Interview with Alejandra Y. Castillo (US Assistant Secretary of Commerce for Economic Development under President Biden)
Alejandra Y. Castillo was the US Assistant Secretary of Commerce for Economic Development under President Biden and led the Economic Development Administration (EDA) between August 2021-2024. Previously, she served as the National Director of the Commerce Department’s Minority Business Development Agency (MBDA) under President Obama.
Interviews conducted on 9th December 2024 and 20th December 2024
Q: How would you characterise Bidenomics and how do you assess its performance over the last four years?
From an economic development perspective, when the Biden Administration took office in 2021, the context was clear: the country was emerging from the public health and economic impact of the pandemic. But more significantly, we recognised a deeper, long-term challenge-decades of disinvestment across the United States. Entire regions that once thrived through manufacturing and other key industries had steadily declined. For too long, there had been no meaningful, place-based investment strategy aimed at driving economic growth and a need for industry cluster ecosystem building.
In response, the Administration began assembling the building blocks of a modern economic revitalisation strategy. The first was the American Rescue Plan – a necessary intervention to stabilise the economy, accelerate recovery, and avert a recession. The second was the Infrastructure Investment and Jobs Act – long discussed but finally delivered. It went beyond roads and bridges to include broadband connectivity, digital infrastructure, and critical human capital investments in workforce development.
The third major pillar was the Inflation Reduction Act – a name shaped by political timing, but substantively focused on accelerating the clean energy transition and building a low-carbon economy. Finally, the CHIPS and Science Act provided both a short-term response to supply chain vulnerabilities and a long-term investment in research and innovation. While the CHIPS component addresses urgent needs in semiconductor production, the Science component is the foundation for future economic competitiveness.
Taken together, these legislative initiatives form the backbone of what has come to be known as Bidenomics. This is a long play economic strategy – an intentional “big bet” on America’s future. While it may not have yielded immediate political returns, it is designed to deliver sustained economic development, enhance U.S. competitiveness, and strengthen national security.
Q: Some of the criticism of ARPA at the time was that it was contributing to inflation above and beyond the global inflation that was occurring. Is that fair?
Roughly three-quarters of the criticism is unfair; one-quarter is fair. Let me explain.
The majority is unfair because the inflation we experienced was largely the result of a global economic shock. Supply chains were severely disrupted not only by the pandemic, but also by geopolitical, climate disasters, technology and other events like the blockage of the Suez Canal. These disruptions created systemic bottlenecks that fuelled inflation across multiple sectors and around the globe.
Meanwhile, corporate profits remained strong. There was no meaningful dip – companies continued to generate significant earnings, in part through aggressive price-setting. Consumers bore the brunt of these increases, while corporations posted record margins, largely unaffected by broader economic conditions as prices continued to increase.
Now, on the part that is fair, as a member of the Administration, I stand behind the President’s policies. I also acknowledge that we lacked a sharply focused short-term economic strategy-something truly immediate, over a six-month horizon able to address the urgency of everyday living.
To be clear, the President took action on some short-term solutions, like tapping the Strategic Petroleum Reserve to reduce gas prices. But we needed a broader, more visible response – both in public messaging and in policy – to address the day-to-day impact of inflation on American households. Targeted tax relief, for example, could have offered near-term reprieve. Instead, most of our attention focused on providing conditions to build structural long-term place-based investment strategies, sometimes at the expense of addressing people’s immediate economic pain.
Q: What was different about the place-based economic development in this administration compared to Obama and Clinton?
Under Clinton, I remember distinctly a place-based economic strategy focused on construction specifically building prisons in rural areas. There was a lot of that: “Let’s build a prison, we’ll get three cycles of workforce,”. That was creating jobs in areas that hadn’t seen it.
There was an evolution of those ideas under Obama. The Economic Development Association (EDA) in particular, the agency that I led under President Biden, focused on its traditional portfolio and had to fight to defend its budget from getting cut. In large part, we were addressing big economic shocks and industry failures (i.e. financial crisis, automobile, housing). We were focusing on those emergencies.
What President Biden did was take a more holistic approach, extending economic productivity, technological innovation, and growth beyond the traditional hubs on the coasts – the Bostons, the Washingtons, the New Yorks, as well as West Coast centres like Seattle, Silicon Valley, and San Diego – and spreading it further into the heartland. In doing so, he democratised technology and innovation, a move that also attracted and brought in more capital and conditions for job creation and higher wages.
