Fiscal Commission Makes Growth and Competitiveness a Priority

DEC 07, 2010

The 65-page final report released by The National Commission on Fiscal Responsibility and Reform late last week calls for hundreds of billions of dollars in funding cuts for domestic and defense programs. Against this background, it is of considerable significance that the report advocates “expanding high-value research and development in energy and other critical areas.”

Commission co-chairs Erskine Bowles and Alan Simpson supported protecting investments in R&D in their proposal issued in mid-November. Last week’s final report, “The Moment of Truth ,” builds on their proposal, and broadly outlines spending parameters for what are termed high-priority investments.

R&D’s first mention in the final report was in a section entitled “Our Guiding Principles and Values”:

“Cut and invest to promote economic growth and keep America competitive. We should cut red tape and unproductive government spending that hinders job creation and growth. At the same time, we must invest in education, infrastructure, and high-value research and development to help our economy grow, keep us globally competitive, and make it easier for businesses to create jobs.”

The report outlines how discretionary spending reductions totaling more than $50 billion “in immediate cuts” and $200 billion “in illustrative 2015 savings” could be made and enforced. “Every aspect of the discretionary budget must be scrutinized, no agency can be off limits, and no program that spends too much or achieves too little can be spared,” the report states. Discretionary spending in FY 2012 would be equal to or lower than FY 2011 spending. Total discretionary FY 2013 spending, in inflation-adjusted dollars, would equal FY 2008 levels. “This path would require serious belt-tightening,” the report cautions, and would be applied to both security and non-security programs. “One of the Commission’s guiding principles is that everything must be on the table.”

In the same section on “Discretionary Spending Cuts, the Commission describes its recommendation to “increase high-priority investment” as follows:

“RECOMMENDATION 1.9: ESTABLISH CUT-AND-INVEST COMMITTEE TO CUT LOW-PRIORITY SPENDING, INCREASE HIGH-PRIORITY INVESTMENT, AND CONSOLIDATE DUPLICATIVE FEDERAL PROGRAMS.
“The Commission recommends creating a new, bipartisan Cut-and-Invest Committee to be charged each year with identifying 2 percent of the discretionary budget that should be cut and identifying how to redirect half of that savings, or 1 percent, into high-value investment. Over the next decade, the Cut-and-Invest Committee will be expected to recommend more than $200 billion in discretionary cuts, freeing up $100 billion for high-priority investments America will need to remain competitive, such as increasing college graduation rates, leveraging private capital through an infrastructure bank, and expanding high-value research and development in energy and other critical areas.”

This same recommendation criticizes the “alarming proliferation of [duplicative] federal programs” that “results in unnecessary deficit spending and crowds out important investments.” Of note is the following reference to STEM programs:

“For example, the government funds more than 44 job training programs across nine different federal agencies, at least 20 programs at 12 agencies dedicated to the study of invasive species, and 105 programs meant to encourage participation in science, technology, education, and math. Many of these programs cannot demonstrate to Congress or taxpayers they are actually accomplishing their intended purpose. Programs without demonstrable results costs taxpayers billions of dollars and fail those the programs are intended to serve.”

Finally, a one page exhibit later in the report entitled “Fostering an Economy Recovery” explains: “A plan to reduce the deficit must therefore promote economic growth and not undermine the economic recovery. Our plan would accomplish these goals in at least four ways:" In addition to “Reduce the deficit gradually,” “Put in place a credible plan to stabilize the debt,” and “Consider a temporary payroll tax holiday in FY 2011” is the following:

“Implement pro-growth tax and spending policies. In designing its proposal, the Commission made growth and competitiveness a priority. For example, our discretionary plan maintains important funding for education, infrastructure, and high-value R&D, and establishes a Cut-and-Invest Committee to continue to reprioritize spending toward investment. . . . ”

The Commission has eighteen members. Fourteen affirmative votes were needed for approval of the report, triggering a Senate vote on its recommendations. Although only eleven members indicated their support for the report, it is expected that many of the Commission’s recommendations will be considered during the FY 2012 appropriations cycle. While the Commission’s recommendation to expand support for high-value R&D does not guarantee an outcome, the report puts research on far more favorable grounds than many other government programs.