[Senate Hearing 111-535]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 111-535
 
                  WEATHERING THE STORM: CREATING JOBS 
                            IN THE RECESSION 

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                            ECONOMIC POLICY

                                 of the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   ON

EXAMINING POLICIES CONGRESS MIGHT CONSIDER IN DEVELOPING IMMEDIATE JOB 
    CREATION, AS WELL AS MEDIUM AND LONGER-TERM POLICIES TO ACHIEVE 
                         SUSTAINABLE JOB GROWTH

                               __________

                            DECEMBER 9, 2009

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


      Available at: http: //www.access.gpo.gov /congress /senate/
                            senate05sh.html

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

               CHRISTOPHER J. DODD, Connecticut, Chairman

TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
DANIEL K. AKAKA, Hawaii              JIM DeMINT, South Carolina
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
HERB KOHL, Wisconsin                 KAY BAILEY HUTCHISON, Texas
MARK R. WARNER, Virginia             JUDD GREGG, New Hampshire
JEFF MERKLEY, Oregon
MICHAEL F. BENNET, Colorado

                    Edward Silverman, Staff Director

              William D. Duhnke, Republican Staff Director

                Patrick Brown, Professional Staff Member

                     Marc Jarsulic, Chief Economist

                       Dawn Ratliff, Chief Clerk

                      Devin Hartley, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                 ______

                    Subcommittee on Economic Policy

                     SHERROD BROWN, Ohio, Chairman

         JIM DeMINT, South Carolina, Ranking Republican Member

JON TESTER, Montana
JEFF MERKLEY, Oregon
CHRISTOPHER J. DODD, Connecticut

                      Chris Slevin, Staff Director

                                  (ii)














                            C O N T E N T S

                              ----------                              

                        FRIDAY, DECEMBER 9, 2009

                                                                   Page

Opening statement of Chairman Brown..............................     1

                               WITNESSES

    Heather Boushey, Senior Economist, Center for American 
      Progress Action Fund.......................................     4
        Prepared statement.......................................    29
    Bruce Katz, Vice President, Brookings Institution, and 
      Director, Metropolitan Policy Program......................     5
        Prepared statement.......................................    38
    Ray Leach, Chief Executive Officer, Jumpstart, Inc...........     8
        Prepared statement.......................................    44
    Rick L. Weddle, President and CEO of The Research Triangle 
      Park, and first Chairman of the International Economic 
      Development Council........................................    11
        Prepared statement.......................................    47

                                 (iii)


          WEATHERING THE STORM: CREATING JOBS IN THE RECESSION

                              ----------                              


                      WEDNESDAY, DECEMBER 9, 2009

                                       U.S. Senate,
                           Subcommittee on Economic Policy,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Subcommittee met at 2:08 p.m., in room SD-538, Dirksen 
Senate Office Building, Senator Sherrod Brown, Chairman of the 
Subcommittee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. This hearing of the Economic Policy 
Subcommittee of the U.S. Senate Banking Committee will come to 
order. Thank you all for joining us, the four guests, 
witnesses, and others in the audience.
    Few among us have ever witnessed the economic challenges 
facing this country today. We have avoided the collapse of our 
financial system. We were successful as a Nation with that and 
as a Senate and Congress and White House back a year ago. But 
millions of men and women, as we know too well, are still 
struggling to make ends meet, struggling with lower wages and 
depleted savings.
    Our Nation is showing some signs of economic recovery, but 
working families shield their children as best they can from 
the financial and emotional costs of job losses. Big banks and 
financial institutions have recovered but are still wounded 
and, most unfortunately, too often hesitant to lend. 
Creditworthy businesses are cutting workers because they cannot 
get credit. They have the capacity, they have the customers, 
but too often cannot get credit to move forward.
    Fear of the unknown is pervasive, whether it be fear of a 
parent's job security or health insecurity or fear of paying 
for a child's college education or fear of losing one's home--
all persistent problems in Mr. Leach's and my part of the 
country, and really around this whole country.
    Since 2008, we have been accustomed to the refrain ``worst 
since the Great Depression,'' when unemployment reached 25 
percent and economic output fell by 25 percent in the 3-plus-
year period between 1929 and 1933. Earlier this year, this 
Subcommittee examined the lessons of the New Deal. What we 
heard was a range of perspectives in that hearing. One 
irrefutable conclusion was that the New Deal kept millions out 
of poverty and that investments in our economic infrastructure 
paved the way for the most dynamic economic the world has ever 
since, beginning only 15 years later.
    Similarly, President Obama and Congress have taken steps to 
rebuild our economy and reinvest in our workers. The American 
Recovery and Reinvestment Act has helped our Nation weather the 
economic storm. Last week, the Congressional Budget Office 
reported ARRA programs have sustained as many as 1.6 million 
jobs this year. The Congressional Budget Office report 
estimates that the unemployment rate would be somewhere between 
0.3 and 0.9 percent higher without the ARRA. But there are 
concerns that demand will again fade. While last Friday's 
slight reduction in unemployment is encouraging, there is no 
reduction in urgency to create jobs.
    Yesterday, the President outlined job creation proposals 
that his administration is considering. Congressional leaders 
are assembling ideas for job creation policies and will act in 
the coming weeks. I believe we need to help small business by 
making it easier to access credit. The Small Business 
Administration estimates that a new job will be created for 
every additional $23,000 lent to qualified borrowers. We need 
to encourage growth in manufacturing, the jobs that have, as we 
know, the strongest multiplier effect. One manufacturing jobs 
supports four other jobs throughout the economy.
    As President Obama noted yesterday, job creation will 
ultimately depend on the real job creators--businesses across 
America, entrepreneurs in Youngstown and Dayton, students in 
our colleges and universities, workers in factories in every 
corner of our great land.
    We have two proven job creators here with us today, 
alongside two forward-looking economic thinkers. Today we will 
hear our witnesses discuss what steps are necessary not just to 
weather the storm but to create new jobs. I thank each of you 
for your participation today and look forward to your thoughts 
on economic recovery, look forward to your comments on short- 
and long-term policies needed to truly jumpstart the hiring of 
more workers.
    I will introduce each of the four witnesses, and Senator 
Dodd I think is coming along and will make an opening 
statement, the Chair of the full Committee, in a moment, but I 
will introduce each of the four of you. Then we will begin.
    Dr. Heather Boushey is the Senior Economist at the Center 
for American Progress. Prior to joining the center, Dr. Boushey 
was a Senior Economist with the Joint Economic Committee of the 
U.S. Congress. She studies working families and trends in the 
U.S. labor market, has written extensively on labor issues, 
including tracking the recession and its impact on workers and 
their families, women's labor force participation trends and 
income inequality, and work/life policy issues. She has 
testified before Congress and given lectures nationwide. Dr. 
Boushey's research has been featured in major national and 
regional papers, television, and radio. She previously worked 
at the Center for Economic Policy Research and the Economic 
Policy Institute, where she co-authored ``The State of Working 
America'' and ``Hardships in America.'' Dr. Boushey received 
her Ph.D. in economics from the New School for Social Research 
and her B.A. from Hampshire College.
    Bruce Katz is Vice President of Brookings here in 
Washington. He is the founding director of the Brookings 
Metropolitan Policy Program. He regularly advised national, 
State, regional, and municipal leaders on policy reforms that 
aim to advance the competitiveness of metropolitan areas. He 
focuses particularly on reforms that promote the revitalization 
of central cities and older suburbs and enhance the ability of 
these places to attract, retain, and grow the middle class. He 
recently served on the Obama transition team and is a senior 
adviser to HUD Secretary Shaun Donovan. Before joining 
Brookings, he served as chief of staff to Henry Cisneros, the 
former Secretary of the U.S. Department of Housing and Urban 
Development. He has also served as staff director on the Senate 
Subcommittee on Housing and Urban Affairs. He is a visiting 
professor of social policy at the London School of Economics, a 
frequent writer, and commentator on urban and metropolitan 
issues. Welcome, Dr. Katz. Nice to see you.
    Ray Leach, founder and CEO of JumpStart from Cleveland, 
from my States. Since 2003, Mr. Leach has led JumpStart, 
recognized recently by the Economic Development Administration 
as one of the most innovative venture development organizations 
in our Nation. JumpStart invests risk capital in early stage 
companies and provides entrepreneurs with business operation 
plans and guidance to help attract larger pools of capital and 
accelerate growth. My editorial comment: Prior to Mr. Leach 
coming to Cleveland with JumpStart in 2003, Cleveland had a 
reputation as one of the worst places to start a business in 
the Nation, and he has totally reversed that into Cleveland 
being one of the best places. His career began at IBM and has 
been principally focused on information technology companies. 
He is a Sloan fellow and earned his M.B.A. from MIT. He earned 
a B.A. in finance from the University of Akron in Akron, Ohio.
    Rick Weddle is President and CEO of The Research Triangle 
Park in North Carolina. Under his leadership since 2004, The 
Research Triangle Park has generated successful development 
projects with capital investment of more than $800 million and 
the creation of more than 6,300 new high--quality jobs 
averaging $80,000 per year. The Research Triangle Foundation 
has assisted in recruiting 18 new firms and 4 expansions to The 
Research Triangle since 2004. Prior to 2004, for 5 years Mr. 
Weddle was President and CEO of the Greater Phoenix Economic 
Council, assisting 170 companies with expansions or relocations 
to Phoenix that created 26,000 jobs. He also spent 4 years in 
Toledo, Ohio, where he served as President and CEO of the 
Regional Growth Partnership, assisting 119 companies with 
expansions or relocations that created some 4,000 jobs. He 
recently received the Lifetime Achievement Award for Excellence 
in Economic Development from the International Economic 
Development Council. He is a native of Oklahoma.
    Dr. Boushey, if you would begin, welcome to all four of 
you. Please keep your comments to close to 5, 6, 7 minutes, and 
we will begin the questions. Thank you.

  STATEMENT OF HEATHER BOUSHEY, SENIOR ECONOMIST, CENTER FOR 
                 AMERICAN PROGRESS ACTION FUND

    Ms. Boushey. Oh, there we go. All right. I will start over. 
So thank you, Chairman Brown, for inviting us to speak to you 
today about job creation. In my remarks, I am going to focus on 
a few key highlights from my written testimony, which goes into 
much more depth on the issues at hand.
    Of course, the good news is that on Friday, we learned that 
the unemployment rate fell to 10 percent and only 11,000 
workers lost their jobs in November. This is a clear indication 
that the steps that Congress and the administration have taken 
to get the economy back on track have been effective. The 
American Recovery and Reinvestment Act, signed into law last 
February, boosted economic growth in the third quarter and 
saved or created upwards of 1.6 million jobs. The act was a 
significant accomplishment, but the economic effects of the 
recovery package will start to diminish beginning in the middle 
of 2010, well before we are fully out of the woods. Economists 
now predict that economic growth will be only about 2 percent 
for 2010 given the policy efforts already in place. Without 
additional action on the part of Congress, the U.S. economy 
could easily slip into an extended jobless recovery--or see the 
recovery stall altogether.
    There are a few key steps that Congress should take now to 
help boost jobs in the short- to medium-term.
    First, Congress should move quickly to ensure that the 
extended unemployment benefits included in the Recovery Act do 
not expire as planned at the end of this month. These benefits 
go to the long-term unemployed who now account for a 
historically high share of unemployed workers. As the chart 
behind you shows, nearly four in ten workers have been out of 
work and searching for a job for at least 6 months.
    Now, extending these subsidies to help the unemployed 
purchase health insurance or allowing States the option to put 
unemployed workers on Medicaid must also be done before the end 
of the year.
    Second, Congress should provide another funding boost to 
the States. State and local governments have shed almost 
160,000 jobs over the past year, with nearly 80 percent of 
local government jobs lost in just the past 4 months. So those 
layoffs are accelerating, and these layoffs are, of course, 
working against economic recovery at the local level. The aid 
to the States contained in the package put into place last 
February helped, but it only addressed about 30 to 40 percent 
of the gap faced by State governments.
    Third, the Federal Government could spur the creation of 
millions of mostly private sector jobs by directing additional 
Federal money into youth and young adult employment--such as 
AmeriCorps, VISTA, YouthBuild, and the youth service and 
conservation corps--child care, after-school programs, and in-
home health services for the elderly and disabled, as well as 
training for those serving America's youngsters, oldsters, and 
the disabled. Nonprofit groups and small businesses provide 
most of these jobs, although they are paid for by programs that 
are currently being cut by State and local governments. 
Funneling funds into these programs not only quickly gets 
people into jobs, but supports families and communities by 
providing much needed services. These programs often have long 
waiting lists, and any new funds will be able to meet pressing 
needs.
    Fourth, the proposals that the President put forward 
yesterday that focus on promoting green jobs as a part of the 
overall recovery agenda are certainly the right way to go. 
Congress should establish a two-tier program to transform the 
market for energy efficiency--a ``cash for caulkers'' program. 
The first tier would promote immediate investment in energy 
efficiency, through super-efficient appliances and simple home 
improvements. The second tier, which should be implemented in 
parallel at the same time, would increase consumer awareness of 
comprehensive whole-home energy audits and retrofits. These 
will, of course, create substantial jobs, good jobs in the 
construction and manufacturing sectors.
    So I want to close by noting that we should consider using 
the TARP funds for job creation. We should not let the American 
people be scared by tactics about the long-term Federal budget 
deficits and allow those to keep Congress from doing what we 
need to do to keep the economy moving back on track in the 
short term. The deficit will rise regardless of whether or not 
Congress approves additional spending if we do not get people 
back to work. Unemployed people do not pay income taxes; they 
do not pay sales taxes if they do not have any money to buy 
things; and if their home gets foreclosed on, then they are not 
paying real estate taxes. Over the last year, we have seen tax 
revenues fall by nearly as much as we have seen expenditures go 
up, so certainly if we fail to act, that, too, will increase 
the deficit.
    The question is whether we will make the investments today 
to get the economy back on track or whether we will allow the 
scourge of unemployment to linger. If we do nothing, we risk 
not only missing an opportunity to get the 15.4 million 
unemployed workers back to work quickly, but also are harming 
our economy over the medium to long term.
    Thank you.
    Chairman Brown. Thank you, Dr. Boushey.
    Mr. Katz.

STATEMENT OF BRUCE KATZ, VICE PRESIDENT, BROOKINGS INSTITUTION, 
           AND DIRECTOR, METROPOLITAN POLICY PROGRAM

    Mr. Katz. Thank you, Chairman Brown, for the opportunity to 
testify. I also will focus on the highlights from my written 
testimony. I am going to make three points that build on 
President Obama's presentation yesterday at Brookings that try 
to connect macroeconomic policy to metro-economic realities.
    The first point is that the American economy, like most 
developed economies, is a network of metro economies which 
envelop not just cities and suburbs, but a good portion of our 
rural areas. The 366 metro areas in the United States house 83 
percent of our population. They generate 88 percent of our GDP, 
and due to sprawl, about 50 percent of the U.S. rural 
population actually live in metropolitan areas because of the 
distension of economies. We are metro nation. We need to start 
acting like one, like China, like Germany, like Britain, with 
the kinds of smart policies and targeted investments that will 
enhance our competitiveness globally.
    Second, the Great Recession has affected different metro 
economies in radically different ways. Metros like Austin, San 
Antonio, and Washington, D.C., have fared fairly well during 
this downturn, buoyed by strong health and education sectors 
and Government. By contrast, bubble real estate economies, such 
as Phoenix, Tampa, and Jacksonville, have continued to lose 
jobs at two or three times the rate of the United States as a 
whole over the last quarter. Motor metros, as you know, such as 
Youngstown and Akron, have shed jobs two and three times faster 
than the United States, respectively, over the last quarter. 
Bottom line, there is no single American economy. Even as 
economists talk about national recovery, a large number of our 
metro economies are still mired in recession.
    Third, Federal efforts to bolster job creation need to 
connect ``The Macro to the Metro.'' I will focus on two kinds 
of Federal responses.
    First, metros need the Federal Government to intervene 
quickly to prevent further job losses from the collapse of 
general and specific tax revenues. One critical strategy is 
direct fiscal assistance to local governments, which employ 10 
percent of the Nation's workforce. There is always a fiscal lag 
to recessions. The massive decline in property values has not 
yet shown up in local government budgets, which derive about 70 
to 75 percent of their revenue from property taxes. By one 
calculus, property tax revenues for both local governments and 
school district could decline in the coming year by $35 
billion. If the decline in State transfers to localities is as 
large as the decline in State revenue, local governments could 
lose another $74 billion.
    In fiscal year 2009, about 70 percent of cities dealt with 
budget shortfalls through layoffs, furloughs, and hiring 
freezes. This will only get worse as revenues decline.
    So fiscal aid to cities would keep municipal payrolls 
stable and also stall cuts in local spending on construction, 
procurement, and other areas. The simplest form is direct aid 
in a new program. It could be modeled, actually, on the old 
general revenue-sharing program we had in the 1970s. A second 
option would be to restructure the State Fiscal Stabilization 
Fund started in the Recovery Act to provide direct fiscal 
assistance to local governments through a passthrough. In my 
written testimony, I also focus on a second strategy for 
stopping job losses by enabling Federal resources to be used 
for transit operating subsidies. The Recovery Act provides a 
lot of funding for capital, none for operating.
    Now, second, metros need the Federal Government's support 
in creating jobs that build the economy of the future, one that 
is low carbon, innovation fueled, export oriented. Investment 
in the next generation of infrastructure is critical here. I 
recommend that Congress expand funding for the U.S. DOT's 
Transportation Investment Generating Economic Recovery--TIGER--
Discretionary Grants, originally funded at about $1.5 billion 
in the Recovery Act. TIGER uses job creation as a metric for 
evaluating applications, and TIGER-funded infrastructure, 
competitively awarded, has a powerful ability to create well-
paying jobs now and a stronger economy in the future.
    TIGER disbursements are not expected until February 2010, 
but the program is attracting substantial demand. Nearly 1,400 
applications received so far by DOT total $57 billion--
remember, just $1.5 billion appropriated--and come from every 
State. If even one-third of these applications are projects 
that adhere closely to the objectives of the program, that 
represents $20 billion in high-quality projects that are ready 
to start, but lack funding and, again, build the economy of the 
future.
    So I believe that funding the qualified TIGER pipeline 
should be considered as part of any job creation effort. 
Congress should also consider making TIGER a permanent part of 
the DOT budget. My written testimony also recommends Federal 
support for the national infrastructure bank that Senator Dodd 
has sponsored, as well as industry clusters.
    So, in conclusion, the time is long past due for national 
economic policy to align more closely with metropolitan 
economic realities, given the economic primacy of our 
metropolitan areas.
    I thank you again for the opportunity to testify here today 
and welcome any questions. Thanks.
    Chairman Brown. Thank you, Mr. Katz.
    We do not get our full Committee Chair here very often 
because he is so busy, so do you want to make a statement now 
before the other two panelists?
    Chairman Dodd. Well, that is very generous of you, and I 
will try and stay as long as I can.
    Let me, first of all, thank my colleague from Ohio for 
chairing this work area, job creation, which is so important. 
And this Committee has a lot to say about it in terms of a lot 
of jurisdictional issues that we are involved in. So I find it 
exciting that there is some real attention being given to how 
we do this. This forward-leaning, I think all of us agree that 
obviously you want to do everything you can for those who have 
fallen through the cracks. Whether it is extension of 
unemployment benefits or insurance or COBRA extensions and the 
like, we have got to do that, obviously, for people.
    Certainly I believe very strongly the best social program, 
I have often said, that anyone ever imagined or came up with is 
a decent-paying job. There is no better social program in terms 
of what it means to individuals, families, communities, and, 
obviously, it is our job to be honest enough with people to say 
that a lot of these jobs that are gone are not coming back, 
candidly. And so we have got to be thinking about what we can 
do to create that new level of jobs in the country where the 
opportunities are there.
    A lot of basic research is being done in this country, and 
if we export the basic research and end up a lot of the very 
products which we have designed and created--plasma television 
is a classic example--the ingenuity that came up with that 
concept was created here. All the manufacturing occurs 
offshore. So we export our basic research and have to import 
the products that are produced as a result of our own 
technology.
    So I am excited about the ideas of marshaling the general 
creativity, and obviously in high technologies, the empowerment 
zones I thought was a wonderful concept a few years ago, where 
we targeted resources to areas and to getting into sort of the 
green technology zones, in effect to reward industries into, 
one, developing ideas in green technologies or utilizing green 
technologies. To the extent that benefits all of us I think is 
sort of a creative idea if you think of a cluster.
    Obviously, small business, we all talk about it, and it is 
tremendously important, and we have got to be imaginative in 
how we support this. It is not just tax credits, and this is a 
difficult one that gets into the payroll tax area. But if you 
are going to encourage small businesses to keep employees they 
have or hire new ones, we have got to provide that incentive 
for them.
    Now, you get into, obviously, some issues and payroll tax 
questions, but, nonetheless, I think that is the clear 
incentive that makes the most difference for people, things 
like the--I love the creative--I think it was John Doerr who 
came up with the title of ``cash for caulkers,'' a sort of 
intriguing idea to put some people to work in that area. So 
there are any number of concepts.
    I have got a long statement here, Mr. President, that I 
will ask to be included in the record. It goes through a number 
of these ideas, including, of course, setting up that lending 
facility utilizing some of these TARP resources that exist. 
Having been involved, deeply involved a year ago in the 
emergency economic stabilization bill, a highly criticized 
effort at the time, still highly criticized, I happen to 
believe we did exactly the right thing with it, and history I 
think will record it as such. And so I think we can honestly 
say we have stabilized the major financial institutions in the 
country, and clearly now, given the resources that are 
available, to at least use a substantial part of those 
resources to make a difference in job creation I think is 
tremendously well warranted and worthy of the kind of effort 
the President is putting into it, and those of us up here can 
help support with either our own ideas or getting behind these 
proposals.
    So this is a very timely hearing to have on some of these 
ideas that are being kicked around here, and I thank my 
colleague. I thank all of our witnesses. You are all talented 
people who have thought about this long and hard for a long, 
long time, and any additional thoughts and ideas you have for 
all of us I know you are sharing with us, and we really welcome 
them. So thank you.
    Chairman Brown. Thank you, Senator Dodd. Thanks for joining 
us.
    Mr. Leach, your testimony.

  STATEMENT OF RAY LEACH, CHIEF EXECUTIVE OFFICER, JUMPSTART, 
                              INC.

    Mr. Leach. Senators Dodd and Brown, thank you for the 
opportunity for me to testify on behalf of nonprofit 
organizations located throughout the United States who work 
with and are supported by public, foundation, and private 
sector partners who are focused on the transformation of 
regional economies.
    While all of us are encouraged by the recent news regarding 
a slight reduction in total U.S. unemployment, economists tell 
us that we are going to need to create at least 6 million new 
jobs in order to reach full employment in the United States. 
Economists also tell us that 70 percent of all new jobs in the 
U.S. economy are created by firms that are less than 5 years 
old.
    With this being the case, now is the time for Congress to 
reconsider the Federal Government's role in the formation of 
new, highly disruptive technology businesses that have the 
potential to create significant white, green, and blue collar 
jobs as well as completely new industries.
    This being the case, I believe new ideas and actions are 
required in order to for the U.S. economy to not only get back 
on track for long-term economic growth, but to also allow the 
United States to remain the world's largest wealth- and job-
creating economy in the decades to come.
    Recent conversations regarding the expansion of small 
business loan guarantees, reducing loan fees, providing tax 
credits to small companies who hire new employees, are a start 
to help more established, typically lower-growth companies. 
However, I do not believe that these initiatives will have the 
ability to jump-start the U.S. economy in such a fashion where 
we can get back to full employment as quickly as we otherwise 
could if the Federal Government leveraged some new ideas and 
initiatives.
    I appreciate the chance to share with you today an approach 
that has not been discussed to my knowledge to date with this 
Committee and how the Federal Government can partner with 
communities, States, and regions of the country to accelerate 
the formation of entrepreneurial ecosystems based on regional 
cluster collaborations and partnerships that have the potential 
to produce sustained, long-term economic transformation, 
growth, and wealth creation.
    In order to illustrate this example, I would like to talk a 
little bit about my organization, JumpStart, a nonprofit 
located in northeast Ohio, headquartered in Cleveland and 
working in northeast Ohio.
    It has been our mission over the last 4 years to recreate 
the entrepreneurial ecosystem which at one time was incredibly 
robust, particularly in the late 19th and early 20th centuries. 
As a result of JumpStart's work, we are working on--the 
origination of JumpStart and the foundation of our initial work 
was from 1990 to 2002, if you looked at the largest 
metropolitan economies across the United States, northeast Ohio 
was the worst-performing regional economy 10 out of 12 years 
between 1990 and 2002.
    In 2003, the public, philanthropic, and private sector 
leadership of Greater Cleveland came together to build a 
strategic plan to build an organization ultimately that I am 
running today called JumpStart, which is a nonprofit entity 
that provides programs and access to capital, which is now 
recreating the entrepreneurial ecosystem to assist new 
innovators and entrepreneurs to realize the greatest economic 
outcomes that could result from the creation of new firms based 
on disruptive, globally competitive innovation that has the 
potential to create hundreds, thousands, and tens of thousands 
of new jobs in the coming decade.
    I am encouraged to report that since this is collaboration 
of supporters was created, JumpStart has generated significant 
economic results to date and has been able to demonstrate the 
promise to help accelerate the economic transformation of the 
northeast Ohio economy. Over the last 4 years, again, starting 
with very brand-new one-, two-, three-people companies, 
JumpStart has been able to create 600 jobs, and the companies 
that we are focused on are expected to create at least 3,000 
new positions in the next few years, while at the same time 
JumpStart has been able to attract over $1 billion of private 
sector capital to northeast Ohio's startup firms.
    JumpStart's venture development business model has recently 
been highlighted in the national media and has won multiple 
awards as a national best practice organization that has the 
potential to transform the economic future of our country.
    With these thoughts in mind, Congress should take lessons 
from JumpStart's public, private, and foundation collaboration 
in order to leverage Federal resources to ensure that new and 
innovative businesses continue to be created by entrepreneurs 
across the United States via a new robust Federal program that 
focuses on accelerating technology commercialization, 
increasing access to technical assistance, education mentoring, 
and training for all entrepreneurs--of course, also improving 
access to risk capital and at the same time not significantly 
overlapping any significant Federal programs.
    One of the examples that JumpStart has been able to benefit 
from in Ohio is something called the Ohio Third Frontier 
Project. This is a $1.6 billion public sector initiative that 
is focused on creating and accelerating the research- and 
technology-drive economy in Ohio. A recent assessment of this 
program was performed by SRI International and determined that 
after the State expenditures totaling $681 million over the 
last 7 years have generated over $6.6 billion of economic 
activity and over 41,300 jobs have been created in the last 7 
years in Ohio, which has resulted in a $2.4 billion increase in 
employee wage and benefits.
    So today I am recommending that Congress create a $2 
billion 4-year initiative from currently available funds from 
ARRA in order to create the Federal Innovation, 
Commercialization, and Job Creation Network whereby existing 
proven nonprofit economic development organizations and higher 
educational institutions who have been able to demonstrate 
significant commercialization and economic outcomes could serve 
as individual regional centers which would manage technical 
assistance and capital access programs to benefit regional 
innovators and entrepreneurs who demonstrate the promise of 
launching wealth-creating new companies.
    Expected results from this program would include: first, a 
doubling of resources provided by the Federal Government 
focused on commercialization and the creation of new high-
potential, high-growth companies by leveraging Federal dollars 
to non-Federal public, private, and foundation partners that 
have an aligned vision. A special focus on the 
commercialization of innovation, as Senator Dodd commented, 
basic research is great, but if we are not creating jobs from 
that research, we are not getting the bang for the buck that 
the Federal Government is making such significant investments 
in, so focusing on commercialization, which has the promise to 
create a small number of jobs immediately but has the potential 
to create at least 25 new jobs in the next 36 months.
    We could also realize from this program increased private 
sector investment of over $4 billion from investors across the 
globe within the next 4 years in brand-new firms that have been 
created or supported from this program.
    Finally, with this program, the Federal Government could 
realize the creation of at least 260,000 brand-new jobs from 
brand-new firms within the next 6 years, an additional 1 
million U.S. jobs to be created as a result of this work by the 
year 2020.
    So I greatly appreciate the opportunity to share these 
thoughts, and I look forward to taking questions later.
    Chairman Brown. Thank you very much, Mr. Leach.
    Mr. Weddle.

