Introduction

Congress currently supports funding for over 130 programs to meet varied economic development challenges and conditions, create opportunities for economic growth and job creation, and assist a range of economic sectors, geographic regions and localities, and demographic groups. These programs are administered by multiple federal departments and independent federal agencies—typically in partnership with state and local stakeholders—and oversight of them is assigned to multiple congressional committees. Many current federal programs support infrastructure, workforce development, and business assistance activities. Others fund planning, technical assistance, economic adjustment assistance, disaster recovery, entrepreneurship, the development of scientific research capabilities, and other activities.¹

The term "economic development" lacks a common definition and can refer both to a policy objective as well as a set of tools to achieve that objective.² The Department of Commerce Economic Development Administration (EDA), for instance, describes economic development as creating

the conditions for economic growth and improved quality of life by expanding the capacity of individuals, firms, and communities to maximize the use of their talents and skills to support innovation, lower transaction costs, and responsibly produce and trade valuable goods and services.³

Economic development is also described both as a long-term process and a practice designed to create jobs and economic activity, and as efforts designed to address equity and create wealth at various levels (e.g., local, regional, state, national).⁴

In the absence of a standard definition for economic development, goals and success are measured by a range of metrics and at a variety of levels of practice.⁵ Economic development goals, and the tools to achieve them, can vary depending on the perspective of the stakeholder and other factors.⁶ Some analysts note that broadly-shared improvements in economic well-being and quality of life are common goals of economic development.⁷ Still others include job quality, equity, environmental sustainability, housing, community development, education, and similar social objectives as goals of economic development.⁸ In practice, some of these goals may be in conflict with each other.⁹

Historically, Congress has generally supported economic development programs that facilitate outcomes such as changes in job-related measures, levels of private investment, tax base, and business growth. As noted below, Congress may also support policies that seek to improve outcomes related to community conditions or services that may indirectly contribute to economic growth outcomes.

The federal economic development policy landscape is composed of multiple programs across several federal agencies, employing a variety of approaches. This report highlights federal programs associated with state and local economic development strategies that have been identified in the following resource directories and reports:

• The Office of Management and Budget's budget functional classification system, which includes programs involved in community and regional development in the federal budget under category 450;¹⁰
• Federal agency resource directories associated with economic development and business development;¹¹ and
• Other government reports, which analyze aspects of federal departments, agencies, or programs associated with economic development.¹²

This report provides a broad overview of available resources and potential metrics that Congress can use to compare various programs. Following a brief, abbreviated history of economic development policy, this report discusses the characteristics of major federal programs and services that assist with state and local activities. This report concludes with considerations for policymakers. The report includes a variety of resource lists:

• Table 1 is a summary of selected federal agencies, and Table A-1 in the Appendix lists federal programs for state and local economic development activities, including planning, technical assistance, infrastructure, and revitalization activities.
• Table 2 lists the active federal regional commissions and their missions and service areas.
• Table 3 provides a summary of programs to assist with economic adjustment assistance and post-disaster economic recovery.
• Table 4 provides a summary of selected workforce development programs designed to help individuals achieve longer-term economic outcomes, such as higher income or education or skill levels through education and job training activities.
• Table 5 provides a summary of programs for business technical assistance. Several programs provide assistance to businesses or to intermediary support organizations and other stakeholders that support business development efforts.

Disaster assistance programs for businesses and individuals, as well as other programs designed primarily to serve individuals or workers are beyond the scope of this report. Housing, community development, and most education programs are also excluded from this report, but are considered major components of economic development planning by many policymakers, practitioners, and researchers.

The Diversification of Economic Development over Time¹³

Changes in economic development policy reflect changes in markets, industries, and demographics as well as shifting priorities and ideas about what drives economic growth.¹⁴ The following abbreviated review of economic development in the United States provides context for the current portfolio of federal programs and the federalism that underpins most strategies.

