By Kritika Agarwal
A new report from the Information Technology & Innovation Foundation warns that slashing federal research and development (R&D) spending could deal a severe blow to the United States’ economy.
According to the foundation’s analysis, cutting federal investments in R&D by 20% in FY26 (a $40 billion reduction from FY25) and then maintaining those cuts for 10 years would reduce the U.S. GDP by $717 billion.
ITIF also found that cutting federal investments would reduce federal tax revenues by close to $179 billion over 10 years. The report said that any immediate taxpayer savings from reducing federal R&D investments would ultimately lead to long-term economic costs that will be borne by all Americans.
The Trump administration is currently proposing cutting federal funding for research by 22%. Specifically, it’s proposing cutting the National Institutes of Health by 39%, the National Science Foundation by 56%, NASA’s Science Mission Directorate by 47%, and the Department of Energy Office of Science by 14%.
As the ITIF noted, federal R&D is the backbone of American innovation and economic growth – it drives patented technologies, powers start-ups, and boosts competitiveness globally. The U.S. government funds 19% of domestic R&D and often funds research that is too risky for private businesses to support.
Further, according to ITIF, the majority of federal research dollars (70%) “flow to universities and labs, training Ph.D. candidates, and attracting top talent;” cutting this funding would severely weaken the U.S. STEM workforce.
The report also highlighted the danger of shifting U.S. R&D strategy while rivals like China are ramping up their public investment. ITIF said that “China has been increasing R&D investment by 2.6 percent annually over the last decade, compared with just 2.4 percent in the United States.” If China sustains this pace and the United States proceeds with cuts to its research investments, ITIF warned, “China will make great steps in closing the gap to becoming the largest economy in the world.”
While federal R&D cuts may provide short-term savings, the long-term impact of those cuts is bound to be severe – lower GDP growth, reduced federal tax receipts, and weakened global competitiveness. The report makes it clear: Disinvesting in R&D is a costly mistake.
Kritika Agarwal is assistant vice president for communications at AAU.