tv U.S. Senate CSPAN May 3, 2010 8:30am-12:00pm EDT
>> now remarks on the state of financial markets and their role in the u.s. and world economy. from citigroup ceo vikram pandit. he spoke last wednesday at columbia university as part of their lecture series, "the world leaders forum." [applause] >> thank you for that wonderful introduction. thank you for making me relive the last two years. [laughter] and i really think the introduction was rather complete. should we go to q&a? what do you think? [laughter] anyway, it's wonderful to be here back at columbia. obviously, this community holds a very special place in my heart, and it always will. when i first came to the campus in 1973, i was 16 years old, and so i literally grew up in morningside heights. now, i've got to admit, it took me some time. i spent nearly ten years here, and i really do want to thank the university for its patience.
what struck me about columbia was that you were really never far from the real world, and lee is very correct in saying that columbia is an incredible, diverse place with a large international student body, a global university, and by the way, there was never any pressure to conform here. and sometimes there were endless debates and each of us had to find our own way, and in many, many ways i left the university extremely well trained for the world that i'm in. i was also one of those people who was fortunate enough to find my calling early in life. i didn't really have a game plan, but i guess good things happened if you are well trained by university and doing the kind of work that you like, and so today i'm here as a grateful alumnus of the university, and, of course, also as the chief executive officer of citi which is one of the world's great
financial institutions. we're a company of 265,000 people in 160-plus jurisdictions. we have more than 200 million customer accounts. we serve clients big and small including 99% of the fortune 500, and we call ourselves america's global bank. and by the way, most days it's a great job. but every day it's an exciting and challenging job with a sense of purpose because citi has the ability to open up opportunities for millions of people around the world and to be a force for positive change. as lee said, i've had this job since december 2007 during a trying and difficult period for millions of people. i came aboard during the financial crisis. citi lost billions of dollars. we needed help from the u.s.
government. our shareholders suffered, so did our employees, and sadly, we had to let thousands of good people go with. thousands of good people go. a lot of americans are hurting these days as well, and for many, many of them their pain is worse than anything we've had to deal with at citi. they're hurt, they're angry, and much of that anger is directed at the financial services industry, and i don't blame them. it's easy to see why. the industry contributed to our nation's economic slump which has brought about a 10% unemployment rate and to foreclosures that force people out of their homes. ordinary americans think bankers don't understand them. worse, worse yet they believe we don't care about them. that's not a good place to be for anybody, for our country, us, any of us here in this room. so over the last two years we've
been working very hard to remake citi from top to bottom, and we're making much progress. we've got much to do, but we've also done quite a bit. and to fully succeed, we must take the responsibility for showing them, showing the american people that we do care. citi is committed to serving our clients' interests, helping individuals and families in financial distress, promoting economic recovery and supporting the reform of our financial system. today we find ourselves in a very new position of financial strength from which to pursue these goals. so this evening i would like to share with you how we dote to finish got to this point, one bank's journey through the financial crisis. i want to share with you what we've learned, how we're different today, our views on how regulation needs to change, and our commitment to what we
call responsible finance. and i fully realize that we have to live what we say and make our words become actions, but that's my job. let me start by addressing what i think what went wrong in the markets leading up to the financial crisis. citi, like other financial institutions, was a creature of its environment. that precrisis environment was characterized by a vibrant financial market. it seemed to offer an abundant, bottomless pool of financing and capital. thanks in large part to securitizations, the rise of the shadow banking system and the acronyms they spun off like cdos, sivs and others. in that environment aggressive procyclicalty defined the mentality. very smart people defined and measured risks in ways that made
traditional concepts appear primitive. the markets convinced themselves that risk was actually declining, shareholders came to expect their companies to generate the high returns they saw other companies churning out. consolidation became synonymous with strategic success, and size mattered more than ever. market players even assured themselves that there was suddenly new financial engineering that could transform illiquid assets into liquid form, and all the while we were assured that this time it's different. and david weinstein talked about this. this is a phrase that the world has heard and heeded all too easily not only since the second world war, but all through the 1800s and 1900s and each time on the eve of a major upheaval in the markets.
citi rapidly grew both its balance sheet and off-balance sheet assets to historic highs in both size and leverage, and the wisdom of asset diversification gave way to concentration in ever-larger amounts of real estate and consumer lending. as a result, at the peak of the housing market citi, like many others, was highly exposed to u.s. housing and the u.s. consumer. citi and many other financial institutions took comfort from the fact that the many of the securities that they held were highly rated, and they were insured. and in retrospect we know that this was false comfort. so what did we do at citi to pull ourselves out of this crisis, to build a new citi and to learn and to remember the lessons of the you are the -- turmoil that we've lived through
over the last two years? after i became ceo, my management team and i focused on three immediate priorities. financial strength, strategic clarity and cultural change. we moved extremely fast to shore up the financial strength of citi, and we succeeded. we raised tens of billions of dollars of capital. since our peak in 2007, we reduced our assets by over half a trillion dollars, we completed 43ty vestures, our annualized costs are down $13 billion and, unfortunately, we had to lower our head count by 110,000 people. and by the end of last year, citi was amongst the strongest banks in the world by most of the credit loan measures on capital and liquidity. along the way we received additional help from the u.s. taxpayers in their form of
t.a.r.p. investment in citi. by the end of last year, we had paid back that investment with a substantial return. for taxpayers. however, and i've said this again and again, i will continue to say this publicly, we still owe the taxpayer a large debt of gratitude which we are committed to repaying by remaining an active contributor to the american economy and the communities that we serve. to be a bank means to take deposits, make loans, provide payment systems and custodial services, financed rate, facilitate capital flows through trading and underwriting all with confidence and trust by focusing on banking basics. citi will be ultimately 40% smaller in size from it peak in 2007. we also resolve to concentrate on why we're distinctive and why clients need us.
our most distinctive competitive advantage is citi's unique ability to connect the world through an unparalleled international presence. in addition, we changed our business model from one of capital deployment to client seven terroristty. seven we vowed to focus on client interest, and that's much more a platitude because financial companies, including citi, often stray from this principle. transactions trump relationships, and often with an emphasis on trading for the bank's own accounts. a best bank serves the interests of its shareholders and employees by concentrating on what is best for its customers and on building relationships with them, and that is a clear, clear lesson of this financial crisis. we also recognize that our strategy could only be as good as our people. financial services is a people
business. we had to make some critical changes in personnel and senior management and in the leadership of our businesses. we had to have a world class team sharply focused on the basics of banking. in addition, citi made changes to its board of directors including the recruitment of individuals with deep experience in banking and other elements of the field. and finally, we resolved never to compromise our financial strength again. it has to be at the core of our strategy. we made extensive changes in the citi's risk management systems, established tough new financial discipline and returned to traditional, more conservative assessments of risk. let me talk about a third priority, cultural change. clearly, something that's much more intangible, but to me it's absolutely essential. and it is at the center of what i'm going to talk about next.
a sound culture internalizes strategy and drives constructive behavior every day. a culture of responsibility is a very powerful force beyond rules and beyond regulations to help guard against bad judgments, temptations to push the envelope, and the impulse to act in self-interest first. so we at citi are creating a unified culture that's built on the values of responsible finance. no one, including me, wants to see a repeat of 2008-2009, but here's the problem; in five, ten, twenty or thirty years people involved in the midst of an economic bubble are unlikely to see beyond the illusions that it creates. their memories of what happened in 2008-2009 will be dim, maybe even nonexistent, and they could repeat history. they could succumb to
all-too-familiar pressures that we just saw over the last many years. to them, risk in market will appear to be coming down creating pressure to increase risk leverage and take more risk. shareholders will demand more and more profits as they view mounting returns for other shareholders. clients will say to their financial advisers, what's wrong with you guys? my friend's adviser is getting him 30% a year, and media and pundits on wall street will say to ceos, you are just too risk averse. you're living in the dark ages, get with it. managements, board of directors and government officials will all feel these conflicting pressures, and when they react, they will turn up the heat within the whole system, and that climate pseudoexperts and even people who are generally smart and wise will reassure everyone this time it's
different. just as they have repeatedly done in the past. and we know it won't be different. so what cowe do -- what do we do? does history have to continue to clone itself? how can we make sure the lessons that we've learned are embedded in our collective memory so that we can at least mitigate future crises? we thought about this a lot, spent a lot of time thinking about this for citi. how do i create an institution for the future? we thought about it for the system, how do we make sure the system internalizes the learning? the and i know of only two answers. one is regulation, to try to hard wire the learning from this era into the financial system, and the other is culture. each financial institution can create a culture of responsibility. but let's be honest, neither answer is likely to be complete.
history has clearly shown that there is not a correlation between the enactment of more laws and the end of great financial crises. and by the way, smart people with self-interest will always find a way around the letter of the law. we do need a new global order for regulators, bankers, administrators that'll either substitute or supplement existing frameworks with the goal to stay ahead of crises. realistically, the goal is not to stop crises, but to mitigate them and have the tools necessary to effectively planning them -- manage them. so one of the reasons i'm really here tonight is that i'm at the right university with the right group of people, the right minds. the best minds anywhere for addressing the question in the world, and the country needs your best thinking on this. how do we create a global banking and regulatory structure that constantly enables us to
learn and stay ahead of crises? how do we insure that there's clarity of principles by which to run the system with continuous updating of laws, regulation and other tools to take into account new products, new ways of doing business and new technologies? can we change the approach to evaluate whether this time it's really different, or can we even hope to? let me go back to citi's responsibility. i believe a strong culture of responsibility is a significant part of the answer. its purpose is to insure we serve client interests, and we are a force for positive change in the world. i should point out that in my experience the type of business you are in significantly effects culture. there is truth in the notion, for example, that banking has one kind of culture and retail brokerage has another kind of culture.
it's very different. within our diversified financial services company you can find a variety of different cultures, and i think, therefore, by returning to the basics of banking we're helping set the fundamental tone for the culture that we want at citi. i believe that the systemic, that the systematic pursuit of responsible finance is ultimately the way to embed in citi an institutional memory that deeply impacts the behavior of both current and future employees in all our businesses and at all levels of our company. it is intended to guide citi's behavior when private economic interests conflicts with public interest. and its precise meaning will evolve with changing times and changing definitions of what's in the public's interests, and perhaps it offers some basis for culture change on a larger scale on the system as a whole.
today we have three core principles that are responsible in finance. first, citi's activities must contribute to the economy and to the global economy, and today citi must contribute to america's recovery. by practicing the basics of banking, we assist people in distress, help businesses grow, support the financing of public projects around the world. for example, since the beginning of the u.s. housing crisis in 2007, we have helped 900,000 homeowners in their efforts to avoid foreclosure. we lend actively to businesses after owl size with -- of all size with a special focus on small and mid-sized companies that have trouble obtaining the financing where they need. we're leaders in exporting american goods and services and we're one of the biggest sources for financing for schools, hospitals and other vital infrastructure projects. the second principle is that our businesses must be all about our
clients. our products and services must promote customer choice and control over their financial lives. that's why, for instance, we've had some of the industry's most pro-consumer policies on fees and overdrafts. it's why we invest tens of millions of dollars in educational programs that provide scholarships for college education as well as counseling and instruction on financial matters for low-income individuals and families, and it's also the reason why our strategy and business model are designed to use our capital for clients versus proprietary trading. the third principle is that we'll be a strong advocate for systemic safety and for forward-looking global financial reform. that, by the way, starts with making sure our house is in order always and that we run our businesses prudently. but it goes beyond that, and i
have publicly and often advocated reform that will protect consumer interests and strengthen confidence in our financial markets and institutions. until entire citi organization around the -- the entire citi organization around the world has joined me in this endeavor, and the fundamental principles of reform that we advocate today are exactly the ones that the president talked about last week, and i think lee mentioned some of these a little bit earlier, but banks should be banks focused on serving clients. banks should not speculate with their capital. markets need to be transparent. derivatives should be cleared centrally and settled centrally. we need a strong federal consumer authority to protect consumer interests. we should end, once and for all, the phenomenon of too big to fail. we should have a strong systemic regulator. it is essential, absolutely essential to have a level playing field across the global
financial industry, and we need a merit-based compensation system driven by long-term performance. we belief these principles of regulatory reform can create a stronger financial system and bring wall street and main street closer together. still, the broader challenge is to create a global banking and regulatory system that constantly learns from experiences and stays ahead of crisis. and let me remind you again that this is where i hope the world gets help from some of the superb and well-trained minds here at this university. and, obviously, we're thinking long term. now and then i contemplate what citi will look like in five years, ten years, twenty-fife years, thirty-five years from now, and i don't know what the markets are going to look like or who our competitors are going to be or how the economy will fare in 2020 or 2035, but i do
believe the right culture will serve us well. someone said that a corporate culture is nothing more than how we do things around here, and our culture will be shaped by responsible finance. my responsibility at citi is to build that culture, and that will be my most valuable legacy. at the institution. both citi and columbia are great institutions, and they've been around for a while. and our histories are quite intertwined. this world-renowned university was founded at kings college in 1754 in lower manhattan. it students included alexander hamilton, our nation's first treasury secretary who went on to found the bank of united states. when that bank lost its charter in 1812, a group of merchants formed the citibank of new york,
today's citigroup, and took over the national bank's old headquarters on wall street in 1812. columbia and citibank have survived the war of 1812 with citibank having opened it doors only two days before the war. survived the civil war, the financial panic of the 19th century and the great depression because they were blessed with leaders who acted as stewards of great institutions. during hard times people who feared bank failures brought their money to citibank because we were known as prudent bankers. our reputation was quite literally our most valuable asset. so today whether we study or teach at columbia or work at citi, we do so because of the integrity and dedication of those who came before us, and we owe them a great deal. we can repay that debt by enhancing the quality and reputation of these great institutions and by using their
power to make the world a better place, and at citi that is my purpose as we move forward. so, mr. president, thank you for inviting me to speak here today to this wonderful group. i thank you very much, all of you, and i'm ready to take questions. [applause] >> so thank you very much, vikram. i think i'll just ask one or two questions, and then we'll open it up for people to go to the microphones. i have a complicated question to ask at the beginning, not surprisingly, i suppose. i'm very struck by the way in which you characterize how the world got to the point it did in
2007 and how that world is likely to come again. so what you described was a world in which actors whatever they thought initially convinced themselves of things that turned out to be not true, or they felt trapped in a system where they had to act contrary to what they hoped they could get out early enough. so that's the bubble. it's a mass hysteria, it's a psychological problem. and to the people like me who think about constitutional law, this is not a new phenomenon. we have a bill of rights because democracy loses its bearings,
people become frightened. rather than e bull cent and create market bubbles, they become fearful, and they oppress minorities and treat people badly. and as a way of dealing with that, we put the bill of rights to a constitution, we took the power to enforce that or deal with that problem out of the political system almost entirely. lifetime appointments for judges, a culture of hording the constitutional rights and so on. my question to you is, if you were sort of in an ideal world -- forget about the politics of the moment -- and you were trying to have a constitution, a bill of rights for the financial bubbles, what kind of social structure do we need to help us stop that from happening? now, the fed is not there.
