Chapter 4 | Research and Development: U.S. Trends and International Comparisons

Recent Trends in Federal Support for U.S. R&D

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The level of overall federal support for R&D (including for both R&D conduct and R&D plant) has generally increased year to year since the early 1950s (Figure 4-8; Appendix Table 4-21 and Appendix Table 4-22).^​ What was $2–$5 billion in the mid-1950s increased to well above $100 billion in FY 2003 and to just under $130 billion in FYs 2007 and 2008. The level moved higher still in FYs 2009 and 2010, largely a result of the $18.7 billion of incremental funding for R&D authorized by ARRA. In fact, the FYs 2009 and 2010 levels were the highest since the early 1950s, whether considered in current or constant dollar terms (Figure 4-9). Annual growth in federal funding averaged 6.2% in current dollars over FYs 2000–10, or 4.0% when adjusted for inflation.

However, a notably different trend has prevailed in the years since then, as federal R&D funding has been buffeted by the more challenging policymaking circumstances for the federal budget that prevailed over the last several years. The $147.0 billion in FY 2010 had dropped to $131.4 billion in FY 2015—with the track of the annual total over the intervening years a mix of several large declines (FYs 2011 and 2013), a modest gain (FY 2014), and several small changes (FYs 2012 and 2015) (Figure 4-9). The obligations total for FY 2016, which is not yet final, indicates a large increase over the FY 2015 level, to $142.6 billion. Nevertheless, when adjusted for inflation, the FY 2015 level is 18% below the FY 2010 level, and the FY 2016 level is still 12% below (Figure 4-9).

Some of this post–FY 2010 drop in federal R&D funding reflects the waning of the incremental funding provided by ARRA, which showed up as R&D obligations mainly in FYs 2009 and 2010. Even so, the still-sluggish U.S. economy and the more recent federal budget environment since 2011 have taken a toll—with federal funding for R&D affected as part of this larger picture.^​

In FY 2015, eight agencies each obligated more than $1 billion (current dollars) annually: DOD, HHS, NASA, DOE, NSF, USDA, DHS, and DOC (Table 4-15). Taken together, these eight agencies accounted for about 97% of the federal R&D and R&D plant total that year. Another four agencies obligated funding in the $500 million to $900 million range: Department of Transportation, Department of the Interior, Department of Veterans Affairs, and the Environmental Protection Agency.

Figure 4-10 charts the annual total federal funding for R&D and R&D plant together and that for each of the eight agencies from FY 2007 to FY 2016. With only preliminary data for FY 2016 available at this point, one noticeable trend in the chart is the substantial drop in the federal funding total (current dollars) that occurred from the FY 2010 peak through FY 2015. The figure also shows the funding drop has been borne most heavily by DOD ($11.9 billion of the $15.6 billion cumulative decline from FY 2010 to FY 2015) and HHS ($7.2 billion of the $15.6 decline). NASA had a gain of $2.7 billion over the period; DOE and DHS had gains of, respectively, $0.6 billion and $0.5 billion. The other agencies sustained substantially smaller losses or gains.

Table 4-16 and Table 4-17 provide breakdowns, by agency, of the $131.4 billion of federal dollars obligated for R&D and R&D plant in FY 2015 according to purpose (R&D conduct, R&D plant), performers funded (intramural, extramural), and type of work (basic research, applied research, development).

The majority of federal dollars obligated for R&D ($128.6 billion) was for R&D conduct, whether performed by the intramural R&D facilities of the agencies themselves, agency-affiliated FFRDCs, or by one or more of various other extramural performers receiving federal R&D funding private businesses, universities and colleges, state and local governments, other nonprofit organizations, or foreign performers) (Table 4-16). Barely 2% of the annual total ($2.8 billion) funded R&D plant, with most of the obligations in this category coming from a few agencies.

For the $128.6 billion of obligations for R&D in FY 2015, 25% was for basic research, 25% for applied research, and 50% for development (Table 4-17). These proportions vary widely, however, across the differing departments/agencies.

In FY 2015, DOD obligated a total of $61.7 billion for R&D and R&D plant (Table 4-16), about 47% of all federal R&D and R&D plant spending that year. Almost all of the DOD total was R&D spending ($61.5 billion), with the remainder spent on R&D plant. Of the total, 36% ($22.2 billion) was spending by the department’s intramural laboratories, related agency R&D program activities, and FFRDCs (Table 4-16). Extramural performers accounted for 64% ($39.4 billion) of the obligations, with the bulk going to business firms ($35.8 billion) (Appendix Table 4-23).