From the mid-19^th through the mid-20^th century, the approach to economic development supported by federal policy and state and local practices focused on physical infrastructure, business recruitment, and industrial growth.¹⁵ Investments were episodic and the number of communities receiving assistance was limited. During this time, federal assistance helped establish and expand basic infrastructure by constructing or improving land, roads, railroads, utility systems, and buildings. Congress also authorized programs and established agencies to expand rural economic development and provide electricity service to rural areas.¹⁶ Economic development programs at the local, state, and federal levels generally supported efforts to create a favorable business climate by lowering production costs and taxes or incentivizing capital investment in specific locations. State and local strategies during this time often prioritized recruiting a firm or industry to a new area through tax credits, incentives, and business site improvements over other activities, such as human capital development or entrepreneurial assistance. The emphasis on industrial development and business recruitment is often referred to as "smokestack chasing."¹⁷

Following World War II, the types of federal development assistance available to state and local stakeholders shifted and programs expanded. State and local economic development practitioners increasingly sought to expand capital sources and new markets for goods and services in order to facilitate business growth. This marked a shift from attraction-based strategies that primarily sought to improve an area's competitive position—often through incentives, subsidies, or capital, land, or labor enhancements. Through these changes, many viewed the government as having a role in facilitating and anticipating opportunities.¹⁸

During the 1950s, 1960s, and 1970s, Congress authorized programs and appropriated funding for several urban redevelopment/urban renewal, regional planning, and related programs that targeted economically distressed areas.¹⁹ In addition, the Small Business Act of 1953 created the Small Business Administration to "aid, counsel, assist and protect, insofar as is possible, the interest of small business concerns." In 1965, Congress passed legislation authorizing both the Appalachian Regional Commission (ARC) and the Economic Development Administration (EDA).²⁰ In 1965, Congress also established the Department of Housing and Urban Development (HUD), and appropriated funds for area development, housing, and urban redevelopment/renewal programs.²¹ In 1974, Congress consolidated several HUD programs into the Community Development Block Grant (CDBG) program.²² In the late 1960s and early 1970s, Congress also authorized legislation for many of USDA's current grant and loan programs that support rural economic development.²³

Following World War II, the level of federal development assistance to state and local stakeholders expanded, and then decreased in the 1980s and 1990s.²⁴ In the following decades, state and local strategies as well as federal programs evolved to incorporate efforts to address structural changes in the U.S. economy caused by demographic shifts, increased levels of global trade, and the shift from manufacturing to service sectors. Government programs focused on efforts that increased or developed capital sources and new markets for goods and services, and that supported new businesses and business growth. In the 1990s, Congress authorized programs at several federal agencies for regional efforts to develop and expand industry clusters.²⁵ In the 1990s and 2000s, state and local economic development practitioners increasingly networked, coordinated, and brokered information in order to promote regional economic competitiveness in light of challenges presented by globalization, trade policies, and other factors affecting the U.S. and regional economies in new ways.²⁶

Over time, the strategies for economic development have increased and diversified.²⁷ Federal economic development policies continue to support state and local strategies for infrastructure development, but also include business recruitment and retention, workforce development, and capital access activities. At the same time, new and modified federal programs seek to support knowledge and technology industries, build globally competitive regions, develop resilient networks and "ecosystems" of various distinctions (e.g., entrepreneurial, capital, innovation), and build capacity at multiple levels.²⁸ Current economic development programs continue to be state and local government-centered with "decentralized federal participation," and aim to assist state and local stakeholders in their efforts to attract private investment, create jobs, build wealth, address inequities, diversify their tax bases, and related goals.²⁹

Strategies and Activities

The parameters of what constitutes economic development—as well as its benefits and limitations—are defined differently depending on the stakeholder, the context of implementation, and other factors. The process and practice of economic development may occur at the local, state, regional, or federal level, and can be carried out by public and private sector stakeholders and institutions. State and local stakeholders generally utilize federal financial assistance and other resources to implement economic development strategies, including, but not limited to

• investment in infrastructure, community amenities, and utilities;
• industrial development and recruitment;
• support for small- and medium-sized business formation, including entrepreneurial assistance, business support, acceleration, and incubation strategies;
• existing industry and capital expansion;
• trade promotion;
• regional industry specialization and network development;
• regional economic diversification;
• workforce development and human capital development;
• planning, technical assistance, capacity-building, and leadership training;
• technology- and innovation-based economic development; and
• the promotion of natural, cultural, and historic assets.³⁰

Given that many federally supported economic development projects originate at the state and local levels, the capacity of state and local stakeholders to address economic drivers and global market trends, among other factors, is increasingly recognized as a critical factor in determining the relative success of federal programs. The EDA-commissioned report, "Economic Development: A Definition and Model for Investment," issued in 2016, suggests that developing the capacity of stakeholders (e.g., firms, individuals, industries, institutions) broadly aids in economic development because it expands the capabilities of economic actors.³¹ EDA uses the terms "capacities" and "capacity building" to "refer to the public sector's role in investing in new ideas, knowledge transfer, and infrastructure to build a foundation so that the private sector can flourish (i.e., enable economic development to promote regional prosperity)."³²

How Are Federal Economic Development Resources Distributed?