 STATEMENT OF RICK L. WEDDLE, PRESIDENT AND CEO, THE RESEARCH 
TRIANGLE PARK, AND FIRST CHAIRMAN OF THE INTERNATIONAL ECONOMIC 
                      DEVELOPMENT COUNCIL

    Mr. Weddle. Chairman Brown, Senator Dodd, thank you for the 
opportunity to testify today on the important topic of short-
term policies Congress should consider or could consider in 
creating jobs. The American Recovery and Reinvestment Act has 
done much to help stimulate the economy and job growth during 
the downturn. However, with unemployment at 10 percent, 
continued action is needed.
    As President and CEO of The Research Triangle Park, the 
nation's oldest and largest research park, RTP is one of the 
best examples of how the public and private policymakers can 
have a lasting impact on job creation and economic growth. Mr. 
Chairman, as you also noted in the introduction, for 4 years, I 
served as President and CEO of the Regional Growth Partnership 
in Toledo, Ohio, where in my work there I was able to 
experience and benefit from a number of--and operate under a 
number of challenges in the recovery manufacturing environment.
    As past Chairman of the International Economic Development 
Council, my comments today also represent the viewpoints of the 
world's largest economic development organization, with more 
than 4,600 members, dedicated to creating high-quality jobs and 
vibrant communities.
    My remarks today will address the following three points. 
What do the front-line economic developers see as best 
practices or revitalization programs that have worked well to 
create jobs? What specific recommendations can we offer to 
build on the success of the Recovery and Reinvestment Act in 
the short term? And what should we keep in mind to ensure that 
there is a balance between short-term immediate actions and the 
need to create long-term capacity for innovation and continued 
economic growth?
    First, allow me to share some data for the survey conducted 
last week of the 4,600 members of the International Economic 
Development Council. The data provides firsthand feedback from 
the field regarding policies and best practices in their 
communities. With a 10-percent response rate, the data 
represents input from over 400 communities nationwide. Roughly 
a third of the practitioners believe the Recovery Act has 
already created new jobs in their community. Another 30 percent 
do not believe the jobs have been created in their communities 
yet. And a quarter are still unsure of the Act's effect on job 
creation. It is clear from these results that more needs to be 
done.
    I have included a number of case studies in the written 
testimony that reflect initial analysis from around the country 
of what can be done to address this ongoing need of job 
creation. Allow me to summarize some highlights and principles 
we found among them.
    The first principle is to build on and use what we have in 
innovative ways. The case studies indicate we do not need to 
reinvent the wheel. Our communities have many assets upon which 
to build and we should leverage their work as much as possible. 
One way to do this is to bring jobs back home and directly 
incent the hiring of Americans now. Globalization has benefited 
many U.S. companies, yet offshoring of U.S. jobs is a 
gargantuan obstacle to economic development efforts. We need to 
place direct emphasis on hiring and retaining American workers.
    We can offer incentives directly to companies willing to 
bring work from an offshore location to the U.S. location 
marked by high unemployment. According to the Information and 
Technology Innovation Foundation, who first surfaced this idea, 
a forgivable loan program administered by EDA would be a 
particularly efficient method for not only creating jobs, but 
doing so in areas where the need is greatest.
    Second, we should expand the current Invest in America 
program housed in the Department of Commerce to become an 
internationally competitive marketing arm of the U.S. 
Government. The United States is the only developed country 
without such a national scale program. Most of the nations we 
compete with for investment have well-resourced programs to 
identify opportunities for foreign direct investment. To meet 
this market need, an initiative would require a $50 million 
annual investment at the Federal level complemented by another 
$50 million tranche in matching funds annually to U.S. States 
and regions specifically for attracting high-quality jobs and 
investments in the United States.
    Third, we should evaluate and align trade and exchange rate 
policy with job creation goals. Many trade and exchange rate 
policies seem to have been working against our national job 
creation goals.
    Another way to build on existing programs is to strengthen 
the innovation infrastructure in communities. This could be 
done with a combination of new ideas, like tax credits or 
direct incentives to redevelop vacant office space and retail 
space to provide much-needed wet labs and other spaces 
conducive to innovation and discovery.
    The second principle is the idea of providing resources to 
those who are most agile and flexible. For individuals, the 
Committee could consider an out-of-the-box idea. Consider tax 
credits to spur talent mobility within the United States. Given 
the current housing situation, many talented individuals are 
stranded, if you will, in locations where they cannot sell 
their homes. It would not be unreasonable to formulate a 
business and individual tax credit to help some workers 
relocate to take a new job.
    Other activities could target small business and 
entrepreneurs, the key drivers of economic recovery. The small 
firm that gains access to needed credit or cash will be more 
likely to hire additional workers to get the job done.
    We should emphasize non-traditional financing entities, 
such as Certified Development Corporations, Community 
Development Financial Institutions, and Revolving Loan Funds.
    And finally, for companies, we could look to build off 
success that are moving capital in the private sector. In 
particular, the reduction or elimination of fees on the current 
504 and 7(a) loan programs have been very successful, as well 
as the Recovery Zone Facility Bonds.
    Now, let me turn to the final principle that focuses on 
both short-term job creation as well as building our long-term 
innovation capacity. There is no doubt that the Federal 
Government's investment in research and development is a 
critical tool for stimulating innovation and building long-term 
competitiveness. We need to find ways to target and accelerate 
innovation by encouraging more R&D commercialization.
    First, we should invest in innovation infrastructure, such 
as research parks, incubators, and others, as they marry short-
term creation goals with the need to build strong, regional 
innovation ecosystems. The ideas posed in S. 583, Building a 
Stronger America Act, will directly incent the construction of 
new and expanded research parks.
    Another suggestion to jump-start commercialization would be 
to offer a bonus R&D tax credit in 2010 and 2011 which 
companies could choose to take against their non-corporate 
income tax. This recommendation put forth by the Information 
and Technology Innovation Foundation would help companies 
maintain research during this challenging economic time.
    The rationale for making such investments and incenting 
such programs is best illustrated perhaps by the story of 
Research Triangle Park. Fifty years ago, the leaders of North 
Carolina realized that our State was not well poised to be at 
the forefront of the post-war science and technology-based era. 
Based on the strengths of the State's universities, the 
University of North Carolina, Duke University, and North 
Carolina State University, they created a place where companies 
could take advantage of the region's intellectual assets with 
the physical infrastructure to support corporate R&D 
activities.
    We need bold new thinking on how to replicate the RTP model 
in other locations. This can be done by directing investment 
toward retaining and growing critical industries that can 
support high-growth companies. We can harness the existing 
Federal infrastructure, such as the Economic Development 
Administration's University Program or the Manufacturing 
Extension Partnership Networks to reach out to competitive, 
innovative companies. These programs provide an important link 
between Federal goals and the private sector. Additionally, the 
Committee could consider steps to allow the Workforce 
Investment Act to support incumbent worker training. This 
strengthens competitiveness of existing businesses and allows 
them to retain critical jobs.
    This recession is like none other that we have experienced. 
We are not just rebooting our system. We are likely moving to a 
new operating platform. As such, we should learn from these 
historical successes, but also realize that a different 
paradigm is needed. The actions taken under the initial 
Recovery Act and the ones this Committee and others recommend 
now are merely a downpayment. They are not the full solution, 
and even after the second or third round, more action may be 
needed.
    We are at an inflection point in America today. As we 
emerge from this historic downturn and recalibrate the way we 
do things, now is a prime moment to consider what must be done 
to incent appropriate private sector behavior and move the 
Federal Government from just providing a few tools and helping 
the companies and communities in selected areas to becoming a 
full partner in the National Economic Recovery Strategy.
    On behalf of the economic development practitioners around 
the country, working hard to create jobs every day in 
competitive communities, I want to thank you, the Chairman, 
Senator Dodd, for allowing me the opportunity to share these 
thoughts. I would be happy to respond to questions.
    Chairman Brown. Thank you, Mr. Weddle.
    Dr. Boushey, a few weeks ago, I was speaking to the Findlay 
Rotary Club and the tone of the questions illustrated a real 
fear of deficits in our country. Talk to us--you mentioned that 
that shouldn't override what we need to do on creating jobs. 
Talk about that for us, if you would.
    Ms. Boushey. Talk? I mean, I think that is a really 
challenging question, especially for everyday Americans who 
tend to look at this in the same way that they do their 
household budget. Oh, I am spending too much on my credit card. 
Therefore, I am in deficit. That is just an unmitigated bad.
    But it is not the same thing for government and I think we 
haven't done enough to really educate the public that there is 
a big difference there. One thing I don't think people hear 
enough about is that unemployment rises, you see tax revenues 
fall and you see demand for services go up. That in and of 
itself is going to raise the deficit. And so the rhetoric that 
we are hearing out there on the airwaves and the radio and 
television is all about we spend more and that is what raises 
the deficit. We don't hear enough about how what raises the 
deficit is the poor economy that we are in right now and the 
fact that if we don't get economic growth back on track, that 
problem will only continue to mount.
    And I think this is a really pivotal moment, because we are 
talking about making investments in our long-term economic 
growth, the kinds of things that my colleagues up here have 
been talking about, and also getting, in the short-term, 
getting people back to work. The sooner that we can get the 
economy back on track, the better that will be for the deficit 
in the medium- to long-term. It will require some spending now, 
but those investments are going to pay off.
    And just to add one thing, I mean, I think it is helpful 
when we are talking to--I find it is helpful when I am talking 
to sort of regular folks that we think about this in the same 
way that we do putting a child through college, that that is 
the kind of investment we are willing to take out loans for, to 
go into a household deficit, because we know it is going to pay 
off in the future. And that is the way we should be thinking 
about the challenges facing us right now. We will address them, 
but once we get the economy back on track.
    Chairman Brown. Thank you. One of the, I think, most 
important proposals in this body from the last couple of years 
is Senator Dodd's National Infrastructure Bank. I hear a lot 
about deficit, but we don't talk all that much about the 
deficit we have in infrastructure that we are passing on to our 
children.
    The Mayor of Columbus came to see me about a year ago and 
he said that unless we get more Federal help, like the Federal 
Government used to invest more in water and sewer, that every 
individual, every homeowner in Columbus will see double-digit 
percentage sewer and water bill increases for as far as he 
could see, and we know what that does to economic development.
    Explore that with me, what these deficits--what this 
infrastructure deficit does to the sort of the job-creating 
efforts for manufacturing especially, but for anything else.
    Ms. Boushey. Well, there are so many different layers to 
it. I mean, just to start with manufacturing, if you are going 
to manufacture goods, you have to get them from point A to 
point B, and you certainly don't want the bridge to collapse on 
you as you are driving there, right? And we know that we have 
got this deficit in terms of roads and bridges and that big 
picture kind of stuff. Making those investments makes it easier 
to transport our goods. It makes it cheaper. It makes it more 
efficient. I mean, that would be the first thing I would think 
about.
    Another piece that we need to think about in terms of 
infrastructure, thinking a little bit more broadly than just 
manufacturing, is, of course, our investments in education and 
our capacity to train the next generation, which is a vital 
component of our infrastructure that is related to our long-
term economic growth. Are we creating the kind of workforce 
that can have those jobs of the future and are we making those 
investments today to do so.
    I mean, it really is quite a tragedy when you think about 
us being the wealthiest country on the planet and we have--here 
in D.C. for a few years we had potholes that were exploding 
left and right, creating dangerous situations, but also making 
it challenging to convince people to make those kinds of 
investments to locate their companies and to see us as a place 
to grow.
    Chairman Brown. Let me ask one other slightly related 
question for you before moving on. The Treasury Department 
reported Monday it expects to have some $200 billion back for 
TARP. What is your sentiment about how we should reprogram TARP 
money, move TARP money in whatever ways toward economic 
development? How would you structure that?
    Ms. Boushey. Well, I think that at the time that you all 
did TARP, that was the right thing to do. That was the right 
way to spend that money. I think it is very fortunate and 
speaks to the foresight that Congress and the administration 
had when those funds were allocated, to allocate that much 
money and to do what you did to stop the financial crisis in 
its tracks.
    But, fortunately, it appears we don't need all that money. 
But we do need the money for the reverberations of that 
financial crisis on Main Street and what has happened with jobs 
and what is going on in the economy nationwide. We know that 
this recession was caused by the financial crisis and we 
allocated those funds to deal with that. That problem appears 
to be sort of on its path toward recovery, so let us reallocate 
those funds to the aftershocks of that crisis in terms of job 
creation and making the investments that we need to make to get 
the whole economy back on track.
    I would add to that that, again, it is looking at the 
economy as a whole dynamic, that if we don't get people back to 
work, we are going to see even more folks having their homes 
foreclosed because they can't pay their mortgages, which in 
turn affects the financial system. So those investments that we 
make in job creation or in small business loans or whatever 
pieces we want to allocate to certainly will feed back into 
helping the financial sector over the medium- to long-term.
    Chairman Brown. Thank you, Dr. Boushey.
    Senator Dodd, questions?
    Chairman Dodd. No, no, just to thank you. I appreciate 
those comments. One of the difficulties, and I appreciate 
Senator Brown raising the issue of the Infrastructure Bank--the 
only hearing I have ever had here in the two-and-a-half years 
on this Committee on an issue where I saw this kind of 
unanimity of thought is when I had the President of the AFL-CIO 
and the Chairman of the Business Roundtable as well as the 
Chairman of the Chamber of Commerce all in agreement on a 
proposal was this long-term bank, the Infrastructure Bank 
concept, and there are a lot of different variations on how you 
do this.
    The motivation behind it is because I don't see any of the 
means by which we can do this--we certainly don't have the 
resources, even if you are in balanced budget, the idea that we 
could draw down through an appropriations process to build the 
kind of national or regional--we are not talking about the 
local infrastructure needs, I mean, those are important, 
obviously--and so there are a number of different ideas.
    This is not unique. Other nations have done this, and you 
have got to do it with some success. Sovereign wealth funds, I 
mean, people get nervous about the possibility they could pick 
up and take their investments and go home. It is very difficult 
to pick up and leave--take a high-speed rail system back to 
wherever you are from initially. So the idea of tapping into 
those resources is one way.
    And you have to do this. Arnold Schwarzenegger, Ed Rendell, 
two Governors who are very knowledgeable and thoughtful--Ed 
Rendell has worked on these issues for years--are strong 
supporters of this, as well. Chuck Hagel was my cosponsor, 
Republican cosponsor of this idea for many years.
    In fact, I often tell the anecdote that we put the bill 
together and we were trying to decide when to announce it, our 
latest version of it, anyway. And I thought we ought to wait 
until September and Chuck Hagel said, no, let us do it in 
August. And I said, August is a dreadful month to announce a 
new idea. No one will come. No one will pay attention to us. 
But he kept on pressing and I said, fine, we will do it in 
August.
    And so we held the press conference, and, of course, I was 
right. The only camera that showed up to cover it was the one 
in the room when we walked in. They wouldn't have shown up on 
their own anyway. And no one paid any attention at 10 that 
morning. At 5 in the afternoon, Chuck Hagel and I were on every 
TV screen in America, because at 4 in the afternoon, the bridge 
in Minneapolis collapsed. And so all of a sudden, the issue of 
infrastructure became this huge theme across the country.
    Chuck was clairvoyant, because had we done it a week later, 
of course, we would have been accused of pandering rather than 
having an idea to deal with some of these issues ahead of time.
    So I have been trying--the administration has been somewhat 
supportive of it, but you cannot find a period of economic 
growth in our country, I don't believe, where we did not make 
investments in infrastructure. You just have to do this. Your 
point about the local, the sewage and water system and direct 
bearing on what that means to local taxpayers, not to mention 
economic growth that can go forward. It is the Panama Canal, or 
if you want to talk about the Lewis and Clark expedition, or 
you want to talk about the Federal Highway System.
    I mean, there is a wonderful book out by Felix Rohatyn that 
was just published recently, and he and I have done a lot of 
work together on this, identifying historically the investments 
in infrastructure that led directly to the economic growth of 
the United States.
    So I appreciate the comments. It doesn't produce the kind 
of jobs immediately, and the topic of this hearing is, of 
course, in this moment of crisis, what can you do. So I 
acknowledge the fact that this kind of an idea doesn't produce 
the kind of results in the short-term, but we have got to start 
thinking beyond just short-term or we are going to be lurching 
from one crisis to the next in this area.
    And I happen to believe that one of the major important 
functions, and I will raise this as a question with you and you 
can all respond, if you would like, is the rebuilding, if you 
will, of the level of confidence and optimism among American 
investors, the consuming public generally. And while this idea 
may not generate the kind of jobs in the short-term, to the 
extent it can generate a level of excitement about the United 
States once again moving in the 21st century forward leaning, I 
think has its own desired impact economically.
    If our country and the people see us not only coming out of 
a recession, but far more importantly, leaning forward and 
anticipating the future, I think that has a huge positive 
impact among people in terms of their habits, what they do, how 
they feel about themselves, their country, and their community.
    So I don't know if you have any comments or thoughts on 
that subject matter, but we are having an awful time trying to 
convince people of the value of this. And again, it doesn't 
take a lot of public monies to leverage an awful lot of private 
capital. That is the great beauty of it. Any comments you want 
to make on that point? Yes?
    Chairman Brown. I would like to first make one. I 
understand the infrastructure with the Interstate System and 
the canals and the railroads, but what was the infrastructure 
for Lewis and Clark? I missed that part, Mr. Chairman.
    Chairman Dodd. Well, thank God that----
    Chairman Brown. Did something come out of that that I 
didn't know about?
    Chairman Dodd. Sure, called Manifest Destiny.
    [Laughter.]
    Chairman Brown. All right, fair enough. Never mind. We will 
proceed.
    Chairman Dodd. Well, I want to just make one point, by the 
way. Had Thomas Jefferson had the Congressional Budget Office 
around----
    Chairman Brown. He wouldn't have gone.
    Chairman Dodd.----he wouldn't have gone. If they had scored 
the Lewis and Clark expedition or the Louisiana Purchase, we 
would still be 13 colonies running around. I mean, the scoring 
on that, Jefferson smuggled through, both in the Lewis and 
Clark expedition and the Louisiana Purchase. The Louisiana 
Purchase was the entire budget of the country for 1 year, the 
entire budget, that one acquisition. And you can imagine CBO, 
poor Doug Elmendorf having to score that at that time.
    [Laughter.]
    Chairman Brown. All right. Any comments on Chairman Dodd? 
Mr. Katz, yes?
    Mr. Katz. I want to focus on one aspect of the 
Infrastructure Bank, because it is not just about investment 
and it is not just about long-term sustainable productive 
growth. It is about reform of how we allocate resources.
    When the American Recovery and Reinvestment Act, the 
funding of about $27 billion for highway funding was sent down 
to the States, most States tend to allocate transportation 
spending according really to a political logic. You have 33 
Senate districts and 66 House districts, which I think is the 
number in Ohio----
    Chairman Brown. Thirty-three and 99. That was pretty good.
    Mr. Katz. Let us just spread it around, as opposed to a 
market logic as to where are we going to get the highest return 
on investment and how do we make decisions based on evidence, 
based on data, whether it is high-speed rail, whether it is 
transit, whether it is new highway expansion, whether it is 
smart grid, et cetera.
    I think where the United States has gone awry over the past 
15, 20, 25 years compared particularly to our European 
competitors is that we are not making infrastructure 
investments with a view toward the long-term and as a means 
toward economic competitiveness and sustainable growth. We are 
making it really pursuant to an old-style log-rolling exercise, 
particularly at the State level.
    So my view about the Infrastructure Bank, it is invest and 
reform, and let us make decisions again based on merit and 
evidence rather than the politics.
    Chairman Dodd. I would like you to look, as well--I didn't 
mention this--at what I call our Livable Communities Act. It 
doesn't have many cosponsors here, but it has attracted 
tremendous attention nationwide because it, again, does exactly 
what you are talking about. It goes to the issue of how then 
land use issues, providing grants to States to kind of make 
that intelligent plan, much as North Carolina did with the 
Triangle 50 years ago. Terry Sanford, who I loved serving with 
here, when he was Governor of North Carolina was brilliant in 
that regard.
    Kay Bailey Hutchison, our colleague on this Committee, she 
and I have had long conversations. In Texas, the idea of a 
high-speed rail system between Dallas, Houston, and San 
Antonio, that triangle, and then having the sustainable 
development occur within that triangle in terms of intelligent 
land use and livable community development in that State makes 
all the sense in the world. But it is the transit system that 
begins to try it together.
    Charlotte, North Carolina, a classic example of how a 
light-rail system has transformed that city economically, that 
investment. Now, the highest real estate values are along that 
light-rail system, contrary to what we grew up with. Of course, 
living near the railroad tracks was going to be reducing the 
value of properties. Today, it increases the value of 
properties. Just examples.
    Chairman Brown. Thank you.
    Yes, Mr. Leach.
    Mr. Leach. Sure. I wanted to make a comment on the forward 
leaning. I embrace and encourage the forward leaning idea and 
the fact that the country and existing and future partners with 
the Federal Government want to lean forward along with you, 
certainly in regards to some of my commentary.
    A great example of this is the Foundation Community in Ohio 
and Michigan that collectively have pulled together about $170 
million of philanthropic resources to be completely focused on 
transformative economic development initiatives in those two 
regions. So those two communities, certainly in the 
philanthropy in those communities, are forward leaning, for 
sure. This is an initiative that these kinds of entities have 
never seriously considered and pursued, at least at this scale.
    So again, the opportunity to engage, of course, with 
philanthropy, but also with the corporate community in 
partnership with the Federal Government. Now is the time to 
build these partnerships, aggregate this level of resources to 
create the scale of opportunities that we have before us.
    Chairman Brown. Thank you.
    I want to go back to Mr. Katz. You said something in your 
testimony about we are a metro nation. You mentioned real 
estate metros and you mentioned motor metros, others. You said, 
we are a metro nation. We should act like one. What do you mean 
by that?
    Mr. Katz. Well, when you look at what drives prosperity and 
productivity, I think it comes down to innovation, and I think 
this really builds on what everyone has been saying here. 
Innovation, human capital, education and skills, 
infrastructure, and, let us say, the quality of place. Those 
assets are not uniformly distributed across the American 
landscape. They tend to concentrate in pretty intense ways in a 
relatively small number of places, here, as in Europe, as in 
China, as in India, as elsewhere. There is an agglomeration 
effect, essentially, where two plus two equals five. The 
benefits of density.
    So if you look at the top 100 U.S. metros alone, they sit 
in only 12 percent of the land mass of the country. They are 
very energy efficient. They house two-thirds of the population. 
They generate three-quarters of the GDP. But what comes to 
those key assets is about 78 percent of patents, 94 percent of 
venture capital and innovation, about three-quarters of our 
knowledge workers when you talk about human capital. When you 
talk about infrastructure, these are the air hubs. They are the 
freight hubs. They are the seaports. And obviously when you 
talk about quality of place, they tend to have the transit, the 
cultural institutions, and so forth.
    So the world may be flat, as Tom Friedman says, but the 
assets that drive national economies forward tend to 
concentrate at hyper levels in a relatively small number of 
places. So when nations want to get smart about growth and 
productivity and sustainability, what they have to do is to 
help their major metros leverage their own assets in the 
pursuit of national goals. It is a different kind of way of 
looking at national economic policy.
    Chairman Brown. Thank you.
    Chairman Dodd was talking about the innovation that you 
talked about and how innovation--what innovation can do with 
job creation. I was, a month or so ago, I was meeting with a 
group of Silicon Valley executives that are very interested in 
the climate change bill, you know, John Doerr's comment that if 
you price carbon, large amounts of capital will be unleashed. 
As I was talking to these executives, some of them were already 
wealthy. All of them, I think, expected to become wealthy 
because of the climate change legislation, which I appreciate 
and I am fine with.
    But what I wasn't so fine with was any plans they really 
had to take this innovation and make sure that those jobs stay 
in this country. What are your thoughts on not necessarily 
climate change, but as several of you said and Chairman Dodd 
said, so much innovation has come about by great minds in our 
country coming out of great universities, coming out of great 
university settings, incubators, all kinds of venture capital 
firms, all the kinds of things that have happened, but the 
manufacturing then goes overseas. What do we do here, 
particularly coming out of climate change, that these jobs, 
these manufacturing jobs stay here?
    Mr. Katz. I think there are a lot of examples from abroad 
that we really need to adopt in the United States, and really 
for about 30 years, we have basically said we are not going to 
have industrial policy in the United States because we don't 
want to pick winners and losers.
    I think there are a whole set of policies that are really 
general in nature that don't sort of bear the burden of prior 
mistakes. So if you look to Germany, if you look to some of the 
European countries, they are investing heavily in vocational 
education, in education and skills that directly relate to the 
clusters of innovation that emerge in their major metros like 
Stuttgart or Hamburg or elsewhere. They are investing in 
institutions that have really a Federalist relationship--
Federal government, State government, cities and metros, and 
nonprofits, because Germany pretty much looks like us in terms 
of its governance system. They are investing in institutions, 
both public and nonprofit, whose job it is to really help 
extend innovation to the marketplace and commercialize products 
for domestic production.
    So the United States sort of decided it is going to be a 
laissez faire activity here. We will invest in advance R&D, but 
we won't simultaneously invest in the kinds of institutions, 
intermediaries, that can provide not just the capital, but the 
skills training, the marketing efforts for domestic and global 
markets. So we have been basically tying one or two hands 
