Responding to new realities in US science and technology

When we were asked to write this piece in late 2024, our aim was to discuss the role of philanthropy in the U.S. science and innovation discovery system and its importance to economic growth, better health, and national security. Since then, this ecosystem has been undergoing revolutionary change, the implications of which are largely predictable. If research by economists about the role of federal research and development funding on economic growth is any indication, the outlook for the decade through 2035 for the U.S. is one of retrenchment, declining economic growth, and the nation falling out of leadership in science and technology discovery and innovation.

A 2024 study by the Federal Reserve Bank of Dallas found that, since the end of World War II, federal government spending on R&D has underpinned and accounted for about 20 percent of business economic growth alone. Today, federal spending is planned to be reduced by at least 20 percent, and the current administration’s actual target is to make reductions of up to 50 percent at the National Science Foundation, at least 25 percent at the National Institutes of Health, and about 15 percent at the Department of Energy.

The administration argues that there is waste, fraud, and abuse in the science, technology and medicine research funding system, and that this abuse amounts to as much as 50 percent of the funding. The claim is that such reductions will not harm the system but simply root out inefficiency. This hypothesis is false. While funding for programs relating to diversity, equity and inclusion efforts may be eliminated, those program cuts do not come close to 50 percent of the funding that has gone directly to support of scientific research.

The Dallas Fed report’s findings imply that the planned reduction in federal R&D spending will, over time, reduce by at least half the contribution of the nation’s science and technology research enterprise to economic growth. This has significant implications for employment and living standards.

Compounding the impact of the administration's R&D funding cuts is its campaign against the nation’s research universities — the primary performers of basic and applied research. (The definitions of “basic” and “applied” in this context are adopted from the NSF.) More than 50 percent of graduate students in science, technology, engineering, mathematics, and medical (STEMM) fields are from abroad. These foreign students are dominated by people from just two countries: 36 percent from India and 27 percent from China. The administration now proposes canceling visas for students from China and curtailing the number of international students overall. Already, the number of students coming to the U.S. for graduate study is dropping. This leads to another major impact on the U.S. science, discovery, and innovation ecosystem — a crisis in the number of trained workers in the field.

Revolution, not evolution

These two factors alone — a reduction in federal support for R&D and a reduction in the human capital of science and technology performers — will be felt for a decade or more. Given all the evidence, the United States will fall behind in economic growth and experience a loss of productivity in science, technology and biomedical discovery and innovation.

What is occurring is revolution, not evolution; the trend lines are clear, and the vision and strategy that have guided the United States in these areas for 80 years have ended.

Now one might ask, “Are there other sources of funding and human capital that could step in?” — the presumption being that the Dallas Fed report is accurate and thus economic growth will falter within a decade. (These long-term trends do not appear overnight, but they do appear.) The only other major source of support for basic and applied research in our system is philanthropy. It is true that industry is the largest spender of all on R&D, but that spending is primarily on near-term goals of companies, not on basic science and technology that drive new disruptive discoveries and innovations.

A 2023 study of philanthropic funding, co-authored by one of us, showed that all forms of philanthropic support amount to about 30 percent of what the federal government spends on basic and applied research. The government spent about $55 billion a year on these categories in 2024, and all of philanthropy, including funds available to universities from endowment payout (the legacy of past philanthropy), came to about $16.7 billion. Philanthropy, while significant, is clearly no substitute for federal funding.

On top of all this, the federal government has gone to war with our universities and is attacking on many fronts. One such proposal that has now been signed into law is to tax the annual payout from university endowments. Since about 50 percent of the payout from these endowments each year goes to support undergraduate students, and 25 percent goes to supporting science, technology and medical research on campuses, this tax amounts to killing the goose that lays the golden eggs. It also makes it even less possible for philanthropy to help in a meaningful way.

Four core principles to forge a truce

All this suggests that an eventual truce in this conflict would be in the long-term interest of both the federal government and the performers of basic and applied science — the universities. At a time when the social compact between universities and the federal government is so frayed, it is incumbent upon us to distill the essential components that permit universities to fulfill their missions as providers of advanced education for students, as creators of new knowledge, and as bulwarks of democracy — and for the federal government to fulfill its role in securing economic growth, national defense and a higher standard of living for all.

Here are four principles upon which to build such a concordat:

These core principles must be ones that universities live by and the federal government respects. Only then will the formidable history of U.S. progress and leadership continue.