Federal Funding of Research and Development

Abstract

The history of government funding of research and development, or R&D, dates back to the mid-twentieth century and the Cold War era rise of the military-industrial complex and "space race." In the twenty-first century, most federal funding is directed toward the biotech-pharma complex and is awarded to academicians, private companies, state and local governments, and research centers. The chief funding agents are the National Science Foundation (NSF), the National Institutes of Health (NIH), and the Department of Defense (DOD).

Overview

Federal funding for research and development began in the 1950s as a result of the establishment of the National Science Foundation. In the twenty-first century, NSF funding is dispensed through thirteen divisions that include Biological Sciences, Computer and Information Science and Engineering, Education and Human Resources, Engineering, Environmental Research and Education, Geosciences, Interpretative Activities, International Science and Engineering, Math and Physical Sciences, and Social, Behavioral, and Economic Sciences.

Since 1987 amid significant growth in biomedical research and development, more than one-half of all government funding has been distributed through the National Institutes of Health, amounting to $32 billion a year for research and development. Through twenty-seven separate institutions, including the National Cancer Institute, the National Genome Research Institute, the National Institute on Aging, the National Institute of General Medical Science, and the National Institute of Mental Health, the NIH allots federal R&D funding through grants, contracts, research training and career development programs, loan repayments, and extramural diversity research and programs. Funding agencies operating under the Department of Defense include the Defense Advanced Research Projects Agency, the departments of the Air Force, Navy, and Army, and various other defense agencies.

Critics complain that most federal funding goes to states with large research universities. In 1975, state shares of research and development funding ranged from 8.7 percent in Rhode Island to 36 percent in Nebraska. In the 1980s, more states became involved in government funding of research and development. By 2005, Arkansas, Louisiana, and Nebraska were contributing less that 50 percent of each state's total R&D funding. Missouri and Massachusetts, on the other hand, were contributing more than 70 percent of total R&D funding.

Government support for research and development in such areas as science, defense, energy and water, labor, health, and human services is frequently included in appropriations bills for relevant departments. Thus, a major complaint has been the tendency for members of Congress to use "pork barrel" earmarks to win research and development funding for their states. Members have historically been able to insert advantageous spending packages into bills from their positions on particular committees, or in return for cooperation on other matters such as support on a vote the party considers to be important. Scholars looking at congressional spending from 1963 to 1989 learned that military funds increased significantly in the home states of defense committee members (Hulbert & Scott, 2012).

Congress declared a moratorium on earmarking funds in fiscal year 2011–2012, but the practice proved controversial. In the politically charged battle to win votes necessary for the repeal and replacement of the Obama-era Affordable Care Act in 2017, Republican party leadership resorted to pork barreling to drum up support.

In the nineteenth century, the United States developed a reputation as a nation of inventors with Thomas Edison's inventions such as the incandescent light bulb and the motion picture camera, Eli Whitney's cotton gin, Robert Fulton's steam engine, Samuel F. B. Morse's telegraph, and Alexander Graham Bell's telephone. The federal government provided such inventors essentially no financial assistance.

In 1939, World War II broke out in Europe. Between 1941 and 1945, research and development, including the development of atomic weapons, became a major factor in the Allies winning the war. In the peace that followed, researchers turned their new knowledge to advancing existing technologies and designing new products that included everything from better military vehicles and equipment to new medicines and medical devices to labor-saving household products to synthesized materials that would drastically change life in the second half of the twentieth century and beyond. These advancements were viewed as beneficial to society as both making life easier and stimulating the U.S. economy.

To promote further advancements in fields from health to defense, the federal government formed partnerships with universities, private companies, and whole industries. What came to be known as the military-industrial complex controlled economic and political decision-making for much of the last half of the twentieth century. The term "military-industrial complex" was coined by President Dwight Eisenhower, who warned in 1961 in his Farewell Address that the complex posed a major threat of "misplaced" power that was likely to become persistent.

Further Insights

In 1942, Senator Harley Kilgore first proposed the establishment of the National Science Foundation. Vannevar Bush, an engineer who headed the U.S. Office of Research and Development during World War II, lobbied Roosevelt to allow him to launch his own research project in the area of federal R&D funding. His research was published in July 1945 as Science, the Endless Frontier, which laid out a proposal for establishing a government agency to be charged with funding R&D in the fields of medicine and natural sciences. For several years, Congress debated such issues as patent ownership, geographic distribution of funding, and the merits of basic versus applied science. Congress finally passed a bill in 1947, but it was vetoed by President Harry Truman who wanted the agency to be headed by a presidential appointee. Four years later, the final version of the bill passed and was signed by Truman on May 10, 1950.