behind our back as we proceed.
    So I think there is a lot to learn here, and the good news 
is we are the most innovative economy in the world and we are 
about to see a step change in innovation with clean energy, 
with infrastructure, with a whole set of other emerging 
sectors. So now what we have to do is sort of finish the 
conversation, extend out the policy envelope, and in a 
Federalist way, really leveraging up local nonprofit private 
sector energy and discipline, create the new ideas and 
inventions and processes, but then create the jobs at home.
    Chairman Brown. So, Mr. Weddle, if taking off on what Mr. 
Katz said, in your comments about the new clean energy economy 
holding the promise of a manufacturing renaissance, a lot of us 
are deeply disturbed about the Texas wind farm, that we put 
tens and tens and tens and tens of millions of dollars, of 
taxpayer dollars for this wind farm. Yet, some 2,000 jobs 
probably, unless we can stop it, will be created--unless we can 
change and redirect it, will be created in China to make those 
wind turbines.
    How do we assure that we are not creating more demand as we 
do this, for China-made wind turbines? Or am I just wrong? Is 
that not a problem?
    Mr. Weddle. Well, I would agree with--first of all, I would 
agree with everything that Bruce just said about the whole idea 
of deliberating taking some steps to make sure that we benefit 
from the innovation that we get. I think we have been too 
hands-off for too long. Maybe that worked when we were the only 
game on the planet, when we could drive everything according to 
our own design. I do not think it works in a world where there 
is more parity.
    We are at the cusp right now of the first era in humankind 
where we have unbundled profitability and prosperity. There was 
a time when you, if you had profitable companies, you had 
prosperous people and communities, and that does not 
necessarily work because of the globalization that has 
occurred.
    So I think we have to review our trade policies and review 
our tax policies. I do not have all the answers to that, but I 
think well-intentioned, well-minded, thoughtful people can 
figure out how to make sure that we do harvest some of the 
value that comes from innovation.
    Look only right now at the advance, the funding that has 
gone into basic research in the last two or 3 years, which was 
a sea change from the 5 years before that, but it has gone in 
there without thinking through how are we going to harvest that 
intellectual property. Are we going to put in place the 
innovation infrastructure in our communities, so that our 
community leaders can harvest that IP?
    I think it is just a question of setting some goals and 
then reverse engineering those goals and looking at the 
policies that make that happen. Other countries do this, and it 
is not rocket science. So I think we have to.
    I do not think we have to take for granted that you have to 
just accept that as a policy from our corporate leaders because 
we have to ask the question, are our interests aligned and are 
our interests bundled together, and I think that is a good 
starting point for discussion.
    Chairman Brown. You had talked about a cluster strategy. I 
think of the city you used to live in, that Ray knows a lot 
about too, Toledo. Toledo has the largest number of solar 
energy manufacturing jobs of any city in America. It is a bit 
of a cluster. It is potentially that, certainly.
    What do you advise to a city like that, so that they really 
can have that sort of cluster strategy for economic 
development? Where do they go?
    Mr. Weddle. Well, in my oral and in my written remarks, I 
said it is time for the Federal Government to move from just 
providing tools and assistance to a few communities, a few 
places, and become a full partner in these strategies. There is 
no harmonization of economic strategy from Federal to State to 
community to metro level.
    Toledo, with all due respect, they are having to do all 
that by themselves. And region by region by region in America 
today, we are competing with countries. We are not just 
competing with other cities or other areas. So the Federal 
Government needs to be more of a full partner to help, I think, 
move some of the resources down to the metropolitan level, so 
that these cluster strategies can be well resourced in that 
regard.
    I am sure you have a similar comment on that, Bruce, in 
that regard.
    Everything that Toledo has done they have done on their 
own, fundamentally, in saying that they wanted to develop these 
technologies and try to do it. But they have an aging 
infrastructure, their resources are constrained, and it is 
difficult to make those local investment decisions at scale, I 
guess is what I am saying.
    Chairman Brown. Mr. Leach, would your Federal Innovation, 
Commercialization and Job Creation Network play into that?
    Mr. Leach. It would. In fact, I think one of the realities, 
especially the role that the Federal Government has played 
historically and looking forward, is the resources they are 
providing are extremely precious for basic research, and they 
would be very precious and incredibly powerful and make a 
significant impact in the vision that I shared today.
    I think one of the things that we are struggling with as a 
Country, which relates to many of the comments here, is the 
practice of accelerating technology and commercialization. We 
have the ability to do that now, at least at the beginning 
stages, with nonprofits and with intermediaries that exist 
across the United States. It does not need to go from the basic 
lab directly to the private sector, and that there are partners 
with the Federal Government, or could be, are today and could 
be increasing partners with the Federal Government who care 
very much about economic transformation, commercialization and 
place and want to make sure that those jobs and the economic 
wealth that is created through that transformation has 
resonance and can make an impact.
    I think one of the things we are struggling with to some 
degree as a Country is this is especially in the trenches with 
these innovators and entrepreneurs. We have relied on the 
private sector to assist entrepreneurs, to move their companies 
forward. When we do that, you are immediately giving it to the 
private sector, and you would have less influence in that 
construct in terms of where the ultimate jobs are created.
    So this incremental movement of a stronger industrial point 
of view from the Federal Government, I think, will more 
significantly benefit the Country, but it is an evolution. And 
this program that I have envisioned would very much put that in 
place.
    Rick commented about Toledo having a vision and being 
alone, and, certainly from the University of Toledo point of 
view and the regional growth partnership, they have provided 
significant leadership. Having said that, the State of Ohio has 
also. The public sector has made very, very large investments 
in their vision, in that region's vision, as they have in 
northeast Ohio, central Ohio and other parts of the State.
    So the State of Ohio's Department of Development gets this. 
I mean they have built a strategy around this approach. There 
is no reason why the Federal Government could not partner and 
piggyback on that strategy and bring resources, as Rick shared, 
also as a full partner.
    Chairman Brown. Tell me how, Mr. Leach, in Ohio--and I am 
sorry for the parochialism, to the other three of you--that 
there is discussion that Ohio would be the site of the first, 
just off the coast of Cleveland, Lake Erie could be the first 
site of wind turbines, a field of wind turbines anywhere on 
fresh water in the world? There are fields of wind turbines in 
salt water with a different set of issues, of course.
    How does the Third Frontier and how do your efforts lead to 
that happening? Talk through the scenario of how you sort of 
capitalized that.
    Ohio is the site now of a number of wind turbine 
manufacturing, component manufacturers. There is little 
assembly of wind turbines in the United States, ergo, the China 
field in Texas. Talk about the process of how that happens and 
how you helped to make that happen and how Third Frontier, how 
the State can help make that happen.
    Mr. Leach. Sure. Well, the Third Frontier does have a 
particular focus on energy. Historically, they have had a very 
large focus in the fuel cell space, and over time they have had 
an increasing focus in wind.
    The way the structure works in Ohio is the private sector 
shares ideas and collaborates with the public sector and other 
supporters of these types of initiatives, and they roundtable 
around what are the most important things we could work on 
collectively that could generate not just innovation but 
ultimately commercialization and jobs in Ohio.
    There is a private sector commission. It is called the Ohio 
Third Frontier Commission, which there is certainly some public 
leadership on the commission, but there are six members of a 
nine-panel commission that bring the private sector judgment 
and influence to these projects.
    So they look at the opportunities. They post RFPs and 
provide opportunities to stakeholders in the State and also 
outside the State that like to make investments in these 
projects, and they rate them. They leverage the National 
Science Foundation experts in these particular technologies and 
industries, to rate what is the total economic impact of such 
projects, not just in relationship to attraction of private 
sector investment, but also what is the ultimate job impact on 
these kinds of projects.
    So they are bringing very, very significant private sector 
due diligence and analysis to these projects, or rating them, 
and therefore then funding them based on the commercialization 
impact in Ohio, obviously, and that is how they are rated.
    So they are bringing, again, very significant private 
sector discipline. The State is not picking winners and losers. 
The State is bringing resources, certainly leveraging on a 10 
to 1 basis the private sector resources in these projects, but 
they have a very, very disciplined process.
    There is no reason why the Federal Government could not 
rely on a parallel process or provide resources to the States 
and have the States add that to their existing resources in 
order to make larger impacts.
    Chairman Brown. Thank you.
    Mr. Weddle, you, in your written testimony, talked about 
the role of incubators in North Carolina, Ohio, and the 
National Association of Incubators--I am not sure that is the 
right term--is located in Athens, Ohio. There are incubators in 
Ohio that have played a significant role but particularly a 
fairly unheralded role because people do not know a lot about 
them because they start very small businesses and many of them 
grow.
    What are the keys to building a successful network of 
business incubators? And go especially to the Federal role, out 
of EDA or whatever you think the Federal role should be in 
stimulating the growth of incubators.
    Then the numbers are pretty stunning, how little Federal 
investment leveraged properly, locally, translates into a 
significant number of jobs. But talk that through for us.
    Mr. Weddle. Most incubators operate on a shoestring because 
they are underresourced, and the whole idea is they do not make 
a lot of money. If anything, they require subsidy or some 
operating expense in that regard. We have a successful network 
of incubators in Research Triangle Park, but they all have 
their own set of parameters with which they were started and 
funded.
    I think the Federal Government could play an important role 
in providing funds for either acquiring the space, setting up 
the space, outfitting the space, making it so that it would be 
able to be provided for startups, spinoffs out of universities 
or out of companies. We have to remember that not all startups 
come out of universities. The history of the 1,600 startups in 
Research Triangle Park is that more came out of the companies 
and the park than out of the universities, in terms of that 
growth pattern.
    But it is really hard to get the space reserved, to get it 
outfitted, so that you can provide very, very flexible terms 
and mentoring activities for the companies. I think the Federal 
Government could be a good partner in providing direct grants 
to nonprofits, to establish those kinds of activities.
    Chairman Brown. Thank you.
    Mr. Katz and Dr. Boushey, I will ask them a question. Then 
I would like you all to think about the last question I am 
going to ask and have all four of you answer that, about what 
is the one or what are the two things that you think are most 
important for this Congress to do to help create jobs in a sort 
of medium range, not just short term, but obviously the crisis 
is now.
    So think through that as I ask Mr. Katz and Dr. Boushey 
this question first. What in the Recovery Act was the most 
important thing for industrial States? What did we do in the 
Recovery Act that mattered most in States like Ohio, Michigan, 
Wisconsin, western Pennsylvania, those States?
    California and Texas are the largest manufacturing States, 
but they do not necessarily think of themselves that way. The 
States that really were industrial States, what were a couple 
of things the Recovery Act did?
    Mr. Katz, you first, then Dr. Boushey.
    Mr. Katz. Well, the jury is still in a sense.
    So, first, fiscal stabilization; about $48.6 billion was in 
the Recovery Act to help State Governments. A large portion of 
that went to education. Other parts went to general government 
aid. So, again, it gets to this general issue of as we think 
about creating jobs through the front door, you should not be 
losing jobs through the back window. In the early phase of the 
Recovery Act, I think fiscal stabilization has played a very 
big role.
    There are other bonding mechanisms, like the Build America 
bonds which have really been taken up by the market in a 
substantial way, that both help on the capital side, but also 
reduce debt service. That has been of help.
    I think the jury is out about what is going to happen in 
the next six to twelve months because we have substantial 
funding coming down the pike in not old-style infrastructure--
you know, filling potholes on freeways and county roads--but 
really the next generation infrastructure, when we talk about 
high-speed, when we talk about smart grid, when we talk about 
health care information technology.
    I think the question will be not just whether the States, 
but these metropolitan areas, this sort of interesting mix of 
nonprofits, universities, private sector firms, cluster 
associations, local government have had the vision to take 
advantage of the Federal funding. So we are going to see an 
uneven application of the Recovery because the capacity across 
the Country is quite different.
    Chairman Brown. Dr. Boushey?
    Dr. Boushey. Yes, my answer is going to echo Bruce's. I 
mean I think when you look at where we spent the funds, of 
course, a third of it was on tax cuts. Some of that was good 
spending. Some of it, we would have done anyway, the extension 
of the AMT, for example.
    But you know the biggest bang for the buck was the money 
that we spent on unemployment insurance. That was 16 percent of 
the Recovery Act dollars, the aid for the least among us, those 
hit hardest, and that I am sure had some of the biggest bang in 
those hard-hit industrial States with the super high 
unemployment rates. So, when I think of Michigan, I think of 
the UI program, not necessarily helping the kinds of things we 
have been talking about here today, in terms of the innovation 
or specific companies, but certainly helping the whole 
landscape and providing the biggest local dollars. People have 
money in their pocket.
    And then the aid to the States, I think I would put as the 
second most important one because it really was, again, big 
bang for the buck, lots of money.
    I do not think that is to discount all of the other kinds 
of programs here, but in terms of the largest ones that is what 
I would say.
    Chairman Brown. Thank you.
    I will start with Mr. Weddle and move to your right. Just 
give us the one or two most important things you think Congress 
should do in the next 3 months for job creation.
    Mr. Weddle. Thank you. I am happy to make a couple of 
comments, and I think I agree with most everything everybody 
else says. This is a pretty well-aligned panel, I think, today.
    I think restoring or providing additional funding to States 
and cities is going to be vital because their revenue base is 
really going to show some wear and tear about the middle of 
this next year, but I would require two things in that.
    One, I would require that we find some way to align the 
Federal Government and State strategies and plans together a 
little bit better, rather than just throwing money, and I would 
also make sure there was an economic development component to 
that. There was no economic development component to earlier 
stimulus plans.
    And then second, I think, because I think it is an out-of-
the-box and an innovative idea, the expanding the Invest in 
America Now program to a $100 million scale, nationally drives 
a stake in the ground and says we are going to compete on this 
planet for new jobs and investment from everywhere.
    And I think those would be two interesting things to try to 
do.
    Chairman Brown. Thank you. On the Invest in America, could 
you, in writing for us, contrast? That was going to be one of 
my questions, and we were kind of running out of time for you 
specifically. But contrast what other countries do that is so 
much more inventive or thorough than we do on this. They sort 
of invest, and you said there was something in the Commerce 
Department or somewhere that we could do.
    Mr. Weddle. For example, we have a half a million dollar 
budget for the whole Country.
    Chairman Brown. Right, right. See what other countries do.
    Mr. Weddle. We will be happy to do that.
    Chairman Brown. I would be very interested to see that.
    Mr. Leach, thank you.
    Mr. Leach. I would say to equip the EDA, the SBA and other 
Federal agencies in the absence of larger, more robust, 
something new program as I talked about earlier, to have 
additional significant resources that are focused on the 
commercialization of new technologies and equally, if not more 
importantly, require these agencies and their partners to reach 
out to non-Federal sources who have aligned interests and very 
significant resources, who will aggressively partner with these 
Federal agencies.
    Chairman Brown. Thank you.
    Mr. Katz.
    Mr. Katz. I will answer less programmatic, more at the 
paradigm level. I think what we need is a narrative about what 
the next American economy looks like that could really 
galvanize State, local, metro action, private and public.
    So Larry Summers gave a speech in July. About 80 percent of 
his speech was focused on the retrospect of what was done to 
prevent the collapse. A very small portion focused on what 
comes next. But what he said is we will be export-oriented, 
less consumption-oriented. We will be focused on innovating in 
what matters, not financial engineering. We will be low-carbon, 
and, hopefully, we will be opportunity-rich.
    If you take those four pillars of the next economy--export-
oriented, innovation-fueled, low-carbon and opportunity-rich--
that is the ticket around which to organize a whole set of 
policies, innovation policies, human capital policies, 
infrastructure policies, not just at the Federal level but in a 
Federalist system.
    I think we have lacked that clear, coherent direction and 
vision from the national government, frankly, for decades. And 
I think now we need to have it, and then the programs will 
follow. They are almost derivative of that vision.
    Chairman Brown. Thank you, Mr. Katz.
    Dr. Boushey?
    Dr. Boushey. Yes, again, I am going to follow Bruce and 
agree with him. I mean I think there are a couple things. First 
of all, in the medium term, passing that UI extension has just 
got to be critical, and I know that is coming up next week, but 
I think that is super important. Second, making sure that we 
continue to provide more funding to the States is an important 
piece.
    A couple other points, I mean one is that I think we should 
not be afraid of deficits. We should spend that TARP money on 
some of these job creation programs, but we need to make sure 
that we are focused on a strategy that does not waste it, that 
is about long-term investments.
    You know we have talked a lot. I mean there has been a kind 
of disconnect here this afternoon, with the short term and the 
long term in the sense that it is as though these things that 
we are talking about on the long term, the more innovation 
front, are not really also about short-term job creation. But 
we need to sort of remember that economists think that the 
unemployment rate is not going to come down to a full 
employment level until 2014, 2015, and it could be even longer 
than that.
    So I do not think that those are in any way in conflict as 
long as your time horizon is not like 20 years. As long as we 
can do some of these things in like 2 to 6 years, I think that 
is all consistent.
    Then finally, I want to just tap into what Bruce said about 
this notion of galvanizing, and what Senator Dodd said about 
optimism. I think that focusing especially on the alternative 
energy piece, which has this sort of very sexy, new ideas, that 
we are going to get our economy on a better path, that both 
helps manufacturing, that can create a strong U.S. 
manufacturing base, but also deal with the very important 
issues of climate which are being discussed right now.
    And finally, I had one more piece which is that on this 
notion of less consumer-driven economy, we also need to be 
really focusing hard on the kind of financial regulation that 
is going to be happening over the next few months, that you 
guys are going to be doing here in the Senate and the House. 
Focus on getting Wall Street back where it belongs, which is in 
service of our productive economy, not the other way around.
    I mean for too long we have allowed this economy built on 
financial bubbles to be the so-called creator of growth, and we 
can see that that has just been a house of cards. The focus of 
the financial sector should be to provide capital for 
productive investments, and thinking about financial regulation 
that gets us back on that track has to be a key component of 
the backdrop for a lot of what we have been talking about here 
this afternoon.
    Chairman Brown. Well said, thank you. Thank you all.
    The record will remain open for 7 days--so, anything that 
you want to add, including my request to you, Mr. Weddle, 
anything you want to expand on. All your testimony, of course, 
is entered in the record, as were the comments you made.
    Thank you very much. I appreciate all of your joining us 
here today.
    Subcommittee adjourned.
    [Whereupon, at 3:30 p.m., the hearing was adjourned.]
    [Prepared statements supplied for the record follow:]
                 PREPARED STATEMENT OF HEATHER BOUSHEY
       Senior Economist, Center for American Progress Action Fund
                            December 9, 2009
    Thank you, Chairman Brown and Ranking Member DeMint, and Chairman 
Dodd and Ranking Member Shelby, for inviting me to speak to you today 
about the recession, the nascent recovery, and job creation. My name is 
Heather Boushey and I'm a Senior Economist at the Center for American 
Progress Action Fund.
    I'd like to start with the good news. On Friday, we learned that 
the unemployment rate fell to 10.0 percent and only 11,000 workers lost 
their jobs in November, both numbers were better than had been 
expected. This is unambiguous good news for workers and their families.
    This data provides an indication that the steps that Congress and 
the Obama administration have taken to get the economy back on track 
have been effective. The American Recovery and Reinvestment Act signed 
into law last February has worked its magic and injected momentum into 
the economy, boosting economic growth in the third quarter and saving 
or creating upwards of 1 million to 1.5 million jobs.\1\ Recovery 
dollars will continue to pump up demand and add jobs to the economy as 
the remaining $553 billion is spent in 2012.\2\
---------------------------------------------------------------------------
    \1\ Deborah Solomon, ``U.S. Economy Gets Lift From Stimulus,'' The 
Wall Street Journal, September 2, 2009, available at http://
online.wsj.com/article/SB125185379218478087.html; Josh Bivens, ``How We 
Know the Recovery Package is Helping'' (Washington, D.C.: Economic 
Policy Institute, October 2009) available at http://epi.3cdn.net/
bb4f1bd7339f12b9a3_4im6bxb5c.pdf.
    \2\ Recovery.gov.
---------------------------------------------------------------------------
    But we are by no means fully out of the woods. There are 
indications that employers are beginning to need to ramp up hiring, but 
have yet to actually do so. We need Congress to be vigilant in 
continuing to promote job creation and reducing the hardships among 
those hardest hit by the recession.
    The economic effects of ARRA dollars will start to diminish 
beginning in the middle of 2010--well before we will be fully out of 
the woods. Economists now predict economic growth of only about 2 
percent for 2010 given the policy efforts already in place. This is a 
clear indication that without additional action on the part of Congress 
and the Obama administration, the U.S. economy could easily slip into 
an extended jobless recovery--or see the recovery stall altogether.
    The economic recovery could result in a longer period of job losses 
and slower job creation compared to the past two recessions. The nearly 
2-year-long Great Recession began with the collapse of the U.S. housing 
bubble and ensuing financial crisis, which led to a recession that was 
deeper and more protracted than other kinds of recessions.\3\ Even now, 
we continue to see global financial markets subject to debt-related 
shocks that could potentially upend this economic recovery by hampering 
access to credit. On top of this, the massive deleveraging going on in 
households across the United States is putting sharp limits on the 
potential for consumption to grow quickly.
---------------------------------------------------------------------------
    \3\ Carmen M. Reinhart and Kenneth S. Rogoff, ``What Other 
Financial Crises Tell Us,'' The Wall Street Journal, February 3, 2009, 
available at http://online.wsj.com/article/SB123362438683541945.html.
---------------------------------------------------------------------------
    Further, those without a job continue to face extremely daunting 
challenges in finding new work. The typical unemployed worker has been 
searching for work for 20.1 weeks, and a record 5.9 million of those 
workers have been searching for work for at least 6 months, 38.3 
percent of the total unemployed. We need to ensure that we do not leave 
any demographic groups behind during economic recovery. The 
unemployment rate among teens is 26.7 percent, it is 15.6 percent among 
African Americans, and 12.7 percent among Hispanics, and 15.0 percent 
among those without a high school diploma.
    Combined, this suggests a need for additional actions, even though 
it will contribute to Federal budget deficits. However, government 
spending in 2010 that gets people back to work would be the best thing 
for restoring fiscal balance in the coming decade.\4\ High unemployment 
adds to government expenses as more families need assistance from all 
levels of government, including unemployment benefits and food stamps, 
help with health care bills, and help coping with a home mortgage 
foreclosure. And unemployed workers do not have earnings on which they 
owe taxes, a trend which has contributed to this year's rise in the 
deficit. While tax revenues fell by 17 percent in 2009, spending 
increased only a bit more--18 percent.\5\
---------------------------------------------------------------------------
    \4\ Michael Ettlinger and Michael Linden, ``Deal with It: A Guide 
to the Federal Deficit and Debt'' (Washington, D.C.: Center for 
American Progress, September 2009) available at http://
www.americanprogress.org/issues/2009/09/pdf/deal_with_it.pdf.
    \5\ Michael Ettlinger and Michael Linden, ``Who's to Blame for the 
Deficit Numbers?'' (Washington, D.C.: Center for American Progress, 
August 2009) available at http://www.americanprogress.org/issues/2009/
08/pdf/deficit_blame.pdf.
---------------------------------------------------------------------------
    One way to address the long-term deficit concerns is to legislate 
the ways we will pay for job creation as we legislate job-creation 
provisions. Yesterday, President Barack Obama put on the table using 
unallocated funds from the Troubled Asset Relief Program to pay for job 
creation. Alternatively, Congress could establish a tax on the U.S. 
financial services industry to raise an additional $150 billion a year.
    In my testimony below, I focus on two issues. First, an outline of 
what we can learn from the implementation of the recovery package so 
far. Overall, the recovery package boosted economic growth, but the 
elements of the package were not uniformly effective. As we debate the 
challenges of a slow-growing economy, focusing on the elements that 
provided the biggest bang for the buck is the best way forward. Tax 
cuts, in particular, have relatively small ``multipliers,'' that is, 
for every dollar of Federal spending, the effect on the overall economy 
is small than for other kinds of spending, such as that targeted to 
those hit hardest by the recession and aid to the States that are 
highly budget-constrained due to falling tax revenues and growing 
demand for services.
    Congress's approval of a 2-year recovery package continues to look 
like it was the right decision. The effect of the Recovery dollars will 
not peak until mid-2010, but the economy will need a steady infusion of 
demand. Now is the time to consider whether further job creation 
measures are the right course of action. Given the challenges of a 
slow-growth economy, and continued high unemployment and State fiscal 
problems, both of which work against the nascent economic recovery, 
focusing on job creation is the right path. Below, I present a menu of 
the best options for creating jobs in the short- to medium-term based 
on the Center for American Progress report released last week, 
``Meeting the Jobs Challenge: How to Avoid Another Jobless-or Job-Loss-
Economic Recovery.'' Below, I summarize our recommendations that report 
goes into in greater detail. There are a few key steps, however, that 
Congress should take now to help boost jobs in the short- to medium-
term:

    Continue to help those hurt most by the recession. Congress 
        should ensure that the extended unemployment benefits and COBRA 
        subsidies passed in the recovery act do not expire as planned 
        at the end of December. These benefits go to the long-term 
        unemployed, who now account for an historically high share--
        more than one-third-of unemployed workers. Extending the 
        subsidies to help the unemployed purchase health insurance--or, 
        better yet, allowing States the option to put unemployed 
        workers on Medicaid--must also be done before the end of the 
        year.

