The Case for Place-Based Industrial Policy in the Rust Belt
In August 2024, the Brookings Institution updated its running assessment of CHIPS and Science Act regional investments, tracking a pattern that would have seemed unlikely a decade earlier: eight of the sixteen finalist regions in the National Science Foundation's Regional Innovation Engines competition were located in the industrial Midwest, and ten fell within a broader heartland geography stretching from western Pennsylvania to Iowa. These were not consolation awards. They were competitive selections for federal investment in quantum computing, energy storage, smart water systems, and advanced manufacturing, the kinds of technology-forward sectors that economic development conversations of the 2000s and 2010s assumed would cluster exclusively around coastal tech hubs.
The CHIPS Act, and the broader wave of place-based industrial policy it represents, is the largest deliberate experiment in regional economic redirection the United States has undertaken in generations. The Peterson Institute for International Economics estimates the law's subsidy budget, including its investment tax credit, approaches $200 billion, and the Information Technology and Innovation Foundation reports that it has already helped stimulate $540 billion in announced semiconductor supply chain investment across more than 100 projects in 28 states. The question this article examines is not whether this represents a significant policy intervention. It plainly does. The question is whether the specific mechanism, localized tax credits paired with federal co-investment, is producing the kind of resilient regional manufacturing ecosystems that can withstand the global supply chain shocks that originally motivated the legislation, or whether it is producing a geographically dispersed version of the same boom-and-bust investment cycles that have characterized American industrial policy for a century.
What "Place-Based" Actually Means in CHIPS Act Implementation
Place-based industrial policy is not simply industrial policy that happens to occur in a particular place. It refers to a deliberate policy design in which the geographic location of investment is itself a policy objective, not an incidental outcome of where private capital would have flowed absent intervention.
The CHIPS Act's structure embeds this logic in two distinct mechanisms. The first is the Advanced Manufacturing Investment Credit under Section 48D of the tax code, which provides a 25 percent investment tax credit for qualified property in advanced manufacturing facilities, recently increased to 35 percent for property placed in service after December 31, 2025. This credit is not geographically targeted in its statutory design; it is available to qualifying facilities regardless of location, but its practical effect has been concentrated in regions with available industrial land, existing supply chain infrastructure, and workforce pipelines that the semiconductor industry can build on. Ohio, Arizona, Texas, and upstate New York have emerged as the primary beneficiaries, and three of those four are not traditional technology hubs.
The second mechanism is explicitly geographic: the Regional Technology and Innovation Hubs program and the NSF Regional Innovation Engines program, both funded through CHIPS and Science Act appropriations, designate specific regions for sustained federal investment in technology ecosystem development. These programs represent the clearest application of place-based logic in the legislation, because the selection criteria explicitly favor regions with underutilized innovation capacity, meaning research universities, technical workforce, and industrial infrastructure that has not been fully connected to commercial technology development.
The distinction matters because the two mechanisms produce different kinds of regional outcomes. The tax credit mechanism follows private investment decisions and amplifies them. The Tech Hubs and Innovation Engines mechanism attempts to create investment conditions that would not otherwise exist. Evaluating "place-based industrial policy" as a single category obscures the fact that these are different policy instruments with different theories of regional economic change.
The Resilience Question: What the Supply Chain Disruption Argument Actually Requires
The policy rationale most frequently invoked for CHIPS Act investment is supply chain resilience, the idea that concentrating semiconductor production in Taiwan, South Korea, and a handful of other locations creates a strategic vulnerability that domestic manufacturing capacity can mitigate. This rationale has obvious validity at the national level. Its application at the regional level requires a more careful argument.
A resilient regional manufacturing ecosystem is not simply a region with a large manufacturing facility. It is a region with the supplier networks, specialized labor markets, logistics infrastructure, and institutional knowledge that allow a manufacturing sector to absorb shocks, adapt to changing input availability, and support multiple firms rather than depending on the continued operation of a single anchor facility. The distinction between a facility and an ecosystem is the distinction between the Rust Belt's historical experience with single-employer manufacturing towns, which collapsed catastrophically when those employers left, and regions like Germany's Baden-Württemberg, where a dense network of small and medium manufacturers creates redundancy that no single firm's decisions can destroy.
