Impact of Sequestration on Technology and Innovation

As required by the Sequestration Transparency Act, the White House released details about how the $120 billion in budget cuts would be applied if Congress does not stop the sequestration plan agreed to as part of the Budget Control Act. As the White House’s document makes clear, these budget cuts would have a dramatic impact on the budget of defense and non-defense programs, including many projects important for technology R&D, modernizing government, spurring clean energy innovation, and developing digital platforms. Many of these cuts will have a substantial impact on specific policy initiatives. For example, these cuts include $86 million in cuts to DHS’s information security program and $8 million in cuts to the Public Safety Trust Fund. It also includes $400 million in cuts to basic energy research as well as $23 million to high-risk, high-reward clean energy R&D at ARPA-E.

In terms of information technology (IT), these cuts include:

• National Institute of Standards and Technology (NIST) – $62 million
• Scientific and Technical Research and Services – $47 million
• Construction of Research Facilities – $5 million
• Industrial Technology Services – $10 million
• National Telecommunications and Information Administration (NTIA) – $13 million
• State and Local Implementation Fund – $5 million
• Public Safety Trust Fund – $8 million
• Department of Agriculture – $6 million
• Rural Electrification and Telecommunications Loan Program – $3 million
• Distance Learning, Telemedicine, and Broadband Program – $3 million
• Department of Health and Human Services – $1 million
• Office of the National Coordinator on Health IT – $1 million
• Department of Homeland Security -  $141 million
• National Protection and Programs Directorate, Infrastructure Protection and Information Security – $86 million
• Science and Technology Directorate, Research, Development, Acquisitions and Operations – $55 million
• Department of Justice – $4 million
• Justice Information Sharing Technology – $4 million
• Department of Labor – $2 million
• IT Modernization – $2 million

In addition, there are a number of agencies important to IT that would see a significant reduction in their operating budgets.

• Federal Communications Commission (FCC) – $28M
• National Telecommunications and Information Administration (NTIA) – $4M
• Federal Trade Commission (FTC) – $26M
• Patent and Trademark Office (PTO) – $242M

Federal energy innovation programs would face significant cuts. At the Department of Energy:

• Department of Energy Innovation Programs – $689 million, or a 16.8% cut to DOE’s energy innovation programs compared to FY2012

• • Office of Science – $400 million
  • ARPA-E – $23 million
  • Office of Energy Efficiency and Renewable Energy – $148 million
  • Office of Fossil Fuel R&D – $44 million
  • Office of Nuclear Energy – $63 million
  • Office of Electricity Delivery and Energy Reliability – $11 million

And there are a number of budget activities within the Department of Defense that, among other projects, invest in energy innovation and will see cuts. In fact, projects within these budgets account for 24% or $1.5 billion of the federal government’s total investments in energy innovation in FY2012. Of course, the OMB doesn’t provide the project-level impact of the sequester, but assuming the cuts impact budget activities equally, energy innovation programs within the DOD would be cut by the following:

• Research, Development, Testing, & Evaluation Programs – $118 million
• Army – $19 million
• Navy – $27 million
• Air Force – $45 million
• Defense Wide – $27 million
• Procurement Programs – $114 million
• Army – $7 million
• Navy – $86 million
• Air Force – $4 million
• Defense Wide – $15 million

Overall, it is abundantly clear that the across-the-board cuts are bad policy and should be avoided if possible. As ITIF wrote in Taking on the Three Deficits, while budget cuts are a necessary piece of debt reduction, indiscriminate budget cuts that harms America’s ability to innovation and grow are far from rational economic policy. Hopefully, as the impact of the potential sequestration cuts becomes clearer, this will provide Congress the motivation it needs to act and create a more innovation-friendly budget.