Federal Partnership Model

Federal assistance for state and local economic development is often based on the principle that the national economy represents a "summation of the performance of hundreds of local economies."³³ In recognition that the economic development needs vary, sometimes greatly, from place to place and from sector to sector, most federal economic development programs now assist with projects developed from state and local plans, priorities, and input. In establishing the EDA, the Public Works and Economic Development Act of 1965 (P.L. 89-136), as amended, recognized economic development as an "inherently local process," and the role of the federal government as a key partner.³⁴ In its Value Proposition, EDA notes that "instead of a Washington-knows-best approach, EDA works hand-in-hand with local economic development partners to advance their locally-developed projects which are linked to the region's long-term, sustainable economic development strategy."³⁵ Other federal agencies generally take a similar approach whereby economic development projects typically originate at state and local levels and nonfederal stakeholders select strategies or industries to pursue in order to address their community-specific needs and opportunities.³⁶

Federal Economic Development Programs and Agencies

Because economic development is a complex, multi-faceted process and practice, Congress has authorized multiple agencies and programs to meet its economic development policy goals. Federal economic development programs are designed to meet several goals, including federal objectives related to promoting interstate commerce and national economic growth.³⁷ Economic development may be an agency's primary mission or it may be more indirectly related. The Department of Commerce (DOC) Economic Development Administration (EDA) is the only federal agency with economic development as its exclusive mission.³⁸ The Departments of Agriculture (USDA), Commerce, and Housing and Urban Development (HUD), and the Small Business Administration (SBA) also administer economic development programs and are generally considered core federal economic development agencies. Additionally, the Department of Labor (DOL) and the Department of the Treasury administer programs that support workforce and business development, which are often considered integral components of economic development.

Federal Regional Commissions

The active federal regional commissions (the Appalachian Regional Commission, the Denali Commission, the Delta Regional Authority, and the Northern Border Regional Commission) also focus on economic development (see Table 2).³⁹ Active federal regional commissions receive partial federal funding and are considered independent federal agencies. For more information, see CRS Report R45997, Federal Regional Commissions and Authorities: Structural Features and Function, by Julie M. Lawhorn.

Related Agencies

In addition to the federal agencies, federal regional commissions, and programs noted in "Program Structures and Purposes," Congress has authorized other agencies to administer programs that create conditions to support economic development outcomes. These programs may incentivize private investment; contribute to a community's quality of place; improve individuals' wellbeing, income, or job prospects; or advance other measures of economic development. The Departments of Defense (DOD), Education (ED), Energy (DOE), Health and Human Services (HHS), the Interior (DOI), and Transportation (DOT) as well as the U.S. Environmental Protection Agency (EPA) and other agencies may also support economic development. Programs administered by these agencies are primarily authorized to address other purposes such as land use, transportation, education, environmental remediation, health, livability, and other amenities, conditions, or events.⁴⁰ For instance, infrastructure investments funded by the Department of Transportation contribute to local, state, and national economic development goals.

Program Structures and Purposes⁴¹

Congress has authorized both people- and place-based implementation approaches for economic development programs. In economic development, these approaches are sometimes framed as people-to-jobs or jobs-to-people policies.⁴²

Programs that have a geographic dimension targeting assistance to a specific area are often referred to as place-based policies. Place-based policies tend to target assistance toward labor markets, neighborhoods, regions, and specific geographies, rather than by providing support directly to individuals. Place-based policies often, but not always, target the geographic and spatial dimension of economic distress and poverty. Place-based policies may include infrastructure programs, revitalization programs, and certain tax policies that incentivize investment in a specific area, among others. Place-based people policies include initiatives that seek to address the markets, conditions, or policies in or near areas where disadvantaged people live and are considered a subset of place-based policies.

