The spending limits that Congress agreed to this week as part of a deal to raise the debt ceiling could hurt U.S. spending on R&D and infrastructure. Some experts say such spending is essential for the country to remain competitive globally.

The budget deal sets spending caps that will reduce spending by $1 trillion over the next decade, and it sets up a committee that will attempt to find an additional $1.5 trillion in reductions. The spending limit for the 2012 fiscal year, which starts in October, would reduce discretionary spending by $7 billion compared to last year, and by $73 billion compared to what President Obama asked for in his budget.

The deal does not specify how funding under that cap will be distributed among agencies and programs—that will be settled in appropriations bills. So in theory, Congress could increase funding for R&D and infrastructure by making cuts elsewhere. But that scenario is a long shot. “The debt deal is going to have a bad impact. I don’t see Congress having the sophistication or insight to separate out, in a serious way, funding for infrastructure and research. It’s going to get caught up in the overall fever of budget cutting,” predicts Robert Atkinson, president of the Information Technology and Innovation Foundation (ITIF), a Washington-based think tank. 

Reductions to R&D spending have already been seen in spending bills passed by the House earlier this year. President Obama made boosting clean energy development a centerpiece of his policy agenda this year, and as part of that, he called for a more than $1 billion increase in funding for energy efficiency and renewable energy R&D at the U.S. Department of Energy. But the House passed an appropriations bill that instead cut funding for that R&D by $60 million. Obama also asked for $620 million for the Advanced Research Projects Agency for Energy, but the House only approved $173 million.

Even keeping R&D level with recent years would not address a decades-long slump in the growth of R&D spending that has seen the U.S. lose ground against other countries, Atkinson says. In a recent study by ITIF of 36 countries around the world, the growth in R&D averaged 16 percent over the last decade. In the U.S., federal R&D funding decreased by 1 percent, he says. “By any measure, it’s clear that we’re underinvesting,” he says.

The prospects for investment in infrastructure improvements, which have been chronically underfunded, also look bad. Atkinson estimates that it would take $180 billion a year to keep up with the needs of transportation infrastructure, but only $60 billion is being spent. Even the temporary boost from the Recovery Act of 2009 only made up one-third of the shortfall.

Although President Obama proposed significant increases in transportation infrastructure funding this year, Senate Democrats decided to maintain current levels, while the House recommended cuts of one-third, says Donna Cooper, a senior fellow at the Center for American Progress. She also notes that federal loan programs for large-scale infrastructure projects under the U.S. Department of Transportation, the DOE, and the EPA are all at risk in budget negotiations. “People who are concerned about infrastructure have a whole lot to be worried about,” Cooper says.

Chad Evans, senior vice president at the Council on Competitiveness, says that the council’s members, which include CEOs at major companies, recognize the need to address the debt. Yet the council also emphasizes the need for R&D and infrastructure, and is disappointed that recent progress on increasing funding is now at risk. The council’s business leaders are putting together recommendations for what funding should be prioritized as Congress makes decisions on specific programs. Balancing cuts and investments is a “nuanced position,” he says. “The recent rush and panic mutes nuance. We have to return to a place of reasoned discussion.”