Biden’s Hidden Economic Success

President Joe Biden’s economic agenda is achieving one of his principal goals: channeling more private investment into small communities that have been losing ground for years.

That’s the conclusion of a new study released today, which found that economically strained counties are receiving an elevated share of the private investment in new manufacturing plants tied to three major bills that Biden passed early in his presidency. “After decades of economic divergence, strategic sector investment patterns are including more places that have historically been left out of economic growth,” concludes the new report from Brookings Metro and the Center for Energy and Environmental Policy Research at MIT.

The large manufacturing investments in economically stressed counties announced under Biden include steel plants in Mason County, West Virginia, and Mississippi County, Arkansas; an expansion of a semiconductor-manufacturing plant in Schuylkill County, Pennsylvania; a plant to process the lithium used in electric vehicle (EV) batteries in Chester County, South Carolina; an electric-vehicle manufacturing plant in Haywood County, Tennessee; and plants to manufacture batteries for EVs in Montgomery County, Tennessee; Vigo County, Indiana; and Fayette County, Ohio.

These are all some of the 1,071 counties—about a third of the U.S. total—that Brookings defines as economically distressed, based on high levels of unemployment and a relatively low median income. As of 2022, the report notes, these counties held 13 percent of the U.S. population but generated only 8 percent of the nation’s economic output.

Since 2021, though, these distressed counties have received about $82 billion in private-sector investment from the industries targeted by the three major economic-development bills Biden signed. Those included the bipartisan infrastructure law and bills promoting more domestic manufacturing of semiconductors and clean energy, such as electric vehicles and equipment to generate solar and wind power.

That $82 billion has been spread over 100 projects across 70 of the distressed counties, Brookings and MIT found. In all, since 2021 the distressed counties have received 16 percent of the total investments into the industrial sectors targeted by the Biden agenda. That’s double their share of national GDP. It’s also double the share of all private-sector investment they received from 2010 to 2020. Funneling more investment and jobs to these economically lagging communities “is really just at the core of what [Biden] is trying to accomplish,” Lael Brainard, the director of Biden’s National Economic Council, told me. “The president talks a lot about communities that have been left behind, and now he is talking a lot about communities that are coming back.”

This surge of investment into smaller places is a huge change from previous patterns that have concentrated investment and employment in a handful of “superstar” metropolitan areas, Mark Muro, a senior fellow at Brookings Metro and one of the report’s authors, told me.

“As the rich places have been getting richer, the social-media/tech economy was something that was happening somewhere else for most people,” Muro said. “Clearly, this is a different-looking recovery that is occurring in different places and has a tilt to distressed communities right now.”

One of those places is Fayette County, in south-central Ohio, about equidistant from Dayton, Cincinnati, and Columbus. Fayette’s population of roughly 28,000 is predominantly white and rural with few college graduates. Its median income is about one-fourth lower than the national average, and its poverty rate is about one-fourth higher.

Early in 2023, Honda and its partner LG Energy Solution broke ground on a massive new plant in Fayette to build batteries for Honda and Acura EVs. The Honda project has already generated large numbers of construction jobs, as has a massive Intel semiconductor-fabrication plant under construction about an hour away, outside Columbus, in Licking County. “The trade associations for electrical workers, plumbers, whatever it might be, they are going to have jobs in the state of Ohio for years,” Jeff Hoagland, the CEO of the Dayton Development Coalition, told me. “These are huge facilities. The Honda facility is the size of 78 football fields.”

Honda is already advertising to fill some engineering jobs, and once the plant is operational in late 2024 or early 2025, it expects to hire some 2,200 people. Most of those jobs will not require college degrees, Hoagland said. Many more jobs, he added, will flow from the plant’s suppliers moving to establish facilities in the area. “There are companies already buying up land,” Hoagland told me.

Hoagland said he has no doubt that the federal tax incentives in the big Biden bills for domestic production of clean energy and semiconductors were central to these decisions. The federal incentives have been “100 percent critical, and I know that firsthand from Intel and from Honda,” Hoagland said. “Those companies needed those [incentives] to get into the full implementation of their strategy to rebuild that manufacturing, that supply-chain base, in the United States. Now we are seeing all these companies come back to the heartland in Ohio to do manufacturing.” Yet another firm, Joby Aviation, announced in September that, with support from federal clean-energy loan guarantees, it plans to construct a factory near Dayton to build electric air taxis.

