Does Families USA Know What’s Up in Its Own Backyard?

Families USA seems to be really polishing up its business of putting out publications that rank states according to dubious criteria. They’re coming fast and furious. This latest one is a real howler – but for what it ignores, not what it measures.

In Your Own Backyard purports to measure the economic impact of National Institutes of Health (NIH) funding in each state. It notes that NIH funding (which comes via Congress) has been pretty flat and losing pace to inflation since 2003, and argues that an immediate increase of 6.6% would get the NIH back on track to full funding. Families USA condemns the federal government for not increasing NIH funding according to Families USA’s preferences, and uses the U.S. Department of Labor’s RIMS II model to estimate the “multiplier” for NIH grantmaking in each state.

Very simply put, “multiplier” refers to the fact that if you spend money in an area, the recipients who earn it will then spend it themselves, etc., etc. Overall, Families USA estimates that NIH grants multiply by a factor greater than two. That is, $23 billion of grants, nationwide, generated almost $51 billion of business activity last year.

So far, so good: I don’t know many folks who would advocate complete withdrawal from government funding of scientific R&D. (Well, I know of at least one, an English scientist named Terence Kealey who wrote an impressive libertarian book, The Economic Laws of Scientific Research, which argued exactly that.)

Families USA demands a funding increase of $1.5 billion (6.6%), which will result in new business activity of over $3 billion. Well, ok, but Families USA also has the gall to point out that much of the new business activity and employment would be in the biotech industry (pp. 12-13). Meanwhile, Families USA maintains an entire collection of anti-pharma screeds on a special webpage. (The title of one paper, The Choice: Health Care for People or Drug Industry Profits, gives you the gist.)

So, while Families USA thinks it’s ok for the government to fund projects that give rise to biotech activity, it doesn’t think it’s ok for the biotech entrepreneurs who actually invent something to profit from their success!

If Families USA was concerned with inadequate NIH funding, it might have looked around to see who else is funding scientific R&D. According to PhRMA, the trade association for the brand-name pharmaceutical industry, drugmakers invested $59 billion in R&D in 2007, up from $48 billion in 2004.

That’s an annual increase of 7% over three years, far greater than the rate of inflation. So, investors are still willing to put their savings at risk in pharmaceutical enterprises, despite attacks by Families USA and fellow travelers. I am confident the increased jobs, which Families USA ascribes to NIH funding, could also be credited to the pharmaceutical companies, which invest almost three times as much in R&D as the NIH does.

So, Families USA, how about calculating that multiplier?

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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