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Chapter 4. Research and Development: National Trends and International Comparisons

Federal R&D Performance and Funding

The U.S. government supports and facilitates the nation’s R&D system through various policy avenues. The most direct of these are the R&D activities conducted by federal organizations (whether agency intramural laboratories and facilities or FFRDCs) and the funding for R&D provided to other performers (such as businesses and academic institutions).[20] This section provides statistical detail on these federally performed and funded R&D activities—in particular, how the funding has been allocated among differing national objectives, how current federal spending on R&D differs across the agencies, and how the current spending is allocated among differing research fields. The next section compares federal R&D spending priorities with those of national governments in the other major R&D-performing countries. (For definitions of key federal budget terms used in this section, see the sidebar, “Federal Budgetary Concepts and Related Terms.”)

Federal R&D Budget, by National Objectives

Federal support for the nation’s R&D spans a range of objectives: national defense, health, space, energy, natural resources and environment, general science, and various other categories. The Office of Management and Budget (OMB) classifies agency funding requests into 20 broad categories termed budget functions (OMB 2012a). Federal agency R&D activities appear in 15 of these 20 functional categories.[21] While the authority for spending granted to the agencies (termed budget authority or appropriations) through the federal budget legislation enacted annually by the Congress is not yet actual spending, a look at how this budget authority divides among the various functional categories provides a useful picture of the present priorities and trends in federal support for U.S. R&D.

Budget authority for all spending on R&D by the federal agencies totaled $144.4 billion (current dollars) in FY 2011 (figure 4-17; appendix table 4-32 and appendix table 4-33). In FY 2010, the total was $149.0 billion. It was $164.3 billion in FY 2009—noticeably higher because of the one-time $18.7 billion increase from ARRA.[22] The totals in FYs 2006 and 2001 were $136.0 billion and $91.5 billion, respectively.

Defense-Related R&D

R&D directed at national defense objectives is supported primarily by the Department of Defense (DOD) but also includes some R&D by the Department of Energy (DOE) and the Department of Justice (where some R&D by the Federal Bureau of Investigation comes under a defense category). National defense represented about 58% ($83.2 billion) of the total budget authority for R&D in FY 2011 (appendix table 4-32). It also accounted for 58% in FY 2006 and 51% in FY 2001.

This predominance of national defense R&D goes back many years. In FY 1980, there was rough equivalence between national defense and nondefense R&D. By FY 1985, national defense had become more than twice as large as nondefense, but from 1986 to 2001, nondefense R&D surged, with the national defense share shrinking back to just over half. Following September 11, 2001, however, national defense R&D again increased as a share, accounting for 59% of federal R&D budget authority in FY 2008. The drop to 52% in FY 2009 reflects chiefly an effect of the one-time increase in R&D budget authority from ARRA, primarily targeted at health, energy, and general science research.

Nondefense R&D

Nondefense R&D spans the other 14 budget function categories, which include activities in the areas of health, space research and technology, energy, general science, natural resources and environment, transportation, agriculture, education, international affairs, veterans benefits, and a number of other small categories related to economic and governance matters. Budget authority for nondefense R&D accounted for 42% ($61.2 billion) in FY 2011 (appendix table 4-32). It was also 42% in FY 2006, but it was just under 50% in FY 2001.

The most striking change in federal R&D priorities over the past two decades has been the considerable increase in health-related R&D, which now accounts for just over half of all nondefense R&D (figure 4-17). Health R&D was 12% of total federal R&D budget authority in FY 1980 but rose to 22% in FY 2011. This rise in share jumped after FY 1998, when national policymakers set the National Institutes of Health (NIH) budget on course to double by FY 2003. Health research was also particularly favored by the ARRA increment, rising to 26% of the total R&D budget authority in FY 2009 (appendix table 4-32).

The budget allocation for space-related R&D peaked in the 1960s during the height of the nation’s efforts to surpass the Soviet Union in space exploration. It stood at 10%–11% of total R&D budget authority throughout the 1990s. The loss of the Space Shuttle Columbia and its crew in February 2003 prompted curtailment of manned space missions. In FY 2006, the space R&D share was down to about 8%; it was 6% in FY 2011.

