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Go to: Table
1. Total R&D by Agency (House Action as of 8/29)
Table 2. Total R&D by Agency (Senate Action as of 8/29)
Table
3. Basic and Applied Research by Agency (House Action as of 8/29)
Table 4. Basic and Applied Research by Agency (Senate Action as of 8/29)
PDF version
of this document
Related sites:
AAAS
Report XXVI: Research and Development FY 2002 (President's Request
for FY 2002; full text on line)
AAAS R&D Funding Updates for FY 2002
Senate appropriations:
Department of Energy
U.S. Department
of Agriculture
Department of Commerce
Department of Transportation
Department of the
Interior
National Aeronautics and Space Administration
National Science Foundation
Environmental Protection Agency
AAAS R&D Funding Updates for FY 2002
House appropriations:
Department of Energy
U.S. Department
of Agriculture
Department of Commerce
Department of Transportation
Department of the
Interior
National Aeronautics and Space Administration
National Science Foundation
Environmental Protection Agency
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(This analysis is a progress report
on FY 2002 House and Senate appropriations so far in the budget process,
and summarizes the AAAS R&D Funding Updates released so far. The
complete series of AAAS R&D Funding Updates, including continually
updated analyses of R&D by agency in FY 2002 appropriations, is
available on the AAAS R&D Web Site (http://www.aaas.org/spp/R&D)
in the "FY 2002 R&D" or the "What's
New" sections.)
Congress returns next week from a month-long August
recess to confront a slow-moving FY 2002 appropriations process that
has just become even more difficult. Before leaving Washington, Congress
made some progress on FY 2002 appropriations. Both the House of Representatives
and the Senate drafted their separate versions of 9 out of the 13 appropriations
bills, but left the largest and most difficult bills for the fall. None
of the appropriations bills has been signed into law, or even gone to
House-Senate conference. The task of getting all 13 appropriations bills
signed into law on or soon after the October 1 start of FY 2002 became
even more difficult this past week. Revised budget projections show
that because of the slowing economy and the large tax cuts enacted in
June, the projected non-Social Security surpluses for the next few years
have disappeared, forcing politicians to choose between dipping into
the politically sacred Social Security surplus to fund domestic and
defense programs, or paring back spending. The political pain involved
in making these decisions, as well as the differing interests of a Republican
President, a Democratic-controlled Senate, and a Republican-controlled
House, now make it certain that the appropriations process will not
be done until late in the fall, and makes it impossible to predict final
FY 2002 funding levels for federal R&D programs.
FY 2002 R&D in House and Senate Appropriations
Before a month-long summer recess, the House and Senate
drafted separate versions of 9 out of the 13 appropriations bills. In
September, some of them still await Senate approval (the House approved
all 9 bills), and all of them must go to House-Senate conference. Then,
the final versions have to be approved by the House, the Senate, and
the President. These bills fund most of the R&D funding agencies,
but neither the House nor the Senate have even started work on bills
funding the two largest R&D funding agencies (the Department of
Defense and the National Institutes of Health).
Both the House and the Senate would offer modest increases
to the R&D agencies whose budgets they have considered so far. While
the President's request would have cut R&D funding for nondefense,
non-NIH agencies, both chambers would bring funding above the FY 2001
level. The House would appropriate $28.0 billion for R&D in its
versions of the nine appropriations bills (excluding NIH, DOD, Education,
and some other minor agencies), a modest 2.2 percent or $594 million
increase over the FY 2001 funding level, but $1.2 billion above the
overall cuts requested by the Bush Administration (see Table
1). The Senate would be even more generous than the House with $28.6
billion for the same programs, 4.1 percent above FY 2001 and nearly
$1.8 billion above the request (see Table 2).
For some agencies, the House would be more generous than the Senate
while for others the Senate would be more generous; these differences
will have to be resolved in House-Senate conference.
When it returns to session in September, Congress will
face enormous pressure merely to keep funding at the currently proposed
levels. The nine appropriations bills were drafted before the August
recess, before revised budget projections cast extreme doubt on whether
one could approve the President's request and still preserve the Social
security surplus (see next section). They were also drafted before the
costs of the remaining appropriations bills, including the big-ticket
areas of health, defense, and education, could be considered. With the
new budget situation, funding levels above the President's request,
such as the levels proposed for R&D programs, are threatened because
of the need to conserve projected Social Security surpluses and to set
aside enough funds to draft the four remaining appropriations bills
in the fall. (For details on individual agency appropriations, please
see the agency R&D Funding Updates on the AAAS
R&D Web site).