Under the directorship of Alan T. Waterman, a former Yale physicist appointed to the position by Truman, the twenty-four-member board dispensed funding for research and development in medical research, math and physical and engineering sciences, and biological sciences. Scholarships and fellowships were distributed by the scientific personnel and education division. The funding of research and development in the social sciences remained controversial until 1955 when it was folded into the division dealing with mathematics and the physical and engineering sciences. Three years later, an "other sciences" field was created, and opportunities for social scientists increased. One of the most influential NSF directors was William D. McElroy, a biologist from Johns Hopkins who served from 1969 to 1972. During his tenure, the NSF budget for research and development rose from $400 million to $650 million. By that time, the budget was fairly evenly divided between basic and applied research.

The NSF was established in 1950 with the goal of promoting health, prosperity, and welfare in the United States. The work of the NSF, the National Aeronautics and Space Agency (NASA), and the DOD is closely linked to national defense and security issues. Funding from the NSF is considered integral to work being carried out at American research universities and colleges because almost one-fourth of all NSF funding is spent at such institutions. A large share of NSF funds are channeled to academicians in the fields of mathematics, computer science, and social science. NSF funds to academic institutions are generally awarded as limited-term grants for a period of three years. On average, NSF awards twelve thousand grants per year. Recipients include individuals, research teams, state and local governments, private companies, and research centers. Funds may also be used to purchase equipment that is too expensive for a single institution or center. NSF recipients include more than 223 Nobel Prize winners, including Jack W. Szostak (physiology or medicine), Thomas A. Steitz (chemistry), Elinor Ostrom (economics), and Oliver E. Williamson (economics).

The U.S. government distributes funds for research and development through federal agencies and departments. The latter includes the Department of Agriculture, the Department of Commerce, the DOD, the Department of Education, the Department of Energy, the National Nuclear Security Administration, the Office of Science, the Department of Health and Human Services, the Department of Homeland Security, the Department of Housing and Urban Development, the Department of the Interior, the Department of Justice, the Department of Labor, the Department of Transportation, the Department of the Treasury, and the Department of Veterans Affairs. Most federal government funds from agencies is dispensed by the NSF and NASA. Research and development funding is also distributed by thirteen federal agencies, including the Environmental Protection Agency, the Library of Congress, the Federal Trade Commission, the Federal Communications Commission, the Smithsonian Institution, and the Social Security Administration.

Issues

Peer decision makers who determine who gets federal funding for research and development attempt to refrain from making political statements. However, because funding ultimately derives from public funds, politics may infringe when issues are particularly controversial. Before progressing through the channels of the relevant agency, applications for research are carefully reviewed by peers who decide on the viability of a project. In the early days of the NSF, decision makers managed to avoid most political battles over McCarthyism, but they were forced to recognize that some major American researchers had been blacklisted by the House Un-American Activities Committee. In the early days of stem cell research, R&D funding was highly political because scientists took stem cells from aborted or unused embryos, drawing scientists into the battle over abortion. Conservatives insisted that taxpayer funds should not be used to fund stem cell research. However, scientists found a way to generate pluripotent stem cells using adult cells, and the controversy dwindled.

NSF total obligations for federal funding of basic research and development rose from $1,851,571,000 in 1951 to a preliminary estimate of $145,408,745,000 in 2017. From 1956 onward, the government identified outlays according to whether they were directed toward basic or applied research and development. In 1956, the government spent $206,441,000 on basic research and $654,506,000 on applied research. Russia launched Sputnik in 1957, and the space race was on, leading to greater government emphasis on research and development in related fields. In 1966, federal spending for research and development skyrocketed, with $1,579,000 spent on basic research, and $4,081,000,000 spent on applied research.

Research and development is a process of testing out ideas and either building on them or throwing them out and starting over. Through what has been identified as the "charity mindset," the federal government is aware that not all research projects will be successful and are not likely to provide a return on federal investment; however, the government is willing to invest on the chance that a project will lead to a major breakthrough.

In practice, only 1 to 3 percent of government-funded R&D projects lead to successful patents. The federal government makes funding decisions according to which projects are deemed to have the greatest potential for success. Between 1982 and 2007, the federal government spent $537 billion on research and development funding. During that same time period, research and development funding by venture capitalists and private equity companies skyrocketed to $1.6 trillion (Myhrvold, 2010).

Between 2001 and 2013, requests for NSF funding rose by 53 percent at the same time that the number of grants awarded fell by 9 percent. The declining success rate was due to two major factors: changes in the federal budget and the tendency of the federal government to grant larger awards than in the past. In 2009, President Barack Obama's American Recovery and Reinvestment program led to a 32 percent increase in federal funding for research and development, but R&D funding cuts were a byproduct of both the Budget Control Act of 2011 and the Tax Payer Relief Act of 2012.

The awarding of larger awards is a natural outcome of the granting of multi-principal research grants to teams of researchers who work on a joint project for five to seven years. Multiple-principal research teams may be made up of researchers from various disciplines, resulting in research questions being addressed from a variety of viewpoints. Such projects are generally seen as having a greater impact on society as a whole than is research conducted by individuals. Approximately, one in five NSF grants is now awarded to multi-principal research teams.