Nondefense federal R&D classified as general science had about a 4% share of total federal R&D in the mid-1990s, growing to 7% in FY 2011. However, much of this change reflected an important reclassification: starting in FY 1998, several DOE programs were shifted from the energy category to general science.

Federal Spending on R&D, by Agency

Fifteen federal departments and a dozen other agencies engage in and/or fund R&D in the United States. Nine of these departments/agencies reported R&D spending in excess of $1 billion annually in FY 2011, and these nine accounted for 97% of the total (table 4-13; appendix table 4-35). Another six of the departments/agencies reported spending above $100 million annually.

(The budget figures reported in this section are in obligations. For the distribution of federal R&D across the agencies, data on spending in obligations terms provide the most comprehensive and consistent account. Budget authority, as discussed earlier, lays out the themes of the broad federal spending plan. Spending obligations reflect federal dollars as they are spent, that is, the implementation of the plan by federal agencies. Because planning and actual spending are different steps, the reported statistics on R&D in obligations typically differ from the corresponding items in budget authority terms.)

In FY 2011, federal obligations for R&D and R&D plant together totaled $136.4 billion: $132.1 billion for R&D and an additional $4.3 billion for R&D plant (table 4-13). The corresponding figures for FY 2010 were $147.0 billion in total, $140.4 billion for R&D, and $6.6 billion for R&D plant; for FY 2009, they were $144.8 billion in total, $141.1 billion for R&D, and $3.7 billion for R&D plant (appendix table 4-34). Federal obligations for R&D increased annually on both a current and constant dollar basis from the late 1990s through FY 2010 (figure 4-18; appendix table 4-34). The FY 2011 drop in funding was a noticeable departure from this trend.

(The corresponding figures for federal funding of U.S. R&D cited in table 4-1 earlier in this chapter are lower. The table 4-1 figures are based on performers’ reports of their R&D expenditures from federal funds. This difference between performer and source of funding reports of the level of R&D expenditures has been present in the U.S. data for more than 15 years and reflects various technical issues. For a discussion, see the sidebar, “Tracking R&D: The Gap between Performer- and Source-Reported Expenditures.”)

The nine departments/agencies that account presently for almost all federal R&D differ widely in the balance of R&D performed and/or funded among intramural laboratories, FFRDCs, and various extramural performers (including private businesses, universities and colleges, other nonprofit organizations, state and local governments, and foreign organizations). There are also significant differences in the character-of-work profiles, that is, the balances among the basic research, applied research, and development conducted.

Department of Defense

In FY 2010, DOD obligated a total of $71.8 billion for R&D and R&D plant (table 4-13), which represented a little over half (53%) of all federal spending on R&D and R&D plant that year. Nearly the entire DOD total was R&D spending ($71.7 billion), with the remainder spent on R&D plant.

Thirty-one percent ($22.3 billion) of the total was spending by the department’s intramural labs, related agency R&D program activities, and FFRDCs (table 4-13). Extramural performers accounted for 69% ($49.6 billion) of the obligations, with the bulk going to business firms ($46.6 billion; appendix table 4-35).

Considering just the R&D component, relatively small amounts were spent on basic research ($1.9 billion, 3%) and applied research ($4.7 billion, 7%) in FY 2011 (table 4-14). The vast majority of obligations, $65.1 billion (91%), went to development. Furthermore, the bulk of this DOD development ($59.0 billion) was allocated for major systems development, which includes the main activities in developing, testing, and evaluating combat systems (figure 4-19). The remaining DOD development ($6.1 billion) was allocated for advanced technology development, which is more similar to other agencies’ development obligations.

Department of Health and Human Services

The Department of Health and Human Services (HHS) is the main federal source of spending for health-related R&D. In FY 2011, the department obligated $31.8 billion for R&D and R&D plant, or 23% of the total of federal obligations that year (appendix table 4-35). Nearly all of this was for R&D ($31.6 billion). Furthermore, much of the total, $29.9 billion, represented 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 20% ($6.2 billion) of the total. Extramural performers accounted for 81% ($25.6 billion). Universities and colleges ($18.3 billion) and other nonprofit organizations ($4.9 billion) conducted the most sizable of these extramural activities (appendix table 4-35).

