The Economic Development Issues We’re Watching Under Another Trump Administration

Eight years ago in Monterey, California, Esteban Kelly was speaking at a relatively small gathering of local economy organizations and advocates from across the country.

An audience member asked Kelly, executive director of the U.S. Federation of Worker Cooperatives, what it would take for workers in the U.S. to replicate the Mondragon ecosystem of worker-owned and worker-controlled, democratically-run cooperatives in Spain’s Basque region.

As of 2017, Mondragon encompassed over 250 worker-controlled cooperatives, employing more than 50,000 workers domestically and another 10,000 abroad. Ten months after the first Trump administration had come into office, replicating something like that in the U.S. seemed like a pipe dream.

Not to Kelly. Without a hint of irony, Kelly said the first thing we’d need to replicate Mondragon was a brutal authoritarian regime. Mondragon itself was founded back in 1956, 17 years into Spain’s 36-year dictatorship under General Francisco Franco, who had it out for Basque dissidents in particular. The historical reality is that Mondragon emerged from a deep resistance movement facing violent political repression.

Less than two weeks from today, the Trump administration will return to power after a four-year hiatus. Keeping the potential of deep resistance movements in mind, here are seven economic justice storylines I’ll be following over these next few years. There will be a lot to resist, but also some previous work to keep building on.

Mass deportation looms large

Building a wall along the U.S.’s Southern border, and making Mexico pay for it, was Trump’s signature 2016 campaign promise. By the end of his term, the Trump administration built a grand total of 15 miles of new barrier, according to BBC. Mexico never paid a dime.

But there was also the Muslim travel ban. Seven days into the first Trump administration, the White House issued Executive Order 13769, directing the federal government to suspend entry to foreign nationals from a list of majority-Muslim countries. Legal challenges slowly chipped away at the ban; some parts remained in place until the Biden administration did away with it.

What does that tell us about the second Trump administration? In his 2024 campaign, he called for the mass deportation of 11 million unauthorized immigrants, with Trump stating that he would declare a national emergency and use the U.S. military to accomplish this. History has shown that this plan could fall flat, like the border wall; but it could also be implemented rapidly, like the Muslim travel ban was, scarring countless families and crippling urban economies for years to come.

Read more: The Financial Costs of the Prison-to-Deportation Pipeline

At the Brookings Institution, Alan Berube forecasted major negative consequences for U.S. cities as a result of such deportations, such as slower population growth and losing key segments of the workforce in crucial urban sectors like construction, hospitality and personal services. Immigrants are also twice as likely as native-born residents to start businesses, meaning that contrary to the “job-taking” racist trope, immigrants are more likely than others to be job-creators, according to economists.

Opportunity for whom?

Trump’s pick for Secretary of Housing and Urban Development, Scott Turner, has been a cheerleader for Opportunity Zones, the tax incentive designed to drive investment to economically distressed areas.

Turner was the first Trump administration’s pick to head the Opportunity and Revitalization Council, created specifically to support the implementation of Opportunity Zones.

Opportunity Zones have become part of the first Trump administration’s legacy, even though the idea was floating around for years before Trump happened to sign it into law as part of the 2017 Tax Cuts and Jobs Act. Around $40 billion of investments have been made so far through the Opportunity Zones tax incentive since it became available in 2018, according to tax consultant firm Novogradac.

The results of these investments have been mixed at best: Some studies show faster job growth and business growth in designated Opportunity Zone census tracts, while others show limited to no improvement in Opportunity Zone residents’ earnings, employment, or poverty rates. Unlike other tax incentives intended to support economic revitalization, like New Markets Tax Credits, Opportunity Zones didn’t come with guardrails or reporting requirements to ensure and track actual benefits to surrounding communities.

Even though HUD doesn’t have anything directly to do with Opportunity Zones, Turner’s nomination has Opportunity Zone supporters excited that the incentive may be extended or even made a permanent part of the tax code. Currently, Opportunity Zones expire on Dec. 31, 2026.

