How has the sequester affected you?

The director of the NIH, Francis Collins, has asked the question on Twitter:

I want to hear; tell me how the #sequester is affecting your biomedical research right now. Use #NIHSequesterImpact

Click here to see how others are answering; lots of cancelled postdocs, affected science, etc.

So I am curious -- how has the sequester affected you, readers? Please tell me in the comments.

(I hope that you are not too much affected, but I am guessing that is not the case. Sorry.)  

A sequester thought

I don't really have much to say on the sequester that hasn't been said elsewhere, so I'll keep this short. Let's just say that there are probably a lot better ways of going about budget-cutting, and there's no doubt that there will be a drop in GDP growth because of this. That's bad.

Former NIH director Elias Zerhouni's comment to the Washington Post:

The second area is vibrant human capital, which is the part that I’m most concerned about. If we don’t offer the young bright minds a career that is predictable, then we lose them. We have, like, 17,000 scholarships that we give to people to stay in science.

I suspect that most readers of this blog hold federal funding of graduate students and postdocs at arms' length, in that it's partially responsible for the excess of scientists. But this sort of near-random cutting is not ideal and there are undoubtedly lots of graduate students, postdocs and assistant professors who will be permanently and negatively affected.

Best wishes to them, and to all of us. 

Payroll taxes kick in -- ugh

So the shakeout from the fiscal cliff hits first today for me, with my first paycheck of 2013. You'll have to trust me when I say that it's 2.9% lower; I can't quite figure where the difference is, but it's mostly under the Social Security line item on my paystub, because the payroll tax cut has expired:

Workers’ share of the Social Security payroll tax, which had been temporarily cut from 6.2 percent to 4.2 percent for two years, was immediately snapping back to the higher level. 

The result is smaller paychecks for all wage earners, with the country’s economic recovery still sluggish and unemployment stubbornly high. A worker making $50,000 in 2013 will take home $38.46 less per two-week paycheck, or $1,000 per year.

A look back tells me that I didn't expect the payroll tax cut to be extended, and I was wrong. Well, I guess my payments to my bookie will be a little lower this month. (kidding kidding)  Here's hoping that the extra money is going straight into some pharma retiree's pocket for a job well done.

Why is sequestration bad?

Credit: Washington Post, altered by Chemjobber

So, as promised, the second part on the "fiscal cliff." Apart from the big tax increases that were planned because of the fiscal cliff, there are also large budget cuts planned. What's undesired for both parties in Congress is the targets of the cuts and the means by which they will be applied. From the Washington Post:

Legislators don’t have any discretion with the across-the-board cuts: They are intended to hit all affected programs equally, though the cuts to individual areas will range from 7.6 percent to 9.6 percent (and 2 percent to Medicare providers). The indiscriminate pain is meant to pressure legislators into making a budget deal to avoid the cuts.

Naturally, the science funding agencies will be hit because of this. From C&EN's article on the issue:

For example, the National Institutes of Health, part of the Department of Health & Human Services, faces a total of $11.3 billion in cuts over the first five years of sequestration. Elsewhere, the Environmental Protection Agency could lose $213 million and the Department of Energy could be out $4.6 billion. 

For example, the National Science Foundation’s average annual budget over the first five years is $5.6 billion, assuming congressional appropriators hold all discretionary accounts flat to mirror the overall cap set by the law. Each year of this period, it would lose an average of $421 million to deficit reduction, for a total five-year loss of $2.1 billion, according to AAAS. 

...Sequestration would make that situation worse, says Steven Fluharty, senior vice provost for research at the University of Pennsylvania. The university received $900 million in R&D awards in 2012, 80% of which came from the federal government. He estimates that sequestration could cost the university $50 million to $60 million per year in research funding and more than 1,100 jobs.

But what is immediately relevant to me is that graduate students and postdoctoral fellows and their programs will be affected. I know that there are many who think that this might be a blessing in disguise, but I don't think that's the case -- subjecting all federally-funded science to more-or-less arbitrary cuts (and basically subjecting academic science to funding decimation) does not seem to be wise.

I think the case could be made for altering federal funding of R&D away from its human-health-first-and-foremost/keep-Granny-alive priority to something that focused more on the basic and less on the translational, and more on the long-term than the short-term. But that's an argument for another time. Sequestration is big and random (as opposed to big and prioritized), and therefore undesired. The House of Representatives and the President should come to an agreement and sooner rather than later.*

*I know that's a lame conclusion, but I do not love politics on this blog. The rest of the internet is better for that.

The tax bite of the "fiscal cliff"

Credit: Wonkbook
(click through to see whole infographic)

So a reader challenged me to address the fiscal cliff and its effects on chemists. I've decided to address it in two portions. The "fiscal cliff" [or (as the Washington Post's Ezra Klein more descriptively (and accurately?) refers to it) "the austerity crisis"] is a package of tax cuts that are ending and federal spending cuts that might happen. Naturally, those in federally-funded universities, grant-related positions and the like will suffer effects from it; I will address it tomorrow. But everyone pays taxes, so everyone will be affected by this.

I am really not particularly interested in the elephant-versus-donkey part of assigning blame, but I do want to talk about the actual practical effects of what were to happen if all of the intended tax increases were to be imposed.

To the right is a portion of an infographic from the Tax Policy Center** and Washington Post that predicts that:

• For 2nd lowest-income quintile households (20k-39.7k), the average increase would be $1,231.
• For middle income quintile households (39.7k to 64.5k), the average increase would be $1,984.
• For the 2nd-highest income quintile (64.5k to 108k), the average increase would be $3,540. 

These are not insignificant increases -- I estimate that, for my household, I suspect it would be somewhere around $300 a month, which would definitely affect our consumption. I'll throw in the numbers for the non-1% households of the top quartile (e.g. a double Big Pharma household?): 

• For the top 80%-90% of households (bounded by 108k to 143.4k), the average tax increase would be $6,162. 
• For the top 90-95% of households (bounded by 143.4k to 204.3k), the average tax increase would be $7,830. 
• For the top 95-99% of households (bounded by 204.3k to 506.2k), the average tax increase would be $14,085

I think it's safe to assume that these tax increases (or, actually, returns to Clinton-era income tax rates, and Bush-era payroll tax rates) will be unlikely to happen for the bottom 98% of households, so in other words, most everyone. That said, it appears to me entirely possible that said tax increases will actually happen for a month or two, while the powers that be play chicken with one another. 

*Based on this white paper.