- The House, in appropriations action so far, would offer modest
increases to most R&D funding agencies. For the agencies whose
appropriations the House has drafted, total R&D would increase
by 2.2 percent or $594 million (see Table
1). The House would offer a $272 million or 8.3 percent increase
for R&D in the National Science Foundation (NSF), a sharp contrast
to the requested cut in the Bush budget request. The House would also
boost NASA R&D funding by 4.5 percent or $446 million to $10.4
billion, in contrast to flat funding in the request. With the notable
exception of the Department of Commerce, most other R&D funding
agencies would see flat funding or small increases and would receive
far more than the cuts requested by the Administration. Commerce R&D
would fall 9.4 percent in the House plan because the House would concur
with the Administration plan to eliminate R&D in the Advanced
Technology Program.
- The Senate would offer larger increases than the House for most
R&D funding agencies. For the agencies whose appropriations
the Senate has drafted, total R&D would increase by 4.9 percent
or $1.1 billion (see Table 2), $1.8 billion
more than the Administration request. The Senate would provide smaller
increases than the House for NSF R&D (up 4.0 percent) and NASA
R&D (up 0.4 percent), but larger increases than the House for
most other agencies. The Senate would boost Department of Energy (DOE)
R&D by 8.3 percent to $8.4 billion, with increases for all three
of DOE's missions in defense, energy, and science. In contrast to
a requested cut of nearly 10 percent, the Senate would boost R&D
in the Department of the Interior by 4.3 percent. And in contrast
to the House and the Administration's proposal to zero out the Advanced
Technology Program, the Senate would give substantial increases not
only to the ATP but to other Commerce R&D programs for a Commerce
R&D total of $1.4 billion, a 13.5 percent increase.
- The House and the Senate would offer increases for basic and
applied research in appropriations so far (see Tables
3 and 4). For the agencies whose
appropriations the House has drafted, basic research would rise by
2.9 percent to $9.4 billion, including a 9.2 percent increase for
basic research at NSF, but neither the House nor the Senate has drafted
appropriations for NIH, the largest federal sponsor of basic research.
The Senate would provide a 3.6 percent boost to basic research for
the same group of agencies, including large boosts for basic research
in NSF, DOE, and USDA. If applied research is also included, House
appropriations so far would lead to a 3.2 percent boost in total research
to $17.8 billion, with large increases for NSF and NASA balanced by
small increases or small cuts for most other agencies. For total research
in the Senate, the increase would be 7.0 percent with across-the-board
increases for most agencies, including substantial boosts for basic
and applied research in NSF, DOE, NASA, and Commerce.
Policy Context and Budget Outlook:
A Recap of the FY 2002 Budget Process So Far
In April, President Bush requested a total of $661
billion for discretionary programs in FY 2002, a 4.0 percent increase
over FY 2001, but with only placeholder numbers for the DOD budget pending
completion of a strategic review. In late June, the Bush Administration
finally released its FY 2002 DOD budget request for $329 billion, a
$27 billion increase over FY 2001 that pushed the total FY 2002 discretionary
request up to $680 billion. While this would represent a 7.1 percent
increase over the original FY 2001 level (before a July FY 2001 supplemental
of $7 billion), the entire increase and then some would go to defense,
education, and the National Institutes of Health, leaving all other
domestic discretionary programs with less money in FY 2002 than in FY
2001. Not surprisingly, although request called for enormous increases
in DOD and NIH R&D, all other R&D funding agencies would share
in the squeeze on discretionary spending and would see their funding
decline (see AAAS
Report XXVI: R&D FY 2002 for details of R&D in the FY
2002 request).
The Bush Administration squeezed discretionary spending,
except for the priority areas of education, defense, and health, in
order to make room for large, multi-year tax cuts that were signed into
law in June. The final tax cut bill, although scaled down from the Administration's
original proposals, is estimated to cost $1.3 trillion over the next
eleven years, plus another $500 billion in extra interest costs resulting
from the lost revenue. In the April budget, the budget projections showed
that the President's discretionary proposals, the tax cut, and other
budget proposals could all be paid for while still preserving Social
Security surpluses for the next ten years, allowing all Social Security
surpluses to be used for paying down the national debt.
