The Competition for Dollars

This is the first in a series of posts that will examine NASA and its science budget within a historical context. Jason Callahan will explore what NASA delivers for for the (relatively) small amount of money that it spends, what challenges it faces in securing funding for the future, and how planetary science has fared when it has received robust funding in the past. I hope you enjoy it. --Casey Dreier, Director of Advocacy

One of the most common misperceptions about NASA is the amount of money the U.S. government spends on the agency. NASA competes for funding with all of the various entities that make up the federal government, but the agency is now confronting larger economic trends over which the space community has little control.

It’s worth looking into this topic a bit to help understand just what we have received for our investment in NASA over the past fifty years, and why we should continue to invest in space science. In this series of posts, I hope to do so in a way that clearly explains NASA’s position in the federal government and the U.S. economy, and hopefully shed some light on the nature of the budget challenges facing planetary science today.

This installment is divided into two sections: 1) a brief primer on the U.S. economy and the federal budget since NASA’s formation, and 2) NASA’s (and the space science community’s) challenges in the context of changes in the federal budget environment.

The Federal Budget Since NASA’s Formation, in a Nutshell

So, what is the U.S. economy, and just how big is it? For those of you who remember your high school civics classes well, please bear with me.

The economy is the marketplace in which all forms of production (from manufacturing to services to knowledge) are distributed, traded, and consumed, which is a very abstract concept. I’m sure there will be several economists out there slapping their foreheads at this overly simplistic statement, but the economy basically represents all of the ways people do business with each other. The most common way to measure the economy is by calculating the gross domestic product, or GDP. This is essentially (and again, apologies to the economists) a measure of the value of all the goods and services produced in a year. So, looking at the U.S. GDP since the formation of NASA gives us a good idea of the size of the U.S. economy and how it has changed.

The purple line in the above plot shows that U.S. GDP has grown from just under $4 trillion in 1959 to a little over $14 trillion in 2010. So, the U.S. economy is now three and a half times as large as it was fifty years ago. Many factors account for such rapid growth, including our increasing population, the vast increase in international trade, and the high value placed on U.S. goods and services.

One of the fundamental functions of the federal government is the allocation of resources for public purposes, and most of those resources involve money. This means that whether the government is providing our Social Security payments, helping to fund our schools and universities, or maintaining our military, money is required. We fund the federal government primarily through taxes, measured as receipts, and the government spends those funds on various services, measured as outlays. The green line represents federal outlays, or expenditures, over the last fifty years, while the black line represents receipts, or money coming in to the federal government. Government spending has increased from just under $1 trillion in 1959 to approximately $3.5 trillion in 2010, so the federal government has grown at roughly the same rate as the U.S. economy since 1959.

That is not, unfortunately, the whole story. When we look at the relationship between the economy and federal receipts (the purple and black lines), there is a fairly strong correlation: when the economy grows, so do tax revenues; when the economy shrinks, so do tax revenues (though not always at the same rates).

But when we look at the U.S. economy as it relates to federal spending in the last thirty years (the purple and green lines), there is little correlation between GDP and spending. In times of recession, federal spending goes up. In times of expansion, federal spending goes up.

This leads us to one other trend that places increasing pressure on federal resources: debt. Federal debt is money borrowed by the U.S. government to pay for expenditures exceeding the amount of money raised (primarily) through taxes. Beginning in the late 1970s, government spending exceeded income consistently, and the federal debt grew at a rate matching—and often outpacing—the rate of increase of GDP. The result of this expanding debt is an increasing cost to the federal government each year to pay just the interest on the debt, without bringing down the principal. The cost of the interest on U.S. federal debt in 2010 was $414 billion. I have no desire here to wade into the politics of the debt, I only want to highlight the increasing impact it has on the competition for federal dollars.

Not All Spending is Equal: Discretionary vs. Mandatory

The federal budget can be broken into two categories: mandatory spending and discretionary spending.

• Mandatory spending is money spent without annual approval by Congress. Major social programs like Social Security, Medicare, Medicaid, and welfare programs are examples of mandatory spending, and the yearly costs of these programs will grow or shrink  according to the demands placed on them. Spending on these programs can only be modified by an act of Congress—a major political undertaking in most cases. Think of the so-called “third rail” of Social Security reform in American politics. Very few politicians will touch it for fear of losing their jobs.
• Discretionary spending is what most people think of when they think about government spending: defense, education, energy, commerce, justice, agriculture, transportation, health and human services, and NASA (among many others). Funding for of these programs require annual review and approval by Congress. The largest expenditure in the discretionary budget by far is for defense, and it’s common to see budget numbers broken down even further into defense and non-defense discretionary spending.

The above plot shows total federal expenditures since 1962 in green and total discretionary expenditures in olive. The space between the green and olive lines represents the sum of all mandatory spending programs mentioned earlier. Non-defense discretionary spending is represented by the orange line, so the space between the olive and orange lines indicates defense spending. Note the large difference between total U.S. spending in green and the total non-defense discretionary spending in orange. The vast majority of spending in the United States goes towards these mandatory programs and defense.

Defense spending has increased from about $400 billion in 1962 (or approximately half of the federal budget at the time) to roughly $800 billion in 2010 (accounting for just under a quarter of the federal budget now). Non-defense discretionary spending was about $100 billion in 1962 and $700 billion in 2010, growing from 13 percent to 20 percent of the federal budget. Mandatory spending was about $250 billion in 1962 and roughly $2 trillion in 2010 and now accounts for approximately 60 percent of the federal budget, up from a little over 30 percent in 1962. This growth in mandatory spending accounts for the lion’s share of growth in federal spending.

NASA Is Discretionary and Competes Every Year for Funding

The final plot shows NASA’s budget line in comparison to the non-defense discretionary budget (the one that Congress approves every year). You may have to squint.

NASA has averaged between two and 2 ½ percent of the discretionary budget, and roughly 6 ½ percent of the non-defense discretionary budget since the early 1960s. But looking at NASA since the end of the Apollo program, it has averaged less than five percent of non-defense discretionary spending. At the peak of the Apollo program, NASA’s budget accounted for 4 ½ percent of the entire federal budget, but since the mid-1970s, the agency represents less than one half of one percent of all federal expenditures.

NASA has always competed for funds with all of the other entities of the federal government, but as we have seen in the figures above, the agency faces growing, long-term economic trends over which the space community has little control. As mentioned above, in 2010, the interest on the federal debt amounted to $414 billion, roughly twenty three times the NASA budget that year. This is not to suggest that the United States would spend more on NASA if it carried less debt, but it shows that an increasing debt load places a significant burden on limited resources. The United States also faces mandatory spending requirements that are increasing far faster than the growth of the federal budget, leaving the discretionary budget as the only place to find funds. Given the combined pressures of increasing federal debt and mandatory spending, it’s clear that NASA has not had to compete for funds within a budgetary environment quite like this before.

But don’t despair! In my next post, I’ll discuss the unique value of NASA and its planetary science activities, how they contribute to the U.S. economy, and why I think the people in the U.S. planetary science community are the best selling point for taxpayer investment in space science.

Part 2: The Rise and Fall (and Rise and Fall) of Planetary Science Funding >>