Chap. 2 - Historical Trends in Federal R&D

2

Historical Trends in Federal R&D
Kei Koizumi, AAAS

Although high-priority investments in weapons development, human space exploration, and physical sciences research help to keep the federal R&D outlook brighter than the bleak outlook for domestic programs overall, the FY 2008 budget continues the recent trends of declining federal support for research amid increasing support for weapons systems development. (See Table I-11 for historical data. More historical data are available on the AAAS R&D web site.)

Figure 1.
The total federal R&D request of $143.0 billion, a 1.3 percent increase, would fall short of the 2.4 percent increase needed to keep pace with expected inflation (see Figure 1). In real terms, the federal R&D portfolio would decline for the first time since 1996 after flattening out the last few years.

Figure 2.
For defense R&D, Figure 2 shows that nearly all of the increases in the past few years have been in weapons systems development, "6.4" or higher in the Department of Defense (DOD) classification system. DOD's S&T investments ("6.1" through "6.3"), comprising basic and applied research and technology development, barely hit a record high in 2005 after taking 16 years to return to Cold War funding levels and remained level in 2006 and 2007. But the FY 2008 budget proposes to cut these S&T investments 20 percent in just one year, and reverse all the increases of this decade. The S&T accounts fund all of DOD's investments in research, including key federal contributions to the support of the physical sciences, engineering, and other research fields. On the development side, large increases for weapons development, especially in the Air Force, and billions of dollars in requested development funding in wartime supplementals would bring DOD's non-S&T development funding to new highs in 2007 and 2008.
Nondefense R&D peaked in FY 2004 and is now headed down, but for most programs funding has been stagnant for nearly two decades. Nondefense R&D did very well between 1998 and 2003 because of the campaign to double the NIH budget, as shown in Figure 3. The creation of the DHS also helped to boost nondefense R&D investments by creating a new area for investment. But all the other nondefense R&D funding agencies collectively have seen their budgets remain flat for nearly two decades (see the red bars in Figure 3), even as the U.S. economy, the federal budget, and the U.S. population have all boomed during that time. The 2008 proposed increases for DOE Office of Science, NSF, and NIST as part of the ACI plus development gains for NASA would recover the lost ground of the past few years, but would be offset by cuts in other agencies. These non-NIH agencies, combined with DOD's research investments (also flat or declining in recent years), fund nearly all of the federal investment in non-biomedical research, including the physical sciences, non-medical life sciences, environmental sciences, engineering, mathematics, computer sciences, and social sciences.

Figure 3.
The federal investment in basic and applied research would fall for the fourth year in a row in real terms (see Figure 4) if the FY 2008 budget is enacted. Federal research did very well between 1998 and 2003 because of the campaign to double the budget of NIH, the largest federal supporter of research. Other agencies also increased their research investments in that time period because a string of budget surpluses freed up resources for domestic appropriations. But with the return of budget deficits in 2002 followed by restraints on domestic spending thereafter, growth in research funding for NIH and other domestic agencies slowed in 2004 and then reversed. At the same time, DOD research support lagged as the Pentagon went to war in 2003 and shifted resources away from research toward near-term projects, and NASA research fell even within a stable R&D budget as it shifted resources from research first to returning the Space Shuttle to flight and then toward developing the Shuttle's replacement.

Figure 4.
As a result, federal support for research in nearly all disciplines is now in decline, a decline that would accelerate in the 2008 budget, even in the physical sciences where ACI gains would be more than offset by NASA and DOD cuts. The 2008 budget would leave the federal research portfolio 7.4 percent below the 2004 level in inflation-adjusted dollars. As shown in Figure 5, flat funding for research in most agencies going back decades has resulted in mostly flat funding for research by science and engineering discipline. Funding for the physical sciences, in particular, has just kept pace with inflation going back three decades, a trend that has prompted the ACI and other attempts to boost federal investments in the physical sciences. Similarly, environmental sciences research and social sciences research have seen stagnant funding for the past decade. Although funding for computer sciences research increased dramatically until 2001 because of the growing importance of computing in all facets of the economy, even this funding has stagnated in recent years. The major growth in federal research support has been in biomedical research, particularly during the NIH doubling period 1998-2003, but even this support has been declining since the NIH doubling period ended. Meanwhile, federal support for non-biomedical life sciences research has been slipping steadily in recent years. Once agencies' research investments in 2007 and 2008 are spent, the downward trends in these disciplines are almost certain to continue.

Figure 5.
Federal research investments are shrinking as a share of the U.S. economy, just as other nations are increasing their investments. As shown in Figure 6, the federal R&D investment exceeded 1 percent of U.S. Gross Domestic Product (GDP) until recently, buoyed by big increases in weapons development, but is now declining sharply. Federal investments in development, mostly in DOD, have held steady as a share of the economy, but the federal research/GDP ratio is in free fall down to a projected 0.38 percent in 2008, below the long-term historical average of 0.4 percent after gains in the late 1990s. Despite an increasingly technology-based economy and a growing recognition among policymakers that federal research investments are the seed corn for future technology-based innovations, the U.S. government research investment has failed to match the new realities and has also failed to match the competition. Asian nations are dramatically increasing their government research investments: both China and South Korea, for example, are boosting government research by 10 percent or more annually.

Figure 6.
Looking over the longer term, the mission-oriented U.S. R&D funding system means that federal R&D investments can shift dramatically to respond to changing national needs. Spending on defense R&D has exceeded all other R&D spending (grouped together as "nondefense R&D") for most of the past four decades, although the relative size of the two sectors has varied considerably over the years. Figure 7 shows how priorities in nondefense R&D have shifted over the same period. Civilian R&D expenditures reached a high point in the mid-1960s, declining for several years thereafter. After several years of significant growth in the late 1980s and the late 1990s, they have only in this decade returned to the levels of the 1960s in real (i.e., inflation-adjusted) terms.

Figure 7.
Priorities, however, are different now than they were in the 1960s. Indeed, they changed significantly after September 11, 2001. Space exploration was the dominant function in the 1960s, driven mainly by the Apollo Program. It lost priority after we succeeded in landing on the moon in 1969, however, and has never regained its lead despite the recent presidential announcement of plans for a human return to the Moon and then human space flight to Mars. Energy R&D gained priority following the oil shortages of the 1970s, then retreated as national attention turned elsewhere. Health R&D, meanwhile, has shown practically uninterrupted growth over these years and now represents the largest single share of the civilian R&D portfolio. Homeland security-related R&D has increased in importance since September 11 with the creation in 2003 of a new cabinet-level department devoted to homeland security; its work is divided among several national priorities, including defense, transportation, and health. (See Chapter 1 and Table I-4 for details of national priorities in the FY 2008 budget.)