(This analysis is a preview of the forthcoming AAAS
Report XXXI: Research and Development FY 2007, a comprehensive look at
the President's budget for R&D in FY 2007. More tables and continually updated
supplemental materials on R&D in the FY 2007 budget can be found on the AAAS
R&D Web site at www.aaas.org/spp/rd).
President Bush
released his fiscal year (FY) 2007 budget proposal in February. As in previous
years, a major focus of the budget is the President’s promise to halve the deficit
by the time he leaves office in 2009. In order to do so, the President proposes
to continue cutting domestic discretionary spending in future years, and also
to restrain defense and homeland security spending after large increases until
now. But in his FY 2007 budget, President Bush introduced a new American Competitiveness
Initiative to boost funding for physical sciences research by setting in motion
a plan to double the budgets of the National Science Foundation (NSF), DOE’s Office of Science, and the National Institute of Standards
and Technology (NIST) laboratories over the next 10 years, and continued to emphasize
his Vision for Space Exploration calling on NASA to increase R&D over the
next few years to get closer to the goal of returning humans to the moon and going
onward to Mars.
In
order to accommodate these four agency increases within a shrinking overall budget,
this new AAAS analysis shows that funding for all other R&D funding agencies
would decline in real terms over the next five years. Nearly every federal R&D
program outside the priority areas of physical sciences and space would fall,
often sharply. These projections are only projections, but they carry considerable
weight because previous years’ projections have proved to be accurate guides to
current federal R&D funding levels.
Projections for R&D in the FY 2007 Budget: All R&D Agencies Decline Over Next Five Years
Except NASA, NSF, DOE Science, and NIST
The
FY 2007 budget contains projections for federal spending and revenues to FY 2011,
and provides the assumptions behind the Bush Administration’s goal of reducing
the budget deficit. As in the past two budgets, there was controversy this February
when the Bush Administration did not publish detailed account projections for
individual federal programs in the FY 2007 budget, though they were traditionally
made public. Instead, only aggregate totals were published showing unspecified
future reductions in discretionary spending and detailed projections were given
only for selected agencies (namely agencies in line to receive increases in future
years such as NASA and DOE). The detailed projections are only available in an
unpublished computer printout circulating around Washington,
which AAAS has obtained. Although these projections are mostly extrapolations
of current policies, they are far from mechanical exercises; as this analysis
shows, the projections show widely differing budget trajectories for programs,
and show how overall budget goals translate into specific program budgets. More
importantly, past projections have proved to foretell the current R&D funding
environment. The AAAS analysis of the latest outyear
projections reveals that the Bush budget would cut R&D funding for all major
R&D programs over the next five years except for NASA’s space exploration
programs and the three agencies singled out in the American Competitiveness Initiative.
Even defense and homeland security R&D, recipients of large increases until
this year and projected for increases in past budgets, would decline in the latest
projections.
- Federal
support for R&D is projected to increase from $134.5 billion this year to
$141.9 billion in FY 2011, a nominal increase but a 5.1 percent cut after adjusting
for expected inflation (see Table 1). There is
money set aside for NSF, DOE’s Office of Science, and NIST to win substantial gains
every year through 2011 to stay on course for a 10-year doubling path and for
NASA to build new space vehicles. But there are projected cuts for every other
R&D funding agency (see Figure 1).
-
Although NASA R&D is projected to gain 42 percent in real terms to an R&D
budget of $17.8 billion by 2011, the gains would go solely to a dramatic ramp-up
of the Constellation Systems program from $1.7 billion this year to $7.7 billion
in 2011 (up 300 percent after inflation), and a 21 percent real boost for finishing
the Space Station. The largest gains would come in 2011 (see Figure 1), based
on the assumption that the non-R&D Space Shuttle will be retired in 2010,
thus freeing up money for other programs. But the NASA Science portfolio would
fall 5.0 percent in real terms, and all other NASA R&D would plunge 24 percent,
including a halving of the Human Systems Research and Technology portfolio of
life and physical sciences research and a 27 percent real reduction in aeronautics
research.
Figure 1. (click
on the image for PDF)
-
The three American Competitiveness Initiative agencies, in a sharp turnaround
from previous projections and previous budgets, are projected to do well in future
budgets (see Figure 1). Despite a shrinking domestic pie, NSF, DOE Science,
and NIST would claim steadily increasing slices over the next five years to fulfill
the first half of a 10-year doubling plan. The NSF budget is projected to
climb from $5.6 billion this year to $7.9 billion in 2011, providing ample room
for NSF’s R&D investments to increase 43 percent in current dollars or 28
percent in constant dollars by 2011 (see Figure 2). The total DOE Science budget
is on track to increase from $3.6 billion this year to $5.3 billion in 2011, allowing
for a 32 percent real increase in its R&D portfolio over the next five years
(see Figure 2). And R&D in the NIST labs would grow by 54 percent in real
terms, offset somewhat by the proposed elimination of NIST’s external R&D in the Advanced Technology Program.
