Anti-innovation

The anti-innovation presidency

Behind all the theater of ‘Tech Week,’ Trump’s budget makes deeper cuts to research and development than any White House in modern history.

By MICHAEL GRUNWALD

“Innovation” is one of those Washington priorities, like “security” or “the children,” that politicians in both parties tend to describe as investments rather than spending. Even as budget wars have raged on Capitol Hill, there’s been a fairly broad consensus that funding research and development is vital to American competitiveness. The Beltway seems to churn out an inexhaustible supply of bipartisan reports proclaiming that bigger government investments in science and technology today will pay economic dividends for taxpayers down the road.

This week has been “tech week” at the White House, and President Trump has jumped onto the rhetorical bandwagon, hailing the glories of innovation. “My administration is embracing a new spirit of innovation that will make life better for all Americans,” he told a group of technology leaders gathered in the Oval Office on Monday; he doubled down Thursday, promising another group of new-economy executives that his government would “help unleash technological breakthroughs that will transform our lives.”

But Trump’s 2018 budget goes the opposite direction: It proposes the deepest cuts in innovation investments that any administration has ever proposed.

Not only does the Trump budget slash climate science and clean energy research beloved by Trump’s critics, it whacks advanced manufacturing programs and fossil energy research catering to Trump’s supporters, as well as basic science and medical research beloved by almost everyone. It’s a powerful rejection of the innovation-industrial complex, and even though Congress is likely to ignore most of it, a similarly powerful reflection of Trump’s political war on Washington elites.

Overall, Trump’s budget cuts research and development spending by about 5 percent from current levels, but that figure includes hefty increases for late-stage weapons development at the Pentagon. It would roll back non-defense R&D by an unprecedented 19 percent, taking the axe to the popular as well as the obscure. The National Institutes of Health would absorb a 21.5 percent hit, including major cuts in research on aging, cancer, infectious disease, mental health, and drug abuse; NIH grant programs would have their stingiest award rates since 1970. There would be even harsher cuts for the Agricultural Research Service, the National Institute of Standards and Technology, NASA’s education funding, NOAA’s ocean research, and EPA’s science office.

The Trump blueprint would also eliminate the Agency for Healthcare Research and Quality, which oversees studies of which medical treatments actually work; the U.S. Geological Survey’s monitoring programs for volcanoes, earthquakes and the climate; and a popular Manufacturing Extension Partnership that provided technical assistance for more than 25,000 companies last year. And it would wipe out ARPA-E, the most futuristic agency in Washington, a cutting-edge incubator for energy research modeled on the high-tech Pentagon unit that pioneered GPS and the Internet.

Trump aides believe some federal investments in R&D have been duplicative or ineffective, while others ought to be handled by the private sector. And they’re still proposing $150 billion in R&D funding, which is considerably more than zero. But their main argument for spending less on innovation is simply that America can’t afford to spend more. Trump’s Office of Management and Budget director, Mick Mulvaney, is an ardent limited-government conservative, and the budget he crafted for Trump reflects his belief that Washington spends way too much of your money. Trump made it clear his top budget priorities are strengthening the military and securing the border, while somehow reducing deficits without raising taxes or cutting Medicare or Social Security for the elderly. Mulvaney had to shrink something—really, just about everything else—to try to check all those boxes.

“We wanted more for defense and the border, so we had to offset those increases somewhere,” one senior budget official explained. “We’re still making a big commitment to R&D. It’s just less than other administrations might make.”

In fact, even within Trump’s top government priorities, like the military and the border, innovation is getting a haircut. The American Association for the Advancement of Science calculated that Trump’s budget would squeeze the Pentagon’s science and technology spending by 5 percent, including an 18 percent cut for its “manufacturing innovation institutes.” The Department of Homeland Security’s science and technology budget would shrink by 20 percent, limiting research into cybersecurity, bioweapons defense, and border technologies.

There’s a political logic to Trump’s innovation policy heresies. Two thirds of R&D spending goes to blue states, and most of it tends to cluster in large cities and college towns rather than farm country or the Rust Belt, one reason these issues have more resonance for cosmopolitan technocrats than for Trump voters. President Obama talked about them incessantly, clamoring for aggressive investments in innovation to help America “win the future,” but Trump has attacked just about everything Obama was for, from health care reform to the Paris climate agreement. On the campaign trail, he never emphasized winning the future, just winning, and he never proposed any new innovation policies of note.

