Budget Cuts: Department of Nose Cutting, Face-Spiting

Much of the politico-economic debate in the US and UK has focused on the merits or lack thereof of budget cuts so that the respective countries can, to use a shopworn phrase, 'get their fiscal houses in order.' This sounds like very brisk, responsible, no-nonsense advice. One can imagine Maggie Thatcher pursing her lips and slashing lines through entire lists of expenditures so that the family can still afford a bit of meat on Sunday. However, as the following essay from the Economist makes clear, the cuts being proposed in both countries have almost nothing to do with saving money and a lot to do with conservative distaste for government, period. The implications of the proposed cuts to the budgets of the US National Institutes of Health (NIH), as elucidated here are actually counterproductive and could lead to increases in health care costs, the largest current threat to American economic well-being. Sadly, they are not the only example:

"CONTINUING a theme, as is my wont of late: it's hard to sound convincing when protesting against budget cuts. There's an overarching "we all have to sacrifice to get by" atmosphere in these situations, and people who try to defend their particular interests come off sounding like whiners. When some congressman says that, yes, money needs to be saved, but that zillion-dollar alternative fighter-jet engine that just happens to be built at a factory in his district is critical to national security...well, yeah. This is why the earmark system is under attack, and, while the amount of earmarks in the federal budget is relatively trivial and eliminating them won't do much about the national debt, it probably wouldn't be a bad thing if they disappeared. It's obviously far better for funds to be apportioned through a stringent process of review by independent experts in the field, where Congress allocates the money without knowing what projects will be funded, and the experts are barred from having any connection to projects whose funding they review. Congress would have a much harder time cutting a programme that chooses how to spend its money in such a merit-based fashion. Right, Science magazine?

The House CR passed last month would cut [the National Institutes of Health's] budget by $1.6 billion. That’s 5% below the president’s 2011 request and $638 million, or 2%, below current levels. The National Science Foundation would be funded at $6.8 billion. That figure is actually $75 million below its current level, according to NSF officials, and a whopping $1 billion below what the president requested for the agency in 2012.

Huh. Bloomberg?

“America’s economic destiny depends upon maintaining and enhancing our lead in technology, innovation, science and research,” says [former 10-term Republican congressman John] Porter, now chairman of Research! America, an advocacy group in Alexandria, Virginia.

He is horrified by what House Republicans want to do to NIH. “These are blind cuts that take us exactly in the wrong direction; they are wrong-headed and short-sighted,” he says... With the economy as a priority, says the legendary investor Peter Lynch, health-research spending should be at the top of the agenda. “The NIH has been one of the great elements of our economy,” says Lynch, who managed Fidelity’s Magellan Fund from 1977 to 1990, when assets grew 630-fold. “We should be expanding, not reducing this investment.

Well, okay—a lobbyist and an investor who's probably talking up his position in biotech and pharmaceuticals. But from a libertarian perspective, if the market doesn't support this stuff, then the government shouldn't engage in coercive taxation to artificially subsidise it. Right, David Koch?

On Friday, conservative billionaire David Koch lamented the deep federal cuts that are expected to impact both the National Institutes of Health and the National Cancer Institute—and, by extension, MIT's new David H. Koch Institute for Integrative Cancer Research. "If the cutbacks happen, it will significantly diminish the level of research that can be carried on at the Koch Institute," he said, speaking at the opening of the research center.

So okay... But why do cuts to the NIH result in such dramatic curtailment of research, National Cancer Institute director, former NIH director and Nobel Prize for Medicine winner Harold Varmus?

"The most important new thing we do every year is to make new awards to people with new ideas," Varmus said. "Yet we have obligations to people who got grant awards last year, the year before and the year before that." With grants lasting as long as five years, Varmus explained, the National Cancer Institute is locked into long-term commitments... That is why new grants are so vulnerable as the government lurches from continuing resolution to continuing resolution. From his days at NIH, Varmus operates on the rough rule of thumb that "the system works well if you are funding one-third of your new grant applications." These days, the NIH as a whole is backing only maybe one-sixth of new grant requests. "When you're only funding 10 or 12 percent," Varmus said, "you really can't make the distinctions between applicants that we're being asked to make... The number of new grants gets severely curtailed even with a 2-to-4 percent reduction." With no more than 20 percent of NCI's budget devoted to new grants, even a $300-million cut in funding would send shock waves through the nation's cancer research community.

But surely this money would be put to more efficient use by private industry. Right, investigative health journalist Merrill Goozner?

Nearly one out of every five important medical advances approved by the Food and Drug Administration between 1990 and 2007 was invented in a federally-funded lab, according to the [New England Journal of Medicine] study, which previous estimates had put at closer to one in 15.
Moreover, those inventions, which included 40 new drugs for cancer, are currently generating in excess of $100 billion a year in sales for drug and biotechnology firms. That’s about one-sixth the total revenue for the entire global pharmaceutical industry.

NIH grant funding is a long-term process. Researchers spend months or years putting together research-programme proposals. The great majority are rejected. Those whose proposals are rejected frequently go back, spend months improving them, and resubmit them for the next round of consideration. The review process is grueling and uncertain; its outcome may be affected by commercial or political trends that influence what research issues are considered "important", or by the intellectual convictions or interests of particular reviewers. But it is as close as the scientific world can get to awarding funding for research based on pure merit. When you herky-jerk this funding around for arbitrary short-range budget goals, you screw up five-year-long longitudinal studies, or, if the NIH determines to maintain funding for long-term projects, you make it impossible to start new research.

And for what? Once again, and for the umpteenth time: the United States faces a serious debt problem on the order of trillions of dollars over a 20- to 30-year time frame. This debt problem is overwhelmingly driven by rising Medicare and Medicaid spending due to rapid cost inflation in the medical sector. Other significant budget problems include a substantial but demographically limited increase in Social Security expenditures, and immense and spectacularly wasteful defence spending. The final serious budget issue is that American taxes are set at a level that remains several per cent of GDP lower than expenditures throughout the business cycle, a problem either created or severely exacerbated by the Bush tax cuts of 2001 and 2003. Every other federal spending category apart from the ones I have mentioned is, from the point of view of our debt problem, trivial, and cutting any other category has a negligible effect on the debt. Cutting peer-reviewed research funding in order to generate trivial savings that will have no measurable effect on the debt problem is just ridiculous.

It may be tedious to just keep repeating, over and over, that these cuts are ridiculous. But they're the dominant political event in the country this spring, and when the dominant political event consists of overwhelming, repeated ridiculousness, there's not much to do but keep pointing out how ridiculous it is.