For existing renters in Opportunity Zone areas, including commercial renters, there is reason for concern, based on the kinds of investments made so far and the way the tax incentive works.

At least $23.65 billion in Opportunity Zone investments include at least some residential units. And at least $14.38 billion include at least some commercial space, with some of those investments overlapping in mixed-use projects, according to Novogradac. Those investments include at least 192,166 housing units, the vast majority of them rental units. While Opportunity Zone investment is eligible to combine with federal low-income housing tax credits or other affordable housing programs that regulate rent amounts, doing so is not a requirement. So it’s very likely most of the rental units and all of the commercial space created using Opportunity Zone tax incentives are market-rate.

The structure of the Opportunity Zone tax incentive encourages investors to maximize the resale value of properties. As long as investors hold onto Opportunity Zone investments for at least 10 years, the capital gains from selling those investments will be tax-free at the federal level and in some states at the state level too. The first Opportunity Zone investments will become eligible for those tax-free windfalls starting in 2028. The higher the rents, the higher the tax-free windfalls from cashing out of Opportunity Zone real estate investments.

Redoing reinvestment

Just days after the 2016 election, Trump’s pick for Treasury Secretary Steven Mnuchin was called out for redlining: The bank where he’d been board chair was accused of discrimination against certain neighborhoods or communities based on race or immigrant background. After coming into office, President Trump appointed Joseph Otting as Comptroller of the Currency, one of the federal government’s top bank regulatory officials. Otting had previously been CEO at the same bank.

Otting went immediately to work gutting the regulations for enforcing the Community Reinvestment Act, or CRA, one of the nation’s primary anti-redlining laws — signed in 1977 by the late President Jimmy Carter, whose state funeral is Thursday.

Even an unprecedented pandemic didn’t stop Otting from trying to gut the CRA. Bank watchdog groups, community development organizations, small business groups and local officials wrote thousands of comment letters opposing the proposed changes. Even many in the banking industry were skeptical of Otting’s proposals.

Read more: Why the Community Reinvestment Act Is Back in the News – Again

Those changes were approved in the first Trump administration’s final days, but they were promptly rescinded under Biden. As a result, however, CRA regulations remain outdated. It’s not clear at this point how much priority a second Trump Administration will place on updating CRA rules given the slate of other financial regulation priorities that are on its likely docket, from loosening rules around cryptocurrency to defanging the Consumer Financial Protection Bureau or watering down new requirements proposed for large banks (the latter two of which are discussed below).

Current CRA enforcement remains flawed: 98% of banks receive passing grades on their periodic CRA examinations, though communities of color still can’t access capital as easily as white communities. And yet, loosening CRA regulations could reduce key flows of capital to communities that need it most. Although it’s not totally clear how much CRA-reported lending would have happened even without the law, the CRA and the regulations enforcing it remain a crucial driver for some of the $24 billion in loans to small businesses in low- and moderate-income census tracts and $126 billion in community development loans reported in 2023 to federal regulators as part of CRA compliance.

Big banks are getting excited

One group that’s excited is big bank CEOs, who anticipate a much friendlier environment. That includes everything from more favorability for mergers and acquisitions after four years of skepticism from the Biden administration, to quashing or watering down a proposal that would have required the largest banks to retain more profits instead of wiring those dollars to shareholders, as well as a potentially neutered Consumer Financial Protection Bureau.

An even more favorable environment for big banks could impact access to capital for small businesses and struggling commercial real estate in downtowns or industrial areas. Community banks or smaller banks, those with less than $10 billion in assets, have traditionally used local knowledge and local relationships to seek out opportunities that larger banks can’t or aren’t interested in seeking out. There are still 4,000 community banks out there today, but that’s half as many as there were in 2005, according to the FDIC.