it's still -- what kind of structure do we need, what tools are there? >> well, i would start by recommending against lifetime employment for ceos. i don't think that's a good idea. [laughter] but i think that is the question, and there are a couple different aspects about bubbles we need to think about. there is the psychology part, but there is also an informational counterpart. somewhere along the way the markets just did not have the information necessary to absorb what was going on and, therefore, give the markets a chance to succeed. and we found that out here. i mean, we did, we knew nothing about the extent of the cds portfolio, credit default swap portfolios in sound institutions. that particular market went from a few billion dollars early 2000 to over trillions of dollars in a very short period of time. by the way, lots of issues
against transparency in the securitization market. so there are issues about social structure we can talk about, but there is one fundamental principle i think that's absolutely critical which is that around the world we have to endeavor to always change rules, always change laws to insure we have continuous transparency. now, that's easier said than done because there are lots of vested interests behind not wanting transparency. by the way, some of the dealers who deal in these markets are the first ones to say, how does it help? but if there is one principle that we have to abide by, it is give capital markets a chance to work, and they have no chance of working unless they have information that they need to clear. that's the first thing. now, it gets very complicated.
the reason it gets complicated is that we do live in a political economy, and you'll know also not only as a student of the constitution, but as a student of history that some of the biggest changes in the constitution happen around economic disasters as well, or the biggest changes in laws or regulations happen around when economies turn. so the question of how you institutionalize some sort of learning, and you used the bill of rights, etc., to make it happen is incredibly difficult because we live in a global market, yet each country is going to have its own ideas about the kind of political economy it wants to run. witness what's going on in europe today. and in that scenario, it's very difficult to come up with something that works. the closest thing we have is the federal reserve bank. the closest thing anybody has is
the central banks around the world, but those, too, are a bank in every country. could we hypothecate a global central bank? but how would it work? so these are some real practical issues. these are not questions of theory, these are questions of practice. >> right. >> and i keep coming back to saying if we follow one principle which is the principle of transparency and take the pain that goes with that, we can be a lot better off than where we are. it's not going to solve all the issues. there are going to be market failures, but we go a long way down the road. .. the kind of global economy
we're doing with the same degree of sovereignty. that states assume. a, do you think that's right? b, how do you see that unfolding? >> obviously, sovereignty is a political question. and it doesn't matter what i think. it's a matter of what the people in the country think. what they want. and so that is always going to be the case. that's not going to change. but think about -- think about sovereignty or rather governance in a very different way. what are we learning from the capital markets?
there's a wonderful real life example we're going through in europe. where a group of countries got together and said no individual currency. we've given up national sovereignty of printing local money. but we are adapting one currency. and then we have examples of certain countries who actually have lost control, therefore, off their credit ratings and their financing because they can't print money. they are far off the euro. now, the ultimate governance mechanism in some ways here is the bond holders who own sovereign debt of certain european countries telling them what they need to do. and so ironically, yes, there's political sovereignty. but the capital markets tend to take over economic governments very well. and that's the phenomena we're going to have to live with. and, therefore, the need of
global coordination and the need for really thinking about the financial side of the equation for countries around the world is that ultimately the capital markets will speak. and as they speak, they will control your economy. and they'll control what you need to do. and -- but learning through that and getting there is a difficult process. i must say that having gone from g7 to g20 is absolutely terrific. >> right. >> and that's a great vehicle to start with. it may not be complete. it may not be perfect. but it's a very positive step. >> but your thought here is that sovereignty is going to give way where there's going to be huge pressures on sovereignty but it's not going to come from a global financial system to respond globally but it's going to come from markets demanding that countries behave in certain ways that they may not want to. and they're going to cede some of their sovereignty. that's what -- >> i think and the history of
that is clear and the countries in latin america and in europe, the bond holders are telling countries here's how you manage your economy. >> yeah. >> and so all of a sudden it's more what the population is thinking. it's about what it is that the capital markets think 'cause you need the financing to keep the economy going. >> so let me just ask one final question from me. and it's a light question. >> just like the others. >> yeah. do you enjoy your day? i mean, do you really like going to work? [laughter] >> okay. let's go to -- [laughter] >> yes. >> yes, thank you. i was very gratified, sir, to hear your opinions of how banks -- >> and we will leave the last few minutes of this program to go live now to the u.s. chamber of commerce. a number of the nation's governors among those participating in a summit on the
economy in job creation, uc former education secretary margaret spellings who's the vice president. the national chamber foundation is one of the host of this event. it's just beginning. you're watching live coverage on c-span2. >> a broad range of sectors including manufacturing, information technology, health care, and oil refinery and on and on. and why don't we take a moment and let each of our chamber and business leaders tell us their names, what their businesses are. and what state they're from. so that the governors can have some feel for who we're visiting with. and we'll start down at the end with you, bill, from delaware. [inaudible] >> thank you. [inaudible] >> thank you, jim. [inaudible]
>> thank you. [inaudible] >> leeann cravits i represent fidelity. and margaret, it's great to see you and it's wonderful to see everyone else here and to be with our governor. >> i'm the president and ceo of the new mexico based company encorp. we manufacture solar cell for space and power implications. >> i'm joel and at chatham university and i come from los angeles. >> philip zimmerman practice strategy group. we worked on the report. >> tom donohue -- [inaudible]
>> i'm the chief operating officer of the u.s. cham. >> stan, manager of the chamber's campaign for free enterprise. >> bill little with the "a company out of chicago. >> i'm from a small chain in west texas, a company my wife and i started when i was 22 and she was 20. glad to be here. >> russell kitchenner in charlestown, west virginia. we work with students around the world most of whom are active duty military. >> steve roberts, the west virginia chamber of commerce. >> harry steagall, president and ceo of hms technologies. we are a service disabled owned business technology provider in west virginia. >> all right. well, we're going to hear from all of the governors today, obviously, as well as from you all as we react to some of our topics.
we're also going to hear from joel and dolores zimmerman about a study that we have commissioned that they've worked on for us called enterprising states that you should have before you, which provides an analysis of state job creation strategies. and identifies high performers in a number of areas. the goal of this study is to provide a snapshot of effective policies and programs from around the country. and to highlight the good work, the great work that states are doing now to grow jobs. this study really demonstrates what laboratories are in reform our states are and our human capital and economic potential states have. it provides practical examples of creative policymaking all over the country. and makes clear the spirit of entrepreneurship and innovation that is weathering the economic storm. while my recent policy experience has been at the federal level, i have had previously in my career the opportunity to work for two governors.
and i know that governors are the leading policy innovators when it comes to reform. and particularly with respect to job growth especially in times of economic difficulty like we have today, it's vitally important that we know what's happening out in the states, the kinds of challenges that are being faced and met by our governors and the private sector. and we hope that today's discussion will better inform all of us. those of us here at the u.s. chamber, governors, business leaders about the good work that is going on. so before i turn the program over to our leader, tom donohue, i'd like for you all to look at a very brief video about our campaign for free enterprise, the dream big campaign. it's about a 2-minute video. ♪ >> it's in the air we breathe. dirt under our fingernails. we hear it pounding in the night. feel it in our bones. americans have always dreamed big dreams.
dreams so big we've needed skyscrapers to reach them and families to pass them on. stone and steel to build them. and generations to keep them safe. american dreams so powerful they become an economy. and built the greatest nation on earth. american free enterprise, it sets our nation apart. it makes america exceptional. it's the unstoppable power of 300 million americans dreaming big and rolling up our sleeves. our challenge, create 20 million new jobs over the next decade. washington can help in times of trouble. but enterprise is what america is counting on to create jobs and growth for the long haul. and that's what free enterprise does best. your dreams make the difference. it's the idea that came like lightning that became the
business that created the paycheck, that fed the families who, who supports the community, that becomes the american economy. free enterprise is the unlimited potential of the american people. it's the innovator who likes questions better than answers. it's working late into the night. so hard, the sweat tastes sweet. free enterprise is the entrepreneurial spirit that keeps us striving for success. american free enterp♪ >> so let's get america ready. learn more about the 20 million job challenge. stand up and speak out for free enterprise. your dreams provide the energy, imagination, and opportunities to build a better future. for ourselves and our children. join the campaign for free enterprise. join the pledge. and always dream big. ♪
♪ >> what if we found a way to grow our economy naturally, bottom-up and create the jobs of tomorrow? what if we found a way to reward the dreamers, the innovators, the workers who put in the hours to roll up their sleeves? we have. a strategy for new american jobs. it's how american free enterprise can create the 20 million new jobs we need in the next 10 years. we can put americans to work. and doubling u.s. exports, rebuilding our infrastructure, expanding credit and investments, transforming education and leading world in cleaning energy technology and reducing economic certainty with responsible economic policies. join the discussion at freeenterprise.com and connect on facebook. support the u.s. chamber's strategy for new american jobs. more dreamers make the difference in american free enterprise. it's you so dream big.
>> thank you. now it's my pleasure to introduce the president and ceo of the united states chamber of commerce tom donohue. thank you, tom. >> thank you, margaret, good morning, ladies and gentlemen, governors, welcome. we're honored to have you here today. i think i'd like to start my comments by expressing my appreciation to our cochair men governor bredesen and governor pawlenty. now, unfortunately, due to the floods and severe storms in tennessee over the weekend, governor bredesen had to go home. and governor haley barbour is stuck with his problems down in mississippi. and as we were having some conversations up here, there are challenges in our country today. and those challenges are most effectively going to be met by
the governors and we are, therefore, particularly pleased that you'll be here. and governor pawlenty, thank you to you for carrying both sides of this issue today. as you know, the governor is most innovative governor in the country. he's held the line of taxes and improved k-12 education standards and made minnesota a leader in energy reform. leaders like governor because pawlenty and bredesen are bringing economic growths to their states and to our country. we appreciate their leadership. and again, appreciate their participation. i'd also like to join margaret in thanking all of the governors, the state chambers, and the business leaders for attending this event. together, they represent the three most important groups to our economic recovery and long-term growth. why? because only the private sector can create the 20 million jobs
we'll need in the next decade. the federal government can help. they can help stabilize a faltering economy in some ways. but it is no substitute for businesses large and small that create almost all of the new jobs. we have many representatives of these innovative and job-creating businesses here today. and you'll hear some of their stories. and where are these jobs being created? at the state and local level, of course. that's why we're so pleased to be hosting this bipartisan group of leaders. they play an essential role in creating the right conditions in which businesses can form, grow, and prosper. those of us inside the beltway tend to think from time to time of washington as the center of the universe. and the chairman of our foundation, bill little, reminds me every day that we're a
different part of the universe but clearly not the center. justice brandeis had a very thoughtful comment. he said the states are the laboratories of democracy. where a commonsense solutions we would say innovation, experimentation and bipartisanship occur far more frequently at the state and local level than they do here in washington. we invite state chambers here because governors and businesses have no greater ally in economic development. they do a good job. by the way, they also go out and try to get businesses to come from other countries. and sometimes they come from other states to their state because they have a better opportunity for them. i was upstairs at a breakfast this morning with some leaders from indonesia. and they had a fascinating question. why are american companies going so many other places around the world? and not coming here?
and i said, why are foreign countries investing in so many countries around the countries and you're not? and what can do you to help yourself attract business? and i thought about the governors. and what they do every day to encourage people, encourage companies not only to come to their state and stay in their state but to succeed in their state. they help businesses get started. they promote their growth. and advocate for good public policies and they can bring the private and public sectors together to formulate shared goals, coordinated actions and to solve the challenges that american business faces. the chambers represented here today do all those things exceptionally well on our behalf. what unites all of us is a shared belief in the power and principles of free enterprise. together, we're pursuing an urgent goal. getting our economy back on its
feet and on a path to sustained growth. jobs are priority one. but when it comes to job creation, the question is, what works and what doesn't? what can states learn from one another? what are economically successful states doing that others should consider? and that's what we're here to talk about today. to find solutions we must first understand the scope of the challenge before us. we're all very familiar with what's happening at the federal level. some good, some not so good. spending and deficits are going through the roof. we don't have to have a balanced budget as many of you do. we just passed a huge expensive health care bill that no one read before they voted on it and very few people seem to understand. what will be the consequences, good and bad, for the states and for our businesses?
congress is on the verge of passing a sweeping financial reform bill. reform is desperately needed. and we have called for it for more than four years but it must be the right reform. healthy capital markets power our economy. we need stronger consumer protections. the elimination of regulatory dead zones. and a streamlining of duplicative and overlapping regulating agencies. if we got this reform right, we can better protect consumers, spur lending and create jobs. if we get it wrong, we can check off credit to small and large businesses across the country and stifle our recovery. in addition, we're not doing enough to reduce our dangerous overdependence on foreign energy. and our infrastructure in many ways is crumbling around us.
every governor here understands the frustration of not getting a highway bill which is the easiest of our things to take care of. what's not as well understood are the dire circumstances in some of these areas facing our states. the recession has hit many states very hard rvevenues are t a pre-2006 level. state governments face a $3 trillion shortfall in promised pension, health care and other retirement benefits. and that's a conservative estimate. budget outlooks are grim. 35 states are projecting a combined budget gap of $56 billion for fiscal year 2011. and the worst may yet be to come. if history is a guide, the most
difficult budget years for a state are the two years immediately after a national recession is declared over. it's a great time to be governor, isn't it? when washington is confronted with a lack of financial resources, it has an easy solution. print more money. run up deficits. borrow and spend. the problem is, we're getting too close to the red light and this is a serious time. states can't do that. they must balance their budgets every year, year after year. that means cutting spending or raising taxes. or both. and states must balance these decisions against the need to retain and attract private enterprise. no private enterprise? no jobs. so let's look at a number of free enterprise solutions and then we'll get on with our discussion. states have a choice in how to
deal with these challenging times. they can tax and spend or regulate or they can treat business -- and they can treat business as nothing more than cash cows. very few states find that productive. they can turn to an all-powerful federal government that will effectively make all decisions for them. they know that won't work. or they can innovate, invest, inspire, nurture businesses force the job creation by empowering people to make their own decisions. one approach is based on the belief in a benevolent federal government that knows what's best for all of us. the other is based on free enterprise. individual initiative. and personal responsibility. today we're releasing a new study that shows that states that pursue a cause based on free enterprise principles happen to fare better than those that don't. the study caused enterprising states highlights successful
state strategies for job creation and economic growth. it cites specific examples of innovative state policies based on free enterprise that have attracted more businesses, more economic activity and many more jobs. by sharing these success stories and lessons learned, we hope to create a roadmap to economic revitalization and an ongoing dialog that makes every state stronger. what do economically vibrant states do according to the study? they keep taxes low. the study found that high tax rates do not lead to either healthy economies or budgets. on the contrary, many states with the highest tax rates and the most onus regulatory regimes have experienced the worst budget crisis taxpayers and businesses are leaving their state while extraordinary state
expenditures on these issues are staying. they target investments in infrastructure projects and create growth-friendly environments in communities due to the successful states. they work hard to attract science and technology-based companies that will generate the jobs of tomorrow. they help companies large and small to export. they welcome foreign direct investment. they don'tion it. -- they don't shun it. they cultivate people for work force development and strong schools. and those are just a few of the highlights from the study. the folks who did the study will be here today to go through all the details. we appreciate your participation. let me add a personal note before i conclude. there are two points that i just made in the last couple of comments. one is about trade. the more we export and the president even took it from our
report last year -- if we would double down on exports in this country and we're the largest exporters in the world, we'll create a lot of jobs but the unions have put tremendous pressure on this white house and on this congress and we're not moving on our free trade agreements. and we're not moving to double our exports. the second thing which i take my hat off to the men and women of the states that are here on what they've done on k-12 education, a program we've all been working on because while we're going to provide 20 million jobs from the private sector in 10 years and we have 20 million people to hire, that's the 8 million unemployed and coming into the work force we're not going to have 20 million skilled educated people to do this work. and we must get about this business. so the point is, we need smart policies at the state level to lift us out of this recession. we need state leaders like those of you gathered here to foster
the free enterprise system. we need federal leaders to remember the tenth amendment to the constitution. the powers not delegated to the united states by the constitution, our reserve to the states respectfully or to the people. states need the freedom to innovate and experiment. and they must not be unduly constrained by federal mandate and the unintended consequences of massive federal legislation. we must remind all americans that free enterprise is the only system that can create the 20 million jobs america will need over the next 10 years. that's why in october, the chamber launched a positive, forward-looking campaign to defend, protect, and advance the free enterprise system. as you just saw, it's called american free enterprise, dream big. the initiative may be the most
important and the most historical one of our nearly 100-year history. we are doing events across the country in your states highlighting the benefits of free enterprise and we've run a national ad campaign more to come. we are partnering with like-minded organizations to broaden the reach of our messages. we're holding elected officials accountable for their votes rewarding those that support free enterprise. and we're reaching out to young people who are no longer being taught about free enterprise in our school systems. and we're holding events like this one where we discuss how cities and states can become more free enterprise-friendly. in fact, i was in colorado last week with a whole group of mayors who think they're really on the firing line. and it is true. and so the further you get away from mayors and governors and the closer you get here to the federal triangle, the more you are losing track of what really needs to be done.
