Building a Federal Enablement and Delivery System for Regional Industrial Hubs

During the Biden era, the philosophy behind “Build Back Better” was that the Covid shock – which revealed America’s supply chain fragility and the essential workers who keep the nation running – opened up a generational window to reinvest in American infrastructure, industry, and communities. Much as the New Deal electrified rural America and built the 20th century industrial economy from the depths of the Great Depression, the Biden administration aimed to pull the nation to the technological frontier from the depths of the pandemic.

This agenda contained two primary flavors of industrial policy. For one, Washington was passing a raft of national, sectorally-targeted programs to onshore semiconductor, clean energy, and electric vehicle production. At the same time, place-based programs like the RECOMPETE pilot, NSF Engines, and EDA Tech Hubs were passed with bipartisan support in the CHIPS and Science Act. This reflected a growing consensus that national strength – including our ability to compete with China – was rooted in regional innovation and production capabilities. 

The challenge: industrial policy has a delivery problem

Unfortunately, federal industrial policy is only as good as regions’ ability to absorb it. Across priority sectors, from batteries to semiconductors, we have seen industrial projects struggle to overcome real-world competition for scarce inputs, such as affordable electricity, available land, and a skilled industrial workforce. Meanwhile, the Trump Administration has rescinded funds from awardees and enacted significant cuts to their agencies while pursuing a very different implementation strategy. Now the AI boom is driving heated debates within communities around what types of projects generate real localized returns for those communities.

The ambition is there, so what’s the problem?

Top-down national industrial policy has few tools to enable project success. Recent federal industrial policy has focused on top-line investments in strategic sectors, but not real-world delivery into communities and regions. After certifying a tax credit or grant, the federal government can do little for companies struggling to get power or equipment or workers. 

On the other hand, bottom-up place-based policies enable regional capacity-building, but fall short of bringing regional visions to life. Many (not all) regions simply do not have the financial, data analytics, or operational tools to land projects, and when projects emerge, regions remain reactive and competitive amongst one another.

The policy gap in the middle is delivery. 

The opportunity: A regional delivery platform

As the next Congress and Administration considers the future of both regional programs and national industrial policy around strategic sectors, we encourage them not to simply revamp or reauthorize these programs in silos, but to think about additive institutions that link the two. Specifically, we recommend the development of a new regional delivery platform, wherein the federal government proactively delivers customized services – enabling infrastructure, workforce services, and flexible capital – to regionally-planned and targeted economic growth sectors. This delivery system should be enshrined as a new institution, a Regional Industrial Development Authority (RIDA), which could itself be embedded in a new national institution (e.g., a National Development Bank, re-imagined Ex-Im Bank) or within the Department of Commerce.

The delivery system should not be a one-size-fits-all approach. Regions have various roles in the innovation-to-production ecosystem around critical industries, largely built on existing local advantages. The fundamental barriers to siting and operating a factory in a Rust Belt region are fundamentally different than in a high-tech innovation hub – and the regional delivery system should be designed to defray these barriers. 

Here’s how it would work: 

1. Create a Regional Industrial Development Authority with a regional delivery mandate. This entity should have flexible planning and financing tools that reach across the federal government’s authorities on infrastructure, energy, workforce, and more.
2. Define fairly large regions with clear boundaries, but empower communities to define their own strategies within them. EPA offers one potential model, with regional offices that build long-term relationships with communities, but regions should also be encouraged to plan at the scale of an NSF Engine or EDA Tech Hub, which tend to fall along more natural regional lines (e.g., Ohio River Valley or Olympic Peninsula). 
3. Facilitate region-led, place-based planning. Provide recurring capacity dollars to regions for industrial planning activities, allowing it to continue between boom and bust periods of federal funding. RIDA would build technical knowhow, analytical capacity, and market/finance expertise in north-star sectors.
4. Offer “enablement” support to bring that plan to life, including both (a) interagency coordination and (b) flexible financing tools that invest in key bottlenecks to production (buildings, land, port infrastructure, power, machinery, scale-up facilities). This may include direct public co-ownership of high-priority sites in critical sectors (e.g., clean room shells for semiconductor fabs), given the nature of shared infrastructure.