    Support State and local governments. The Federal Government 
        should provide another funding boost to the States. State and 
        local governments have shed almost 160,000 jobs over the past 
        year (November to November), with nearly 80 percent of the job 
        losses at the local level occurring in just the last 4 months. 
        These lay-offs are working against economic recovery at the 
        local level. All but two States had or still have shortfalls 
        for fiscal year 2010, totaling $190 billion. The aid to States 
        contained in the recovery package was clearly helpful, but it 
        only addressed only about 30 to 40 percent of the gap faced by 
        State governments.

    Expand national service and provide support for needed 
        services. The Federal Government could spur the creation of 
        millions of mostly private-sector jobs by directing additional 
        Federal money into youth and young adult employment (such as 
        AmeriCorps, VISTA, YouthBuild, and the youth service and 
        conservation corps), child care, after-school programs, and in-
        home health services for the elderly and disabled as well as 
        training for those serving America's youngsters, oldsters and 
        disabled. Nonprofit groups and small businesses provide most of 
        these jobs, although they are paid for by programs that are 
        currently being cut by State and local governments. Funneling 
        funds into these programs not only quickly gets people into 
        jobs, but supports families and communities by providing much-
        needed services. These programs often have long waiting lists 
        and any new funds will be able to meet pressing needs.

    Promote sustainable growth and green jobs. To promote new 
        green jobs, Congress could establish a two-tier program to 
        transform the market for energy efficiency--a ``cash for 
        caulkers'' program. The first tier would promote immediate 
        investment in energy efficiency, through super-efficient 
        appliances and simple home improvements. The second tier 
        implemented in parallel would increase consumer awareness of 
        comprehensive whole-home energy audits and retrofits, which 
        create substantial and sustained numbers of good jobs in the 
        construction and manufacturing sectors.

    A tax cut to spur spending. To promote spending by those 
        who have income, Congress could offer a partial tax moratorium 
        to taxpayers with adjusted gross income below $150,000 for a 
        married couple or $75,000 for an individual. Personal income 
        taxpayers could be offered the opportunity to pay $2,000 less 
        in their 2009 Federal income taxes but would be required to pay 
        the sum back over the next 3 years. This idea has the virtue of 
        costing very little overall for Federal budget purposes since 
        it is simply deferred taxes and would be likely to be spent 
        quickly by taxpayers who choose that option.

    If we do nothing, we risk not only missing an opportunity to get 
the nearly 16 million unemployed back to work quickly, but also harming 
our economy over the medium to long term. The deficit will rise 
regardless of whether Congress approves additional spending; the 
question is whether we will make the investments today to get the 
economy back on track or whether we will allow the scourge of 
unemployment to linger.
The American Recovery and Reinvestment Act
    The recovery package pumped $787 billion into the U.S. economy and 
included a variety of mechanisms for getting the economy back on track, 
among them:\6\
---------------------------------------------------------------------------
    \6\ Center for American Progress, ``Recovery and Reinvestment 101 
Update,'' (Washington, D.C.: Center for American Progress, August 2009) 
February 27, 2009, available at http://www.americanprogress.org/issues/
2009/03/pdf/recovery_reinvestment_101.pdf; Congressional Budget Office, 
``Estimated Impact of the American Recovery and Reinvestment Act on 
Employment and Economic Output as of September 2009'' (November 2009), 
available at http://www.cbo.gov/ftpdocs/106xx/doc10682/11-30-ARRA.pdf.

    Aid to the unemployed, which boasts the biggest bang for 
        the buck in terms of spurring economic demand (16 percent of 
        the total package). The multiplier for this kind of spending is 
---------------------------------------------------------------------------
        between 0.8 and 2.2.

    Aid to State and local governments to help them avoid 
        layoffs and maintain services (11 percent). The multiplier for 
        this kind of spending is between 0.5 and 1.7.

    Tax cuts for most families, which help to boost spending 
        (32 percent). The multiplier for this kind of spending is 
        between 0.7 and 1.9.

    Investments in infrastructure, which are still ramping up 
        and coming on line, as these projects take longer to get up and 
        running (23 percent). The multiplier for this kind of spending 
        is between 1.0 and 2.5.

    Investments in a green economy, which not only creates jobs 
        but also paves the way for long-term economic sustainability 
        (18 percent). The multiplier for this kind of spending is 
        between 1.0 and 2.5.\7\
---------------------------------------------------------------------------
    \7\ Center for American Progress, ``Meeting the Jobs Challenge: How 
to Avoid Another Jobless--or Job-Loss--Economic Recovery,'' December 
2009, available at http://www.americanprogress.org/issues/2009/12/pdf/
job_options.pdf. Mark Zandi says that increased infrastructure spending 
has a multiplier of 1.57.

    These recovery dollars were a key factor in the economy seeing 
positive economic growth in the third quarter, rather than no growth at 
all. The Wall Street Journal quotes Jan Hatzius, chief U.S. economist 
for Goldman Sachs & Co. predicting that the U.S. economy would grow by 
3.3 in the third quarter and that, `` `Without that extra stimulus, we 
would be somewhere around zero,' ''\8\
---------------------------------------------------------------------------
    \8\ Deborah Solomon, ``U.S. Economy Gets Lift From Stimulus.''
---------------------------------------------------------------------------
    This is consistent with the Administration's own findings. The 
Council of Economic Advisors shows that the nearly $200 billion in 
recovery dollars pumped into the economy as of the end of October added 
roughly 2.3 percentage points to real GDP growth in the second quarter 
of 2009 and most likely added even more in the third quarter.\9\ They 
estimate that without the recovery package, the economy would have shed 
over a million more jobs than it actually did.
---------------------------------------------------------------------------
    \9\ Executive Office of the President, ``The Economic Impact of the 
American Recovery and Reinvestment Act of 2009: First Quarterly 
Report,'' September 10, 2009, available at http://www.whitehouse.gov/
assets/documents/CEA_ARRA_Report_Final.pdf; Recovery.gov.
---------------------------------------------------------------------------
    The Recovery dollars have been spent on a wide variety of projects 
around the country. Here's a sample of some of the projects:

    Education. Grants in education have saved or created valuable 
education programs, improved access to higher education, and helped 
prevent a decline in education quality. The Department of Education has 
found that the American Recovery and Reinvestment Act provided a total 
of $48.6 billion for the State Fiscal Stabilization Fund, or SFSF, to 
be administered by the Department of Education to help sustain and 
create jobs and advance education reforms.\10\ As of early November, 
2009, $35.4 billion of the SFSF allotment had been obligated by the 
Department of Education to States and $13.2 billion is expected to be 
obligated in the coming months. SFSF funds were able to restore nearly 
100 percent of the 2008-2009 budget gaps and a significant portion of 
the 2009-2010 shortfalls.\11\ The Congressional Budget Office estimates 
that the money distributed to SFSF has an estimated output multiplier 
of 0.7 to 1.9.\12\
---------------------------------------------------------------------------
    \10\ U.S. Department of Education, ``U.S. Department of Education 
American Recovery and Reinvestment Act Report: Summary of Programs and 
State-by-State Data'' (November 2, 2009) available at http://
www.ed.gov/policy/gen/leg/recovery/spending/arra-program-summary.doc.
    \11\ Ibid.
    \12\ Congressional Budget Office, ``Estimated Impact of the 
American Recovery and Reinvestment Act on Employment and Economic 
Output as of September 2009'' (November, 2009), available at http://
www.cbo.gov/ftpdocs/106xx/doc10682/11-30-ARRA.pdf.
---------------------------------------------------------------------------
    Examples of saved or created programs:\13\
---------------------------------------------------------------------------
    \13\ U.S. Department of Education, ``U.S. Department of Education 
American Recovery and Reinvestment Act Report: Summary of Programs and 
State-by-State Data.''

    Stimulus money helped Alabama budget maintain the funding 
        level for the heralded Alabama Reading Initiative, a ``shining 
---------------------------------------------------------------------------
        star of modern-day education in the State.''

    In Arkansas, Little Rock School Board opted to spend a bulk 
        of its received stimulus money on ``reading recovery'' 
        programs, after-school tutoring, and math and literacy coaches. 
        Most of the special-education funds would be spent on classroom 
        materials and equipment, professional, development, and summer 
        reading programs.

    In Maryland, Gov. O'Malley announced that he would provide 
        more support community colleges to keep up with increased 
        enrollment.

    Leominster High School in Fitchburg, MA, started an 
        Alternative Education Program. Officials had discussed creating 
        the program for over 2 years, but ``the School Committee 
        decided to move forward with the idea earlier this year, after 
        learning that the district would receive around $900,000 in 
        Federal stimulus money for special education. A portion of the 
        money was used to cover the cost of starting the program.''

    Stimulus funds also provided the prize for the Race to the 
        Top program, a $4 billion contest incentivizing State 
        innovation in education reform.

    Recovery dollars have also improved access to higher education:\14\
---------------------------------------------------------------------------
    \14\ Ibid.

    ARRA funds were used to mitigate tuition increases at 
---------------------------------------------------------------------------
        public universities in at least 31 States.

    University of Massachusetts was able to rebate a $1,500 fee 
        increase and instead employ the standard annual increase to 
        cover the cost of inflation.

    At the University of Minnesota, an expected tuition 
        increase was cut by about half. The Minnesota State College and 
        University System, which includes the State's community 
        colleges, reduced a planned tuition increase from 5 percent to 
        2 percent.

    In Virginia, ARRA funds kept tuition increases to the 
        lowest rate since 2002.

    SFSF has allowed Auburn University in Alabama to mitigate 
        tuition increases that would have been required to bridge the 
        gap created by reduced State appropriations.

    Infrastructure investments. Investments in roads are crucial to 
supporting business and building infrastructure. Federal Highway 
Administrator Victor Mendez has predicted that ``[b]y addressing many 
long-overdue repairs to America's roads and bridges,'' we are 
``improving the economy and local quality of life while strengthening 
the nation's infrastructure.''\15\ Of the $26.6 billion available for 
Federal highway and bridge projects under the American Recovery and 
Reinvestment Act, more than 75 percent has now been obligated. To date, 
nearly 8,500 highway projects have been approved and nearly 5,000 are 
underway. In early November, the Federal Highway Administration crossed 
the $20 billion mark in approved obligations for highway, road and 
bridge projects.\16\
---------------------------------------------------------------------------
    \15\ U.S. Department of Transportation, Office of Public Affairs, 
``Highway Investment Hits $20 Billion: Recovery Putting People to work 
on Investments with Long-Term Benefit,'' Press Release, November 3, 
2009, available at http://www.dot.gov/affairs/2009/fhwa3409.htm.
    \16\ Ibid.

    Examples:\17\
---------------------------------------------------------------------------
    \17\ Ibid; Recovery.gov, ``Featured Stories: Stretch of I-40 Gets 
Needed Makeover in Albuquerque Area,'' September 24, 2009, available at 
http://www.recovery.gov/News/featured/Pages/NMI40.aspx.

    In August, construction began on the $26.2 million I-279/
        Fort Duquesne Bridge preservation project in Pittsburgh, PA, 
        designed to improve the safety of the bridge that serves an 
---------------------------------------------------------------------------
        estimated 81,000 drivers each day.

    In September, work got underway in San Bernardino, CA, on a 
        massive billion-dollar project, using $128 million in ARRA 
        funds for additional lanes on I-215 to reduce traffic 
        congestion that had been crippling the local economy.

    Also in September, work began on the three-mile extension 
        of Minneapolis' Trunk Highway 610 to I-94. When completed, this 
        project will reduce traffic congestion and improve area 
        residents' quality of life with sound walls and a pedestrian 
        bridge.

    Last month in Nelsonville, OH, construction started on the 
        8.5-mile, four-lane highway to divert interstate traffic from 
        local streets. The project is using $138 million in ARRA funds 
        and is the largest Recovery Act underway in Ohio to date.

    The New Mexico Department of Transportation has broken 
        ground on a major highway and interchange reconstruction 
        project on Interstate 40. On May 21, 2009, Albuquerque-based 
        Mountain States Constructors Inc. was awarded a $24 million 
        contract--$14.8 million of which comes from Recovery funds--to 
        build one overpass and four ramps, and to reconstruct Paseo del 
        Volcan and Central Avenue just west of Albuquerque. When the 
        project is completed in May 2010, the existing climbing lane 
        will extend seven-tenths of a mile further to better 
        accommodate the trucks and heavy vehicles that frequently 
        travel through the area. The I-40 project has created 78 
        Recovery jobs so far.

    Tax cuts. In total, Treasury estimates that $62.5 billion in tax 
relief was available through ARRA tax provisions by the end of August 
2009.\18\ The Making Work Pay provision accounts for 37 percent of this 
total.\19\ In 2009 and 2010, the Making Work Pay will provide a 
refundable tax credit of up to $400 for working individuals and up to 
$800 for married taxpayers filing joint returns. This tax credit will 
be calculated at a rate of 6.2 percent of earned income and will 
phaseout for taxpayers with modified adjusted gross income in excess of 
$75,000, or $150,000 for married couples filing jointly.\20\
---------------------------------------------------------------------------
    \18\ ``$62.5B in Tax Relief,'' Recovery.gov, September 27, 2009, 
available at http://www.recovery.gov/News/featured/Pages/
Estimated$625BinTaxReliefFromtheRecoveryAct.aspx.
    \19\ Ibid.
    \20\ Internal Revenue Service, ``The Making Work Pay Tax Credit,'' 
accessed on December 7, 2009, available at http://www.irs.gov/newsroom/
article/0,id=204447,00.html.
---------------------------------------------------------------------------
    Other individual Credits account for 19 percent of the dollars 
available through ARRA tax provisions.\21\ Among these, the American 
Opportunity Credit will allow more parents and students to qualify for 
help paying for college expenses over the next 2 years. The AOC 
modifies the existing Hope Credit for 2009 and 2010 so that it includes 
more Americans, including many with higher incomes and those who owe no 
tax. It also adds required course materials to the list of qualifying 
expenses and expands coverage to 4 years of post-secondary education 
instead of two. Many of those eligible will qualify for the maximum 
annual credit of $2,500 per student.\22\ The full credit is available 
to individuals who have modified adjusted gross income of $80,000 or 
less, or $160,000 or less for married couples filing a joint return. 
The credit is phased out for taxpayers with incomes above these levels. 
These income limits are higher than under the existing Hope and 
Lifetime Learning Credits.\23\
---------------------------------------------------------------------------
    \21\ ``$62.5B in Tax Relief.''
    \22\ Internal Revenue Service, ``American Opportunity Credit,'' 
accessed on December 7, 2009, available at http://www.irs.gov/newsroom/
article/0,id=205674,00.html.
    \23\ Ibid.
---------------------------------------------------------------------------
    Energy. The ARRA includes a program launched in late October 2009 
which allocates $3.4 billion program for 100 Smart Grid Investment 
Grant awards. Federal funds will be matched by industry funding for a 
total of public-private investments worth more than $8 billion. These 
grants represent the largest single grid modernization investment in 
U.S. history. The Department of labor announced at the end of October 
that applicants from 49 States have been selected to receive awards and 
are expected to create tens of thousands of jobs.\24\
---------------------------------------------------------------------------
    \24\ U.S. Department of Labor, ``U.S. Secretary of Labor Hilda L. 
Solis Announce $138 Million for Smart Grid Technology,'' Press Release, 
October 28, 2009, available at http://www.dol.gov/opa/media/press/opa/
opa20091326.htm.
---------------------------------------------------------------------------
    Of these funds, approximately $1 billion will build infrastructure 
and expand access to smart meters in order to provide consumers access 
to dynamic pricing information, which would enable them to program 
smart appliances when rates and demand are at their lowest such as late 
at night, et cetera.\25\ Another $2 billion will go to projects that 
integrate various components of a smart grid in a single system, or cut 
across project areas. These include smart meters, smart thermostats and 
appliances, syncrophasors, automated substations, plug in hybrid 
electric vehicles, renewable energy sources, etc. Another $400 million 
will fund grid modernization projects to reduce the amount of power 
wasted in transit from power plants to homes, and $25 million will 
enlarge the manufacturing base for components of smart grid 
systems.\26\
---------------------------------------------------------------------------
    \25\ The White House, ``President Obama Announces $3.4 Billion 
Investment to Spur Transition to Smart Energy Grid,'' Press Release, 
October 27, 2009, available at http://www.whitehouse.gov/the-press-
office/president-obama-announces-34-billion-investment-spur-transition-
smart-energy-grid.
    \26\ Ibid.
---------------------------------------------------------------------------
     An analysis by the Electric Power Research Institute estimates 
that smart grid technologies could reduce electricity use by more than 
4 percent by 2030. That would mean a savings of $20.4 billion for 
businesses and consumers around the country, and $1.6 billion for the 
State of Florida alone--or $56 in utility savings per person.\27\
---------------------------------------------------------------------------
    \27\ Ibid.

---------------------------------------------------------------------------
    Examples of Smart Grid Technology Grants:

    $138 million was awarded to NV Energy for smart grid 
        technology. Matching funds increase the value of this project 
        to $298 million. This statewide project will link 1.45 million 
        electric and gas meters across 54,600 square miles of service 
        territory, delivering more than $65 million in benefits 
        annually to 2.4 million Nevadans.\28\
---------------------------------------------------------------------------
    \28\ U.S. Department of Labor, ``U.S. Secretary of Labor Hilda L. 
Solis Announces $138 Million for Smart Grid Technology.''

    $15.7 million was awarded to Rappahannock Electric 
        Cooperative in Fredericksburg, Virginia. To improve overall 
        system reliability, the funds will assist in implementing 
        digital improvements and upgrades to communication 
        infrastructure, advanced meters, cyber security equipment, and 
---------------------------------------------------------------------------
        digital automation.\29\

    \29\ ``Webb and Warner Announce Nearly $15.7M in Stimulus Funds for 
Investments in Fredericksburg's Smart Grid Technology,'' Press Release, 
October 28, 2009, available at http://webb.senate.gov/newsroom/
pressreleases/2009-10-28-01.cfm.

    The Detroit Edison Company was awarded $83,828,878 to fund 
        its SmartCurrents program. The program includes the deployment 
        of a large-scale network of 660,000 smart electricity meters 
        and will implement the Smart Home program, which will provide 
        customer benefits such as dynamic pricing to 5,000 customers 
        and smart appliances to 300 customers.\30\
---------------------------------------------------------------------------
    \30\ ``Stabenow, Levin Praise More Than $103 Million in Smart Grid 
Grants for Michigan,'' Press Release, October 27, 2009, available at 
http://stabenow.senate.gov/press/2009/
102709LevinStabenowPraiseMoreThan103MillioninSmartGridGrantsforMichigan.
htm.

    The Whirlpool Corporation in Benton Harbor, Michigan 
        received $19,330,000. The funds will support the manufacturing 
        of smart appliances to accelerate the commercialization of 
        residential appliances capable of communicating over a home 
        network with other smart technologies. These appliances will 
        allow customers to defer or schedule their energy use, which 
        can lower consumer costs and reduce peak electricity 
        demand.\31\
---------------------------------------------------------------------------
    \31\ Ibid.

    $127.5 million was awarded to the Sacramento Municipal 
        Utility District. The smart grid stimulus Federal grant program 
        of Sacramento, California's capital city, will explore how to 
        design, run and manage an urban smart grid utility system with 
        different types and sizes of clients. California will match the 
        stimulus subsidy with funds to improve building automation 
        systems, energy efficiency and retrofitting projects that are 
        already in schedule, including several buildings in downtown 
        Sacramento.\32\
---------------------------------------------------------------------------
    \32\ Jen Balboa, Sacramento Municipal Utility District, ``SMUD and 
regional partners win $127.5 million in Federal grant money,'' News 
Release, October 27, 2009, available at http://www.smud.org/en/news/
Documents/09archive/stimulus-10-27-09.pdf; EcoSeed, ``Sacramento reaps 
$127.5 million from smart grid stimulus,'' EcoSeed, November 16, 2009, 
available at http://www.ecoseed.org/en/general-green-news/green-
business-news/green-business-news/5145.
---------------------------------------------------------------------------
    National Security. President Obama committed $3.5 billion for the 
Department of Homeland Security in the ARRA. These funds will go to 
guarding against terrorism; securing our borders; smart and tough 
enforcement of immigration laws and improving immigration services; 
preparing for, responding to, and recovering from natural disasters; 
and unifying and maturing the Department of Homeland Security. The 
Coast Guard received the largest proportion of these funds at $1.4 
billion, Transportation Security Administration $1 billion, the U.S. 
Customs and Border Protection was budgeted close to $1 billion, FEMA 
$615 million, and the DHS Management Directorate received $200 million, 
and Immigration and Customs Enforcement received $20 million.\33\
---------------------------------------------------------------------------
    \33\ Office of the Secretary, U.S. Department of Homeland Security, 
``Creating Jobs While Making America Safer U.S. Department of Homeland 
Security Recovery Act Plan'' (2009) available at http://
www.exercise.dhs.gov/xlibrary/assets/recovery/
DHS_Recovery_Plan_Final_2009-05-15.pdf.
---------------------------------------------------------------------------
    Examples of recent awards by programs:\34\
---------------------------------------------------------------------------
    \34\ Ibid.

    U.S. Coast Guard funding received from the Recovery Act 
        will support multiple operational communities and accommodate 
        the dynamic state of mission needs related to alteration of 
        bridges, shore facility construction, and vessel repair 
        acquisition. The Recovery Act funds will allow for completion 
        of four bridge alteration construction projects. Additionally, 
        shore facility construction and vessel repairs will be 
        performed to preserve existing capabilities. Completion of 
        these projects will facilitate safe and efficient navigation 
        along the Nation's waterways, create jobs in the construction 
        sector, and create a $240 million stimulative impact on the 
---------------------------------------------------------------------------
        construction industry.

    Transportation Security Administration funding received 
        from the Recovery Act will support two programs: the 
        procurement and installation of checkpoint explosives detection 
        equipment; and the procurement and installation of checked 
        baggage explosives detection systems. TSA developed its $1 
        billion plan with a risk based approach that accelerates 
        deployment of in-line baggage handling systems and enhances 
        detection of liquid threats in carry-on baggage.

    U.S. Customs and Border Protection funding received from 
        the Recovery Act will help CBP meet its mission of keeping 
        terrorists and their weapons out of the United States, and 
        securing and facilitating trade and travel, while enforcing 
        immigration and drug laws. In addition to helping support the 
        multi-year modernization strategy that includes reconstruction 
        of up to 23 existing CBP-owned land ports of entry as well as 
        repairs and alterations at a minimum of an additional 10 
        locations primarily along the northern border of the United 
        States, the Recovery Act also provides resources needed for CBP 
        to continue deploying cutting edge imaging technologies that 
        allow safe and efficient inspection of cargo and vehicles 
        entering the United States.

