It's very important to remember that government research money is taken from the citizens, who otherwise would allocate it in accordance with their preferences.

Taxes in the US are actually very high, plus the government takes a lot of money via inflation of the money supply.

It seems likely to me that government-funded research is a "local maximum."

If we were to massively shift the backbone of the economy from consumption to production (i.e., letting people and companies keep more of their money), we would certainly see much more private research.

In fact, we could potentially have a "research economy," if the intellectual property issues were sorted out. In this system, research institutes would take over a lot of functionality from academic departments (including training new researchers). Such an institute my employ tenured academicians who make lower, fixed wages (as with current academicians) but are free to do basic research, plus applied people try to market the results and are paid competitively (as with current industry people).

There is also a high level of regulatory capture in most industries that punishes any attempt to transition research results into a marketable product.