A review of the U.S. R&D/GDP ratio over time shows a peak of 2.9 percent in 1964 with a gradual decline to 2.2 percent in 1978. This drop largely reflected Federal cutbacks in defense and space R&D programs, although gains in energy R&D activities between 1975 and 1979 resulted in a relative stabilization of the ratio at around 2.2 percent. Over the entire 1965-78 period the annual percentage increase in real R&D was less than the annual percentage increase in real GDP. In years that real R&D spending decreased, real GDP also fell, but at a lower rate (chart 6).
From 1979 to 1985 the R&D/GDP ratio increased steadily from 2.2 to 2.8 percent. This increase was as much due to a slowdown in GDP growth as to increased spending on R&D activities. For example, the 1980 and 1982 recessions resulted in a slight decline in real GDP; there was no corresponding reduction in R&D spending. In contrast, during previous recessions changes in support for R&D tended to parallel-and even exceed-the adverse movements of the broader economic measures. Since 1985 the R&D/GDP ratio has trended slightly downwards as a result of declining growth in Federal R&D expenditures and slow to declining growth in non Federal R&D expenditures.