There's a little-known dirty secret in science funding; prior to World War II and the Manhattan Project, the overwhelming majority of basic research was done by corporations. Thus, the tanks, planes, materials advancements and everything else were created by the private sector.
With the runaway success of the nuclear bomb, the government moved next to space travel, and though that was still primarily government contractors the perception was that 'the government' did it.(1) Werner von Braun and all that. From that point on, federal government control of academic research has been solid. When the government controls the money, they control what researchers work on. President Ronald Reagan was arguably the greatest proponent for federally-funded basic research in American history(2) and since his time, the perception in academia has been that only federal grant principal investigators are doing 'real' science.
This has led to a lot of confusion. The technology to create human embryonic stem cells was done outside the federal grant process in 1998 - it was illegal after President Clinton made the Dickey-Wicker Amendment into law - yet in 2001 critics declared that President Bush and Republicans anti-science when the federal government funded it for the first time.
Instead of cheering, like the NIH did, vocal critics called the federal guidelines a 'ban' and stated that science progress was crippled unless the federal government had no restrictions. State government and corporate funding of science were forgotten(3), even though it was obvious that if hESCs were going to cure all those diseases right away, as the claims went, corporations would be pursuing it so they could own it.(4) At the national level, baffled Republicans don't seem to have realized they were anti-science, because they doubled funding for the NIH and increased the NASA budget after a decline during the Clinton years.
We've been in an economic malaise since late 2008 and no one's federal science budget is getting doubled again any time soon. Government is currently spending $600 billion more per year than it takes in and with new health insurance laws, that deficit is going to rise a lot.
What will happen to science?
Well, it will get more efficient, that's for sure. As I have written about in the past, the National Science Foundation could fund thousands more science projects each year without a budget increase at all - simply stop funding nonsense like 'studies' of Everquest and duplicating 'STEM outreach' with a dozen other agencies. They even squandered $500,000 to build "Science 2.0" - no one on the NSF committee ever even bothered to do a Google search to see if Science 2.0 already existed, much less check the Patent and Trademark Office. And the US Department of Energy could stop throwing money at solar panel manufacturers and invest in basic research instead - the $72 billion wasted on trying to create winners and losers in the private sector could have funded 100,000 American basic research labs in the US in order to perhaps get us actual good solar power technology.
Really, the modern federal government doesn't think actual science is essential the way Reagan did, it is just a political talking point. During the government budget shutdown, President Obama kept on more White House cleaning staff as 'essential' than he did at the entire National Science Foundation. So what would happen in budgets for federal grants stayed flat? The only people really hurt will be researchers who are most successful at gaming the federal grant process. Science would be just fine.
Because the second dirty secret of science funding is this: Corporations need science. And most companies secretly like the modern system of federally-funded research as much as academics do. While academics get the illusion of 'freedom' from corporate influence, corporations get to have their say and guide research at a higher level of government - and instead of having a small pool of shareholders at risk, they now have 100 million taxpayers. If the research pans out, great, their company can buy it. If it flops, the loss has been amortized over a giant pool of citizens.
The evidence is there that other groups will fill the funding gap - when they must. Now that Bush is no longer in power and doubling federal budgets for science, state governments have stepped up, finds an NSF analysis, though proponents of federal control of science said that would never happen. State government agency expenditures for research and development in 2011 (the most recent year available) increased 11 percent over 2010. Leading them all was New York, which spent almost $183 million, and Ohio came in second place. What are they researching? States like New York, Florida, and Pennsylvania fund primarily health research while Ohio and California pursue energy.
Corporations are not required to itemize their basic research separately but it's likely filling that gap also, so science will not die if we can't give every PhD a six-figure income in academia. As I have noted before, the Science Technology Engineering Math (STEM) glut in universities and resulting terrible pay for post-docs is because everyone wants to stick around and get tenure. But if you instead want money, the private sector is always short of qualified people. And all science is good science.
(1) Check out the government spec for the Mercury program. They tasked contractors with creating something to:
a. Direct the entire flight in respect to the mission;
b. Monitor the flight in respect to aeromedical and capsule systems;
c. Keep the astronaut and range stations informed of mission progress;
d. Coordinate all of the range stations and maintain a smooth flow of information to all of the units involved in the operation;
e. Supply information and alert the recovery team forces following the decision to start the reentry.
That's it. Thanks, IBM and the others, for reading that and still making it all possible somehow.
(2) In 1988 he even took to the air during Easter week to proclaim that federally-funded basic research was "one of the most practical things government does". And then G.W. Bush raised science spending too. Those Republicans were always throwing money at science.
(3) It would have been better for Californians if states had stayed forgotten. Emboldened by revenue from an artificial housing market, California Democrats decided to stick it to Bush and Republicans by spending $3 billion on hESC research, which was mismanaged and allocated in crony fashion and has thus accomplished nothing.
(4) Though it was never a ban, Bush critics declared that President Obama 'lifted the ban' when he signed an executive order in 2009 slightly modifying federal funding of hESC research. Like war protests, complaints about hESC funding evaporated in 2009 despite the fact that nothing really changed except the political party in the White House.