Flash: Research University Finds Shortage of Government Research Funding

05/01/2015 02:17 pm ET | Updated May 01, 2016

I heard a news report on the radio about a new MIT study that finds that the U.S. government is not spending enough on research and development and that this is putting us at a competitive disadvantage. More detail on this is available from a Wall Street Journal story ("U.S. Is Faulted for Risking Edge in R&D," Robert McMillan, 4/27/2015). This news comes as Congress is debating the 2016 federal budget.

The headline finding that got journalists' attention is that federal funding for basic research has dropped from 9.1% of total annual federal outlays to just 2.6%.

What goes unmentioned is that MIT is a major recipient of government research funds, which may have inadvertently colored the study findings.

I felt the need to look a little closer, and I'm glad I did. Some cursory research raised questions in my mind about the analysis.

First, according to the MIT study, federal outlays on basic research have grown from $16.2 billion in 1968 to $178 billion in the 2015 budget. This more than seven-fold increase in government spending is characterized as a dangerous reduction in government support, because R&D's share of total outlays has fallen so sharply.

But is this ratio a relevant metric?

In the years since 1968 the federal budget has seen an enormous shift toward non-discretionary spending (Social Security, Medicare, Food Stamps, etc.). Clearly, MIT isn't suggesting we take money from Food Stamp recipients and give it to research scientists.

So wouldn't the more meaningful comparison be to look at R&D's share of Federal discretionary spending over this period? By this measure, R&D's share has indeed fallen, but just to 12% in 2014 from 18% in 1968.

Is it relevant to consider how the composition of the federal research funding has changed? Maybe special national priorities had boosted R&D spending during the 1960's and 1970's.

I found another MIT analysis, "66 Years of Sponsored Research" published in the MIT Faculty Newsletter of January 2007, that explains that MIT research funding has ebbed and flowed with defense spending. In 1970, Department of Defense was the largest single source of MIT research funding at 28%. By 2006, DOD funding had fallen to 15%, as the Cold War focus on high tech weapons waned.

Finally, if we are concerned about competitive risks, shouldn't we look at the entire picture of R&D spending in the U.S. economy? During the time that the Federal government commitment was growing by an average annual rate of roughly 15%, private sector investments in research and development was growing much faster.

According to the Bureau of Economic Analysis, between 1968 and 2014, gross private investment in intellectual property rose to $647 billion in 2014 from $16 billion in 1968. At first blush, it looks like private and public R&D spending in the U.S. has grown faster than the overall economy, rising to 4.5% of GDP in 2014 from 3.4% in 1968.

My analysis is admittedly very simplistic and I'm probably missing some important issues. There may be a real crisis in R&D funding in the U.S., but lawmakers and taxpayers will be better served by more thorough and objective analyses than are likely to come from Institutions with a financial stake in the outcome of the funding debate.