Considering just the R&D, relatively small amounts were spent on basic research ($2.1 billion, 3%) and applied research ($4.6 billion, 7%) in FY 2015 (Table 4-17). The majority of the obligations, $54.9 billion (89%), went to development. Furthermore, the bulk of this DOD development ($49.6 billion) was allocated for major systems development, which includes the main activities in developing, testing, and evaluating combat systems (Figure 4-11). The remaining DOD development ($5.2 billion) was allocated for advanced technology development, which is more similar to other agencies’ development obligations.

HHS is the main federal source of funds for health-related R&D. In FY 2015, the department obligated $30.4 billion for R&D and R&D plant, or 23% of the total of federal obligations that year. Nearly all the funding was for R&D ($30.3 billion). Furthermore, the majority, $29.0 billion, was for the R&D activities of NIH.

For the department as a whole, R&D and R&D plant obligations for agency intramural activities and FFRDCs accounted for 24% ($7.3 billion) of the total. Extramural performers accounted for 76% ($23.3 billion). Universities and colleges ($16.9 billion) and other nonprofit organizations ($4.3 billion) were the most sizable of these extramural activities (Appendix Table 4-23). Nearly all HHS R&D funding was allocated to research—50% for basic research and 50% for applied research. Only a tiny fraction, 0.2%, was for development.

DOE obligated $12.3 billion for R&D and R&D plant in FY 2015, or about 9% of the total of federal obligations that year. Of this amount, $11.4 billion was for R&D, and $1.0 billion was for R&D plant.

The department’s intramural laboratories and FFRDCs accounted for 70% of the obligations total, a substantially higher percentage than most other agencies. Many of DOE’s research activities require specialized equipment and facilities available only at its intramural laboratories and FFRDCs, which are used by scientists and engineers from other agencies and sectors as well as by DOE researchers. The remaining 30% of obligations went to extramural performers, chiefly to businesses and to universities and colleges.

Basic research accounted for 39% of the $11.4 billion obligated to R&D, applied research accounted for 37%, and development accounted for 24%.

DOE R&D activities are distributed among domestic energy systems, defense (much of it funded by the department’s National Nuclear Security Administration), and general science (much of which is funded by the department’s Office of Science).

NASA obligated $11.4 billion to R&D in FY 2015, or around 9% of the federal total. Nearly all of it ($11.4 billion) was for R&D. Of these obligations, 72% were for extramural R&D, which was conducted chiefly by business performers. Agency intramural R&D and that done by FFRDCs represented 28% of the total NASA obligations. By type of R&D, 51% of the NASA R&D obligations funded development activities, 28% funded basic research, and 21% funded applied research.

In FY 2015, NSF obligated $6.0 billion for R&D and R&D plant, or 5% of the federal total that year—$5.7 billion for R&D and $0.3 billion for R&D plant. Extramural performers, chiefly universities and colleges, accounted for 94% ($5.6 billion). Basic research was about 88% of the R&D component. NSF is a primary source of federal government funding for academic basic S&E research; it is the second largest federal source (after HHS) of R&D funds for universities and colleges.

USDA obligated $2.4 billion for R&D and R&D plant in FY 2015 (2% of the federal total), focusing mainly on life sciences. The agency is also one of the largest research funders in the social sciences, particularly agricultural economics. Of USDA’s total obligations for FY 2015, about 65% ($1.5 billion) funded R&D by agency intramural performers, chiefly the Agricultural Research Service. Basic research accounts for about 39% of the federal total, applied research accounts for 51%, and development accounts for 9%.

DHS obligated $1.6 billion for R&D in FY 2015 (1% of the federal total), nearly all of which was for R&D ($0.7 billion) and R&D plant ($0.9 billion) spending of the department’s Science and Technology Directorate. Of the total, 83% was for agency intramural R&D; 17% went to extramural performers, primarily businesses and universities and colleges. For the R&D component, 2% was for basic research, 28% was for applied research, and 71% was for development.

