Biden’s Science Priorities and the Debt Ceiling: 5 Takeaways
On the most recent episode of Breakthrough Science with Prime Movers Lab, we hosted a panel of science policy experts to discuss President Joe Biden’s FY2024 R&D funding priorities and the potential impact of the debt ceiling negotiations on science policy. The well-timed panel (which you can watch on our YouTube channel or embedded above) occurred just hours before House Republicans passed a proposal that set discretionary spending caps over the next decade.
In brief, the House Republican bill would increase the debt ceiling by $1.5 trillion, enough to push out a default until March 31, 2024. It would also bring discretionary spending (non-entitlement and defense spending) back to 2022 levels — a $130 billion cut — and it would cut budget deficits by $4.5 trillion over the next decade. In addition, future discretionary spending increases would be capped at a 1% annual rate for the next decade, which could have a dramatic impact on federal R&D investments.
While the likelihood of the bill passing in the Senate and being signed into law is 0%, some elements of it could find their way into negotiations between Biden and Speaker Kevin McCarthy. Of particular importance to Prime Movers Lab portfolio companies are R&D funding levels in the CHIPS and Science Act and clean energy tax incentives that were passed in the Inflation Reduction Act that could be eliminated or reduced. Here are the top takeaways from the discussion that shine some light on how these provisions might fare in negotiations:
Spending Caps Could Have a Dramatic Impact on Federal R&D
Federation of American Scientists Associate Director of R&D and Advanced Industry Matt Hourihan described how the spending caps outlined in the House Republican bill would reduce discretionary spending by more than $3.5 trillion below baseline figures over the next decade. The last time Congress adopted a set of discretionary caps like this, it likely reduced federal R&D investment by more than $200 billion over the nine years they were in place. Comparing these estimates suggest all federal R&D could decline by $28 billion or 13% in FY 2024, and $442 billion or 19% over the decade, he said.
While any budget cuts that Biden and McCarthy agree on will likely not be this draconian, discretionary spending will, unfortunately, be where many of the cuts come from in a budget deal. Holland & Knight Associate Marissa Serafino pointed out that many Republicans supported the CHIPs and Science Act and their districts are benefitting greatly from the tax incentives in the IRA so it would be hard for some members to repeal them. K&L Gates Associate Mike O’Neill echoed that sentiment, pointing out that “R&D today is job creation tomorrow,” making it much harder for Republicans to make cuts.
I, unfortunately, could see Republicans adopting strict discretionary spending caps that could negatively impact R&D funding. Members may not want their favorite programs to fall victim, but if topline funding numbers are reduced, the fights over smaller shares of the pie could be brutal in future sessions. As for the IRA tax incentives, I see them being more insulated during budget negotiations.
New chairmen are having an immediate impact on science policy
In the 118th Congress, a handful of new committee chairmen have emerged as key players in setting the course of science policy. Rep. Frank Lucas (R-OK) is the new chairman of the House Science Committee, bringing years of experience on the House Agriculture Committee to his efforts to reform the National Oceanic and Atmospheric Administration. In addition, Rep. Chuck Fleischmann (who represents the Oak Ridge National Laboratory) took over the House Appropriations Energy & Water Subcommittee, making him a critical player in the fusion energy industry. Fleischmann also has a seat on the House Science, Space, and Technology’s Energy Subcommittee, giving him an outsized role in authorizing energy legislation and also appropriating funds for energy R&D. Rep. Hal Rogers (R-KY) is the new chair of the House Appropriations Commerce, Justice, & Science Subcommittee, which writes checks to National Science Foundation, National Institute of Standards and Technology, National Aeronautics and Space Administration, and other agencies. As the previous chair of the House Appropriations Committee, he is well-versed in committee dynamics and could play a major role in charting the future of R&D funding.
Some alignment between Democrats and Republicans does exist
Despite the tight budget outlook, we’re seeing some alignment around certain priorities, including fusion energy. As previously mentioned, Republicans like Fleischmann are protecting the emerging technology from cuts. Investments in the electric grid are also getting bipartisan support. A budget deal might end up being the vehicle for Sen. Joe Manchin’s (D-VA) permitting reforms and other parts of HR.1 (the House Republicans’ high-priority energy bill).
Some R&D funding could shift to the Department of Defense
It’s important to keep in mind that the spending cuts outlined by McCarthy would not impact defense spending. At the same time, the Biden budget called for a cut in Defense R&D. Requesting less R&D funding is a consistent tactic used by the Department of Defense to make an ask for additional funding for other priorities because they know that Congress will increase their R&D funding nonetheless. During the next few years, it’s a very real possibility that Defense R&D could become a bigger portion of overall federal government R&D because it will not have the same budgetary constraints as non-defense spending.
Startup founders should get their story ready to protect funding
The panelists unanimously agreed that national security should be a key talking point in meetings with congressional members on both sides of the aisle for those who want to maintain provisions that are even remotely tied to American competitiveness. R&D investments that the United States does not make today are investments that our geopolitical competitors will make, O’Neill warned.
As for founders pursuing funding for semiconductor research or manufacturing, Serafino advised startups to be very buttoned up when responding to notices of funding opportunities (NOFOs) and have a coalition of support to demonstrate commercial viability. Founders who are working with national laboratories should make sure those partnerships are known. National laboratories are the crown jewels of the R&D ecosystem and look great as partners. Lab partnerships create a constituency hook for meetings with members of Congress who represent those labs. Perhaps most importantly, founders need to have their jobs story ready and remember that “all politics are local.” Members are trying to make the case to their constituents back home that they are creating jobs by investing in R&D.
Prime Movers Lab will continue to track the appropriations process and debt-ceiling negotiations for our portfolio companies and provide updates as news breaks.
Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation, and agriculture.
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