The decline in basic research for university labs is not a new problem. Federal funding for university research and state funding for higher education have been declining for decades. America was once the world leader in government-funded research as a percentage of GDP, but according to the Information Technology and Innovation Foundation (ITIF), the U.S. ranked 28 out of 39 nations in 2019, with many countries investing more than double the U.S. share of GDP.
The development of new technologies into useful products is accomplished by private companies, but many of these products initially came from federal basic research across many fields of science. For example, transistors were not suddenly discovered by the electronics industry; they emerged from people working in wave mechanics and solid-state physics. The fundamental principles behind the transistor rely on quantum mechanics, the study of electron behavior at the atomic level, which provided the theoretical framework for understanding and engineering semiconductor devices.
Magnetic resonance imaging (MRI) originated from research into spin echoes and free induction decay (FID). In 1950, Erwin Hahn detected FID and spin echoes using pulse techniques. FID is the rapid decay of the MR signal after an RF pulse, while a spin echo is generated by a 180-degree radiofrequency pulse. Modern MRI uses these principles, along with magnetic field gradients, to create images based on the spatial distribution of nuclear spins.
The point is that using America's tripartite approach of government, university labs, and private corporations, basic research did lead to the invention of research breakthroughs like the Eniac Computer; which was funded by the military and built by University of Pennsylvania and Harvard; the transistor, invented by Bell Labs; the microprocessor came from space and strategic missile funding; and the Internet which was conceived by DARPA and built by research universities. These inventions are the foundation not only of the U.S. economy but also of industries all over the planet.
The Problem
The majority of basic research funding leads to expanding scientific knowledge, not to new inventions. Funding basic research is like funding the discovery of a cure for cancer. We spend a lot of money on a wide range of research projects in the hope that some of them will lead to a cure for a specific cancer. It is very expensive research, and many critics don't see any payoff or believe it is too inefficient. The biggest challenge comes from short-term investors who want faster returns on their investments and the Trump administration, which is determined to reduce waste in government.
The problem is that there is no easy way to determine which basic research efforts will directly translate into a new product or technology. So, in the past, the U.S. gambled by expanding the basic research investment to increase the odds of developing a breakthrough invention.
But times are changing. Some argue that certain research areas or projects may not be as productive or as impactful as others. Others believe that basic research is needlessly complex or impractical, leading them to view it as wasteful. So many critics support funding research that leads to products or patents instead of basic research that leads to theoretical knowledge that may or may not lead to tangible products and innovations.
The Trump administration seems to be favoring Milton Friedman, who famously argued for abolishing the National Science Foundation, the National Institute of Health and all government funding of higher education. Friedman believed that private sources should fund science and research. He also thought the efficiency and quality of research would improve when privately funded.
Trump has surrounded himself with people who generally believe that government agencies and programs are inefficient and wasteful and should be reduced. Russell Vought is the director of the Office of Management and Budget (OMB). A central architect of Project 2025, Vought is an outspoken critic of federal agencies. Vought has a skeptical view of federal funding for basic science research, arguing that much of it is mismanaged and driven by "woke ideology" rather than a core public purpose. Vought and his allies have characterized federal science funding as bloated and unfocused, criticizing research they perceive as being influenced by "woke ideology" and diversity, equity, and inclusion initiatives. As director of the Office of Management and Budget (OMB) under the second Trump administration, Vought proposed deep budget cuts to federal science agencies like the NSF and the NIH.
The Trump administration also has the Department of Government Efficiency (DOGE) patrolling federal agencies, looking for waste and people. DOGE put forward a budget for fiscal year 2026 that seeks to reduce federal funding for basic scientific research by roughly one-third, or 34%.
The administration has framed these cuts as reducing wasteful spending, eliminating ideological bias (like DEI), and refocusing research priorities. These are reasonable goals, but the problem is that there is no easy way to determine which basic research efforts will directly translate into a new product or service. So, making arbitrary cuts to reduce expenditures could be throwing the baby out with the bathwater.
Another issue concerns facilities and administrative (F&A) costs, which are treated as overhead and may reduce the amount of funding directly available for research. These costs cover expenses such as building maintenance, utilities, administrative staff, and other routine costs. Universities argue that F&A costs are essential for supporting the infrastructure and administrative processes needed to conduct research, but critics contend that these are overhead costs that should be borne by the university and are not part of basic research. Many people believe these costs are excessive and should be reduced.
Losing Technology Dominance
Another outcome of the reduction in federal basic research is the loss of technological dominance. A survey by the Australian Strategic Policy Institute (ASPI), called the Critical Technology Tracker, is a data-driven project that covers 64 critical technologies across defense, space, energy, the environment, artificial intelligence, biotechnology, robotics, cyber, computing, advanced materials, and quantum technologies. The tracker "provides a leading indicator of a country's research performance, strategic intent, and potential future science and technology capabilities."
The dataset represents 21 years from 2003 to 2023. The tracker focuses on the top 10% of the most highly cited research papers as the leading indicator of a country's research performance. From 2003 to 2007, the U.S. led in 60 of the 64 categories, while China led in 3. From 2019 to 2023, China led in 57 of 64 categories. ASPI says, "China's enormous investments and decades of strategic planning are now paying off."
China has invested heavily in basic science research and has a growing pool of scientists. Meanwhile, the U.S. faces challenges such as declining public trust in science and concerns about the budget reduction in basic research funding discussed above. The U.S. has experienced brain drain as international students gain a U.S. education, only to return to their home countries after earning their degrees. President Donald Trump announced a $100,000 fee for new H-1B visas, which is expected to cause major disruptions for university research efforts and will drastically increase the cost of hiring international talent for crucial roles.
Cuts to Federally Funded Research
According to the Information Technology and Innovation Foundation (ITIF), the agencies in Table 1, aside from DOD (now DOW), are subject to significant cuts under Trump's proposed budget request.
The ITIF says, "spending reductions would come at a steep cost to the U.S. economy. Cutting federal R&D spending by 20 percent would reduce U.S. GDP by more than $700 billion cumulatively over 10 years, versus maintaining the same amount of R&D spending that was budgeted in 2025. It would shrink the economy by $1 trillion compared with maintaining the 2025 level of R&D intensity as a share of GDP. And it would put the U.S. economy nearly $1.5 trillion behind China's pace."
A lack of investment in early-stage, basic research shrinks the pool of knowledge from which future innovations will be drawn. This ultimately makes it harder for the private sector to conduct later-stage R&D and bring new products to market. The ITIF also says that the lack of investment will lead to stagnant productivity growth, reduced innovation, and a declining standard of living. The ITIF argues that this underinvestment, particularly in university research, is hurting U.S. economic competitiveness and positions the nation to lose its global leadership to nations like China and South Korea, which are increasing their R&D investments.
The Answer Is Increased Federal Basic Research Funding
Advocates of expanding basic research believe that it takes a wide range of research projects, as the U.S. pursued after World War II, to lay the foundation for science that leads to a computer, a transistor, or the Internet.
But today's business climate is not like the post-World War II climate. Today, investors want quicker returns and favor applied research over basic research. If we are to compete on the world stage with countries like China and our strategy is innovation, we are probably going to have to increase (not cut) the federal budget for basic research to stay in the game. But today, the cost-cutters and short-term investors are winning the battle of federal budgets and agencies; who knows where it will lead.
Michael Collins is the author of a new book, "The Globalization Trap," which will debut in November 2025. He can be reached at [email protected] or on mpcmgt.net.
