NCPA - National Center for Policy Analysis

Congress Could Embolden Innovation by Stimulating the Free Market

March 5, 2015

The private sector spends four times more than federal spending on Research and Development (R&D). Be that as it may, only 5 percent of private R&D spending goes to basic research. Additionally, federal agencies are focused on applied research, which emphasizes near-term problems and projects and competes with a private sector that already spends roughly 400 percent more on applied R&D.

Just 29 federal civilian agencies distribute R&D funds, yet 90 percent of spending decisions are made by five agencies, which are highly susceptible to lobbying and other political demands. As a result, federally funded researchers are forced to spend much of their time performing administrative duties.

Congress should consider four high-level policy reforms:

  • Decentralize federal R&D spending. Authority for awarding and monitoring the majority of federally funded basic research should be given to the hundreds of extraordinarily capable U.S. research universities and institutions. Currently, researchers must petition agencies in Washington, D.C., for funding.
  • Incentivize more private spending on basic research. Through tax policies and other means, encourage greater private-sector outlays on basic research in corporate laboratories and the nation's research universities.
  • De-bureaucratize grant approval and monitoring. Use modern information tools to significantly reduce the overregulation of scientists.
  • Reduce federal funding for industrial-class project development. A boost for federal support for basic research should come by offsetting cuts in spending in industrial-development types of applied research.

Still, there is good news: the U.S. boasts the world's greatest concentration of scientists and leading research universities. By stimulating the free market, Congress could pave a way for needed breakthroughs in health care, security, energy and environmental innovation.

Source: Mark P. Mills, "Basic Research and the Innovation Frontier: Decentralizing Federal Support and Stimulating Market Solutions," Manhattan Institute, February 2015. 


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