as the facilitators of partnerships and private and public sector, state and local chambers have got to be leaders in this effort. and as the world's largest business federation, the u.s. chamber has got to stand up and take some of the lead here. the message we must carry is that free enterprise is the solution, not the problem. that given the freedom and the incentive to do so, state and local businesses can jumpstart our economy, create millions of new jobs and put us on the path to long-term prosperity. and most of all, that our recovery will come from the bottom up not from the top down. again i want to thank you for being here. for participating in this discussion and sending a fundamental message that we have got to do this from the bottom up with the people that every day are leading our country and
our states. and i thank you all for being here. and, governor, i think we're going to hear from you first. we appreciate the extraordinary amount of time you've helped us in putting this event together. and we look forward to your comments. thanks. >> well, good morning, everybody. thank you for being here. we sure appreciate it. and to tom donohue and to the united states chamber of commerce, thank you for your continued leadership and advocacy on, i think, one of the most strategically important questions and issues facing our country. and that is making sure that free enterprise remains free and continues to be the engine of job growth and investment and economic opportunity for our citizens and for our country. on behalf of governor bredesen who understandably couldn't be here this morning because of a natural disaster in his state, i want to thank all of the attendees for taking the time to be here. and participating in this discussion and particular, i want to thank my colleagues and fellow governors for taking the
time to be here in each case joe manchin in west virginia and the governor in delaware and governor richardson in new mexico and governor carcieri from rhode island. we may have slightly different views on some policy priorities but these are probusiness projob governors who have got a demonstrated record of understanding the importance of the role of free enterprise in the economy. and i enjoy and look forward to the discussion this morning. i also want to thank margaret spellings for her leadership and vision in putting this event together. as i mentioned to some before we started, it's very difficult to say no to margaret on anything. so when the phone rings, we say yes. and we want to rally to the cause. but let me just share a few reflections from my standpoint. and first of all, i appreciate the theme of this gathering, which is free enterprise. it may seem quaint, but emphasizing the word "free" matters because we understand what enterprise means but free is the opposite of burden or
suffocated or overregulated or overtaxed and the like. through public policy you can either dramatically or in increments begin to stifle the notion of free. and one of the great, i think, strengths and genius of this country and the economy of our country is the notion that we have dreamers and designers and innovators and risk-takers and inventors and others who come forward and say, one of our great advantages is our ingenuity, our sense of dynamic quality, our sense of the ability to create, the sense of ability to take risks. it's qualitatively different than much of the rest of the world. and that remains one of our great advantages. so we want to celebrate that we're free and enterprise in this gathering this morning. i was at the milk and global conference in los angeles about a week ago. i had a chance to visit with an individual who provides about 50,000 jobs in the united states of america. and i said what does the future look like for you and for your
company? and he said well, we're going to grow, just not in the united states. i said how come? he said we see most of our growth occurring in asia. i said why? he said three things. certainty, cost and people. as they take risk they want it in an economic environment that's stable and reliable as to what the near-term, intermediate term and long-term cost structure and political environment are going to look like. second of all, the issue regarding demographics, quality of the work force, availability of the kinds of people that he needed for his enterprise he thought were more prevalent and likely to go in asia and lastly, cost of structures. each state is different and i really appreciate the phrase if the book that was released this morning 50 little republics, quote-unquote, because what are the strengths and challenges for minnesota may be different in terms of our history, our
policies, the challenges and opportunities we face may be different than new mexico or they may be different than west virginia. and so each state has to customize or semi customize its approach to making sure that our states are places where entrepreneurs and innovators want to deploy capital, take risks, start businesses, grow businesses, buy capital equipment, you know, build buildings, conduct research and hopefully commercialize it locally. but in each state, there are some different measurements of challenge and opportunity. i'll share just a few reflections briefly from minnesota's perspective and i will look forward to the discussion more broadly from the job providers and leaders in the room and the governors from a public policy perspective in their state. and first of all, minnesota is a state that prides itself on its quality of life. if you go around my state and ask people, you know, what do you like about minnesota, you'll hear various things. some people might say well, i love to hunt and fish. and other people might say i love to watch brett favre and
the vikings win the super bowl or hopefully next week. some people would say we love the arts and culture and amenities and people talk about riding their bikes around lake or others say civics and getting involved in charities. and each of those things depend on one threshold opportunity and that is people can't have a good quality of life unless they have a job or an economic opportunity. it's pretty tough to go duck hunting and buy a shotgun and to do duck hunting unless you have a job. it's pretty tough to go buy vikings tickets to watch brett favre and the vikings play unless you have a job. so all of these other issues are important. but they are somewhat secondary to the threshold issue as are we providing enough jobs to provide our citizens economic opportunities to that they can have a quality of life. and so the answer to these questions of what are those things that we can do to make it more likely not less likely that people will start businesses,
add employees, build buildings, buy capital equipment, conduct research, commercialize it usually does not reside with the politicians. many of whom have not been in the private sector. i think a good way to ask and answer the question is, go ask the people who actually do it. and so go to the individuals who have been the dreamers, the designers, the risk takers, the entrepreneurs and say, what are those things that will make it more likely not less likely that you'll start a business ad jobs and on down the list? and from minnesota's perspective there are a couple of things that are both a challenge and an opportunity. the first is costs. it matters in your city, in your county, in your region, in your state, in your country how your cost compare to either your competitors either nationally or globally. now we immediately jump to the tax issue and that's very important. but costs are more broadly defined than traffic tabs. -- taxes and we have workers' compensation cost. we have unemployment insurance
cost, we have a basket of cost related to regulation and not the financial costs and the time delays associated with that. there are a bundled or basket of things that represent the costs of doing business in a particular city, state, region or country. and if those are not competitive compared to the rest of the country or the rest of the world, the flow of capital will begin to migrate away from you. so in minnesota's case our costs are too high in that regard. one of the things i've done as governor is to say we're not going to make them worse and over time we're going to make them strategically better. and i will save you the long version of it. but the short version of it is you can just put a competitive dashboard up on the wall, set aside the political rhetoric and put some data around what your cost burdens or measurements are for your state or your city or your county and see how it compares to the rest of the country and the rest of the world. in the case of my state, those costs need to come down. our value-added proposition in the marketplace probably in minnesota isn't going to be that
we're going to be the cheapest place because we have some other advantages. but we also can't be so smug about how special we think we are in terms of the quality of our life and the other amenities that we have to offer that we can provides ourselves out of the market and expect that not to affect the deployment of capital. so one of the strategic objectives from my state is to lower cost and bring them in line so we can be more competitive with the rest of the nation and the rest of the world. on the opportunity side, though, minnesota has this advantage. we have work force readiness, work force preparedness, work force success that is significantly above average or as it's said we're all above average. but we have a situation in my state with our a.c.t. scores are the highest in the nation. our n.a.p.e. scores are the highest of nation. we've took a round of testing and we placed 15th and 16th in the world. we retook those tests recently and came out fifth or sixth in
the world. so one of our value-added propositions in the marketplace is we have current and future workers who are educated, skilled, motivated, innovated and the like so that leads to some other advantages. we want to preserve that. but as a state and a nation we're going to have to squarely address the education and work force preparedness issue much more aggressively than we have recently. we cannot be a successful country of just 300 million people leaving a third of our team on the bench. that's what we're doing as a country. we have a third of our students nationwide dropping out of high school. it used to be if you dropped out of high school in the old days you could get what my dad called the strong back job. those jobs are mostly gone so now you either have an education or a skill or you're marginalized or unable to access the economy of today and tomorrow. and as importantly those marginalized individuals then become, you know, off to the side of the economy in a way that then puts more demanding and pressures on government to serve their needs.
as opposed to meaningfully accessing the private economy themselves. and it becomes a vicious cycle. so as important as the cost issue is the issue of whether our children and the future citizens and workers of this country are going to be properly educated, have a skill that's relevant to the economy of today and tomorrow. and pretty clearly that is not happening to the degree that it needs to in many parts of our country. and that's why i applaud -- i don't always agree with everything that goes on in washington, d.c. but i do applaud the recent emphasis of many of the education reforms initiatives that have been put forward to try to overhaul our education system and that needs to be a big part of the discussion as well. i look forward to the rest of the discussion. but i want to thank margaret spellings and the chamber for convening this. thank you to my fellow governors for taking the time to be here. and we look forward to the discussion unfolding this morning. thanks a lot. [applause] >> thanks, governor.
thank you for your leadership and participation and for those great comments. we're next going to hear from the researchers who had prepared the study known as enterprising states, what you have before you. joel is the distinguished presidential fellow and urban futures at chatham university. he's a senior fellow at the center for urban future in new york city and a senior consultant with a practice strategy group in fargo, north dakota. so you your own self have a bird's eye view on lots of localities from your bio. joel is an author, a columnist internationally recognized authority on global economic, political and social trends. his most recent book is titled "the next 100 million: america in 2050" which explores how the nation will evolve over the next four decades. it's a fascinating book. dolores zimmerman is chief executive officer of a study
group. she's a strategy consultant with 25 years of domestic and international experience working with local and regional economic development groups, companies and universities. she has been awarded seven small business innovation research awards from saadawi. -- usda. gentlemen? >> thank you very much. we're going to divide this up a little bit between delor and me. when you're from california you're always careful about your water. so what i'd like to do -- oh, thank you. what i'd like to do is just go over some of the statistics. i think this is a really important discussion to be having. from the beginning of this whole last two, three years it was clear to me and i think to my colleagues that the big issue was going to be jobs.
it sort of took a while for washington to wake up to that. but i think i may have people's attention. as you can see we've had very ve job lses over the last few years. and as you look at it, who's really been hit the hardest? and it really has been the minority population, the unemployed are obviously more heavily african-american and latino populations, although the pain has been somewhat widely distributed. i want to point to the numbers 16-19, 20-24. that is probably the scariest number of all. i have some very wonderful students and i asked them what are you going to do when you graduate and he said park cars. and that is something you hear more and more. more and more kids are saying, i'm going to live with my parents. i'm going to, you know, do
whatever i can to sort of stay. in worst case they go to law school. so basically -- i mean, we have an enormous amount of energy coming out of this young generation and right now it's being very much stunted. we have to be considering the idea if these young people go through another two, three, four years where their best hope is to be a barista at starbucks we've got some serious problems. you see this particularly in the blue collar population, construction, manufacturing. but again, it's been in the information sector and other sectors. but problems with construction are particularly severe. this is a movement of upward mobility. it was a strong back kind of jobs that people could get. it was very, very important. those of us who live in the southwestern united states know that there was an enormous percentage of the latino population that was involved in the construction business. and the death of that business
and the extreme contraction of that business has been very, very devastating. i can see it in my own neighborhood in los angeles. and i think this is something that you have to look at. and the whole manufacturing part of the economy, particularly in the state of california where i live has been pretty hard-hit. and even areas that you think are doing really well, if you read the newspapers, let's say silicon valley, silicon valley has viewer fewer jobs than 2000 and severe levels of unemployment and underemployment. again, this is particularly true in these fields as you can see. and the hardest hit in many ways has been manufacturing and the question whether those jobs will come back at all. the interesting thing about manufacturing is we think of it as sort of low skilled but increasingly manufacturing is a high skilled profession and its wages are reasonably high. there's a great need for skills training. i think one of the problems that
we have in this country is that -- and delor and i work in some pretty rough neighborhoods is the kids are given the choice you can either go to college and become a brain surgeon or you could work at target or you could deal drugs. that's kind of what your choices are. and kids don't understand that we're going to have a severe shortage of skilled labor. i've even been in situations in los angeles where in companies when plastic injection molding that can't get a foreman that they have to bring in from argentina because they can't find that person in the united states, yet, these people would be capable -- these kids are not making it through high school or barely making it through high school and instead they're being shuttled into a system that really doesn't push them towards skills that would actually be useful and would provide a decent life. so what's our biggest problem, the biggest problem is going to be creating about 13 million new jobs for our growing population and restoring the 7 million jobs.
we have to think about job loss not as a statistic or something that a bunch of academic economists talk about. but actually how it actually affects lives. and i have to say every day i -- almost every day i hear a story of the dry-cleaner went out. the guy who shut down hits factory or somebody who had to take their kid out of the school because they can't afford the tuition anymore. so these are really very personal things and they have ramifications over time. so, okay, i'll give you some good news. since it's been sort of not so good so far. are we of necessity in the incline? are we in necessity this recession is part of a decline in the united states? well, one of the things is when the financial crisis happened, many people here and elsewhere said well, you say the american model is all broken, free enterprise model is broken, we really have to be more like europe, i'm sure the greeks would agree with that. the fundamental thing is the united states despite all the
things that we mess up is actually doing better than most of the advanced industrial countries right now. and the question is, where do we go longer term? and this is what i wrote about in the new book. and basically we have reasonably good demographics. better than all our competitors including interestingly enough east asia which i'll talk about. they have a large growing population. it has a very resilient system. even though no matter how much washington tries to screw it up, americans manage to somehow to keep going. and that we have a very, very strong basic value system. and i think the whole idea of the little republics that thomas jefferson talked about is really going to be the core. and i think mr. donohue was on the very right track. it's going to come up from the bottom up and come from the communities and the states, come from the neighborhoods. it's not going to come from the top. now here are some just basic numbers that might be of some interest when president kennedy was elected we had less than 200 million people. we have slightly over 300
million. and most projections are around 400 million by 2050. and i think it's very important to understand that this is a -- not necessarily the most rapid rate of growth that we've had, but it is pretty exceptional when you compare it to our competitors. if you look at the age 65 by 2050, japan and germany -- you're going up around 30, 35, 40% of the population over 65. we really have no historical parallel to this ever. they've never had so many older people with relatively so few young people. in many countries. and my good friend, bill frye at brookings told me one time -- he went to japan and he said how are americans having all these kids. bill, if they have ask that question they're in more trouble than i thought. we have a younger population. that's a great advantage over time. and i think by the way it should be pointed out that not only
japan but korea and eventually china are all going to run into the same thing. the one-child family will have ramifications in the labor force over time and, of course, the fact that there are now so many more boys than girls in china. you can imagine what that's going to lead to. now, the america that we're going to see is going to be very different. my mother who's 86 going on to 87 -- when she grew up, her cohort was about 15% of the population was nonwhite. my 5-year-old daughter -- the world that she's growing up in is going to be at least 40% nonwhite. so we're going to be looking at a very different america. so when we think about these 20 million jobs, many of those 20 million jobs are going to minority groups and are going to be very much targeted to that group because that's where your work force is. that's where your work force growth is going to be. so to fundamentally ignore the
issue of jobs or not prioritizing is going to have a disproportionate effect on a generation that's coming into the work force that is very, very diverse. now, this is probably the most interesting of all the statistics that we've developed. and this is the growth of the population 15 to 64. that's your group of people going into high school into college and still in the work force. between 2000 and 2050, the u.s. will grow about 42%. that's a lot of jobs. so, you know, whatever the 20 million number that mr. donohue is talking about is going to be going on for 20, 30, 40 years. so we've got to be thinking long term about this. in comparison, china's work force will decline by 10%. europe's by 25%. korea's by 30%. and japan's by 44%. so we have an advantage and it's not just the advantage of having more people but young people who come up with great ideas.
