Late last year, a leader in the Economist asked which industries and sectors China would dominate next? As the article explained:
The country’s autonomous taxis, constructed for a third of the cost of Waymo’s in America, are racking up millions of kilometres of driving and are forging partnerships in Europe and the Middle East. In medicine, meanwhile, China has turned itself from a copycat maker of generics into the world’s second-largest developer of new drugs, including those tackling cancer. Western rivals are licensing its firms’ wares. The day when a pharma giant emerges from China no longer seems so remote.
That piece echoed the tone of a 2024 report from the National Science Foundation (NSF), which found that the US lead in innovation was being increasingly challenged. As the NSF’s Vice President stated at the time, “The United States has led the world for decades in advancing the most fundamental technologies that have fueled the country’s economic growth and stability. The rise in international patents and trademarks demonstrates that U.S. innovation leadership is not a birthright”.
For decades, the US lead in innovation has been underpinned by a system resting, broadly, on three pillars.
- Government funding for areas of public interest
- Universities and research institutes to conduct fundamental research
- Private firms to commercialise the resulting knowledge.
The system has, by most measures, worked well with the government’s funding of basic research directly underpinning innovation in the private sector and also helping to fund the training of scientists and researchers.
Now, though, that model is under threat. The Trump administration is looking to cut the NSF’s budget by 55% and, as Nature reported this week, disbursements from the Fund this year have already been subject to large delays.
Last week, the NSF finally began distributing substantial sums of money to its eight basic-research directorates, staff members say. A ledger of these distributions, seen by Nature, indicates that some directorates are now set to spend more money this year than they did last year: the technology, innovation and partnerships directorate, which funds translational research, would get a 33% boost from 2025 levels, for example.
But most directorates would have to make do with less. Funding for the biological-sciences directorate would be roughly 25% lower than in 2025, and funding for the social, behavioural and economic sciences directorate (SBE) would be 30% lower — despite a Congressional report accompanying the 2026 appropriations bill that directs the NSF to “equitably distribute funding to support all basic research directorates” and not to cut funding for any directorate by more than 5% from the 2024 level. Such reports are not legally binding, but they convey Congressional intent and are taken seriously by agencies.
Even leaving aside the issue of global economic competition – what impact will these cuts have on the American economy? That was a question the Clark Center’s US Economic Experts Panel turned to last week, and the results were striking.
The Panel was first asked whether “Independent of any other cuts to public funding of scientific research, a 55% reduction in the budget for the National Science Foundation would have no measurable effect on the well-being of the typical American over the next 10 years”?
Weighted by confidence, 27% of respondents strongly disagreed, 55% disagreed, 13% expressed uncertainty, and just 6% agreed.
In other words, the vast majority believed that over a decade of cuts to public science funding would impact the well-being of typical Americans.
Among those expressing uncertainty, several mentioned that one reason for that was that ten years was a relatively short time frame. As Ivan Werning of MIT put it, “only because 10 years may not be enough time for measurable effects reach households. But effect is immediately on production of ideas and R&D, which has impact further out, e.g. horizon 20-30y from basic research to production”. In many cases, respondents believed that NSF budget cuts would impact well-being, but that it would simply take longer to show up in the data.
The panel was also asked a more backwards-looking question, namely, whether “Historical federal support for scientific research has paid for itself through a substantial positive effect on long-run US productivity growth”? 73% of respondents, again weighted by confidence, strongly agreed that it had, and another 24% agreed.
As Caroline Hoxby of Stanford argued in answer to the first question -“The NSF funds basic research that is the foundation for R&D closer to downstream use. It is a public good for which even very R&D-oriented firms would not pay”.
The near unanimity of the belief that federal support for scientific research has yielded a positive return was unsurprising. Many recent papers and empirical investigations have demonstrated just this.
As Larry Samuelson of Yale stated, “Basic scientific research is the essential key to long-run productivity growth”. Or, as Christopher Udry of Northwestern rather pithily put it, “Take your pick: Human genome project, the internet, mRNA vaccines, spectrum auctions, kidney exchange, GPS, …”.
Over the longer term, the advance of technology has been the major driver of economic growth. And, for decades, that advance in the US has been underpinned by broad public financial support for basic research and training. Cutting back on that, in the view of the experts, will damage economic growth and lead to a loss of well-being for ordinary Americans. It is hard to think of a more self-defeating policy.
