The United States should increase federal research spending by at least $90 billion per year—focused exclusively on technologies critical to national economic power—to avoid losing the techno-economic competition with China, according to a new report published today by the Information Technology and Innovation Foundation (ITIF). The report, the fifth in a series on "Mobilizing for Techno-Economic War," argues that America's current science and research model is outdated and poorly designed for strategic competition, devoting too much funding to basic science and too little to engineering and applied research that directly benefits U.S. companies. Federal R&D funding as a share of GDP has collapsed from 1.86 percent at the height of the Cold War in 1964 to just 0.62 percent today, while engineering receives only 15.6 percent of federal research support compared to other scientific disciplines.
The report documents stark differences between U.S. and competitor nations in research priorities. South Korea devotes 29 percent of government R&D spending to industrial technology, while the United States allocates just 1 percent. Industry funding for university research has dropped from a high of 7.4 percent in 1999 to around 6 percent in 2024. At the National Science Foundation, engineering accounts for only 8.2 percent of funding, while the agency's new Directorate for Technology, Innovation, and Partnerships received just 6.8 percent of total NSF funding in FY 2024, down from 8.9 percent the previous year. China operates close to 50 graduate programs focused on battery chemistry or battery metallurgy, while only a handful of U.S. professors work on batteries. The Chinese government has established over 500 State Key Laboratories—large-scale research centers with up to 100 researchers working on single topics—compared to NSF's 19 Engineering Research Centers, which typically employ only about 30 researchers each.
"The most important research policy change is to make not losing to China the top national mission for federal research funding, on par with having the most advanced military in the world," the report states. According to author Robert D. Atkinson, the current model diverges from national power goals in five critical ways: the balance between science and engineering, the stage of research funded, the areas invested in, the level of industry involvement, and the duration of research funding. The report argues that "the current U.S. science system, while possessing strengths, is not likely to sustain U.S. techno-economic strength vis-à-vis China." It calls for Congress to triple the NIST budget and double DARPA funding over five years, and notes that too much U.S. basic research "spills over" to other nations—especially China, which uses systems like its China National Knowledge Infrastructure Express to access over 300 million international scientific articles while restricting foreign access to Chinese publications.
The problem stems from an outdated framework established after World War II by scientist Vannevar Bush, whose 1945 report "Science: The Endless Frontier" created a system focused on basic research with minimal strings attached and little connection to commercial needs. That model worked when America dominated global manufacturing and faced no serious techno-economic rivals, but it's poorly suited to strategic competition with China, which organizes research around large teams with an explicit mission to beat the United States in national power industries—advanced traded-sector industries critical to national security like aerospace, pharmaceuticals, semiconductors, and machine tools. The report explains that early-stage basic research often can't be used by industry because it's too general, and there's insufficient funding to move discoveries through the "valley of death"—Technology Readiness Levels 4 to 6—where promising technologies die from lack of support. Meanwhile, China focuses its research on later-stage applied work designed to give domestic firms advantages, knowing it can "free ride" off U.S.-funded basic research by sending graduate students to American universities and having researchers attend international conferences.
The report recommends Congress create a "civilian DARPA" funded with at least $20 billion per year by year five, establish five national industrial research institutes modeled after Taiwan's Industrial Technology Research Institute, and expand Manufacturing USA centers from 18 to at least 36. It calls for at least one-third of new funding to go to engineering research, tripling the Department of War's funding for university-based industrial research, and creating new specialized research universities focused on narrow technology areas like materials, optics, and robotics. The report also proposes raising the collaborative R&D tax credit from 20 percent to 50 percent for industry funding of university or federal lab research, and providing grants for alternative Ph.D. programs modeled on Denmark's Industrial Ph.D. Program, which produces graduates who earn 10 percent more and are three times as likely to hold senior leadership positions. The bottom line: America needs a grand new bargain where the science community commits to conducting research explicitly aimed at winning the techno-economic competition with China, with funding focused on specialized centers with scale, sustained for at least 10 years, and designed to ensure discoveries are commercialized in the United States rather than benefiting competitors.