Philadelphia bet its future on the ‘meds and eds’ now under attack by DOGE

A century ago, the blackened smokestacks along the Delaware River were the emblem of Philadelphia’s economy. Today it’s the shiny glass towers that hug the Schuylkill waterfront and dot hospital campuses around the city.

Those sleek new buildings owe their existence to a long-running partnership between the federal government and local universities. Over the years, government has provided the seed money for university scientists to study diseases and experiment with new technologies.

As private companies picked up their research, they built offices and labs where they could turn academic discoveries into real-world medicines and devices. Residential developers soon followed, erecting apartment towers and rowhouses aimed at people who work in the so-called knowledge industry.

The connection between those federal research grants and lifesaving medical treatments is well known; it’s one reason scientists from American universities regularly dominate the Nobel Prizes. But what people tend to forget is that government investment in “meds and eds” is also what saved older cities after American manufacturing imploded in the 1970s.

Thanks to that federal support, Philadelphia was able to rebuild its shattered economy, replace vacant factories with labs, and recover some of its lost population. Together, U.S. Census figures show that universities, hospitals, and their spin-offs account for 30% of the jobs in the city and 13% in the metro area.

But that economic model is now at risk because of President Donald Trump’s drastic funding cuts to the National Institutes of Health (NIH) and universities. The cuts imperil research institutions everywhere, but it will be cities that suffer most.

And Philadelphia will be hurt more than other cities.

Unlike more diversified economies, Philadelphia doesn’t have many big employers. Besides hospitals and universities, there’s Comcast and government. In fact, the whole region is more reliant on meds and eds than most metro areas, according to a recent ranking by the Federal Reserve Bank. If that sector shrinks, the loss will ripple through the whole economy.

It’s hard to fathom why the Trump administration would adopt such a destructive policy. The reductions in NIH grants have been variously described as part of an effort to streamline the federal bureaucracy, a backlash against diversity initiatives, revenge against Democratic-leaning urban elites, or a combination of all three.

While Congress put some NIH cuts on hold until Sept. 30, the end of the fiscal year, many expect Trump and his chain saw-wielding henchman Elon Musk will continue to hack away at university and medical funding in the next budget.

The policy shift is already hobbling one of America’s successful industries. Even before the University of Pennsylvania learned this month that the Trump administration was withholding $175 million in direct funding, it decided to preemptively impose a hiring freeze and reduce the number of new doctoral students by a third.

Boston Children’s Hospital is grappling with a $100 million cut in NIH funding. In Baltimore, Johns Hopkins University has announced it’s laying off 2,000 employees.

Those are devastating numbers for old Rust Belt cities, but I suspect most meds and eds jobs will be lost in smaller increments with much less fanfare. This hit home for me after talking to a Penn researcher who runs a small lab working on a promising treatment for a major blood disease. His lab employs just eight people: three postdoctoral fellows and five technical staff. Even though the NIH approved the grant last fall, the researcher was told in February he would not be receiving any money this year.

While Penn offered temporary funding to keep the lab going, the researcher expects the money won’t last, and he will have to lay off several technicians. What happens to these skilled workers and their institutional knowledge? Will they find new jobs in the private sector? Or leave Philadelphia? How will the lab function without them?

What’s certain is that the number of layoffs will start to add up, with serious consequences for the city’s tax revenue. The term urban doom loop was coined to describe the financial hardships cities faced after the pandemic, when people stopped going downtown to work and shop. Philadelphia has been steadily recovering from that difficult period and has even gained new residents.

Now we’re facing Doom Loop 2: Trump’s version.

Philadelphia’s life science sector, which has been one of the bright spots in the post-pandemic office market, will be a casualty of those university cuts. Three big developers — Brandywine Realty Trust, Gattuso Development, and Breakthrough Properties — are wrapping up large lab buildings between Drexel University’s campus and Center City, and will be looking for tenants. Once the government funding dries up, who will fill all that new space?

Children’s Hospital of Philadelphia is also completing a 14-story research tower on the South Street Bridge, part of a pair meant to serve as a triumphal gateway to its campus.

Trump ran for office on the promise to reindustrialize the American heartland. It would be great if his administration succeeded in launching new factories, just as President Joe Biden did when he passed a bill to fund computer chipmakers.

But there’s no reason you can’t have both old-style manufacturing and meds and eds. As of 2019, health care and higher ed accounted for 15% of the jobs in the U.S., compared with 10% for manufacturing, according to the U.S. Census.

Some Republicans say they want to get away from the model in which the government subsidizes R&D for private businesses. But the federal government has always invested strategically in innovation, starting with the $30,000 congressional subsidy that allowed Samuel Morse to erect the world’s first telegraph line in 1844. The internet wouldn’t exist without government investment. Nor would Musk’s SpaceX.

I reached out to several economists who specialize in cities to ask about the effects of Trump’s funding cuts. Not one would talk to me on the record. The Brookings Institution, which has always been my go-to place when I need an expert on urban policy, insisted there was no one available to speak on the subject.

But one high-placed economist at a government agency told me she fears Trump won’t stop at defunding medical research. She expects the administration will also cut Medicaid payments to hospitals. Not only would that make it harder for the poor to get lifesaving care, it would devastate hospital budgets. That, too, would put more stress on cities like Philadelphia.

“It’s like they’re robbing one sector to finance another,” said Tony Sorrentino, an associate vice president at Penn who has just written a book on the impact of meds and eds in Philadelphia called Medicine for the City. He noted that the three big hospitals on Civic Center Boulevard — Penn, CHOP, and the Veterans Affairs Medical Center — employ 17,000 people.

The list of detrimental policies goes on. Tariffs could push up the price of lumber and steel, making construction more expensive. Mike Zaidel, a partner at Becker and Frondorf, which manages large construction projects, told me he is increasing his cost estimates by 3% to 5% to account for the tariffs. That’s on top of the normal, annual price escalation of about 5%.

High interest rates have already slowed residential construction considerably in Philadelphia and other cities, despite the strong demand for housing. Between the high cost of money and rising material prices, “a new building could cost 10% more,” Zaidel said.

Then there is immigration. Although Philadelphia’s population gains are often attributed to young professionals, it’s really immigrants who have fueled the city’s growth. They’re the ones working in science labs and starting small businesses. But the recent crackdown on immigration could deter foreigners from settling here.

Still, people like Jerry Sweeney, who is the president and CEO of Brandywine, the company responsible for the life science buildings around 30th Street Station, remain hopeful that the turbulence is only temporary. While he said “the level of uncertainty has increased dramatically in the last several months,” he also noted that Trump frequently reverses course. “At some point, I think rationality will prevail.”

Still, if you wanted to devise a plan to wreck urban economies, you couldn’t have come up with a better strategy than the one the Trump administration is currently pursuing.