Proposed U.S. budget cuts raise fears about tech innovation

Proposed budget cuts to federal research agencies could hinder U.S. technology innovation and its ability to compete globally, as tech rivals such as China heavily invest in research initiatives.

President Donald Trump’s budget request for fiscal year 2026 makes significant cuts to federal science and technology research agencies, including the National Science Foundation and the National Institute of Standards and Technology. The proposed NSF budget cut would slash the agency’s funding in half, from nearly $9 billion to $3.9 billion in FY 2026. NIST is facing a $325 million budget cut.

Trump has also proposed cuts to the National Institutes of Health, NASA, the Cybersecurity and Infrastructure Security Agency and the Small Business Administration. In the budget request, the administration said after assessing FY 2025, it found “spending contrary to the needs of ordinary working Americans.” The administration focused its efforts on eliminating FY 2026 funding for agency programs on climate and gender, and looked to move some governmental services to state and local governments.

NIST and NSF are government agencies charged with supporting technology research and development in the U.S. and promoting innovation and global competitiveness. Federally funded research plays a key role in driving U.S. scientific and technological innovation, said Rob Atkinson, president of the Information Technology and Innovation Foundation and a critic of the proposed federal research agency budget cuts.

Atkinson said federal research provides robust groundwork for U.S. innovators. He pointed to Apple’s iPhone, noting that many of the core technologies powering the devices — including cellular technology, voice recognition software and multi-touch technology that enables touchscreens — can be traced back to federally funded research.

“Does that mean they were going to build an iPhone? Of course not, it took the genius of Steve Jobs to put the ingredients together,” Atkinson said. “But without the federal government, the ingredients would be suboptimal.”

Cutting budgets for federal research agencies like NSF and NIST will significantly affect U.S. companies’ ability to develop and create new products, he argued. Atkinson said he sees “absolutely no benefit” from the proposed cuts.

“You’ll see absolute levels of decline in U.S. innovation,” he said.

Federal research agencies play a critical role in anchoring what Atkinson calls “innovation ecosystems,” such as research and innovation labs at MIT, Harvard, Stanford and Research Triangle Park, a global innovation center in North Carolina. On top of budget cuts at federal agencies, the administration has also significantly cut funding for several U.S. universities, including Harvard.

Weakening federal research agencies harms those innovation hubs, making them “less robust,” Atkinson said. Meanwhile, countries including U.S. tech and trade adversary China are investing heavily in technology research and development.

“That matters because other countries are really expanding this,” Atkinson said.

Indeed, the U.S. has been slipping in rankings over the last 40 years in terms of R&D spend as a percentage of the economy, said Rick Lazio, senior vice president of tax consulting firm alliant.

In an era of advanced technology, cybersecurity and generative AI, Lazio said, the U.S. is “going in the wrong direction.”

“China has been very quickly moving toward parity in terms of their investment in research and development,” he said. “Of course, that economy has transformed over the last 40 years, beyond just being a manufacturing economy to being a strong competitor in technology.”

Atkinson said he thinks the proposed budget cuts are only the first wave. The Trump administration will likely pursue more cuts, and “research is an easy target.”