This spring was dominated by conversations of trimming down the federal budget to help reduce the U.S. national debt, culminating in the Fiscal Responsibility Act (FRA), which mandated a cut in total discretionary spending and a maximum 1% increase for the subsequent five years when signed into law. If appropriators do not reach a consensus that can be signed into law and a continuing resolution is still in effect on April 30, 2024, a sequestration would occur to bring discretionary spending down to FRA amounts.
This is not the first time that cuts have been mandated; we’ve only just recently finished the last wave of mandated discretionary spending caps: the Budget Control Act (BCA) that was signed in fiscal year (FY) 2011 and
continued through FY 2021. The BCA cuts impacted R&D funding, costing an estimated $200 billion in federal R&D over the course of the decade BCA was implemented, despite the discretionary caps being waived on multiple occasions.
Legislators made deals six times over the lifespan of BCA to increase discretionary spending levels above the caps, meaning that the harsh cuts in the original deal were softened over time. This reality is built into the new FRA deal, requiring that the caps be maintained for the first two years, but leaving Congress the option to waive them in the subsequent three years.
The Congressional Budget Office (CBO) initially calculated that the BCA would reduce discretionary spending by $2 trillion, more than the FRA’s current prediction of $1.5 trillion. In the end, the BCA did reduce federal spending, but several types of spending were exempt from the limits (e.g., military, pandemic) and coupled with the waived caps, the reduction was not as extreme as expected. FRA may have waived caps too, so the cut may become less severe with time, but it will still have impacts on R&D agencies.
Last month, we published a report breaking down the amount of ‘pure’ R&D in the various appropriations proposals currently in the House and Senate. The report looked at how much of the proposed agency budgets would go directly to the performance of basic, applied, and developmental research, along with the cost of maintaining and building the facilities that those researchers would use. These numbers essentially represent the R&D capacity of an agency.
In that report, we already saw the impact of cuts to R&D, with the House treating the FRA caps as a ceiling and identifying extra funding to reduce so they can match the original Limit, Save, Grow Act numbers. The Senate is adhering to the FRA numbers, with discussions of potentially adding extra funds to Defense (and maybe other agencies) through emergency supplementals.
This report aims to reflect on the impact of the prior cuts, looking back at the R&D estimates for each agency during the BCA period (FY 2012-2021) to put into context the potential impact that the House and Senate appropriation proposals will have for the first year of FRA cuts (FY 2024), as well as how agencies have fared since the height of R&D spending in FY 2010. FY 2010 spending was so high that it was the impetus for the BCA in 2011, and is thus a good starting point for our retrospectives. All the numbers in the following breakdowns are the estimates of ‘pure’ R&D in the agencies (not total agency appropriations) and are adjusted for purchasing power to reflect how far those dollars can go.
The graph above is a representation of that R&D capacity across the agencies the report will examine, showing the FY 2010 highs, the drops as BCA was formulated and then implemented, and the occasional rise as necessary, or as BCA caps were waived throughout the years.
To download the full report, click here.