The Trump budget cuts that could hurt the economy for a long time

Yahoo

09-05-2025

President Donald Trump sent shockwaves through the scientific community with his proposed budget that would slash federal spending on research and development by an unprecedented 23% — or $163 billion — in fiscal 2026. A broad range of experts are warning that those short-term savings will likely have serious long-term repercussions on the economy and harm the country's global competitiveness.
A recent study by American University set out to calculate just how damaging the budget cuts would be, and determined that a 25% reduction in public funding of research and development would reduce GDP by 3.8%, more than $1 trillion, while decreasing annual tax revenue by 4.3% and making the average American approximately $10,000 poorer (in today's dollars).
'If those dollar numbers, anywhere from 20%-45%, are real, I want to be really clear: we are no longer in a race with China on biomedical research. We will have lost that race,' Sudip Parikh, president of the prestigious American Association for the Advancement of Science, testified at a congressional hearing last week.
The federal government is the nation's largest source of funding for basic and applied scientific research. The White House is requesting cuts in spending of 37% at the National Institutes of Health (NIH) and more than 50% at the National Science Foundation (NSF), the country's two major science funders. It also wants to cut NASA's science budget by more than half and eliminate most federal funding of climate and ecological research.
U.S. research and development spending accounted for 3.43% of the country's GDP in 2022, with the federal government responsible for about one-third of the total.
The American University researchers pointed out that the federal government has historically been the dominant funder of basic research because the payoffs from such investments can take 20 to 30 years, too long of a time period for private investors to risk major investments. A paper published in January by the National Bureau of Economic Research noted that such public funding of basic research creates a pipeline for private sector innovation and commercialization.
The U.S. Government's long time largesse has already been responsible for revolutionary breakthroughs in science and technology that the private sector would never have taken on in the early stages because of the risk involved, including the Internet, GPS, semiconductors, the Human Genome Project, and numerous advances in medical treatment, as noted in a 2023 report by the World Economic Forum (WEF). The report determined that one job is created for every $25,000 spent in public funding on research and development.
'Using these metrics, a $100 billion investment would in theory then generate 4 million new jobs,' the WEF said. 'The data across sectors and industries is clear: Government-funded R&D directly and indirectly fosters innovation and job growth.'
University research departments, among the main recipients of federal funding and now under attack by Trump, can also drive economic growth. In an essay in the Boston Business Journal on Tuesday, Don Ingber, founding director of Harvard's Wyss Institute for Biologically Inspired Engineering, wrote that 'in the 16 years since Wyss was founded it has filed over 4,500 patents, negotiated 145 licenses with industry, launched almost 70 startup companies, and enabled the creation of nearly 2,000 new jobs.'
'We are at the dawn of a new age, in which biotechnology and artificial intelligence are merging, and those who figure out to harness these advances will win big.' Ingber wrote. Cutting back now on the partnership that has been in place between government and academia for the past 75 years, he warned, 'This will hurt our economy and your pockets.'
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