The early evidence from CHIPS Act implementation suggests both patterns are occurring simultaneously, in different places. In central Ohio, where Intel has committed to a massive fabrication facility investment near Columbus, the project has attracted a documented cluster of supplier announcements, including materials, equipment, and specialty gas providers establishing operations within the same logistics corridor. This is the ecosystem pattern. In other CHIPS-funded locations, investment has been concentrated in a single facility without the surrounding supplier development that would constitute ecosystem resilience, leaving those regions in a position structurally similar to the single-employer manufacturing towns of the twentieth century, just with a semiconductor fab instead of a steel mill or auto plant.
The policy lesson is that the tax credit mechanism alone does not reliably produce ecosystem-level outcomes. Ecosystem development appears to require the kind of sustained, multi-year regional coordination that the Tech Hubs and Innovation Engines programs are designed to support, but those programs are funded at a fraction of the scale of the tax credit mechanism. The CHIPS for America Workforce and Education Fund, for instance, provides $200 million in loan and loan guarantee funding nationally, a figure dwarfed by the tax credit exposure on a single major fabrication facility.
The Political Durability Problem
Place-based industrial policy operates on timelines that exceed the political cycles that authorize it, and the CHIPS Act's recent history illustrates the consequences of that mismatch directly.
The investment tax credit increase from 25 to 35 percent, enacted in 2025 reconciliation legislation, demonstrates that the policy retains bipartisan support at the level of the tax incentive itself. Semiconductor manufacturing as a strategic priority has not become a partisan issue in the way that, for instance, clean energy investment has. But the broader CHIPS for America Fund, the grant and loan component that supports the workforce development and ecosystem-building functions of the law, operates under appropriations processes that are considerably more volatile than the permanent tax code provisions.
This creates a structural vulnerability specific to the ecosystem-building theory of place-based policy. If the tax credit component, which rewards investment regardless of its ecosystem effects, persists while the appropriations-funded ecosystem development components face funding uncertainty, the policy's net effect will tilt toward the facility-without-ecosystem pattern over time. Rust Belt regions that have built their economic development strategies around the assumption of sustained federal partnership in workforce development and supplier ecosystem building face a planning problem: the most durable component of the policy is the component least connected to the resilience objective that justified it in the first place.
States have responded to this uncertainty by building their own complementary incentive structures. Ohio's state-level incentive package for the Intel investment, layered on top of federal tax credits, includes workforce training commitments administered through the state's community college system, explicitly designed to build the labor market depth that ecosystem resilience requires regardless of what happens to federal appropriations. This represents a meaningful adaptation: state-level place-based policy filling the gap that federal appropriations volatility creates. Whether it is sufficient depends on whether states without Ohio's fiscal capacity can replicate the model.
What the Evidence Supports and What It Does Not
The evidence to date supports a qualified case for place-based industrial policy in the Rust Belt. The investment has been real, the geographic distribution has meaningfully diverged from where private capital would have flowed without intervention, and at least some locations show early signs of the supplier ecosystem development that distinguishes resilient manufacturing regions from single-employer dependency.
What the evidence does not yet support is the strong version of the resilience claim, that this wave of investment will produce manufacturing ecosystems durable enough to withstand the kind of supply chain shock that motivated the policy. That outcome depends on factors—sustained workforce development investment, supplier network formation, and multi-year institutional coordination—that are harder to fund, harder to measure, and more politically vulnerable than the tax credits that have driven the headline investment numbers.
The honest assessment is that the CHIPS Act has successfully redirected the geography of where major manufacturing investment decisions are being made. Whether that redirection produces resilient regional ecosystems or a new generation of single-facility company towns is a question that the policy's design has not yet answered, and that the next several years of implementation, particularly the fate of the appropriations-funded ecosystem development programs, will determine.
This is the first article in the PPV Economic Insight series. The next installment, Green Jobs and Just Transition: Lessons from the Inflation Reduction Act, examines the distributional effects of federal clean energy investment and what happened when that policy framework faced a change in political administration.
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PPV connects policy decisions with real-world workforce and economic impacts. Our analysis is evidence-based, nonpartisan, and transparently sourced, grounded in how policy actually affects people's livelihoods. Claims are grounded in primary sources, public data, and verifiable program documentation. Speculation is labeled as such.