The 2012 federal Budget marks the beginning of a painful and unnecessary fiscal retrenchment. Despite boasting one of the lowest debt-to-GDP ratios amongst industrialized countries, the Conservative government is pressing ahead with deep cuts of more than $5 billion across departmental budgets by 2014-15. For post-secondary education and research, Budget 2012 is a profound disappointment. While there were no cuts to cash transfers to the provinces in support of education, the planned 3 per cent increase is too little to offset inflation and enrolment increases. The federal government should have done more. Most of the provinces have far less fiscal room available to adequately fund health care, social services and post-secondary education. The most disturbing aspect of the Budget for the sector, however, is in research. Here, the government has fully embraced targeting and commercialization, at the expense of investments in basic research. The National Research Council (NRC) is being transformed into a service centre for industry. The federal granting agencies receive no new money this year, and face a cut in the next two fiscal years.