the goal of creating new technologies. The federal government should increase our investment in long-term basic research—ideally through reallocation of existing funds,¹ but if necessary via new funds—by 10% annually over the next 7 years. It should place special emphasis on research in the physical sciences, engineering, mathematics, and information sciences and basic research conducted by the Department of Defense (DOD). This special attention does not mean that there should be a disinvestment in such important fields as the life sciences (which have seen substantial growth in recent years) or the social sciences. A balanced research portfolio in all fields of science and engineering research is critical to US prosperity. Increasingly, the most significant new scientific and engineering advances are formed to cut across several disciplines. Investments should be evaluated regularly to reprioritize the research portfolio—dropping unsuccessful programs or venues and redirecting funds to areas that appear more promising.

The United States currently spends more on research and development (R&D) than the rest of the G7 countries combined. At first glance (see Box 6-1), it might seem questionable to argue that the United States should invest more than it already does in R&D. Furthermore, federal spending on nondefense research nearly doubled, after inflation, from slightly more than $30 billion in fiscal year (FY) 1976 to roughly $55 billion in FY 2004.²

However, the committee believes that the commitment to basic research, particularly in the physical sciences, mathematics, and engineering, is inadequate. In 1965, the federal government funded more than 60% of all US R&D; by 2002 that share had fallen below 30%. During the same period, there was an extraordinary increase in corporate R&D spending: IBM, for example, now spends more than $5 billion annually³—more than the entire federal budget for physical sciences research. Corporate R&D has thus become the linchpin of the US R&D enterprise, but it cannot replace federal investment in R&D, because corporations fund relatively little basic research—for several reasons: basic research typically offers greater benefits to society than to its sponsor; it is almost by definition risky and shareholder pressure for short-term results discourages long-term, speculative investment by industry.

Although federal funding of R&D as a whole has increased in dollar terms, its share of the gross domestic product (GDP) dipped from 1.25% in 1985 to about 0.78% in 2003 (Figure 6-1). Furthermore, in recent years much of the federal research budget has been shifted to the life sciences. From 1998 to 2003, funding for the National Institutes of Health (NIH)