DOC obligated $1.5 billion for R&D in FY 2015 (about 1% of the federal total), most of which represented R&D ($1.3 billion) and R&D plant ($0.2 billion) spending of the National Oceanic and Atmospheric Administration and the National Institute of Standards and Technology. Of this total, 75% was for agency intramural R&D; 25% went to extramural performers, primarily universities and colleges. For the R&D component, 17% was for basic research, 69% was for applied research, and 13% was for development.

The eight agencies already discussed accounted for 97% of the total R&D and R&D plant obligations ($131.4 billion) in FY 2015. The other agencies shown in Table 4-16 and Table 4-17 play significant roles in the overall U.S. R&D system, but individually they account for comparatively small to very small levels of federal resources annually. Furthermore, as the data in the tables show, these agencies continue to vary considerably with respect to the type of research and the roles of intramural, FFRDC, and extramural performers.

Development work cannot easily be classified by S&E field, but research—basic and applied—can be. The research conducted and/or funded by the federal government spans a full range of S&E fields (computer sciences and mathematics, environmental sciences, life sciences, physical sciences, psychology, social sciences, engineering, and other S&E fields). Analysis of the source, nature, and field support patterns provides insights into the federal government’s research priorities (Figure 4-12; Appendix Table 4-24 and Appendix Table 4-25).

In FY 2015, funding for basic and applied research combined accounted for half ($63.6 billion) of the $128.6 billion total of federal obligations for R&D (Table 4-17). About half of this amount, $30.5 billion, supported research in the life sciences (Appendix Table 4-24). The fields with the next largest amounts were engineering ($12.0 billion, 19%) and physical sciences ($6.5 billion, 10%), followed by environmental sciences ($4.4 billion, 7%) and computer sciences and mathematics ($3.7 billion, 6%). The balance of federal obligations for research in FY 2015 supported psychology, social sciences, and all other sciences ($6.4 billion overall, or 10% of the total for research).

The allocation of federal research funds across agencies and fields reflect the differing agency missions. HHS accounted for the largest share (47%) of federal obligations for research in FY 2015 (Appendix Table 4-24). Most of this amount funded research in life sciences, primarily through NIH. The six next largest federal agencies for research funding that year were DOE (14%), DOD (11%), NSF (9%), NASA (9%), USDA (3%), and DOC (2%).

DOE’s $8.6 billion in research obligations provided funding for research primarily in engineering ($3.7 billion), physical sciences ($2.7 billion), and computer sciences and mathematics ($1.0 billion). DOD’s $6.7 billion of research funding emphasized engineering ($2.7 billion) but also included computer sciences and mathematics ($1.2 billion), physical sciences ($0.8 billion), and life sciences ($0.8 billion). NSF is charged with “promoting the health of science.” As such, it had a comparatively diverse $5.7 billion research portfolio that allocated about $0.7 billion to $1.2 billion in each of the following fields: environmental sciences, life sciences, computer sciences and mathematics, physical sciences, and engineering. Lesser amounts were allocated to psychology, social sciences, and other sciences. NASA’s $5.5 billion for research emphasized engineering ($2.1 billion), followed by physical sciences ($1.5 billion) and environmental sciences ($1.3 billion). USDA’s $2.1 billion was directed primarily at life (agricultural) sciences ($1.8 billion). DOC’s $1.1 billion was distributed mainly in the fields of environmental sciences, physical sciences, engineering, and computer sciences and mathematics.

Viewed over the longer time span of 1990 to 2015, the total of federal funds obligated for research across all S&E fields increased on average by 5.9% annually over 1990–2000 and by 5.2% over 2000–10 (Appendix Table 4-25). Adjusted for inflation, these average annual growth rates were, respectively, 3.8% and 3.0%. More recently, however, the research obligations total has been declining—essentially a zero average annual rate of growth for the period of FYs 2010–15, or -1.7% when adjusted for inflation (Appendix Table 4-25).

A more complex mix of trends is evident when narrowly defined S&E fields are considered. Federally funded research in the environmental sciences increased by an inflation-adjusted average annual rate of 3.9% in FYs 2010–15, reversing a sizable constant dollar decline in FYs 2000–10 (Appendix Table 4-25). In contrast, federally funded research in life sciences showed a constant dollar, average annual decline of 3.8% over the same period, reversing what were high positive rates of growth through the decade of the 1990s and 2000–10. Federally funded research in computer sciences and mathematics averaged 0.8% in FYs 2010–15, well ahead of the decline that prevailed for all S&E fields together, but the rate was well below those for the 1990s and 2000–10. The rate for physical sciences also was above zero for FYs 2010–15, reversing lower rates in the earlier periods. Engineering showed a declining average annual rate for FYs 2010–15, reversing what were notably positive growth rates in the earlier periods. Other fields (e.g., psychology, social sciences) showed constant dollar declines in the FY 2010–15 period, worse than that for the all-fields total.

