The Impact of Debt Ceiling Talks on Federal R&D Spending

Let’s be clear, it would be a financial and economic catastrophe for Democrats and Republicans in Washington to fail to raise the US debt ceiling on time. And it would be far better for that result to happen without the disciplining action of a nasty Wall Street reaction. Meeting that goal is going to require a compromise that means, broadly, capping federal spending for a period of time, perhaps two years. A few more details on a possible deal, via Bloomberg:

The two sides have yet to agree on the amount of the cap. Under the terms of the emerging agreement, defense spending would be permitted to rise 3% next year in line with President Joe Biden’s budget request. . . . The accord would also include a measure to upgrade the nation’s electric grid to accommodate renewable energy, a key climate goal, while speeding permits for pipelines and other fossil fuel projects that the GOP favors, people familiar with the deal said. The deal would cut $10 billion from an $80 billion budget increase for the Internal Revenue Service that Biden won as part of his Inflation Reduction Act.

Whatever the exact details, it seems pretty likely that the big increase in federal spending on science and innovation isn’t going to happen as set out in the bipartisan CHIPS and Science Act passed last year. Now things won’t be as bad as if the bill passed by House Republicans—it would reduce discretionary spending by more than $3.5 trillion over the coming decade—were to actually happen. In that case, according to science budget analyst Matt Hourihan, federal science investment would decline by 19 percent, or $442 billion, through 2033 versus a baseline scenario in which spending increases with inflation.

Yet even with full funding—which already didn’t seem to be happening—US R&D spending would only tick up as a share of the economy. The long-term trend wouldn’t change too much, as shown in this chart:

How much should the US be spending on federal R&D? I think the Space Age totals provide a good baseline for discussion:

Hey, if we’re in a geopolitical technology race, let’s act like it.