Cutting federal funding for scientific research could cause long-run economic damage equivalent to a major recession, according to a new study from researchers at American University.
In recent months, the Trump administration has sought to cancel or freeze billions of dollars in grants to scientists at Columbia, Harvard and other universities, and has moved to sharply curtail funding for academic medical centers and other institutions. Deeper cuts could be on the way. As soon as this week, the White House is expected to propose sharp reductions in discretionary spending, including on research and development, as part of the annual budget process.
Economists have warned that such cuts could undermine American competitiveness in areas like vaccine development, artificial intelligence and quantum computing, and could slow growth in income and productivity in the long term. The private sector can’t fully replace government dollars, they argue, because basic research is too risky and takes too long to pay off to attract sufficient private investment.
The study, by a team of economists at American University’s Institute for Macroeconomic and Policy Analysis, is among the first efforts to quantify the risks posed by Mr. Trump’s cuts. Because the full extent of the administration’s plans is not yet clear, the researchers studied a range of scenarios.
Even the mildest approach — a 25 percent reduction in public support for research and development — would correlate to a drop in economic output.
U.S. gross domestic product, adjusted for inflation, would be 3.8 percent smaller in the long term — a decline similar in magnitude to that in the Great Recession, which ended in 2009. The drop in output would be much more gradual than that downturn, taking place over years rather than months. But it would also be more lasting. Cuts to scientific research would sap innovation, leading to slower productivity growth and, as a result, permanently lower economic output.
“It is going to be a decline forever,” said Ignacio González, one of the study’s authors. “The U.S. economy is going to be smaller.”
A smaller economy also means less income for the government to tax. As a result, while cutting investment could save money in the short run, it could leave the federal budget in worse shape over the longer term. The researchers estimate that a 25 percent cut to research funding would reduce government revenues 4.3 percent in the long term.
Larger funding cuts would have even greater effects. A 50 percent reduction in funding would lower gross domestic product nearly 7.6 percent, the researchers estimate, and a 75 percent cut would reduce it 11.3 percent — a larger decline than in any recession since the Great Depression.
Such estimates might seem extreme, but they are consistent with other research. A recent paper published by the Federal Reserve Bank of Dallas found that government investments in research and development accounted for at least a fifth of U.S. productivity growth since World War II.
“If you look at a long period of time, a lot of our increase in living standards seems to be coming from public investment in scientific research,” said Andrew Fieldhouse, a Texas A&M economist and an author of the Dallas Fed study. “The rates of return are just really high.”
Political leaders in earlier eras appeared to recognize that payoff. In another recent study, Mr. Fieldhouse found that past efforts to cut the federal budget largely spared investments in nondefense research and development.
In recent weeks, scientists and higher education leaders have tried to rally support among the public and in Congress for continued federal funding. On Tuesday, the Science Coalition, a group of public and private research universities, released a report on the role of federal funding in promoting economic growth. The report highlighted examples of private companies that grew out of government-backed university research.
“Research that’s happening at one university, it doesn’t just stay in those walls — it has a ripple effect,” said Abigail Robbins, president of the coalition. “This is not a blue or red state issue. It transcends that.”