Nearly all of HHS R&D funding is allocated to research: 51% for basic research and 49% for applied research (table 4-14).

Department of Energy

DOE obligated $9.9 billion for R&D and R&D plant in FY 2011, about 8% of the total of federal obligations that year. Of this amount, $9.1 billion was for R&D and $0.8 billion was for R&D plant.

The department’s intramural laboratories and FFRDCs accounted for 76% of the total obligations. 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. Accordingly, DOE invests more resources in its intramural laboratories and FFRDCs than other federal agencies. The 24% of obligations to extramural performers went chiefly to businesses and universities and colleges.

For the $9.1 billion obligated to R&D, basic research accounted for 41%, applied research accounted for 33%, and development accounted for 26%. 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).

National Aeronautics and Space Administration

The National Aeronautics and Space Administration (NASA) obligated $8.4 billion to R&D in FY 2011, 6% of the federal total. Seventy-five percent of these obligations were for extramural R&D, given chiefly to business sector performers. Agency intramural R&D and that by FFRDCs represented 25% of the NASA obligations total. By character of work, 76% of the NASA R&D obligations funded development activities, 13% funded basic research, and 11% funded applied research.

National Science Foundation

NSF obligated $5.4 billion for R&D and R&D plant in FY 2011, or 4% of the federal total. Extramural performers, chiefly universities and colleges ($5.0 billion), represented 94% of this total. Basic research accounted for about 93% of the R&D component. NSF is the federal government’s primary source of funding for academic basic science and engineering research and the second-largest federal source (after HHS) of R&D funds for universities and colleges.

Department of Agriculture

The Department of Agriculture (USDA) obligated $2.6 billion for R&D in FY 2011, with the main focus 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 2011, about 63% ($1.7 billion) funded R&D by agency intramural performers, chiefly the Agricultural Research Service. Basic research accounts for about 42%, applied research accounts for 50%, and development accounts for 9%.

Department of Commerce

The Department of Commerce (DOC) obligated $1.4 billion for R&D in FY 2011, most of which represented the R&D and R&D plant spending of the National Oceanic and Atmospheric Administration and the National Institute of Standards and Technology. Seventy-one percent of this total was for agency intramural R&D; 29% went to extramural performers, primarily businesses and universities and colleges. For the R&D component, 13% was basic research, 74% was applied research, and 13% was development.

Department of Homeland Security

The Department of Homeland Security (DHS) obligated $1.1 billion for R&D and R&D plant in FY 2011, nearly all of which was for activities by the department’s Science and Technology Directorate. Sixty-four percent of this total was for agency intramural and FFRDC activities. Just under 37% was conducted by extramural performers—mainly businesses—but also universities and colleges and other nonprofit organizations. Of the obligations for R&D, 14% was basic research, 33% was applied research, and 53% was development.

Department of Transportation

The Department of Transportation (DOT) obligated $1.0 billion for R&D and R&D plant in FY 2011, most of which was for activities by the department’s Federal Aviation Administration and Federal Highway Administration. Thirty-four percent of this obligations total was for agency intramural and FFRDC activities. Sixty-six percent was conducted by extramural performers—mainly businesses—but also state and local governments, universities and colleges, and other nonprofit organizations. Of the obligations for R&D, barely 1% was basic research, 71% was applied research, and 29% was development.

Other Agencies

The six other departments/agencies obligating more than $100 million annually for R&D in FY 2011 were the Departments of Education (ED), the Interior (DOI), Justice, and Veterans Affairs; the Environmental Protection Agency (EPA); and the Smithsonian Institution (table 4-13 and table 4-14). These agencies varied with respect to the character of research and the roles of intramural, FFRDC, and extramural performers.

Federal Spending on Research, by Field

The research conducted and/or funded by the federal government spans the full range of S&E fields. These fields vary widely with respect to their current funding levels and the history of support (appendix table 4-37 and appendix table 4-38).