Programs that direct assistance to individuals or disadvantaged individuals are referred to as people-based programs. Analysts frame people-based approaches as tools that offer a direct line of assistance to individuals, generally without conditions tied to a place or individuals' locations. People-based policies include some forms of workforce development, job training, and education assistance programs, among others.⁴³

Programs for Distressed Areas

As noted, place-based policies include initiatives designed to address conditions of long-term economic distress (e.g., persistent poverty, high unemployment levels, and other socioeconomic indicators) in specific geographic areas. Conditions of long-term economic distress can have a long-term impact on individuals, the state and local tax base, the workforce, health outcomes, and more.⁴⁴ Initiatives to address conditions of long-term economic distress may involve multiple forms of assistance due to the sustained impacts of jobs loss and disinvestment on the social and economic health of a regional economy.

Congress has authorized several programs designed to help state and local stakeholders address conditions of long-term economic distress, in addition to the programs designed to address economic recovery needs following an economic shock, dislocation, or disaster event (see Table 3).⁴⁵ These programs may base eligibility on geographic designations by Congress or by other state or federal agencies or officials, or by economic distress criteria:

• CDFI Fund programs and tax credit policies often target distressed areas or zip codes.
• Prospective participants in the Opportunity Zones program must direct investment to designated census tracts nominated by the state's governor and meet specified economic criteria.⁴⁶
• The programs administered by regional commissions and authorities seek to build economic resiliency or support economic restructuring in economically distressed regions, such as the Delta and Appalachia areas.⁴⁷
• Projects are generally eligible for EDA's Public Works and Economic Adjustment Assistance (EAA) funding if the service areas meet the criteria for economic distress and other criteria.⁴⁸
• The programs administered by the Department of the Interior, Bureau of Indian Affairs, Office of Indian Energy and Economic Development and HUD's Indian Community Development Block Grant (ICDBG) program are available to tribal entities. Some programs may provide assistance to areas that have experienced long-term economic distress.

As noted, Congress may also approve legislation that directs assistance from existing programs to economically distressed areas (e.g., areas with high unemployment or high poverty levels for a certain period of time). For instance, appropriations for select programs authorized in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) and other programs in subsequent appropriations bills have included provisions to address persistent poverty counties. The "10-20-30" provision was designed to direct 10% of federal funds for specific programs to counties with 20% poverty rates or more for the past 30 years.⁴⁹

Programs for Economic Adjustment Assistance and Post-Disaster Economic Recovery

Several federal grant programs are designed to assist state and local stakeholders with economic adjustment, economic recovery, revitalization, restructuring, rebuilding, and other activities following economic dislocation or disaster events.⁵⁰ A selection of these programs are listed in Table 3. The programs offer flexibility to state and local stakeholders to address a range of construction and non-construction activities in efforts to restructure or build resiliency in regional economies.⁵¹ Congress has authorized ongoing and supplemental appropriations to support economic adjustment or recovery in response to economic shocks and disaster events. For instance, existing EDA programs received regular supplemental appropriations in response to natural disasters beginning in the 1990s and in response to the Coronavirus Disease 2019 (COVID-19) pandemic in FY2020.⁵² Congress also authorized programs to assist communities impacted by the Base Realignment and Closure (BRAC) process and other defense activities.⁵³

Program Eligibility Criteria and Funding Considerations

Federal economic development assistance is generally delivered to state and local stakeholders through grant, credit assistance, and tax policy programs.⁵⁴ Funding strategies vary depending on the type of policy vehicle. For instance, many grant programs rely on congressional appropriations. Among other considerations, federal direct loan and federal loan guarantee programs must consider the expenses incurred by the government, or subsidy costs, when borrowers default. Alternatively, if the loan programs create profit for the government—for example, through fees and other assessments—they may generate negative subsidy costs. Among other considerations, many tax policies rely on foregone tax claims.⁵⁵

Program eligibility criteria also vary. As noted, some forms of federal assistance are targeted to specific scenarios or disruptions (e.g., disaster recovery and economic adjustment assistance or assistance for ongoing conditions of economic distress); types of recipients or beneficiaries (e.g., low- and moderate-income neighborhoods, workers, rural areas, students, or small businesses); and regions or communities (e.g., areas served by federal regional commissions or tribal areas or communities). For instance, USDA Rural Development programs target rural communities with eligibility based on population thresholds and other program requirements. For HUD's CDBG program, grantees must use funds to meet one of three national objectives and at least 70% of those funds must benefit low- or moderate-income persons.⁵⁶