    Federal Emergency Management Agency funding received from 
        the Recovery Act will provide funding for grants to help those 
        in greatest need, thereby reducing the loss of life and 
        property and protect the Nation from all hazards. This includes 
        $100 million for the Emergency Food and Shelter National Board 
        Program; $150 million for Public Transportation and Railroad 
        Security Assistance; $150 million for Port Security Grants; 
        $210 million for Assistance to Firefighters Grants for 
        modifying, upgrading, or constructing non-Federal fire 
        stations; and $5 million expansion in authority for Community 
        Disaster Loans.
Maintaining the Focus on Job Creation
    Job creation must remain our top priority. The Jobs Summit that 
President Obama held last week was important as it focused directly on 
this most pressing problem. There are three ways to think about the 
goal of job creation:

    Policies that directly boost employment and reduce 
        unemployment;

    Policies that help to those most in need, which often have 
        the largest bang for the buck in terms of impact on economic 
        stimulus; and

    Policies that create jobs while laying the foundation for a 
        strong and sustained economic recovery.
Directly boosting employment and reducing unemployment
    The options that would create jobs the most quickly and reliably 
involve the most direct public policy tools available to Congress and 
the Obama administration to preserve public employment, increase 
private employment closely associated with public spending, and create 
incentives in public programs to reduce the numbers of unemployed. They 
include:

    Providing Federal funds to States, localities, and schools 
        to reduce job losses and maintain valuable services.

     The aid to States contained in the ARRA was clearly helpful, but 
        it only addressed about 30 to 40 percent of the gap faced by 
        State governments. As a result, at least 42 States cut services 
        and 30 States raised taxes in 2009. These actions are not 
        helpful as the private sector tries to build on today's nascent 
        economic recovery.

     Additional aid to State and local governments and school districts 
        boasts clear advantages over many of the alternatives. First, 
        the added resources will immediately and directly boost 
        employment in a very hard hit sector. Distinct from the private 
        sector, job cuts are being forced exclusively by impossible 
        budget situations, not by a lack of demand for services. 
        Ameliorating those budget dilemmas will result in more jobs. 
        Second, additional aid will prevent further cuts to State and 
        local education systems-investments that will pay dividends far 
        beyond the current recovery.

    Targeting new job creation in sectors with special 
        investment needs, including national service employment, 
        private- and public-sector employment in child care, and after-
        school programs, and elderly and disabled care, alongside more 
        training for health professionals.

     These jobs, which are largely provided by nonprofit groups and 
        small businesses, are paid for by programs that are currently 
        being cut by State and local governments. These programs also 
        serve needs where there is almost always more demand than 
        supply. Indeed, the Bureau of Labor Statistics projects that 
        these kinds of jobs will be among the fastest growing in the 
        years to come. Investing in these jobs will help pave the way 
        for long-term economic growth by saving and then creating new 
        jobs with long-term career paths and steady personal income 
        growth.

    Creating community jobs such as those undertaken by 
        nonprofit groups to help distressed individuals or communities.

    Creating jobs in needed infrastructure investment, 
        including foreclosed homes and schools.

    Reducing the numbers of unemployed by encouraging early 
        retirement to reduce unemployment through social security, job 
        sharing, and saving primary- and secondary-school teachers' 
        jobs by offering early retirement.
Support for those hardest hit
    Helping those who are most in need is both the right thing to do 
and good for the economy. Channeling funds to the unemployed has a 
direct impact on communities as unemployed workers spend these funds. 
This not only helps the unemployed and their families, but helps the 
overall economy since without aid, unemployed workers who are rendered 
destitute, have no income, and no assistance from the government are 
not active consumers contributing to economic recovery.
    The economic hardships faced by communities hit hardest during the 
Great Recession also threaten long-term social and economic damage. 
They threaten the cohesiveness of neighborhoods and institutions such 
as schools and churches. These things matter from an economic 
perspective--saving a neighborhood is less costly than restoring it 
both financial and social terms.
    Doing more to ensure that families in need get the assistance they 
need not only boosts local economies by pumping money into them and 
helps the national economy by spurring economic demand, but also helps 
families until job creation starts back up. So in the second section of 
the report we recommend the following options to spur support for those 
hit hardest by the Great Recession:

    Extend the unemployment compensation provisions for the 
        long-term unemployed contained in the ARRA recovery package, 
        which are set to expire at the end of 2009, to at least the end 
        of 2010.

    Ensure that the unemployed have access to health care by 
        extending the Federal program that subsidizes health insurance 
        coverage for the unemployed.
Creating the conditions for a strong and sustained economic recovery
    The economic recovery following the recession in 2001 was the 
weakest in the post-World War II era in terms of job gains and income 
growth, leaving the typical family worse off in terms of income in 
2007--the year the most recent recovery peaked--than they were in 2000, 
at the prior economic peak following the 1990s expansion. The reason: 
the George W. Bush administration and a conservative-led Congress 
pushed through tax cuts for the exceedingly wealthy that did not 
trickle down to create broad-based economic growth and job creation 
while also failing to supervise our financial sector amid an explosion 
of ill-considered lending.
    This time, a progressive administration and Congress understand 
that health care reform, prudent regulation of the financial sector, 
improving education, and addressing the long-term issue of climate 
change and energy independence will, together, pave the way for a more 
vibrant economy in the medium to long run. Integrating these goals into 
our short-term goals of job creation where possible should continue to 
be a priority.
    This third section of the report presents two options that focus on 
one of those pillars of our future economic growth, the clean-energy 
transformation of our economy, through:

    A ``green bank,'' or more specifically a Clean Energy 
        Deployment Administration that would finance new green-energy 
        projects and home and building green retrofits to boost energy 
        savings and job creation.

    A new $30 billion Federal revolving loan fund, as outlined 
        in the Investments for Manufacturing Progress and Clean 
        Technology Act now before Congress, to help small and midsized 
        component parts manufacturers retool their plants and retrain 
        workers to serve the growing global market for low-carbon 
        energy technology.
Tax provisions to spur job creation
    Tax cuts are not as direct, fast-acting, or reliable a way to 
create jobs or spur growth as the other options presented above. 
Nevertheless, as a politically viable means of encouraging job creation 
in the private sector with a minimum of administrative overhead, they 
are sometimes the best option. They also can, in some cases, be 
designed to pay for themselves over a period of time.
    There are some tax cuts that are more likely to spur private-sector 
jobs growth, specifically:

    A deficit-neutral partial tax moratorium on income taxes in 
        2009.

    A two-tier residential and commercial building retrofit 
        program featuring a ``cash for clunkers'' program for household 
        appliances and a ``home star'' certification program for deep 
        energy efficiency retrofits for entire residential and 
        commercial buildings.

    An expansion of currently effective industrial retrofit 
        measures that provide tax credits for investment in clean 
        energy manufacturing.

    A 1-year extension of the current fix to the Production Tax 
        Credit for renewable energy to ensure that this important tax 
        credit continues to have impact, and that includes 
        manufacturers of significant components such as wind turbines 
        and blades to extend its benefits to cover domestic 
        manufacturing supply chains.

    A job-sharing tax credit that would encourage employers to 
        reduce hours rather than laying off workers.

    Changes to the Low-Income Housing Tax Credit to revive the 
        stalled credit market and spur investment in shovel-ready and 
        much needed affordable housing projects.
Conclusion
    The recovery package has pumped billions of dollars into 
communities across the nation. As expected, it took quite a few months 
for the effects to start to be seen, but now we know that these funds 
had positive impact on economic growth in the third quarter and the 
economy lost only 11,000 jobs last month, after losing more than twice 
as many every day last January as President Obama took office.
    But, we cannot stop focusing on job creation. Unemployment remains 
excruciatingly high, especially among young workers, workers of color, 
and older and displaced workers. The last two recessions led to 
``jobless recoveries'' and the unemployment rate did not peak for about 
a year and a half after the recession was declared officially over by 
the National Bureau of Economic Research. We run a grave risk of not 
creating sufficient jobs this time around as well; projections are now 
that we will not get back to ``normal'' rates unemployment until far 
into the mid-teens of the next decade.
                                 ______
                                 
                    PREPARED STATEMENT OF BRUCE KATZ
            Vice President, the Brookings Institution, and 
                 Director, Metropolitan Policy Program
                            December 9, 2009
    Thank you Senator Brown and members of the Subcommittee for the 
opportunity to testify before you this afternoon. I am Bruce Katz, Vice 
President and Director of the Metropolitan Policy Program at the 
Brookings Institution.
    Yesterday at Brookings, President Obama laid out three priorities 
for new investments to create jobs, including bolstering small business 
growth, added investments in transportation and communications 
infrastructure, and rebates for home energy efficiency retrofits. These 
are important steps, but, as the president himself noted, there is no 
silver bullet or single law that will address our current situation. 
There is more to be done on several fronts, and my testimony will 
address some complimentary and overlapping issues.
    I will make three main points today.
    First, the American economy, like most developed economies 
worldwide, is a network of metropolitan economies, which envelop not 
just cities and suburbs but a good portion of our rural areas. Because 
the American economy is metro-led, Congress and the Administration must 
understand that national recovery will also be metro-led, and so will 
depend on restoring economic health and vitality in our metropolitan 
engines.
    Second, the Great Recession has affected different metro economies 
in radically different ways. The bubble-led economies in the Sun Belt 
and the auto-dominated industrial economies in the Great Lakes have 
borne the brunt of this downturn. It is important to recognize that, 
even as economists talk about national recovery and unemployment 
numbers improve, a large number of our metropolitan economies are still 
mired in recession.
    Third, Federal efforts to bolster job creation need to connect 
``The Macro to the Metro.'' Our research shows that metros need two 
kinds of Federal responses.
    They need the Federal Government to intervene quickly to prevent 
further job losses from the collapse of general and specific tax 
revenues. It would be the height of folly to focus on creating new jobs 
in the near term while ignoring the fact that metropolitan areas are on 
the verge of losing municipal jobs due to a steep and foreseeable drop 
in tax revenues.
    Metros also need the Federal Government's support in creating jobs 
that build a balanced, productive future economy, which is low carbon, 
innovation-fueled and export-oriented. There can be no return to normal 
after this recession since what preceded it was anything but normal.
    So let me start with the broader metropolitan frame.
    Our research and that of others shows that our nation's 
metropolitan areas, which encompass cities, suburbs, exurbs, and a 
large portion of our rural communities, are the engines of the national 
economy. As Harvard Business School Professor Michael Porter notes, 
there is really no such thing as the ``U.S. economy,'' but rather a 
network of interlinked metropolitan economies across the country.
    There are 366 metro areas in the United States, housing 83 percent 
of our population and generating 88 percent of our GDP.
    The top 100 metros alone sit on only 12 percent of our land mass 
but house two-thirds of our population, generate three quarters of our 
GDP and concentrate the advanced research institutions, innovative 
firms, talented workers and sophisticated infrastructure that are 
needed to compete globally.
    The majority of the GDP of 44 of our 50 States is generated by 
their metropolitan areas. Ohio is a quintessential metro State since 
the largest seven metropolitan areas alone generate 80 percent of State 
GDP. South Carolina's five largest metropolitan areas are responsible 
for 60 percent of State GDP, and its full complement of 10 metros 
contribute 82 percent of State GDP. In Oregon, the Portland metro by 
itself generates 59 percent of State GDP.
    We are a Metro Nation, and we need to start acting like one.
    Second, metros vary considerably in size, assets, economy, and in 
how hard they have been hit by the recession. Some specialize in 
finance and real estate, others in manufacturing and production, still 
others in advanced services. Some act as hubs for the movement of 
goods; others for the development and commercialization of ideas.
    Since April of this year, Brookings has made a quarterly assessment 
of the impact of the downturn on each of the top 100 metros. Our latest 
Monitor, to be released December 15, shows what the recession looks 
like from the ground up.
    We find that every metro is struggling to convert GDP growth into 
new jobs. Employment continued to decline in 87 of the nation's top 100 
metros through the third quarter of this year, and unemployment varies 
dramatically from metropolitan region to metropolitan region, ranging 
from a high of 16.7 percent in Detroit to a low of 4.8 percent in 
Omaha.
    The metro focus shows that how long the road to recovery will be. 
Only six metro areas in the top 100 (Albuquerque, Austin, McAllen, San 
Antonio, Virginia Beach, and Washington DC) have exceeded their peak 
pre-recession output. Only one metro area (McAllen) has exceeded its 
peak pre-recession employment.
    We have also seen intense variation in economic pain. The housing 
collapse has been felt in the sun-drenched, bubble real estate 
economies such as metros like Phoenix, Tampa and Jacksonville, which 
have continued to lose jobs at two to three times the rate of the 
United States as a whole over the last quarter. The auto collapse has 
devastated the ``motor metros'' concentrated around the Great Lakes. 
Detroit, which has been hemorrhaging jobs throughout this decade, has 
had more than twice the rate of job loss as the Nation as a whole since 
the beginning of the recession in December 2007. Youngstown and Akron, 
which have also outpaced the national rate of job loss throughout the 
recession, have shed jobs two and three times faster than the United 
States, respectively, over the last quarter.
    By contrast, metros I mentioned earlier like Austin, San Antonio 
and Washington, D.C. have fared fairly well during this downturn, 
buoyed by strong health and education sectors and government.
    This variation reinforces the point: there is no single American 
economy.
    Finally, any further Federal response on job creation and economic 
recovery must connect ``The Macro to the Metro'' if it is to be 
successful. More specifically, the Federal Government must address the 
needs of metros and their contribution to the economy in two ways.
    In the immediate term, the Federal Government must act quickly to 
stop additional job losses that are large and foreseeable. We must not 
overlook the importance of job retention in a rush to job creation.
    Thinking more broadly, the Federal Government must catalyze job 
creation that helps build the next economy and sets the country on the 
path toward long term, sustainable growth. We cannot return to the 
unbalanced, consumption-led growth of the past decade, driven by 
unsustainable, speculative increases in housing values and reckless 
engineering of new loan products and secondary market vehicles. True 
economic recovery will depend on the Nation finding a different 
economic path, one that is more productive, sustainable and inclusive. 
Given this framework, we recommend that this Subcommittee and the 
Administration and Congress consider five discrete interventions that 
prevent further job losses and help build the next economy.
Stop Additional Job Losses
    While the recently released unemployment numbers indicate that 
hemorrhaging of jobs has been staunched somewhat, the brutal fact is, 
because of the delayed effects of the recession on local budgets and 
its continuing effects on the ready availability of capital, our metros 
will see significant job losses absent Federal intervention. It does no 
good to bring in new jobs through the front door if we're losing them 
out the back window.
Strategy 1: Direct assistance to cities and towns
    One critical strategy for job retention is direct fiscal assistance 
to local governments, which employ 10 percent of the nation's 
workforce.
    Local government finances, local government employment, and private 
sector jobs that depend on local projects are on the verge of a crisis. 
Local government finances typically feel the full impact of larger 
macro trends 18-24 months after their onset because property tax 
assessments lag the real-time decline in property values. For fiscal 
year 2006-2007, local governments generated $370 billion in revenue 
from property taxes, according to U.S. Census data. Property values 
have fallen 9.5 percent since then, meaning that the local budget gap 
may be as large as $35 billion--and this excludes declines in sales and 
income taxes, which have dropped by $3 billion, according to Census 
data. Brookings research projects another $15 billion in total revenue 
declines over the third and fourth quarters of this year.\1\ Roughly 70 
to 75 percent of that should be from property tax losses.
---------------------------------------------------------------------------
    \1\ Using quarterly census data from 1997 to present, we estimated 
this by regressing annual growth rates in local revenue on growth rates 
in housing prices, the unemployment rate, holding the quarterly level 
of revenue constant. For every 1 percentage point increase in national 
unemployment, local revenue is predicted to fall by 0.35 percentage 
points. Likewise, a 1-percentage point decrease in housing prices is 
associated with a 0.38 percentage point decrease in revenue.
---------------------------------------------------------------------------
    At least $50 billion would be required to make up for these local 
revenue shortfalls, but that would do nothing to address the massive 
losses in transfer payments from States, which make up one third of 
local government budgets. If the decline in State transfers is as large 
as the decline in State revenue, local governments could lose another 
$74 billion, for a total local government shortfall of $124 billion.
    A National League of Cities survey found that in FY2009, 67 percent 
of cities dealt with budget shortfalls through layoffs, furloughs, and 
hiring freezes--a response that might be expected to continue without 
some sort of intervention, possibly leading to massive reductions in 
jobs and vital services.\2\
---------------------------------------------------------------------------
    \2\ Christopher Hoene and Michael Pagano, ``City Fiscal Conditions 
in 2009'' (Washington: National League of Cities, 2009).
---------------------------------------------------------------------------
    But fiscal aid to cities would not just keep municipal payrolls 
stable. It would also stall cuts in local spending on construction, 
procurement, and other areas that directly affect private sector firms 
that provide construction, printing, and other services. NLC reports 
that 62 percents of cities delayed capital projects in FY2009 due to 
budget shortfalls.\3\ Bringing these back online would provide jobs in 
site management, planning, and technical assistance, as well as 
construction. This local spending also advances national priorities 
such as infrastructure improvements, retrofits and other ``green 
jobs.''
---------------------------------------------------------------------------
    \3\ Ibid.
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    Fiscal assistance to cities and towns could take several forms. The 
simplest is probably direct aid, in a new program that is separate from 
but analogous to the State Fiscal Stabilization Fund in ARRA. A model 
could be the general revenue sharing program (GRS) that was in place 
from 1972 to 1986. This system had the obvious benefit of providing a 
fast-moving response to local government liquidity crises. But it also 
had the virtue of targeting aid where it was most needed, through a 
formula that took into account localities' tax effort, population, and 
per capita income. If re-enacted for a short term today, the program 
would address the coming local government fiscal crisis and help keep 
municipalities and counties from cutting back in ways that could place 
a significant drag on the nation's nascent recovery just as the 
Recovery Act spending trails off late next near.
    A second option would be to restructure SFSF to provide direct 
fiscal assistance to local governments that are entitlement 
communities. This approach would allow a local pass through to be 
carved out of an extended or expanded SFSF program. Using SFSF in its 
current form would not be a particularly effective vehicle for 
providing relief to local governments. SFSF did not have any straight 
pass-through to local governments, so funds were not directly used by 
cities and towns. SFSF did probably forestall cuts that State 
governments would have made in local aid, so probably provided indirect 
benefit. However, a direct benefit is needed now.
Strategy 2: Transit system operating subsidies
    Perhaps the best example of the folly of focusing exclusively on 
job creation and ignoring job preservation comes from our nation's 
transit systems. As the Federal Government's Recovery Act funds aimed 
to create so-called shovel-ready, temporary construction jobs, transit 
agencies are facing the likelihood of laying people off from stable, 
permanent positions.
    No fewer than 51 transit agencies around the country are facing 
some combination of service cuts, fare increases, and layoffs.\4\ 
Transit systems that are vitally important for moving workers in major 
metros like New York, Washington, Philadelphia, and Atlanta have all 
recently considered job and service cuts as well as far increases to 
close millions of dollars in deficits. St. Louis had to suspend nearly 
half of its bus service and one-third of its rail service, and laid off 
nearly one-quarter of its staff, even though in 2008 ridership on the 
region's buses grew by almost 9 percent, one of the largest gains in 
the Nation over that time.
---------------------------------------------------------------------------
    \4\ Transportation Equity Network and Transportation for America, 
``Stranded at the Station: The Impact of the Financial Crisis on Public 
Transportation,'' Washington: 2009.
---------------------------------------------------------------------------
    While the Recovery Act provides $8.4 billion to be spent on transit 
this year, Federal rules stipulate that this money can be spent only on 
capital improvement projects and not to finance gaps in day-to-day 
operating expenses for transit agencies in urbanized areas with 
populations greater than 200,000. While capital is of course critical 
to transit service, operating costs are also vital to cover the 
salaries of the workers who keep the system running, as well as the 
debt contracted to pay for capital projects, and are generally about 
twice as high as capital expenses for the largest transit agencies.
    The Federal Government should step in and change the rules so that 
transit agencies can spend transit capital stimulus dollars on 
operating expenses. Certainly, agencies have capital needs as well, but 
particularly in these stressful economic times they should have the 
short-term flexibility to use those Federal dollars to meet their 
immediate problems.
    These two strategies--direct municipal aid and transit operating 
subsidies--would provide a Federal finger in the dike, keeping jobs in 
sectors that are being battered by forces that are not entirely within 
their control. They would stop the hemorrhaging of jobs.
    They will not, however, be sufficient to address the hyper-
unemployment levels among some categories of metropolitan workers, 
particularly Hispanic and African Americans, younger people, and people 
with less education. These groups will only experience real relief with 
the implementation of focused job-creation strategies through proven 
programs like the Community Development Block Grant. CDBG is a well-
understood program that provides communities with flexible, easily 
deployed resources to address local development priorities.
    In the current recession, CDBG funds have been a tremendously 
efficient source of job creation.\5\ If program rules were relaxed to 
allow more funding for jobs and job creation, CDBG could a potent way 
to deliver public sector employment jobs relatively quickly. Many 
cities have an established network of community-based facilities 
experienced in managing and handling CDBG funds that could help bring a 
public-sector employment program up to scale. Further, if a summer jobs 
program were a part of this initiative, it could be put in place in 
short order, as has been done in past years. The fiscal year 1998 
summer jobs program, funded at $871 million, provided jobs and training 
for 480,000 disadvantaged youth.
---------------------------------------------------------------------------
    \5\ An analysis of Recovery.gov data from FY2009 Q4 reveals that 
CDBGs created 4,773 jobs at a cost of $7,214 each, while the average 
other grant did so at a cost of $56,220 per job. The general finding 
here seems to be corroborated by analysis of FY2005-2008 data from 
regular budget cycles.
---------------------------------------------------------------------------
Build the Next Economy
    As Congress acts to stem further job losses, it must not overlook 
the long-term. We need to lay the groundwork not just for jobs for the 
next year, but jobs for the next generation.
    In the midst of rising unemployment, increasing poverty and 
battered industries, we need high aspirations for the next economy.
    This next economy should be a low (or at least less) carbon 
economy, as we struggle with the threat of climate change.
    It should be innovation fueled, as we strive to make quantum leaps 
on everything from clean technology and renewable energy to high speed 
rail, the smart grid and health care information technology.
    And it should be less driven by domestic consumption and more 
oriented toward exports, particularly to rising nations like China, 
India, and Brazil that are rapidly urbanizing and industrializing.
    These three factors will play to the strengths of America's metros, 
because it is in metros where you find the transit systems and density 
that reduce carbon emissions. It is in metros where you find the well-
educated workers, the concentrations of research institutions, and the 
streams of Federal funding that support innovation. And it is in metros 
that you find the ideas and products that are valued and sought abroad, 
and the rail, port, and logistics networks that move these products to 
markets overseas.
Strategy 4: Next generation transportation
    Our competitor nations understand the importance of having state-
of-the-art, seamlessly integrated infrastructure systems, from roads to 
rail to ports to planes. A new approach to infrastructure is not only a 
competitive necessity for our nation's metros, it also is critical to 
helping metros realize a number of national goals, such as a reduction 
in carbon emissions.
    Congress should continue to fund, as a matter of course, the U.S. 
DOT's Transportation Investment Generating Economic Recovery (TIGER) 
Discretionary Grants, originally devised for the Recovery Act. The $1.5 
billion TIGER program will fund competitive grants to support 
nationally, regionally, or metro-significant projects that may 
facilitate linking transportation, housing, energy, and environmental 
concerns, such as greenhouse gas emissions. The projects will be 
rewarded based on their ability to preserve and create jobs, invest in 
transportation infrastructure that will provide long-term economic 
benefits, and assist those most affected by the current economic 
downturn. In short, these are the type of projects designed to support 
a new long term vision for infrastructure in this country.
    Typical DOT programs do not require formal evaluations, but TIGER 
provides the regulatory structure to improve employment impacts because 
it uses job creation as a metric for evaluating applications. In the 
short run, this ensures that TIGER funding creates construction-related 
jobs in a time of great need. But as the economic recovery stabilizes, 
and TIGER takes its place as a regular part of DOT's budget, the job 
creation criteria could be broadened to balance short and long-term job 
creation. TIGER-funded infrastructure impacts have a powerful ability 
to create well-paying jobs now and a stronger economy in the future.
    TIGER disbursements are not expected until February 2010 but 
preliminary USDOT analysis shows that the program is shiningly popular. 
The nearly 1,400 applications received so far total $57 billion and 
come from every State. If even one-third of these applications are 
projects that adhere closely to the objectives of the program, that 
represents $20 billion in high-quality projects that are ready to 
start, but lack funding.
    TIGER should be a permanent part of the DOT budget, starting with a 
$20 billion appropriation, so that these and other critical projects 
can be realized. There are many potential vehicles for an expanded 
TIGER program. One is the FY2011 budget. By then there should be more 
information about the projects funded through the first wave of grants, 
including job creation and retention. This information will help refine 
the job creation criteria for future grants. TIGER could also be funded 
through a short-term reauthorization of the current surface 
transportation law, SAFETEA-LU which expires at the end of this month. 
Or the new spending on infrastructure that President Obama proposed in 
yesterday's address could include a new round of TIGER funding.
Strategy 5: National infrastructure bank
    Another important idea to support broad competitiveness goals is a 
national infrastructure bank (NIB), which would serve as targeted 
mechanism for financing infrastructure. A development bank in essence, 
a NIB would have to balance the rate-of-return priorities of a bank 
with the policy goals of a Federal agency. Ideally, it would improve 
the Federal investment process and focus on multi-jurisdictional or 
multi-modal projects with regional or national impact. For these types 
of infrastructure projects, the NIB could provide Federal funding in 
terms of grants, loans, and loan guarantees.
    Another important idea to support broad competitiveness goals is a 
national infrastructure bank (NIB), which would serve as targeted 
mechanism for financing infrastructure. Congress should pass the 
National Infrastructure Bank Act to establish an independent Federal 
entity to evaluate and fund infrastructure projects ``of substantial 
regional and national significance.'' A White House Press release 
following the President's speech yesterday spoke of supporting 
``financing infrastructure investments in new ways, allowing projects 
to be selected on merit and leveraging money with a combination of 
grants and loans . . . '' The NIB would provide grants, loans, loans 
guarantees to projects requiring Federal investment of at least $75 
million. The Federal Government would provide initial capital of $60 
billion that NIB would use to issue bonds, with the proceeds used to 
finance major projects proposed by public entities. The NIB Act should 
be passed and funded at just under $61 billion.
Strategy 6: Cluster initiatives
    As SBA administrator Karen Mills wrote last year before joining the 
Obama Administration,

        Due to rising global competition, the nation's capacity for 
        generating stable, well-paying jobs for a large number of U.S. 
        workers is increasingly at risk. In this environment, regional 
        industry clusters represent a valuable source of needed 
        innovation, knowledge transfer, and improved productivity . . . 
        Many U.S. industry clusters are not as competitive as they 
        could be, to the detriment of the nation's capacity to sustain 
        well-paying jobs.