Funding for basic and applied research combined accounted for $58.2 billion (about 44%) of the $132.1 billion total of federal obligations for R&D in FY 2011 (table 4-14). Of this amount, $30.2 billion (52% of $58.2 billion) supported research in the life sciences (figure 4-20; appendix table 4-37). The fields with the next-largest amounts were engineering ($10.1 billion, 17%) and the physical sciences ($5.5 billion, 10%), followed by mathematics and computer sciences ($3.3 billion, 6%) and environmental sciences ($3.1 billion, 5%). The balance of federal obligations for research in FY 2011 supported psychology, the social sciences, and all other sciences ($5.9 billion overall, or 10% of the total for research).

With differing missions, the federal agencies vary significantly in the types of S&E fields emphasized. HHS accounted for the largest share (54%) of federal obligations for research in FY 2011 (appendix table 4-37). Most of this amount funded research in medical and related life sciences, primarily through NIH. The five next-largest federal agencies for research funding that year were DOE (12%), DOD (11%), NSF (8%), USDA (4%), and NASA (3%).

DOE’s $6.8 billion in research obligations provided funding for research in the physical sciences ($2.6 billion) and engineering ($2.3 billion), along with mathematics and computer sciences ($1.0 billion). DOD’s $6.6 billion of research funding emphasized engineering ($3.6 billion) but also included mathematics and computer sciences ($1.0 billion), physical sciences ($0.8 billion), and life sciences ($0.6 billion). NSF—not a mission agency in the traditional sense—is charged with “promoting the health of science.” Consequently, it had a comparatively diverse $4.9 billion research portfolio that allocated about $0.7 billion to $0.9 billion in each of the following fields: environmental, life, mathematics and computer, and physical sciences and engineering. Lesser amounts were allocated to psychology and the social and other sciences. USDA’s $2.4 billion was directed primarily at the life (agricultural) sciences ($1.9 billion). NASA’s $1.6 billion for research emphasized engineering ($0.6 billion), followed by the physical sciences ($0.4 billion) and environmental sciences ($0.4 billion).

Growth in federal research obligations has slowed in recent years. Federal obligations for research in all S&E fields expanded on average at 1.7% annually (in current dollars) over the 2006–11 period but at a much higher 2.7% over the 2001–11 period (appendix table 4-38).

Looking just at the recent period of FY 2006–11, the level of federal research obligations in the life sciences, psychology, and the social sciences experienced average annual growth at or just below the pace of expansion for all S&E (1.7%), meaning these fields essentially maintained their shares of the total (appendix table 4-38). Obligations for the fields of mathematics/computer sciences and engineering, however, expanded at average paces well above that for all S&E, meaning these fields’ shares of the total were increasing. Obligations for the physical sciences grew at less than half the rate of all S&E, a greater level of obligations in FY 2011 than in FY 2006, but a declining share of the whole. The field of environmental sciences experienced both a declining share and a lower absolute level in FY 2011 compared with that in FY 2006.

Notes
[20] The analysis in this section focuses primarily on developments in federal R&D priorities and funding support over the course of the last decade. But there is a particularly interesting story to tell in how the comparatively minor federal role in the nation’s science and research system up until World War II was reconsidered, redirected, and greatly enlarged, starting shortly after the end of the war and up through the subsequent decades to the present. For a review of the essential elements of this evolving postwar federal role, see Jankowski (2013).
[21] The 15 budget function categories in which federally performed and/or funded R&D activities typically appear are national defense (050); international affairs (150); general science, space, and technology (250); energy (270); natural resources and environment (300); agriculture (350); commerce and housing credit (370); transportation (400); community and regional development (450); education, training, and social services (500); health (550); Medicare (570); income security (600); veterans benefits and services (700); and administration of justice (750). The other five categories in which R&D typically does not occur are social security (650), general government (800), net interest (900), allowances (920), and undistributed offsetting receipts (950). Furthermore, to clarify analysis, NCSES statistics on federal R&D funding by budget function normally separate the (250) function into subfunctions: general science and basic research (251) and space flight, research, and supporting activities (252).
[22] For more on the effect of ARRA in R&D performance, see chapter 5.
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