Grant Programs

"Federal grant programs" or "federal domestic assistance programs"—commonly referred to as grants—are forms of financial assistance that provide money, property, services, or other items of value for goals authorized by Congress, including economic development.⁵⁷ Unlike most credit programs, recipients of grant assistance are not required to repay funds. Congress has approved categorical grants and block grants for federal economic development programs. Agencies allocate funds using both competitive and formula methods.⁵⁸ Depending on the statute, federal grants for economic development may require recipients to contribute matching funds. Cost share requirements vary by program and may depend on criteria such as levels of economic distress, type of applicant, and other conditions. Economic development programs typically have other federal administrative requirements and, in some instances, performance metrics to ensure that the funds are used in ways that meet federal objectives.

Examples of economic development grant programs include

• U.S. Department of Agriculture (USDA) Rural Development programs
  USDA Rural Development administers several categorical grant programs to support the construction or renovation of community infrastructure and facilities; broadband planning and development; business development, credit, and assistance; and other activities in rural communities.⁵⁹
• Public Works and Economic Adjustment Assistance (PWEAA) programs, administered by the DOC, Economic Development Administration
  The PWEAA programs are categorical grants awarded on a competitive basis to support both construction and non-construction projects for economically distressed communities.⁶⁰ Congress may approve supplemental appropriations for the Economic Adjustment Assistance and other programs to address disasters, pandemics, and specific regional issues or conditions.⁶¹ PWEAA grants serve urban and rural communities.
• Community Development Block Grant (CDBG) program, administered by the Department of Housing and Urban Development (HUD)
  CDBG is a formula-based program. CDBG provides grants for a broad range of community and economic development activities including housing, public facilities, infrastructure, and projects to expand economic opportunities. The CDBG program serves urban and rural communities.⁶²
• Programs administered by federal regional commissions and authorities
  Federal regional commissions and authorities work with states and other partners to administer grants for economically distressed areas in congressionally determined regions.⁶³

Credit Assistance Programs

The goal of many economic development credit assistance programs is to address private market capital gaps.⁶⁴ For economic development, finance experts categorize federal credit programs as follows: (1) capital to businesses; (2) capital for development finance institutions; (3) project finance; and (4) technical assistance and support activities.⁶⁵ Credit programs may be designed to lend directly to the ultimate recipients (e.g., units of local government, businesses) or they may be designed to pass capital through intermediary organizations or financial institutions (e.g., regional development organizations (RDOs), community development corporations (CDCs), community development financial institutions (CDFIs)).

Federal credit assistance programs expand access to capital through federal loan guarantee and direct loan programs. Loan guarantees may be defined as "a loan or security on which the federal government has removed or reduced a lender's risk by pledging to repay principal and interest in case of default by the borrower."⁶⁶ Loan guarantees may be used in a range of federal policy settings.⁶⁷ A direct loan is "a disbursement of funds by the government to a nonfederal borrower under a contract that requires the repayment of such funds with or without interest."⁶⁸ Federal loan programs for economic development may have below-market, zero, or other interest rate requirements. Some federal loan programs may be designed to provide partial principal forgiveness.

Examples of federal credit assistance programs include⁶⁹

• The Small Business Administration (SBA) programs provide loans and loan guarantees through private lenders to assist small businesses that are otherwise unable to access credit on reasonable terms. These programs are designed to promote competition in private markets.⁷⁰
• HUD's Section 108 loan guarantee program allows local and state governments to leverage their CDBG allocation as a loan guarantee for large-scale development projects.⁷¹
• The USDA administers direct loans and federal loan guarantees for both public and private sector borrowers located in rural areas.
• The Department of Treasury's Community Development Financial Institutions (CDFI) Fund administers several programs designed to expand credit to development finance institutions, which then provide credit and other services to underserved individuals and communities.⁷²
• EDA, USDA, HUD, ARC, and other agencies make grants to entities that administer revolving loan funds (RLFs) to provide credit assistance in underserved markets.⁷³

Incentives Through Tax Policies

Tax policies (e.g., exemptions, preferential rates, credits) are a form of financial incentives that can be designed to facilitate economic development objectives.⁷⁴ Section 3(3) of the Congressional Budget and Impoundment Control Act of 1974 specifically defines tax expenditures as:

those revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.⁷⁵

In addition to policies that incentivize investment in specific geographic areas, the federal government supports tax policies that may indirectly incentivize economic development through research and development (R&D) and innovation initiatives.

