By Kritika Agarwal
As President Trump proposes massive cuts to federal spending on science and research, multiple recent reports and studies show that these cuts would seriously harm the American economy, including at national, state, and local levels.
According to a new analysis by economists at American University, a 25% cut to federal spending on research and development would reduce the United States GDP “by an amount comparable to the decline in GDP during the Great Recession” caused by the 2008 financial crisis.
Cutting federal spending on R&D by half, the study found, “would make the average American approximately $10,000 poorer (in today’s dollars) than the value implied by the historical trend in GDP.” The economists also found that cutting federal R&D spending would “shrink government revenue.”
Currently President Trump is proposing a more than 40% reduction in the budget of the National Institutes of Health and a 56% cut to the budget of the National Science Foundation – two federal agencies that support a significant portion of the national spending on research and development.
The economists noted that the reason why cutting federal R&D spending would have such outsized impacts on the economy is because the government typically funds research that is often deemed too risky by private investors but which increases "the stock of knowledge in the economy and directly boost[s] GDP in the long run by increasing aggregate productivity." Historically, the government has relied on universities as partners to conduct much of this basic research.
In a recent analysis of data collected by the National Center for Science and Engineering Statistics, The New York Times found that “in fiscal year 2023 alone, roughly $60 billion flowed from the federal government to universities in all 50 states, funding research on an array of topics, like cancer, Alzheimer’s disease and rare isotope beams.”
The Times noted that federal spending on university research often provides “a boon to the surrounding communities;” Brookings Metro Senior Fellow Joseph Parilla told the outlet: “For a lot of places it is the last remaining economic and innovation engine that gives them relevance in a modern, technology-driven economy.” In fact, United for Medical Research found that, in FY24, ever dollar of NIH funded research yielded $2.56 dollars in economic activity nationwide.
Companies, of course, also rely on innovation coming out of university research funded by the federal government. The Science Coalition, which includes more than 50 of the nation’s leading public and private research universities and partners with AAU, recently issued a report spotlighting “industry leading companies and technological breakthroughs that grew out of federal investments in basic scientific research.”
For example, the report notes how Google, “a household name brand and global technology leader, grew out of federally funded research at Stanford University.” Other examples highlighted in the report include Qunnect, “a quantum technology startup” that has its roots in “federally backed research at Stony Brook University,” and City Therapeutics, a company that is “developing next-generation medicines to improve treatments for a wide range of diseases” by building on research conducted at The Ohio State University with support from the NIH.
These reports show that the United States must continue to prioritize federal funding for R&D. As AAU noted in a recent statement, cutting the nation’s science budget “would set support for American science back decades and allow China to quickly surpass the United States’ global scientific and technological dominance in fields critical to our national security and future economic growth.”
Kritika Agarwal is senior editorial officer at AAU.