GUIDE TO R&D FUNDING DATA -
THE PRESIDENT'S PROPOSED FY 2005 BUDGET

President Bush released his proposed fiscal year (FY) 2005 budget on February 2. This budget requires approval from Congress; as of November, Congress still had not completed work on the budget. Below are selected tables and charts based on data from the FY 2005 budget documents. (FY 2005 begins on October 1, 2004.)

Because of continuing sluggishness in the economy depressing tax revenues, a new package of tax cuts enacted last May, and billions of dollars in previously unbudgeted spending to pay for the Iraq war, the FY 2004 federal budget deficit was a record-breaking $413 billion. Just three years ago, the budget was in surplus. Although the Administration's forecast sees the budget deficit declining (though not disappearing) in future years, the forecast is based on several questionable assumptions: that the U.S. economy will rebound strongly beginning this year after several years of sluggish growth, that tax cuts scheduled to expire in 2005 and 2006 will not be extended, that further supplemental spending for wars and homeland security will not be necessary, and that discretionary spending will be restrained in future years.

The data below are for the proposed budget only, and do not reflect congressional action. The complete set of budget documents is available on-line from the Office of Management and Budget in the Executive Office of the President, or in printed form from the Government Printing Office. This page presents data only for the overall federal budget. Please see our FY 2005 R&D page for our analyses of R&D funding proposals contained within the federal budget. For information specifically on R&D in the federal budget, please go to the next section of the Guide.

The first table presents an overview of the FY 2005 budget by broad category of spending (discretionary, Social Security, Medicare, etc.), including comparisons of the FY 2005 budget with the most recent estimates for FY 2004. It shows that two-thirds of the budget is for mandatory programs (net interest and entitlement programs), leaving just one-third of the budget for discretionary spending (annually appropriated programs) out of which nearly all federal R&D is funded.

-Table I-2. The President's FY 2005 Budget (2/04)

The chart below displays the same information in pie chart form.

-Chart. The President's FY 2005 Budget by Category (2/04)

The FY 2005 budget also contains projections for spending in budget categories out to FY 2009. Growth in entitlements is expected to continue unchecked, while discretionary spending would grow only slightly. Interest on the national debt, once expected to disappear, would continue to be a large expense because the government will continue to run deficits.

-Chart. Federal Budget by Category, FY 2003-2009 (2/04)

The FY 2005 budget proposes to cut overall discretionary spending in FY 2005, in sharp contrast to rapid growth in recent years. But the FY 2005 proposals allot nothing for the FY 2005 and future costs of occupying Iraq and Afghanistan and restrain nondefense, non-homeland security spending to an incraese of just 0.5 percent in FY 2005. The Bush Administration proposes to restrain spending growth in future years, also.

-Chart. Trends in Discretionary Spending, FY 1976-2009 (2/04)

Historical data in the budget show that mandatory programs have grown steadily as a share of the federal budget, and discretionary spending declined until recent years, but the discretionary share of the federal budget is now increasing (especially defense) and is expected to continue to increase moderately to FY 2009.

Table I-3. Historical Trends in R&D and Federal Outlays (2/04)
Chart. Distribution of Federal Outlays by Category, 1970-2009 (2/04)

Other historical data in the charts below highlight budget deficits or surpluses, the national debt in dollars and as a share of GDP, and federal spending and revenues as a share of the economy. In the past several years, budgets have gone from deficits to surpluses, but because of the recession, tax cuts, homeland security costs, and wars in Iraq and Afghanistan, the federal government recorded a record budget deficit in FY 2004. The deficit would decline in FY 2005, but the budget does not include any future costs of the occupation of Iraq and Afghanistan. The government had begun to pay down the national debt to the public in the late 1990s, but with the return of deficits the government is adding to the national debt again. The government will continue to accumulate government-held debt, mainly debt held by the Social Security trust fund.

At the same time, federal spending as a share of the economy has increased in recent years, while federal revenues have declined as a share of the U.S. economy because of increased spending on one side and proposed and enacted tax cuts on the other.

The discretionary portion of the budget funds programs with a variety of missions, though the largest single mission remains national defense. Discretionary spending is appropriated each year through 13 appropriations bills of varying sizes.

-Chart. Discretionary Spending by Appropriations Bill, Proposed FY 2005 (2/04)

R&D is a significant but declining part of the federal budget. Nearly all federal R&D is funded through the discretionary portion of the budget, and although R&D has remained relatively constant as a share of all discretionary spending, R&D has declined as a proportion of the total budget as the discretionary share of the budget has declined. (For more information on R&D in the federal budget, please go to the next section of this Guide.)

-Chart. R&D as Percent of the Federal Budget: FY 1962-2005 (2/04)
-Chart. R&D as Percent of Discretionary Spending: FY 1962-2005 (2/04)

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