TRGETING SCIENCEFederal R&D Funding Boosts Productivity for the Whole Economy − Making Big Cuts to Such Government Spending Unwise
Large cuts to government-funded research and development can endanger American innovation – and the vital productivity gains it supports. If the government were to abandon its long-standing practice of investing in R&D, it would significantly slow the pace of U.S. innovation and economic growth.
Large cuts to government-funded research and development can endanger American innovation – and the vital productivity gains it supports.
The Trump administration has already canceled at least US$1.8 billion in research grants previously awarded by the National Institutes of Health, which supports biomedical and health research. Its preliminary budget request for the 2026 fiscal year proposed slashing federal funding for scientific and health research, cutting the NIH budget by another $18 billion – nearly a 40% reduction. The National Science Foundation, which funds much of the basic scientific research conducted at universities, would see its budget slashed by $5 billion – cutting it by more than half.
Research and development spending might strike you as an unnecessary expense for the government. Perhaps you see it as something universities or private companies should instead be paying for themselves. But as research I’ve conducted shows, if the government were to abandon its long-standing practice of investing in R&D, it would significantly slow the pace of U.S. innovation and economic growth.
I’m an economist at Texas A&M University. For the past five years, I’ve been studying the long-term economic benefits of government-funded R&D with Karel Mertens, an economist at the Federal Reserve Bank of Dallas. We have found that government R&D spending on everything from the Apollo space program to the Human Genome Project has fueled innovation. We also found that federal R&D spending has played a significant role in boosting U.S. productivity and spurring economic growth over the past 75 years.
Measuring Productivity
Productivity rises when economic growth is caused by technological progress and know-how, rather than workers putting in more hours or employers using more equipment and machinery. Economists believe that higher productivity fuels economic growth and raises living standards over the long run.
U.S. productivity growth fell by half, from an average of roughly 2% a year in the 1950s and 1960s to about 1%, starting in the early 1970s. This deceleration eerily coincides with a big decline in government R&D spending, which peaked at over 1.8% of gross domestic product in the mid-1960s. Government R&D spending has declined since then and has fallen by half – to below 0.9% of GDP – today.
Government R&D spending encompasses all innovative work the government directly pays for, regardless of who does it. Private companies and universities conduct a lot of this work, as do national labs and federal agencies, like the NIH.
