Evidence-Based Economics
The pressure being put on the Federal Reserve to lower interest rates is well-intentioned—the goal of bringing down mortgage costs and decreasing living expenses is admirable. But that's not how economics work. Artificially forcing rates down will stoke inflation and push prices further out of control in the long term.
The Fed must remain independent. Economic policy must be grounded in evidence, not politics. We support policies that address the root causes of affordability rather than applying band-aids that create bigger problems down the road.
Almost every major technological advantage the United States has enjoyed over the past 80 years can be traced back to federally funded research and development. The internet, GPS, the semiconductor industry, the Human Genome Project, mRNA vaccine technology, advanced materials science—all of it originated from or was dramatically accelerated by government-funded R&D. When America invests in research, America leads. When we don't, other countries fill the gap.
Right now, that gap is narrowing. The NSF Science & Engineering Indicators show that China has more than tripled its R&D spending as a percentage of GDP over the past two decades and is on pace to overtake the United States in total research investment within the next few years. South Korea, Israel, Japan, and Germany all spend more on R&D as a share of their economies than we do. The technologies that will define the next century—artificial intelligence, quantum computing, advanced energy systems, biotechnology, next-generation materials—are being developed right now, and the countries that fund the research will own the industries that emerge from it.
This isn't about throwing money at problems. R&D spending is one of the highest-return investments a government can make. Studies consistently show that federally funded basic research generates economic returns many times the original investment, because the breakthroughs it produces ripple through the private sector for decades. Every dollar spent on the research that led to GPS, for example, has generated hundreds of dollars in economic activity through the industries it enabled. Cutting R&D spending to balance a budget is like skipping the seed corn to save on this year's grocery bill—you save a little now and lose everything later.
We need to increase federal R&D investment, particularly in basic research that the private sector won't fund because the timelines are too long and the commercial applications are too uncertain. The private sector is excellent at applied research—turning discoveries into products—but someone has to make the discoveries first. That's historically been the role of government-funded research, and we've been slowly abdicating that role for decades. It's time to reverse course.
Here's something that will make your blood boil if you care about where your tax dollars go. When the federal government awards a research grant to a university, a massive chunk of that money never makes it to the actual research. It gets siphoned off by the university as "indirect costs"—also known as overhead—before a single experiment is run, a single graduate student is hired, or a single piece of equipment is purchased.
We're not talking about a small administrative fee. At many major research universities, the overhead rate is 50% or higher. Some charge rates above 60%. That means if a researcher wins a $1 million federal grant to study, say, a promising new cancer treatment or a breakthrough in battery technology, the university takes $500,000 to $600,000 off the top before the researcher sees a dime. The scientist who wrote the proposal, who had the idea, who is doing the actual work that taxpayers are funding—that person gets to work with what's left.
What does the university spend that overhead on? Ostensibly it covers things like building maintenance, utilities, administrative support, and library access. And yes, research does require infrastructure. But anyone who has spent time in academia—or talked to the researchers who actually live this reality—will tell you that the overhead rates have become a revenue extraction mechanism that far exceeds the actual costs of supporting research. Universities have gotten addicted to overhead as a revenue stream, and the researchers are the ones who pay the price.
I've talked to and worked with researchers who find this system maddening. They're brilliant people trying to solve real problems—diseases, energy challenges, national security threats—and they watch half of their hard-won funding disappear into a university's general fund before they can spend a dollar on the work the grant was actually for. They write budgets knowing they have to inflate every number to account for the overhead tax, which means they either do less research than the grant was supposed to fund or they spend months writing additional grant proposals to make up the difference. It's a system that punishes productivity and rewards administrative bloat.
The fix isn't complicated. Federal research grants should include a hard cap on indirect cost rates—a reasonable ceiling that covers legitimate infrastructure costs without allowing universities to treat every grant as a profit center. Congress has done this before in narrow contexts: the NIH caps overhead for training grants at 8%, and the federal government caps overhead on grants to non-university institutions at 26%. There's no reason the same principle can't be applied more broadly. A cap in the range of 25-30% for university research grants would still cover real infrastructure costs while freeing up billions of dollars—across the federal research portfolio—that would actually go to the research taxpayers thought they were funding.
This isn't about punishing universities. It's about making sure that when the American people invest in research, that investment actually reaches the researchers. Every dollar that gets absorbed into administrative overhead instead of funding actual science is a dollar that doesn't produce the breakthroughs we're paying for. If we're going to increase R&D spending—and we should—we need to make sure the money is going where it's supposed to go.
Here's something that gets lost in every trade war, tariff battle, and policy reversal: American businesses are remarkably resilient. They can adapt to almost any set of rules. What they can't adapt to is not knowing what the rules are, or having them change every few months based on whoever is winning the latest political fight.
Businesses plan in years and decades, not news cycles. A manufacturer deciding where to build a factory needs to know what tariffs, trade agreements, and regulations will look like for the next 10–20 years. A farmer planting crops in the spring needs to know whether the export markets will be open at harvest. An energy company investing billions in infrastructure needs regulatory certainty that outlasts a single administration. When the rules keep changing, investment freezes, hiring slows, and the people furthest downstream—workers, small suppliers, family farms—get crushed.
The current USMCA renegotiation is a textbook example. The United States, Mexico, and Canada must complete their joint review by July 1, 2026, and the uncertainty is already rippling through the agricultural sector. North American trade partners account for nearly one-third of total U.S. agricultural exports—over $58 billion annually. Proposals to split the trilateral agreement into bilateral deals have farmers, ranchers, and agribusinesses unable to plan their planting seasons, negotiate export contracts, or make investment decisions. Fertilizer imports from Canada—which supplies over 90% of U.S. potash needs—have already been disrupted by tariff uncertainty.
Tariff wars, currency manipulation threats, and trade pact upheavals all share the same fundamental problem: they introduce chaos into systems that run on predictability. The costs don't fall on the people making the decisions in Washington. They fall on the farmer who can't sell soybeans, the small manufacturer whose steel costs doubled overnight, and the consumer who pays more for everything at the grocery store. Trade policy should be strategic, predictable, and built for the long term—not wielded as a weapon in political disputes that have nothing to do with commerce.