You’re right, those bright, talented kids will just give up and quit their careers because US government funding has been reduced for research in their field. It’s so sad that the only way innovation can happen is if it’s funded by the government.
Your comment is intended as sarcastic, but what you are describing is 100% happening. Industry does not fund a lot of the education and early-career work of scientists doing basic research. Most of those PhDs are funded through federal grants. Fewer grants and more uncertainty means fewer opportunities for young people to go into the field, which means fewer people choosing to go into the field.
Motivated, intelligent people will build things and innovate whether tax dollars are involved in funding their research or not.
If the work is valuable, some non-government entity will fund it. Otherwise it should die.
At best all government can do is get out of the way so that private actors can solve problems and innovate. At worst it strangles innovators through higher taxes and more stringent regulation.
Look at the light bulb, locomotive engine, airplane, etc. Government involvement in major innovations is almost always peripheral.
Governments fund a massive percentage of the foundational work that is necessary for productizable innovations, that precedes it by decades. Private companies rarely fund this type of work.
Take AI. All of the current models are descendants of the work of Geoff Hinton. He labored for decades in academic obscurity, when AI was a punchline. It was only after these decades of government support did he get a result interesting enough for Google to hire him.
There are countless other examples like this, lithium batteries, GPS, the Internet. GLP-1 drugs came from the study of gila monsters.