Trump did create a White House Office of American Innovation led by his son-in-law, Jared Kushner, and at his meeting with tech leaders he vowed that the office would help upgrade the federal government’s balky technology. But he did not suggest that it would help promote innovation in the private sector; he suggested that was the private sector’s job. In fact, one of the office’s main tasks will be shrinking and reorganizing the government, reflecting the belief of Mulvaney and other movement conservatives in the administration that the best thing government can do to spur innovation is to get out of the way of innovative businesses. In fact, during last year’s crisis over the Zika virus, as public health experts were racing to study its link to birth defects, Mulvaney asked a provocative question on Facebook: “Do we really need government-funded research at all?”

Historically, though, the U.S. government has played a vital role in seeding and developing technological advances ranging from supercomputing to hydraulic fracking, advanced prosthetics to lactose-free milk, LED lighting to MRI testing. The Trump budget represents an abrupt departure from this tradition, at a time when federal expenditures on R&D have already drooped to their lowest level as a share of the economy since the Russians launched Sputnik. This has innovation experts scratching their heads, since Trump’s entire budget depends on yet another departure from budget tradition, a blithe assumption of 3 percent annual growth. Mark Muro, policy director at the Brookings Institution’s metropolitan studies program, says that with America’s workforce shrinking, the clearest pathways to that kind of robust growth would be more immigration and more innovation—and Trump has made it clear he doesn’t want more immigration. But he doesn’t seem to think Uncle Sam can help make innovation happen, either.

“There’s no conception in this budget of any positive role for government,” Muro says. “It’s totally out of step with everything we know about the innovation economy. I guess you could say that’s an innovation.”

OBAMA FIRST UNVEILED his innovation agenda in a November 2007 speech at Google headquarters, calling for major investments in clean energy, digital technology, medical research, and basic science—as well as education reform, job training, and infrastructure, which he also categorized as innovation spending. Two years later, he was elected president during an economic meltdown, and quickly tucked a remarkable amount of that egghead agenda into his $800 billion stimulus bill, using public dollars to jump-start private industries that felt like the future.

For example, the stimulus poured billions of dollars into solar power, and while the highest-profile result was a busted loan to a manufacturer called Solyndra, other stimulus projects have helped increase U.S. solar generation by more than 3000 percent since 2009. Similarly, the stimulus financed an entirely new domestic battery industry for electric vehicles, as well as a $465 million loan to rescue a failing automaker called Tesla; more than 400,000 EV’s have been sold in America since 2009, and Tesla is now the most valuable U.S. car company. Overall, the stimulus sparked the largest federal investment in innovation since the moon mission, including record funding for a smarter electric grid, factories producing clean energy components, digital health records, NIH research, and an out-of-the-box grant competition called TIGER for innovative transportation projects.

Obama kept banging the drum for innovation throughout his presidency, repeatedly calling on America to “out-educate, out-innovate, and out-compete the rest of the world.” On October 21, 2015—also known as Back to the Future Day, because that’s the day Marty McFly time-traveled to in his cinematic DeLorean—Obama unveiled an ambitious agenda for future investments in growth areas like precision medicine, brain science, artificial intelligence, and educational technology. But the huge bump in innovation funding through the stimulus turned out to be a one-time bump. The Republicans who took back the House in 2011 consistently rejected Obama’s requests for more money, so federal R&D expenditures have stagnated, dipping to about half their 1980s levels as a share of GDP.

Now Trump is proposing to gut them, sending an unmistakable message about his priorities. He’s not interested in helping the geeks who carried signs poking fun of him at the March for Science.

“Nobody has ever proposed cuts of this scale,” says Matt Hourihan, who oversees R&D policy at the American Association for the Advancement of Science. “Nobody has ever drawn this narrow a boundary around what government should be doing with basic science. It’s really a clean break with a bipartisan consensus.”

The Trump budget would kill the loan program for fuel-efficient automakers that saved Tesla, as well as similar loans for “innovative technologies” in the green energy world. It would also kill TIGER, even though Trump’s transportation secretary, Elaine Chao, told Congress she would push to boost the program’s funding because it was working so well, and the AHRQ, even though its comparative effectiveness studies help save lives (by highlighting safety measures like a checklist that reduced central line infections in hospitals) and taxpayer dollars (by exposing wasteful and ineffective surgeries, drugs, and medical devices). It would cut the Energy Department’s clean energy program by more than two thirds, and fossil energy by half. If you include education, job training and infrastructure in your innovation bucket, Trump’s budget cuts all of them as well, although he has promised a still-unspecified $1 trillion infrastructure program outside his budget.

