Trump’s Budget Could Hurt Manufacturing and Innovation

The president’s spending blueprint calls for cuts to federal programs that underpin technology breakthrough and support jobs.

President Donald Trump's overview of the budget priorities for Fiscal Year 2018 are displayed at the U.S. Government Publishing Office.
Joshua Roberts / Reuters

Donald Trump won the White House after promising to bring back jobs to the United States and revive American manufacturing. But the president's budget blueprint, released on Thursday, calls for federal funding cuts that could set back scientific and technological breakthroughs that spur innovation and create jobs as well as jeopardize, or even eliminate entirely, government programs designed to support American manufacturing.

The Department of Energy is one of the agencies that would be impacted by cuts. It would sustain an overall budget cut of roughly $1.7 billion, and its Office of Science would lose roughly $900 million in funding, according to the White House blueprint. “To sustain advanced manufacturing, countries need to invest in a balanced research and development portfolio,” David Hart, a senior fellow at the Information Technology and Innovation Foundation, said in an e-mail. “DOE is a major funder of physical sciences and engineering research and development, so the cuts will hurt in that regard.”

Additionally, Trump’s budget proposes ending or discontinuing federal funding for several programs that either promote innovation or are intended to benefit manufacturing. At the Department of Energy, the blueprint eliminates Advanced Research Projects Agency-Energy, which is set up to act as a government funder of breakthrough energy projects that can help commercialize technology that might one day support the creation of private sector jobs. It also scraps the Advanced Technology Vehicle Manufacturing Program, which runs a loan program intended to help support United States manufacturing facilities.

At the Department of Commerce, the proposed budget would discontinue federal funding for the Manufacturing Extension Partnership, a program that provides assistance to small and mid-sized manufacturers. The blueprint notes that “by ending federal funding, MEP centers would transition solely to non-federal revenue sources.” Hart said that the program would not be able to be sustained on a national basis, however, without federal funding. “These kind of cuts will undermine supply chains and regional clusters that are particularly important to sustained competitive advantage in advanced manufacturing,” he said.

According to science and technology experts, these components of Trump’s budget, as well as the budget’s overall funding cuts to federal agencies that support research and development, could hurt American innovation and manufacturing, and put future opportunities for job creation at risk.

“If these cuts were to be enacted, they would signal the end of the American century as a global innovation leader,” Joe Kennedy, another senior fellow at the Information Technology and Innovation Foundation, wrote in a blog post responding to the budget release. “The reality is that if the United States is going to successfully manage its growing financial problems and improve living standards for all Americans, it needs to increase its investment in the primary drivers of innovation, productivity, and competitiveness. The Trump budget goes in the opposite direction,” the post reads.

The call to eliminate the Advanced Research Projects Agency-Energy, or ARPA-E, for example, runs the risk of setting the country back in research and development. The budget blueprint argues that “the private sector is better positioned to finance disruptive energy research and development and to commercialize innovative technologies.”But that explanation glosses over the fact that government funding has historically played a critical role in the development and commercialization of new technology.

“The ARPA-E program was developed precisely because there is a gap in investment and funding in the private sector for early-stage development of innovative, new technologies because they’re incredibly risky,” Rob Cowin, of the Union of Concerned Scientists, said in an interview. “As technologies are built, and demonstrated, there’s a lot more appetite for private sector investment because there’s less risk. But at the beginning there’s a tremendous amount of risk, largely associated with cost and performance, and that’s where government funding can help get new technology off the ground.”

The president’s proposal to eliminate ARPA-E, in other words, seems to undervalue the importance of government funding to technological innovation. The suggested cut could also take the creation of new jobs off the table. “Eliminating ARPA-E means eliminating new opportunities to commercialize and manufacture the technologies of the future,” Cowin said. “Between 2009 and 2015, ARPA-E projects attracted over $850 million in private sector investment, creating new companies and new jobs, while growing new markets.”

Of course, the administration could still create new employment opportunities in other sectors. The budget calls for an increase in funding for the Departments of Defense, Veterans Affairs, and Homeland Security. At the Department of Labor, the president's blueprint states that it will help states expand apprenticeship, which it describes as “an evidence-based approach to preparing works for jobs.” The budget also notes that the administration will “work hard to identify regulations that eliminate jobs or inhibit job creation.”

Presidential budgets, like Trump’s, typically function more as a statement of priorities and political messaging than an actual roadmap for government overhaul. Now that Trump has outlined his budget priorities, Congress will have a chance to review them. If some of the proposed cuts to research and development are enacted by the legislative branch, that may make it harder for the president to make good on his promises to support manufacturing in the United States and create jobs.