Subsidies Won't Stop Stagnation

PRESIDENT JOE BIDEN is making a “big bet on place-based industrial policy,” writes Brookings Institution senior fellow Mark Muro

- Ronald Bailey

Muro and his colleagues argue that the initiative aims to address the fact that “many of the nation’s towns and regions struggle under the weight of economic stagnation and social decline.”

The size of the bet is around $80 billion in various industrial subsidies. It is unlikely to pay off as advertised.

These direct subsidies contrast with earlier federal place-based economic development programs, which chiefly used tax credits to encourage investment in poor urban neighborhoods and rural regions. Most research on those programs—which include New Markets Tax Credits (created by President Bill Clinton), Empowerment Zones (George W. Bush), and Opportunity Zones (Donald Trump)—indicates that they have had a negligible impact.

In a 2019