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This Congressional Budget Office (CBO) study, prepared at the request of the Ranking Member of the Senate Committee on the Budget, examines recent trends in federal support for research and development and the current state of knowledge about the economic effects of that support. Private businesses are the largest sponsors of research and development (R&D) in the United States; however, the federal government has long provided significant support for R&D activities to both supplement and encourage private efforts. The government finances research and development through spending and tax benefits that give businesses an incentive to increase their R&D spending. This study addresses questions such as whether the current level of spending is appropriate, what returns taxpayers receive for public investment in R&D, and whether funds are allocated to areas of inquiry and projects that will provide the highest return on that investment.--Preface