New knowledge and continuing innovation have been major factors in increasing economic well-being. Private businesses are the largest sponsors of research and development (R & D) in the United States, producing the discoveries that in turn lead to new products and services and the growth of productivity; 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 -- fiscal year 2007 appropriations for R & D activities total $137 billion -- and tax benefits that give businesses an incentive to increase their R & D spending. Studies of federally supported R & D provide multifaceted but incomplete answers to questions about those governmental activities: 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. Results of the Congressional Budget Office's (CBO's) economic analysis of federal support for R & D and its review of trends in the data over time indicate the following: Over the 1953-2004 period as a whole, federal spending for R & D has grown, on average, as fast as the overall economy; Distinguishing between research and development is important in evaluating the effectiveness of the government's R & D spending and the benefits it may provide; Federal funding of research -- particularly of basic research -- is generally viewed favorably because of its large potential for spillovers and the corresponding economic benefits; Studies of federal spending for basic research in the past, particularly studies of research conducted at academic institutions, have estimated that the average returns from that spending exceed the returns that might have been gained had those resources been put to other uses.