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Public R&D Spending Drop Could Hamper Future Productivity, Experts Warn
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Experts caution against proposed budget cuts to critical research agencies.
- Federal science funding is at a 70-year low, impacting future productivity.
- Public R&D has a larger productivity impact than private R&D.
- Proposed budget cuts to NIH and NSF could significantly slow growth.
- The U.S. might potentially be underinvesting in fundamental research.
The trend of declining public R&D investment isn’t new, but it’s exacerbated by recent proposals, like those from the Trump administration for its 2026 budget, which would slash science budgets. Fieldhouse, a researcher, states, “Based on our research, I think it’s unambiguously clear that if you actually slash the budget of the NIH by 40%, if you slash the NSF budget by 50%, there’s going to be a deceleration in U.S. productivity growth over the next seven to 10 years that will be measurable.”
While business R&D spending has surged, companies invested about $700 billion in 2023, dwarfing the U.S. government’s $172 billion expenditure. Many might assume this private investment is more efficient. However, research suggests publicly funded research, which leans towards fundamental science, drives greater long-term productivity growth.
Spillovers of Public Research
A working paper,”Public R&D Spillovers and Productivity Growth,” highlights the significant impact of knowledge spillovers. Arnaud Dyèvre, an economics professor at HEC Paris, found that public R&D spillovers influence productivity growth three times more than private R&D spillovers. Dyèvre, who conducted much of this research as a postdoc at MIT, notes that the U.S. appears to be “underinvesting in fundamental R&D.”
“We need both,” Dyèvre insists, referring to public and private sector funding. However, he adds, “the empirical evidence” suggests a current imbalance. The exact percentage mix remains a complex question.
Defining R&D’s Return
Figuring out the optimal balance between fundamental and applied research funding is a key challenge. In mid-July, Open Philanthropy and the Alfred P. Sloan Foundation announced plans to fund a five-year “pop-up journal.” This initiative aims to tackle questions surrounding the definition and optimization of R&D funding ROI.
“There is a lot of evidence consistent with a really high return to R&D,which suggests we should do more of it,” says