For example, the Pacific Northwest, once blessed with abundant, clean hydropower, is struggling to build enough power capacity and infrastructure to support new economic opportunities. Under this proposal, regional utilities and energy developers could approach RIDA  to tap into favorable financing tools to underwrite the necessary power buildout. At the same time, RIDA could engage with the federal Bonneville Power Administration to facilitate grid upgrades and the Department of Interior to facilitate expeditious permitting.

Doing this level of work requires granularity and specificity at a smaller scale than the regional boundaries. The Advanced Industrial Zones model offers one organizing approach. Leading global industrial clusters are often grown in defined geographic zones of activity, with a dedicated administrator, plan, and set of authorities to facilitate industrial development. The proposed RIDA could ask regions to clearly define these zones to target investment. The key will be ensuring that such a process remains community-driven and politically insulated to augment longstanding regional priorities, not reset them every few years. Interestingly, in the United Kingdom, we have seen a similar push into reindustrialization while granting regions autonomy in developing and deploying regional economic growth strategies. For instance, the Cambridge x Manchester Innovation Partnership combines Cambridge’s R&D assets with Manchester’s  physical scale, government capacity and production ready site. 

The U.S government does many of the things we are describing. Yet, over the course of decades these authorities have been distributed across the federal apparatus on the basis of jurisdiction, not integrated 21st century industrial policy. Commerce funds regional capacity-building activities; a different part of Commerce does supply chain assessment. DOE creates transmission needs assessments; a different part of DOE issues grants and loans to manufacturers. DOI leases federal lands; various parts of DOI and EPA handle permitting of facilities themselves. 

A region would have to be incredibly – impossibly – adept at navigating federal bureaucracy to stitch all these ingredients together. 

There is one notable exception. A small number of federally-chartered Regional Commissions fill critical gaps in infrastructure funding where it is needed most. The Commission is recognized for generating positive outcomes on growth, unemployment, and poverty. One study found the Appalachian Regional Commission’s $115 million in water and wastewater infrastructure investments led to $3.8 billion in leveraged private sector investment. However, ARC and the other Commissions have limited geographic reach and rely on budgets on the order of tens of millions of dollars, making them small players in the world of multi-billion dollar economic development projects. 

A new institution, like RIDA, could take best practices from the Regional Commissions and bring them to national scale, covering the full footprint of America and providing a single home for embedded capacity, industrial strategy expertise, and resources that regions can tap into. 

Delivering for the American people 

A federal system that enables communities to actualize their economic development goals is one that can translate regional plans into increased industrial capacity, quality job creation, and diverse, inclusive innovation ecosystems.

For communities hard-hit by deindustrialization, federal support is critical to unlocking the potential of disinvested infrastructure and assets to attract new industries. These communities have no shortage of assets and ideas, but  anchor employer departures have left them in a budget hole. RIDA could enable them to proactively finance the brownfield remediation or workforce programs necessary to attract the next wave of opportunity. 

For communities with rich innovation engines around universities, national labs, or startup ecosystems, there is often a sense that they do not need support – they are home to highly-educated populations. But these communities often lack industrial infrastructure and are expensive, challenging places to permit and site new facilities, so companies tend to scale elsewhere. The result is a lack of quality middle-class jobs, an affordability spiral, and ultimately lost industrial competitiveness (as they do not benefit from the link between the lab and the factory floor). A regional delivery system can empower these communities to break down some of the barriers to industrial development – by supporting commercialization facilities, contract manufacturing capacity, or new electricity infrastructure.  

For policymakers considering a next round of national industrial strategy, we encourage them not simply to think about running a bigger, smarter, or faster playbook, but to focus on building durable connective tissue between federal ambition and regional economic development goals. A RIDA can improve project delivery while allowing regions to win in the industries of the future.