White House proposes cutting R&D, regional innovation, economic development, education, more

March 16, 2017

The White House Office of Management and Budget today released America First: A Budget Blueprint to Make America Great Again, an overview of the administration’s proposal for the FY 2018 federal budget. This is a precursor for the full budget proposal, expected in May. The administration would increase spending authority for defense and security by $54 billion while decreasing all other discretionary spending by an equivalent amount. The White House would eliminate the Economic Development Administration, Appalachian Regional Commission and Delta Regional Authority, among others, along with all funding for the Manufacturing Extension Partnership and ARPA-E, and would impose significant reductions in research spending by most agencies.

The blueprint makes the White House’s prioritization of defense and security both explicitly and implicitly clear. In the document, a letter from President Trump states that his proposed budget makes, “the safety of our people its number one priority — because without safety, there can be no prosperity.” In his letter, three sentences are devoted to explaining the cuts to non-defense discretionary spending:

“Many other Government agencies and departments will also experience cuts. These cuts are sensible and rational. Every agency and department will be driven to achieve greater efficiency and to eliminate wasteful spending in carrying out their honorable service to the American people.”

Innovation priorities

The following table provides an overview of the blueprint’s treatment of agencies and programs supporting regional innovation economies.

Innovation priorities in the White House’s FY 2018 budget blueprint

Agency Program Proposed change
Commerce Economic Development Administration Eliminates entire office for savings of $221 million
Commerce NIST Manufacturing Extension Partnership Eliminates federal spending for savings of $124 million
Commerce Minority Business Development Agency Eliminates entire office (savings unclear)
Commerce NOAA coastal management, research and education programs Eliminates programs for savings of $250 million
Commerce Census Bureau Spending increase of $100 million for Decennial Census preparation
Energy ARPA-E Eliminates program (savings unclear)
Energy Office of Science Reduces spending by $900 million
Health & Human Services National Institutes of Health Proposes restructuring and consolidation to achieve $5.8 billion in savings
Labor Apprenticeship Proposes to “help states expand" (spending unclear)
Treasury CDFI Fund Eliminates program grants for savings of $210 million
Environmental Protection Agency Office of R&D Reduces activities to “statutory requirements" for savings of $233 million
NASA Miscellaneous R&D Prioritizes public-private partnerships, aeronautics and Mars mission over Earth research and Europe mission for savings of $100 million
Small Business Administration Regional Innovation Clusters, Growth Accelerators and PRIME grants Programs eliminated for savings of $12 million
"Other agencies" National Science Foundation NSF impact unclear but “other agencies" spending reduced by 9.8 percent

Notes: All figures and quotes from America First: A Budget Blueprint to Make America Great Again. Changes in spending assume passage of a continuing resolution (CR) for 2017 spending.

The White House’s budget proposal has further implications for innovation policy that are difficult to calculate in advance of the full budget release. For example, significant reductions in agencies’ R&D spending will result in a corresponding reduction for SBIR/STTR, and the implications of the cuts on staffing levels are currently unclear.

For further descriptions of the budget blueprint, the Washington Post graphically depicts the proposed cuts with agency-by-agency highlights.

Overall spending

The budget blueprint is presented by the administration as a neutral budget due to its offsetting of $54 billion in discretionary defense and security spending by $54 billion in other discretionary — e.g., non-mandatory (Social Security, Medicare, Medicaid and other) — cuts. The administration proposes a total of $1,151 billion in FY 2018 discretionary spending, which is a reduction of 2.6 percent from the estimated FY 2017 discretionary budget of $1,181 billion.

The FY 2018 spending level of $1,151 billion ($30 billion less than FY 2017) is as a result of the federal budget caps, which are required by the Balanced Budget and Emergency Deficit Control Act of 1985. (Note that these budget caps can be increased as the FY 2017 cap was through the Bipartisan Budget Act of 2015 and the 21st Century CURES Act). However, the White House’s blueprint assumes that the FY 2018 cap will only be increased by the $1 billion of increased appropriations included in the 21st Century CURES Act and makes no request for additional capacity.

Congressional response

While the president is required to submit a budget to Congress, the legislature is responsible for ultimately crafting and passing the federal budget. House Speaker Paul Ryan quickly tweeted a seeming endorsement of the cuts on Twitter

Other members of the House have staked out positions on opposite sides of the budget. Appropriations Subcommittee on Labor, Health and Human Services, and Education Chair Tom Cole (R-OK) has previously indicated his disapproval and added he hopes “the administration is aware of the difficulty of some of these things.” Freedom Caucus members Todd Rokita (R-IN) and Mo Brook (R-AL) questioned whether the cuts, which keep the budget neutral relative to spending caps, were sufficient.

Republican senators on record to date indicate that the budget may face significant challenges in that chamber. Senator Lindsey Graham (R-SC) has called the administration’s budget “dead on arrival,” and Senator Roy Blunt (R-MO) said, “there are many concerns with non-defense discretionary cuts.” Senator Mitch McConnell (R-KY) has said the Department of State cuts are unlikely to pass the Senate.