I watched the first presidential debate today and the focus on jobs and growing the economy started me thinking back to a national conundrum we faced in 2011 and its repercussions today. Election mania has taken over and it has been a long time since 2011 and the Debt Ceiling crisis we thought was going to bankrupt the country. Remember that? If you recall, the way out of the deadlock surrounding how to raise the national debt ceiling was the Budget Control Act. This act raised the national debt ceiling and called for a decrease in the national debt of at least $2.1 billion over the coming 10 years. The cuts were to come from decreases in military spending combined with a plan that would be decided by a bipartisan debt-reduction committee (the reduction from the committee should amount to at least $1.2 trillion). Should they not agree, automatic cuts across the board of $1.2 trillion would go into effect (called sequestration). If you remember correctly, no agreement was reached and at the beginning of 2013, sequestration is set to go into effect.
What connected the dots for me between the debt ceiling crisis, sequestration and jobs was a recent report released by The Information Technology & Innovation Foundation (ITIF) quantifying how sequestration would affect government spending on science R&D and how, in turn, the economy would be affected. The study found that sequestration cuts to discretionary spending would result in an 8.8% (totaling 12.5 billion) cut over 2011 spending for federally funded R&D in 2013 with similar cuts in the following years. At this moment you may be tempted to say ‘8.8%?!? not that big of a deal, right?’, but the truth is that R&D is an important driver of the national economy. Federal R&D dollars contribute to the innovation in pharmaceuticals, renewable energy, and defense that have made the US a leader in technology and science. R&D also has spillover effects, meaning that research for a specific application could end up enabling a new and different technology (think memory foam, which was invented by NASA to absorb impact on astronaut takeoff and reentry and now resides in your mattress). The ITIF study estimated that the decrease in R&D funds from sequestration would result in a decrease in GDP of $203 to $860 billion dollars, depending on how you define what R&D spending would have been without sequestration. In terms of jobs, sequestration cuts would also result in the loss of 200,000 jobs in 2013.
You may wonder, well why wouldn’t private interests pick up the slack? And the answer is that research is a risky business. Profits aren’t always guaranteed. Plus, the government has the ability to invest in farfetched ideas with the hope that a few will pay off (take a look at the DARPA and ARPA-E programs that specialize in this type of R&D funding). Another area that private interests don’t venture into very often is basic science research, the government funds over 60% of all basic R&D; understandably private enterprises tend to focus on the development half of R&D.
R&D spending and sequestration may be small potatoes for the first presidential debate, but I do hope that along with their high praise for US small businesses, job creation, and science education the candidates are thinking about a major driver behind all of these crowd pleasers: research and development. Without cultivating our nation’s innovation and creativity with federal funding, we risk impairing our nation’s technological edge. Sequestration consisting of across the board spending cuts could be avoided, of course, if Congress and the President act. If presidential candidates want to continue to see the wheels of innovation churning out new money making, job creating technology, federal R&D should be maintained as an important component of our national economic recovery plan.