Recovery Act Helped Maintain U.S. R&D Spending During Economic Crisis

American Recovery and Reinvestment Act (ARRA) funding allowed the U.S. federal government to maintain steady funding of research and development (R&D) during the economic crisis. Now that the vast majority of those funds have been spent, however, the U.S. will have to step up its support of R&D to remain competitive. Earlier this year, the National Science Foundation (NSF) National Center for Science and Engineering Statistics released some illuminating data on how an increase in federal spending helped buoy U.S. R&D as the country's gross domestic product (GDP) declined in 2009 (see the April 4, 2012 issue). Several NSF releases over the past few months have detailed the vital role ARRA funding played in bolstering federal R&D spending as private sector spending fell.

From 2004 to 2008, U.S. R&D spending grew by approximately $25 billion each year, jumping from $302.5 billion in 2004 to $325 billion in 2005, $350.2 billion in 2006, $377 billion in 2007 and $403 billion in 2008. In 2009, that growth suddenly halted. R&D spending that year totaled $400.5 billion, a small (0.6 percent) decrease from the previous year. While the sudden halt in growth was cause for concern, the decline in R&D spending was smaller than the decrease in U.S. GDP, which dropped by 2.5 percent.

During the 2004-08 period, R&D spending growth was driven by the private sector. In 2008, businesses spent $290.7 billion on R&D, about 72.1 percent of total U.S. spending. That same year, the federal government spent 44.7 billion, about 11.1 percent of the U.S. total. When private sector spending fell by 2.9 percent in 2009, the federal government offset some of that loss by increasing its spending by 3.3 percent. While the federal increase was much smaller that the private decline in spending, its was enough to protect R&D spending from some of the damage experienced by the U.S. economy as a whole.

Recovery Act funding provided the boost to federal spending that allowed the U.S. to avoid a major decline in research activity. The first injection of ARRA funds came in 2009 as the crisis began to impact R&D spending. In that year, the federal government provided $63.3 billion in obligations for research, including $7.7 billion in ARRA funds, according to a recent NSF InfoBrief. While non-ARRA obligations increased by a modest 3.9 percent, total R&D obligations grew by 18.2 percent.

In 2010, ARRA support for federal R&D obligations totaled $6.8 billion, according to preliminary data from NSF. That Recovery Act funding allowed federal obligations to increase by 2.4 percent in 2010 to an estimated $65.3 billion. NSF, however, projects that without ARRA funding, federal obligations for research will have fallen by 7.5 percent in 2011 to $60.4 billion.

Read the NSF InfoBrief on ARRA's role in 2009 federal R&D obligations at: http://www.nsf.gov/statistics/infbrief/nsf12314/

Most of ARRA's support for R&D was targeted toward universities and colleges. In 2009, universities and colleges received 23.7 percent of all federal R&D obligations, but 58.9 percent of ARRA obligations, according to another NSF InfoBrief. Federal academic science and engineering (S&E) obligations (which include R&D, along with other types of S&E obligations) totaled $30.3 billion in 2009, including $5.9 billion in ARRA funds. The injection of ARRA funds provided a considerable boost for academic R&D, which had faced a slow decline in constant dollars since 2005. NSF's InfoBrief does not include preliminary or projection numbers for 2010 or 2011, but does demonstrate the extent to which academic R&D was dependent on ARRA funding during the crisis years.

Read the NSF InfoBrief on ARRA's role in federal science and engineering obligations to universities and colleges in 2009 at: http://www.nsf.gov/statistics/infbrief/nsf12320/.