i'm always amazed both by my students and by my daughters of things they come up with. things they think about. and i think this is really going to be a great thing for us relative to countries where the population gets very much older. and generally speaking if you have a more age-oriented population, a population with a lot of people, 60, 65, don't tend to get the innovation. and you have a kind of conservatism which is really everything is designed to save the retirements and pensions of the retired and not really so much focused on job growth. now, we also want to talk about what's the roles of states because this is going to be very critical. and i can tell you i travel a good deal in this country. and there are parts of this country that are still very vital and people are thinking forward. and there are people who are trying different things. the whole question of how do we divide up powers in this country? and i think one of the things that i think judge brandeis
talked about it's a good thing in the federal system -- you know, the founding fathers were pretty smart. and i think this notion that states are places that can experiment so if something starts in minnesota and it works other states will do it. if something starts in california and occasionally things we start in california don't work, you know, people start saying well, we don't want to go down that path. but it's very important to have that demonstration effect in terms of getting to good policy. you can't do that if everything is done at the federal level. and, of course, the history, which is the whole story in itself, is that the states have been innovators all along. erie cafortunately -- canal. we are still living on the very grade things the governor did and even the governors before him and after him did and california and what north carolina did with the research
triangle and china is making in its infrastructure in both human and physical. these are states and localities really leading the way. and i think that this is something that we have seen before. and i was glad to see al fromm here because i worked for al some at the democratic leadership council. and in those days there were many governors who were doing great things including bill clinton, what he was trying to do. but all over the country. mayors and governors -- they were really the policy innovators. and we sort of lost that in our current atmosphere where everything is so focused on what's happening in washington. so what we'd like to do now is sort of focus this discussion on what states are doing. and see which states have been doing the best job. and what things we can learn from the research. >> good morning, everybody. in looking at the 50 states in the five territories, there were really only two central questions that we had.
one, which state policies have the greatest impact on creating jobs? and number two, are there best practices and the demonstration effect that joel talked about that we can look at per each of the states. so we reached out to all the 50 states, the five territories, talked to people at the economic development agencies. went to the websites of their agencies. went to the governors websites. read reports from each of the states. did a pretty thorough analysis of what's going on and just to find out what's working. there were five areas that we focused on, entrepreneurship innovation, exports and international trade, work force development and training, infrastructure and then taxes and regulation. so for each -- for each state we did a case study and as you can imagine when you have one page for each state you're kind of limited but we did try and find those things that people told us were really making a difference. things that they really thought was going to help to create jobs. and economic development.
now, the findings we've done in terms of a heat map of the 50 states, we were unable to get the same information from the territories but that those the top ten in each of those measures that we used. and in the next top 15 -- and this is on page 27 if you've got your report, just to get a picture of which states are performing in the top tier along each of those measures. this map is also arranged so that it shows regional variations and you can see how that plays out in the map. for each of the policy areas, we identify the high performing states and then talked just a little bit about some of the things they are doing. and then, of course, the case studies. now, in terms of the overall measures that we used for high performance, we looked at job creation, gross state product changes and then changes of median family income. and per capita income. and the job creation that we looked
and then also 2007 to 2009 to kind of look at the effects of the recession. now, if you look at the states, you'll find that there's some things here that are worth noting. first of all, all those states in the middle top half of the country there, very strong in the commodities sector. and those actually did pretty well in the last few years. so i think that's part of the reason they're there. texas, the energy side, those states in the middle also did fairly well because they learned from other states 10 years ago, 10, 15 years ago and started to do the science and technology policy, things that needed to take place. so they kind of benefited those things coming together and then you see new york, maryland, and tennessee -- i'm sorry. virginia. thanks a lot. so those are the top performers on the global measures that we used. and you'll see how that plays
out. i want to make an observation in talking with the 50 states. one thing we learned is that there's a lot of changes, a lot of transformation going on right now. a lot of the legislatures were in session and they were doing new things. a lot of the states were reorganizing their economic development efforts. and, in fact, we found that was common amongst a lot of states and there was just a lot of change. we can expect that some of the things that were in this report will be -- will be different even in the next few weeks and months. so let's talk about what the states are doing. and i think what we found first of all is that there's a lot of streamlining of government. there's agency restructuring going on. there's efforts to enhance coordination between the agencies. we find that in a number of states. there's changes in regulatory and permitting processes. the agencies are doing that so that it happens quicker and then we also found program delivery
is being localized. and we see that in work force development. we see that in economic development. and we see that across-the-board. there's also a critical analysis of tax policies going on. some states are looking to broaden the base. i think about 28 to 30 states are looking at taxing some kind of services. and then there's also targeted tax credits being implemented. in many of the states. we found a renewed focus on business start-ups and in helping entrepreneurs through management and technical assistance, loans, microbusiness loans. we also found productivity and competitiveness programs going on. and while those don't necessarily create jobs, the people we talked to said, hey, that helps to anchor the companies that have been here for a long time here in the state and we think that's really a worthwhile thing. finally, there's a strong -- again, there's a strong emphasis on incentivizing on private sector investors and this we
found to be in many states with primarily tax credits and we see that quite a bit. on the infrastructure side, we're seeing targeted investments and infrastructure that helps local communities do the things they need to do. we really see the rise of public/private partnerships, the p3 activities that are going on. and in some states like governor bred bred -- bredesen's state. we're also seeing that happen. and then on the export side, there's a widespread efforts to increase exports, of course. but we also found in some states, many states actually a strong effort to attract foreign direct investments. as joel mentioned earlier and as tom mentioned earlier there's
many states that are doing -- doing these science and technology economic initiatives, clean tech initiatives. what some people often refer to as the triple helix innovation and that is harnessing the resources and the capabilities at the universities combining them with government and business. and then in the work force development side, many efforts to retool workers. many efforts to help businesses make a shift to new markets, new technologies. and many states are implementing s.t.e.m. programs, science, technology, engineering and manufacturing programs. and many states are getting traction in that particular area. so let me wrap this up and turn it over to joel for a few concluding comments by saying what do we think some of the keys to state success are? first of all, well designed state development tools. effective work force development systems plus strong infrastructure. these are three fundamental ements of what we've seen.
and they work together primarily to help the local economic development community, businesses at the local level really get the things done that they need to get done to implement the initiatives that make a difference. most of all, states must carefully weigh policy to refrain from constructing barriers from private enterprise growth because many of the most innovative, most -- the initiatives that will create the most jobs that spring up from the local level from the private enterprise, from the small business and the local development community. so it's very important that we found that those barriers are not put in place. so i'll turn it over to joel. and he will make a few concluding comments and then we can open it up for discussion, i guess. >> anyway, i hope that you'll get a chance to read the report. there was quite a bit of research done here.
it was done with a very intensive effort. i just want to leave you with a couple of things. first of all, it is very important to understand that we have this enormous opportunity ahead of us for the next 20 or 30 years. and that is what we would call the demographic dividend. in other words, the fact that americans are still having children, still having a growing population and, of course, with some of that coming from immigration as well that we have an enormous opportunity as a country to move forward. and i think that this is -- you have to understand that that opportunity is there. but that opportunity is also a great obligation because we could conceivably take on to policies that discourage job growth and then we're going to have a very serious social problem. my travels all over the world working on these issues i can tell you there are many countries where you do see the growth of a permanent underclass not just in minority populations but across-the-board. and i think this is something we're going to have to address. this should be the major issue.
and fundamentally i think the little republics that jefferson talked about are really the key to everything. america is a decentralized country and as we go to 400 million people there's no way we could have a centralized government that isn't essentially an o-tok si because you cannot have a country that has so many different interests and so many different kinds of people from the center that you can do a much better job from the state and local level on most issues. there are many things the federal government needs to do but that i think the states and the localities are really where we have to find the innovation. so i think we're all very delighted to be here to share this with you. and to leave with just one thought which is this is not a partisan issue at all. as mayor la guardia, who was mayor when my -- when my parents were growing up -- it was funny because in my father's house, my
>> would you lead off and say your name, what you're from and what your business is? >> good morning. cheryl, rhode island, manufacturing. we are engineered textiles solution manufacturers from rhode island. thank you. >> john gregory. northern rhode island chamber. >> paul, cba. we are a about a 30 person cpa firm. >> i'm paul foster. we are refinery business with refineries in new mexico, texas and virginia. >> and you're in el paso, right? >> yes. >> welcome all of you. we're also welcomed by people watching on c-span as well as folks on our webcast, and we already have facebook and twitter questions, which we will
save. and then finally before we begin our discussion, i will remind you that following our discussion about 11:30 or so we will open the floor to the members of the press were here as well. so let me begin by asking if you all have any questions for delore or joe about their findings in the study. >> i would like to ask joel a question because i think he was very, a very good report. but you said most of the workers in this country in the future are going to be women and minorities. >> right. >> what does that say to the need for a comprehensive immigration bill? >> oh, god. i should ask you that question. >> you know what i will say. [laughter] >> obviously i think there has to be a sensible immigration bill, but first of all the immigrants who are here, they are here and we'll have to out some way to have some sort of
path toward naturalization. i don't see we will go back to what we did in the previous eras and try to drive people out of the country. i think there are changes we need to make an immigration. i think what i find frustrating and sometimes very talented people who want to stay in the united states would add a great deal to our economy find it very difficult to stay. there has to be more of a skill-based immigration, and then lastly, the need to have some sense of control on the border. particularly given what's going on in northern mexico right now. and i think that's unfortunately part of what sparked what happened in arizona was kind of, a kind of panic that took place. so i think you have to have some sort of policy over the long term. but i think that has to come with you understand that immigration is one of our major competitive advantages as a country. >> other questions? >> just to follow-up on that, joel. i was interested in the forecast for the population growth because i think that is huge.
just curious what the difference or the spread of immigration portion of that versus, you know, not immigration. >> generally speaking the american fertility rate, considerably higher than it is, particularly in europe, japan and korea by it so. some of that is driven by second and third generation immigrants. so immigration is part of it. right now one out of every five kids in the united states is hispanic. that's largely the product of immigration, but in the next generation they will have been born here. so over time if you look at, let's say, the hispanic and asian populations, they are going to be more and more nativeborn second, third generation. so immigration will playable. one thing, i get into a lot in the book, we will see more and more of mixed race couples. in california of about 13% of
all marriages are multiracial. plus we have a president who is himself a multiracial background. i think they'll become more of a commonality. i get a lot of criticism from natives about, a country where they will have these organize groups of citizens, bernard to be balkanized when their and your family. and the other thing that i think is very important as people come to this country to be in this country without coming to this country so that can re-create what they had someplace else. there'll always be tied to your other place, but i find, at least in los angeles were would have a very difficult business climate, if it hadn't been for the immigrants of all kinds am armenia, from the folder -- former soviet union, from mexico, from korea, there would be virtually no dynamic entrepreneurial economy. you can almost not find a company that's going faster than
in southern california that does not have a significant number of immigrants. so i think this is absolutely at the core of what we need to go. it's what the country is all about. i think there are no greater believers in free enterprise than immigrants. >> governor, i think if you push joel for another moment you can learn so between now and 2050 and pick up 100 million people, if we're going to have a much stronger population growth and you're going to have in europe, it's coming from three places. a natural internal growth, and from the massive indication of hispanics already, and further. i mean, average age, what, 23, 24 in mexico? and then it is other immigrants as well. and if we don't add that, we're not going to have the workers. and the assumption of the 2050, getting another 100 million
people, has a major component in those two issues. >> let's turn to the governors. what's your take on what you've heard this morning, and how does that play out in your say? what are you hearing, governor carcieri? >> i think all the things that, both joel and bill said are clear. i was saying to what tom bernard, look at rhode island. you know, small, you know, didn't state. we're sort of microcosm of what's happened to the nation over probably the last 50 years. rhode island's history was, if you go back to the last century, one of the wealthiest states in the nation on the back of manufacturing that develop along the rivers and roadways. and cheryl, by the way, should know that i think we just want to a round of blood that had a devastating impact. she distinguished herself not by
toothless because we had one in '05 where she acts we should write the book on how to prepare for recovery because never missed the shipment this last time because they had the wisdom to lift all the machinery up five feet. so that the waters stayed underneath. and when it subsided, but, you know, all along the river she was all manufactured which created the wealth. what we are going through is as a state now is trying to find a way. i think this is a microcosm of the nation, what is it that's going to drive the wealth creation for the nation, if you're going forward. and all of these things i think are clear. we've got a big emphasis in our case on knowledge and innovation, because being a small state where heavy. i think we're ready to pop in terms of degree, awards because we educate a lot of young people like massachusetts, the center for higher education. so how do we cap that talent,
entrepreneurship that creates the new economy. at the same time make sure we are supporting the manufacturing business, like cheryl, that is so critical. one of the observations i would have, and i don't know did it get any comments, joel, because my other thought was if you look at this time period, at my age and i've been in my whole career in business, so i've been through five recession. if you go back to the collapse of all of the text stocks and so forth, that had a very different impact than this one. this was clearly real state driven with all the money chasing real estate. but when you see the unemployment, we see the same thing, it's in the low skilled areas, heavily tends to be construction related, et cetera. but as you look forward, the question is, what's the nature of the economy? you know, because we've got to get competitive and figure how we are going to play in asia as
a nation, i believe. so i think going forward, there's some interesting issues because we have been through two very different, different recessions in terms of what caused them. >> should i -- >> go ahead. >> the first thing they'll have to do both. i think there's a very unfortunate tendency among many localities. more cities and states to say we don't need construction, we don't need manufacturing, we donate agriculture, we don't need a basic industries and we can just concentrate on being getting coal. but the fact of the matter is that's not going to employ very many people and is not going to create the kind of democracy that i would like to see. but the other thing i think is very critical is that we have to understand that in the world economy, we have something, we're the only country that is close to a very dominant high-tech creative segment. and also have tremendous amount
of strength in commodities and in agriculture. one of the things i talk about in the book, because maybe i'm affected by hangout with the north dakota guys, but part of it is we have a world with 3 billion more people doing the same time to read 1100, the world had 3 million. many of those people in into the middle-class, they're beginning to have aspirations for goods and services. including agricultural products, that the united states, the best country in world to provide. so i think that we have to have -- were not a little country. know, we're not a small country like singapore which is going to focus on a couple of industries, two or three industries, take advantage of its position and do extremely well, as they have. we are a big country, we have a big population, and with a lot of natural resources which one of the things that are going to do well, those states with a
high degree of natural resources have tended to do better. so i think you have to have a very broad strategy. i also think this illustrates why each state has to come up with its own ideas, because each state is like a little republic with its own particular series of strengths and weaknesses. >> governor richardson, can we go to you, tell us what's happening in new mexico. >> this was an excellent study, and a showdown states can do it. one area that wasn't covered is, i bet you if you ask all these governors who have succeeded in creating jobs, two things that are absent in the study. you couldn't possibly do this, but one was how did you get this done? and that was through coalition building. in my case with the business community, for lowering taxes and creating industries like the movie industry and the space board, education reform.
