Where did the government funding go?
Could be government funding is constant (or even increasing), just due to the perverse incentives involved, we're producing PhDs faster than we're producing funded positions for them.According to [1] "Since 1982, [...] The number of [science and engineering] PhDs awarded annually has also increased [...] from ~19,000 in 1982 to ~36,000 in 2011. The number of faculty positions created each year, however, has not changed, with roughly 3,000 new positions created annually"
[1] http://www.nature.com/nbt/journal/v31/n10/fig_tab/nbt.2706_F...