At The Brookings Institution
As Prepared for Delivery
Today I want to focus on an area this institution has been emphasizing for many years: place-based growth. When communities across the country thrive economically, so too does our overall economy. Economic growth takes root at the local level. From that basic reality comes an important insight: we are more effective at growing the economy when we lift communities up rather than leaving them behind.
Trickle-Down
Take the alternative that we can broadly shorthand as trickle-down economics. Trickle-down is what it says: it holds that getting the government out of the way by cutting public investment and cutting taxes for those at the top will generate wealth and income that trickles down.
That economic approach has been tried and tested – most recently in the previous administration – and the reality has not matched the rhetoric. Trickle-down has generated wealth and opportunity for some, but at the expense of widening inequality, deteriorating infrastructure, and fragile supply chains.
The economic evidence makes clear this led to growing regional inequality, with some areas seeing declining economic opportunity and lower labor force participation, especially for workers without college degrees1. Trickle-down meant too many communities across our country were left behind and left out.
Towns lost anchor employers. Businesses chased low taxes, low wages, and non-union labor, resulting in an exodus of unionized manufacturers from regions like the Midwest. Tax revenue dropped, resulting in an erosion of local public investment. And distressed communities often fell into a downward spiral of disinvestment.
These trends were exacerbated by the China Shock. According to some research, the wave of cheap, subsidized imports from China wiped out nearly one million manufacturing jobs concentrated in industrial communities in the Midwest and the South2.
Take Milwaukee’s 30th Street Industrial Street Corridor. During the Great Migration, Milwaukee’s Black population multiplied3. By 1970, more than 40% of these Black residents worked in blue-collar jobs – a rate higher than Detroit. Many jobs were accessible by transit or in walk-to-work neighborhoods, and many families joined America’s growing middle class.
But then manufacturers moved – to other regions or other countries – and Milwaukee lost nearly half of its manufacturing jobs. Redlining exacerbated the effects on Black workers and families4. And the 30th Street Corridor fell behind the rest of Milwaukee in employment and income.
These forces didn’t just hollow out communities, they hollowed out the middle class.
Bottom-Up Middle Out
This President came to office with a different approach to growing the economy – from the bottom-up rather than the top-down. Bottom-up, middle-out economics means investing in the communities that were left behind by trickle-down economics. It means investing in the workforce and infrastructure. It means providing incentives to encourage businesses to invest in areas that have been disinvested. It means supporting small businesses on Main Street that bring communities together.
Many economists now agree that place-based policies punch above their weight in distressed communities. They can build more resilient, productive, and innovative communities – and revitalize cities like Milwaukee, Wisconsin, or Allentown, Pennsylvania.
The President’s economic agenda combines targeted investments in industries such as infrastructure, clean energy, and semiconductors with well-supported economic and community development principles. This ensures that supply-side policies and public investment are reaching communities that were previously left behind and that economic growth is more broadly shared. This strategy is guided by 6 general principles.
Investing in Local Infrastructure
First, well-designed public investment in local communities is a force multiplier for private investment and growth. Communities often need a helping hand to turn around a downward spiral of disinvestment and declining local revenues. That is why the Bipartisan Infrastructure Law (BIL) is designed to create strong economic foundations — connecting every home, school, and small business to high-speed internet, building resilience, and fixing the roads, bridges, airports, ports, and rail that are the connective tissue of commerce all across the country.
Earlier this month, the President visited small business owners in Allentown, Pennsylvania, once home to major iron and steel manufacturing. The Administration has invested hundreds of millions of dollars in rebuilding roads and renovating airports in the area, alongside strategic, federal economic development dollars and new private investments in manufacturing. For example, $22 million is going toward fixing the 90-year-old Cementon Bridge over the Lehigh River that has been in poor condition since 1999. Today, the Allentown area is experiencing an investment, employment, and small business boom.
Unlocking Private Investment
Second, there are special incentives to encourage private investment in communities that suffered from disinvestment. The President’s strategy is unlocking private capital and the economic potential of previously left-behind communities.
Inflation Reduction Act (IRA) tax credits set aside $4 billion in additional tax benefits for clean energy manufacturing investments in energy communities – places at risk of job displacement due to the energy transition – and low-income communities.
This approach is producing results: A Treasury analysis found that clean energy investments are growing fastest in energy communities. For instance, the Administration has helped drive more than $20 billion in federal support to the communities most affected by the energy transition, from Appalachia to the Four Corners.
Providing special incentives to encourage investments in hard hit communities is an intentional policy choice. Research suggests that public investments yield a greater return in the hardest hit communities for each dollar spent5, and this is especially true for improving employment outcomes6.
The IRA provides bonus tax credits to small-scale solar and wind projects in low-income communities, bringing clean energy and lowering costs to places where the private sector is less likely to invest on its own. Treasury found that close to 80 percent of IRA investments have gone to counties with median household incomes below the national average.
And, for the first time, local, state, and Tribal governments, as well as non-profits, can access clean energy tax credits as direct payments, unlocking new opportunities for local communities to invest in themselves.