she teamed with me, the chamber of commerce, and we got a lot done. so you've got to a coalition. secondly, he got to of bipartisanship which doesn't seem to exist in the city at all. and at the state level, when you're dealing with a legislature, you are in very, very pressurized like 30 day or 60 day session. you've got to get things done or you've got to balance the budget, or you're against the law. that was the part that i think needs to be mentioned. another thing states do and have to do is you can't just do policies on some of these. you've got to spend your resources. state resources, you know, in my state we created a private equity program where we put out $400 million from our state investment fund for a startup company. and we invested in 30 day private equities, small companies. we put money out to develop a supercomputer that some of our fastest supercomputer,
noncommercial so that businesses can participate in it. we lowered taxes. you know, i make no qualms about being a taxcutting democrat. i'm like an endangered species, but we lowered the state personal income tax. we lowered capital gains. we cut it in half. we created highway jobs credit which basically says if you pay high wages over the prevailing wage, you get a tax incentive, a rural tax credit. we attracted companies from fidelity. i think that's what they like us. this is a huge company that went to little new mexico. and in new companies like the solar company with our incentives, and basically saying if you come, we will reward you. but train our people, help our people be part of a technology landscape. and it worked. i mean, we still have economic
problems. and we are below the unemployment rate and seem to be moving forward. >> governor, we will regard a little bit about minnesota if you want to react briefly before turn to your -- >> i know you will say there are 50 little republics and it's not one thing, it's not a silver bullet, but if we forced you to wait these things, not the performance comment, just reflection of how you them but the other columns that contribute to a healthy or more likely healthy economic climate by state. peter: is a little bit about the weighting of these categories, export, innovation taxes our cause, workforce development, infrastructure. i know they all vary by state, but if you had to pick the ones their most important, what would you say? >> i would say the category that has the most potential to create jobs is the ambition side of things. we heard over and over again that these are the sorts of things that enable us to react quickly to, you know, get the
new markets to attract foreign investment. so i think those strategies, those strategies that encourage innovations like the science and technology initiatives, governor richardson just talk about the investments they make. some of the things you're doing and your state with science and technology, particularly in biosciences. that's really where the attraction has gone, i think. >> i just want to add one quick thing. we do a lot of research on migration, and one of the things we find is that places that have a good quality of life, but a good quality of life that's affordable, that's really the key. i know governor richardson, you lives in los angeles and have been involved in the entertainment industry, covering it and being surrounded by it. one of the reasons why people want to go to new mexico from the entertainment industry is they perceive it as being affordable and a good place to live. and what we're seeing is a lot
of the next generation, the millennial generation, they're looking for places where they can settle down, raise a family, buy a house. and in many parts of the united states right now, particularly some of the high-tech areas, it's simply not in the cards. to be able to buy a house. so it's a combination of having an innovation policy and having an affordable high quality of life if you want to attract those people. and i know just from the entertainment peace, i've heard a lot about new mexico as being perhaps one of the attractions of going there, and one of the attractions of even working with trenton in north dakota and people think i could live a better quality of life can have good public schools, those are really attractive things to this sort of, you know, well educated person. but somebody who doesn't have particularly wealthy parents. >> one follow-on effect would. we did a study from minnesota's perspective of job growth from 2003 until the crash of 2008, and then correlated that the
government spending, state and local spending. and what we saw with very few exceptions for sparsity is a pretty strong correlation between those places with high job growth and lower government cost. and to be more specific about the migration from great lakes in northeast to southwest, which is a big surprise. that's been going on for a long time, but a noticeable pattern. so what would you say in reaction to that? do you agree with that as a demographic observation? and what's behind it come in your views do? i don't think it is one thing, but there are definite people would rather pay less taxes than more, and that states that have good tax climates, that's an extra thing that have going for them. you know, the biggest case that i've worked both in houston and dallas, they are attracting, you know, companies that may be headquartered in the northeast or in california. up one of the attraction is lower taxes. lower regulation. we found in, i did a lot of work
with lenders in rebuilding l.a. after the riots, and what we found most interesting was that although taxes were a problem when we interviewed entrepreneurs, regulations and the way the government treated them was actually even higher up on the list of why people left. so it's not just high taxes, but it sort of the attitude of government towards entrepreneurs, how they are treated. i mean, if you want to start right now in california any kind of technology company, you have so many different regulatory hurdles, except at the very high income it doesn't make sense to be the. so i would say taxes are part of it but the regulatory environ it is a part of it, too. and lastly, how you are treated. i can do having tons of businessmen say i don't want to go to the city and be treated like i am a criminal because i want to build a business. >> this is probably a correlation between high tax states and regulatory
environments that are not favorable to business, i would guess those two things go hand-in-hand or their highly correlated. >> governor, talk about -- >> this last issue that you all mentioned with respect to how business our tree, we think is very important. and what it means to us as we got to put ourselves into issues other people who create the jobs for the prosper in the first place and focus in on the things they care most about. and actually not that complicated. businesses want to locate in places where there are reasonable taxes, where there are great schools. that's when number one i think is critical. it's about the cost of doing business. it is about the quality of life, the quality of life means everything from a 50 minute commute instead of a 45 minute commute. it means having nice outdoor spaces to enjoy the weekend. they want to be in places where there's strong languages with higher education and local copies.
and responsible government. and we see this all the time. and would also means is states have to figure out which battles are going to engage in. we're a small state whenever going to win the battle can we write a bigger check of some states to entice countries come to delaware. so we've got to win the battle of being more responsive, more flexible, more demo, more agile. and so we had a situation last year where we lost within the course of seven months, our entire automobile industry. we lost a chrysler plant and we lost the general motors plant. we suffered in lost a refiner. these were thousands of very good paying jobs. we had a positive outcome for all three. and the case of the chrysler plant, the university of delaware has purchased a. they will be putting people to work doing research. general motors was purchased, that plant was purchased by a company called pfister automotive which will be making a plug-in hybrid. then the refinery will be opening with new leadership. but in the case of the general
motors plant, for instance, pfister automotive had dozens of places that they could go to manufacture their cars. they were required under the terms of the federal department of energy loan to manufacture their cars and a shattered on a mobile plant. unfortunate there are dozens of those plans. and after looking throughout the country they chose delaware. we have certain things going for us just by sort of where we are. we have access to tens of place of customers within a couple hours tries. we have strong transportation for such. we have the port of wilmington which is important to them because they want to export many of their cars. we had a great workforce, but we were also very response. my standard is for us to be ridiculously responsive. they told us what they're looking for an we got an offer letter within a day. that doesn't happen too often in government. later when they came to delaware to announce that they have chosen our state, the founder of
the company said that we are able to get to keep people in delaware together faster that takes him to take us down before out to dinner. we thought that was very important. that's a standard that we aspire to every single day, whether it's with big companies or if it's with small copies. and that means listening very, very carefully and asking the right question. last year when we heard over and over again from smaller companies were having difficulty accessing the credit markets in any kind of affordable way, we came up with program to help them borrow. more recently, earning -- ernie brought together a number business leaders to out the stake in what's called the first aid innovation which is focused on really gearing up our innovation economy. they're also very involved in educational improvement agenda. we're fortunate just to have one the race to the top competition. we think that's a really important signal to send as well. but we think every single day
we've got to get better, and every single day we got to come up with something that's different that sets us apart. so we just introduced legislation last week, two weeks ago, that scott our business finder see. we think it's the first time in the country that anybody has come up with this, but basically if you're a delaware company and you are able to reach out to your supplier, your partner, your customer, and encourage them to set up shop in delaware and create jobs, you each get a per job tax credit over a three-year period. so it's a referral incentive system. it's something we all know about from our business community because it's like paying somebody based on the commission. we think we are to leverage that which is best about our state, which all the businesses who are already there and say we want to make it very much to your incentive to reach out to your colleagues and to your suppliers and customers to come to delaware as well. and so we've got plenty more work to do, but in the end, and i think this report is going to
be very helpful i'm sure in terms of specific technical programs and solutions. but absent the right attitude and absent the right culture of businesses understanding that they are very much wanted and desired in this state, the rest of it is pretty much meaningless. and this is something where we believe we've got to get together the business community, the academic community. for that matter, the organized labor, because in the end people want good jobs. when you have good jobs, and a lot of them, that's going to take care of a lot of other problems. that's just where we've got to keep focusing every day. . .
unless you can connect at that level, we talked about partnerships and without partnerships you can't go anywhere. i never could figure out why we always had labor here and business here because i felt we were all together. and the reason i said that -- i've never seen a successful business without a tremendous successful work force that was intelligent, that was committed and dedicated in getting the job done. and if they're treated well, it would be the greatest asset you've ever had. they'll make your business and you grow it. and on the labor side, i've
never seen a good labor force unless they had a place to work. that means a good business to work for. and so once we got all sides together and steve roberts, my partner with the chamber and kenny purdue my partner with afl-cio we don't make any decisions unless everybody is at the table. different sides of the fence would say are we going to have a seat at the table? i said not only love a seat at the table but if you don't show up for dinner, i'm going to come look for you and that's the approach that you have to take. you've got to make them sit down and you've got to find ways you can agree on. i talk about partnerships. without forming the partnerships that we did, and without getting our financial house in order, we'd never changed workers' comp. we privatized workers' comp in a very challenging setting and no one ever thought it could be done. we did it in a special session with 5 1/2 days. and now we have one -- i think one of the premier workers' comp systems in the country. and we have other states looking at what we did and getting our
house in order being annual to reduce premiums by 20 to 30%. and then also we changed insurance reforms that put $80 million back in people's pockets. by being more aggressive and competitive. the partnerships -- the only thing i have a approach with that with, i don't expect washington to be my provider and i don't expect the state of west virginia to be every county and every municipality's provider and that's what sometimes everybody looks to. well, let's go up the ladder and someone else will be responsible. i said all i'm looking for is a good partnership and we'll make it. in west virginia we're setting in a situation which is unbelievable with our potential growth. we're 13% -- our cost of doing business in our state is 13% below the national average. i'm within a one-day drive -- one-day drive of 60 to 70% of
people of america. if you look at the natural beauty that we have -- we have the boy scouts of america choosing our state to be where they're going to grow the next 100 years of scouting, 10,000 acres of the bechtel summit. it's unbelievable the things that are going on. i've always said, as governors, we want to create wealth and share wealth. and if you want to share wealth and create wealth, you have to attract investments. if you set everybody down and explain to them no matter what side of the fence they're on, if you're going to make an investment, what you expect, i expect a return, well, and then i tell them at the end of the day you're going to have a partner you never negotiated with. and all of you here sitting around this table in business understand what i'm speaking of because you have at the end of the day ended up with a partner that is usually the government. you never negotiated with any of us. you never sat down and said what the terms were going to be and what my return was going to be.
we established a retail government. we know in order for us to be able to be a good partner we have to understand how we grow this. and what we try to do continuously is basically reach out -- we want you to be successful. we want you to have a market on return of investment. and for that our share of the partnership is this. providing good liveable wage with a benefit package and a safety concerns for all of our citizens and we're going to have a great partnership. and it's worked very well for us. we've grown more jobs in six years. and we continue to look for different innovative and creative ways. we put $50 million in books for brains in your institutions for research. we're doing everything humanly possible to diversify our economy. we're an energy-based economy as you know and with that comes some challenges and with that we provide the energy that's really made this nation what it is and it's kept it free. we're very proud of that. we lost 29 miners. i want to thank all of you who are watching and all of your
states for their sincere sympathies. and best wishes and their prayers. these are very strong, very good quality people. and people always ask me -- they said why -- in west virginia we do a lot of the heavy living. -- lifting. we do the manufacturing, the mining, and we do it all and we never complain. we're just hard-working people. and i said why do they do that? they have a love of family and more importantly it's their patriotiot. what we've do keeps this country free and we're proud of that. but we know we can do it better and that's what we're looking at. we're asking this federal government to be our partner. allow us to find the innovative and creative ways to create the new energy of the future. but don't disregard the energy -- the coal that's given us what we have, the natural gas, the energy that we have right now in our country. and we think that in west
virginia we can find that. and that's why invested so much of our time and money into research. the other thing is we have broadband high-speed going throughout our entire state. we're the most rural state east of the mississippi. and in another year to two years maximum we'll have every nook and cranny of our little state of west virginia with high-speed broadband and we're very proud of that. and we think that will help tremendoususly. -- tremendously. >> before we open up the floor for about business innovation you have some captive governors what might foster and create job growth for you in your communities. and i would like tom donohue to make some comments. >> i just want to ask just one question. i'm looking at this from the perspective of how this study was done. and looked at the states and what's strong. and i start with you, governor, cow from business. but the nature of the question is, and many of you have had business experience. but the question is, as you form
your governments, as you track your key staff, as you look at who's in your legislative groups, what kind of business experience is there? are you doing a better job on the state level than we're doing on a federal level to get people -- somebody made a comment about lawyers. but what about people that have been in business? have you found that, something you're able to do better than you used to? >> tom, i would say the hardest thing in government is finding -- you're either going to find them on the upstart or on the last leg. of their careers. to find them in the money-making it's hard to pull a person from businesses that's basically been successful and providing for their family in any realm. and try to take them right out and say i need this much time in public service. so i'll never forget this. i had a gentleman -- every time i interview somebody, i knew putting a staff together that i better get people that think the same as i do, if not i would
spend half my time trying to convince them what i wanted to do so i tried to philosophically we were on the same page. there's a man who is the best person for the job will not apply for the job. and i really needed this person. i said why not? well, he doesn't want his children to read about -- he doesn't want his children to read about what his salaries are and some of the decisions that people are upset and it's too private. and i called him and asked him to come in and we spoke for a while. i said how do you like your life? oh, i love my life. how do you like your country. it's a wonderful country. wouldn't this be a heck of a position if your forefathers took the same person. needless to say the person is the best person we had in the last four or five years and saved a lot of knowledge because of his knowledge. that's heart. i'm sure we have all these stories of recruiting. and sometimes i've heard jack
talk about he's doing things now to give incentives and great. how can we get some top management. think about an education. we blame education for everything. and right now we expect them to do everything for us. and worry expect because we don't have the work force. you name an educator that had to make -- take a business course and management course and yet they spend more time for policy and more management and more money is spent in education and none of them have any expertise in those areas and we wonder why we're not successful. >> as you know we're trying to work on that. >> yeah. >> no. i was going to say, tom, this is probably one of the most important issues right now facing our states. and i think the federal government is getting the business community and representatives of the business community is engaged. i know it's extraordinarily difficult. we know, you know, back in our
small state, what you've seen -- and i think the demands on business are clear, you know, everybody is having to work, you know, with fewer resources so the human resource demand is enormous. but i think if businesses don't start sponsoring and allowing young people because i think that joe is absolutely right. it's either young people who haven't yet started it or people like myself who got into this after i retired, we need people at different stages. and in order for that to happen, businesses have to be willing to allow their employees to run for public office. and give them the time that it takes. now, each state varies in terms of time commitment to the legislature. but labor does that. both public and employee labor unions as well as private, you know, have members of -- they're paid by those unions that are encouraged in our legislature both the senate and the house, we got them well represented. i credit them for having the wisdom to do that. but unless the business
community does the same thing and allows and incentivizes their own people to get involved i think that we're at risk of losing that whole representation. >> governor richardson? >> well, here i want to give credit to legislatures because if you look at legislatures -- i'm just going to speak for mine. there are citizen legislators. so many of them are in businesses. they're business leaders, attorneys. many are retired. so i think legislatures that handle the public's business, they're very, very conscious of the budget. they want to have government state government more efficient. now, state government is different. in my case, in my cabinet i have a small proportion, very small of business leaders that are part of the administration. a lot of it, tom, is okay. people just in these economic
times they don't want to sacrifice for their families and, you know, take a government job for the sake of, you know, patriotism. and so state government, i believe, in many cases, has to develop a system of probably more security to attract a wider range of public employees. you know, lastly, it seems to me that because there's a requirement that most states have that we balance our budget, meaning in new mexico it's the law, that we state governments, even though there's some waste like everywhere else, are more budget conscious, more business oriented than the federal government's certainly right now in the congress. so that's my observation. >> governor markell and then we'll open the floor to some business observations. >> well, we've been fortunate, first of all, i do think this recession has really focused the
attention of folks across the spectrum. we've been successful at bringing some very strong business people into the cabinet. but i also in picking up on what governor richardson was saying in our case our legislature, we've got a bipartisan small business caucus. we call them the short brothers. different parts of the state. but they together have gone throughout the state and held a number of hearings with members of the business community to really focus in on the things that they care most about and that's been very important. we've also got a very engaged business community in part led by the three individuals who are here today with the state chambers business round table and they've been engaged on the business issues that the legislature deals with but they've also been incredibly engaged in the kaeks issues. -- education issues. and i'm convinced that one of the reasons we won the race to the top competition is because we have a decades-long legacy of
academic innovation that we built on and it's been led in part by governments. but we've also had at the table the state teachers union and the business community. when we went down for our interview with the review panel, we literally had sitting next to each other the president of the teachers union and one of the leaders of our business community. and that -- and everybody understands that we've got a very engaged business community. and a whole variety of aspects of delaware life. and again, i think we have this collaboration and our voices at the table across a whole range of issues has been a big plus. >> let me give you a hint of really good people. all people at different levels, personnel people, marketing people retire from business. they're all excited. they're going to play golf. and in about 15 months they all want to, you know, go back to work. and i think it's easier for the states to attract them because they don't have all the problems
you have here in washington. i'll give you some places to go look, joe, and you go get a couple of them. anyway, thank you for your comments. >> one specific thing we did literally on the first day i took office we launched what we called our government performance review to take a hard look at state spending recognizing not only we had our own issues to deal with but businesses want to be located in places where they feel their tax money is well spent. we had thanks to the leadership of the folks at the end of the table here we had six lonely executives from delaware companies who volunteered to work with dozens of state employees over many months to help us focus in on places to save. >> we started off in west virginia. i started the governor's council of young professionals 'cause i wanted to find out what these young bright people who are coming back, staying here great education, how we can keep them. they've never been asked to be involved. so i don't blame -- i mean, sometimes we get so busy that we don't -- the government does not do a good job recruiting.
