Deep cuts in federal research spending could reverberate beyond campuses, denting college-town economies and costing jobs outside academe.
An analysis suggests that a cap on overhead costs for research funded by the National Institutes of Health would cause a $6.1-billion hit to the overall economy, as well as a $4.6-billion reduction in labor income.
The Trump administration earlier this month imposed a 15-percent limit on indirect expenses paid as part of medical-research grants, which is about half of the average rate the agency previously offered. Officials have called the administrative and facilities costs wasteful, but colleges and hospitals, which have sued to block the cuts, argue that the funds pay for critical needs beyond researchers’ salaries and supplies, such as hazardous-waste disposal and electricity that operates critical laboratory equipment.
The fallout could ripple throughout the economy. If colleges and hospitals have to trim spending, “we risk not only slowing scientific progress but also damaging the broader economy in ways that will be difficult to reverse,” said Bjorn Markeson, an economist with IMPLAN, an economic-software and analysis company, who conducted the analysis.
Markeson estimates a decrease of $2.4 billion in gross domestic product directly related to research activities. The NIH cuts could also have an impact on spending up and down the research supply chain — the companies and people who provide goods and services to researchers and their staff. That amounts to $1.8 billion in GDP and $1.1 billion in labor income.
In addition, the analysis calculated induced effects as people employed in research roles and related industries curb their household spending, a potential $1.9-billion impact on GDP.
We risk not only slowing scientific progress but also damaging the broader economy in ways that will be difficult to reverse.
The caps wouldn’t just lead to job cuts for scientists and lab managers, Markeson noted. For example, spending reductions could affect manufacturers of scientific equipment as well as producers of materials used in those apparatuses, like steel and microscopic lenses. Fast-food workers, office clerks, and accountants could be out of work if local economies contract.
Of the 46,000 jobs that could be affected, two-thirds are not directly related to research, the analysis shows.
It “highlights just how interconnected research funding is with local economies,” Markeson said, although he noted some of the impact could be felt on a regional, state, or national level.
Forty-five cities, counties, and mayors have filed a brief in support of lawsuits against the NIH brought by higher-education institutions, medical organizations, and the attorneys general of 22 states. They cited a report from United for Medical Research, a coalition of research institutes, patient advocates, and private companies, that found that every dollar in research spending produces $2.46 in broader economic activity.
Less research spending could lower tax revenues, depress real-estate values, and force local governments to step in to support out-of-work residents. It would be a “severe economic hit to many of our most critical anchor institutions, imperiling their positions as key economic drivers in our communities,” states the brief.
Many of the cities supporting the brief, including Boston, Cleveland, and San Francisco, have cast themselves as hubs of innovation and technology, encouraging the growth of biotech and research-related companies around colleges and medical centers. A substantial reduction in science funding would be a blow to both local industry and community identity, they argue.
In Baltimore, the Johns Hopkins University, the top college recipient of NIH funds in 2023, is the largest private employer and pays nearly $500 million annually to local contractors and suppliers.
The efforts of officials in Salt Lake City and Gainesville, Fla., to form partnerships with their flagship research universities to encourage life-sciences start-ups and attract concentrations of health-technology workers could be jeopardized.
The Texas Medical Center, which includes Rice University and the University of Houston, provides more than 120,000 jobs to the Houston area. Research institutions in Harris County collect a combined $263 million in indirect costs, the legal filing notes.
A federal judge has imposed a temporary nationwide halt on the funding cap.
