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National Security and Economic Growth: A New Plan

I've already heard some complaints from free-market friends who worry that our proposals sound too much like industrial policy. But we explicitly reject industrial policy: governments should pick winners or fund businesses. But governments should fund basic research in defense, and let entrepreneurs bet on the civilian spinoffs. That's what the Reagan Administration did. As a young consultant to the National Security Council, I executed a study at the behest of Dr. Norman A. Bailey on the economic impact of the Strategic Defense Initiative. Reagan well understood the link between defense technology and growth as well as the entrepreneurial transmission mechanism. In a Feb. 19, 1985 speech presenting National Technology Awards, Reagan stated:

Our administration has made a firm commitment to technological progress. Both of them are probably true, but one we view as nothing less than a commitment to human creativity and imagination. While we're cutting back, wherever possible, unnecessary government spending, we're continuing our strong commitment to basic research and development.

We have cut personal income tax rates; we plan to cut them again. This could spur savings, and higher savings could, in turn, boost the capital formation so important in funding new high-technology ventures. And we've rolled back needless government regulations to help provide the freedom needed by those at the frontiers of technology to experiment with new hypotheses and techniques.

In space, we're opening the way to private enterprise; the space shuttle program is already working closely with private industry. And in 1985NASA is scheduled to deploy eight commercial communications satellites. Space technology will continue to grow even more rapidly as we pursue our plans to launch a permanently manned space station -- and to do so within a decade.

In defense, we're putting technology at the service of a decade's old dream: the elimination of nuclear weapons. Our Strategic Defense Initiativerepresents, perhaps, the most dramatic and wide-reaching research effort to explore the means for making nuclear weapons obsolete.

Let me make one thing plain: The Strategic Defense Initiative is not a bargaining chip. It's an historic effort on behalf of our national defense and peace throughout the world, and we intend to see it through.

The story of American technology is long and proud. It might be said to have begun with a blacksmith at his bellows, hammering out fine tools, and the Yankee craftsman using simple wood planes, saws, and mallets to fashion the fastest sailing ships on the ocean. And then came the railroad men, driving spikes across our country.

And today the story continues with the workers who built the computer in a child's room; the engineers who designed the communications satellite that silently rotates with the Earth, shining in the sunlight against the blackness of space; and the men and women of skill and determination who helped to put American footprints on the Moon.

I support Republicans who want to restrain the federal budget. I had a lot of sympathy for Sen. Ted Cruz and his colleagues when they threw themselves in front of the train in an attempt to delay Obamacare. Austerity is not a governing platform for any party, however. The plain fact is that if we can't get the U.S. economy out of its "new normal" doldrums with economic growth languishing in the 1%-2% range, and we can't raise the labor force participation rate from the alarming 63% level to which it has sunk under Obama, we can't fix the budget problems. Our economy won't be able to bear the retirement and medical costs of the next thirty years without unacceptable pain.

Dr. Kressel and I propose to start a dialogue about the twin demands of national defense and economic growth. We can do once again what America did during the Reagan years. We still have the world's best universities, the best scientists, and the most agile capital markets. But we don't have unlimited time. We have a lead, but our lead is slipping, and if we don't innovate, countries who learn to copy our present range of technologies will overtake us.