Government Focus by National Objective

Numerous changes have been occurring domestically and worldwide that have caused the R&D landscape to be in considerable flux. The most notable changes include the demise of the Soviet Union, the transition of Eastern European communist systems into market economies, an increase in international economic challenges to the preeminence of U.S. competitiveness, public and private sector demands for budgetary austerity and accountability, and realignments within industry and at research universities. This means the ultimate determination of Federal funding priorities - which are mirrored in the functional focus of Federal R&D support - is subject to more than the usual political uncertainty.

U.S. Funding Priorities

Federal R&D funding priorities shifted overwhelmingly toward defense programs in the 1980s; these included both DOD programs and nuclear weapons research funded by the DOE.36 Defense R&D spending peaked in 1987 at $39 billion (inflation-adjusted 1987 dollars), when it accounted for 69 percent of the Federal R&D total. Since then, however, the data reflect a distinct de-emphasis on defense priorities as well as the current Administration's stated intention to shift the focus of Federal R&D support back to an even military-civilian split by 1998 (Clinton and Gore, 1993). (See figure 4-20 and appendix table 4-29.) Proposed Federal R&D funding for defense-related activities accounts for 53 percent of the 1996 total.

Of the Federal nondefense functions, health - particularly the R&D programs of HHS - experienced the largest inflation-adjusted R&D funding growth since the early 1980s. In particular, AIDS-related research has grown substantially and now accounts for roughly 11 percent of Federal health R&D funds, which is second only to the 16-percent share directed toward cancer research. Funding for space research has shown a bit of a roller-coaster pattern, dropping precipitously in the early 1980s and then rising rather steadily thereafter. Most of its R&D funding growth has been in support of Space Station Freedom.37

Among the other major functional recipients of Federal R&D funding, energy displays the largest sustained decline in support and is currently funded about 60 percent less (constant dollars) than at the start of the 1980s.38 Research funding for general science programs,39 which include those of NSF and DOE, has fared no better - and has done relatively much worse - than that for many other major civilian budgetary categories during the past 15 years. (For agency-specific details, see Patterns of Federal R&D Support in this chapter.)

The following five functions account for 89 percent of proposed 1996 R&D budget authority:

Two other functional areas of Federal concern each account for 3 percent of R&D budget authority and for most of the gain in the all-inclusive "other" category: (1) transportation, which is dominated by aeronautical research funded by NASA, and (2) natural resources and the environment. (See figure 4-20.) Environmental research, in particular, has been identified as an area of specific Government interest that has received increased funding from the present administration.40

The largest single percentage increase for R&D in 1996 was proposed in the Commerce and Housing Credit (CHC) function - jumping 15 percent over 1995 - under which is included R&D support at NIST and comprises both its intramural research program and extramural ATP support for precompetitive generic technologies. Should NIST receive full funding of $720 million, the CHC function would account for 1 percent of all Federal R&D, or five times its 0.2-percent share held in 1990. Current budgetary deliberations by the Congress, however, appear to reduce spending for a number of these activities and functions.

International Comparisons

A breakdown of public expenditures by major socioeconomic objectives provides insight on governmental priorities, which differ considerably across countries.41 In the United States during 1994, 55 percent of the government's $68 billion R&D investment was devoted to national defense, compared with 45 percent in the United Kingdom (of the $9 billion government total), 34 percent in France (of the $14 billion total), and 10 percent or less each in Germany, Italy, Canada, and Japan. (See figure 4-22.) Cutbacks in defense R&D are expected to continue in the United States, United Kingdom, and France.

Another emphasis is health-related R&D. The U.S. Government devoted 17 percent of its R&D investment to 1994 on health-related R&D; this emphasis is especially notable in its support for life sciences given to academic and similar institutions. The emphasis on life sciences and health-related research is much more pronounced in the United States than in other countries42 and is reflected in research output trends. (See chapter 5, Academic Research and Development: Infrastructure and Performance.)

Japanese and German government R&D appropriations in 1994 were invested relatively heavily (51 percent of the $18 billion and $15 billion totals respectively) in the advancement of knowledge (which is combined support for advancement of research and general university funds, or GUF). Indeed, the GUF component of advancement of knowledge, for which there is no comparable counterpart in the United States, represents the largest part of government R&D expenditure in most countries.43 Energy-related activities accounted for the second largest share of Japanese R&D support (21 percent of governmental R&D funds), reflecting the country's concern with its high dependence on foreign sources of energy. In Canada, 12 percent of the government's $3 billion R&D funding is directed toward agriculture.

In each of the four European countries and Canada, industrial development accounted for 7 percent or more of governmental R&D funding, reaching 16 percent of Italy's $8 billion government total. Industrial development accounted for 4 percent of the Japanese total, but just 0.6 percent of U.S. R&D. The latter figure - which may be understated relative to other countries as a result of compilation differences - has recently increased, reflecting the current Administration's programs that provide investment in commercially relevant R&D programs - notably within NIST.

