Study: Cuts to Science Funding Will Yield Great Recession-Level Economic Hit

By Dave Levitan  |  April 30, 2025 | 9:29am
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Study: Cuts to Science Funding Will Yield Great Recession-Level Economic Hit

It’s less a “self-inflicted wound” and more “jumping head-first into a wood chipper.” The ongoing destruction of the federal support and funding for science will produce a massive hit to the economy, on par with what we saw in 2008, according to a new study from American University’s Institute for Macroeconomic & Policy Analysis.

“Our preliminary model-based evaluation finds that budget cuts to public R&D would significantly hurt the economy in the long run, with large negative effects on GDP and private investment,” wrote study authors including Ignacio González, Juan Montecino, and Vasudeva Ramaswamy. They modeled out various levels of cuts to National Science Foundation, National Institutes of Health, and other funding bodies, with a time frame out past 25 years because so much of scientific progress is measured in decades rather than years. The results are ugly.

“A 25 percent reduction in public R&D spending would reduce GDP by approximately 3.8 percent in the long run,” they wrote. “This effect is comparable to the decline in GDP during the Great Recession.” Oh.

The ways this happens are several. Government funding of scientific research increases “the stock of knowledge in the economy,” the authors wrote, and boosts GDP over the long term by increasing aggregate productivity. “Moreover, because technological progress makes private businesses and their workers more productive, it also raises real wages and the returns on private investment, which increases investment.”

The 25-percent reduction was only the low-end of the possibilities here. If cuts to federal science funding reach 50 percent, that will gut the GDP by 7.6 percent, making the average American $10,000 poorer in today’s dollars. The cuts will also directly impact government revenue — a 25 percent cut in funding reduces revenue by 4.3 percent per year, and a 50 percent cut would double the drop to 8.6 percent.

The authors noted that these estimates are actually conservative, and the true macroeconomic effects are likely worse. They don’t account for “additional spillover channels,” and the idea that NIH- or NSF-funded innovations would probably increase the likelihood of innovations in other publicly funded areas.

“Technological progress—and the scientific discoveries that drive it,” they wrote, “is the single most important engine of long-run economic growth and society’s material well-being.”

 
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