Thomas Katsouleas is Vinik Dean of the Pratt School of Engineering at Duke University.   

With the sequester cuts starting tomorrow, federal science funding agencies from the NIH to NSF and DoD are considering how to deal with smaller budgets. Administrative staff and boards are convening, and some of the early suggestions are worrisome. One council member at an institute of the NIH considering a 10% budget cut bemoaned that this would more than decimate the number of new proposals they could fund in the coming year. The NSF yesterday sent a message to all university presidents with the same message: Under sequestration they would reduce the number of new science awards by 1,000.

The rationale they are locked into is the same one that gets poker players into trouble chasing an inside straight. They view their prior commitments as something they are locked into – in just the way the poker player sees his bets as committing him. One NIH Institute Advisory Council member told me they “can’t” cut existing programs because the scope of work agreed to in the grant could not be fully completed if they did. That means the entire burden of budget cuts falls onto new projects and new ideas.

Engineers view the problem differently — as a multi-variable optimization problem. In this case, what needs to be optimized is the overall mission and core values of the institution.

One aspect of the mission is to ensure not only the quality and value of current science but the nurturing of new ideas and a new cadre of investigators that will be critical to the future.  Taken in this context, we have to weigh the cost of jeopardizing five years of citizen investment in current research against killing off career paths and future ideas for generations to come. And unlike poker players, we have more options than just calling or folding. In many cases, we can reduce the scope of a research program by 10% without eliminating the value of the entire project.

To see why this sort of analysis is so important, consider the following oversimplified model.

If all grants are currently funded for five years, then 20% of the budget is in each year. If no existing grants are cut, then the 10% cut must fall entirely on the new grants, which were 20% of the budget, thus reducing them by half to roughly 10% of the budget.  This would reduce the pay line on already ridiculously low success rates by a factor of two — NIH could go from an 18% success rate to 9%, cutting out half or more of new investigators and likely forcing them into other career paths, and almost certainly undermining US competitiveness in innovation, not to mention health care.

More broadly, as possible cliffs approach, we encourage the President, Congress and every administrative body confronting them to avoid the natural tendency to protect certain elements as “can’t touch” and to evaluate all the tradeoffs in light of the highest priorities and overall mission of the institutions involved. Furthermore, Congress and others should avoid micromanaging how to implement the cuts and let the agencies evaluate what best suits their mission.

No matter how well intentioned (and politically appealing) it is, protecting individual values in isolation of the consequence to other values can never be as optimal as making decisions with the full system in view and on the table. There are too many things we can’t imagine doing until we see the cost of not doing them.

[Top image from Matthias Pahl/Shutterstock, with help from VentureBeat's Tom Cheredar]

In 2013, unless changed by bipartisan legislation, two things are mandated to happen. One is the automatic expiration of the Bush-era tax cuts, which should increase tax revenue by about 20 percent. Another is the beginning of a $1 trillion nine-year slashfest from the federal budget. Together, some say, that could cost about a million jobs in the U.S. and send the country off its already-precarious economic rails into a recession.

The goal is a reduction of the national debt and elimination of the federal deficit. But how does the U.S. debt stack up against other countries?

It is certainly the biggest national debt on the planet, at $15.5 trillion dollars. That’s more than the gross domestic product, and slightly higher than Japan’s $13.5 trillion debt. And the difference between the U.S.’s external debts and assets is over $4 trillion.

Here’s an infographic put together by Liam Fisher of IronFX that shows how the U.S. debt stacks up globally:

photo credit: ‘Ajnagraphy’ via photopin cc

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Up to 147 million Americans are planning to shake off their turkey dinners, get up early, and visit their favorite retailers this coming Black Friday. In the process, they could be pumping up to $30 billion into the U.S. economy.

The National Retail Federation’s latest poll says 147 million shoppers is a slight decrease from the 152 million who shopped last year’s Black Friday, possibly due to this being the earliest Thanksgiving since 2007. But per-shopper spending looks to jump 25 percent, according to a Consumer Electronics Association poll, to $218.

“The 2012 Thanksgiving weekend has the potential to be the biggest shopping weekend on record [in the U.S.],” the CEA’s chief economist, Shawn DuBravac, said in a statement.

Sixty percent of U.S. adults — about 140 million Americans — plan to buy at least one Christmas gift this weekend, according to the Consumer Electronics Association. That one gift — plus whatever goodies we buy ourselves — will add up fast.

Multiply the 147 million American shoppers that NRF predicts may hit stores this weekend with the average per-shopper spend CEA is estimating, and you’ve got almost $32 billion in gifts and assorted goodies flying off both real and virtual shelves this weekend — $32,046,000,000, to be exact.

That would be a major increase from last year, which saw about $11.4 billion in Black Friday sales and $1.25 billion in Cyber Monday revenues. But it does cover the entire weekend: Friday, Saturday, Sunday, and Monday, and combines both offline and online sales.

According to new Nielsen poll, a lot of those gifts will be electronics, as kids are hoping for iPhones, iPads, and Nintendo Wii Us under the tree. The same is true of gifts Americans present to themselves, and adults’ wish lists are full of tablets, smartphones, and laptops.

According to the CEA a third of Americans will visit a bricks-and-mortar store, while another 20 percent will prefer to let their fingers do the walking, online.

But not all is sweetness and light.

As the U.S. government deals with an impending “fiscal cliff,” half of consumers surveyed by the CEA say they’re worried and that it will affect their spending — perhaps in anticipation of taxation increases in the new year. Eighteen percent said the fiscal cliff will have a “large impact” on their spending.

But perhaps not very large, if we’ll be spending $32 billion in four days this weekend.

photo credit: Michael Holden via photopin cc