Government R&D funding statistics compiled annually by the OECD provide insights into how national government priorities for R&D differ across countries. Known technically as government budget allocations for R&D (GBARD), this indicator provides data on how a country’s overall government funding for R&D splits among a set of socioeconomic categories (e.g., defense, health, space, general research).^​ GBARD statistics are available for the United States and most of the other top R&D-performing countries discussed earlier in Table 4-18 (corresponding GBARD data for China and India are not currently available). (All amounts and calculations are in current purchasing power parity or PPP dollars, unless otherwise noted.)

Defense is an objective for government funding of R&D for all the top R&D-performing countries, but the shares vary considerably (Table 4-18). Defense accounted for 51% of U.S. federal R&D support in 2015 but was markedly lower elsewhere—a smaller but still sizable 16% in the United Kingdom, 14% in South Korea, 7% in France, and 3%–4% in Germany and Japan.

Defense has received 50% or more of the federal R&D budget in the United States for many years. The defense share was 63% in 1990 as the Cold War period waned but then dropped in subsequent years. It rose again in the first decade of the 2000s—in large part, reflecting post-9/11 security concerns—but it has been declining again over the last several years. For the other countries, the defense share of government R&D funding has generally declined or remained at a stable, low level.

The health and environment objective accounted for almost 53% of nondefense federal R&D budget support in the United States in FY 2015 and 35% in the United Kingdom. For both countries, the share has expanded markedly over the share prevailing several decades ago. The health and environment share of nondefense government R&D is currently 15% in South Korea and 13% or less in France, Germany, and Japan.

The economic development objective encompasses agriculture, energy, fisheries and forestry, industry, transportation, telecommunications, and other infrastructure. In the United States, government R&D funding in this category was 13% of all nondefense federal support for R&D in 2000 and had dropped to just below 12% in 2015, substantially lower than most other major nations (Table 4-18).^​ In the United Kingdom, government R&D funding for economic development was at 14% in 2000, declining from 2000 to 2010 but rising to 16% in 2015. France was at 18% in 2000, rising to 21% by 2010, but declining back to 18% by 2015. Japan was at 33% in 2000 but generally declined in the years after to 25% in 2015. Germany was at 22% in 2000, rising somewhat by 2010, but dropping back to 22% in 2015. South Korea, at 52% in 2010 and 50% in 2015, has consistently exhibited the largest share for this category among the top R&D-performing countries.

The civil space objective accounted for about 16% of nondefense federal R&D funding in the United States in 2015 (Table 4-18). The share was 21% in 2000 and declined to 13% by 2010 but has experienced increases more recently. The share in France was about 11% for 2015, down from 13% in both 2000 and 2010. The space share has been well below 10% for the rest of the top R&D-performing countries.

Both the nonoriented research funding and general university fund (GUF) objectives reflect government support for R&D by academic, government, and other performers that is directed chiefly at the “general advancement of knowledge” in the natural sciences, engineering, social sciences, humanities, and related fields. For some of the countries, the sum of these two objectives represents by far the largest part of nondefense GBARD: in 2015, Japan (61%), Germany (60%), France (50%), the United Kingdom (40%), and South Korea (24%). The corresponding 2015 share for the United States (17%), although appearing substantially smaller, requires interpretive caution. Cross-national comparisons of these particular indicators can be difficult because some countries (notably the United States) do not use the GUF mechanism to fund R&D for general advancement of knowledge, do not separately account for GUF (e.g., South Korea), and/or more typically direct R&D funding to project-specific grants or contracts, which are then assigned to the more specific socioeconomic objectives (see sidebar Government Funding Mechanisms for Academic Research).

Finally, the education and society objective represents a comparatively small component of nondefense government R&D funding for all the top R&D-performing countries—3% of nondefense GBARD in the United States in 2015. However, the share was notably higher in South Korea (8%), France (6%), Germany (5%), and the United Kingdom (5%). Japan (1%) was well below the United States.