Hearing Recap – Bringing Prosperity to Left-Behind Communities: Using Targeted Place-based Development to Expand Economic Opportunity
WASHINGTON – On Wednesday May 11, 2022, at 12pm ET, the U.S. House Select Committee on Economic Disparity and Fairness in Growth – Chaired by Congressman Jim Himes (CT-04) – hosted a hearing, “Bringing Prosperity to Left-Behind Communities: Using Targeted Place-based Development to Expand Economic Opportunity.” Select Committee Members and policy experts examined how wealth disparities between and within local economies have increased – including rural towns, industrial centers, and historically marginalized urban neighborhoods– and how targeted place-based initiatives and programs can restore local economies and bring economic opportunity to vulnerable regions.
Opening Statements from Chairman Himes and Ranking Member Steil
“Opportunities for economic prosperity and mobility are unevenly distributed across the country, and these challenges motivated the development of place-based programs,” said Chairman Himes. “As the Chairman of this committee, I have sought areas of bipartisan agreement, and I believe that place-based policies – which serve economically distressed areas and connect people to economic opportunity – are strategies that we can all agree on.”
“Today I want to learn about how to expand place-based programs that work and how to rethink place-based policies that don’t,” continued Chairman Himes. “A key question I hope to address is ‘what can the federal government do to make these policies and programs more effective for those who need them most, doing so as efficiently as possible?’ I look forward to learning about the unique challenges and solutions that can help uplift our left-behind communities and ensure they prosper in the 21st century economy.”
“One of the topics that we are going to discuss today is what is the role of the federal government, in particular vs. the role of community leaders, state, and local policy,” said Ranking Member Bryan Steil (WI-01). “As we look at this, though, I think what we see often is that there's not a one size fits all approach from the federal government. There is an opportunity to look at making sure that we are addressing the local needs.”
The Select Committee presented recorded video testimonials of individuals communicating their personal experiences with place-based policies:
Sharon Vogel, Executive Director of the Cheyenne River Housing Authority – Cheyenne River Sioux Reservation, SD
“The commute for our communities can be a hundred miles a day. The most challenging thing about leveraging for [federal] money – especially when you’re going to apply for government programs – is the bureaucracy of accessing the funds intended for the poorest of the poor.”
State Representative Seth Grove – Pennsylvania District 196
“What we need is less federal government. We need more focus on allowing state and local governments to operate freely… If you create an environment where everyone is treated equally, with low taxes, broad base, you’ll get better outcomes every single day.”
The following witnesses testified before the Select Committee on ways the federal government can enhance place-based initiatives:
Dr. Timothy Bartik, Senior Economist at the Upjohn Institute for Employment Research, and Co-Director of Upjohn Institute’s “Place Based” Research Initiative, described why place-based policies are an important complement to people-based policies. “105 million Americans live in distressed local labor markets, which are metro areas or rural commuting zones that lack sufficient jobs. Fifty-five million Americans live in disadvantaged neighborhoods, where the employment rate is much lower than the rest of their local labor market,” said Dr. Bartik. He proposed the creation of a flexible federal block grant to address local labor markets and disadvantaged neighborhoods. Through the block grant, “we can best increase job creation by providing businesses with customized services,” and increase “a community’s ability to access good jobs, through enhancing transit or providing reliable cars, and making sure residents can access job training and childcare” added Dr. Bartik.
Dr. Tracy Hadden Loh, Fellow at the Brookings Institution Metro Program’s Anne T. and Robert M. Bass Center for Transformative Placemaking, explained the mismatch of many place-based policy designs. “Past place-based policies have often targeted the wrong places either by being too expansive and diffusing impact, or by over-weighting political priorities in their map,” said Dr. Loh, adding “to maximize the impact of a policy in relation to its intention, the right intervention must be connected to the right places.”
Mr. Jay Williams, President and CEO of the Hartford Foundation for Public Giving, former Assistant Secretary of the U.S. Economic Development Administration, and former Mayor of Youngstown, Ohio, advocated for wealth building opportunities for communities of color. “In our cities, we must adopt revitalization strategies that provide Black and Latinx residents meaningful ownership opportunities so that they can be the benefactors of neighborhood growth and vitality,” said Mr. Williams.
Ms. Cheryal Hills, Executive Director of Region Five Development Commission in Minnesota, National Association of Development Organizations (NADO), highlighted the need to modernize relevant federal agencies. “It is imperative that we reauthorize the U.S. Economic Development Administration (EDA), which Congress has not reauthorized since 2004,” said Ms. Hills, adding “economic, social, and environmental conditions have changed monumentally since then, and it is imperative to modernize the U.S. EDA so that federal investments are more relevant to today’s realities.”
Mr. Levon Johnson, President and CEO of the Greater Elkhart Chamber of Commerce, highlighted the importance of local stakeholders when designing place-based policies. “We believe that place-based initiatives rooted in local inclusion and at the direction of impacted stakeholders have led to sustainable practices that give us the ability to be agile in all economic climates,” said Mr. Johnson.
The subsequent Q&A portion of the hearing produced the following points of exchange between the Select Committee Members and witnesses:
Chairman Jim Himes (CT-04) asked Dr. Bartik to explain why “programs that only offer tax incentives to firms or to investors are often suboptimal”, and what lessons can be learned from the Empowerment Zone Program. Dr. Bartik replied, “the problem with tax incentives is that a lot of times, they incentivize, things that would have happened anyway,” adding “what Empowerment Zones did differently is in addition to trying to incentivize job creation and hiring in the neighborhood, these programs also gave a block grant to each neighborhood used for job training, for small business job creation, and for nurturing the growth of small businesses.”
