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Budget 2011: Industry Clusters as a Paradigm for Job Growth

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From its opening pages, the Obama administration’s FY2011 budget request adopts a stance that pervades this blog. Declares the document: “We need to recognize that competitive, high-performing regional economies are essential to a strong national economy.” (See page 20 of the federal budget.)

In line with this recognition, the new budget unveils not one, but several proposals to support regional industry or innovation “clusters” through multiple federal departments. Clusters, as we have noted previously, are a fundamental fact of national economies, and a critical enhancer of regional economic performance. However, as we have also noted, the U.S. lags other nations in providing support to these “bottom-up,” region-based systems of business development, innovation, and talent matching. And so the 2011 budget seeks to change that by applying cluster approaches across multiple segments of the federal delivery system--rather than anchoring it in a single agency. 

Along these lines, the administration’s new approach marks a welcome advance over last year’s initial budget request. Last year, the administration seemed to regard “clusters” as a discrete single program to be implemented by only the Economic Development Administration (EDA)--and so took its lumps en route to obtaining only a small portion of its request. This year’s budget, by contrast, treats regional industry networks as more of an operating paradigm for multiple activities, and as more a means to the important end of linking and aligning multiple federal interventions to maximize their impact in support of regional prosperity. (See page 22 of the federal budget.)

And so at least four agencies are this year engaged in a new, more pervasive embrace of cluster policy in the 2011 budget:

  • The EDA’s proposed $75 million Regional Innovation Clusters program would provide regional planning and matching grants focused on leveraging regions’ competitive strengths to boost job creation and economic growth. (See pages 2, 41, 46 of the Department of Commerce Budget-in-Brief)
  • The Small Business Administration would support EDA’s cluster effort by directing a proposed $11 million toward promoting greater small business participation in regional clusters by better coordinating its resources for business counseling, training, and mentor-protégé partnerships. (See page 136 of the President’s Proposed FY2011 budget for the SBA
  • The Department of Labor (DOL) would use its newly proposed Workforce Innovation Fund (of up to an estimated $108 million) to help ensure that the workforce development system also aligns with regional cluster growth by facilitating regional collaboration among training and employment services providers and stronger linkages with employers so that worker training leads to good jobs. (See pages 4, 17 of the DOL’s Employment and Training Administration Congressional Budget Justification)
  • UPDATE:  The National Science Foundation (NSF) plans to invest $12 million to promote new “NSF Innovation Ecosystems” as a part of its existing $19.2 million Partnerships for Innovation program. The new “innovation ecosystem” component aims to support regional innovation clusters around universities by engaging faculty and students across all disciplines in efforts to increase the impact of promising innovations through commercialization, industry alliances, and start-up formation. (See page 4 of the NSF Budget Overview)
  • The Department of Agriculture’s (USDA) budget request calls for a Regional Innovation Initiative to align federal resources to promote more economic opportunities in rural communities and have greater regional impact. To support this approach, USDA plans to set-aside roughly 5 percent of the funding from approximately 20 existing programs and allocate these funds competitively among regional pilot projects tailored to local needs and opportunities. While not specifically focused on industry clusters, the $1.4 million proposed for regional planning activities and $135 million expected for project implementation from new USDA set-asides does seem to provide yet another avenue for regional cluster support and development (while also dispensing with the myth that clusters are only “urban”). (See page 14 of the USDA Budget Summary)   

In sum, the 2011 budget’s multi-agency cluster push represents a step forward for the cause of sensible economic management in the United States. On display in the 2011 budget request is what appears a broader and more thoughtful understanding by one branch of the national government that the American economy is regional; that regional industry networks and clusters are a defining aspect of its organization; and that clusters of firms and other entities are a proper object of national economic policy. No longer a single isolated program, cluster offerings are now dispersed across multiple agency precincts, and regarded as a broadly appropriate means for furthering regional prosperity. That’s a good thing.

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