Examples of federal tax policies that are intended to encourage capital investment in low-income or distressed communities include⁷⁶

• New Markets Tax Credit program. The Treasury's Community Development Financial Institutions Fund certifies entities and designates areas for the New Markets Tax Credit program.
• Opportunity Zone program. The CDFI Fund also certifies areas (nominated by state governors) that are eligible for Opportunity Zone tax incentives.

Common Strategies Supported by Federal Economic Development Programs

Infrastructure, workforce development, and business assistance activities are frequent components of many state and local economic development plans. They also constitute distinct policy domains of their own, and are supported by separate federal programs. The partnerships, finance mechanisms, and implementation strategies associated with these activities may overlap. Although the programs and objectives may vary, the administration of the different activities may be overseen by the same federal, state, or local agency.⁷⁷ The following sections highlight basic connections between economic development and infrastructure, workforce development, and business assistance activities. Other policy tools also frequently overlap with economic development objectives, but are beyond the scope of this report.

Infrastructure

State and local stakeholders frequently include infrastructure and revitalization efforts in strategies designed to achieve both short-term and long-term development goals. Federal economic development policies have historically supported these efforts through programmatic assistance for public utilities (e.g., electricity, telecommunications, drinking water, and wastewater), water resources management infrastructure, and transportation, freight, and transit projects.⁷⁸

Congress continues to support infrastructure activities in economic development policies. Funding for infrastructure activities is primarily authorized through programs administered by the DOT, EPA, EDA, HUD, USDA, and federal regional commissions, among others. Although some of the federally-funded infrastructure programs provided by these agencies may be designed to support economic development outcomes, many programs administered by other federal agencies, such as EPA, are designed to meet other distinct policy goals, such as environmental remediation or health and human safety outcomes. In addition to grants, other common tools to finance public infrastructure investments include bonds, loans, tax credits, and private-public partnerships (among other policies). Additionally some federal agencies such as the U.S. Army Corps of Engineers (USACE) and the Department of the Interior Bureau of Reclamation are responsible for projects involving federally owned infrastructure, which may impact state and local economic development. For instance, the USACE assists with federal harbor maintenance involving ports and other waterways, planning and constructing new navigation channels, and other roles.⁷⁹

Table A-1 in the Appendix provides a summary of selected federal programs that support more general economic development, including infrastructure and revitalization activities.

Workforce Development

Workforce development programs provide a combination of education and training services to prepare individuals for work and help them improve their prospects in the labor market. In the broadest sense, workforce development efforts include secondary and postsecondary education, on-the-job and employer-provided training, and the publicly funded system of job training and employment services.⁸⁰ By leveraging federal and other resources, state and local stakeholders implement individual, organization, and community strategies and coordinate training and resources across both public and private sectors.

The Workforce Innovation and Opportunity Act (WIOA; P.L. 113-128) is the primary federal workforce development law and includes provisions for individual, organization, and community levels of policy implementation. WIOA supports a decentralized system of programs in which federal workforce development funding is administered by state and local stakeholders. Programming decisions related to training and coordination are made locally. Workforce Development Boards and American Job Centers/One-Stop Centers are the governance and delivery entities for WIOA-funded programs, which offer classes, workshops, and assistance with job searches in cooperation with units of government, organizations, and businesses. WIOA support for individuals includes job and training services for adults, dislocated workers, and youth.⁸¹ WIOA provides the foundation of the core federal workforce development strategy. Other federal agencies may administer employment and training programs for specialized aspects of specific industries or communities, but are generally not considered components of the core federal framework for workforce development.⁸²

See Table 4 for a summary of federal programs associated with state and local workforce development strategies.

