Government Spending Continues To Drive R&D Growth
In the 1990s, industry drove dramatic growth in U.S. R&D following one of the longest economic growth periods in U.S. history. After the high-tech bubble burst in 1999 and 2000, the largest increases in government R&D spending in a decade took up the slack as many industries cut their R&D increases to stay financially solvent. And in an uncertain 2003, with a recession seemingly in decline, homeland security jitters, and a growing budget deficit, the outlook was still optimistic for increased R&D growth. In 2004, the economy was continuing to improve, but not as fast as many had expected. There were still the uncertainties of homeland security, the outcome of a presidential election, and the long-term economic issues of an increasing trade deficit and now record federal budget deficits.
The uncertainties involved in this roller coaster economic ride for the past five years has made for an interesting, to say the least, study in forecasting trends. Dramatic changes in the socio-politico-economic climate can do that. But through all these years of changes, total U.S. R&D spending has continued to increase each year. It did not increase at the rates of the late-1990s, but those, in retrospect, were unrealistic to maintain. And the fact that total R&D spending has continued to increase is at least partially responsible for the current U.S. economic recovery.
In this environment of change, analysts at Battelle, Columbus, Ohio, and the editors of R&D Magazine expect that total R&D in the U.S. for 2005 will increase by approximately 3.6% over that spent in 2004 to $311.6 billion. The principal driving force for this increase will be the expenditures by the federal government, estimated to increase by almost 6%. The overall government increase is dominated by an increase in spending by the Dept. of Defense (DOD). And while other government and non-profit R&D spending sectors may have larger percentage increases in funding, the sheer magnitude of the DOD budget will dominate the 2004 to 2005 increase.
Although private industry continues to dominate the overall funding of R&D, as it has for the past 25 years, the actual increase for 2005 is expected to be less than 2%, representing basically no change in inflation-adjusted real dollar outlays. This relatively flat funding continues a behavior that has been in effect for the past four years.
The academic and other non-profit sectors combined will exhibit an increase of approximately 8.6% in total funding, but only a 7.3% gain in the performance of R&D. These margins are a result of the decreases or relatively small increases expected in the industrial support of these sectors.
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