I have another warning note in my in-box this week. It is the latest in a long line of messages from US biologists’ main lobby group, the US Federation of American Societies for Experimental Biology (FASEB), about the “disastrous” impact if the country makes a career out of a ‘fiscal reef’ in January.
The fiscal cliff is a set of sharp budget cuts (called sequestration) and tax increases that will take effect in January if Congress and the White House fail before agreeing on other ways to balance the budget.
Now, I’d like to know why science advocates in Washington DC have spent all summer scrambling publicly about a budget plan that so many of the people they represent are good for both American society and American science. At least consider the bad result. menu.
The United States, most observers agree, is facing an external deficit. This year, US$3.6 trillion (24% of GDP) will be spent by the government, but only $2.2 trillion will be raised in taxes. Scientists as well as anyone know that this is not sustainable.
The dispute over how to reduce the deficit ended a year ago, when a ‘super-committee’ of Congress failed to reach an agreement. This left what is now known as the fiscal cliff – a fall-back arrangement agreed in August 2011 to strike a better deal. It is imperative that unless alternative plans are agreed upon, taxes will rise and across-the-board spending cuts will take effect.
For those with progressive leanings, the fiscal cliff has many attractions. First, it cuts all ‘discretionary’ spending equally – including half going to the Pentagon. Second, it protects Social Security, Medicare and Medicaid — the linchpin of the United States’ threadbare welfare state — from any deductions. In doing so, it refuses to balance the budget on the back of the poor.
Lastly, and most importantly, it closes 80% of the deficit through higher taxation and only 20% through spending cuts. This is a sensible approach in a country where income tax rates – on the middle class as well as the wealthy – have become unforgivably low.
The fiscal cliff, then, is a tough budget package that leans firmly to the left. How did a right wing Congress get there? Well, lawmakers never thought it would get enacted. Now they are trying to expose it. And from FASEB in Washington DC to the National Association of Manufacturers, every special interest is eager to lend a hand.
Scientific societies have been warning all summer that the forfeiture would be a disaster for science, implementing cuts of up to 8% in the 2013 budget. Under this scenario, the National Institutes of Health, if the preamble of the past, would reduce its average annual grant from about $450,000 to $400,000—not pretty, but not impoverished at all.
At this point in American history, however, worse things could have happened than a one-time, 8% drop in grant funding. For example, the nation could continue to slip and fall into hard debt and decline – a bad thing for scientists as well as the public. Going over a cliff can avert it: Even a freshman on the Central Committee of the Communist Party of China might wake up on January 1st, wink and think: Good Lord, maybe America isn’t finished.
As FASEB and other science proponents know, research and development spending has never, and never will be, far from its historical level of one-seventh of America’s discretionary spending. If taxes were raised and defense spending was cut, the long-term outlook for non-defense discretionary spending would have been quite bright.
After all, a ‘rock’ is not a rock. This is only a new baseline, in which proper taxes have been paid, spending has been reduced and the poor have been saved. Once this is set, the way could be open to boosting selective spending – including, perhaps, in research – as well as tax cuts.
That’s why people like Institute of Medicine member Peter Orszag and President Barack Obama’s first budget director and anti-austerity economist Paul Krugman say that going over the cliff may be the best route to proper budget settlement.
The worry that a cold shower of spending cuts and tax hikes will send the economy into recession is legitimate. But economists don’t really know how fiscal tightening affects economic growth. Just last month, the International Monetary Fund revised its estimate of the fiscal multiplier—the dollar of economic activity generated by each dollar of government spending—from 0.5 to “in the range of 0.9 to 1.7”, acknowledging that it is, in fact, a tax. May not ‘ read the complex relationship between fiscal tightness and economic growth.
Sure, Obama and his lieutenants need to publicly say that the nation must refrain from going over the cliff. In negotiating deficit reduction that doesn’t ruin public spending, however, his willingness to take the drop is his most powerful weapon.
