R&D Budget Cuts Could Leave US Trailing Behind

Remember the sequester? The $85 billion in federal budget cuts that were supposed to jolt Washington into figuring out a solution to the escalating debt? The ones that almost no one has ended up noticing against the backdrop of the usual political dysfunction?

They’re about to take a big bite out of innovation.

Federal agencies that pay for a third of the nation’s research and development have started drastically slowing their awards process. That’s made laboratories put a hold on hiring. And government spending on technology has plummeted enough to drag down an otherwise robust overall IT sales forecast by a full percentage point.

“There’s no doubt that things are going to slow down in the foreseeable future,” says Matt Hourihan, director of the R&D Budget and Policy Program at the American Association for the Advancement of Science (AAAS). “These are real problems that are going to have long-term impacts on the productivity of the innovation system.”

In the biggest one-year drop in four decades, government research grants are being cut by $9.6 billion, a nearly seven percent hit, the AAAS says. This follows a 10 percent decline since 2010 in R&D funding, which was more or less flat in the decade before that. And it comes at the same time that competitor nations including South Korea, China, and Singapore are vastly increasing research spending.

Since R&D has multiplier benefits to the economy, cuts that were in place even before the sequester are projected to reduce U.S. GDP by $203 billion over the next nine years, according to the Information Technology and Innovation Foundation, or ITIF. If in the last nine years U.S. R&D spending had remained constant, the foundation estimates, the economy would be $565 billion bigger. And if the United States had invested in research at the same rate as China, that number would have been $860 billion.

These additional blows will cost the nation 200,000 jobs by 2016, the ITIF says. The AAAS estimates that the National Science Foundation will fund as many as 1,000 fewer research grants.

Such consequences are not lost on lawmakers, says Jim Jensen, who heads the National Academy of Sciences government-relations office.

“A lot of senators do get that these agencies that fund the basic research are very, very important to our long-term economic security,” Jensen says. “It’s just that it’s tough apportioning the U.S. budget, because this is a democracy.”

Hiring of graduate and post-doctoral students is already in limbo in university labs, which get 60 percent of their funding from the government—potentially discouraging people from going into research in technology fields.

“What a lot of us are concerned about is the long-term impact, that we’re going to lose a whole generation of researchers and scientists if there’s no way to support them and they don’t see a career out there,” says James Tracy, vice president for research at the University of Kentucky.

At NASA, which is absorbing $726.7 million of the cuts, several space technology projects are, or soon will be, on hold, including part of the agency’s investment in SpaceX and other commercial space projects. The Department of Defense is absorbing billions in reductions, though it’s not yet clear how much they’ll affect defense-related research. Funding for the Department of Energy is flat, though the R&D allocation for the Department of Homeland Security was increased enough before the sequester took effect that it remains above 2012 levels.

The sequester will take a toll on more than government-funded research. The cuts will substantially reduce all-important government IT spending. Forrester Research, which previously projected a 7.5 percent increase in tech spending nationwide for this year, now says the sequester’s effect on federal government technology purchases will reduce that by a full percentage point, down from $820 billion to about $808 billion.

The Obama administration’s 2014 budget proposal would restore some federal support for research, especially in the areas of biotechnology and clean energy, boosting research-and-development spending, but only by about 1.3 percent over 2012 levels.

The ITIF says such funding would need to be $330 billion above what the sequester allows just to stay on pace with the rest of the economy between now and 2021. To grow at the same rate as R&D in China, it would need to rise by $511 billion.

Neither seems likely in the current climate.

“We are on a trajectory that is going to keep funding restrained over the next decade, unless Congress acts,” says Hourihan.

Whatever happens, since research grants take time to kick in, people who run research labs are bracing for a frugal 2014.

“We’ve always been in a situation where, well, we might be running a little short, but we know next year will be better. Now we’re in a position where that will not necessarily be true,” says Tracy, at Kentucky.

“We’ve set a tone that R&D is not as valued by the country as it has been.”

Photo courtesy of NASA/photographer Kim Shiflett

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