it's not a fertile ground if you will and we changed and we're going to have a summit this year and we're bringing the young professionals around the state to connect them and connect them with the jobs that we need. and i looked at it as governments -- as community service. can you give me two years. can you give me one year? what can you give me. it's the greatest resume-builder. >> can we be invited to your meetings? we'll come. >> let's hear from some folks from business. you have some of your nation's leading governors here. what do you think they can do to foster job creation. russell, let's start with you. >> thank you, dr. spellings. >> i represent the higher education sector but a special dimension of that sector. we are a for-profit institution that in 2002 served 2,000 students and as i indicated earlier, now serves 63,000.
our sector is one of those high growth industries that has great potential for helping to assist governors and their objectives in identifying a qualified, prepared work force. the fact that we're located in charlestown, west virginia is due in large part to those items that governor manchin outlined in terms of the quality of the environment and the amenable attitude of the state toward private industry including new and emerging industries. one of the challenges that we're finding relates to a dimension that joel mentioned and that is the attitude -- the regulatory attitude of government. to some extent i think the department of education, the united states department of education is working cross-purposes in terms of that attitude. it's interesting. 4 out of the 5 governors seated
here today do not have overly cumbersome regulatory policies in place related to higher education. there is a call on the part of the united states department of education for every state to have a much more rigorous regulatory profit in place having to do with higher education institutions. and i think there is a legitimate need for greater accountability in higher education. i'm not sure to what extent it needs to be tied to a encumbering regulatory environment. and so i would simply pose the question to the governors. to what extent can we work with you and what can we do to assist you in preparing that work force and doing it in a way that does not trigger some form of an overly regulatory environment? thank you very much. >> thank you very much. first of all for choosing west virginia and i'm hoping we're working as well as we should be working with you.
but with that being said, higher education is not one word in my constitution the state of west virginia where we're mandated to put a penny into higher education. we are mandated to pay for primary and secondary education. and to that tune, if you don't pay your taxes in our state we will take your property and sell it on the courthouse steps to pay for primary and secondary education that sounds serious to me higher education is more in a competitive type and has to add value and our forefathers felt there was value to be added by increased knowledge and with that higher education has to be able to move in the marketplace. and i'm looking for the best bang for our buck in higher education. and you always watch us when it's time to cut education and budgets. we'll cut higher education much quicker than we will primary and secondary if we never touch primary and secondary because of the setup. so with that being said higher education has to be able to react quicker, provide jobs, show more of a value to the community and to the area where it operates out of so i try to
give them as much flexibility and i'll push them as hard as i can and i want them to be as good as they can but i can't put a cap on where they can't grow and they can't spread out and take advantage of market forces. with that let us know and we'll help you all we can. >> governor pawlenty? >> if i can put one of my minnesota friends on the spot here. david olson serves in my appointment as the head of the minnesota state college and university board so we have a unique situation where somebody who was steeped in business policy and business background also now has been working in the trenches as the leader of our state college university system for a good number of years and he's come away with some lessons learned and some frustrations so i would invite david to weigh in on this issue. >> well, thank you, governor. and there has been some -- we made some progress but there has been some frustration and for us it's a public, you know, system and there's a but -- boatload
of bureaucracies. we have campuses and thousands of students and i think we do a very good job with our two-year schools. we struggle with our four-year schools as you know and some of that has to do with some of the union issues and those kinds of things. we're making progress. but it's not easy. >> tear? -- terry? >> i was impressed with the report. and i in particular liked seeing one of the trends as being public/private partnerships as being on the rise and necessary as we move forward. one of the -- one of the things governor richardson and especially in his first term did so well is to immediately after being elected invite myself together with leaders like i have here today with me to talk about what could be done.
and the talked with us about trying to identify the problems and then we would move forward with whatever partnerships we needed to try to succeed. now, i will tell you this, that neither the public or private sector can do this on their own. there's no way it can happen on their own. and so the partnerships are incredibly important. but i will also say -- and i'd love the governors to all respond to this. it's enormously difficult to bring together public and private sector in a partnership to tackle a problem and truly get results from it. governor richardson has been successful in many, many ways to bring us together to do this. some of the efforts, however, haven't worked as well but most have. and they're difficult. and so as i look at the report and see the need for this in order to solve our problems as we move forward, how can we make
these public/private sector partnerships more successful? >> the governor, she gave you early marks. >> by the way, i want to say another thing. i know tom and margaret and bill got these accolades by everybody. i'm going to give an accolade to my second boss in my life. and that's stan anderson sitting over there. he hasn't said a word yet. but he's head of this whole effort that you put together to create jobs. and i just want to say he was a terrific boss. and i worked for him in a republican vacation. -- administration. he was the deputy secretary of state. and i do want to say after working with stan, i saw the light and became a democrat. [laughter] >> can somebody else answer this question 'cause i just gave this good story. >> let me take a stab at it. 'cause i think it puts a finger on what's extraordinarily
important. what we've tried to do in rhode island on two fronts. when you're engaging higher ed, one is the role they play on education. because higher education the focus when margaret was there was still continuing k-12. the fact is that higher ed is producing the teachers for the k-12 system. and what i've seen in my years at this and some of us were talking about this a little bit earlier, the a little bit of frustration governors have and control over the governance of higher education and k-12 systems. and when you're trying to bridge those, how do you get that to happen. now, one of the things i didcç about five years ago is i created a council. k-16 council that i chair. and at that council are the chairs of the two boards that oversee higher ed as well as
k-12. also the two commissioners and we have in rhode island -- we're a small state. it's easy to get everybody together. we have an association of the independent higher education institutions. and they elect one of their presidents who rotate as head of that and that person sits on that council as well as well as our head of economic development and work force training, et cetera. the point is that the two areas you need to bridge that are education because as a key role and economic development because it's all about, you know, the brainpower that's coming out -- that's at work in higher ed and how we tap into that and turn it more into entrepreneurial activity. and so what you first got to get them together and share as you've been hearing other governments saying, what's the issues are? and build on common issue. -- common interest. we've all seen in terms of research funding a lot of the research particularly higher ed tends to be very, very
compartmentalized and like everybody hold it close to their vest but a lot of the funding of research -- i was looking at collaborative kind of research activities so we created a research alliance in rhode island which is bringing together the independent higher ed institutions as well as our public universities and saying, listen, you know, it's in your interest to figure out how you capitalize on strengths that you can draw on together to put the best face forward in terms of research grants. and that's the first wave. you get the researchers starting to work together, then spinning out of that things in terms of businesses and innovation and so forth start to happen. but i found you got to get them all around the table and i know it's easy for me than some of my fellow governors. i'm 48x37, okay? so we can get everybody together. and i try and do that regularly. to begin to sort of foster that. >> governor richardson and then we're going to turn to
infrastructure and trade issues. a little specific here. >> well, we're fortunate in new mexico with leaders like teri to help bring the business community together. one thing that i did and it's along the lines that was mentioned. i like to create a task force in crisis. when i had a real problem i would create a commission. and it wasn't just for the purposes of a meeting. we actually did things and business leaders like to be part of them because in the end, the package that that commission came forth with, when anybody who says meetings and summits and getting people around the table together doesn't work, that's wrong because it does. this is why i think a summit like this is enormously useful. now this has to be follow-up and there has to be creating 20 million jobs in 10 years. it's going to take a lot of
resources and follow-up. >> it goes to the issue of public/private partnerships and higher education. you know, it's pretty clear if you look at the maps at the health and human services publicly subsidized health care and cluster of state budgets is the main challenge of what we face in terms of resources are going in relative in terms of. and so for the remainder of budget categories many of which are equally or more important like k-12 and higher education, we have to find a way to do those more efficiently, more effectively with broader access and better. i think it's pretty clear that the handwriting is on the wall that a portion of it, not all of it for the undergraduate experience is going to move online. it already is. and so the question is who is going to be the early entrants on that space. david is frustrated about the change in public system. if you think how change occurs, transformational change coming from a a breakthrough in
technology with competition can sometimes be an accelerant. so when you see the fastest growth in higher education and what it means for economies of scale, access, quality control and the like, the online space i think is really quite compelling and interesting. and so one of the ways that we could have public/private partnerships is when you look at the most aggressive, most innovative, most entrepreneurial provider of that content service they tend to be in the private sector. they don't have the same kind of limitations, organizationally, legally and otherwise as the public sector does. and so some blending of those efforts might be a nice opportunity for public/private partnership. i know university of phoenix gets a lot of attention in minneapolis. we have cappelli university which is an online graduate institution that's growing rapidly but in the very near future i think higher education is going to be blindsided in ways they don't see coming. in 20 years you're going to have the equivalent not of itunes but
icollege. much of the competitive undergraduate, econ 101, spanish 101 will be much more effectively and efficiently how you want it and when you want it and i think it will disrupt, i think, in a very positive way the traditional delivery of the service. and i think a lot of that is going to speak to public/private partnership and i'm excited about that future. but i think the current higher ed structure is very ill-suited very ill-prepared for what's coming. >> basically what tim had touched on there. but, you know, the graduation rates are risk in all higher education throughout the country. the private sector has much higher graduation rate than any public higher education and if you look at how the money is doled out, it's based on full-time -- fte, they call it full-time equipment and they are
fighting how much money they should get for fte. we're about to change in west virginia we're going to reward you how many graduate also. it's not going to be weighted what you have coming in the door and taking out the door because we haven't put the rubber to the road the way we should. the private does that much better. when i talk on a very successful private entrepreneur in the private arena of higher education who had 17 years prior to that in the public and i said that what enables you to be successful, he had told me -- he said first of all, we don't have all the restraints and regulations and controls that you have on all your public institutions. he said it took me three years to deregulate myself and setting there waiting for someone to send me a check. i figured i had to go out and make it. and once he figured out he was in that entrepreneurial type of atmosphere, then there was no limits to what he could do and it's unbelievable the growth they had.
>> i'm going to turn that into a segue on infrastructure including the topic of broadband. which i know you all are expert on. in fact, bill i'm going to ask you if you would to kind of speak to that. what do you see about the importance of infrastructure including broadband in the growth of your business. this is the medium speed pitch over the speed. >> there's no question that targeted investments creating growth inclusive innovation that is the erie canal in terms of being the enabling technology. and maybe i'll just mention a couple of things that i experienced in delaware that i think happened at the state level some worked so well and maybe not worked so well in how this can all take place. first i'll talk about the state as a customer. delaware decided several years ago that they wanted to connect all their businesses -- i'm
sorry all of their locations including the schools with high-speed broadband infrastructure, which was -- which was great because now the state, of course, had the advantage of that infrastructure. the additional advantage that brad to the state of delaware was that an infrastructure builder like verizon had a robust backbone network throughout our whole state having the state as an anchor customer now as anyone comes in and they want -- and they want connections, there's that robust backbone network that we're able to serve them over. the state can play a huge role as a customer in moving this along. next i'll just mention a state as a regulator, of course, verizon is building its fios network which is our fiber to the premises, our homes. governor manchin mentioned the need for broadband out to every nook and cranny of the state. what we've done with our fiber network is we're continually showing up in the areas where we built our fiber.
in fact, in delaware having some of the highest speed connections right down into residential areas. one of the beauties in delaware is we don't have a lot of local governments, large parts of the states are unincorporated which meant when we wanted to get our video franchise which is the anchor service which allows us to build -- make the economics work for this we're at a one stop shop at the state agency. we were able to get our franchise and all of a sudden bingo, we have 975% of the area of the state where we can then go ahead and build and it was a much easier than a lot of our states where we have to go berg by berg to get our franchises. on the other hand we did have a municipality in delaware where they put overly burdensome requirements on us. they could really -- they really did wind up stifling our ability to grow. and so we're not investing as heavily in that particular municipality. and it's not just on things that
are necessarily revenue-generating for the municipality in the areas. it has to do with things like service requirements, reporting requirements, all these kinds of compliance that they can put on it which makes the investment much tougher to justify. so i think some examples as customers and regulators where, you know, states can make a big difference in seeing how quick this important infrastructure is invested. >> i'm also going to ask you since you used to deal with other kinds of infrastructure in the oil refinery business, why don't you speak to that issue and then we'll have our governors, our policymakers react also. >> well, one thing -- one thing that's a concern to me is that the energy infrastructure in the country has aged pretty significantly. and we haven't kept up. it's more of a national issue the state issue.
but we don't put very significant capital into the infrastructure for energy throughout the country, we're going to be facing very significant problems down the road. i'm also concerned on that same line about the energy policy that's being discussed. nationally and i just think that we need to make sure we don't put policies in place that discourage the production and distribution of energy. and that we -- that we create an environment that's friendly to the energy industry. >> governor carcieri, you're called out in a -- >> i was just going to say. i'm actually going to toss it over to, you know, one of our group over here to comment. but we early on were focused on this. and similar to delaware, verizon has and the fios and delaware and rhode island and i think
we've got 95% of the state now wired up for broadband. and as you say, margaret, we show it pretty well in the top ten in most of the penetration of this and it's been very, very important. you know, i toss it to john, paul and cheryl because john is executive director of northern rhode island chamber which is one of our larger chamber organizations. and that's north of the capital city where, you know, this was the last piece really some rural in particular where we gotural the broadband installed, john or paul, you might want to comment. >> no. i think you said it well, governor. one of the advantages of having a small state it didn't take us that long to get up to 95% coverage of the state. not without some politics because rhode island is a political state as most states are. sometimes i think our smallest makes it more intense. i think you kind of covered it.