Encouraging manufacturers to locate their facilities in the U.S. rather than abroad has been the central goal of the tax incentives, loan guarantees, and grants in the clean-energy, semiconductor, and infrastructure bills. But the Biden administration has also been using provisions in those bills, as well as other programs, to try to steer more of those domestic investments specifically into distressed communities.

As the Brookings/MIT report notes, the Inflation Reduction Act’s clean-energy tax credits provide extra bonuses of 10 percent or more to companies that invest in low-income communities. An Energy Department loan-guarantee program favors companies that locate clean-energy investments in communities that lost jobs when fossil-fuel facilities shut down. In a speech last month, Brainard highlighted a $1 billion Transportation Department program that funds infrastructure improvements to “reconnect” neighborhoods that have been isolated from job opportunities by highways or other transportation infrastructure. (Many of those places are heavily minority communities.)

Similarly, under the semiconductor bill, the administration is awarding substantial funds for “regional innovation engines” through the National Science Foundation, as well as “tech hubs” that require communities to organize businesses, schools, and government to develop coordinated plans for regional growth in high-tech industries. The winners of these grants include projects that are based in places far beyond the existing large metro centers of technological innovation, such as Louisiana, Wyoming, North Dakota, South Carolina, and Oklahoma. “Those [programs] are spreading innovation investment to clusters all around the country rather than being concentrated just in a few huge metros,” Brainard told me.

Joseph Parilla, the director of applied research at Brookings Metro, told me that the large manufacturing facilities being built in response to the new federal incentives naturally would flow toward the periphery of major metropolitan areas where many of these distressed counties are located. But Parilla believes the tax incentives and other programs that the Biden administration is implementing are also “having a pretty significant impact” in driving so many of these investments to smaller, economically strained places.

Biden has made clear that he considers steering more investments to the places lagging economically both a political and policy priority. Even in forums as prominent as the State of the Union address, he often talks about the importance of creating jobs that will allow young people to stay in the communities where they were born. Biden has also, as I’ve written, rejected the belief of his two Democratic predecessors, Bill Clinton and Barack Obama, that the most important step for expanding economic opportunity is to help more people obtain postsecondary education; instead, Biden conspicuously emphasizes how many jobs that do not require four-year college degrees are being created in the projects subsidized by his big-three bills. “What you’ll see in this field of dreams” are “Ph.D. engineers and scientists alongside community-college graduates,” he declared at the 2022 Ohio Intel plant ground-breaking.

But it’s not clear that the economic benefits flowing into distressed communities will produce political gains for Biden. In 2020, despite his small-town, blue-collar “Scranton Joe” persona, Biden heavily depended on the big, well-educated metro areas thriving in the Information Age: Previous Brookings Metro research found that, although Biden won only about one-sixth of all U.S. counties, his counties generated nearly three-fourths of the nation’s total economic output.

The outcome was very different in the economically distressed counties. Brookings found that in 2020, Trump won 54 of the 70 distressed counties where the new investments have been announced under Biden. Some Democratic operatives are dubious that these new jobs and opportunities will change that pattern much.

Partly that’s because Democrats face so many headwinds in these places on issues relating to race and culture, such as immigration and LGBTQ rights. But it’s also because of the risk that without unions or many local Democratic officials to drive the message, workers simply won’t be aware that their new jobs are linked to programs that Biden created, as Michael Podhorzer, the former AFL-CIO political director, has argued to me.

Jim Kessler, the executive vice president of Third Way, a centrist Democratic group that has studied the party’s problems in small-town and rural areas, agrees that even big job gains won’t flip small red places toward Biden. But even slightly reducing the GOP margin in those places could matter, he told me. “Some of these swing states have vast red areas, and he needs to do well enough in those areas,” Kessler said. Pointing to new jobs in previously declining places, Kessler said, could also provide Biden a symbol of economic recovery that resonates with voters far beyond those places.

The Brookings and MIT authors expect that Biden will have many more such examples to cite as further investments in industries including clean energy and semiconductors roll out. “The map is not yet finished,” the report concludes. “There are hundreds of distressed counties with assets similar to those that have attracted investment and have not yet been targeted.” One of the most tangible legacies of Biden’s presidency may be a steady procession of new plants rising through the coming years in communities previously left for scrap. Whether voters in these places give him credit for that will help determine if he’s still in the White House to see it.

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