NASA’s overall impact on the nation’s economy

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NASA has been busy on a program to use the moon as a launch pad to Mars. It will spend a lot of money to do so. The agency wanted to get an idea of the economic impact of this program. So it undertook a detailed study covering 2019, partnering with the College of Urban Planning and Public Affairs at the University of Illinois at Chicago. For highlights, Federal Drive with Tom Temin turned to the NASA’s chief economist in the office of the administrator, Dr. Alex MacDonald.

Interview transcript:

Tom Temin: Good to have you on.

Dr. Alex MacDonald: Thanks Tom it’s a pleasure to be on The Drive.

Tom Temin: Now, this was a massive report at nearly, well, more than 2500 page. Is this something that NASA regularly does for all of its programs are just this one?

Dr. Alex MacDonald: So this is actually the first time that NASA has ever done an agency wide what we call an input output macroeconomic model. And in the past, NASA has done various studies looking at the potential economic output of R&D, and other different types of economic output. But for those listeners who are familiar with economic modeling, this is the standard federal government IMPLAN model developed by the US Forestry Service and FEMA back in the 70s. And NASA has used this type of model for its centers a number of times before, but this is the first time we’ve ever done it for a whole of agency perspective. And we did it for all of the agencies procurement and labor. And we also, as you mentioned, it’s a special focus on our Moon to Mars program, because we want to make sure that people understand that going to the moon and getting onto Mars for the first time with humans is a type of initiative that really has a huge potential to contribute to the American economy.

Tom Temin: So is the purpose of this perhaps, in some sense to sustain congressional interest and funding for it? Because this is really a long term program. I don’t think Mars is within reach before another, what 15-20 years realistically?

Dr. Alex MacDonald: Well, we certainly do want the public and of course the representatives in Congress to fully understand the economic output of NASA’s activities. As the chief economist for me, I thought it was just really important to start establishing a baseline for economic output using a very standard model that we can do on a repeatable basis. If we’re interested in how we impact the economy, we don’t just want one report, we want a whole time series of reports that extend out for essentially the indefinite future. That’s the kind of analysis that allows us to really understand the impact that our federal government has on our economy. And in particular, of course, the impact that NASA has.

Tom Temin: Now, is the output for a dollar of input. does it vary across the different agency programs or is it always some kind of federal constant?

Dr. Alex MacDonald: So that’s a great question. For the real answer, you have to get the IMPLAN specialist there from University of Chicago or other places that do IMPLAN model analysis. However, NASA’s result is slightly different. And the reason is simply because the IMPLAN models a very detailed model that takes into account the different types of expenditure. So for example, a R&D or a science expenditure ends up having a slightly larger impact than, for example, a standard management contract for services. And the reason is simply because there’s a greater supply chain of other high tech industries involved in that type of activity. So NASA’s economic impact isn’t necessarily significantly different than another R&D agency. But R&D agencies do tend to have a slightly higher economic output than non R&D ones.

Tom Temin: But when you say NASA is an R&D agency, which it is, it’s also a manufacturing agency. And it builds or contracts for large physical objects that are very expensive, like rocket engine, and everything on top of them up to the point. And so is that part of the model also?

Dr. Alex MacDonald: Yes absolutely. So that that will be another code that gets accounted for in the IMPLAN model. And those are also the types of activities that really drive the output numbers. Just for reference, right, there’s three different types of economic output, there’s the direct impact that you get from your direct expenditure, that’s your procurement number. Then there’s your indirect impact, which comes from your supply chain, right. When you’re building a large rocket engine, there are a number of suppliers, who of course also get business from building that rocket. And then there’s also the induced impact. And that induced impact happens from your civil servants who go and spend in the local communities where they are. And we actually did the report by either state and kind of zip code where the employees kind of work and live. And so that gives you a really different type of insight into how the agency has an economic output. What you realize is that there’s an economic impact in every state in the union. There are jobs in every state in the union that come from NASA’s space exploration activities.

Tom Temin: And of course I mentioned the engines and the hardware, but the Moon to Mars program at this point is more of a research program really than a manufacturing physical plant program. Would that be fair to say?

