Last week the Trump Administration released its final figures for the just-completed 2019 fiscal year, and as expected, the fiscal situation continues to look increasingly difficult. According to Treasury Department figures, the FY 2019 deficit rose to $984 billion, representing a $205 billion or a 26.3 percent jump above FY 2018.
As a share of GDP, the federal deficit rose to 4.6 percent, its highest point since FY 2012 in the wake of the financial crisis and the Recovery Act (see graph below).
Net interest on the national debt – essentially, paying for past borrowing, and thus directly related to past deficits – continued its recent uptick, reaching $375.6 billion according to Treasury data. That puts interest payments near 1.8 percent of GDP, versus 1.2 percent a few years ago.
By comparison, based on preliminary White House data and adjusting for the late FY 2019 omnibus, all federal R&D outlays – including defense, energy, space, and other areas – likely ended up north of $130 billion. That means interest payments were nearly triple the size of all federal R&D investments last year.
The gap between R&D spending and debt repayment hasn’t been that large in 20 years. See the AAAS historical dashboard to noodle with related spending data.
According to the nonpartisan Congressional Budget Office, this recent rise in interest spending is just the early phase of a much longer-term trend in which interest payments and mandatory healthcare programs increasingly dominate the federal budget. The underlying data for the below chart comes from CBO’s most recent long-term outlook.
Under CBO’s scenario, should it come to pass, interest payments would exceed all defense spending sometime around 2030, and all discretionary spending sometime after 2040. Discretionary spending, of course, is where almost all federal R&D lives, and indications are it’s heading for a prolonged squeeze.
There are multiple factors that lead to the above scenario. For instance, an aging American population and rising healthcare costs continue to drive health and retirement spending, while tax revenues fail to keep up – and the 2017 tax reform bill played a role in this. The recent budget deals to raise the spending caps and pave the way for increased science funding have also contributed to this scenario, as they were mostly deficit-financed (unlike earlier cap deals in 2013 and 2015 which included a variety of spending offsets).
Essentially, policies that led to some of the largest research funding increases in years will also contribute to a squeeze on that same funding in the long-term.
The bottom line is, given current trends and absent a broader fix, Congress will likely have only limited ability to ramp up R&D investments in the years ahead. This helps explain the emphasis on public-private-academic partnerships by current White House science policy leadership. Such partnerships may well grow in prominence out of necessity, as resources remain scarce.