    Clusters encompass both existing industries and the emerging 
industries, such as alternative energy, that will grow to meet the 
challenges of the next economy. In fact, strong clusters promote the 
product and process innovation, technology transfer and knowledge 
sharing that help industries shift from the now to the next, and move 
from making tires to making polymers or making auto glass to making 
solar panels.
    The Federal Economic Development Administration's fiscal year 2010 
budget request seeks $50 million for a regional innovation clusters 
initiative that would award competitive, bottom-up grants to strengthen 
local efforts and establish a national clusters research and 
information center. The House appropriations bill trimmed that back to 
$10 million, while the Senate pared it to $35 million. To ensure that a 
fully rounded clusters program becomes operational, House and Senate 
conferees on the Commerce-Justice-Science appropriations bill should 
agree to the Senate funding level for the EDA economic adjustment, 
technical assistance, and research/evaluation accounts, which would 
allow the clusters effort to be funded at about $35 million.\6\ A well-
designed and implemented EDA clusters program would serve as an 
important symbol and demonstration of a new Federal approach to 
economic policy.
---------------------------------------------------------------------------
    \6\ As a compromise, the conferees should also accept the higher 
House funding level for EDA assistance programs ($255 million), which 
would allow conferees to split the difference between House and Senate 
appropriations for public works.
---------------------------------------------------------------------------
    Two other bills currently in Congress would encourage the 
development and success of industry cluster initiatives, and they 
should be passed in some form to bolster the productivity and 
competitiveness of America's regional and metropolitan industries. The 
SECTORS Act of 2009 (``Strengthening Employment Clusters to Organize 
Regional Success Act'') would award grants to local industry-based 
organizations to enhance the competiveness of the industry, improve 
workforce skills, and coordinate State and local economic development 
activities. The SECTORS Act appropriately recognizes the employment 
aspects of clusters, calling for Federal support for

        [I]dentifying and aggregating the training needs of multiple 
        employers, helping postsecondary educational institutions and 
        other training providers align curricula and programs to meet 
        industry demand, and improving job quality through improving 
        wages, benefits, and working conditions for workers.

I'm sure the Chairman is quite familiar with the bill, which he 
introduced with bipartisan support.
    Likewise, the Senate and House both referred a bill to 
Subcommittees on Technology and Innovation that would promote the 
construction of research parks with $7.5 million for each of 4 years. 
The title said it all: ``A bill to provide grants and loan guarantees 
for the development and construction of science parks to promote the 
clustering of innovation through high technology activities.'' Passing 
this bill now would promote innovation by encouraging the concentration 
of technology industries, but it would also create short-term jobs in 
construction related industries.
Conclusion
    I will conclude with these summary thoughts.
    I think the time is long past due for national economic policy to 
align more closely with metropolitan economic realities, given the 
economic primacy of our metropolitan areas.
    In the near term, that will require Congressional action to deal 
directly and forcibly with the coming fiscal storm in our nation's 
metros, given the foreseeable declines in tax revenues as economic 
stress (and declines in income, sales and housing values) undermines 
State and municipal finance. This metro focus also requires deliberate 
and purposeful action to build the economy and the future.
    I spoke at the beginning of my testimony about the variations in 
assets and economic strength between metros. We must also recognize 
variations in institutional capacity. Some municipalities and counties 
lack the staffing and experience to design and implement various 
Federal programs. Some metropolitan areas, particularly in older 
industrial sections of the country, have been in economic decline for 
decades. The Federal Government, therefore, must acknowledge this 
variation in capacity and take steps to put in place a national network 
of firms, non-profit organizations, and individuals that can provide 
technical assistance to make sure our national project of economic 
renewal can reach its fullest potential. HUD has already started doing 
this with regard to neighborhood stabilization funds but more 
intensified efforts are needed in such areas as energy retrofit, 
transportation and education.
    I thank you again for the opportunity to testify here today, and 
welcome any questions.
                                 ______
                                 
                    PREPARED STATEMENT OF RAY LEACH
                Chief Executive Officer, Jumpstart Inc.
                            December 9, 2009
    Mr. Chairman and members of the Subcommittee, thank you for taking 
the time to engage in a broad dialog regarding the current U.S. 
economy's economic challenges, and for inviting me to testify on behalf 
of non-profit organizations located throughout the United States, who 
work with and are supported by public, foundations and private sector 
partners who are all focused on creating economic wealth and jobs via 
the acceleration of the transformation of State and regional economies 
under significant economic and employment distress.
    All of us are encouraged by the recent news regarding a slight 
reduction in total U.S. unemployment, yet I believe everyone also 
recognizes that we have a long way to go in order to create at least 6 
million jobs which economist tell us would equal full employment. While 
it appears that perhaps the worst of the recent recession might be 
behind us, I would strongly encourage this Committee to use this crisis 
as an opportunity to reconsider our national economic policy regarding 
the Federal Government's role in support of the formation of new, 
highly disruptive technology businesses that have the potential to 
create significant white, green and blue collar jobs as well as 
completely new industries.
    I would be remiss if I did not share that I believe the recent 
expansion of small business loan guarantees is a positive action that I 
would strongly recommend Congress to continue to support. I would also 
strongly encourage Congress to dramatically expand high-skill 
immigration quotas to enable the world's brightest and most capable 
individuals to stay in or come to the United States to work for the 
benefit of the U.S. economy. I also believe that a wide range of tax 
credits, not only for hiring new employees, but also to individuals 
making angel investments in very small, high-technology startup 
businesses is something that Congress should support and encourage.
    Yet, today I wanted to share with you, an approach that has not 
been discussed to my knowledge, to date, with this Committee and that 
is how the Federal Government can partner with communities, States and 
regions of the country to accelerate the formation of entrepreneurial 
ecosystems that have the potential to produce sustained long-term 
economic transformation, growth and wealth creation. This approach 
hones the ability to quickly and efficiently create, support and grow 
new technology-based companies. Recent reports from the Kauffman 
Foundation and others tell us that over 75 percent of the new jobs in 
our economy are done so by firms which are less than 5 years old. The 
balance of my testimony today will focus on how the Congress can 
leverage current programs, partnerships and organizations to accelerate 
the creation and growth of firms that have the potential to employ 
hundreds, thousands and tens of thousands of workers in the years 
ahead.
    In order to begin explain this approach; I would like to introduce 
you to my organization, JumpStart Inc. We are a 501(c)3 non-profit 
organization headquartered in Cleveland, Ohio, whose mission is to 
recreate a robust and active entrepreneurial ecosystem in Northeast 
Ohio, which encompasses over 4 million residents and has been a major 
center for manufacturing over the last six generations.
    Going back to a 50-year period of time between 1875 and 1925 years 
ago, cities in our region of Ohio including Cleveland, Akron, 
Youngstown, Lorain and Canton were centers for innovative entrepreneurs 
who created globally competitive companies that were incredible wealth 
and job creators. Due to these significant successes, communities like 
Northeast Ohio found that they no longer needed to rely on new 
innovative firms for their own economic vitality throughout the 
majority of the 20th century. Unfortunately, over time the principal 
firms in Northeast Ohio ultimately became victim of new disruptive 
innovations that became products of new domestic and internationally 
based firms and the increasing challenges of globalization. As result 
of this process, which began to accelerate in the last thirty-five 
years, not only did Northeast Ohio's significant firms who employed 
hundreds of thousands of citizens begin to lose their competitiveness 
and shed employment, but at the same time this economic condition 
exposed the Northeast Ohio region for its lack of a public or market-
based entrepreneurial ecosystem. These entrepreneurial ecosystems are 
critical to wealth creation based on the formation of new businesses as 
their function is to engage and assist innovators and aspiring 
entrepreneurs to help them perfect their inventions, access financing 
to help take their products to market and to help the company's 
founders find manufacturing, sales and management talent to join the 
company that would enable the new business to grow and therefore more 
significantly benefit society by creating increasing employment and tax 
receipts.
    As a result of the absence of an entrepreneurial ecosystem in 
Northeast Ohio, the region has struggled with this critical economic 
transition and has found itself near the bottom of many national 
economic rankings. In fact, Entrepreneur Magazine ranked Northeast Ohio 
as the worst large regional economy for entrepreneurial performance for 
almost twelve years in a row from 1990-2002.
    This is when a new chapter in the economic history of Northeast 
Ohio began to emerge as corporate and philanthropic leadership in 
Northeast Ohio came together in 2003 to begin to better understand what 
needed to be done to recreate a new set of actors and initiatives that 
could accelerate the re-creation of a robust entrepreneurial ecosystem 
that could promote, support and invest in disruptive technologies being 
created at local universities, centers of research and from the 
inventive and industrious citizens of Northeast Ohio.
    Bringing together a broad group of partners, including local, 
regional and State government as well as the corporate and 
philanthropic community resulted in a broad-based strategic plan to 
create JumpStart Inc., an non-profit entity that would work and invest 
to help re-create an entrepreneurial ecosystem and assist new 
innovators and entrepreneurs but do so in a way that would seek not a 
maximum financial return from its activities, but instead work to 
realize the greatest economic outcomes that could result from the 
creation of new firms based on disruptive, globally competitive 
innovation that had the potential to create hundreds, thousands and 
perhaps tens of thousands of new jobs in the coming decades.
    I am encouraged to report that since the creation of JumpStart in 
2004 it has generated significant economic results to date and has been 
able to demonstrate the promise to help accelerate the economic 
transformation of the Northeast Ohio economy. Since 2004, JumpStart has 
engaged with over 7,000 first-time innovative entrepreneurs providing 
them with approximately 100,000 hours of pro-bono technical assistance 
delivered by experienced, serial technology entrepreneurs from 
JumpStart's team. It has made significant direct investments in 42 high 
potential startup companies that have already created over 600 jobs and 
are anticipated to create at least another 3,000 positions in the next 
few years. JumpStart has also helped to create a broad-based group of 
community-driven as well as private sector, profit-motivated investors 
that are making an average of 60 investments in new companies annually 
which have resulted in a total investment of over $1 billion in 
Northeast Ohio startup firms since 2004.
    JumpStart's business model has recently become nationally 
recognized, as it has been discussed by media outlets including the New 
York Times, the Wall Street Journal, BusinessWeek, Forbes, PARADE 
Magazine and the Chronicle of Philanthropy. It also has won numerous 
national awards including the Economic Development Administration's 
2009 Excellence in Economic Development Award for Urban or Suburban 
Communities as well as the State Science and Technology Institute's 
2009 Excellence in TBED (technology-based economic development) Award 
for Increasing Access to Capital. Yet, at this same time JumpStart 
estimates it could make an even greater economic impact. We estimate 
that there are at least another 50 firms located in our region that 
deserve investment from the ecosystem in Northeast Ohio each year, but 
are currently having to wait until more resources are either secured by 
non-profit, economical development organizations, like JumpStart, or 
the less likely outcome of being able to access private for-profit 
resources are attracted to the region.
    There are a handful of critical components to JumpStart's success 
but none of them are as important as the public/private and foundation 
partnership that has been formed in Northeast Ohio in order to 
aggregate the resources required in order to build an organization with 
the ambition and outcomes of JumpStart. In Northeast Ohio, we are 
fortunate to have a group of over 80 foundations who have come together 
to form what is the called the Fund for Our Economic Future. This 
collaboration of regional foundations has pooled together over $60M in 
total resources to focus on a wide range economic development 
initiatives including over $20M focused on the creation of an 
entrepreneurial ecosystem that can accelerate Northeast Ohio's 
transformation.
    As critical as this group is, an even more important player in the 
emerging economic transformation is the State of Ohio's Third Frontier 
Program, a $1.6 billion dollar public-sector initiative that has made 
an incredible impact on the technology, research and innovation 
commercialization economy in Ohio. A recent assessment of the program 
performed by SRI International, found that after State expenditures 
totaling $681 million to date, over $6.6B of economic activity and 
41,300 jobs have been created resulting in $2.4 billion in employee 
wage and benefits. This leverage represents a 22 percent return on 
investment per annum to the State and nearly a $10 return for every 
dollar of State investment. The projects that this program has helped 
to fund have also helped increase Ohio's gross domestic product by 
$440M per annum and these annual revenues are anticipated to continue 
to grow to at least $900M by 2013. At this same time, high tech 
employment growth in Ohio has outpaced almost all other Midwestern 
States and venture capital investment in Ohio has grown over 20 percent 
since 2003 versus only an average increase of 8 percent nationally 
increase during this period of time.
    The combination of these two actors--Northeast Ohio-based 
philanthropic foundations and the State government has created a 
powerful collaboration that is making a tremendous difference to 
Northeast Ohio's current and future economy. This leadership in Ohio 
provides a great demonstration of what leverage can do to accelerate 
the growth and formation of new businesses that create opportunities 
and jobs.
    To ensure that new and innovative businesses continue to be created 
by entrepreneurs not only in Ohio but across the United States, a broad 
set of Federal programs should be developed that focus on accelerating 
technology commercialization, increasing access to technical 
assistance, education, mentoring and training for entrepreneurs and 
improving access to risk capital. Unfortunately, current Federal 
programs have particular limitations that often times do not achieve 
job-creation outcomes. These limited existing programs include the 
following:

    The SBIR and STTR research-support programs which have a 
        limited focus on commercialization, especially when the 
        economic outcomes are to occur via the creation of new firms or 
        the deployment of Federal research into young, less mature 
        firms.

    Current Small Business Administration's (SBA) loan programs 
        that are principally focused on less innovative, incumbent 
        firms that benefit from secured loans (which are typically more 
        helpful to maintain jobs versus dramatically growing new jobs).

    Technical assistance programs provided via the SBA's Small 
        Business Development Center programs which tend to focus on 
        even smaller firms that do not have the capacity, in general, 
        to generate a significant number of jobs in the next 5-10 
        years.

    The current Small Business Investment Company (SBIC) 
        programs which are focused on providing mezzanine capital to 
        investment firms who invest in established firms, the SBA needs 
        to strongly consider new equity-focused programs that would 
        support non-profit venture development and venture capital 
        funds that are looking to bring substantial co-investment to 
        new innovative firms that have the potential to create 
        significant wealth and jobs.

    The Economic Development Administration needs more regional 
        strategic planning and high-growth innovation-focused resources 
        to support technical assistance programs run by non-profit 
        regional intermediaries who are focused on innovation-based, 
        high growth firms and industries.

    The absence of robust State, foundation and private-sector 
        partnerships is preventing and limiting the Federal 
        Government's ability to accelerate the creation of new 
        technology-based companies and jobs. Many States have made 
        substantial investments in organizations who are perfectly 
        suited to partner with the Federal Government agencies and 
        programs yet there exists no strategic, tactical and robust 
        collaboration amongst the practitioners and experts in the 
        States that focus on assisting innovative, principally 
        technology-based, firms who have the potential to dramatically 
        grow regional and ultimately our national economy.

    In order to address the shortfalls of the Federal programming 
outlined above, Congress should create a $2B, 4-year initiative from 
currently available funds from the original ARRA bill in order to 
create the Federal Innovation, Commercialization and Job Creation 
Network program where existing proven non-profit organizations and/or 
institutions who have been able to demonstrate significant 
commercialization and economic outcomes could serve as individual 
Centers within the network as well as to collaborate with parts of the 
country that do not have established and proven partners already in 
place to create new Centers. Each of these organizations would be 
required to provide matching non-Federal resources from local, State, 
or regional public and/or private sector partners. Key attributes of 
the new approach would include:

    Federal resources would be immediately matched and aligned 
        to parties that have a similar vision and prioritization on 
        commercializing disruptive innovation and supporting high-
        potential innovators and entrepreneurial firms.

    The program will have a special focus on the 
        commercialization of innovation which has the promise to create 
        a small number of jobs immediately but also has the potential 
        to create at least 25 new jobs within 36 months.

    The program would be additive and complimentary to the 
        support and assistance currently provided by NIH, SBIR, SBDC, 
        and SBA programs.

    The program would provide a logic framework to build 
        partnerships to support significant economic outcomes including 
        increased private sector investment, revenue and employment 
        growth in the next 4 years.

    We believe that there are at least 40 non-profit 
        organizations in the United States that could meet the 
        requirements to become a federally supported Center. Each 
        partnering non-profit would have to be able to demonstrate a 
        history of delivering significant economic outcomes (job 
        creation, capital attraction, increased revenues) from its work 
        preceding Federal support.

    Regions of States that do not have existing non-profit 
        organizations or collaborations that could qualify as a Center 
        would be encouraged to build new strategic plans and 
        collaborations that would have the ability to realize the goals 
        of the program. Once these initiatives are formed and non-
        Federal resources are secured, the Federal Government could 
        consider supporting these organizations.

    Mr. Chairman, I believe that the economic outcome of such a program 
outlined above would make a dramatic impact on all regions of the 
country--urban, suburban and rural. By partnering with established, 
proven organizations that can bring significant leverage to the table, 
anticipated benefits and economic outcomes would include:

    Leveraging existing infrastructure and expertise.

    Accelerating technology commercialization of Federal, 
        industrial and community-based R&D.

    Dramatically strengthen technical resources for high-
        potential technology entrepreneurs.

    Create innovation and commercialization infrastructure in 
        areas that currently are underserved.

    Increase the United States Global competitiveness in high 
        growth entrepreneurial innovations.

    Increased private sector investment of at least $4B from 
        private sector investors across the globe within 4 years in 
        firms created and/or supported from the Federal Program.

    Creation of at least 260,000 new jobs within 6 years at 
        1.25 the current national average annual wage. An additional 
        1,000,000 U.S. jobs to be created as a result of the work of 
        the work of the network by 2020.

    I greatly appreciate the opportunity to present to this Committee. 
I look forward to the opportunity to continuing the dialog on how we 
can dramatically increase programs that support commercialization and 
entrepreneurial progress so that we can create an increasing number of 
globally competitive and wealth-creating jobs in the United States.
                                 ______
                                 
                  PREPARED STATEMENT OF RICK L. WEDDLE
            President and CEO of The Research Triangle Park,
  and first Chairman of the International Economic Development Council
                            December 9, 2009
    Chairman Brown, Ranking Member DeMint and Members of the Committee, 
thank you for having me here today to testify on behalf of economic 
development professionals throughout the country.
    My name is Rick Weddle and I serve as President and CEO of The 
Research Triangle Park (RTP), the nation's oldest and largest research 
park. As the home of more than 170 companies involved in cutting-edge 
research and development in a variety of industry sectors, RTP is 
probably one of the oldest and largest-scale examples of how public and 
private policy can have a lasting impact on job creation and creating 
long-term economic competitiveness.
    I am also speaking as an economic development practitioner with 
over 30 years' experience. During my tenure, I have worked with regions 
and communities in five States to help reinvent, reposition and 
redirect themselves. These activities have cumulatively resulted in the 
creation of more than 26,000 jobs with a total payroll of $1 billion.
    Finally, as the first Chairman of the International Economic 
Development Council (IEDC), my comments today represent the viewpoints 
of the world's largest organization serving the economic development 
profession with more than 4,600 members. The diverse membership of IEDC 
is dedicated to creating more high-quality jobs, developing more 
vibrant communities, and generally improving the quality of life in 
their regions.
    I am here today to share with you my thoughts and the learning of 
the economic development community on how to create jobs and 
reinvigorate our struggling economy. I have organized my testimony 
around three questions that should be considered as we develop new 
policy that aims to create jobs and rebuild national competitiveness.
What have we learned from the Recovery Act that can help inform future 
        decisions?
    In February 2009, Congress passed the American Recovery & 
Reinvestment Act, which provided $787 billion dollars to tackle the 
severe recession triggered by the collapse of the financial sector and 
real estate market. The Recovery Act was designed in a rush to provide 
resources to triage the economic crisis, resulting in a package of tax 
cuts, formula-based fund transfers and direct grants and loans, most of 
which would be channeled through existing programs. The act had grand 
ambitions to simultaneously meet five goals: 1) to create and retain 
jobs; 2) to rebuild infrastructure; 3) to invest in science, health and 
technology; 4) to assist those most hurt by the recession; and 5) to 
stabilize State and local budgets to maintain service delivery. 
Overall, the main drive of the stimulus is to boost demand as the 
catalyst for economic renewal and job creation.
    Given the actual brevity of the Recovery Act's implementation thus 
far, any identification of lessons learned can only be tentative at 
this point. I have broken the lessons into what is generating positive 
results for economic development and where the challenges remain on the 
ground.
    On the positive side, Recovery Act investments so seem to be 
achieving the following economic development objectives.

    They are reigniting stalled projects of strategic 
        importance.

    In some communities, Recovery Act investments have jumpstarted 
development projects that had been stalled due to lack of credit in the 
private sector and/or insufficient public funds. In Dayton, Ohio, for 
example, Community Development Block Grant stimulus dollars coupled 
with waste water infrastructure dollars combined on the ground to 
restart a multi-use development district, entitled Tech Town, which had 
been put on hold due to the lack of public funds. Restarting this 
project not only has the capacity to generate short-term jobs through 
construction, but also represents a long-term investment in the 
economic transformation of Dayton, which has long been struggling to 
rebuild after the decline of manufacturing. I will return to this 
example later in my testimony.

    They are allowing communities to maintain relevant projects 
        that otherwise might have been cut.

    In some cases, Recovery Act dollars have allowed communities to 
maintain relevant projects and programs that would have been cut in the 
absence of these investments. For example, Richmond, California, used 
Recovery Act money to maintain and expand a successful job training 
program aimed at at-risk young adults that was slated for closure in 
response to budget cuts.

    They have enabled business expansion through strategic 
        infrastructure investments.

    Whereas investing in infrastructure upgrades creates short-term 
jobs, strategically targeting those investments to enable businesses to 
expand enhances the overall economic development impact of that 
investment. For example, local economic development professionals in 
Youngstown, Ohio, lobbied the State to invest some of its Recovery Act 
transportation allocations to relocate a national rail line which 
divided the property of V&M Star Steel. By moving the rail line, the 
company was then able to double its operations and create 400 permanent 
jobs. Notably, however, for this to occur required State-local 
coordination and engagement, which can be a trouble spot.

    They have incented regional coordination.

    The lure of Recovery Act dollars has encouraged communities to 
establish regional alliances and coalitions to tackle big, commonly 
shared problems. The Chicago Metropolitan Planning Council spearheaded 
a coalition of non-profit business and civic groups, real estate 
developers and the metro mayors' caucus to create a 17-town region in 
Southern Chicago to align resources, including Recovery Act dollars, to 
collectively rebuild. Similar regional initiatives are visible in the 
San Francisco Bay area, where local political and transportation 
leaders have come together to bid for Recovery Act high-speed rail 
funding.

    They have leveraged resources to increase the size and 
        scope of investments.

    Recovery Act dollars also have served to attract additional public, 
private and community resources. For example, the California Emerging 
Technology Fund committed to use a portion of its seed funds to match 
and leverage Recovery Act funds to meet broadband, digital literacy and 
other goals.

    They have increased the dollars available for basic 
        research, a building block of competitiveness in an innovation-
        based economy.

    Basic research is the primary source of the new knowledge that 
ultimately drives the innovation process. Economists estimate that up 
to half of U.S. economic growth over the past five decades is due to 
advances in technology. A study of recent U.S. patents found that 
nearly two-thirds of the papers cited in these patents were published 
by researchers at organizations supported by Federal funds, and these 
linkages have been growing at an accelerating pace. The major Federal 
R&D funding agencies all received significant funding through the 
Recovery Act, the first real increase in Federal research funding in 5 
years.

    They have invested in long-term transformation and economic 
        diversification.

    The recession exposed many weakness in the U.S. economy, such as 
the severe problems in the automotive sector, revealing the need for 
investments in long-term economic transformation. Some Recovery Act 
dollars are enabling this level of transformation. One such example is 
the Economic Development Administration's allocation of Recovery Act 
dollars to the University of Arizona to support the startup phase of 
its Bio-Science Park, which will be located in a distressed urban 
neighborhood. This is a critical investment in the innovation 
infrastructure this country needs to remain competitive in the short- 
and long-term. I will return to this case later in my testimony.

