Federal Influence on Innovation

Innovation is a central driver of economic growth in the United States. Workers become more productive when they can make use of improved equipment and processes, and consumers benefit when new goods and services become available or when existing ones become better or cheaper although the transition can be disruptive to established firms and workers as new products and processes supersede old ones. Looking ahead, innovation will continue to be important for economic growth, in part because the supply of workers to the economy is expected to increase at a much slower rate in the future. The federal government influences innovation through two broad channels: spending and tax policies, and the legal and regulatory systems. In this book, the Congressional Budget Office (CBO) examines the effects on innovation of existing policies and systems and the possible effects of a variety of proposals for changing those policies and systems. This book also discusses the current status of the research tax credit; the role of trade secrets in innovation policy; and the patent system for specific industries.