What was different was the way we created these large-scale grants. These were not one million dollars here, one million dollars there. These were large scale grants. The grants were designed to bring universities, community colleges, nonprofits, philanthropies, workforce development boards, and in the case of Tech Hubs private sector – a coalition of stakeholders – and say to them, “give us your best ideas, what would work in your region?” as opposed to a top-down, cookie-cutter, “here’s what we want.” We allowed communities and regions to curate what type of economic growth, economic activity and industry they wanted to invest in and see grow.
We found some amazing surprises. As I always say, who would think that Tulsa would be the drone capital of the US? Who would think that New Hampshire would be where regenerative biotechnology would be taking place? We found and discovered those areas that already had the seed but needed de-risking from the federal government.
What we’re now seeing is the second wave of capital needs after the federal government has played its role to de-risked, now we need to continue to incentivise the private sector to speed up commercialisation and start-up community as well as existing firms able to support the supply chain to move into the next phase.
Q: Can you say more about the Economic Development Administration’s role in the Biden Administration?
Historically, the EDA operated with an annual budget of around $400 million. Compared to our OECD counterparts, the U.S. consistently lagged in the percentage of public investment dedicated to economic development.
Under the Biden Administration, that changed dramatically. Federal investment in the EDA scaled from $400 million to $1.2 billion, then to $4.5 billion, and ultimately to $6.8 billion. Roughly 75% of those funds were directed toward economic development initiatives, while the remaining 25% supported disaster recovery. It’s important to note this distinction, as climate change is becoming an increasingly disruptive force, with natural disasters posing growing threats to local and national economic stability. As a result, the EDA’s role in disaster recovery has expanded significantly.
Overall, this surge – from $400 million to nearly $6.8 billion in just three years – represents an unprecedented scaling of federal economic development funding. It reflects a recognition of the deep economic distress facing many regions and the urgent need to invest in critical technologies, workforce development, and regional resilience.
The key question for the next administration is: how will this level of investment be sustained? One-time, once-in-a-generation interventions may create short-term momentum, but they are insufficient to drive long-term, transformative economic growth. To generate meaningful returns, we must continue making sustained, strategic, place-based investments-supporting both existing industry clusters and the emergence of new sectors anchored in critical technologies across the country.
Q: Looking across the span of programs that EDA has been overseeing over the past few years, how do you find those areas that really are in a “valley of death” or really do need that extra nudge, versus those that are just good at telling a good story about their local economy?
That is one of the key tests that we use for many of these programs. I’m going to speak on EDA specifically; there are other departments like the Department of Energy, National Science Foundation, and other places where large place-based investments have occurred. But I’m going to focus on the four big programs that we had.
One was the Build Back Better Regional Challenge funded under the American Rescue Plan Act (ARPA) in FY22. In addition, we designed the Good Jobs Challenge. In FY24 we received funding for the Tech Hubs program as well as the RECOMPETE program under the CHIPS and Science Act.
For all of these programs, we had record numbers of applications – over 500, give or take – applications that came from all over the country. There were three categories of applicants. One type was where some university had a great idea, they’ve been shopping their idea for many years with little funding success, and they said, “Okay, let’s go after these programs.” Those often never made it. The second type of applicants were those that had a good idea, but needed some additional capacity to further develop their proposals. The third category of applicants – a smaller group – that had a robust stakeholder engagement, well developed ideas and a strong path for implementation. Those were the ones that were reviewed thoroughly.
The ‘but-for’ argument was a big test, and we used a lot of data: prime-age employment gap, distress data not just on the employment side, but also social indicators, health indicators, industry indicators. In essence we wanted to know that “but for these federal investments” these important economic proposals would be jeopardised. This perhaps was the most time-intensive process to ensure federal dollars would actually have a multiplier effect beyond just additional money. That’s the criticism also taking place with CHIPS. Why is the U.S. providing Intel, a private company, so many federal dollars? Is this not something they would do already? What we like to see is that our dollars are either catalytic or additive in a very different way.
Q: What are the metrics that you are looking at over the longer term that would tell you whether this is a success or not? For the tech hubs, would you be happy if two or three or four of those succeeded but the others didn’t?
We’d love to see all of them succeed. Is that realistic? Probably not. But what we do want to see, and I’m focusing more on the tech hubs, is to see those technologies that are going to break through as new industries where the US will have a comparative advantage, ideally, an absolute advantage. You’ll start to see in three years whether the private sector capital is actually tracking. Many of the tech hubs are already doing capital convening. By the way, last week EDA partnered with the National Science Foundation to do a roadmap summit where you had a number of different sources of capital.
