If you’re in the higher education field, you have probably heard a lot in the last four days about the Trump regime reducing funding to the National Institutes of Health (NIH)—roughly the equivalent of our Canadian Institutes of Health Research, only with a budget four times larger even after adjusting for population size. Specifically, the Trump administration is limiting the amount of overhead costs that institutions can recover from government. Cue much shouting in the US about adverse impacts, destruction of American Science, etc. But what’s really going on?

Before we start, let’s first acknowledge that this policy change is not legal. It’s quite clear that matters of this nature requires the approval of Congress (Trump tried lowering the rate of indirect cost recovery a couple of times in his first term via the normal budget process—his team is fully aware of how this is supposed to work). However, since payments go through a cabinet agency, and Co-President Musk and his DOGE Brownshirts have seized the keys to electronic payments system, Trump figures he has the right to override congress and just go ahead and do as he pleases. A court will rule against Trump eventually (22 states filed suit against the NIH changes on Monday) but Trump II’s standard operating procedure is that no judgement against him can be put into effect so long as he controls the Justice Department and the DC constabulary. And so, for the foreseeable future at least, that announcement is the de facto if not the de jure law of the land.

The actual policy change, couched in bland bureaucratese, can be read on the NIH website. Henceforth, payments to institutions in support of indirect costs of NIH research will be capped at 15%; that is to say that for every one dollar of research, the NIH will henceforth pay fifteen cents towards institutional overhead costs. To understand what this means in financial terms to institutions and researchers, it’s important to understand how indirect cost funding works in the US, because it is a heck of a lot more complicated than it is here. For one thing, the overhead rates are negotiated between individual institutions annually, and the rates may be different for different types of research, performed in different locations. Take a look at this sheet from Johns Hopkins Medical School, which lists all the different recovery rates for NIH projects. The “headline” rates of support are 50-55% depending on which year we’re talking about, but many types of research get significantly less than that. Across the (according to page 87 of this document from the NIH’s Budget Office, NIH as a whole gives out 20B in “direct” grant support and about $8B in indirect supports which implies that overhead is given out at about 38 cents on the dollar. A cut to 15% means that indirect support is being cut by 60%, or about US$4 billion a year (C$5 billion at PPP).

Up here, the Canadian equivalent to this move—reducing Research Support Funds for CIHR grants to about 15%—would see a reduction in funds of about $70 million, or about 1.5% of what we are seeing in the US. It is a much bigger deal in the US partly because their rates of indirect research support were much higher than the Americans’ to begin with (rates up here also vary by university, but U of T, which is our equivalent of Johns Hopkins for medical research if I am not mistaken gets only 20.5%), but mainly because NIH spends about 40 times what CIHR does. Their base is a lot higher, so they have a lot further to fall.

One way to look at this is that a $4 billion cut is bad news anywhere but spread across a couple of hundred university hospitals it’s not actually going to hit that hard. At the most NIH-reliant institutions, like Johns Hopkins, it might amount to about 2% of total income but at most institutions it will be less. The thing is, though, that this isn’t going to stop at NIH. Presumably the National Science Foundation (NSF) will follow suit pretty quickly, as will all the other government departments which have their own more applied research agendas. It’s going to start adding up. This isn’t about reforming research recovery rates; if it were, there was always the option of passing a law to do this. Trump and his team does not give one solitary rat’s hairy behind about how much the government spends. What they care about is control. And this is a way of reminding institutions that their reliance on public funding comes at the cost of being vulnerable to the whims of the regime of today. It’s about power, it’s about obeisance (and the fact that it’s directed at those pointy-headed Fauci lovers who not just believe in but actually develop vaccines—that’s an undeniable bonus). So even if it is not a big deal in and of itself, it certainly heralds much larger cuts to come.

Many are asking whether this attack on science and universities isn’t an opportunity for Canada or <insert country here> to steal a march on the US and scoop up some disaffected American scientific talent on the cheap. My guess is: probably not. Large-scale scientific exoduses are rare, and the situation in the US is (as yet anyway) neither Germany 1933 nor Moscow 1991 in the sense that there aren’t a lot of Americans likely to flee the country just yet (although I do note that anti-authoritarian Yale historian Timothy Snyder seems to have parked himself in Toronto for the duration). I suspect that the real way all of this affects international talent follows is that the attractiveness of the US as a destination for graduate students and new PhDs will decline significantly. Which is to say there isn’t going to be a sudden flood of Americans on the market, but there will be a sudden flood of internationally mobile talent that doesn’t have an obvious place to go anymore.

But who exactly is it that is supposed to “pick up” these promising scholars? To recruit, you need money. Not just to cover scholars’ salaries (which is a comparatively trivial matter) but to fund the whole research ecosystem that feeds these researchers. It’s not small change. Eight years ago, Canada might conceivably have been in the position to do this, but eight years of alternating policy neglect and policy vandalism has left universities and the research ecosystem in no state to go on a hiring spree. Australia, New Zealand, and most of Europe are for the most part in similar straits. India and Turkey are spending a lot of money but are working from so low a base, and with so few decent facilities that they aren’t going to be a destination for many. Japan? Korea? Maybe, but the culture is a barrier.

The one country that is certainly going to benefit from all this is China. A significant chunk of America’s university science enterprise relies on the fact that it’s better (more lucrative, more interesting) to be a graduate student/postdoc in America than it is in China. The reliance on China has dropped a bit over the past decade due to security concerns but there is no doubt that China is still losing a lot of scientific talent at a young age to the US. To the extent that overhead grants were supporting those students, it will be harder for US universities to keep bringing Chinese students over. The likelihood is that a great many of these students will now stay in China.

Assuming the NIH announcement is simply the first in a series, the long-term implications are simply that a declining proportion of the world’s science will be performed in America. The impact not be felt for many years—famously, the real downstream effects of spending on basic research take decades to be felt—but it will, in the end, reduce American prosperity.

And it’s only week 3. 205 more to go.