>> we've just been joined by the governor of the great lone star state, my cover, governor rick perry. governor, thank you for being here. we're engaging in a stimulating discussion about how we can all contribute to job and economic growth. and we've heard from some business folks and from our governors also. >> we have the way to do it. [laughter] >> you do? and may i say as your fellow texas braggadocio. >> rick, you don't need to worry. margaret has been doing your job. >> go ahead, governor. >> we trained her well. listen, thank you all and i'm sorry we're tardy coming in. we had a meeting with janet napolitano talking about issues. the biggest focus on the people's minds on the gulf coast
is obviously the oil spill. we've also got issues, border security. and that's actually what we were talking with her about, tom, just to kind of share with her some of our great concerns. mexico is the number one trading partner that texas has. so obviously having a border that is secure but does allow for the free flow of commerce is very important. so i know jose cuevos and paul lives on the border -- as a matter of fact, his wife is a very, very successful businesswoman in mexico. we have serious, serious concerns about what's going on in mexico. and i hope this administration is helpful in every way that it can be to president calderon. because getting that border
safe, getting that border secure is very important for what we do. in the sense of commerce and the jobs creation economic development. so i don't know if you know this, margaret, breaking news today, chief executive magazine -- tim, are you paying attention? chief executive magazine named texas number one for business for the fourth year in a row. [laughter] >> aren't you the publisher of that magazine? [laughter] >> i kind of feel like it. i've been on the cover on it than i have been on "newsweek." [laughter] >> do you know the -- tim and i are great examples of what we happen to believe in. of states competing against criminal history. -- each other. at the end of the day i want him to be my competitor.
and it kind of gets back to that -- some say a little too polyan-anni poly polyan -- pollyannish where states are actually free to compete against each other and not have a national one size fits all economic policy or health care policy or what have you. and that is what has driven us in texas to have a state that has tax policy that is fair. we try to -- i tell people, i said, we think it's kind of good for you to keep more of what you make. and regulatory policy that's fair and predictable. caterpillar didn't shut down in two union heavy states and move their engine manufacturing facility to texas if they were concerned about the regulatory climate being pulled out from under them in years to come.
we had the most sweeping tort reform in the medication in texas. -- state of texas. it has saved billions of dollars. the medical community and the professionals in the health care delivery know the savings. i'll give you one anecdotal story. the hospital, a 26-hospital wide system they're a charity, not-for-profit, charitable type of a delivery. they were spending $100 million a year on defense cost in the state of texas in 2002, i believe. which the year before we put tort reform into place. last year, theypent $2 million for defense cost. you know what happened. those dollars flowed back into those hospitals. people got better care. they got advanced technology into those hospitals.
so the blueprint is there. i tell people governing is really simple. don't spend all the money. that's the first one. have a tax and a regulatory policy that's fair and predictable. a legal system that doesn't allow for oversuing. and then fund appropriately an accountable public school system so that people like caterpillar or medtronics that caught off the bay area of california, a medical device company know there will be a skilled work force. then get out of the way, government. and let the private sector do what the private sector do. is my time up. >> your time was up a long time ago. [laughter] >> thank you. >> one of the things we want to make sure we talk about before we leave and this discussion is the whole issue of trade. governor perry you raised it. governor markell in addition to texas being called it out as a leader in this area you all in delaware, you want to speak to
that or any of you who want to speak to your foreign investment or trade strategies? and then i'm going to ask tom what all we do to promote trade. >> well, first, i think it does start with having the right overall environment for business generally and i talked about that earlier. putting ourselves in the shoes of the people who create the jobs and the prosperity in the first place. i think for the most part i think it also means not being too industry specific. i came out of the technology industry and my experience even the best venture capitalists make a ton of mistakes when they try to pick a winning industry and a winning company and i think those decisions are more difficult when they are put in the hands of people who are not trained to make those decisions. what we want to do is create an overall environment where entrepreneurs and businesses of all kinds of industries can be successful. when it comes to the trade issues specifically, i think it really means playing to your strengths. and we are fortunate in delaware. we've got companies like dupont and others who do export a lot.
we have a strong pole industry. -- poultry. so it's really about building on those relationships and it's working. so we have people who market. we have people who provide technical assistance to delaware companies who are looking to increase their exports. it also means fostering really strong ties with higher education. let's face it, across the country many of the grad students particularly in the sciences come from other countries. and we want more of those folks to stay here and to do business in our states and to foster ties with the countries that they came from. and also when it comes to the k-12 piece that's going to be a critically important issue. but also to make sure that our students today, are little kids,
middle school and high school students that the challenges they face are unlike anything we faced in the sense when i was getting out of high school and getting into the job market basically competing other people in the region and now they are literally competing in the best in the world. we make a big mistake when we tend to think the countries are racing us to the bottom. obviously, globalization has been a hot topic for two decades now. i think until really just the last few years, everybody thought it was about moving the call center jobs and the low wage manufacturing jobs. and that's just not what it's about anymore. these companies are moving big r & d operations. and, you know, really expensive operations to these countries as well. and so i think one of the critical components is making sure that our kids recognize the new world in which they're operating and competing. and that means making sure that they really do understand foreign languages. that they can work cross-border. they ought to be working cross-border while they're in school with kids from other countries because that's the
environment they're going to be living in down the load and i think there's near term things but i think most importantly what kind of steps are we taking into place now to make sure 20 into place now to make sure 20 years from now our kids ar totally prepared to be competing and leading in a world where this global economy is so interconnected. >> let's hear from the rest of the governors first. there's a lot of stuff going on in your state. many of our major members, you know, who are located there just trading all around the world. we have in minnesota the highest per capita concentration of fortune 500 companies in the country. but as they look to their future and to growth, they're concerned about demographics. they're concerned about what are the things that will lead to growth. and there's some warning signs on the dashboard. i'm really glad that rick joined us. i tease him because he's my buddy and we pull each other's leg a little bit. but share a statistic if i might digress for a second on the job
growth in the country in the 2007/2008 time period half or more of it occurred in one state for the whole country and it was texas. and if you want to see some of the most interesting studies, case studies on relative economic growth with different approaches in mind, various publications have studied texas and california comparably size states but very different approaches as it relates to taxation, regulation, and texas just mops up. and that's from a leadership and tone agenda that rick perry has said as governor and there's a lot of lessons i think to be learned from that relative comparison between california and texas. and so i'm glad you joined us, rick, and great job for the work that you're doing in texas. from minnesota's standpoint i would just say where i started, which is costs need to be competitive. and again, minnesota has some other advantages but we can't be so smug about how special we think we are to price ourselves out of the market.
much of our work force in the state of minnesota is a little more diverse than perhaps some other states. we're not as reliant on one particular sector as some other states. but i want to just emphasize that if you like dynamic solutions, if you like entrepreneurial spirit, if you like the ability for organizations to be a little smaller, a little more nimble, a little more dynamic, that leads you to the conclusion that many of these solutions have to be state-driven. the 50 little republics as we started this out. and i analogized it in my discussion is do you want the future to look like general motors in the 1970s, big standardized one size fits all bureaucracies with cost structures that are locked in, lacking in dynamic quality or do you want the future to look more like apple and an ipad or an iphone. in other words, individuals in charge, smaller organizations, more nimble, quicker information. you know, which model do you like better? i don't think the future is general motors from 30 years ago.
i think the future looks a lot more like an ipad, whether it's education, whether it's health care, whether it's economic development. and frankly big standardized command and control systems that look like 1940 industrial models are not the future. and i worry about that being the washington, d.c. mindset as opposed to more nimble dynamic approaches coming to the states. and that's why i think the theme of this conference where we started which is different states with different backgrounds, histories, agendas, weakness are able to more quickly to address those changing needs. our two strengths we got a highly educated, highly innovative health care system. and it needs to change on a competitive basis. if we're going to attract the capital risk-taking and entrepreneurs we've got to get our costs more competitive and my state -- we've made good
progress in the last 5 and 10 years. but more needs to be done. >> you know, i think it's good to hear -- i think every business person of all different sizes knows that trade is the issue. you got to figure out -- the asia pacific is growing, expanding. it's got all those billions of people that are looking for a standard of living we've taken for granted for 100 years. cheryl merchant who runs hope global, why don't you comment on how important this is. because i think it affects not just large businesses that we focus on, you know, but size businesses. >> thank you, governor. hope global is a textile manufacturing. we celebrated 125 years last year. so we were one of the oldest new england primary companies. however, we also have operations in mexico. we have operations in czech republic, in detroit we're 75% automotive so we know the competing world.
i am an automotive brat. i started with gm almost 30 years ago. my hairdresser knows the color. so that bureaucracy is absolutely there but it's changing and we need to learn from it. one of the thought processes i tell you is -- i'm going to china at the end of this month looking at a plant in shanghai as well. hope global has been shipping to china for the last 10 years for all of timberland boot laces. they ship them back because if you remember 10 years ago we would grab a hold of a should you laces and you would get shap, shap. the quality is here. the technology there is nothing about textiles here and mundane anything that we manufacture here in the united states and when you talk about free trade it's not free. you go over there and you do business in czech republic i shut down an operation in ireland and france. those countries have resources to help their businesses move to
eastern, to the eastern bloc and then what they'll tell you keep your company on roller skates because you're going to look to move again and you're going to move again and i listened to the passion that's up here amongst the states. it's happening here in the united states. i love your report. i'd like to know how you see businesses flowing because that competition is there for us. as i mentioned we're all over. we're going to shanghai. we ship everywhere. our operations and i've loved everywhere. i lived in texas for five years actually and i lived in michigan. and i lived -- >> rhode island is much nicer, cheryl. >> i loved in canada. i lived in europe. and i've lived in mexico and i will tell you i am the happiest i've ever been to be in rhode island. but there is no question about that. despite the river. but i'll tell you part of that -- part of that is what you guys have mentioned. i've heard a couple of very innovative ideas here. but you can't be like a verizon and only worry about the at&t customers.
you got to be worrying about the verizon customers. you got to be taking care of the people you have because as a business i will tell you i don't grow with a new customer unless i take care and keep the ones i have. your customer service -- john gregory from the chamber is saying what can do i and he's offering computers from the local business and he's giving me a room and the governor is on the phone saying what can i do and if i need that unemployment, it's done. the customer service you're taking care of your business. everyone is right there at your fingertips. but free trade is not happening. if anything do business in czech republic and when i do business here it's a whirl. we bring companies in and we give them everything. and we let them do whatever they want to do. you will go over there, you will use their people. you will use their suppliers. you will mandate in a whole different way. try to get a patent for the united states versus in europe. it's not right. it's not level. and we need to take care of our
manufacturing right here because -- and we need to stop this roller skating thing. you know, i mean, i agree with the different states but we need to stabilize and we need to grow. we need to worry about getting our businesses bigger versus where can i go for a better tax base and trust me, these gentlemen know i've been thinking those things with the river. seriously, the free trade -- it needs to be different and the second thing i wanted to bring up you really need to keep those -- take care of what you've got. don't keep talking about bringing new businesses in. take care of what you got. those roller skates exist. >> and we'll have kind of a last word and we'll bring the press. >> this is the last question on that. i'm encouraged to hear you speaking about we should be keeping our manufacturing and our businesses in the united states. i wanted you to know west virginia is almost heaven so you can come here, too. [laughter] >> with that being said, cheryl, what attracted you. why did you leave?
what made you leave the u.s.? all the companies think they have to go somewhere else but they find out the grass is not greener. why do i have to leave you first? >> i haven't left. my czech republic, i have different products. i have 100% of north american business, 70% of european business and i'm going to shanghai to take care of that business. i ship japan prototypes from our rhode island operation. the headquarters of my company is in the rhode island. that's where my r & d is at and the design and development and the future growth. that's where my accounting in the worldwide and unfortunately my computers which almost went under water. so we run everything from rhode island. i haven't left. we're looking -- >> you closed down in ireland, you closed down czech republic. >> yes, that is absolutely correct. ireland and france went to czech. and so when they talk about
those governments, you know -- a business in ireland, a business in france you can't do business there. you just can't do business. that will not tell you -- >> i want to help just a second. he asked you the question, why did you leave to begin with? and you haven't that yet. you had an operation in the united states and then you went to ireland or you went to the czech republic. >> no, i repeat i did not leave. what i've had in the u.s. has stayed here in the u.s. i bought ireland. i bought france. shut them down and moved them to czech. so what the businesses here, the headquarters that was here has stayed. >> governor it's a pretty simple issue. 95% of the people that american companies want to sell to live in other parts of the world. we want to keep as much in the united states that is serving the united states and nafta countries and others.
but i heard somebody criticizing pepsico the other day building two bottling plants in china. let me tell you we're not going to bottle pepsicola and to get at 95% of the people that will create the jobs here in the united states because our intellectual property and because of our technology and our innovation. and the point i'm going to quiet in 30 seconds, we said at the beginning of the year the way to create these 20 million jobs is to start by doubling our exports and then doubling them again. and doing a number of things on infrastructure. and doing issues on energy. the president of the united states took that part of our plan, literally, he told us he did, and put it in the state of the union address. the only problem is they're not
doing anything about it because they can't get the congress to move on the free trade agreements. free trade agreements with colombia, korea and panama are all going to be usurped by canada in the e.u. and we've got a big challenge here. the big issue is here american -- most american companies are keeping their north american stuff here with some very visible exceptions and they're expanding around the world to get to other markets and we need to do more of it and do it in a hurry. >> can i have one quick comment? >> you can have all you want. ..
every in this room that's successful to try and work with. i mentor three to the ceos right now. i do it because i only sleep two hours a night. and that's the sleep i need, but i believe that we need to take ownership for entrepreneurship within our perspective states. and i the still it's an important thing to say so. >> we advocate a very much
[inaudible] [inaudible] [inaudible] >> rapping about two and half hours of coverage here from the u.s. chamber of commerce. the 2010th governor summit. perhaps taking a few questions from reporters. we will move on with our schedule. the u.s. house out today, but they will hurt resume legislative work tomorrow afternoon. we'll have live coverage on c-span. the senate is in today at 2:00. no votes expected for today.