If you look at the tech hub designation benefits, you’ll see that the U.S. Patent and Trademark Office is one of our partners. The reason is because the goal of this tech hub is to create innovation and be able to patent it and protect that intellectual property. So that’s a metric. How many patents are we issuing? How many contracts are we issuing? We are also trying to leverage the procurement power of the federal government to be that first customer, in order to help the tech hub scale.
On workforce development: how many people are we training and placing? It’s not just the training, but also the placing. And then the wraparound services: how are these communities really flourishing? I was in Brownsville, Texas. It’s not a tech hub, but it’s where SpaceX is based. What we’re seeing is an entire ecosystem really coming together. The question will be, how do we make Brownsville the hub of the sourcing, versus flying the contractors in, the procurement folks, on a weekly basis, which is what Elon Musk is doing. I can give you a lot of different examples. Chicago is very interesting with the quantum, and so is Colorado. Lots of different metrics.
Interview continues, 20th December 2024.
Q: When we spoke a fortnight ago, we talked about the ARP-the COVID stimulus. You told us that the Biden administration had a really good long-term story about the investments being made but didn’t have enough of a short-term economic plan to reduce bills and cost of living in the next 6 to 12 months.
It’s not that we didn’t have a plan. You saw interventions happening, such as when the President tapped into the oil reserves, which brought gasoline prices down. I think we lacked an articulate communication strategy about what was being done behind the scenes to manage inflation. The Federal Reserve’s steps with interest rates, while painful and unpopular, did help too. The key is that, in the world we live in, you need policy plus a good communications strategy that explains, informs, and mobilises. That’s where I think we fell short. The action to avert a recession was necessary yet there was an urgent need for the public to see and feel a reprieve from the daily pressures.
Q: On place-based policy, and how the Biden administration differed from Obama and Clinton, you said it was much more bottom-up.
To go a bit deeper: in US politics, Democrats have been accused of representing the interest of the major cities and the coasts – California, New York, etc – that have been thriving, particularly in technology. Given the data measuring persistent economic distress, the growth of technology-based jobs and industry, coupled with job creation and increase (or lack thereof) wages, the Biden Administration adopted a very deliberate approach to democratise technology and innovation, investing public dollars in places that don’t usually see that level of tech engagement, job creation or private capital flows.
You hear the phrase “flyover states” to refer to states in the Midwest where capital and technology seldom landed as investments. The idea was to invest in places like Tulsa, Oklahoma, Wichita, Kansas or Bolder, Colorado and create momentum – new technologies, new industries, new jobs – by leveraging federal dollars as “seed capital’ to build the momentum and the next wave of capital from the private sector. In essence incentivise different capital stacks to support place-based economic growth through new technologies and industry formation. We worked to change the paradigm of what had traditionally occurred with most of the funding flowing to the coasts, and create a more inclusive and equitable economic model.
Q: You mentioned four initiatives: the Build Back Better Regional Challenge, the Good Jobs program, Tech Hubs, and Recompete. Could you just briefly explain how each differed and what lessons you carried from one to the next?
Let’s start with the American Rescue Plan (ARP). During COVID, that legislation gave the Economic Development Administration (EDA) $3 billion. Normally, we hover around $400 million a year, so we were under the microscope to deliver bold programs.
Under ARP, we launched three major programs:
Travel & Tourism ($700M) – this typically sat under the International Trade Administration (ITA), because travel and tourism are considered exports. But EDA had done some infrastructure for museums and trails to promote travel and tourism. Under ARP, we led a large allocation for recovery in this sector.
Good Jobs Challenge ($500M) – recognising we needed a new approach to workforce development. The US has always been enamoured with how Germany does workforce development, but the German model is very unique. It is tethered to trade unions and executed by Chambers of Commerce which isn’t the model we use here. We designed the program to focus on healthcare and new technologies
Build Back Better Regional Challenge ($1B) – I see this as the prelude to Tech Hubs. It allowed the federal government to test what could work. It combined place-based thinking, technology, capacity, and regional industry cluster growth. It allowed for places around the country to think about what they believed their economic future could be. We had two phases. First, we asked for the submission of a simple five-page narrative supporting the economic idea would be – we did not want places to be overcome by the heavy lift, we just wanted to understand and look at major concepts and ideas. We received over 560 applications and combed through it to get the best ideas. We identified 60 finalists for the Build Back Better program. The second phase was much more detailed and in-depth. We wanted to institute a two phase process because we knew there were places like New York who can always put together an incredible proposal, while other places cannot, and so we wanted to be attentive to capacity on the ground, as well as the strength of the coalitions.