As for R&D, the senior budget official told me the administration wants to shift the government focus from applied research towards early-stage experimentation that private firms tend to avoid, partly because they tend to focus on short-term earnings, partly because they worry that their competitors will end up reaping the benefits of their expensive research. But that doesn’t explain why the Trump wants to dismantle ARPA-E, which finances disruptive energy technologies in their earliest stages. Since 2009, its grant recipients have gone on to raise more than $1 billion in private capital, for ideas ranging from easier-to-make silicon wafers for solar panels to laser-operated drill bits for oil wells. Bill Gates and other business leaders have described ARPA-E as a model for what government ought to be doing to help America compete in the 21st century “Look, we had to make some tough choices,” the official explained. “We’re still going to have national labs.”

The Trump budget also calls for a 70 percent cut in an Obama program called Manufacturing USA, which has partnered with industry and academia to finance early-stage research into growth areas like robotics, photonics, 3-D printing and lightweight materials at “hubs” in cities like Detroit, Knoxville, and Youngstown. And it would shut down the Manufacturing Extension Partnership, a $120-million-a-year program with offices providing technical assistance to small and medium-sized manufacturers in all 50 states. Atkinson said that Canada invests ten times as much in similar programs as a share of its GDP, while Germany invests 20 times as much and Japan 40 times as much—and they’ve lost less of their manufacturing base.

“I thought reviving U.S. manufacturing was going to make America great again,” says Rob Atkinson, president of the Information Technology and Innovation Foundation. “These programs are already terribly underfunded, and they’re serving Trump’s voters. But this administration is under the ideological delusion that the government is always the problem. No other country acts like this.”

Administration officials point out federal programs with noble goals and unobjectionable-sounding names are not necessarily effective, and they’ve got a point. The Manufacturing Extension Partnership’s offices in all 50 states, including states without much manufacturing, is hidden-in-plain-sight evidence that political considerations often drive funding decisions. It may seem odd that Trump wants to get rid of the Economic Development Administration, when he talks so much about economic development, and when the EDA specifically focuses on the depressed rural regions and smaller cities where so many Trump voters live. But a Government Accountability Office report found that every one of the agency’s 80 programs overlapped with some other federal program.

Andy Roth, a lobbyist at the conservative Club for Growth, said Trump and Mulvaney deserve credit for taking on the sacred cow of “investment in innovation,” because it’s really just a euphemism for corporate welfare. Roth argued that when government helps a company or an industry with basic research or applied research or anything else, it’s picking winners and losers, substituting the judgment of politicians and bureaucrats for the genius of the free market. Roth said the government should protect businesses from high taxes and intrusive regulations, but should otherwise leave innovation to the innovators in the private sector.

“We don’t believe the government should be in the innovation business,” Roth said. “We’re thrilled that the Trump administration is getting rid of some of these programs, because there are a lot of stinkers out there.”

But innovation experts say there’s voluminous evidence that the long-term benefits of these investments far outweigh the costs, and that cutting them is like eating seed corn. Atkinson estimates that Trump’s cuts would reduce GDP by $139 billion by 2027. And some programs the administration portrayed as stinkers don’t really sound so awful. For example, the budget proposed to save $1.16 billion a year by axing the “21st Century Community Learning Centers” after-school program for needy children, declaring “performance data demonstrates the program is not achieving its goals.” It cites evidence that “student improvement in academic grades was limited, with states reporting higher math or English grades for less than half of regular program participants.” But a program that helped nearly half its participants improve their grades sounds quite successful. On standardized tests, according to the budget, “less than 20 percent of participants improved from ‘not proficient’ to ‘proficient’ or above.” Again, that’s real improvement. Maybe it’s not enough improvement for $1.16 billion a year, but it’s pretty weak evidence of a boondoggle.

Republicans in Congress have already made it clear that much of Trump’s funding attack on innovation is dead on arrival. They won’t eliminate ARPA-E or TIGER. They won’t slash medical research at NIH or shred science at EPA. But advocates worry about the death of Washington’s innovation consensus. In the past, even though lawmakers didn’t always back up their R&D rhetoric with R&D funding, science and technology were treated like motherhood and apple pie, a kind of no-fly zone in the thick of Capitol Hill’s partisan bombardments. But in Trump’s Washington, norms cease to be norms, and anything can come under attack.

“Government support for innovation is an American success story, and one of the few places of American consensus,” Muro says. “At least it used to be.”