    Where the Recovery Act has added flexibility to existing 
        programs, it has added value.

    When the Recovery Act has added greater flexibility to existing 
programs, we have seen positive results. The Richland, California, 
program discussed earlier was funded by the Workforce Investment Act's 
Youth Activities fund, whose spending criteria had been broadened by 
Recovery Act legislation to include 18- to 24-year-olds in youth 
activities. Equally, the new SBA provisions have been working well, 
allowing some financing to enter the market.

    They have resulted in job creation and retention and will 
        continue to do so.

    While there have been a lot of questions recently about the 
reliability of the job creation figures surrounding Recovery Act 
investments, it is clear that when awards have been made, jobs have 
been created and retained. Some new programs, such as Recovery Zone 
Bonds, have proven to be quite effective and have received public and 
private sector praise. Moreover, the Recovery Act's stabilization of 
State and local budgets has helped retain a significant number of jobs 
that otherwise may have been lost. The bigger issue is public 
perception, which I will return to when we look at the Recovery Act's 
challenges.
    On the same day as President Obama's Jobs Summit, the International 
Economic Development Council (the association representing the economic 
development community), RTP and DCI International issued a survey to 
over 4,000 economic development professionals across the country to 
find out if Recovery Act dollars had created jobs in their regions. A 
10-percent response rate, representing over 400 communities nationwide, 
returned the following results: 34 percent noted that jobs were created 
in their region from the Recovery Act, 31 percent responded no jobs 
have resulted from Recovery Act dollars, and 25 percent noted that job 
creation has not yet been determined.
    While the Recovery Act has positive lessons to offer, it also faces 
challenges and limitations. Moving forward, these lessons need to be 
considered if the government is to create jobs and strengthen the 
economy.

    There are significant misperceptions about the Recovery 
        Act.

    Information gaps about what the Recovery Act is designed to do, 
when the money will be available, how much money will be available and 
what it can and cannot do abound, resulting in significant 
misperceptions by the public. The bulk of the Recovery Act is not 
designed to create jobs, but to stabilize the economy. The dollars 
available to create jobs are to be disbursed over a 2-year period, so 
it functions, in effect, as a slow trickle of funds--as opposed to a 
great blast, which is what the public was expecting. In addition, some 
States have not drawn down all the available funding, delaying that 
potential impact and leading to further misperceptions about the 
Recovery Act's effectiveness. Finally, some of the newer programs, such 
as health information technology, were never mandated to be disbursed 
earlier, but were given time to enable the programs to develop. Given 
the complexity of the program, insufficient time has been devoted to 
educating the public as to its potential and its limitations.

    Speed has been emphasized at a high cost.

    While speed has not always been achieved, speed is still used as an 
indicator of success, which may have consequently prioritized deadlines 
over transparency, strategy and new business development. To meet the 
need for speed, communities may put forth projects which are shovel-
ready, but not part of a larger plan that targets longer-term 
sustainable growth. While such projects may create short-term jobs, 
one-off, disconnected investments will not have the same transformative 
impact on a community as projects that strategically align grants, 
strategy and resources toward a bigger goal. Finally, the need for 
speed meant that contracts were allocated to existing, often larger 
companies, thus missing an opportunity to invest in startups, minority- 
and female-owned, and other very small businesses that may be emerging 
as some currently unemployed individuals look to create their own 
enterprises.

    An overall lack of public alignment has hindered 
        implementation.

    A lack of administrative capacity at the Federal, State and local 
levels has created challenges to the implementation of the Recovery 
Act. At the Federal level, many agencies found themselves with 
significantly more money than they had administered before, plus the 
need to create new regulations, all in a very tight timeframe with 
insufficient staff. On State and municipal levels, budget deficits 
often left insufficient staffing resources available to apply for or 
monitor Recovery Act funds, which have more stringent reporting 
requirements than regular Federal dollars. Unfortunately, the States 
and localities already struggling with budget shortfalls before the 
Recovery Act passed were also the least positioned to put together a 
strategic approach to accessing and using stimulus dollars.

    The definition of distress can be too inflexible.

    When the Recovery Act was passed, economic conditions were 
different than they are today. For example, a number of States--such as 
West Virginia, Wisconsin and Oklahoma--experienced their worst 
unemployment declines since the passage of the Recovery Act. 
Unfortunately, the act's criteria for some programs, such as Recovery 
Zone Economic Development Bonds, relied on 2007-2008 data for 
determining allocation levels; thus, those States that were hardest hit 
afterward have access to fewer resources, even though they have equal 
challenges today as those that were hit by the recession earlier.

    Federal funding silos have been maintained.

    Most of the Recovery Act investments were channeled through 
existing agencies and existing programs, often at different levels of 
governments, making it difficult to integrate the funding streams at 
the local level into strategic efforts that can revitalize distressed 
places and nurture significant job creation. While some communities and 
regions did manage to access multiple funding sources, different and 
often more complicated reporting requirements adds complexity and 
significant capacity challenges to measuring the outcomes. Moreover, 
since States are major recipients and allocators of the funding, it 
keeps them in charge, and their decisions may not be in aligned with 
local needs.

    Insufficient funding has been directed to economic 
        development organizations.

    Despite the focus on job creation, most Recovery Act dollars were 
not allocated to economic development organizations, which work daily 
in the trenches to create and retain jobs. Economic development is 
often countercyclical, with States and localities able to allocate more 
money to it during prosperous times and forced to make cuts during 
economic downturns. Yet it is precisely in a challenging economy when 
economic development investments are most required. It is tantamount to 
cutting back the police force while crime is rising.

    Reporting requirements may deter small business engagement.

    The Recovery Act's heavy focus on reporting both challenges public 
sector capacity and influences the ability of the private sector to use 
funds. For example, the reporting requirements apply even to 
contractors receiving under $25,000 of the total contract value. 
Because the reporting requirements call for staff time to oversee 
compliance, smaller contractors seem hesitant to bid on stimulus-funded 
projects. This is particularly troublesome, as small businesses are 
ripe targets for job creation.

    Measuring job creation is complicated and unreliable.

    In public perception, the success of the Recovery Act is measured 
by its ability to create jobs and to do so quickly. Yet not only is it 
extremely difficult to measure job creation from public investment 
generally, its real impact can only be measured over time, often 
significant time.

What's working around the country that is creating jobs and 
        transforming the economy?

    Please allow me to start with the story of The Research Triangle 
Park. Fifty years ago, the leaders of North Carolina recognized that 
our State and the Triangle region, in particular, were not poised to be 
at the forefront of the post-war, science and technology-based era. As 
such, they made a big bet and established a place where educators, 
researchers, and businesses could come together as collaborative 
partners to change the economic composition of the region and State, 
thereby increasing the opportunities for the citizens of North 
Carolina. The vision was to attract research companies from around the 
Nation to locate in a parcel of land surrounded by the State's research 
universities-the University of North Carolina at Chapel Hill, Duke 
University, and North Carolina State University. The resulting 
``Research Triangle Park'' would be a place where companies could take 
advantage of the region's intellectual assets and that provided a ready 
physical infrastructure for corporate R&D activities.
    In the fifty years since, the mix of long-term investment in 
education and a commitment to building a conducive environment for 
innovation and technology-based economic development has paid off. RTP 
has grown to be a globally known center of innovation. Currently, there 
are more than 170 companies and research and development facilities in 
RTP, with more than 42,000 employees with combined annual salaries of 
over $2.7 billion. The average salary in the Park is $56,000 annually, 
nearly 45 percent more than regional and national averages. Companies 
represented in RTP include IBM, GlaxoSmithKline, Cisco Systems, BASF 
and Credit Suisse. In addition, a number of U.S. Federal agencies have 
a presence in the Park, including the U.S. Environmental Protection 
Agency, the National Institute of Environmental Health Sciences, and 
the U.S. Forestry Service.
    While RTP is an essential model for understanding what works out in 
the field, there are other equally important models that we can learn 
from. When asked in the survey and through other feedback mechanisms 
which programs they have seen have had the most impact to date, 
economic development practitioners listed funding for infrastructure 
projects, a focus on small business and fostering entrepreneurship, and 
freeing financing and extending credit as the most effective programs. 
These results remind us that private companies create jobs. Thus, the 
quickest, most effective way to create jobs is to provide companies 
with the capital they need to find new markets, expand production and 
ultimately hire new staff. Below are several different examples of how 
jobs were created at private companies with assistance or funding from 
economic development groups or government.
    Our first set of cases centers on the importance of non-profit 
financial intermediaries for extending both debt and equity credit to 
enable small business expansion.
    Kentucky ``ezone'' helps create jobs by providing funding and 
support to entrepreneurs: From July 2008 through June 2009, the 
Northern Kentucky ezone (a division of Northern Kentucky Tri-County 
Economic Development Corporation) created 189 jobs through its work 
with entrepreneurs in the region. The ezone assisted 29 new high-tech 
companies in Northern Kentucky and assisted in generating $14 million 
in investment for client companies from venture and angel funds. 
Additionally, $2.1 million in investments in ezone client companies 
came from Kentucky Science and Technology Corporation and other public 
funds.
    SBA loan program helps manufacturing company create/retain 50 jobs: 
San Diego-based CDC Small Business Finance is an SBA 504 lender. In 
2009, it helped Campbell Certified, Inc., a structural/architectural 
steel fabrication company in San Diego County, obtain an SBA 504 loan 
that enabled it to buy a $1.7 million facility, expand operations, and 
create/ retain a combined 50 jobs.
    The second set of useful practices focuses on effective measures 
for helping small businesses export and integrate into the global 
economy, which enables them to enter new markets, expand and grow jobs.
    Attracting foreign direct investment and helping export-ready 
companies: Economic developers in Portland, Ore., are helping clean 
tech and green building companies access emerging foreign markets by 
launching regular communication with State foreign representatives to 
develop specific company targets abroad and for investment in Portland. 
They also launched an International Roadshow to bring all of the 
foreign representatives of the State back to Portland for a week to 
meet with qualified export-ready companies from the city, and help them 
find partners in these global markets that will generate significant 
export sales and increase jobs for Portland companies.
    Loan guarantee enables the creation of new jobs at Illinois 
company: In June 2009, the Export-Import Bank of the United States 
announced that it would provide a long-term loan guarantee to back 
American Plastics Technologies Inc.'s export sale of equipment to make 
intravenous solutions, injectable medicines and bottled water to 
Nigeria. The loan guarantee supports the creation of 40 jobs. Sixteen 
U.S. suppliers from across the country, eight of them small businesses, 
are participants in the APT export. (While this is not a local example, 
it illustrates the value of loan guarantees to expand export markets.)
    The next set of cases highlights entrepreneurship, innovation and 
commercialization. These are all activities that expand regional 
economies by creating new jobs, new companies, and in some cases new 
industries. Economic developers foster this growth by connecting 
entrepreneurs, technologies and fledgling companies with funding and 
resources that can help bring new products to market.
    Oklahoma non-profit helps expand the technology-based economy of 
the State: i2E, Inc. provides Oklahoma companies with comprehensive 
commercialization services, proof-of-concept funding and seed/startup 
funding. Over its 10-year existence, it has assisted 425 
commercialization clients and helped clients to attract $345 million of 
private capital. In a recent economic impact survey, responding clients 
reported creating 998 jobs at an annual average wage almost double the 
State average.
    Business incubator provides comprehensive services to emerging 
science companies: The San Jose BioCenter gives emerging science and 
technology companies access to world-class facilities and support 
typically only available to larger firms. Since opening in August 2004, 
the incubator has assisted 60 clients and graduated 14 companies. Six 
of the 14 BioCenter graduates have purchased or leased entire buildings 
and now employ between 30 and 400 people in the Bay Area.
    Program fosters business startups in rural Iowa: MyEntreNet uses 
web technology to provide online networking and resources to 
entrepreneurs who are otherwise isolated by distance. Through the 
service, they connect with other entrepreneurs, technical support, 
training and information on obtaining funding. In 2008, 321 jobs were 
created with the help of MyEntreNet and related business incubation 
services.
    It also makes sense to target business assistance to strengthen 
core industries that create good jobs. Targeting manufacturing as well 
as energy, health and others not only creates jobs quickly, but does so 
in a way that builds competitive advantage for longer-term economic 
gain.
    Richmond, Va., business retention program identifies and assists 
expanding businesses: From July 2008 to June 2009, the Greater Richmond 
Partnership's business retention program was able to find and build on 
good news in the business community. Outreach efforts helped to 
identify 111 expanding businesses and 167 firms with plans to add staff 
in the coming 12-month period. These firms intend to create more than 
1,600 new jobs and make capital investments in excess of $88 million. 
The program is working with these businesses to ensure that they have 
access to the resources and information they need to realize their 
plans.
    Economic developers help wind-power company create manufacturing 
jobs: Mariah Power, a Reno, Nev.-based company, decided to manufacture 
its turbines in Manistee, Mich., due to a unique partnership with a 
local manufacturer, a highly skilled workforce, and extensive 
assistance and funding from local and State economic development 
groups. A former auto parts manufacturing facility run by MasTech 
Manufacturing was retrofitted to produce the turbines after nearly 
closing operations due to the crisis in the automotive industry. A 
$400,000 Community Development Block Grant, provided by Manistee County 
in partnership with the State, enabled the upgrade of equipment needed 
to produce the turbines, and the company also received venture 
financing. The company has created 60 manufacturing jobs in Manistee 
over the past year and plans to add another 120 jobs in 2010.
    Economic development groups in Michigan collaborate to grow green 
jobs: In Saginaw County, Mich., Saginaw Future, Inc., Michigan Economic 
Development Corporation, and the Saginaw County Chamber of Commerce 
collaborated to facilitate a $1 billion investment from Hemlock 
Semiconductor (which makes polycrystalline silicon, a key component of 
solar panel construction), in order to help establish a new industry 
cluster, create jobs and spur an economic resurgence. The groups worked 
together to address company concerns, provide tax credits, job training 
assistance and other incentives. Saginaw Future and its partners also 
are investing in workforce development and research and development 
initiatives.
    In addition to assisting businesses, another valuable way to create 
jobs quickly is through real estate investments, particularly in large, 
strategically designed projects. These create short-term construction 
jobs but also boost long-term competitiveness and economic 
diversification, leading to permanent, high-wage jobs. The focus here 
should be on commercial property, another market that is in decline, 
and innovation infrastructure, to enable long-term economic 
revitalization and competitiveness.
    Redevelopment of a former auto manufacturing site for mixed-uses 
and high-tech companies continues in Dayton: Tech Town is a 30-acre, 
mixed-use district under development on a former GM manufacturing site. 
Located close to Wright Patterson Air Force Base and within a 
Historically Underutilized Business (HUB) Zone, the goal is for the 
district to become a place where business, academia and government work 
together strategically to take technologies developed at Wright-Patt 
and other regional R&D facilities and apply them to commercial uses. 
Stimulus CDBG funds are helping keep the project moving, which has the 
goal of diversifying and strengthening the region's economy.
    Tech park construction jumpstarted to foster the growth of 
companies related to the University of Arizona-Tucson: The University 
of Arizona-Tucson received $4.7 million grant in Economic Development 
Administration stimulus funds for phase-one infrastructure improvements 
at the Arizona Bioscience Park. The biosciences facility is designed to 
be part of a larger, mixed-used development that includes a hotel and 
conference center, retail and residential development. It also is 
intended, in conjunction with the university's existing Science and 
Technology Park and business incubator, to support the growth of high-
growth, high-tech companies in the region based on university assets. 
Funding was awarded in late August; construction is expected to begin 
soon.
    Cleveland Flats East Bank project moves forward despite credit 
woes: Cleveland Flats, designed to be a model sustainable, walkable, 
mixed-use community on former brownfields sites, has gained new life 
with new sources of funding, including a $30 million HUD 108 loan and 
$25 million in Recovery Zone Bonds for infrastructure. The Recovery 
Zone infrastructure funding allows tax increment financing revenues to 
be converted from infrastructure to direct project subsidy and a 
repayment source for the HUD 108 loan. With private financing scarce 
and expensive, this creative financing covers the project gap so it can 
proceed.

What new thinking should Congress consider when crafting a new jobs 
        package?

    Let me share some suggestions for short-term job creation. I will 
first take a few moments to discuss some of the key principles that I 
believe should guide our thoughts as next steps and additional programs 
are identified. These are:

    Build on and use what we have in innovative ways

    Provide resources to those who are the most agile and 
        flexible

    Further support R&D capacity--both basic and industry-led

    Prioritize action--in regard to short-term impact, but also 
        in terms of the policy's ability to nurture innovation over the 
        long-term

    Focus on changing private-sector behavior

    With these principles as guidelines, I would like to summarize some 
policy priorities and strategies to achieve them.

    Incent the hiring of Americans now.

    Globalization is a reality which has benefited many U.S. companies, 
yet the off-shoring of U.S. jobs is a gargantuan obstacle to economic 
development efforts. As we move forward, we need to place a direct 
emphasis on hiring and retaining American workers. The new green 
economy promises manufacturing jobs for renewable energy machinery such 
as wind turbines and solar panels. We need to ensure that these 
manufacturing jobs are here in the United States, and not in China or 
elsewhere. Any job creation package should encourage companies to hire 
American workers, a goal which can be accomplished through a 
combination of incentives and a review of U.S. trade relationships.

    There are several tools and strategies we could use to achieve this 
goal.

    First, we can offer incentives directly to companies if 
        they are willing to bring work from an offshore location to a 
        U.S. location marked by high unemployment. According to the 
        Information and Technology Innovation Foundation (ITIF), which 
        issued this idea, a forgivable loan (it becomes a grant if the 
        company creates and retains the jobs), administered by the EDA, 
        would be a particularly efficient method not only for creating 
        jobs, but for doing so in areas where the need is greatest.

    Second, we can evolve the current Invest in America 
        program, housed in the Department of Commerce, into an 
        internationally competitive marketing arm of the U.S. 
        Government, similar to the agencies found in most of the 
        nations we compete with globally for foreign direct investment 
        (FDI). This initiative would require a $50 million initial 
        investment, complemented by another $50 million that could be 
        made available as matching funds to States and regions 
        specifically for international marketing purposes to attract 
        FDI.

    Third, evaluate and align trade and exchange rate policy 
        with job creation goals. Many trade and exchange rate policies 
        seem to have been working against our national job creation 
        goals. We need to think about whether or not we should: keep 
        defending the dollar; more stringently enforce trade 
        regulations and intellectual property protection; and reexamine 
        some of our bilateral trade relationships to ensure that they 
        support job creation, rather than hinder it. Specifically, we 
        should ensure that we are not subsidizing competition by 
        establishing lucrative trade agreements with countries that 
        lack parity in terms of environmental and worker protections. 
        We cannot demand that every country we trade with have the 
        exact same labor and environmental laws that we do, but trade 
        agreements should be made with the cognizance that the absence 
        of such laws in other countries substantially lowers the cost 
        of business without upholding the standards we as a nation 
        believe are essential.

    Target and reach small businesses and entrepreneurs.

    Federal policy also needs to more fully recognize the importance of 
entrepreneurs and small business as job creators. Businesses of all 
sizes are still facing issues with access to capital and means to 
finance new deals. A small firm that receives an influx of cash will be 
more likely to hire additional workers to get the job done than a 
larger firm with greater existing capacity. Thus, getting resources to 
small businesses and emerging entrepreneurs needs to be a government 
priority. Finding ways to make it easier for small businesses, 
including very small businesses, to access financing, contracts, export 
markets and other resources for growth is the single most useful tactic 
the government can adopt to create jobs quickly.

    There are many approaches we can take to achieve this goal.

    First, we should emphasize non-traditional financing 
        entities--such as certified development corporations, community 
        development financial institutions and revolving loan funds--
        instead of relying on banks to provide working capital for 
        small businesses. One way to support non-traditional financial 
        institutions is by allowing them to offer SBA 7(a) programs. 
        Another effective strategy is to extend the New Markets Tax 
        Credits (NMTC) through 2014 with annual adjustments for 
        inflation, and increase funding to existing programs that are 
        already working in this area, such as SBA 7(a) and 504 
        programs.

    Second, issue Federal tax credits to stimulate seed and 
        venture investments to support entrepreneurs and small 
        companies. Quick infusions of capital can also help to create 
        jobs quickly.

    Third, build on successes that are moving capital into the 
        private sector. In particular, the reduction/elimination of 
        fees on the 504 and 7(a) loan programs has been very successful 
        at bringing more lenders in the program and getting working 
        capital into the hands of small businesses. In addition, 
        Recovery Zone Facility Bonds have also worked to help private 
        companies access financing.

    Include counts of early stage and startup companies in job 
        creation measures. This expands our understanding of how and 
        where jobs are being created in the economy, and may also allow 
        us to identify emerging industries.

    Provide additional funding at all levels of government--
        local, State and Federal--specifically to help small businesses 
        export abroad.

    Accelerate innovation through R&D and commercialization.

    There is no doubt that the Federal Government's investments in 
research and development (R&D) are a critical tool for stimulating 
innovation and building long-term U.S. competitiveness. To create jobs 
more quickly, we need to find ways to target and accelerate innovation 
by encouraging more R&D and commercialization. There are multiple ways 
to achieve this goal.

    Invest in innovation infrastructure such as research parks, 
        incubators and others means, as they marry short-term job 
        creation goals with the need to build strong regional 
        innovation eco-systems. One idea is to create a direct loan 
        program or loan guarantee program to invest in such 
        infrastructure.

    Spur partnerships between universities and the private 
        sector by establishing Federal research grants. Place 
        incentives in current agency programs for public-private 
        innovation partnerships.

    Offer a bonus R&D tax credit in 2010 and 2011 which 
        companies can choose to take against their non-corporate 
        income. This recommendation, also put forth by ITIF, would help 
        companies maintain their research during challenging economic 
        times, allowing them to retain and possibly grow science jobs 
        while investing in the company's long-term competitiveness.

    Another ITIF recommendation that deserves consideration is 
        to allow information technology investments to be expensed in 
        2010. This would help not only to boost a company's 
        competitiveness through productivity gains, but also enable 
        them to buy safer, more energy-efficient equipment.

    Finally, finding new ways to work with universities, 
        Federal labs, hospitals, the SBIR/STTR program and large 
        companies (with patents they are not using) to accelerate 
        commercialization is a critical area where new thinking and the 
        identification of best practice models is particularly 
        imperative.

    Provide support for competitive businesses and industries.

    We need bold new thinking on how to create jobs in a way that also 
supports our long-term competitiveness, and that means ensuring that 
some investment is directed to keeping critical industries strong and 
supporting high-growth industries and companies. There are several 
tools and strategies to accomplish this.

    Harness existing Federal infrastructure such as the EDA 
        University program or the Manufacturing Extension Partnership 
        (MEP) networks to reach out to competitive, innovative 
        companies and help them weather the storm, then expand. These 
        programs work locally with companies and provide an important 
        link between Federal goals and the private sector.

    Increase funding for the MEP. Encourage MEP to intensify 
        its focus on supporting sustainability initiatives and pulling 
        innovative technologies from universities, Federal 
        laboratories, and other research institutions for adoption by 
        manufacturing firms.

    The Federal Government might consider providing additional 
        resources to State programs to support fast-growth, innovative 
        companies, as ITIF also recommends.

    Allow flexibility with Workforce Investment Act (WIA) 
        funding awarded to States to support responsiveness to regional 
        and State needs, especially for incumbent training. This 
        strengthens the competitiveness of existing businesses and 
        allows them to retain critical jobs. Part of a jobs bill needs 
        to include methods to retain existing jobs as well.

    The Federal Government should make a concerted effort to 
        find new ways of supporting and rebuilding our manufacturing 
        industry. In our December 3 survey of the economic development 
        community, manufacturing was identified by the highest number 
        of respondents (39 percent) as the industry that has been 
        hardest hit by the economic crisis.

    Work more aggressively with the economic development 
        community and more fully engage us in the jobs dialog and as 
        funding recipients. This group of dedicated professionals, of 
        which I am proud to be a part, works daily on the front line in 
        their States, regions and communities to create and retain 
        jobs, build companies, and develop innovative eco-systems that 
        keep regional economies running. They know what potential 
        projects could benefit most from an infusion of cash, which 
        company is set to grow and what infrastructure would have the 
        most strategic economic impact. They are first responders to 
        the economic crisis and need to be a more integral component of 
        any jobs bill then they have been in the past.

    Develop strategic principles for the allocation of 
        infrastructure dollars that directly support job creation in 
        competitive and emerging industries, and support local economic 
        transformation.

    Include issues of flexibility, capacity and speed in the 
        design of any short-term job creation policy.

    Any jobs bill emerging from Congress also needs to address some of 
the limitations in the first Recovery Act. In particular, the following 
strategies will offer improvements.

    Set realistic expectations for any jobs package and ensure 
        they are understood by the public. Public confusion and 
        discontent with the Recovery Act is due in part to unrealistic 
        expectations as to what it can really accomplish.

    Build greater flexibility into program design and the 
        definition of distress. Where flexibility was available, 
        Federal programs had a greater scope and impact. There may be 
        additional areas where efficiencies and flexibility can be 
        found. For example, the Federal Government can streamline or 
        waive environmental reviews of building projects if States have 
        similar or more rigorous processes.

    Work with agencies that already have a track record in 
        achieving job-related outcomes, such as the Economic 
        Development Administration and the CDFI Fund.

    Leverage funds across Federal agencies in a targeted manner 
        and consider centralizing the overall management of the program 
        to align their impact.