Let me go back to takeaways. There are four key takeaways from this competition.
Lesson one was on how regions came together. A key component of the submission was ensuring the creation of a “coalition”. The meaning of “coalitions” was defined in the Notice of Funding Opportunity (NOFO). We also provided examples of who could become a coalition member. Some regions came together, and they listed the names of entities and partners. A mere listing of coalition partners with little indication of how they worked together or their vision for assets or capacity to bring the proposed idea to like.
Other regions came together in a very intentional, methodical and deliberate manner. These coalition members represented an array of partners from the public sector, non-profit organisations, universities, community colleges, philanthropy, workforce boards and workforce development organisations among others. In addition, the coalition met weekly or twice a week, they brought coalition members together and worked through ideas, identifying challenges and opportunities while creating a bold economic vision for their regions. It wasn’t just to check a box to say “here are all our partners” – it was truly a “coalition of the willing” who presented clear ideas and had realistic yet audacious vision. So one take away was the strength, authenticity and ability of the coalitions formed.
The second takeaway was how the ideas were created and developed. We received a cohort of applications led by universities. This cohort of applicants had a distinct pattern whereby a Professor who had great ideas, or had developed a pet idea for decades, saw this EDA competition as a vehicle to receive funding and use it as a submission. Thus, these types of applications showcased that the idea wasn’t necessarily something that grew out of a coalition/partnership or germinated out of a coalition/partnership, it was already something baked. Those didn’t make it through. Instead, strong applications were those that showcased a comprehensive and cohesive set of coalition members who came together to identify an opportunity or sets of opportunities based on the assets, talents and capacity on the ground to ignite true economic transformation.
Another takeaway is that out of the 60 finalists, even those that were not selected in the second round of the competition and therefore did not receive federal dollars carried on. They felt empowered and felt as if they had a good project. They went out and found dollars, either through the local, the state or philanthropies. They carried on.
Fourth, thinking big. Pushing the levels of comfort and tapping into industries that are there but had not been pushed forward, as well as inviting new industries as partners to leverage the assets and conditions on the ground with a commitment to building the future workforce.
The next big chunk of federal investments came through the CHIPS and Science Act. EDA didn’t get Bipartisan Infrastructure funding, nor funding through the Inflation Reduction Act. While the CHIPS side of the equation focused exclusively on semiconductor manufacturing, EDA was focused on the science part of the Act. Out of that, EDA was able to launch the Tech Hubs program, authorised at $10 billion but only $500 million was appropriated. There might be another $500 million, specifically $280 million would be the first tranche contingent on the sale of spectrum and Congress has said this money would go to fund the next round of Tech Hubs. That remains to be seen.
Similar to the Build Back Better Regional Challenge, Tech Hubs also had two phases: a concept phase to look at the idea, then the full proposal. Some of the Build Back Better finalists progressed on to Tech Hubs. That’s why I said it was a bit of a prelude, because it allowed places like Tulsa to then take the idea, germinate and mature it. Then Tech Hubs come in and help it to get to turbo speed. That was the beauty of these two programs happening in a relatively short period of time.
Tech Hubs also had a second phase. We announced 12 Tech Hubs. It was a matter of money but also in some cases the technology had not been fully matured. The third piece of Tech Hubs which is less discussed is that we allowed for “strategy development grants,” which help places not quite ready (like California’s Salton Sea region, with lithium deposits but limited extraction tech) to mature their idea for next time. In the event of another Tech Hub round, they would be well placed to apply.
Finally, RECOMPETE was authorised at $1 billion but got $200 million. It’s traditional economic development, laser-focused on areas with high prime-age (25–54) employment gaps that had been devastated by drastic changes in the economy.
Q: Where did the $10 billion figure for Tech Hubs come from? And could you point to local examples of innovative uses of the money that differ from past federal programs?
If I could fully explain the appropriations process, I’d be a very wealthy person-that’s Congress for you. There’s no neat formula. You’ve got Senate proposals, House proposals, spending caps, deals hashed out in conference committees-it’s a complex mix of moving parts and behind-the-scenes negotiations that are often more art than science.
I’m glad we secured $10 billion in authorisation for Tech Hubs. Sure, it would have been better if the number were higher, but that’s what made it through. Of that total, only $500 million was actually appropriated in the first tranche -just 5% of what was authorised. It’s essentially a down payment, with the expectation that Congress will come to recognise the urgency and strategic value of fully funding the Tech Hubs initiative.