Under Biden, skepticism for corporate mergers cut across industries. A federal judge quashed a merger between major grocers Kroger and Albertsons in December. In banking, a major acquisition by Twin Cities-based U.S. Bank of California’s Union Bank barely made it past regulator approval, while Memphis-based First Horizon and Canada’s TD Bank canceled their merger plans after regulator skepticism, and a planned merger of Virginia’s Capital One and Delaware’s Discover will encounter a more favorable environment after the second Trump administration takes office in a few weeks.

“I have to believe we are entering a moment where bigger deals can be done,” Mitchell Eitel, managing partner at law firm Sullivan & Cromwell, said at a recent banking conference, Reuters reports.

Big banks have already been celebrating after convincing federal regulators to water down a regulatory change that would have required them to retain more profits or raise new capital from shareholders as a buffer against potential losses. Retained profits would otherwise go to shareholders in the form of dividends or share buybacks. The changes would have only applied to banks with at least $100 billion in assets. The Federal Reserve announced the watered-down changes in September, cutting the planned increases by more than half. Multiple bank executives speaking at a conference after the election saw potential for a further cut, Banking Dive reports.

Elon Musk’s calls to “Delete CFPB” aren’t coming directly from a big bank, but they do foreshadow the neutering of an agency that has increasingly been a thorn in big banks’ side over the course of the Biden administration. Since 2011, the Consumer Financial Protection Bureau has gone after fraudulent or predatory fees charged by banks and other corporations, returning nearly $21 billion to more than 205 million consumers. The Biden administration initiated new crackdowns on late fees from credit card companies and “Buy Now-Pay Later” firms and just finalized new limits on overdraft fees.

If Musk has his way as part of the still-nebulous, quasi-governmental “Department of Government Efficiency,” the Consumer Financial Protection Bureau could be in his crosshairs. It would take an act of Congress to actually eliminate the bureau, but with a Republican-controlled Congress now in power, that’s one step closer to happening.

Defunding community development

The first Trump administration sought to eliminate funding for programs that have become pillars of the community development ecosystem across the country, including the Community Development Block Grant program and the Community Development Financial Institutions Fund. Community development industry groups and also state and local officials lobbied Congress to keep these programs in place, finding bipartisan support by citing projects and communities in red and blue districts that benefited from either program.

But lobbying to maintain these programs requires political capital that could have been spent on scaling them up. Community Development Block Grant funding has fallen steadily since its early years, accounting for inflation. Meanwhile, the number of communities meeting population requirements to receive a share of direct funding from Community Development Block Grants has steadily risen — which means smaller and smaller slices of a shrinking pie.

Republican politicians have defunded or attempted to defund the CDFI Fund since it came into existence during the Clinton Administration. The fund has bipartisan support in Congress today, but the Trump administration still attempted to defund it under its first few federal budget proposals.

Congress appropriated a record $324 million for the CDFI Fund in the federal government’s 2023 budget. In recent years, the fund has ramped up its support of community development financial institutions in Native and tribal communities as well as new and emerging community banks and credit unions. According to the U.S. Treasury Department, community development financial institutions leverage $8 in other funding for every $1 they receive from the CDFI Fund.

The first Trump administration attempted to defund or eliminate at least 66 programs in its budget proposals, according to The Hill. Other notable defunding targets include the Economic Development Administration (which includes 500 locally-led revolving loan funds across the country), Community Services Block Grants, the Choice Neighborhoods Program, the HOME Investments Program, NeighborWorks, the Appalachian Regional Commission and the Delta Regional Authority.

“I can’t predict whether or not there’s going to be additional funding — what I can say is that everybody is behind the idea of bolstering U.S. economic competitiveness and U.S. national security,” Acting Assistant Secretary of Commerce and Economic Development Cristina Killingsworth, said in a recent media briefing about Economic Development Administration programming, Technical.ly reports.

The Greenhouse Gas Reduction Fund’s uncertain future

The Greenhouse Gas Reduction Fund is finally here. Created under the Inflation Reduction Act in 2022, after two years of rulemaking and program-building the $27 billion initiative is only just starting to see dollars reach actual projects on the ground via the flock of organizations selected to implement its various streams of funding.