Business Assistance and Development

Businesses are generally viewed as a significant generator of economic activity.⁸³ Business assistance and development strategies involve capital access programs; technical, export, and networking assistance initiatives; federal procurement regulations; and tax policies. These initiatives seek to improve conditions for business formation, retention, or expansion in a defined region or to improve the competitiveness of individual firms or sectors. With some exceptions, federal economic development programs generally do not provide direct financial assistance to for-profit businesses for start-up, operational, or debt expenses.⁸⁴ Instead, many agencies assist businesses through programs and services tailored to state and local market or industry conditions.⁸⁵ Examples of federal programs and policies for business assistance and development include

• Capital access programs. Programs that seek to address business capital needs include the Department of Treasury's Community Development Financial Institutions Fund;⁸⁶ USDA, Appalachian Regional Commission (ARC) and EDA funding for targeted revolving loan fund (RLF) programs; and SBA and USDA loan and loan guarantee programs.
• Technical assistance programs. Many programs also offer technical assistance to businesses, including
• DOC Manufacturing Extension Partnerships (MEPs) program;⁸⁷
• DOC Minority Business Development Agency (MBDA);⁸⁸
• EDA's Trade Adjustment Assistance for Firms (TAAF);⁸⁹
• EDA's Economic Adjustment Assistance, University Centers, and Build to Scale programs;⁹⁰
• USDA business assistance programs; and
• Small Business Administration's Small Business Development Centers (SBDCs), Women Business Centers (WBCs), SCORE, and other SBA small business management and technical assistance programs.⁹¹
• Export assistance and foreign direct investment assistance programs. Export assistance and foreign direct investment assistance programs include DOC International Trade Administration programs, such as the SelectUSA program⁹² and select USDA programs.
• Federal procurement policies. Additionally, some federal procurement regulations seek to enhance small business contracting opportunities, specifically for "small businesses, Historically Underutilized Business Zones (HUBZones) small businesses, women-owned small businesses (WOSBs), and service disabled veteran-owned small businesses (SDVOSBs)."⁹³
• Tax policies. As aforementioned, incentive programs may attract investment to targeted areas or projects through tax policies, such as the Opportunity Zones and the New Markets Tax Credit programs.⁹⁴ See "Credit Assistance Programs."

Entrepreneurship and Innovation

In recent decades, state and local stakeholders have expanded initiatives to promote innovation and entrepreneurship. These initiatives are frequently developed in response to concerns about increased global competition and a growing interest in the economic development potential of small- and medium-sized enterprises.⁹⁵ These initiatives are further distinguished from long-standing industrial attraction-based strategies.⁹⁶

Entrepreneurship, in the context of economic development, focuses on developing and fostering new businesses.⁹⁷ Select federal programs may assist public and private sector stakeholders in developing the skills, services, and business climate to support entrepreneurial growth. Several of the MBDA, Treasury/CDFI, and SBA programs noted above and in Table 5 include business-level technical and financial support for individual entrepreneurs. Programs administered by the EDA, USDA Rural Development, and other DOC agencies fund programs for intermediaries that foster entrepreneurship and innovation at the community or institution levels.⁹⁸

In the context of economic development, innovation involves the "development and adoption of new products, processes, and business models."⁹⁹ Innovation-focused efforts to foster business growth and investment generally target technology- and knowledge-based industries,¹⁰⁰ and may include technology transfer, business incubation, targeted technical assistance, and capital access initiatives, among others. Federal programs include the DOC National Institute of Standards and Technology (NIST), Manufacturing Extension Partnerships (MEPs) program;¹⁰¹ Manufacturing USA; the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs;¹⁰² and others.

Science- and Technology-Based Economic Development

Federal, state, and local efforts to support research and development (R&D) may also facilitate economic development. Congress may seek to advance the interests of the national economy through investment in R&D,¹⁰³ metrology, standards activities, technology transfer, commercialization,¹⁰⁴ industrial competitiveness, and related initiatives through R&D or other business assistance programs, including programs that involve university and public private partnerships.¹⁰⁵ Programs at the Departments of Defense, Commerce, Energy, Health and Human Services, and Transportation, and other agencies fund R&D and other activities designed to spur innovation, train the workforce, or attract technology-related or targeted industry investments.¹⁰⁶ Additionally, the National Science Foundation's (NSF's) Established Program to Stimulate Competitive Research (EPSCoR) program administers grants to help enhance research competitiveness and impact economic development in select states through improvements to the scientific infrastructure, research capabilities, and education and training capacities of their institutions. DOD, DOE, NASA, the National Institutes of Health (NIH), and USDA administer programs similar to the NSF EPSCoR program.¹⁰⁷

