March 30, 2015

$100 Billion National Research Bank?


By Deb Hamernik, ASAS Public Policy Chair

At the annual meeting of the American Physical Society in March, some physicists began conversations around a new idea for funding basic research: Congress should create a $100 billion national endowment (e.g., the National Research Bank) to help fund basic research. The National Research Bank would not be subject to Congressional actions or the budget realities in Washington, DC.

Where would Congress get $100 billion? One option is to rewrite the rules governing U.S. corporate income taxes so that companies that currently shift earnings to overseas subsidiaries or parent companies are charged a tax on accumulated earnings and on future overseas profits. There is widespread, bipartisan support in Congress for corporate tax reform. The Obama Administration recently proposed charging companies a 14% tax on accumulated earnings and a 19% tax on future overseas profits. According to President Obama, this income would be used to pay for improvements to the nation’s roads, bridges, and airports.

It is estimated that American companies have accumulated more than $2 trillion in foreign profits. Companies are currently charged a 35% tax on corporate profits earned in the U.S., which many business executives feel is excessive. To get around these taxes, many multinational companies shift their earnings to foreign countries, which face little or no U.S. taxes, unless the income is brought back to the U.S.

Similar to a university endowment, the National Research Bank could invest the $100 billion and use the interest to fund basic research. A Board of Directors for the National Research Bank could administer the proceeds, set research priorities, and decide which projects are funded. At the current rates of return, a $100 billion endowment would generate about $7 billion per year, which is about the size of the current annual budget of the National Science Foundation and about five times more than the fiscal year 2015 budget for the USDA National Institute of Food and Agriculture (NIFA).

The endowment could also be managed as a public-private partnership so that Congress could not use the funds to deal with federal budgetary issues. Another option would be to use the endowment to provide matching funds for federal agency projects or high-risk/high-reward projects, which usually don’t get high scores from peer-reviewers on review panels at federal funding agencies.

While it is clear that a $100 billion endowment for the National Research Bank is a long shot, scientists (and politicians) must look for new sources of support for research. Federal funding for research has been flat in recent years and has not kept pace with inflation. Increasing costs associated with Medicare, Medicaid, social security, and interest on the federal debt continue to comprise a greater portion of the federal budget. The remaining dollars for “discretionary” items (including research and development) are expected to fall to 23% of the federal budget by 2040. In 2012, discretionary funds were 36% of the federal budget and in 1970 discretionary funds were 67% of the federal budget.

Even if you don’t like the idea of a National Research Bank that is supported by an endowment generated by corporate tax reform, it is important to engage in this conversation. Animal scientists have always been innovative in finding new funding streams for research, teaching and extension activities. Surely there are additional ideas for generating new sources of revenue in the agricultural or human nutrition sectors to ensure a sufficient supply of animal sourced foods to meet the growing global demand for animal protein and ensure global food security.