What a Rorschach blot. Comments range from AI to immigration to doomsday results for USA. The admins statement in TFA speaks more to financial policy and grant declines. Unfunded students are much less likely to accept an admission. That's just a fact of life.
They have $27 billion in their endowment. They are choosing not to fund those positions when they easily could on their own.
You got the pipeline backwards. The government picks the research areas/priorities then allocates funding for those, and universities apply and compete to get grants. _Then_, once a grant is given to a school, is funding for labs and graduate students allocated.
If the government has no interest in doing research and provides no funding then schools don’t have projects to work on and no money to hire graduate students.