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In my personal opinion as an academic scientist, the ongoing disruptions to federal science funding in the US mark the death of the current system. It may limp on for a while, but eventually everyone will realize that this system is too unstable to devote a large portion of one's life. (Becoming a scientist requires 4+ years of graduate school after undergrad, and then one or more postdoctoral positions - it's typically a 10+ year commitment.) If funding is wholly subject to political whims, then it could be cut after any election. The best and brightest will seek other pursuits or go to other countries (not that there are many good options when considering every aspect: funding levels, salaries, tenure, etc.).

Both your and Caleb's proposals are where we need to direct our energies. We need new systems that avoid the major pitfalls of the current one. Frankly, I think all federal science funding should go to a block grant system. Distribute funding to independent grantmakers and let that be the end of the government's involvement. No more onerous regulations, no more political bias creeping in at every step. Even if the total amount of funding decreases (which is a typical concern for block grant programs), it would be a worthwhile tradeoff to achieve independence and stability. Basic research takes significant time and investment, and it cannot continue in the midst of these extreme fluctuations and political mud-slinging.

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