Why Trump’s budget proposal may not be a blueprint for economic growth

Reporting from Washington —  For all of President Trump’s promises to strengthen America’s economy, his first proposed budget would make significant cuts for research and development that analysts say in the long run would most likely hurt U.S. competitiveness and slow economic growth.

While Trump’s 2018 budget blueprint released Thursday would sharply boost federal defense spending by $54 billion, that would be offset by slashing funding for the National Institutes of Health — a center of world-class medical research — and education and science programs at the Department of Energy, Environmental Protection Agency and other agencies.

The budget proposes to streamline functions, eliminate ineffective programs and shift the financial burden to states and the private sector. But analysts say that shrinking federal support for things like basic research is unlikely to be made up by others, and could in fact further reduce the nation’s research and development spending because universities and private companies often rely on and build upon the groundwork made by government scientists.

Although companies account for the majority of the country’s spending on research and development, the federal government is by far the top supporter of basic research, funding about 45% of the national total compared with about one-fourth by businesses and another quarter by universities and nonprofit organizations, according to the National Science Foundation. Trump’s blueprint did not specifically mention the NSF, but some experts foresee a whack to its budget as well.

“If they were to be enacted, these cuts signal the end of the American century as a global innovation leader,” said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan think tank. “America’s lead in science and technology was built on the fact that in the 1960s, the U.S. government alone invested more in R&D than the rest of the world combined, business and government. The Trump budget throws this great legacy away.”

In recent years U.S. private and public spending for R&D — nearly $500 billion total in 2015 — has grown at a modest annual rate of around 1%, although it remains the largest in the world.

But the federal government share of R&D expenditures has not kept pace, and the U.S. as a whole now ranks No. 10 globally in so-called R&D intensity, or spending as a percentage of gross domestic product, according to the Organization for Economic Co-operation and Development. The U.S. trails countries such as Israel, South Korea, Japan and Germany.

U.S. federal support for research has been crucial for advances in treating diseases and developing new technologies. Analysts worry that large-scale cutbacks would have significant consequences for future productivity, which is key to raising Americans’ standard of living.

In addition to losing $900 million in the Energy Department’s Office of Science, Trump’s budget proposes an outright elimination of the department’s Advanced Research Projects Agency-Energy, a program modeled after the Defense Advanced Research Projects Agency, which played a vital role in the development of the Internet.

“The private sector is better positioned to finance disruptive energy research and development, and to commercialize innovative technologies,” Trump’s budget report said.

As a blueprint, the budget did not spell out in many cases which group or function would suffer from an agency’s overall funding cuts, but lawmakers were combing through the 53-page report to see any potential threats to interests for their districts and states.

Sen. Bill Nelson (D-Fla.), the top Democrat on the Senate Commerce Committee, has been particularly interested in the Commerce Department’s National Oceanic and Atmospheric Administration, which studies and monitors environmental conditions and warns of weather dangers and threats to coastal resources in places like Florida.

“Fortunately, Congress will have the last say on any reckless cuts to NOAA,” Nelson said. “What isn’t clear from this outline is whether the administration plans to slash funding for the next generation of weather satellites, which provide critical data for forecasts. If they do, then they’re going to have a big fight on their hands.”

Dozens of department programs and independent agencies would face cuts, with some eliminated outright, such as the Corporation for Public Broadcasting and the National Endowment for the Arts. Others targeted for elimination are less-familiar entities, such as the Chemical Safety Board and the Manufacturing Extension Partnership inside the Commerce Department.

While perhaps obscure, the manufacturing partnership was created in 1988 to help smaller manufacturers identify technologies and other ways to help them grow. It has a federal budget of $124 million and is a unit of the National Institute of Standards and Technology, or NIST, whose mission is to promote innovation and industrial competitiveness.

Trump’s budget report said the program was originally intended to transition to non-federal revenue sources. But Gregory Tassey, who until 2013 had been the NIST’s chief economist for more than 30 years, said it would be a mistake to cut support for the program.

The manufacturing partnership, he said, was one of the few that helps transfer technology, to translate breakthroughs or developments in labs into gains in the real world of commerce.

“One can argue over how it functions, what its priorities are and things like that, but the basic functions are highly justifiable,” said Tassey, now a research fellow at the University of Washington’s economic policy research center. “When you start wiping out major portions of programs like these, … that will greater hinder the development or deployment of these technologies.”

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