America Is Falling Behind on University Research

When the late Senator Daniel Patrick Moynihan said that the way to build a great city is “to create a great university and wait 200 years,” he left out a crucial ingredient: funding.

Moynihan was right that universities drive innovation and economic growth, and the research produced by these universities more than pays for itself in societal benefits. Yet the United States is investing far less than its global peers. If policymakers want to strengthen American competitiveness, they must significantly increase federal funding for university research, not cut it.

When ITIF first reported on this issue in 2013, it found that the United States was no longer a leader in funding university research, ranking 24th out of the 39 member countries in the Organization for Economic Cooperation and Development (OECD). In 2021, the United States remained in 24th place, but funding as a share of GDP had fallen by 0.06 percentage points. And while recent data shows that U.S. investment in academic research has grown marginally (see figure 1), the country has slipped in the rankings. It now places 27th within the OECD, investing just 0.2 percent of GDP (see figure 2).

Figure 1: U.S federal investment in university research as a share of GDP (select years)

Ten nations in the OECD, including Switzerland, Germany, and Portugal, invested twice as much.  To reach the median of the OECD, the United States would need to invest $70 billion annually—$23 billion more than it currently does. To lead the OECD, it would take $121 billion more.

Figure 2: Federal investment in university R&D as a share of GDP (2021)

This isn’t just about rankings. The United States has seen its investment in university research decline steadily over the past decade, falling by 18 percent from 2011 to 2021. Only Lithuania and Ireland saw investment fall at greater rates (see figure 3). Meanwhile, Poland, Latvia, and Luxembourg experienced the greatest growth in investment.Between 2021 and 2023, the most recent U.S. data available, investment as a percentage of GDP has remained unchanged (see figure 4).

Figure 3: Percent change in federal investment as a share of GDP (2011-2021)

Figure 4: U.S. federal investment in university research as a share of GDP

Maintaining a healthy university research environment is key to fostering growth in the United States’ innovation-driven economy. Numerous studies have found the societal rate of return on R&D to range from 30 to 100 percent. However, even this wide range understates broader societal benefits, such as productivity growth and startup activity.

For example, the quality of local entrepreneurship and start-ups has been shown to increase in the presence of a federally funded research institution. Additionally, start-ups spun out of research universities have higher success rates and file more patent applications than other firms.

Many advocates for cutting federal support for universities claim that private industry can fill the gaps. Yet even with the robust corporate-university partnerships seen across the country, in 2021, private industry invested less than one-tenth of what the federal government contributed to academic research.

State governments, too, are unlikely to make up the deficit. They have also reduced expenditures over the past two decades, and if the federal government forces more fiscal responsibility on states, including in programs like Medicaid, states will have too much on their fiscal plates to match prior federal investment levels.

Despite the many signs pointing to the need for greater investment, the Trump administration—and more specifically, its “Department of Government Efficiency”—has cut billions in research funding and continues to threaten even deeper cuts. That is a mistake the United States cannot afford. A 1 percent cut to federal investment would put the United States in 31st place within the OECD, dropping investment to 0.15 percent of GDP by 2033 (see figure 5). A 5 percent cut would push the United States to 32nd, above only Costa Rica and Chile.

Figure 5: Forecasted U.S. federal investment in university research as a share of GDP

The United States cannot continue to treat university research as an afterthought, particularly as China threatens to overtake U.S. leadership in innovation. Policymakers must treat university research as the strategic priority it is and reverse these dangerous cuts.