Thomas G. Dolan, editorial page editor for Barron’s asserts in an editorial yesterday that federal support for basic research is overrated — what’s really needed to drive innovation in this country are R&D tax cuts for American business and “permanently opening the golden door for foreign scientists and engineers.” And while he’s not wrong that both tax cuts and improved visa policies are probably key pieces keeping America’s innovation ecosystem powering along, his understanding of the (crucial) role of basic research in that process is somewhat lacking.
Fortunately, CCC Council Chair Ed Lazowska (who is also the Bill and Melinda Gates Chair in Computer Science and Engineering at the University of Washington), has penned this response to help fill out the picture a bit. Here, with permission, is the note he sent to Barron’s:

Your editorial tackles a critical issue.
The steps that you focus on — tax policy (particularly, making permanent the R&D tax credit) and immigration policy — are important elements of a solution.
But improvements to our education system, to federal support of fundamental research, and to various policies that create “friction” in the innovation ecosystem, are equally important.
There have been several authoritative studies of how innovation actually occurs in information technology — my own field.
Let me focus on research here, although there is just as much to say about the other elements of the innovation ecosystem.  America is the world leader in IT innovation due to a complex interplay of universities, industry, and the federal government.  Essentially every aspect of IT upon which we rely today – every billion-dollar sub-category of the IT industry – bears the clear stamp of federally-supported university-based research.  See, for example, the figure on pages 6 and 7 of this National Academies study.
Continued investment is necessary to maintain our leadership and competitiveness.  Achieving many of the “societal grand challenges” of this century will depend critically on further fundamental advances in IT:  the engineering of new tools that will transform scientific discovery; advancing personalized learning; shifting towards predictive, preventive, personalized, participatory medicine; enhancing national security; developing smart controls and smart electric grids needed to address energy and climate challenges.  Many of the “grand challenges” of IT itself will have broad implications for society:  securing cyberspace; designing truly scalable systems; enhancing virtual reality; creating the future of networking; infusing “computational thinking” into a wide variety of disciplines which are themselves becoming “information sciences”; driving advances in entirely new approaches to computing such as quantum computing.
Research is the key to making progress on these grand challenges.  Both industry and the federal government have important, but different, roles to play.  It is crucial to avoid confusing the IT industry’s research and development (R&D) expenditures with fundamental research that is guiding our way to the future.  The vast majority of corporate R&D in IT – far more than 95% – involves the engineering of the next version of a product.  This “development” is essential.  But the transformative ideas – and our nation’s long-term leadership – come from long-range research.  It is a natural and essential role of government to support this fundamental research – R&D that looks out 5, 10, or 15 years, rather than just one product cycle.  This federally-supported research takes place primarily in America’s universities and has the benefit of producing not just the ideas that will power the nation and the world, but the people who will make them happen.  The relatively modest federal investment in IT research has played an essential role in the past, and will play an equally essential role in the future.
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Ed Lazowska
Bill & Melinda Gates Chair in Computer Science & Engineering
University of Washington
http://lazowska.cs.washington.edu