Dr. Alex MacDonald: Well, I wouldn’t say so. And the reason is because our Moon to Mars initiative includes a number of initiatives and frankly, missions that are willing development, and at least one of which Mars perseverance is actually currently on its way to Mars. In addition to those, we also have, of course, the SLS rocket, which has been in development for many years. As well as the Orion spacecraft, the first test articles, which we already flew a few years ago during the EFT one flight. So I would say that it’s really in the midst of development right now, which is actually why we’re starting to see significant economic impact numbers. To give you some context, the overall economic output from NASA in FY 19 was estimated at about $64 billion, the economic output of the Moon to Mars program specifically was about $14 billion. So already in FY 19, Moon to Mars initiatives are a significant part of NASA’s overall economic output and portfolio. And of course, we expect that number to increase if we see increasing appropriations in those areas related to getting onto Mars.

Tom Temin: So the $14 billion in output, what is the input that led to that?

Dr. Alex MacDonald: So for the Moon to Mars program, that initiative was funded at roughly about $5 billion in FY 19 in terms of direct economic impact.

Tom Temin: So almost a three to one ratio then of the output to the input.

Dr. Alex MacDonald: That’s right. And that’s fairly standard for these types of models. So that’s what you kind of expect for an R&D agency like NASA,

Tom Temin: I guess, as the background question I’m surprised NASA has a chief economist at all. I thought I knew everything about every agency, but of course I don’t. And what else do you do as the chief economist there?

Dr. Alex MacDonald: Well, yeah, that’s very kind, it is a bit of a new thing. I was made the chief economist about a year ago, but I have been working at NASA for about 12 years. So I like to joke I did my PhD in the long run economic history of space exploration. And when you do your PhD in something that specific, place like NASA is the only place that can employ you. So I’ve been working on various things. Currently, I’m also responsible for the International Space Station’s National Lab as the NASA Program Executive for that. And I’ve also spent a lot of my time doing various types of analysis for how you work with the private sector, right. How do we move into this world where we have more companies that have the initiative of building new rockets, and we buy services, rather than just pay to develop the rockets? And I’ve also been involved in architecting, some of our overall strategy for the Moon to Mars mission.

Tom Temin: Does your background in economics, does that help inform decisions on how a program might be structured — procurement versus in house versus external research versus internal — those kinds of questions?

Dr. Alex MacDonald: Yeah, that’s exactly the kind of stuff that I tend to look at. And I also tend to look at things like these concepts of sustainability, right. We always want sustainable programs. As an economist, my perspective is always fairly simple minded one, right? We’re dealing with very brilliant engineers and scientists. And you know, I always try to reduce to pretty simple things. A program is sustainable if you can keep affording to do it. And when we think about our Moon to Mars program, that’s exactly the kind of perspective that we’re taking.

Tom Temin: Now, you mentioned that you live in an urban setting. Do you ever wish you lived out in the country so when you look up at night, you could see what it is you were working on?

Dr. Alex MacDonald: It’s funny you mentioned that, I certainly do. I remember very, very distinctly actually, the first time I saw the Milky Way in the Black Hills of South Dakota, and it had a huge impact on me. And even though I must say, even though today, we have a lot of light pollution in DC, I still make time to look out, we got planets in the sky these nights, right. We got Mars pretty high up there. And of course, if you log into things like the ISS station tracker, you can also see when the station passes overhead here, even in downtown DC. And in fact, there was a great pass just last week.

Tom Temin: Yeah, Mars is pretty visible, and it is actually red.

Dr. Alex MacDonald: That’s right.

Tom Temin: Alright, have we covered it?

Dr. Alex MacDonald: I certainly think so. As a last note, the overall number for jobs that NASA has an economic output on across the nation was 312,000 jobs across the nation. And of course, I know a lot of our listeners are at other agencies. I certainly think that these types of analyses are really powerful tools for communicating to our stakeholders because it really shows the way in which federal civil servants and all the work that we do just have a massive impact on the lives of our fellow citizens. So if your agency hasn’t already done an IMPLAN model, I recommend you do one.

Tom Temin: Alright, good advice from Dr. Alex MacDonald, the chief economist in the office of the administrator at NASA. Thanks so much for joining me.

Dr. Alex MacDonald: Thanks a lot Tom. It’s a pleasure.

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