At first, Congress went along with the Administration
proposal. Although Congress scaled back the Bush-proposed tax cut slightly
and added immediate FY 2001 tax cuts that were not in the original proposal,
Congress approved the tax-cut bill by wide margins. In the May congressional
budget resolution, Congress' own budget plan, lawmakers factored in
the cost of the tax cut and agreed with the President's original proposal
for $661 billion in discretionary spending. At the time, the Administration
had not delivered its final DOD request so Congress wrote in a provision
that allowed the House and Senate Budget Committees to release extra
DOD funds when the request finally arrived, provided that the extra
funds would not tap into the Medicare program's trust fund surplus.
Congress joined the President's often-repeated commitments to balance
the federal budget without using the Social Security surplus, and went
one better by promising to keep the budget balanced even without the
$30 billion Medicare surplus.
By summer, however, it became increasingly clear that
the April budget projections were far too optimistic and that U.S. economic
growth was slowing dramatically, depressing federal tax revenues. Then,
when the DOD request came in $18 billion above the placeholder April
request, it became clear that funding the new $680 billion request would
involve tapping all of the $30 billion Medicare surplus, and maybe even
the politically sacred Social Security surplus. Complicating matters
further, in June Senator Jeffords (I-VT) left the Republican Party and
handed control of the Senate to the Democrats, meaning that the Senate
Budget Committee, which was to release the extra DOD funds, was now
under Democratic control and was far less eager to approve large increases
in defense spending than before.
Although Congress started the FY 2002 appropriations
process in June, progress was slow because of the shift in Senate control
and the desire of many lawmakers to wait for revised budget projections
in August and the DOD request in late June to see how much money was
really available. After fits and starts, the House and Senate each drafted
9 of the 13 appropriations bills, but none of them went to House-Senate
conference and both the House and the Senate postponed action on the
most difficult appropriations bills, including the ones funding education,
defense, and health programs, until the fall. Even in the protracted
budget processes of the past few years, at least a few appropriations
bills had been signed into law by the August recess, but none made it
all the way to the President's desk this year.
As taxpayers' tax rebate checks began arriving in the
mail, congressional Democrats leveled harsh criticism at Republicans
for favoring tax cuts that were causing surpluses to vanish, and forcing
the government to dip into the Social Security surplus. Both sides awaited
the release of revised budget projections from the Administration's
Office of Management and Budget (OMB) and the nonpartisan Congressional
Budget Office (CBO) to see how much the budget picture had changed since
April.
Revised Budget Projections: Deficits Return
Last week, OMB released its revised budget projections
first. OMB's report showed that because of the tax cut and the slowing
economy, the unified FY 2001 surplus projection had plunged from $281
billion to $158 billion. More importantly, the non-Social Security surplus
in both FY 2001 and FY 2002 had narrowed to a projected $1 billion,
an amazingly small margin in a $2 trillion budget, with surpluses of
just $2 billion in FY 2003 and $6 billion in FY 2004. In just four months,
the projected surplus for this year had declined by $123 billion. The
projections were heavily criticized, however, because the small remaining
surpluses relied on some questionable accounting: the FY 2001 non-Social
Security surplus relied on an accounting change for Social Security
that departed from traditional accounting practices: without the change,
there would be a $4 billion non-Social Security deficit. The FY 2002
surplus relied on a projection for 3.2 percent economic growth in FY
2002, a predicted economic rebound far more robust than what most economists
are projecting.
This week, however, CBO released its own revised budget
projections, which showed that because of the tax cut and the slowing
economy, the non-Social Security surplus in FY 2001 would completely
disappear and go into deficit. CBO projects a $9 billion on-budget (excluding
Social Security and the U.S. Postal Service fund) deficit in FY 2001
and further on-budget deficits in FY 2003 and FY 2004. Although the
CBO analysis projects a tiny $2 billion on-budget surplus in FY 2002,
this is only because the CBO projections assume that discretionary spending
will grow at the level of inflation after FY 2001; if one assumes the
Bush Administration's FY 2002 request for discretionary spending, the
FY 2002 surplus becomes a deficit because of CBO's lower estimate for
economic growth in FY 2002 (2.6 percent). The CBO report shows the FY
2001 surplus projection shrinking by $122 billion in just three months,
and estimates that $74 billion of the disappearing surplus is due to
the June tax-cut bill and only $25 billion due to the slowing U.S. economy.
