Trump Science Funding Cuts May Hurt Economy, Experts Say

While tariffs implemented by the Trump administration were projected to potentially elevate consumer costs and workforce reductions could exacerbate unemployment, economists express significant concern over another policy area: decreases in federal funding for scientific research. Many economists view these research funding cuts as particularly detrimental to the nation’s long-term prosperity.

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Recent actions by the Trump administration include the cancellation or freezing of billions of dollars in federal grants allocated to researchers through the National Institutes of Health. There have also been moves to substantially decrease funding for academic medical centers and other institutions. Furthermore, the administration’s Department of Government Efficiency initiative sought to terminate hundreds of positions at the National Science Foundation, an independent federal agency, and has also revoked visas for numerous international students.

Economists contend these policies pose a threat to U.S. competitiveness in burgeoning sectors like artificial intelligence. They fear that these measures could lead to a decline in the overall well-being, health, and productivity of Americans in the coming decades.

“Universities serve as crucial engines of innovation,” stated Sabrina Howell, a professor at New York University who has researched the federal government’s role in fostering innovation. “Diminishing support for scientific research risks undermining a vital source of national progress.”

Threat to U.S. Scientific Leadership and Innovation

Scientists have cautioned that the United States is jeopardizing its position as a leader in cutting-edge research and its standing as a magnet for leading scientific minds globally.

Laboratories across the nation are already responding to funding uncertainty by implementing workforce reductions and project cancellations, including, in some instances, the suspension of ongoing clinical trials. Prestigious institutions, such as Harvard and the University of Pennsylvania, have publicly announced hiring freezes. Meanwhile, countries like France are actively recruiting American scientists, promoting a more welcoming environment.

Across the ideological spectrum, economists maintain that investments in scientific research, especially fundamental, early-stage investigations often deemed too risky for private investment, represent a highly effective use of taxpayer funds. Studies indicate that every dollar invested in research and development generates approximately $5 in economic benefits. This figure likely underestimates the true return, as it does not fully quantify benefits outside of gross domestic product measurements, such as increased longevity and leisure time.

“It operates like a highly efficient mechanism: invest a dollar, and receive $5 in return,” explained Benjamin F. Jones, an economist at Northwestern University. “From a societal perspective, this activity yields exceptionally high returns, yet we consistently underinvest in it.”

The Serendipity of Scientific Discovery

Hudson Freeze, reflecting on his undergraduate years at Indiana University in the 1960s, recounted assisting his professor, Thomas Brock, in studying microbes inhabiting Yellowstone National Park’s hot springs. This research was made possible through a National Science Foundation grant. He vividly remembers the excitement of observing, for the first time through a microscope, one of these microbes, Thermus aquaticus, thriving at temperatures previously considered prohibitive for life.

“I was filled with excitement,” he recalled. “I was the first person globally to witness this phenomenon firsthand.”

Decades later, this very organism proved instrumental in the development of polymerase chain reaction (PCR), a DNA replication process foundational to modern genetic science. Dr. Freeze subsequently pursued his own research career, largely supported by federal grants, focusing on a biological process implicated in numerous rare genetic disorders.

Dr. Freeze’s experiences, both as a student and a seasoned scientist, exemplify the unique and crucial role of government in scientific research. Private investors are unlikely to prioritize disorders affecting limited patient populations, let alone fund studies of “yellow slime” in a national park. Yet, such seemingly obscure research endeavors can yield substantial and unforeseen benefits.

“Some of these investigations yield significant breakthroughs, while others do not—that is the inherent nature of scientific exploration,” Dr. Freeze commented. “The federal government possesses the capacity to assume calculated risks in the pursuit of knowledge.”

Historical Perspective: Federal Funding and Innovation

The U.S. research and development system traces its origins to World War II, a period when the government channeled significant resources into universities and private companies to accelerate advancements in aviation, communication technologies, and atomic weaponry. These partnerships deepened in subsequent decades as federal funding supported projects linked to the Cold War and the space race, alongside bolstering basic sciences and medical research.

This sustained investment in research laid the groundwork for numerous technologies integral to the contemporary economy. The internet itself originated as a network of university computers, funded by the Department of Defense. Google’s genesis was a graduate student research project at Stanford, supported by a National Science Foundation grant. Modern medicine, in its entirety, relies to varying degrees on federally funded research, as does much of contemporary commercial agriculture.

