If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.



Fiscal Cliff Deal Sets Up March Battle

Federal Budget: Scientists and industry worry about deep spending cuts that were put off until spring

by Glenn Hess , Marc S. Reisch , Andrea Widener
January 7, 2013 | A version of this story appeared in Volume 91, Issue 1

Credit: Molly Riley/UPI/Newscom
A deal to address the fiscal cliff was finalized on New Year’s Day.
Photo shows clouds looming over the U.S. Capitol during the final hours of 2012, while congressional leaders met to make a deal to avert the "fiscal cliff."
Credit: Molly Riley/UPI/Newscom
A deal to address the fiscal cliff was finalized on New Year’s Day.

President Barack Obama and Congress celebrated New Year’s with a compromise bill that stopped the U.S. from going over the so-called fiscal cliff. However, they did not entirely avert the combination of large tax increases and deep, across-the-board spending cuts. Instead, the agreement focuses on tax rates for individuals, which sets the stage for an even larger battle in the spring surrounding the federal budget deficit.

The deal, which the President signed on Jan. 3, didn’t tackle the greatest fear for scientists and many chemical companies: budget sequestration, the automatic cuts designed to control the federal deficit. The drastic reductions—slashing most federal agency discretionary budgets between 7 and 10%—were originally meant to push Congress and the White House toward some sort of compromise on overall deficit reduction. But the current deal merely postpones these cuts, which will affect science agencies such as NSF and NIH.

Now the sequestration debate will come to a head on March 1 at about the same time the country is expected to hit its current debt ceiling. Congress also needs to finalize the 2013 federal budget that month.

“If the partisan bickering over the fiscal cliff was any indication of things to come, we may be facing a perfect storm in March—and I fear that may not bode well for critical federal R&D and science, technology, engineering, and mathematics education investment that is so critical to U.S. economic growth and job creation,” says Glenn S. Ruskin, director of the American Chemical Society Office of Public Affairs.

The New Year’s agreement did include some good news for the chemical industry: It extended the R&D tax credit until Dec. 31. It also continued the federal Farm Bill, which includes financial supports for biofuels and other alternative energy sources, through Sept. 30, the end of fiscal 2013.

The chemical industry sees a big win in the tax credit for research and experimentation expenses. The credit actually expired at the end of 2011, but the deal makes it retroactive.

“We have long supported using the tax credit to encourage U.S.-based chemical production of innovative new products,” says William E. Allmond IV, vice president of government and public relations at the Society of Chemical Manufacturers & Affiliates, a trade group for the specialty chemical industry. “The slow pace of renewal of the tax credit continues to cause great uncertainty for our members, and we reiterate our call to Congress to make this credit permanent.”

The Dow Jones industrial average gained more than 2% to close at 13,412.55 on Jan. 2 after news of the larger fiscal cliff deal. “The agreement largely averts fears of a recession,” says T. Kevin Swift, chief economist of the American Chemistry Council, the largest U.S. association of chemical producers.

The spring showdown is unlikely to affect U.S. economic growth in the first quarter because businesses had already pared back capital spending and hiring plans, Swift notes. But the agreement leaves unresolved questions of where the federal budget will be cut through sequestration.

Still, without the current deal, the cuts would have kicked in at the start of the year. For this reason, Eleanor (Ellie) Dehoney, vice president of policy and programs at the advocacy group Research!America, welcomes the additional time. The group plans to partner with as many organizations as possible to lobby the 113th Congress to make sure that the consequences of research cuts rival military spending on the list of top concerns.

“We are going to have to figure out how to really position sequestration as a strategic mistake,” Dehoney says. “It is a compelling case because it really makes no sense to cut federal R&D.”


This article has been sent to the following recipient:

Chemistry matters. Join us to get the news you need.