The good news is that award contracts have been signed, so the incoming administration technically will be under legal obligation to spend those dollars as agreed upon. There are eight large recipients or recipient teams handling the biggest chunks of the fund, as well as 60 smaller recipients under the Greenhouse Gas Reduction Fund’s Solar for All initiative.

Read more: Understanding the EPA’s Massive New Investment in Emissions Reduction

We’ll dive deeper into Greenhouse Gas Reduction Fund recipients in an upcoming story, but suffice it to say for now that the Greenhouse Gas Reduction Fund has been designed to support deals financed by private or quasi-public institutions. There’s a particular emphasis on institutions that show they are mission-oriented in some way, including community development loan funds, community banks, credit unions, economic development agencies, or state energy departments and energy authorities. Many of these institutions have already been on the lookout for renewable energy or energy efficiency projects that would be eligible to reduce their cost of financing using Greenhouse Gas Reduction Fund dollars.

With a GOP-controlled Congress alongside Trump in the White House, there’s no telling at this point how the political winds might affect the Greenhouse Gas Reduction Fund. Some of the early projects it has funded are in red states, which suggests the strategy will be similar to the CDFI Fund (which shares many of the same funding recipients): making sure the funds support projects across a wide enough geographic area to win support across the aisle.

States think big, from CRAs to public banks

While advocacy at the federal policy level may be mostly about defending the status quo during a second Trump administration, these next four years provide a real political opportunity for state and local officials. By showing a clear contrast with whatever is happening in the nation’s capital, local and state leaders can think big and set themselves apart.

Take, for example, state-level Community Reinvestment Acts. Taking their cue from the federal version, the basic idea is whenever states require a license for lenders, states would periodically evaluate each licensed lender to see if it is systematically excluding low-income or other designated communities.

At least eight states already have some version of CRA on their own books, according to the Consumer Financial Protection Bureau. Several are more expansive than the federal CRA, which only covers banks. Credit unions are covered under state-based CRAs in Connecticut, Washington, D.C, Illinois, Massachusetts, New York and Rhode Island. Non-bank mortgage companies, which today make the majority of mortgages across the country, are also covered under CRAs in D.C., Illinois, Massachusetts and New York.

The Illinois CRA, which passed in 2021, was the first to include assessing racial discrimination as part of evaluating institutions for compliance. After three years of heated rulemaking negotiations, the Illinois CRA’s regulations received final approval in April 2024.

New York, which only added mortgage companies to its state-level CRA in 2022, just initiated the rulemaking process for that expansion.

Another new year also marks another set of legislative cycles for state and local lawmakers looking to create government-owned banks. Last year, Wisconsin joined the growing list of states where legislators over the past few years have proposed the creation of such institutions as a way to divest from big banks while also strengthening local or statewide economic development.

Read more: A Major New Step Toward Public Banking in Rochester

The proposals mostly follow the model of the 125-year-old state-owned Bank of North Dakota. Government-owned banks would provide bank deposit services for state or local government entities as an alternative to the private banks where they currently have an estimated $726 billion deposited in their various accounts — excluding the $9 billion that the state government of North Dakota has deposited in its state-owned bank.

On the lending side, the Bank of North Dakota partners with local financial institutions to support economic development across the state. Proposed city-, county- or state-owned banks across the country would work similarly. Making loans primarily in partnership with local private institutions helps guard against excessive risk-taking and corruption in loan decisions.

Last year Next City covered a new type of proposal in Rochester, New York, under which state-level legislation would create a bank jointly owned by the city of Rochester and the surrounding Monroe County. As envisioned, it would hold municipal and county deposits while supporting local economic development using the North Dakota model of partnering with local financial institutions. The legislation has the support of other local elected officials in Rochester and Monroe County, including Rochester Mayor Malik Evans, as well as at least one local credit union.