To sustain the "US Innovation Engine," the United States must quickly address its current deficiency in basic science research. The National Science Foundation (NSF) budget, at 1/100th the size of the defense budget, is much, much too low to produce the fundamental scientific research that is needed to sustain economic development over the next several decades. The same can be said of the funding granted to NIH, DoE, NIST, NASA, and every other agency that promotes scientific advancement.
Meanwhile, the Department of Defense is due for a major reduction in funding: the current level is obscene, at $689B in FY2010.
This problem can be easily solved by shifting no less than one half of the DoD budget to non-defense research and STEM education at the secondary and post-secondary levels.