Connecting Neighborhoods to Opportunity
Third, special programs are designed to connect left-behind communities to nearby areas of economic opportunity. In too many cases, communities have been cut off from job opportunities, public transit, and educational and training opportunities by the placement of major highways or other physical barriers.
The Department of Transportation’s Reconnecting Communities Pilot Program is a first-of-its-kind $1 billion program to reconnect communities that had been cut off from opportunity and burdened by past transportation infrastructure decisions. In Buffalo, New York, this program is allocating over $55 million to build a new cap and tunnel to cover the Kensington Expressway – something the community has sought since the 1980s. The expressway cut off east and west sides of roads that previously connected residents to community services, food options, and cultural facilities.
The Department of Commerce’s Recompete is a new grant program that will invest $200 million in connecting workers to good jobs targeting economically disadvantaged neighborhoods that are often disconnected from opportunities only miles away.
We recognize that distressed communities suffering from a downward spiral of disinvestment may not have the capacity to access these historic opportunities. That is why the Administration is finding ways to reach out to communities and help them reach back.
For instance, the Rural Partners Network is a whole-of-government initiative that sends federal staff to 25 rural communities across the country. Rural communities such as the Tri-County North Delta, bordering the Mississippi River, are getting help accessing federal resources through local federal offices or federal partnerships with the local chamber of commerce, higher-education institutions, philanthropies, and workforce development organizations.
Multiplying Innovation Clusters
Fourth, our programs help support science and innovation clusters all across the country, not just in a handful of major metro areas. Just five metro areas represented more than 90% of the nation’s innovation-sector growth from 2005 to 20177. Economists, including at Brookings, have outlined the need for innovation programs in other regions.
The CHIPS and Science Act Regional Technology and Innovation Hub Program allocates resources on a competitive basis to help innovation clusters around the country reach the next level. Just recently, the Department of Commerce designated 31 Tech Hubs – coalitions of universities, labor, companies and non-profits – across the country, focused on building globally competitive manufacturing and innovation ecosystems in industries like clean energy, semiconductors, and artificial intelligence.
The CHIPS and Science Act also established the NSF Regional Engines Program that will award up to 10 years of grant funding on a competitive basis. It will help advance American research and development, while supporting training opportunities for jobs coming to these innovation clusters across the country. This effort includes regions that have not fully participated in the technology boom of the past few decades.
Communities in the Lead
Fifth, many of these programs are designed to lift up the priorities of local communities as opposed to being a one-size-fits all, top-down approach. This Administration knows, based on decades of experience, that policies are only as good as the degree of community engagement and ownership on the ground.
From Recompete to Tech Hubs to NSF Engines, these efforts are competitive grant-based programs where local communities are encouraged to form coalitions of educational institutions, businesses, labor, Tribal organizations, and non-profits to develop proposals designed around the communities’ local economic vision, challenges, and special assets.
Stacking Federal Resources
Finally, we have learned that it is most effective to take a whole of government approach to working with localities by stacking investments. When these programs work well, they pull together federal support for workers, small businesses, and new industries so that the whole is greater than the sum of the parts in supporting an economic comeback.
Milwaukee is a good example of how different federal programs can work together to benefit the whole community. BIL funding is not only removing lead pipes and providing clean drinking water for Milwaukee’s child care centers and homes – it is also supporting local small businesses like Rashawn Spivey’s plumbing business. Milwaukee’s 30th Street Industrial Corridor also recently received a Recompete Program designation. This is on top of efforts to increase access to affordable housing and healthcare.
In a recent visit to Milwaukee, the President said that the goal is to make “sure Milwaukee is coming back – and all of Milwaukee [is] coming back.” Indeed, since the President took office, small business applications are up 70 percent, the share of Black people employed in Milwaukee in 2022 has reached the highest in more than a decade, and billions are being invested in manufacturing, environmental cleanup, infrastructure, and small businesses.
The Baltimore area is similarly benefitting from stacking federal initiatives. BIL is investing $4.7 billion in Amtrak’s Frederick Douglass Tunnel, which is expected to create 30,000 jobs. A new workforce hub has already generated commitments to train and place hundreds of Baltimore residents in apprenticeships. It will improve pathways to the middle class for non-college educated residents and create a skilled workforce to meet the growing demand from new and growing employers. The city has also been designated a Tech Hub, growing its AI and biotechnology sectors to lead in predictive healthcare.
Coming Back
Good economic policy starts with the basic insight that communities are where economic development happens – where people connect with jobs, develop their skills, start businesses, make their homes, and raise families.
President Biden came to office determined to invest in all of America, to leave no community behind. It is working. Communities that had been left behind are making a comeback. In recent visits, the President has talked with workers, small business owners, and residents in communities like Allentown and Milwaukee where new jobs and new small businesses are creating hope.
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[1] Autor, Dorn, and Hanson (2016)
[2] Ibid.
[3] Bonds, Farmer-Hinton, and Epps (2009)
[4] Ibid.
[5] Austin, Glaeser, and Summers (2018)
[6] Bartik (2020)
[7] Atkinson, Muro, and Whiton (2019)
