The Fiscal Responsibility Act passed through the House and Senate only a few days before the default date. It's now on its way to the President's desk to extend the debt ceiling up to January 1st, 2025 and avoid a catastrophic default. The bill includes a lot more than just the debt limit extension thought; stricter work requirements for welfare benefits, permitting reform, the resumption of student loan payments, and PAYGO language all included in the negotiations.
While all these are important issues, we’re going to be looking at how the FRA will impact R&D spending for the years to come. If this bill passes, total discretionary spending will be capped at $1.59 trillion for FY 2024, a small step down from the $1.73 trillion of FY 2023. After FY 2024, spending levels are to receive only a 1% increase for the subsequent five years, though all discretionary caps from FY 2025 onward can be waived.
When it comes to the research portion, the FRA as it currently stands would result in an estimated $8 billion drop in R&D funding, felt primarily by the non-defense side. If the proportion of the budget that non-defense R&D receives is kept consistent with the Presidential Budget Request for FY 2024, 5.3% of total discretionary spending, non-defense spending is estimated to see a $9 billion decrease from FY 2023 levels, and only a 1% increase in subsequent years.
That decrease is notably larger than the decrease in total R&D, as we expect the defense discretionary budgets to be established at the FY 2024 requested levels as negotiations have kept defense explicitly excluded from the cuts. In fact, the total defense discretionary number in FRA is actually larger than in the Presidential Budget Request, meaning that the non-defense side is facing an even bigger share of the decreases than anticipated.
We’ve written before about what these cuts could mean for the STEMM enterprise, and we’ve similar cuts in the past. While the FRA cuts are not as steep as the ones in Limit, Save, Grow Act, we will still see some significant impacts on researchers, discoveries, and tech transfer for years to come. This is especially visible when looking at the difference between the current CBO estimates for R&D funding, and the estimated numbers that the FRA would suggest. By FY 2029, the last year the FRA proposes a discretionary cap, the U.S. will have underinvested by a little over $170 billion in R&D.