Last weekend, the Senate passed and sent to President Obama the Consolidated Appropriations Act that provides $447 billion in Fiscal Year 2010 appropriations for nine cabinet departments and a wide array of independent federal agencies. Deep inside the bill’s conference managers’ statement is a series of instructions to the Economic Development Administration (EDA) to build a regional innovation clusters program. With that action, amid the billions authorized for far more massive programs, a small item with significant potential passed into law and metropolitan leaders of all stripes should be delighted.

As we’ve blogged several times, the clusters program represents a new approach to economic policy, one that aims to harness the creative, competitive energies of industry at the ground level.

While Congress provides nowhere near the $50 million requested by the president, it clearly sees a growing, productive federal role in clusters development and lays the groundwork for this effort.

The funding haircut reflects political priorities rather than a disagreement on substance. Congress didn’t give the requested clusters program funding because the president wanted to pay for it and a companion $50 million small business incubators proposal by slashing by two-thirds the politically popular EDA public works program. So Congress moved the $100 million back to the public works account, leaving just a few million dollars available for clusters grants.

However—as bad as a cut from $50 million to, say, $4 million might seem, the conference managers’ report provides good news on several fronts:

·      While funding is limited, the conferees are clear that they want EDA to make cluster grants now. These are to be mostly planning grants that “identify local clusters for development.” Planning grants are small, so a mere $2.5 million could fund 50 $50,000 planning grants. Fifty grantees laying the groundwork for future clusters development efforts would provide the foundation and the rationale for the larger clusters grant funding in the future. Emphasizing their interest in immediate action, the conferees tell EDA to provide quarterly progress reports on funding cluster awards and to create performance measures for future evaluation

·      For next fiscal year, the conferees instruct EDA to increase proposed funding for regional innovation clusters but without (doing the politically dumb thing of) taking money out of the public works account. In other words, the conferees are saying they’re all for clusters if the president doesn’t rob a popular Peter to pay a promising but unknown Paul

·      The conferees gave the EDA research account enough money to start up the clusters research and information center proposed by the president. This is a big deal—building a picture of the geography of clusters and cluster organizations is a high impact, low cost means to catalyze cluster development through good information

·      Finally, the conferees recognize that a number of federal agencies provide cluster support and direct EDA to develop a means for interagency coordination and report back to Congress in 90 days. In other words, the conferees want to institutionalize and rationalize federal clusters activity.

So the nation now has on the books a progressive, catalytic, and sensible, albeit small, federal program that will begin the work of supporting bottom-up regional innovation. Not far off from the outline we proposed on the subject nearly two years ago. EDA’s tiny new program strikes us as a big deal. 

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