In response to a question from Chairman Himes, Dr. Loh spoke on the importance of data collection in the context of the most recently enacted federal place-based initiative-the Opportunity Zones Program. “Specifically, regarding Opportunity Zones, it is absolutely critical that we have some reporting requirements put on this program,” said Dr. Loh. “I think that the IRS regs were a huge, missed opportunity to do that, and we, as a research community, are struggling to answer basic questions, such as how many projects are there that have received capital support from Opportunity Zone funds. And if we can't even find how many projects there are, then it is even harder to evaluate the impact of the program.”
Congressman Vicente Gonzalez (TX-15) asked Ms. Hills to elaborate on her proposal to pass a new Farm Bill to address the needs of rural communities. Ms. Hills highlighted the importance of communication between rural communities and the federal government, explaining, “When federal agencies are investing in these [place-based] programs…and there is no accountability back to the local communities to understand how they can adjust and revise…that is where the programs become stagnant and don't become impactful to the rural communities that I serve.”
Congresswoman Gwen Moore (MI-04) asked the panel how levels of investment should be balanced to help both urban and rural communities. Ms. Loh explained, “From my research, one of the key determinants out of concentrated poverty is that for neighborhoods experiencing concentrated poverty…becoming more regionally integrated with the economy can really make a difference for that neighborhood. So that is a different situation than neighborhoods experiencing concentrated poverty that are in poor regions.”
Congressman Jodey Arrington (TX-19) elaborated on the concept that federal regulations might be increasing the overall cost of services, like childcare. He explained, “When we are trying to incentivize through Opportunity Zones or Empowerment Zones…I am more for letting the private sector drive it. I don't want the Federal Government to create a market.” Rep. Arrington added, “When you are incentivizing in partnership with local control, local decisions, private-sector led, you have the best chance of actually creating something sustainable.”
Congresswoman Sara Jacobs (CA-53) asked Dr. Bartik to discuss the importance of location on a child’s long-term economic outcomes. Dr. Bartik explained investments in childcare not only help children, but also the local community by creating jobs. “We need to deal with the childcare and preschool sector and really invest significantly more...and that needs to be done on a universal basis, not just in distressed places,” said Dr. Bartik, adding, “We also need to target those distressed places and see if we can get adults in those neighborhoods into well-paying jobs.”
Summary of Memorandum Prepared by Select Committee Majority Staff
Over the last few decades, both American economic opportunity and economic distress have concentrated in separate regions, increasing economic disparity between communities and within them as well. In conjunction with directing economic support to individuals, the federal government has used targeted policies to support economic and community development in left-behind communities and neighborhoods – or place-based policies. These include geographically targeted tax-incentives, federal grant eligibility for targeted municipalities, and deployed regional planning personnel.
Access to economic opportunity and prospects for upward mobility in America are increasingly shaped by where people live. Growing evidence suggests living in economically distressed areas is associated with adverse health outcomes, lower economic mobility and productivity, and diminished opportunities for innovation and entrepreneurship. Since 1980, economic distress has concentrated in certain regions, and this disparity has widened between communities across the country. Since this period, a handful of mostly coastal metropolitan areas became some of the most economically prosperous regions in history, while other places, including historically marginalized urban neighborhoods and large sections of rural America, have seen a precipitous economic decline.
Experts generally recognize the need to complement direct aid to people with place-based development interventions to uplift left-behind communities. When designed and implemented to directly improve economic opportunity for people living in economically distressed communities, place-based policies can improve both the communities themselves and their contribution to national economic performance.
What are Place-Based Policies?
The United States has employed different types of place-based initiatives throughout history: from state and local business tax incentives to spur business activity, to enhanced federal grant eligibility for physical infrastructure to technical assistance for targeted localities. The typical policy goals have been to spur investment and create job opportunities in economically insecure areas, like deteriorating downtown business districts, distressed urban neighborhoods, or regions undergoing economic transition. Other place-based programs have targeted different socioeconomic outcomes, such as improved educational outcomes in neighborhoods. Less commonly, place-based policies may also aim to enhance the economic performance of areas that are already doing well.
Rationales for Place-Based Policies
Place-based economic development policies have several rationales. First, as previously noted, many people in distressed communities want to remain in these communities because of local ties, insufficient resources to move, or higher cost of living in higher-income regions. Further, federal policy incentivizing movement out of distressed communities to more promising areas can start a vicious cycle, as those with means depart a depressed area, decreasing economic potential further and hurting those who remain. Second, state and local governments representing communities that became economically distressed following global and technological economic shifts lost significant tax revenue and economic capacity from the departure of highly concentrated industries like manufacturing. These challenges made it difficult to fund key services and economic diversification efforts on their own. Third, extensive research indicates past and present discriminatory policies against racial minorities in housing, commerce, and small business lending contributed to the spatial concentration of poverty in urban areas, requiring significant investment to remedy past harm.
The federal government uses place-based policies to play a role in supporting local economic development through the tax code, additional federal funding, and personnel with regional convening power. Examples of tax-incentive driven initiatives include the recently enacted Opportunity Zones (2017), which have so far funded investments mostly in real estate projects and in neighborhoods with relatively higher incomes, home values, educational attainment, and pre-existing income and population growth. Another example is the New Market Tax Credits (2000), which offers tax incentives to invest in distressed census tracts.
Additional Federal Funding and Regional Convening Efforts
Four agencies—the Departments of Commerce (US Economic Development Administration), Housing and Urban Development (HUD), Agriculture (USDA), and the Small Business Administration (SBA)— implement various programs supporting economic development, some with local economic distress focus. A 2011 US Government Accountability Office (GAO) report found significant overlap, fragmentation, and potential duplication across these and additional programs. In response, EDA established the Office of Economic Development Integration to coordinate federally-supported local economic development efforts and assist communities applying for federal funding.