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Federal Research Cuts Have a Multiplier Effect on U.S. Economy

In releasing his administration’s budget for the 2014 fiscal year on Wednesday, President Obama said the proposal would replace “the foolish across-the-board spending cuts that are already hurting our economy,” a reference to the effects of the federal sequester that began last month.

John Nelson, managing director of the health-care and higher-education rating teams at Moody’s Investors Service, the credit-rating agency, observed in a recent interview that few politicians at any level of government favor the way the sequester’s $85-billion in automatic cuts will affect research universities. “I think most elected officials recognize the importance and growing value of research universities to economic development,” he said. “They don’t want to hurt research universities.”

Most of damage, at least in the short term, The Chronicle learned in conversations with deans and vice presidents for research at a number of large public universities, is being inflicted upon graduate students, postdoctoral scholars, and principal investigators.

In the long term, data suggest, it is the United States itself that stands to lose the most.

The Information Technology & Innovation Foundation, a nonpartisan think tank that seeks to advance technological innovation and productivity, has pointed out the multiplier effect that basic research has on the economy. ITIF, as the foundation is known, has calculated that the $9.5-billion reduction in federal research-and-development financing in the 2013 fiscal year will reduce the gross domestic product by $154-billion to $654-billion over the next nine years. The total number of jobs lost or not created by 2016 as a result of the budget cuts will be 342,000, the foundation estimates.

Thomas Baldwin, executive associate dean of the University of California at Riverside’s College of Natural and Agricultural Science, likes to point out that a little company called Google was conceived with the help of a National Science Foundation grant. The federal money went to a group of Stanford University researchers who used it to develop a new algorithm that someone had suggested could be used in database searches.

“It came from one NSF grant,” Mr. Baldwin said. “Today the economic output from Google would fund the entire National Science Foundation for many, many years. … Not every grant is that kind of a blockbuster, of course, but you never know where they are.”

The potential return on investment of university research projects is astounding, he continued. “The number that I heard most recently on return on investment on the Human Genome Project was $140 of economic return for every dollar invested.”

Mr. Baldwin, who spoke grimly of the prospect of research teams’ being dissolved after years of federally supported work—never to be reassembled again—was frank in his assessment of the damage from the budget cuts.

Not everyone with whom The Chronicle spoke was as forthright. Some seemed to take pains to project a can-do spirit in the face of adversity, and still others failed to respond to repeated invitations to describe how they were confronting the prospect of budget cuts.

The silence did not surprise Mr. Nelson, of Moody’s, who noted that continued federal cuts could damage institutions’ abilities to attract private researchers and donors.

“Private philanthropists want to give money to places that are successful,” he said. “They don’t generally want to be seen as white knights rescuing stressed organizations. They instead want to give money to a place that’s actually the opposite, a place that’s robust, where they can really have an impact.”

Are the worst-hit institutions simply not advertising the severity of the budget cuts on their research mission lest they frighten away prospective donors and would-be faculty members? Only time, and the outcome of negotiations over the president’s budget, will tell.

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