These aggregate socioeconomic data, however, only begin to capture the extraordinary changes that have taken place in the international arena over the past several years and the resultant shifts in countries' S&T policy directions. According to a recent report released by the OECD (1994a), a number of commonalities among countries are worth highlighting:


36 The Office of Management and Budget (OMB) classifies all activities within the Federal budget into 20 functional categories. The budget function classification system provides a means to classify budgetary resources according to the national need being addressed. There are 15 functions that contain Federal R&D programs. For definitions and details, see SRS (1996). Data reported here reflect estimates for R&D programs contained in the administration's 1996 budget proposal that was submitted to Congress in January 1995 (OMB, 1995). Notably, each specific activity is assigned to only one object code so that programs with multiple objectives will be classified only once under the program's primary functional objective. For example, except for those of the Army Corps of Engineers, all R&D activities sponsored by the DOD are classified as defense, even though some activities have secondary objectives such as health, space, or commerce (that is, defense conversion activities). Consequently, these totals are indicative of trends but not necessarily conclusive. See recent GAO reports for a coverage of the Federal Government's total funding by function (GAO, 1995a; 1995b; 1995c).

37 Funding for the Space Station rose from $22 million in 1984, the first year for which this program received a separate budget line item, to $2 billion in 1994 (AAAS, 1994).

38 For an extensive review of DOE's energy programs, including their placement in a broader global context and in relation to industry's long-term energy R&D investments, see Department of Energy (1995b), informally known as the Yergin Report.

39 Research activities classified under this "general science" budget category are seen as contributing more broadly to the Nation's science and engineering base than are basic research programs that support agency missions.

40 Available statistics on such funding, however, tend not to capture the full extent of these environmentally related R&D activities. Based on the programmatic budgetary classifications used in this section, $2.2 billion was slated for natural resources and the environment in fiscal year 1996. Official budget documents (OMB, 1995) - not constrained by formal classification schemes - reported an environmental R&D investment of more than $5.5 billion in 1996, which included $2.2 billion for the U.S. Global Change Research Program. See also National Science and Technology Council (1995a and 1995b) for further discussion of recent administration efforts directed toward environmental research and the development of a national environmental technology strategy.

41 Data on the socioeconomic objectives of R&D funding are rarely obtained by special surveys, but rather are generally extracted in some way from national budgets. Since these budgets already have their own methodology and terminology, these R&D funding data are subject to comparability constraints not placed on other types of international R&D data sets. Notably, although each country adheres to the same criteria for distributing their R&D by objective (as outlined in OECD, 1981; 1994b), the actual classification may differ among countries because of differences in the primary objective of the various funding agents. Note also that these data are of government R&D funds only, which account for widely divergent shares and absolute amounts of each country's R&D total. The classification of the U.S. totals presented here are generally consistent with those presented previously in this chapter.

42 For detailed comparisons - by field of science - of government (national, state, and local) funding of (1) academic research (including for separately budgeted research and research supported out of general university funds) and (2) academically related research (such as that of university-administered FFRDCs and the NIH intramural program) in the United States, United Kingdom, Netherlands, France, Germany, and Japan, see Irvine, Martin, and Isard (1990). For further comparisons with Canada and Australia, see Martin and Irvine (1992). Note that trends in academic and academically related research should not be equated with basic research trends.

43 In the United States, advancement of knowledge is a budgetary category for research unrelated to a specific national objective. Furthermore, whereas GUF is reported separately for Japan and European countries, the United States does not have an equivalent GUF category: Funds to the university sector are distributed among the objectives of the Federal agencies that provide the R&D funds.

The treatment of GUF is one of the major areas of difficulty in making international R&D comparisons. In many countries other than the United States, governments support academic research primarily through large block grants that are used at the discretion of each individual higher education institution to cover administrative, teaching, and research costs. Only the R&D component of these GUFs are included in national R&D statistics, but problems arise in identifying how much the R&D component is and the objective of the research.

Government GUF support is in addition to support that is provided in the form of earmarked, directed, or project-specific grants and contracts (and thereby can be assigned to specific socioeconomic categories). In the United States, the Federal Government (although not necessarily state governments) is much more directly involved in choosing which academic research projects are supported than in Europe and elsewhere. Thus, these socioeconomic data are indicative not only of relative international funding priorities, but also of funding mechanisms and philosophies as to the best methods for financing research. For the 1993-94 period, the GUF portion of total national governmental R&D support was between 37 and 42 percent in Japan, Italy, and Germany, and between 14 and 21 percent in the United Kingdom, Canada, and France.