It's something I've discussed before (see post chain), but Orac has a great post on it. People who are lucky enough to have R01s have their funding cut cut cut. People who don't have them have a very very slim chance of getting them. People who are trying to get them for the first time have even less chance. At least the renewal rates are fairly high; so there is a chance to continue your current research. However, for people like me, it is very clear there is no future dependant on the NIH.

The final sentence (subscription reqd) in a economic analysis of American science funding is pivotal:

Also, failure to provide adequate funds for biomedical research discourages the brightest young people from choosing scientific pursuits.

Actually that is not true, the best of the best, if they want to continue doing science, will get funded. 3% of them will this year (3% of first time applicants will get funded). But there are another 97% of us, with PhDs, with many years postdoctoral education. What do we do? Find a new job, that's what, or get used to being broke and not being able to do research. Money is one of the most critical components of successful research, the others being ingenuity, know-how, and resources not commericially available (ie things you make yourself).