>> i am worried that the media is starting down that same road of too much consolidation, too many bad private sector decisions. >> tonight a discussion of the issues before the federal communications commission with democratic commissioner michael cops on "the communicators" on c-span2. >> now a portion of a conference on job creation.
the center for american progress here in washington does this. it's about an hour and 10 minutes. >> good morning. we're going to get started on the next panel now. this morning we heard -- what do i have to do to make myself heard around here? this morning's panel you can sort say was about what's going on with labor demand, and this panel we will talk about what's going on with labor supply. just to set the scene a little bit, i've will do what journalists do which is to focus on the headline for the moment. it's springtime in washington and economic optimism and cherry blossom petals filled the air. my own magazine having cover story a few weeks ago that said
at last, a big rainbow. a week later newsweek declared america the comeback country. right on cue this point we learned that an economy grew at 3.5% in the first quarter. below expectations but still the third quarter of growth, the second quarter of above trend growth. looking at my blackberry i see all the memos from wall street saying great, it's a stable, looks at the mix of growth. all of that by consumption. it's not just by inventories. i'm afraid i have to beg to differ. this does not look to me like sustainable growth. it does not look like sustainable because it was led by consumption. consumption was driven by a decline in the saving rate from 3.9% to 3.1%. it everything we know about what this crisis has dented household balance sheets tells us we cannot have a recovery driven by people borrowing more and saving less. why did have to draw down their savings? income growth still remains very weak. in fact, we also learned this
word that wages only grew at .4% annual rate in the fourth corner. why are incomes so we? because job growth is still weak. we've only had one quarter of job growth so far and it is far below what you would expect. with the dow hitting 12,000, all the t-shaped optimists are feeding that they've were right and the pessimists were wrong. i would ask them to look at a chart of employment in this recovery, if you can call it that, which is worse than any other recession we've seen in the postwar period. so the sustainability of this recovery comes down to jobs come and a lot of that is going to be whether the mechanisms are in place for job expansions to be not just positive, but sustainable. and good jobs. not just about the number of jobs but the wages those jobs pay. that's what i would like our panel to talk about this morning. the format will be, i'm going to ask each of the panelist to make a few opening remarks,
addressing one aspect of this issue and will have sort of a discussion among ourselves and then we will turn this into a broader conversation. larry from harvard is known as one of the countries, if not the countries leading economist it were fortunate to have him here this winter he comes to us fresh from a growing on capitol hill where he was told to explain how we get back to 5% unemployment before the midterm. [laughter] >> he has the answer but he's not telling us right now. larry, i'd like you -- christina romer a few months ago gave a speech that she said she wanted to call aggregate demand stupid but was allowed to buy her staff. but the gist of it was that most of the dramatic rise in unemployment is because the demand-side factor, not supply-side factor. it seems likely that there are some supply-side factors at play. for details about the extent to which you see the rise of unemployment to date has been cyclical. and more important, what is the
risk that a lot of the cyclical becomes structural? >> thank you very much, greg. i largely agree with christina romer, that there is no doubt that the growth of unemployment, since the last quarter of 2007 is almost entirely cyclical phenomenon, related to lack of aggregate demand which translate into lack of labor demand and then even as overall demand throughout his grow, employers as they have been in the last couple of recoveries that are quite hesitant to hire, worried about the sustainability of it. just any raw look at the data shows that we basically have 5.5 jobseekers for job opening. so there's no way to conceive, if we could magically fill every job opening with an unemployed worker that we could eliminate. we would still have an 8% unemployment rate which is very
high cyclical levels. so there's no doubt there was a huge cyclical shock. on the other hand, the length and duration of the cyclical shock as great a mass long term problem that over 44% of the current unemployed have been out for six months or more. that's over 4.3% of the workforce but if you add in another 1.4% of the workforce, then it becomes so discouraged that they in no longer call themselves part of the workforce can that's getting is somewhere close to 8 million individuals who have been out of work, more than six months. even when you get a robust economic recovery which is the most important thing we need, there are going to be lingering groups. the long-term unemployed tend to be last in the queue for being high. everything we've looked at historically shows that long-term unemployment is much less sensitive to macro expansion than a short-term unemployment. so even as we get, and we hope we get over the next couple of
years, a very robust recovery will have a growing and serious long-term unemployment problem. the long-term unemployed problem comes out naturally from, yeah, the duration of this downturn. but it also talks about what david said earlier, we have large structural problems that unemployment is disproportionately been greeted in many of those previously high-paying no wage jobs, whether menu management, clinical, construction. we're not going to reconstruct the economy as we go into recovery with the same types of job next we had before. so lots of cyclical unemployment is going to be a mismatch, not just between the skills but between the aspirations and identities of unemployed individuals and the types of jobs out there. so what can we do to do with what's clear going to be a lingering long-term unemployment problem? doing nothing is really problematic. as david said, the cost to individuals and their families of being permanent job loser and having the type of system that existed in the 1980s when we
cut back on disability benefits i didn't extend unemployment insurance as much, even 20 years later we see the lingering impacts on health, on their kids education, and on earnings. we need to do more and when you to keep an extension of unemployment insurance which is going to be a fiscally sound policy in the long run because it's going to lead to fewer people becoming prominently disconnected from the labor market, moving on to things like disability programs which are much more expensive with taxpayer in the long run and not helpful for their families. that's the first thing we need to do. the second is we need to think about policies to improve our we employment services, to improve access to training. there are a number of successful models out there in recent demonstration projects that link employers who have jobs that are growing and have problems finding workers, even in a depressed economy. there are such employers in sectors like health and a wide range of other places. there are a number of models out there that recent evaluation
show to be quite successful in the 20, 30% r.w. eaks growth, and improving employment. so for existing long-term unemployed we need to use our committee colleges more effectively. we need to provide better information reimplement services and will need to do with the housing overhang and a lot of people in areas that today there are not a lot job opportunities in many places, but as a grow we need to make sure we get the regional mobility that has always been a hallmark of american economic growth. so the bottom line is first we have to have a strong cyclical recovery. second, we're still going to need to do more to do with the long-term unemployed. third, we need to think in the future about how can we make sure we don't generate this type of long-term unemployment because it's so difficult to generate. to do with once it's there. so obviously we need to make sure we have no financial catastrophes in the future. that would be the first and most important thing to do. but barring that, we probably need to think more on the prevention side as well.
are there ways of not just using unemployment insurance to pay people are out of work to actually have things like short-term compensation more easily available on better terms for employers so that the key people around, don't lay them off when the labor market is the worst. hopefully they will eventually adjust, many of them will move to other jobs, but throwing them into unemployment and that's the way to get support rather than supporting people to stay in the job may not be the most sensible policy. a number of european countries seem to have done better on that mark. the experience ring of unemployment insurance has created incentives there. we need to examine our unemployment insurance system to do with that in the future. thanks. >> i like to go to cc. you have the president of writing about this extensively by you at princeton. you get to solve the problems that you been writing about all these years. you know, i put that to a few minutes ago in agreement and she laughed.
but david pointed out in his research, even before the crisis hit we had a problem with middle-class wages and has only gotten worse. can you please talk to us about what are the policy options vis-à-vis education entering that can deal with that? >> i'd be happy to. david's paper and his research, which was the paper that was released today is largely based on a lot of his research that's been ongoing and has been very influential to the way we've been thinking about it. so here's what i've taken a way that you have employment growth and expansion in the types of jobs that require these, require the non-analytical task, the tests are not routine, whereas you have decline in occupation have the kind of task they can be automated. anything is if you match up those skills and those types of
non-interactive types of skills of analytical skills them non-routine skills which just maybe correlate them with educational levels, what you see is there's a very nice link between individuals have gone on to some post-secondary score and have these kinds of being able to think on your feet, memo, can be easily replaced by a machine or a computer. which really highlights the potential impact and i think the importance of post-secondary education and really solid case for second education that in addition we have employers who bemoan the fact that high school graduates come to the doors, even called student come to the doors committed on a very good interpersonal skills. they can't think on their feet. they can problem solve very well. it's not the highest skills the employers say they're needing. they just need basic, being able to be a critical thinker. they be known that the applicants don't think have the skill. i don't know how much this is emphasized that recent data suggest today's job market and the job market looking forward is not going to be start working
at a job at ibm and to have a job for 30 just that individuals are more likely, they'll have shorter tenure with the jobs mean that got to remain noble. you're going to move from job to job to job. it's more general kinds of skills just being a good thing to where you can apply the skills and lots of different places that's going to serve individuals well. how does all that add up when we think about going for, how do we prepare our young people, how do we even, you know, people are not so young but our workforce to be able to respond to this changing demand by our employers. so i will give you just a frame where we can talk more as the panel progress is about what the administration thinks about filling in some of the holes here, how we think will address this. but i think what it means is a education entering system, and i have today, the labor economist, education, training, all human capital. i tend to think of it all as school. different kinds of forms but all kinds of a form of school. so i think it means we need a more comprehensive system.
it has to start early. there's good evidence that preschool, girlie education matters a lot. it pays off not just in the short term that pays off throughout and in the just want them best evidence suggests that through age four you are still being impacted of a high quality preschool. so we know we need to start early. and that needs to be followed up with also very good strong elementary, middle school, secondary school. our secondary schools have to be places where individual, not everyone may be literally going to college, but everybody needs to be given the skills where they could go to college so they have the option. a lot of the skills other skills that employers need. we need high schools which respond to the needs of students. not everybody is going to be made for a traditional high school. there needs to be alternative schools which are preparing students for a good career going onto a post-secondary institution. students as they're going through these educational institutions need access to financial aid.
obviously this is an investment for the student, meaning they have an incentive to be paid up front. they will get a lot of it back on the other end, but some of them will be tell. they don't have access to the credit market. and in others, it looks very risky to be taking out loans, et cetera. we need a robust financial aid system which can be responsive to the needs of young people, and also to adults who may not need a big loan or a big grant in order to go and take a few more classes as part of their lifelong learning, but might need access to smaller bones or smallest financial aid. we need to be thinking of our second -- our whole system. again, cradle to career is kind of the way we think about in the administration. but it is a lifelong. one of the realities of life in the united states and of the educational trajectories of individuals, a lot of folks are in and out. one of the tragic inner current system is folks will go for a year or take a class or two, stop now, come back up in those two classes are very low that
the where they want to go next. so i think by making the whole system more coherent we think of this as being stackable come as career pathways where you might start with all courses, everybody needs to be able to do some basic skills. so you start there. so that if you start training to be a nursing assistant or a nurse, you take those classes was that if you decide nursing stuff for me, i want to go off and learn plumbing, those basic skills classes that you've taken are those into classes would still apply to your new career trajectory. or you want to be energy take a couple of classes. you become a nurses aide. you come back and say now i would like to be, actually continue on to be in our index we come back and, you know, exactly where you need to go, what classes you need to continue with. the best example that we can to talk about in washington state, but there are a lot of other examples around the country. i think we need to have a trading system that's flexible to the needs of adults.
growing proportion of individuals pursuing post-secondary education are adults who are working to have children, have complicated lives. and are a lot of our institutions are set for the traditional 18, 19, 20 year old who has parents who are supporting him or her. so i think that it's also very important that our courses are flexible, more online courses that high quality and need to be available, thinking -- trying to get credit for what individuals have learned on the job in ways that make sense. providing it in a way for a don't ours. we need for example, here's another one. a lot of adults don't just want to go back and learn to plus two equals four. four plus four equals a. first of all we hope they learn that before. to learn in occupation about the way i think, i'm going to bother real here, but becoming a carpenter to adding two plus two
in a sense of being a carpenter makes it much more relevant. so having more oriented courses has been shown that part of the study, that's a lot of what you're doing was combining the occupation developments with the basic skills and the other skills that they were learning, and it's just much more successful. there are other examples there. and lastly i just really come it's very important that these systems be more coherent. we have now our students who graduate from high school, they think i've got a high school diploma, i'm ready to go to college. they get to college and it turns out what i learned in high school wasn't enough to go onto college. that just can't be the case anymore. it needs to be that when you graduate from high school, that those competencies are aligned with what the post-secondary institutions also believe they need. so i think we can actually, we can survey think if we can envision a system in biggest coherent system, that's flexible in responding to the needs of what the workers need an employer state, i think we can
we design our system to the 21st century. >> thanks. ronnie black will is chief economist. ron, you spend your life basically waiting for the policy were as trying to figure out what do we do about some of the economic challenges. i'd like you to talk -- my question to you is, again, we know that this hollowing out of the middle-class, what would your advice be on changing those courses? >> thanks, greg. for so i want to begin a stipulating, it may not be obvious, but just visiting workers and union halls across the country were yesterday on wall street, i've been around a while as you can tell from the color of my hair. i have never seen the labor market, not just in the united states in a worse condition than exists at present.
john podesta mentioned a number of figures last time. professor katz mentioned the fact with 44% of the unemployed who have been unemployed for six months or more. it's a record number. it's an outlier country. no other country is experiencing anything like that. but the labor ministers of cheaply countries were here last week. and the head of that, the ilo prepared a study of the situation of global market. they reported interestingly at the end of 2010, the g20 implement will be 34 million jobs less than it was before the crisis hit. and that's despite the fact that they estimate that the combined might of economic support for the governments have undertaken have saved or created 21 million jobs. so there's 55 million jobs that have been wiped out at the end of the if we had not had these aggressive steps we have taken, led by the united states by the way. they also report that 200 people
are now living in abject poverty, less than $2 a day. because of the fx in this crisis. and more disturbing, even than that is that they estimate that half of everyone who is employed is something one did or another of the precarious employment. the level of pain and anxiety and increasing anger in our country and abroad, just can't be exaggerated. what do we do about it? i'd like the formulation -- the chamber the use in the presence report, our goal here has to be a complex one. it's not just recovering from the recession. it's rebounding the economy so that we don't end up back in the same situation we are in now. and it's rebuilding the capacity of the economy going forward. and it seems to me that the most important thing on the demand side and the supply side,
linking the short-term and long-term, is a sustained outlook investment led recovery. that rebuilds the american economy. the building of the economy to pull its weight in the world so that we do not have to borrow 6% of our gdp every year to consume the things that we consume. and i would say i would overlap with a focus on education and employment. i don't think is a better public opportunity, especially in the time of recession than investing in the knowledge and skill base of our workforce. because a high skilled country like the united states, in an increasingly global world, has no long-term future if we do not have a world-class working system. there's no choose for us not having that. in other words, i would say that right now is the time in which pell grants should be expanded. one of the most public programs of ever had in the terms of rates of return as i understand
it was the g.i. bill to throw the people are coming out of the military. that's one of the reasons i have an education. my brother benefited from that and set a trend for me. but if what you get a world-class workforce, we need to think of this not just helping workers help themselves, we as a country can't afford for any worker not to have all the education that they want. it's good for them, of course, but the country can't afford it because we have to base our competitive future on innovation and on learning institutions, and on well educated and well educated workers can do that. second thing i would say is we can't compete if we don't have a world-class infrastructure. we've got a $33.3 trillion deficit with the basic infrastructure in this country. mediocre, fast broadband access in his country compared your competitors. we have to do a lot of things to balance the global economy. i'm not going to get into that right now, but whatever we do have have world class workforce
and a world-class infrastructure. let me suggest that especially when governments are putting together exit strategy for extraordinary measures they've taken long before as greg points out, the sustainable growth and employment, the danger of the short run workers will be left behind. we already have this high level of extended joblessness. that would be a tragedy, and it's going to be socially unacceptable, of course, politically catastrophic. he does these problems we have, these guys get angry without jobs. we are in an election year and it's going to turn politics upside down, i'm afraid. >> so what we've been saying to the labor ministers in the short run, we have to close this gap between growth, which we have three and three quarters of and employment growth which means anything at the moment. in the long run, professor