Figure 1. (click on image to view or download a full-size
PDF version of the chart)
These projections show a remarkable turnaround in the
budget picture. As shown in Figure 1, the budget picture improved during
every year of the Clinton Administration from a record $290 billion
deficit in FY 1992 to a record $236 billion unified surplus last year
(FY 2000) thanks mostly to a rapidly growing economy and also to the
combined efforts of President Clinton and the Republican-controlled
Congress to restrain government spending. (The unified surplus refers
to the surplus in all government accounts, including Social Security).
After decades of deficits, the government finally attained its longstanding
goal of balancing the budget in FY 1998, for the first time in thirty
years. Once achieved, however, President Clinton and Congress agreed
to establish a new goal: balancing the budget without counting the Social
Security surplus, or recording an on-budget surplus. (Social Security
and the U.S. Postal Service are classified as off-budget; the rest of
the government is on-budget. The USPS contribution to the off-budget
accounts is minor, a deficit or surplus of about $1 billion each year).
This new goal was barely achieved in FY 1999, but in FY 2000 there was
an on-budget surplus of $87 billion and a unified surplus of $236 billion
despite unprecedented increases in spending agreed to by the outgoing
President Clinton and 106th Congress.
With the new era of surpluses at hand, the 107th Congress
and President Bush promised to continue running on-budget surpluses,
so that all Social Security surpluses could be used to pay down the
national debt. Both sides used rhetoric suggesting that any use of Social
Security surpluses for anything other than paying down debt amounted
to a 'raid' on Social Security, even though the government had been
using Social Security surpluses to cover government spending for decades
before FY 1999. (Social Security surpluses are invested in Treasury
securities; the U.S. Treasury uses the money to either pay down the
national debt to the public or to finance government programs; neither
option reduces or endangers Social Security's assets or the program's
finances.)
The rhetoric of preserving Social Security surpluses
has come back to haunt all parties in the budget debate. After the finger
pointing of "Who Lost the Surplus?" subsides, with the President blaming
Congress for spending too much and some Democrats blaming the tax cuts,
and with everyone casting around for someone to blame for the economic
slowdown, Congress and the President will have to face reality on how
to complete FY 2002 appropriations.
With FY 2001 nearly over, there is little that lawmakers
can do to influence whether there will be a on-budget deficit or surplus
this year, so the battle lines will be drawn over what to do in FY 2002.
The dilemma is simple: according to the budget projections, it is impossible
to preserve the entire Social Security surplus in FY 2002 while at the
same time increasing FY 2002 spending on defense, education, and other
discretionary programs. While the OMB budget projections show a tiny
$1 billion on-budget surplus assuming the President's request (CBO projections
show a deficit), the President's request does not include the costs
of a major education bill stuck in House-Senate conference in Congress,
which includes billions of dollars in FY 2002 spending commitments that
both the President and Congress have promised to fund. The President's
request, of course, also assumes overall cuts in most domestic programs,
cuts that Congress had begun to reverse in the nine appropriations bills
drafted so far; now, it has become clear that reversing the cuts and
providing modest increases for domestic programs including NSF, NASA,
and other R&D funding agencies would further increase the on-budget
deficit.
Although there will be much hand-wringing over the
new deficit projections, no side can feel comfortable with the situation.
