GUIDE TO R&D FUNDING DATA-
THE PRESIDENT'S PROPOSED FY 2009 BUDGET

Current Headlines

2009 Budget Proposes Flat Domestic Spending, Record Deficits

On February 4, President Bush released his proposed budget for fiscal year (FY) 2009. The AAAS Analysis of R&D in the FY 2009 Budget offers details of the President's budget for FY 2009 and R&D funding in the budget.

The President's 2009 budget projects deficits exceeding $400 billion for the next two years before balancing by 2012, though the budget reaches balance only through large proposed cuts in health care entitlements, an expanding reach for the Alternative Minimum Tax (AMT) to tens of millions of taxpayers, no war funding beyond early 2009, highly optimistic economic growth forecasts, and continuing real reductions in domestic discretionary spending. In 2009, nondefense spending would be held flat with 2008, meaning a decline in inflation-adjusted terms with further cuts envisioned in future years (see Figure, below). Already, nondefense spending has been flat or declining in real terms since 2004 with only a few exceptions for Hurricane Katrina, veterans, and international needs. On the defense side, however, a war that only gets more expensive with time has pushed defense spending to record highs in 2008. The budget assumes a sharp drop in military spending in 2009 and future years, but only by excluding all war costs beyond January 2009. Adding in all war costs in 2008 and 2009 will likely push budget deficits into record $500 billion territory.

In order to make room for substantial R&D funding increases, especially for the physical sciences, in a domestic discretionary budget that would barely increase, the President has proposed to eliminate more than 150 programs, including nutrition programs, health care grants, weatherization assistance, and $3 billion in education programs, and has proposed dramatic reductions in low-income heating assistance, state and local law enforcement grants, homeland security grants, job training grants, and other state and local block grants.

- February 7, 2008

August 2007 - Online Tutorial on the U.S. Federal Budget Process (will be revised soon with FY 2009 material)

Budget Highlights:

President Bush released his proposed fiscal year (FY) 2009 budget on February 4. This budget goes to Congress for approval. Below are selected tables and charts based on data from the FY 2009 budget documents. (FY 2009 begins on October 1, 2008.)

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 2009 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 2009 budget by broad category of spending (discretionary, Social Security, Medicare, etc.), including comparisons of the FY 2009 budget with the most recent estimates for FY 2008. 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 2009 Budget (2/08)

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

-Chart. The President's FY 2009 Budget by Category (2/08)

The chart below shows that the majority of federal revenues come from individuals through payroll taxes and income taxes. Revenues do not cover all spending, so the government will run a deficit and borrow money.

-Chart. The President's FY 2009 Budget by Source of Funds (2/08)

The FY 2009 budget also contains projections for spending in budget categories out to FY 2013. Growth in entitlements is expected to continue mostly unchecked, while discretionary spending would decline in real terms. 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 2007-2013 (2/08)

The budget proposes to cut overall discretionary spending in FY 2009, in sharp contrast to rapid growth for most of this decade. The Bush Administration proposes to restrain spending growth in future years, also.

-Chart. Trends in Discretionary Spending, FY 1976-2013 (2/08)

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 2013.

Table I-3. Historical Trends in R&D and Federal Outlays (2/08)
Chart. Distribution of Federal Outlays by Category, 1970-2013 (2/08)

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, the federal budget deficit has hit all-time highs. Future projections exclude many costs, such as future costs of the occupation of Iraq and Afghanistan and fixes for the growing reach of the Alternative Minimum Tax (AMT). 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. Cuts in personal income taxes have contributed the most to recent declines in federal revenues.

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 12 appropriations bills of varying sizes. The chart below shows discretionary spending by appropriations bill.

-Chart. Discretionary Spending by Appropriations Bill, Proposed FY 2009 (6/08)

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 1962-2009 (2/08)
-Chart. R&D as Percent of Discretionary Spending: FY 1962-2009 (2/08)

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