In a given year, funds for research and development may come from a variety of sources. In 2008, for example, the federal government awarded $30.7 billion to research and development in academia. State governments contributed $3.3 billion or 6.5 percent of the total, with $3 billion of that amount channeled to state universities. Universities and colleges provided 20.2 percent of funding, private organizations provided 7.7 percent, and industry provided 5.5 percent (Myhrvold, 2010).

Because of budget issues and partisan battles, federal support for research and development has proportionately decreased for much of the twenty-first century. At the same time, requests for government funding have rapidly increased. Between 1997 and 2001, applications rose from 31,000 to 62,000. However, reduced budgets and large grants guarantee that fewer applications would be successful. For decades, academic institutions have been peopled by baby boomers (individuals born between 1946 and 1964 during the postwar boom), many of whom have retired or are planning to do so. Research institutions have expressed concerns that the lack of available government funding for research and development is causing younger academicians to go into other fields. In 2012, more than 550 ecologists and environmental scientists wrote an open letter to the NSF, asking the federal government to address this issue because of the potential threat to the future of American research and development.

Daniel J. Howard and Frank N. Laird (2013) suggest that research institutions share the responsibility for the increasing number of unsuccessful R&D applications because the number of researchers continues to grow even as universities place unrealistic demands on academicians working in a publish-or-perish environment. They point out that science and engineering doctorates between 1920 and 1924 averaged 545 per year. By 2010, 27,134 doctorates were granted in those same fields.

Even as R&D grants have declined in some fields, federal grants to the drug industry have tripled since 1990. Yet, those companies are still producing only twenty to thirty new drugs each year. Salaries for biomedical researchers continues to rise at the same time that drug companies are benefitting from low manufacturing costs. Critics of the way that federal funds for research and development are distributed suggest that decisions should be governed by who actually benefits from federal support for research and development.

Terms & Concepts

McCarthyism: A political movement of the 1950s initiated by Senator Joseph McCarthy who was convinced that communists had infiltrated all aspects of American life and culture. Some of his favorite targets were left-wing academicians, Hollywood, and the federal government, particularly those who had any sort of connection with socialist or communist groups during the 1920s and 1930s. Those who claimed a constitutional right not to testify against others were blacklisted, and many were forced out of their professions. Going after the United States Army led to McCarthy's downfall.

Military-Industrial Complex: Refers to the strength of the partnership forged between the military and American industry in the postwar years that allowed them to control both economic and political policies. The complex was made more powerful by the Cold War and the massive arms race. Some scholars believe that in the twenty-first century, a similar power has been bestowed on the closely aligned biotech and pharmaceutical industries.

Multi-principal Investor Grants: Policy announced by the Office of Science and Technology Policy in October 2007 that guaranteed the validity of team-oriented research when making government funding decisions. The policy has led to the granting of larger awards that cover longer periods for multi-principal investors in comparison to those awarded to individual-principal investors.

Pluripotent Cells: Cells that are capable of transforming into other types of cells, making them ideal for use in regenerative and transplant medicine. Stem cell therapy has been used to treat patients with spinal cord injuries or severe burns, degenerative diseases such as Parkinson's and Alzheimer's disease, and conditions such as cancer, diabetes, and stroke. Embryonic cells are naturally pluripotent, but scientists have developed methods for generating pluripotent adult cells that may be used for such purposes.

Pork Barrel Spending: Term used to describe the congressional practice of earmarking funds for pet projects. Coined by illustrator Frank Leslie in 1863, pork barreling has allowed members of Congress to tack appropriations for projects that benefit themselves or their constituents onto unrelated bills, thereby allowing them to be passed without public scrutiny. The majority party in Congress may also use this tactic to win key support on critical votes.

Space Race: Term used to describe the battle for supremacy in space that began in the 1950s. The Soviet Union came out as a frontrunner on October 4, 1957, with the successful launching of Sputnik I while the United States was still readying its own artificial satellite for orbit. On January 31, 1958, the Explorer I was successfully launched. In July, Congress passed the National Aeronautics and Space Act, and NASA was established on October 1.

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Suggested Reading

Falk-Krzesinski, H. J., & Tobin, S. C. (2015). How do I review thee? Let me count the ways: A comparison of research grant proposal review criteria across US federal funding agencies. Journal of Research Administration, 46(2), 79–94. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=113047144&site=ehost-live

Hegde, D., & Sampat, B. (2015). Can private money buy public science? Disease group lobbying and federal funding for biomedical research. Management Science, 61(10), 2281–2298. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=111008463&site=ehost-live

Knight, B. (2008). Legislative representation, bargaining power and the distribution of federal funds: Evidence from the U.S. Congress. Economic Journal, 118, 1785–1803. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=34376050&site=ehost-live

Rosenbloom, J. L., & Ginther, D. K. (2017). Show me the money: Federal R&D support for Academic chemistry, 1990–2009. Research Policy, 46(8), 1454–1464. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=125000299&site=ehost-live

Schickler, E., & Lee, F. E. (2011). The Oxford handbook of the American Congress. New York, NY: Oxford University Press.