-
From $28.6 billion this year and next, Administration plans show the NIH budget
declining steadily to $27.5 billion in 2010 before rebounding slightly to $27.9
billion in 2011. R&D is 97 percent of the NIH budget; NIH R&D would
fall 12.1 percent in real terms between 2006 and 2011 based on these projections
and would end up below the 2002 funding level (see Figure 1), well below the highs
reached after the NIH doubling campaign of 1998-2003.
-
Defense and homeland security R&D would reverse recent gains. After
dramatic increases over the past several years, DOD R&D would level off and
decline in coming years. Pentagon projections show total DOD R&D falling from
$72.5 billion this year down to $71.2 billion in 2011, a slight cut even before
inflation but an 11.6 percent fall after expected inflation. DHS R&D would
also fall after spectacular recent gains, losing ground by 4.6 percent in real
terms by 2011 (see Figure 2). Although R&D in the new Domestic Nuclear Detection
Office and for biological countermeasures would increase, funding for all other
DHS R&D priorities collectively would fail to keep pace with inflation.
-
Other nondefense R&D agencies are projected to
see dramatic reductions in their R&D portfolios, falling between 10 and 30
percent over the next five years (see Table 1 and
Figure 1). The U.S. Department of Agriculture (USDA) would be hard hit with a
28 percent real reduction in R&D by 2011, mostly from reductions in facilities
and earmarks in 2007 that would be carried forward in future years (see Figure
2). Environmental R&D agencies would lose close to 20 percent of their funding
over the next five years, including EPA (down 17 percent), the U.S. Geological
Survey (down 18 percent), and the National Oceanic and Atmospheric Administration
(NOAA, down 19 percent).
Figure 2. (click
on the image for PDF)
-
The Bush Administration’s recently announced support for some alternative energy
R&D technologies could be short-lived. Unlike the situation in DOE Science
where there is money set aside for future increases, the Energy Supply and Conservation
budget account, which funds R&D on the priorities of solar, biomass, and wind
energy, would increase substantially in 2007 but then slide back down in future
years, resulting in a slight cut after inflation. Cuts in other areas of energy
R&D proposed for 2007 would continue in future years would leave the DOE energy
R&D portfolio at $1.2 billion by 2011, an 18 percent loss in real terms (see
Table 1).
The FY 2007 Outyear Projections
in Historical Context: Earlier Projections Became Reality
Although
the Bush Administration has done its best to hide these outyear
projections and has dismissed them as mechanical exercises carrying no policy
weight, previous projections have been remarkably accurate in foretelling actual
appropriations for federal R&D over the last few years (see Figure 3).
Figure 3 compares outyear projections from four previous
budgets (FY 2002 through FY 2005; outyear projections
were not available in the FY 2006 budget) as reported in previous AAAS analyses
to the amounts actually appropriated for the major groupings of NIH R&D, NASA
R&D, and all other nondefense R&D. As Figure
3 shows, the outyear projections have been remarkably
consistent over the years, and appropriations have matched the projections year
after year.
Figure 3. (click
on the image for PDF)
Previous
projections of the NIH budget flattening out and declining during this decade,
considered alarmist and unrealistic at a time when the NIH budget was in the middle
of a five-year doubling campaign, have foretold the flattening and now declining
NIH budget of recent years with uncanny accuracy (see top lines on Figure 3).
If anything, the chart shows that projections for NIH R&D have understated
the cuts that have actually happened. Despite all the turmoil and trouble at NASA
and the announcement of the Vision for Space Exploration in early 2004, NASA R&D
has followed previous projections closely (bottom bars of Figure 3), showing the
consistency with which the Bush Administration has pursued a flat funding profile
for NASA even as the agency has taken on the mission of returning humans to the
moon. Figure 3 shows that NASA R&D has actually fallen short of previous projections,
especially in 2005 and 2006, because of responses to the Challenger disaster resulting
in the unanticipated transfer of hundreds of millions of dollars from R&D
programs to the non-R&D Shuttle program.
The
major deviation from the projections is in the Other Nondefense
R&D category (middle bars of Figure 3), appropriations for which have turned
out to be flat, but significantly above the FY 2001 and FY 2002 projections. But
the FY 2001 projections were made before the fall 2001 terrorist attacks and therefore
long before the now-substantial DHS R&D portfolio and other homeland security
investments were on the drawing board, and the FY 2002 projections were higher
than the previous year but were still made a year before DHS was created. Despite
the nearly 20 R&D funding agencies contained in this category of Figure 3,
actual appropriations and the FY 2007 request have turned out to be remarkably
similar to the projections from three years ago and two years ago.
