The R&D funding crisis

Innovation is the lifeblood of the future economy, which is why government investment is so critical. Hats off to the folks at the NSF. And let's hope they're ready to run another rescue mission: saving U.S. R&D investment.

I recently caught the movie 8 Below, the story of a team of sled dogs that are abandoned and subsequently rescued by scientists in Antarctica. It's about as silly as it sounds - perfect summer fare, particularly for those younger than age 10.

I loved it, of course. But then, I'm a sucker for movies in which the National Science Foundation plays a starring role (the rescue team is funded by the NSF). You see, from what I can tell, the NSF is one of the few organizations that's fighting, er, doggedly to reverse one of the most worrying trends in science and engineering: the R&D funding crisis.

As noted in previous columns, last July and in 2004, healthy R&D funding is key to a healthy economy. Despite some bright spots, however, R&D funding in this country is in serious trouble.

First, the good news: After years of flatlining and downright decreases, the NSF's 2007 budget increased a whopping 7.8% over 2006, adding $439 million to top out at $6 billion. Better still, some $16 million of that funding is earmarked for professional development of teachers and science educators, and $803 million is part of the NSF's involvement in Networking and Information Technology Research and Development (NITRD), a multiagency initiative that seeks to ensure U.S. leadership in networking and information technologies by investing in long-term scientific and engineering research.

NITRD, funded by the American Competitive Initiative, was announced by President Bush in January; it earmarks some $1.3 billion in new federal funding plus an additional $4.6 billion in R&D tax incentives toward scientific R&D, education and worker training.

It's all great stuff. But there's a catch: One of the reasons the feds are investing more heavily in R&D is that the private sector is investing less. The NSF estimates that private-sector funding has dropped by 18% from 2001 to 2003 (the last year in which statistics are available). And to be clear: 70% of annual U.S. R&D funding - $220 billion per year - comes from the private sector (see this NSF site for these and other statistics).

The bottom line? Single-digit increases in federal R&D investment, however laudable, can't make up for double-digit decreases in private-sector R&D investment. Tech companies are among those that have cut back most heavily: In recent years HP, Lucent, Microsoft and Sun all have announced decreases in R&D spending.

It's hard to fault them. Markets reward companies with lean operations, not those plowing money into investments that may not pan out. (Some of my investment-analyst buddies have been grumbling that Microsoft's still spending too much on R&D.) Companies that don't invest heavily - think Cisco or Apple - find it less expensive and easier to cull top researchers from other companies (or academia) than to build their own labs.

Yet innovation is the lifeblood of the future economy, which is why government investment is so critical. Hats off to the folks at the NSF. And let's hope they're ready to run another rescue mission: saving U.S. R&D investment.

Learn more about this topic

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