Study finds that budget cuts to public R&D would significantly hurt the economy

Summary

Federal agencies such as NIH and NSF are critical sources of funding for basic and applied scientific research. Recently, many of these agencies have seen their research operations frozen or downsized. This brief describes a new analysis of the macroeconomic costs of cutting federal funding for scientific R&D. The brief finds that budget cuts to public R&D would significantly hurt the economy in the long run, with large negative effects on GDP, investment, and government revenue. A 25 percent cut to public R&D spending would reduce GDP by an amount comparable to the decline in GDP during the Great Recession. Cutting annual public R&D spending in half would making the average American approximately $10,000 poorer (in today’s dollars) than the value implied by the historical trend in GDP. Cutting public R&D would also shrink federal government revenue. A 25 percent cut in R&D would decrease revenue by approximately 4.3 percent annually, while a 50 percent cut would decrease it by 8.6 percent annually.