RIP Rust Belt
When the domestic steel industry all but died in the 1970s Pennsylvania along with other steel-making states took on the title “rust belt.” It aptly described the economic devastation brought about by the collapse of steel and its impact on communities throughout Pennsylvania, Ohio and the mid-west.
It took a while – about 50 years – but for Penn’s woods the end of the rust belt era came on May 30, 2025 when President Donald Trump took to the stage at a rally in West Mifflin, Pennsylvania to announce an historic deal between the iconic U.S. Steel and Japan’s Nippon Steel.
The deal preserved the presence of U.S. Steel’s headquarters in Pittsburgh – the Steel City – and included billions of investment dollars to upgrade U.S. Steel’s plants in the Mon Valley destined to not only preserve steel and steel-related jobs, but to create thousands of new jobs. It was the most significant development for steel since the discovery of fire.
It isn’t just the U.S. Steel/Nippon Steel deal that has helped Pennsylvania shed its rust belt image. A series of significant events have taken place which are reviving our state’s economy. Most notable is the discovery and development of gas in the Marcellus Shale play. Pennsylvania sits atop more energy than Saudi Arabia. The natural gas industry has revived formerly moribund communities across the state’s northern tier.
Energy would play an even bigger role if state government would get out of its way. Former Governor Tom Wolf embroiled Pennsylvania in the Regional Greenhouse Gas Initiative or RGGI. RGGI is essentially a carbon tax and the state’s participation in the agreement is currently before the courts. RGGI is the sword of Damocles hanging over the head of the industry and has stalled development. If the courts consign RGGI to the dustbin of history the gas industry is poised for expansion.
And then there are promising signs that Pennsylvania is not dependent only on steel and natural gas. The community of Homer City in Indiana County was devastated by the RGGI induced closing of the Homer City Generation Station, once the state’s largest coal fired power plant. But, the site will have rebirth with the construction of a natural gas fired power generating facility.
A 3,200 acre campus will generate enough electricity to power Manhattan – double the output of the former coal plant. That output will power a co-located data center campus. Thousands of construction jobs and an estimated 1,000 permanent jobs will be created as a result of the project.
In southcentral Pennsylvania the shuttered Three Mile Island nuclear plant will be brought back to life by Constellation Energy which has entered into a 20-year agreement with Microsoft to help supply the power needed to operate its date centers in the PJM power grid. An estimated 3,400 direct and indirect jobs will be created due to the project.
These addition capacity inputs to the power grid are especially timely as Pennsylvania is attracting data centers which are enormous consumers of electricity. Amazon has announced a $20 billion investment to expand its data center infrastructure for Artificial Intelligence (AI). Its new facilities in Northeastern Pennsylvania will offer training and education programs in support of the projected creation of 27,000 jobs.
Taken together these and other recent developments show Pennsylvania is not only securing the future of legacy industries, such as steel, but is becoming home to emerging sectors of the U.S. economy.
There are, however, looming concerns. The aforesaid mention RGGI has stalled the development of our natural gas resources along with the pipeline and other infrastructure construction that would position Pennsylvania as a major worldwide energy producer.
State government policies continue to hamper economic development. The 2025 edition of Rich States/Poor States produced by the American Legislative Exchange Council ranks Pennsylvania’s business climate at 36th among the 50 states.
Among the factors driving the poor ranking is Pennsylvania’s top marginal corporate income tax rate – we are 48th in the nation with only two states having a worse ranking. Governor Josh Shapiro campaigned on a promise to accelerate the rate of lowering that tax. That is a promise he has yet to keep.
Tax rates, along with the complexity, cost, and time it takes to navigate the state’s regulatory bureaucracy cause many businesses to by-pass Pennsylvania. Lowering taxes and reducing regulation would greatly accelerate economic development in the state.
It is a testament to the power of the free market system that despite all of these speed bumps the Pennsylvania economy has shaken off the rust of the last 50 years. Now, if we can just get out of our own way, we can once again become the Keystone state in the nation’s economy.
(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal and American Radio Journal. His e-mail address is [email protected].)
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