Although the President has achieved his tax cut and now also has the
powerful rhetoric of keeping the budget in on-budget surplus to curb
additional spending, the President is well aware that congressional
appropriators are looking to chisel down his proposed $27 billion DOD
increase in order to fund domestic programs, and that the price tag
of his priority education reform bill is still unknown. In response,
President Bush last week urged Congress to fund his entire DOD request
first, even though the DOD appropriations bill is perhaps the furthest
from completion of the 13. But also, just a week after promising to
preserve the Social Security surplus, the Administration backpedaled
and called it a 'symbolic goal' and said that fully funding defense
was more important. Congressional Democrats, meanwhile, may be happy
that budget surpluses have declined dramatically under Bush's watch
and as a result of his tax cut, but they are mindful that many Democrats
voted for tax cut and they are acutely aware that regardless of who
is to blame, the goal of preserving the Social Security surplus now
leaves them with no room to increase spending for their domestic priorities
unless they can manage a raid on defense. Congressional Republicans
are far more supportive of additional domestic spending than the President
but also tend to support his defense proposals, so they find themselves
in a bind of having voted for large tax cuts and publicly promising
to preserve the Social Security surplus, and now having to come up with
appropriations bills that fit into these constraints. And all parties
are becoming aware that in an economic slowdown, the standard government
remedy to stimulate the economy is to spend more, not less, and/or put
more money into the hands of consumers, both of which make good economic
policy but bad budget politics.
Earlier pledges to preserve Medicare surpluses as well
as Social Security surpluses have not been forgotten, but with both
OMB and CBO projections showing the Medicare surplus diverted to government
spending in both FY 2001 and FY 2002 (as has happened every year except
last year), there appears to be little support remaining for continuing
to insist on balancing the budget without counting the Medicare surplus.
Now, there are signs that lawmakers are preparing to break the Social
Security surplus pledge as well. The first sign was the Administration's
downgrading of preserving the Social Security surplus from a commitment
to a symbolic goal, and when Congress returns to session next week more
backsliding may follow under the rhetoric of stimulating the economy
or reordering priorities.
Breaking the promises to preserve all Social Security
surpluses would not lead to a budget crisis. The revised CBO budget
projections have reduced projected surpluses by $2.4 trillion over the
next eleven years, mostly because of the tax cuts, but the unified budget
outlook remains strong. As Figure 1 shows, the outlook for the unified
surplus remains favorable; even after a dip for the next few years,
unified surpluses are expected to remain high by historical standards.
The $153 billion unified surplus in FY 2001 would still be the second-highest
surplus in history. While the projections for FY 2005 and later look
even more favorable, they do not account for additional defense, education,
and Medicare spending supported by both the President and Congress,
and do not take into account the quirks of the tax-cut bill, which somewhat
unrealistically assume the phase out of most of its tax cuts in future
years and which also subject millions of taxpayers to the alternative
minimum tax. Both quirks are likely to be fixed by future Congresses,
costing hundreds of billions of dollars. Still, there is little danger
of large unified deficits reappearing any time soon as long as the U.S.
economy avoids a full-scale recession. Thus, the national debt to the
public will continue to decline and be nearly eliminated by FY 2011,
improving the federal government's long-term fiscal outlook just as
the Baby Boom Generation begins to retire.
When Congress returns to session next week, it will
have less than four weeks before the October 1 start of FY 2002 to complete
appropriations, a deadline that will not be met. There will be too little
time in September to approve all the appropriations bills through the
normal process, especially if there are vetoes. In the end, which may
be October, November, or even December, Congress may be forced to bundle
several unfinished or vetoed bills together into an omnibus appropriations
bill, negotiated in a frenzy behind closed doors by congressional leaders
and Bush Administration officials, and only then will it become clear
how lawmakers plan to deal with using the Social Security surplus for
spending: quietly, openly, or disguised in budgetary gimmicks. The alternatives
to tapping the Social Security surplus, raising taxes or cutting spending,
are too painful.
Left hanging in the balance is the fate of federal
R&D. Although DOD and NIH will almost certainly receive the large
increases requested by the Bush Administration no matter what happens
in the budgetary endgame, the appropriations outcomes for the non-NIH
nondefense agencies are still unclear. Although the House and Senate
have so far offered modest increases for these programs, setting final
funding levels for these programs will be extremely difficult in this
budget environment, and it is unclear whether the President will go
along with the higher funding levels or whether he will insist on his
requested levels in order to conserve funds for his priorities. For
all the agencies, even DOD and NIH, it may be a long fall of waiting.
- August 29, 2001
AAAS R&D Budget and Policy Program
1200 New York Ave, NW
Washington, DC 20005
(202) 326-6607; -6600
science_policy@aaas.org
http://www.aaas.org/spp/R&D
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