The
match of appropriations and requests to earlier projections show the consistency
with which the Bush Administration has pursued its budget policies of restraining
spending for domestic programs, and the willingness of a Congress controlled by
the President’s party to go along with his overall budget policies while making
only minor adjustments on the details. Unlike outyear
projections in the 1990s which turned out to be wildly off the mark for a host
of reasons, and unlike recent projections for defense and homeland security R&D
which were overtaken by unexpected events, nondefense
R&D projections from earlier in the decade have matched eventual reality despite
the many twists and turns taken by history this decade.
The Budgetary Context for FY 2007: Reducing the Deficit
Through Discretionary Cuts
Figure 4. (click
on the image for PDF)
The
Bush Administration has consistently proposed to reduce the federal budget deficit
primarily by reducing discretionary spending, the one-third of the budget subject
to the annual control of the President and the Congress, and also the part of
the budget from which nearly all federal R&D is funded. Figure 4 shows historical
trends in discretionary spending and the latest FY 2007 proposals out to 2011.
It clearly shows that the goal of reducing a $412 billion 2004 deficit to $208
billion by 2009 depends heavily on cutting discretionary spending sharply over
the next few years. To reduce discretionary spending on the defense side, the
budget allots nothing for future costs in Iraq
and Afghanistan.
Figure 4 includes all such war, occupation, and reconstruction costs up to FY
2006 and the first few months of FY 2007, but the apparent cuts on the defense
side and thus a great deal of the deficit reduction goal depend on the illusion
that war spending will stop early next year.=
Figure
4 shows that over the past several years, there have been dramatic increases in
both defense and nondefense discretionary spending after nearly a decade of
relative restraint in the 1990s. On the defense side, there have been large increases
in the regular DOD budget topped off in the last five years by Iraq
and Afghanistan
costs. On the nondefense side, there have been large
increases in the relatively new category of homeland security spending along with
some additional funds for foreign aid to Iraq
and Afghanistan;
the FY 2006 total goes higher still to a new record because of emergency appropriations
to respond to Hurricane Katrina. The FY 2007 budget proposes to reduce non-emergency
domestic spending by 0.5 percent, following a similar cut in 2006, and to keep
reducing domestic spending every year to 2011, while at the same time assuming
nothing for further spending on Gulf
Coast reconstruction or future disasters.
While discretionary spending is proposed for cuts, spending on entitlement
programs would increase dramatically. Even with recent increases, discretionary
spending as a share of the U.S.
economy is still well below the levels of the 1980s and early 1990s. The real
growth in federal spending has been in entitlement and other mandatory programs,
now two-thirds of the federal budget. Earlier this year, a prescription-drug benefit
for the Medicare program went into effect, which will dramatically increase future
Medicare spending; spending on Medicare, Social Security, Medicaid, and other
entitlements would continue to grow far faster than the rate of inflation in the
FY 2007 budget, despite some proposed minor trims in the proposal. In addition,
mandatory payments of interest on the national debt would also climb because the
national debt is growing rapidly from the accumulation of record annual deficits.
Even in times of record budget deficits, the FY 2007 budget proposes more
tax cuts. As a result of large tax cut laws enacted earlier this decade, the
federal government is expected to take in 17.5 percent of the U.S. Gross Domestic
Product (GDP) in tax revenues this year, down sharply from nearly 21 percent at
the turn of the century. These reduced revenues, primarily from income tax cuts,
are the primary reason for record deficits. In order to make the total costs of
past tax cut laws appear smaller, nearly all of the tax cut provisions enacted
earlier this decade expire over the next several years, with some income tax provisions
already expired at the end of 2005. The Congressional Budget Office recently estimated
that the Bush Administration FY 2007 budget proposals to extend expiring tax provisions
would reduce revenues by $1.5 trillion over the next decade, with more than 80
percent of the revenue losses in the second five years.
Because
appropriations decisions are made annually, projections are always wrong. They
are not predictions. The FY 2007 appropriations process is just now getting under
way in a Congress with slightly different priorities than the President, and future
appropriations will be decided one year at a time. But the projections illustrate
the consequences of reducing the budget deficit by restraining domestic discretionary
spending rather than a balanced mix of entitlements reductions, increasing revenue,
domestic spending cuts, and defense / homeland security cuts. While the specific reductions contained in
these projections are not inevitable, recent experience shows that they are a
good guide to what lies ahead, at least as long as the Bush Administration and
this Congress continue to pursue current budget policies. And they illustrate
the tough trade-offs that must be made between key priorities such as physical
sciences research and the rest of the federal R&D portfolio.
-
March 8, 2006
(More materials on R&D in the
FY 2007 budget, historical data and charts, and more information on AAAS
Report XXXI: Research and Development FY 2007, can be found on the AAAS
R&D Web site at www.aaas.org/spp/rd.)
