PREVIOUS ADVICE 
It seems that everybody you talk to in National Science Foundation (NSF)-funded scientific disciplines has an NSF-related story to tell these days, and usually that story doesn't have a happy ending.
One small-college scientist I know managed to maintain a productive and serious biochemistry research program for a dozen years despite a teaching load that was recently REDUCED to five courses each year. Now a full professor, he was notified last month that his NSF grant had not been renewed; he is now looking forward to an early retirement. Another scientist of my acquaintance, a prominent researcher at a major state university and a leader in his field, just lost his NSF grant after 15 years.
In both cases the story was the same: excellent reviews and no serious, actionable criticisms. But no renewal, either.
No one who has kept up with news about the NSF budget is surprised that scientists are losing their funding. Fiscal year (FY) 2004 saw a modest 5.4% increase in the amount of peer-reviewed research NSF was able to fund; yet even with that increase, the overall success rates at NSF--a number that includes competitive renewals as well as new proposals--declined from 27% to 24% between 2003 and 2004.
Then, in FY 2005, NSF's budget actually declined for the first time in recent memory. The overall decline was nearly 2%, though the "research and related activities" line item shrunk by a mere 0.7%. That's a small number in percentage terms, but the $30.8 million NSF lost from the year before could have funded a lot of renewals or new projects.
Meanwhile, the number of applications submitted to NSF has increased rapidly. In 2000, NSF received fewer than 30,000 proposals; this year the number will probably exceed 45,000--a 50% increase in only 5 years. Award sizes, too, have increased, as NSF has endeavored to keep up with the cost of doing science--a cost that is increasing faster than the rate of inflation.
Statistical information on the impact of NSF's budget reductions won't be available until March 2006, but the impact of such reductions on scientists in the trenches is bound to be substantial: If a 5% budget increase led to a 3% decline in success rates, what will be the impact on funding rates of a nearly 1% budget reduction? We'll have the overview in about 6 months, but individual scientists have already started to feel the impact.
I contacted several sources at the National Science Foundation seeking a new perspective; how do things look from inside the foundation?
"There is both truth and urban myth in what you are hearing," wrote a program officer, who went on to point out that a qualitative score of "excellent" doesn't mean as much as you might think. "We get reviews with a lower rating, but where words like 'creative,' 'original,' 'risky,' and 'exciting' get used. Often we find ourselves funding proposals with lower review rankings than one we declined--on the basis of the text of the review."
Renewal proposals are especially tricky because sometimes research that was once cutting edge just isn't anymore. "One of the touchiest situations we have to deal with is when the science has just gone stale. The work was really exciting 10 or 20 years ago, and the PI has been milking it ever since. The PI is still publishing [and] actively trains students, but the work is no longer what anyone would call 'at the frontiers.' "
For you beginners, here's a caution: Don't let the desire to stay funded keep you doing science that's no longer compelling. You're likely to find yourself dumped by a project you didn't care about anymore anyway.
Speaking of keeping relationships fresh: Arden Bement, NSF's new director, recently expressed the opinion  that NSF should "push the frontiers" instead of funding "safe research," during a speech at AAAS. (AAAS is the publisher of Science's Next Wave). I didn't pay much attention at the time--top administrators are always spouting platitudes--but word out of NSF is that he really means it. That's good news for early-career researchers, who are riskier by definition and often more innovative by inclination than their more senior colleagues. It might also be part of the reason why grant renewals seem less automatic than they used to, even for productive investigators.
The basic problem, though, is that budgets are shrinking or growing very slowly at a time when the number of applications is growing rapidly, and NSF is working to increase grant size at least at the rate of inflation. As Vernon Ross, chief of the Budget Operations and Systems branch of NSF's budget division, put it in an e-mail, "The bottom line is that proposal pressure has outstripped NSF's funding."
So what does the future hold? The 2006 NSF budget is expected to be about 2% higher than this year's budget. That 2%, however, includes nearly $50 million to transfer from the Coast Guard responsibility (and cost) for the operation and maintenance of the icebreaker fleet used to support polar research. So once inflation is factored in, we're looking at another step backwards. Don't lose heart, but don't look for things to improve anytime soon.
I am preparing for graduate education, and I am wondering if a medical scientist or DVM/Ph.D. would have greater advantage when applying for federal grants than having only a Ph.D.?
The short answer: No. A clinical degree is essential for certain types of research and can be an advantage for others; if you wish to do clinical research, a clinical degree is a big advantage if not an absolute necessity. It is also, of course, essential for clinical practice.
Medical (or veterinary) training can give you a leg up on applying for grants to do certain types of work. But as a general rule, a clinical degree confers no advantage in the competition for scarce research funds. Indeed, many clinical researchers have a harder time getting started in funded research because upon completing their training, they typically have less research experience than their Ph.D. counterparts.
A DVM is for people who love small (or large) furry things. Pursue a clinical degree if you wish to practice medicine or do clinical research. But if your goal is merely to be more competitive for grants, don't waste those valuable years.