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It's budget time again in the United States, and much has happened since last year's round. In the face of a continuing trade deficit, high-tech competition from the Far East, growing reliance on insecure energy sources and mounting evidence of the impact of climate change, will the US government step up to the challenge? If its recent record on research and development is anything to go by, the outlook is bleak.

With the final two appropriations bills of the previous budgetary cycle signed into law on 30 December 2005, the only research and development programmes to experience increased investment in the current financial year are those devoted to weapons development and human space exploration. The last time funding for such programmes was buoyant, in the 1960s, US physicists were enjoying a heyday. But the economic and political realities of today are very different from those of a few short decades ago: these are 20th-century solutions to 21st-century problems.

The cold war is well and truly over. Toyota is overtaking General Motors as the world's largest car manufacturer. IBM's personal computer business is now owned by Chinese company Lenovo. In terms of its number of engineering graduates, the United States now ranks sixth in the world, behind China, the European Union, Japan, Russia and India1. Within the next decade, it is estimated2 that the number of science and engineering PhDs awarded annually in China will exceed that in the US: in China, the number of students entering PhD programmes has increased sixfold in the past decade; in 2003, approximately 70% of the 13,000 PhDs awarded were in science and engineering.

In this context, a group of fifty business leaders, academics and legislators met recently for a one-day National Summit on Competitiveness3, to discuss how the US government should respond. Not surprisingly, two of the six key recommendations from the summit involved a call for more funds. For over three decades, the level of federal funding for research in the physicals sciences has been in steady decline, and is now around 0.05% of GDP4. To redress this, the report recommends that federal investment in long-term basic research in the physical sciences, engineering and mathematics be increased by 10% in the next seven years; and that at least 8% of the total is ear-marked for high-risk, high-return research.

Half the recommendations concern the need to boost the number of scientists and engineers. Specifically: to double the number of bachelor degrees awarded annually in science, mathematics and engineering; to reform immigration policies to make it easier for foreign-born scientists and engineers to work in the United States; and to provide incentives for business to help in the drive to get more students to study science and mathematics through primary and secondary education.

But let's not get too carried away with tales of dread and foreboding. It is important that the numbers be put into perspective. With just 5% of the world's population, the US still employs nearly one third of its science and engineering researchers, publishes 35% of articles in these areas, and received 44% of the citations2. Even if these numbers fall, predictions of the impending demise of US leadership in science and technology are premature.

The old adage is still true — when the US gets a cold, the world sneezes. But if there is one thing to be learned from recent trends, it is that this is unlikely always to be the case. The investment in science and education by Asia's burgeoning economies is to be applauded. Whether this is a blessing or a curse for US science will depend on how its government responds to the challenge.