Collectively, these discoveries propelled the United States’ rapid economic expansion and improved living standards throughout the 20th century. A recent paper from the Federal Reserve Bank of Dallas concluded that government investments in research and development contributed to at least one-fifth of U.S. productivity growth since World War II.

“The impact on living standards has been substantial,” noted Andrew Fieldhouse, an economist at Texas A&M University and co-author of the study. “It significantly fueled economic growth.”

Concerns Regarding Erosion of U.S. Scientific Dominance

Federal investment in science, measured as a proportion of the economy, has diminished since the conclusion of the Cold War. Dr. Fieldhouse’s research suggests this decline is partially responsible for the concurrent slowdown in productivity growth.

Researchers express apprehension that the Trump administration’s policies could further jeopardize U.S. scientific standing. For example, the National Institutes of Health has proposed capping the reimbursement rate for universities and research institutions’ “indirect costs,” covering facilities and non-project-specific staff. A working paper released by the National Bureau of Economic Research indicates this policy could result in considerable funding reductions, disproportionately affecting institutions with highly successful research programs.

“We have experienced a remarkably successful period over the last 60 to 80 years,” observed Daniel P. Gross, a Duke University economist and study co-author. “Sometimes, the true value of something is only realized upon its absence.”

Concerns about losing ground in science are particularly salient in the field of artificial intelligence, a technology widely expected to be a primary driver of future productivity gains. American companies have led the initial stages of the AI revolution, largely due to foundational research conducted at U.S. universities.

However, the recent release of DeepSeek, an advanced AI model developed by a Chinese company, has been interpreted by some American technology leaders as a “Sputnik moment.” This is seen as a signal that the United States must intensify its efforts to maintain its lead in this critical domain.

White House officials dispute the assertion that the administration’s policies are undermining U.S. leadership in science and technology. Vice President JD Vance, in a February address in Paris, advocated for easing restrictions on AI development, among other measures, to ensure the United States remains ahead of China and other competitors.

A White House official, speaking on condition of anonymity, stated that the administration’s grant freezes and reimbursement rate reductions are intended to enhance the efficiency of federal research investments, not to diminish overall support for scientific endeavors.

Opportunities for Streamlining Research Funding

Experts acknowledge potential areas for improvement within the federal grant-making system. Application processing times for federal funding have increased over time, and researchers are dedicating more time to administrative tasks aimed at preventing misuse of government funds.

“Upon learning about the initial concept of the Department of Government Efficiency (DOGE), I initially considered that it might signify a push towards constructive reform,” remarked Stuart Buck, director of the Good Science Project, a nonprofit organization critical of the federal research and development system.

However, Dr. Buck expresses disappointment with the initiative’s direction so far. He suggests that by emphasizing perceived waste and canceling projects deemed politically misaligned with the administration—such as research pertaining to race, gender, or climate change—DOGE and similar efforts could inadvertently make researchers more risk-averse.

“It is perplexing that so many of these initiatives appear focused on excessive vigilance against potential fraud or waste,” Dr. Buck noted. “Numerous instances demonstrate that research initially considered inconsequential can later lead to significant breakthroughs.”

Scientists also voice similar concerns regarding recent administration policies on immigration, including visa revocations for international students involved in political demonstrations.

The Vital Role of Immigrants in U.S. Science

Immigrants have historically been disproportionately influential in scientific and technological progress in the United States. A 2022 study revealed that immigrants accounted for 36 percent of total innovation in the country since 1990, as measured by patents, despite representing less than 20 percent of the population. Furthermore, immigrants demonstrate a higher propensity to establish companies and work within startup environments compared to native-born Americans.

“Immigrants exhibit remarkable contributions, exceeding their proportional representation,” asserted Britta Glennon, a University of Pennsylvania economist specializing in the role of immigrants in innovation.

Even absent formal shifts in immigration policy, she added, the United States could become less appealing to global talent if international students and scientists perceive a less welcoming national climate. A recent working paper co-authored by Dr. Glennon found a decrease in Chinese students choosing to study in the United States during the initial Trump administration, even before official restrictions were enacted.

“We understand that prospective international students are sensitive to their perceptions of the U.S. labor market and its receptiveness towards immigrants,” she concluded. “Currently, the prevailing perception is demonstrably less receptive, which will inevitably have consequences.”