This report was written jointly with Charles Yang, Executive Director at the Center for Industrial Strategy.
Sustained economic growth is the key driver for improving standards of living and national power. Levers for driving economic growth have received significant focus at the national level, such as through monetary policy and fiscal reforms or a national industrial policy. However, insufficient focus has been paid to the role of state economic development agencies and administrations. This has affected program implementation as, historically, national policymaking overlooks these institutions. This insufficient focus has often failed to provide the resources for tasks states are expected to carry out, or neglected information or networks these agencies can offer. This needs to change.
In this piece, we argue that state economic development agencies (EDA) have a critical role to play in driving economic growth. State EDA’s are uniquely positioned to bring regional stakeholders together, creating regional ecosystems boosted by agglomeration effects. Indeed, the recent federal focus on hubs and regional engines is a recognition of this importance and past oversights. However, state EDA’s can go further and be more than vessels of federal funding. While their traditional remit has focused on firm-level tax subsidies, we argue that state EDA’s can use an expanded set of tools to drive economic growth.
This renewed interest in regional economic growth is particularly important amid growing commitment to bolstering large-scale energy, housing, industrial, and infrastructure projects. For capital and labor intensive goods-producing sectors, such regional economic tools matter even more given the intersection of state policy, financing needs, permitting and approval processes, and the lack of stable procurement. In this report, we outline how state EDA’s and governor’s offices can drive regional economic growth through an expanded toolkit. We specifically focus on: 1) housing growth—supply-side housing to enable infrastructure and industrial expansion, 2) innovative financing—funding new initiatives and regional development through government financing, and 3) permitting reform—reforming permitting systems to enable timely project approvals.