On the innovation front, we’ve been intentional about embedding value into the process itself. With the 60 regions selected under the Build Back Better Regional Challenge and the Tech Hubs program, we introduced the idea of “benefits of designation.” We wanted to ensure that even being a finalist had tangible advantages-not just funding. These included things like expedited processing at the U.S. Patent and Trademark Office and targeted support from the Small Business Administration. It was about signalling to private investors that these regions had been vetted, met federal standards, and were investment-worthy-even if they didn’t receive large federal awards upfront.
Across the country, we’re seeing regions step up in impressive ways. In Fresno, California, ag-tech is thriving under Build Back Better. Wichita, Kansas is making major moves in aerospace and advanced manufacturing. El Paso, Texas has aligned city and state resources to build out a defence manufacturing hub, partnering closely with UTEP and securing key contracts. Osceola County, Florida is building momentum in semiconductor packaging and just landed a significant Navy contract.
The way I evaluate success in these places is straightforward: Are they leading in technology? Are their partnerships-with universities or workforce systems-strong and functional? Are they securing procurement deals or attracting private capital? Wichita, for instance, attracted foreign direct investment from an Australian firm. That’s proof that federal investment helped de-risk the opportunity, accelerate development, and position local actors to succeed. That’s what economic development is all about: catalysing momentum that communities can build on.
Q: When you say Wichita or El Paso is doing ‘great things,’ how specifically are they spending money? On workforce, infrastructure, new partnerships? What makes them more creative than past efforts?
Secretary Raimondo’s management style influenced the program. She always asks, “Who’s my point person?” and so that’s also how we designed the program. We required a single leader – sometimes called a “regional innovation officer,” sometimes “regional innovation and competitiveness officer.” At the end of the day, there was a person – not an affiliation or institution – a person that drove the efforts. That person was the driver, a “dog with a bone,” who kept everything moving. They were intentional, they were deliberate, they were relentless. I credit a lot of the success to those individuals. If you met them, you would see why they live and breathe this every single day. They are the connectors, they are the people pitching these ideas, they are finding resources, they are collaborating. These individuals might seem like a small element, but it was truly transformational. We baked that in as part of the process. In hindsight, we could have added more funding for that governance structure. We needed the glue that keeps these things together. We needed it but we didn’t fund it.
Another observation, if you look at EDA’s investment priorities, equity is at the top. I know in the next Administration, they are not going to call it equity, they are going to call it “belonging”.
Whatever you want to call it, the idea is that you have to have representation from the community. It can’t just be the majority population, it has to be people around it. That may be a unique US thing. In my previous professional experience, I remember when Paris was having disturbances, some 15 years ago, with the young Arab community. We collaborated with our Ambassador to France to provide models. When you have an inclusive economic landscape, people feel very invested in the success. We wanted to make sure we were working with communities.
The Tulsa experience is interesting because they are partnering with indigenous communities. Indigenous communities are their own sovereign nations so collaborating with them requires a lot of discussion and agreement, but for them it was important because it helps them test drones on native lands.
Q: Any takeaways for a country like the UK with big regional divides?
On collaboration, there’s a lot of literature on regional economic development. People tend to see it as “my city” versus “my town”. However, when you’re driving through a region, you don’t distinguish where the lines of demarcation are in that city or town or where one economic area begins and the other one ends- it’s fluid. Looking at regional economic development is very helpful, and it breaks down the political nonsense that sometimes takes place, which becomes a very zero-sum game. Changing that paradigm from a zero-sum game to one of collaboration is important.
On metrics, how do you find new ways of creating measurements and monitoring performance and outcomes? When we did the Good Jobs Challenge, which was workforce development, we collaborated with the Census Bureau as well as the Department of the Treasury because what we wanted to showcase was that the actual training led to higher wages. It wasn’t easy because there’s a lot of data sharing and it has to be protected in many ways, but it was a way of collaborating within the government to find metrics that could help policymakers and program designers either tweak or change things based on quarterly metrics and that’s how we did it. We did quarterly evaluations. We presented it to the Secretary. We had green, yellow, red monitoring. If any of these grants were “going south” or something was happening, we wanted to know because we wanted to have as close to real time opportunities to redirect if needed. As you know data does lag so we were at least a quarter behind on the data. Nonetheless, it helped us course correct if we saw things not working out.
These are not easy programs to manage, but they can be incredibly successful. They’re not magic wands, so it’s not as if you are going to see a turnaround in three months. They take at least an 18-month runway to start to see the benefits of the investments and capacity building effort. The results of Bidenomics will be seen in the next 1-2 years.
ENDS