    Thank you for the opportunity to testify today. I would be happy to 
answer any questions the Committee may have.
                                 ______
                                 
                   SUPPLEMENTAL REPORT OF RICK WEDDLE
 Funding for Invest in America to Attract Investment, Create Jobs and 
  Stimulate Growth Industries: A Comparative Review of the Structure, 
  Funding and Program Focus of Competitor Nation Investment Promotion 
                                Agencies
Overview and Introduction
    The information compiled below is a supplemental report generated 
upon the request of Chairman Brown, following my testimony on creating 
jobs in the recession to the Senate Banking Committee's Subcommittee on 
Economic Policy on December 9, 2009. As the Committee will recall, I 
worked with the International Economic Development Council (IEDC), of 
which I am a former Chairman, to compile the analysis presented in my 
original testimony. For this document, I again called on IEDC to pull 
together this research on Foreign Direct Investment (FDI) and other 
countries' approach to it. As noted during my original testimony, the 
United States is the only developed economy without a major FDI 
attraction function. Specifically, this report addresses the following 
recommendation from my original testimony on the Federal role in 
revitalizing our economy:

        We can evolve the current Invest in America program, housed in 
        the Department of Commerce, into an internationally competitive 
        marketing arm of the U.S. Government, similar to the agencies 
        found in most of the nations we compete with globally for 
        foreign direct investment (FDI). This initiative would require 
        a $50 million initial investment, complemented by another $50 
        million that could be made available as matching funds to 
        States and regions specifically for international marketing 
        purposes to attract FDI.\1\
---------------------------------------------------------------------------
    \1\ Rick L. Weddle, In Testimony Before the Subcommittee on 
Economic Policy, December 9, 2009, 2 pm hearing: ``Weathering the 
Storm: Creating Jobs in the Recession.''

    In support of this notion of increased funding for the Invest in 
America program as a tool to attract investment, create jobs and 
stimulate growth industries, I have compiled a comparative review of 
the structure, funding and program focus of competitor nation 
investment promotion agencies to benchmark our efforts stand and frame 
---------------------------------------------------------------------------
recommendations for short-term action.

    This report is structured as follows:

  1)  Why National-Level Inward Investment Promotion? A brief overview 
        of the rationale for pro-active efforts at the national level 
        to promote inward foreign investment.

  2)  How Does the United States Compare? A data-driven argument for 
        the timing and job creation impacts of a well-funded national 
        investment promotion program.

  3)  Country Comparisons of National Investment Promotion Agencies. 
        Profiles of the national inward investment promotion agencies 
        the United Kingdom, Ireland, France, Spain, Brazil, Canada, the 
        Netherlands and Finland. For purposes of comparison, a summary 
        of the current scope of Invest in America is also included.

  4)  Conclusions/Further Recommendations. A summary of findings and 
        specific suggestions for ramping up Invest in America.
Why National-Level Inward Investment Promotion?
    Foreign investment brings outside capital & job creation, 
        drives exports, and is also linked to positive externalities 
        like knowledge transfer and competition-sparked increases in 
        the productivity of domestic businesses.

    The balanced budget requirements and persisting shortfalls 
        facing individual U.S. States may constrain their ability to 
        independently attract foreign direct investment (FDI).

    Time is of the essence in capturing the highest-value 
        outbound investment from rapidly growing emerging markets.

     According to empirical research, as markets globalize, ``the most 
        productive firms become multinationals earlier, while firms 
        that are relatively less productive enter host economies 
        later,''\2\ as international market entry becomes more 
        feasible.
---------------------------------------------------------------------------
    \2\ Silvio Contessi and Ariel Weinberger, Foreign Direct 
Investment, Productivity, and Country Growth: An Overview, Federal 
Reserve Bank of St. Louis Review, MARCH/APRIL 2009, p 74.

    More players for a finite pool of global investments 
---------------------------------------------------------------------------
        translates into more competition. According to the World Bank:

     Today's shrinking economic environment makes effective promotion 
        of foreign investment an especially competitive activity for 
        countries. The current global economic slowdown and associated 
        financial instability are expected to significantly reduce 
        flows of FDI in 2009 and beyond. The extent of FDI decline will 
        ultimately depend on the depth and duration of the economic 
        slowdown. However, companies are already reluctant to make 
        medium-term investments--many projects have been postponed or 
        even canceled, and some estimates suggest that FDI flows could 
        fall by as much as 30-40 percent in 2009.

     As the pool of FDI shrinks, there will be more competition for 
        fewer projects. The ability of [Investment Promotions 
        Intermediaries] to influence investment decisions with timely 
        and relevant country and sector information and facilitation 
        efforts will be more crucial than ever.\3\
---------------------------------------------------------------------------
    \3\ World Bank Group Advisory Services, Investment Climate, Global 
Investment Promotion Benchmarking 2009 Summary Report, P 11.
---------------------------------------------------------------------------
How Does the United States Compare?
    While in dollar values the United States remains the top 
        recipient of inward FDI flows (see Figure 1), as total global 
        flows of FDI increase and more nations compete for finite 
        investment opportunities, the United States share of overall 
        global investment has begun to shrink (see Figure 2).

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
    The United States lags behind other nations in terms of 
        growth rate of inward FDI. The five countries with the largest 
        average year over year percent increase in FDI from 2006-08 
        were the Netherlands, Brazil, Russia, Spain and Saudi Arabia. 
        The United States ranked 13th during this same period while 
        India and China ranked 6th and 9th respectively.

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
    Mergers & Acquisitions (M&A) of existing U.S. firms, assets 
        and divisions account for the vast majority (see Figure 4) of 
        incoming FDI, eclipsing Greenfield activity. However, 
        Greenfield FDI vastly outpaces M&A in terms of job creation. 
        Investment promotion to increase the amount of Greenfield FDI 
        would have strong impacts on job creation.

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
Country Comparisons of National Investment Promotion Agencies
    Below, the national inward investment promotion agencies of 8 
countries are profiled: the United Kingdom, Ireland, France, Spain, 
Brazil, Canada, the Netherlands and Finland. These countries were 
selected as they represent competitor nations for total global flows of 
FDI and/or nations with faster year on year growth rates of incoming 
FDI than the United States. Each is instructional in terms of 
approaches to investment promotion, and each reflects a stronger 
financial commitment to the effort. For purposes of comparison, I begin 
with an overview of the current scope of the Invest in America program.
Invest in America
    While in the past, the sheer size of our economy did not 
necessitate a focus on international investment promotion, in reaction 
to the pressures of globalization, the United States is starting to 
play catch-up in the race to target FDI. The Department of Commerce's 
March 2007 roll out of the Invest in America Initiative reflects this 
new drive to capture FDI through a coordinated national effort.
    The Invest in America Program is housed within the United States 
and Foreign Commercial Service (USFCS) Office of the International 
Trade Administration. At present the program has an estimated annual 
budget of under $1 Million and a direct staff of 3 full-time employees. 
Invest in America also delivers its services through Federal Government 
staff at existing international USFCS posts in target FDI source 
markets.
    In terms of investment promotion services, the office:

    Conducts investor outreach and education

    Performs Ombudsman assistance and foreign investor after-
        care when approached

    Engages with national and sub-national partners to enhance 
        the investment policy environment

    Trains USFCS staff on dealing with foreign investor 
        prospects

    At present, Invest in America is not equipped to promote the United 
States as a destination for investment on a broad scale through 
branding and public relations, an activity conducted by all the IPAs 
profiled below. Invest in America also does not perform lead generation 
or deal facilitation (such as match-making and site selection 
assistance) as these are efforts already performed by State and sub-
State entities.
    Given the rationale for pro-active national investment promotion 
efforts as outlined above, Invest in America is a solid and established 
platform from which to capture a growing percentage of global FDI flows 
and increase the number of inward Greenfield activities. The following 
profiles of other similar agencies provide guidance on the expansion of 
Invest in America to support U.S. competitiveness in the long-term and 
job creation and economic revitalization in the short-term.
United Kingdom
    The United Kingdom's national-level investment promotion activities 
are housed within U.K. Trade & Investment (UKTI). UKTI's parent 
agencies are the Foreign & Common Wealth Office (FCO) and the 
Department of Business, Innovation and Skills.\4\ Within the UKTI, 
Investment Promotion activities are led by the Directorate of 
Investment, which spearheads efforts to market the U.K. economy 
internationally and partners with Regional Development Agencies (RDAs) 
to supplement their FDI attraction, retention and expansion efforts. 
The aim of UKTI's inward investment promotion efforts is to help the 
United Kingdom ``benefit from different forms of foreign direct 
investment not just in terms of the creation of jobs, and the injection 
of capital, but also through the competition and `knowledge spillover' 
effects that inward investors have on the rest of the economy.''\5\
---------------------------------------------------------------------------
    \4\ The parent agencies have gone through a series of changes: 
through November 2007, UKTI fell under the Trade and Industry Committee 
and through June 2009 the Department for Business, Enterprise and 
Regulatory Reform.
    \5\ UK House of Commons Trade and Industry Committee, UKTI's 5-year 
strategy: Government Response to the Committee's Sixth Report of 
Session 2006-07, July 2007, p. 3.
---------------------------------------------------------------------------
    UKTI's total operating budget per annum is listed as 
256 million ($416 million). A portion for programming 
(89 million/$144.7 million) is allocated directly from 
Parliament, the remaining funds are transfers for administration and 
staffing from the parent agencies, the predominant portion 
135 million pounds (219 million USD)--comes from the FCO 
and includes the London HQ budget. For the current budget year, 
15.4 million ($25 million) of UKTI's programming budget 
went directly toward inward investment efforts, including marketing the 
United Kingdom abroad, production of publicity materials and 
advertising. In addition, 17.2 million pounds ($27.9 million) flowed to 
FDI attraction in the form of assistance grants to RDAs.
    UKTI has 2,500 staff and advisers including those overseas, based 
out of embassies, high commissions, consulates and tradeoffices. To 
agency aims to merge delivery of both trade and investment promotion 
services across its overseas operations and maintains staff in 150 
foreign offices including 22 in the Asia-Pacific region, 12 in Canada 
and the United States, 17 across Europe, 2 in Latin America and the 
Caribbean, 1 in the Middle East and 1 in Sub-Saharan Africa.
    The Inward Investment Services provided through the Directorate of 
Investment include:\6\
---------------------------------------------------------------------------
    \6\ Source: UKTI Autumn Performance Report, December 2007, p. 13-
14.

    Promoting the United Kingdom's assets to prospective 
        investors and using regional and local analysis to advise 
        onsite selection. Recruitment efforts focus on six target 
---------------------------------------------------------------------------
        industry sectors.

    Connecting businesses to key contact networks, such as 
        industry leaders, chambers of commerce, universities and other 
        centers of research excellence.

    Facilitating collaborative technology partnerships between 
        United Kingdom and foreign businesses.

    Assisting overseas entrepreneurs to develop a U.K. 
        platform.

    Building relationships and providing after-care services to 
        key high-value investors to facilitate their continued growth/
        retention in the United Kingdom.

    Serving as a source of international investment policy and 
        regulatory expertise.
Ireland
    Industrial Development Agency (IDA) Ireland is the primary national 
entity with responsibility for the attraction and development of 
foreign investment in Ireland. In terms of structure, IDA Ireland is an 
autonomous statutory Agency which operates under guidance from the 
Ministry for Enterprise, Trade and Employment. This government ministry 
is the primary source of funds to the agency and is empowered to issue 
general policy directives and receive reports on activities. IDA 
Ireland is governed by a small Board (approx. 15 members) composed of 
private sector leaders representing the target sectors, as well as IDA 
Ireland's Executive Director and the Assistant Secretary of the 
Department of Enterprise, Trade and Employment. The Board is 
responsible for setting the broad policies of the organization and for 
overseeing its operation.
    IDA's annual budget is =186 Million ($266.7 Million), broken down 
as follows:

    =9 Million in grant assistance ($12.9 Million)

    =37 Million for administration & general expenses ($53 
        Million)

    =11 Million for programming (marketing, consulting, 
        promotions and advertising) ($15.7 Million)

    =46 Million for Industrial Building Charges ($65.9 Million)

    IDA Ireland operates 10 regional offices in Ireland and 17 offices 
outside of Ireland. These are in Boston, New York, Atlanta, Chicago, 
Mountain View, Irvine, Sao Paulo, London, Paris, Frankfurt, Mumbai, 
Moscow, Shanghai, Taipei, Sydney, Tokyo and Seoul. Worldwide, the 
agency has a staff of 260, the overwhelming predominance of which (202) 
are based in Ireland, with 33 staff in America, 11 in Europe and 14 in 
Asia.
    IDA Ireland's services are directed at prospective investor 
companies, promoting the country's suitability as a location for new 
investment or expansion projects by providing information on doing 
business in Ireland and insight on the dynamics of individual regions. 
Investment recruitment efforts focus on 5 high-value sectors (Life 
Sciences, Software and Services, International Financial Services, 
Information Communication Technologies, Cleantech) and attracting 
Research, Development & Innovation (RD&I) projects. Core functions 
include:

    Compiling and distributes detailed sector-based 
        intelligence.

    Connecting businesses to local service providers, local 
        public sector contacts and institutes of education. These can 
        include introductions to companies already operating in Ireland 
        and introductions to relevant university departments, training 
        colleges, or third part service providers such as tax 
        specialists, estate agents, banks and recruitment firms.

    Working on a continual basis with foreign investors 
        facilitated by IDA to retain and support them.

    As indicated in the budget breakdown above, IDA Ireland also has 
funds for direct assistance grants to companies locating in Ireland, to 
support capital development and job creation surrounding an investment. 
Matching grants are also available through IDA for existing foreign 
companies that are undertaking major training initiatives.
France
    The Invest in France Agency (IFA) was created in May 2001 and is 
overseen jointly by the Minister of Economy, Finance and Industry and 
the Minister for Regional Development. These parent agencies 
collaborate to define IFA's strategic priories, objectives, and 
indicators, and are responsible for determining IFA's annual budget. 
Approximately 99 percent of IFA's funding comes in the form of 
allocations of government funding through these parent agencies. The 
remainder comes from regional partners (sub-national IP entities) to 
support their participation in prospect-development events arranged by 
IFA.
    For 2009, IFA's budget was approximately =22.2 Million ($31.8 
Million); =200,000 of this comes from transfers from regional partners. 
For 2010, an additional =5 million has been added to the agency's 
budget for a new communications campaign. IFA's budget breaks down as 
follows:

    70 percent for human resources

    20 percent for operation costs

    10 percent for communication (with this share increasing in 
        2010 to reflect the new campaign)

    Staff wise, in 2007 IFA had 60 employees at their central Paris 
office and 79 staff distributed across 21 foreign offices. Among these, 
most are stand alone offices with multiple staff, though a few are 
housed within embassies, consulates and/or commercial service posts. In 
2008, IFA's combined worldwide staff grew to 160. Of these 21 foreign 
offices, 7 are located in Europe (Benelux, Germany, Italy, Russia, 
Scandinavia, Spain, and United Kingdom), 7 in Asia (China, India, 
Japan, Korea, Singapore, and Taiwan), 2 in the Middle East (Israel and 
United Arab Emirates) and 5 in North America.
    Invest in France staff provide the following services:

    Investment facilitation through every step of the process 
        of opening operations in France. This support includes 
        information about legal regulations, analysis of eligibility 
        for public financial support, & connections with local 
        authorities and industry clusters.

    Site selection

    Ombudsman assistance

    After-care to investor companies
Spain
    Invest in Spain was created in 2005 as an independent agency housed 
within the Ministry of Industry, Tourism, and Trade to enable the 
public sector to provide a better response to the challenges posed by 
the growing integration of international markets and the resulting 
increase in competition to attract the best investment projects. Invest 
in Spain's budget for 2008 was =7.55M ($10.8M). In 2008, =7.2M 
($10.3M), or 95 percent of the agency's total budget, was supplied from 
transfers from the General State Budget. The remaining 5 percent, or 
=350,000 ($500,000), came from income generated through sponsorship and 
agreements.
    Invest in Spain has 43 designated staff in its domestic HQ in 
Madrid, its only direct office, and draws on a network of investment 
officers working in Economic and Commercial Offices in Spanish 
Embassies across the world. In addition, the agency contracts for 
representation directly with in-country investment and site selection 
consultancies in eleven target countries: Canada, the United States, 
Mexico, Brazil, France, Germany, the United Kingdom, the Netherlands, 
Sweden, Japan and India. With these two networks combined, the total 
representation of Invest in Spain spans 95 offices worldwide.
    The agency provides investment facilitation services at no charge 
directly to prospective businesses, as well as delivering after-care to 
existing foreign investors to maintain their presence and encourage 
reinvestment. In addition, Invest in Spain works with other entities 
which attract investment at the regional and local level to establish 
channels for cooperation.
    Specific functions performed include:

    Promoting Spain as a destination for investment and 
        providing information on doing business in the country

    Lead generation

    Connecting potential investors to relevant business 
        networks, chambers and other private service providers

    Providing technical support in the form of partner and 
        location searches and talent recruitment

Brazil
    Apex-Brasil is Brazil's trade and investment promotion agency. It 
took its current form in 2003, becoming an autonomous public agency 
under the Ministry of Development, Industry, and Foreign Trade to 
further promote and coordinate trade and FDI.
    For 2010, the total budget for Apex-Brasil as a whole will be R$286 
Million ($160.9 Million). According to figures released in 2008, inward 
investment promotion was allocated R$50M ($28.1M) from within the total 
Apex-Brasil budget. This was aimed at supporting 29 planned events to 
be performed in 13 target countries, along with the provision of an 
estimated 226 actions of business intelligence, such as sector studies, 
market studies, and investment opportunity studies.\7\ According to 
conversations with Apex-Brasil investment staff, this number was later 
adjusted downwards an undisclosed amount to reflect the onset of global 
recession.
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    \7\ Press Release, December 18, 2008. Apex-Brasil increases 
resources provided to investment and exports promotion in 2009. source: 
http://www.apexbrasil.com.br/portal_apex/publicacao/
engine.wsp?tmp.area=149&tmp.texto=4965.
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    Apex-Brasil employs 300 people across both its trade and investment 
promotion (IP) departments. The IP department has 17 dedicated 
employees in the headquarters in Brasilia, and shares staff members in 
Apex-Brasil's offices in Havana, Miami, Moscow, Brussels, Beijing, 
Warsaw, and Dubai, merging both trade and investment promotion 
functions from these locations. In addition, Apex-Brasil has liaisons 
in Brazilian embassies in other locations abroad.
    In terms of services, Apex-Brasil:

    Performs lead generation in target sectors, focusing on 
        ``companies and projects that offer technological innovations 
        and new business models, strengthen industrial supply chains, 
        have a direct impact on national job creation and improve the 
        volume and diversity of Brazilian exports.''\8\
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    \8\ ApexBrasil: Brasilian Trade and Investment Promotion Agency, 
2009, Who We Are, p.2.

    Provides investment facilitation and assistance with doing 
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        busienss in Brazil.

    Acts as a liaison between prospective investors and key 
        local and regulatory bodies.
    As part of Apex-Brasil's strategy to ramp up inward-FDI, in 2009 
the agency initiated a partnership with the World Bank Group to deliver 
training and technical assistance to improve the capacity of the 
Brazilian States to attract investment. In this arena, Apex-Brasil's 
focus is to decrease the fragmentation among the range Federal and 
State entities working to attract investment, with the long-term goal 
of facilitating a more integrated approach to FDI attraction.
The Netherlands
    The national inward investment promotion entity for the Netherlands 
is an operational unit of the Dutch Ministry of Economic Affairs called 
Netherlands Foreign Investment Agency (NFIA). NFIA works directly with 
businesses to attract new locations and facilitate expansion projects. 
Funding for NFIA flows through the Ministry of Economic Affairs; 
currently the annual budget is =11.5 Million ($16.5 Million). According 
to agency officials, NFIA plans to use these funds in 2010 to attract 
projects worth =500 Million ($718.6 Million) in FDI and create 2,500 
new direct jobs.
    NFIA has one national office, its headquarters in The Hague. In 
addition, NFIA has 19 local offices spread among the United Kingdom, 
Turkey, the United Arab Emirates, the United States, Japan, Korea, 
China, Taiwan, India, Singapore and Malaysia. NFIA directly employs 100 
people worldwide, including 30 in The Hague. Beyond these direct staff, 
the agency partners with embassies, consulates and other entities that 
represent the Dutch government abroad to deliver its services and 
message. NFIA also maintains a broad network of domestic partners, 
including municipalities, provinces, regional development agencies, 
ports and airports, research centers, and technical institutions.
    The agency provides the following assistance to prospective 
investors at no cost:

    Promoting the advantages of the Dutch business environment, 
        particularly as a launch pad for Europe

    Guidance on doing business in the Netherlands, including 
        labor issues, permitting, tax structures and available 
        incentives

    Site selection and match-making assistance

    Work to enhance the investment policy environment

    As organizational priorities set forth by the parent agency in 
2006,\9\ NFIA has broadened their services to:
---------------------------------------------------------------------------
    \9\ Finnish Ministry of Economic Affairs, August 2006, Action for 
Acquisition, p. 3-4.

    Include a stronger focus on encouraging expansions from 
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        existing foreign companies.

    Gaining knowledge-based activities, such as R&D.

    Establishing additional offices in emerging market 
        countries, such as India and China.
Canada
    The Invest in Canada Bureau is one of the three initiatives inside 
the Department of Foreign Affairs and International Trade (DFAIT). Its 
current incarnation dates back to 1998, when it was created to attract 
FDI to Canada. Invest in Canada now meets this goal by undertaking four 
main functions: working to improve the investment climate, marketing 
Canada as an investment location of choice, offering services to 
foreign investors and coordinating aftercare functions once companies 
have made an investment.
    The total planned budget for DFAIT in 2009-2010 is $214.6 Million 
CAD ($201.8 USD), with the largest portion ($161.3M CAD/$151.7USD) 
going toward operating Canada's international platforms. $4.5M CAD 
($4.2M USD) of the DFAIT budget is dedicated to programming for the 
Invest in Canada program; staffing and administration expenditures are 
not included in this figure, but are integrated within DFAIT's annual 
budget.
    At its headquarters, Invest in Canada has 51 employees working in 
investment promotion. DFAIT has 13 regional offices throughout the 
Nation and abroad, it has missions and posts totaling 156, with 50 
offices located in the Americans, 42 in Asia and Oceania, 34 in Europe, 
15 in the Middle East and North Africa, and 15 offices in Sub-Saharan 
Africa. These offices outside of Ottawa provide a range of DFAIT 
functions including the delivery of the investment promotion program in 
the field.
    It should be noted that the Invest in Canada Bureau also works with 
provincial/territorial governments and municipalities in foreign 
investment attraction efforts. For example, it awards funding to 
Canadian communities of up to 50 percent of the costs of improving 
their investment attraction activities.
Finland
    Invest in Finland was founded in 1992 as an independent agency 
housed within the Ministry of Employment and the Economy (MEE), which 
provides its funding. Invest in Finland has an annual budget of =3.1M 
($4.44M).
    Invest in Finland employs 18 people at its headquarters in 
Helsinki, its only office in the nation. The agency also has an 
independent office in Sweden and shared offices with the Finnish Export 
Association in four other target countries. In addition, Invest in 
Finland works in partnership with entities in more than 50 countries, 
including consultancies, chambers of commerce, and economic development 
organizations, to gather information, generate leads and serve 
potential investors. Invest in Finland draws on international business 
development professionals with experience in target industry sectors to 
serve as in-country consultants.
    Service-wise, Invest in Finland:

    Performs match-making services, linking investors with 
        Finnish research universities and institutions, with a target 
        of attracting companies interested in R&D activities.

    Provides investment facilitation to business free of 
        charge. These services cover every stage of setting up a 
        business in Finland, ranging from initial data collection and 
        opportunity analysis to networking and the actual business 
        launch.

    Assists with partner search to support inward Mergers & 
        Acquisitions. According to the European Council of American 
        Chambers of Commerce, ``This covers the whole process of 
        identifying possible businesses and delivering background 
        information, to organizing meetings and giving advice on a wide 
        range of practical issues.''\10\
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    \10\ http://www.european-american-business.com/2009/1_37.php.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
Conclusions/Further Recommendations
    As illustrated by the organizational summaries above, the developed 
countries which capture the lion's share of inward FDI invest strongly 
in their IPAs, making the Invest in America (IIA) office underfunded in 
comparison to its peers. With additional funding, IIA would be able to 
better supplement and complement the efforts of State and sub-State 
entities, especially in the form of matching grants in the face of 
public sector budget constraints and travel freezes. With additional 
staff and leverageable funding, IIA is well placed to attract foreign 
investment in high-growth sectors which will ultimately spin off into 
increased productivity and sustainable jobs at a time when the United 
States urgently needs to stimulate growth in the industries of the 
future. Drawing on the various models presented above, combined with an 
understanding of the unique political and structural environment in 
which Invest in America operates, I recommend that the Committee 
consider $100 million in additional funding to IIA, $50 million of 
which would serve as matching grants to support State and sub-State 
efforts. The remaining $50 million would do well to expand Invest in 
America operations by funding dedicated inward investment promotion 
officers in major foreign markets, expanding in-country investor 
outreach efforts particularly via cultivating relationships with 
significant investors, providing expanded ombudsman services to 
potential investors, and establishing a dedicated after-care team to 
work with existing priority investors to maintain and expand their 
presence in the United States.

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