$500 million for new Tech Hub program included in federal spending bill

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Congressional budget negotiators on Tuesday included an initial $500 million, in a proposed government funding package totaling about $1.7 trillion, to try to spur new research and industrial development on semiconductors and other related technologies in parts of the country that have not seen their technology sectors boom.

The funding is for planning grants for regional technology and innovation centers under a new federal program created earlier this year. It marks a significant step that could ultimately help reshape communities that have been missing the roaring tech sectors that places like Seattle and California’s Bay Area have had in recent years.

The $280 billion CHIPS and Science Act, which President Biden signed into law in August, included about $52 billion in programs to boost domestic production of semiconductors, a critical component in goods ranging from computers to automobiles. Part of the law provided for, but did not fund, a five-year, $10 billion initiative to create at least 20 hubs.

While Congress is still expected to provide the majority of program funding in future years, the initial $500 million is a milestone and sufficient to begin program design and initial activities, Mark Muro said in an email. a senior member of Brookings Metro.

What could transform the program is that semiconductor law has prevented hub money from going to places that are now cutting-edge technology hubs. Instead, he called on the Commerce Department to ensure geographic and demographic diversity by creating at least three hubs in each of the Economic Development Administration’s six regions. EDA is the agency within Commerce that manages the program.

At least one-third of hubs should significantly benefit small and rural communities, which the law defines as areas of no more than 250,000 people.

On Tuesday, Democratic Senate Majority Leader Charles Schumer on the Senate floor described the proposed funding for the program as “the first big down payment” toward building the technology hubs.

That means real dollars to create the Silicon Valleys, Silicon Forests, Silicon Heartlands and prairies of tomorrow,” he said.

A study earlier this month by the Economic Innovation Group, a Washington think tank, identified Greenville, South Carolina; Provo, Utah; Tucson, Arizona; Toledo, Ohio; and Greensboro, North Carolina, as prime examples of places around the country that have the brainpower and other resources needed to take advantage of the program.

Federal funding for hubs alone won’t be enough to rebuild communities, but it could spur significant investment from the private sector as well as from local organizations and universities, according to Kenan Fikri, director of research for the Economic Innovation Group.

It’s one slice of a funding puzzle, he said. But a really key slice.

Congress must pass the massive omnibus spending package that includes seed funding for the hub program by Friday to avoid a government shutdown.

Schumer expressed optimism that lawmakers can meet that deadline. She said the spending deal, which was finalized overnight on Tuesday, opens the door for a vote before Friday. But we hope to do it much sooner,” she added, noting the possibility of East Coast storms later in the week.

But the passage of the omnibus is still uncertain. In recent days, some conservatives have opposed the measure, saying Republicans should wait until they take control of the House on Jan. 3 before negotiating government spending for the rest of the fiscal year, which ends on Sept. 30.

Republicans will soon be in the majority and in the driver’s seat to fight for our priorities, top House Republican Rep. Kevin McCarthy of California said on Twitter last week, who is campaigning to replace Democratic Rep. Nancy Pelosi. as rapporteur. Other Republicans said over the weekend that they oppose passage of the bill unless it includes measures to address the surge of refugees and migrants entering the United States at its Southwestern border.

Despite the political maneuvering, the semiconductor bill won bipartisan support when it passed Congress.

According to a study by Brookings Metro, the creation of the hubs would reverse a trend in which 90% of the increase in jobs in industries involving innovation between 2005 and 2017 occurred in just five superstar metropolitan areas Boston, San Francisco, San Jose, Seattle and San Diego.

A third of innovation jobs have been consolidated in just 16 of the nation’s approximately 3,000 counties, and more than half of the jobs are located in just 41 counties. Instead, the share of those jobs decreased in 343 metropolitan areas.

In recent years, there has been something of a laissez-faire approach. And with that came huge regional divisions, Muro said in an interview.

The effort to spread semiconductor innovation across the country illustrates a larger shift, where the Biden administration and Congress are taking a place-based approach to improving the economy by focusing on areas that have been left behind.

Muro wrote in a blog post last week that the American Rescue Plan Act, last year’s infrastructure bill, Democrats sweeping climate, health care, and tax package, along with the CHIPS bill, together included programs amounting to nearly $80 billion aimed at driving industry development in economically underdeveloped areas.

If we don’t experiment with [a place-based] approach, we will simply receive more than we already have, Muro said, which is an extremely unbalanced economy where a shortlist of places does very well, while most places go sideways or fall into real hardship.

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