Policy Considerations

The federal role in economic development policy has evolved and diversified over time to meet changing economic circumstances. Multiple policies—administered by many agencies, programs, and partners across sectors—comprise the generally decentralized federal approach to current economic development policy.¹⁰⁸ Congressional interest in federal economic development policy frequently focuses on promoting economic growth and job creation. Focusing economic development on outcomes solely related to economic growth remains a matter of ongoing research and policy consideration. In addition to facilitating growth, economic development policies may be designed to reduce regional disparities or socioeconomic inequality. Policies may also be designed to improve outcomes related to community conditions, amenities, or services that may contribute to economic growth outcomes. Such policies may integrate outcomes related to community development, equity, wealth creation, human capital development, environmental sustainability, job types, job quality, and others.¹⁰⁹

The federal role in economic development also remains a topic of perennial policy debate.¹¹⁰ Some have advocated for a greater emphasis on economic development policies that actively support and incentivize the private market while others advocate for less emphasis on federal involvement, arguing that government-led economic development programs are either unnecessary or distort the dynamics of the private market. They favor fewer federal spending programs or limited interventions for economic development. Proponents of limited federal assistance for state and local programs also argue that federal economic development programs are duplicative, have primarily local (as opposed to national) impacts, have overlapping objectives, lack effective federal coordination, and often do not have valid and reliable performance metrics.¹¹¹

Proponents of continued federal assistance for state and local programs suggest a government role may be warranted for the purposes of building capacity, especially when the private market may be unable or unwilling to advance economic development activities.¹¹² Still others view the role of federal assistance primarily as a complement to private resources or a catalyst for private investment.¹¹³ Proponents of expanded federal assistance have called for updating existing programs or creating new economic development initiatives that foster human capital, resiliency, entrepreneurship, innovation, technology, and connectivity. Some practitioners and researchers call for revised or new policy approaches due to shifts in employment sectors, demographic changes, and advances in technology.¹¹⁴

Consideration of whether economic development programs should target assistance to specific beneficiaries, how, and who the beneficiaries should be continue to shape the development of federal policy today. Some advocate for targeting socially disadvantaged and economically distressed areas, some advocate for policies that address rural and urban economic development initiatives separately, while others suggest that assistance should be distributed regardless of socioeconomic conditions or to individuals directly (as opposed to places).¹¹⁵ Several GAO reports on federal economic development programs have evaluated how economic adjustment assistance, small business assistance, and entrepreneurial assistance programs may coordinate with, duplicate, overlap, or complement each other.¹¹⁶ Others have examined the accessibility, impact, and distribution of existing programs in order to understand how federal resources are distributed relative to levels of economic distress, population size or density, and other factors.¹¹⁷

Congress may want to consider factors that may affect the reach and extent of federal resources. When macroeconomic and trade policies, major events, and economic shocks impact local, state, and regional economies, their effects may extend beyond the influence of economic development policies and programs. Economic development strategies generally are not fully replicable because they are condition- and context-specific, and there is no one-size-fits-all solution or federal program that is guaranteed to produce economic development outcomes. Because federal economic development programs are decentralized and vary in terms of scale, eligibility, timelines, and other terms of assistance, state and local stakeholders often apply for funding from multiple agencies simultaneously in order to implement planning, technical assistance, infrastructure, business development, workforce development, and revitalization strategies.¹¹⁸

Congress may wish to consider the extent and the forms of assistance that are designed to facilitate a stronger national economy through investment in state and local economic development activities. Congress may wish to consider the overall federal role as well as the framework and mechanisms for administering assistance. For instance, there may be continued interest in determining how the current set of programs coordinate, complement, or overlap. There may also be continued interest in examining the efficacy and impact of the programs in achieving their stated objectives individually and as a portfolio of programs.¹¹⁹ Additionally, Congress may consider options for addressing economic disparities, assisting lagging regions, and providing disaster assistance and economic relief to individuals and businesses adversely affected by the COVID-19 pandemic and related economic impact through existing or new programs.

Appendix. Federal Assistance for State and Local Economic Development Activities