Monday, August 13, 2012

Sequestration: yes or no?

Members of scientific organizations, like myself, are being urged to sign petitions asking that congress resume talks on methods to avoid resorting to sequestration. In case you haven't heard, we've run out of fancy terms to describe globally important ideas. As a result, sequestration is no longer a group of techniques for removing carbon from the atmosphere but now refers to budget cuts to U.S. spending that give no regard to which government programs receive the cuts. More precisely, funds that exceed the budget set forth by congress are sequestered by the treasury and not made available to congress for appropriations. This is generally viewed as a bad thing, and through this post I'm trying to determine why it is bad and whether or not the arguments make sense.

The argument of we scientists and engineers appears to be this: science and engineering help the U.S. remain competitive in an increasingly global technology market while contributing more to economic growth than other government-funded programs. Therefore, science and technology should receive less of the burden imposed by the budget cuts. Sequestration is seen as unfair and harmful since other organizations that contribute less to the economy receive more-or-less the same cuts to their funding. I have not seen arguments from other federally-funded sectors that may be hurt by sequestration, but I can imagine that similar appeals are being made.

Two possible requests are made, so far as I can tell, in the petition above. The first is that we are asking that sequestration not occur. The second is that so long as budget cuts are made, fewer cuts should be applied towards science and technology than other sectors. If this is indeed a zero sum game, then that would seem to indicate that other organizations will suffer more cuts than they would under sequestration. Perhaps some government-sponsored organizations are viewing sequestration as very appealing in this light.

I have two concerns about the value of the arguments put forth by APS and the many other scientific professional organizations. The first is that science and engineering is a very big field that employs many people. If every bit of it is contributing equally to the growth of the economy, then I agree that sequestration is unfair. But we also know very well that there are too many people, at least in academia, and that this is driving down the quality of scientific research in favor of publishing to gain a competitive edge. I suspect that only a certain percentage of science and engineering is actually of value to our economy, so perhaps it would be more appropriate to suffer sequestration and let the ineffective parts choke from the lack of funding. Harsh, I know, but this is the reality of cutting a budget.

My second concern is based on an intuition I have about complex systems, particularly the stock market. Over the long run (20 years or more), index mutual funds will always outperform actively traded funds, and they do this by matching the mean growth of the market rather than reacting to the daily or monthly fluctuations of stock prices. In other words, reacting to fluctuations and trying to understand the market with a reductionist approach will eventually fail to account for every factor that affects prices, and as a rule of complex systems, even minor factors have big consequences. Additionally, you often pay more in fees for the large amount of trading that is performed. My intuition is that this analogy applies, at least loosely, to federal spending. It may simply be impossible to effect a detailed budget plan that helps the economy in the long run. Any attempt to do so might work, but it's cost in man-hours and other resources may lead to other problems. Across the board cuts imposed by sequestration might be the best approach we have to reducing spending within the government.

Finally, let's keep in mind that the purpose of a government is to secure the welfare of its people. The simplest question we can ask is this: which of the two options—sequestration or a detailed budget reduction plan—will ultimately make people happier? I haven't been convinced yet which one is best for U.S. citizens.

I'm going to end this post for now in favor of other work I need to do, but I think that there are many other subtleties here that are worth considering. I welcome any and all comments, thoughts, and questions as we try to sort this out before January.