for an agile U.S. government willing to take risks up and down the innovation pipeline, not just on basic research. Congress should capitalize on this fleeting window to pass legislation with the potential to transform investment in U.S. innovation.