[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
FOR JOB CREATION
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
HEARING HELD IN WASHINGTON, DC, FEBRUARY 1, 2012
Serial No. 112-49
Printed for the use of the Committee on Education and the Workforce
Available via the World Wide Web:
Committee address: http://edworkforce.house.gov
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COMMITTEE ON EDUCATION AND THE WORKFORCE
JOHN KLINE, Minnesota, Chairman
Thomas E. Petri, Wisconsin George Miller, California,
Howard P. ``Buck'' McKeon, Senior Democratic Member
California Dale E. Kildee, Michigan
Judy Biggert, Illinois Donald M. Payne, New Jersey
Todd Russell Platts, Pennsylvania Robert E. Andrews, New Jersey
Joe Wilson, South Carolina Robert C. ``Bobby'' Scott,
Virginia Foxx, North Carolina Virginia
Bob Goodlatte, Virginia Lynn C. Woolsey, California
Duncan Hunter, California Ruben Hinojosa, Texas
David P. Roe, Tennessee Carolyn McCarthy, New York
Glenn Thompson, Pennsylvania John F. Tierney, Massachusetts
Tim Walberg, Michigan Dennis J. Kucinich, Ohio
Scott DesJarlais, Tennessee Rush D. Holt, New Jersey
Richard L. Hanna, New York Susan A. Davis, California
Todd Rokita, Indiana Raul M. Grijalva, Arizona
Larry Bucshon, Indiana Timothy H. Bishop, New York
Trey Gowdy, South Carolina David Loebsack, Iowa
Lou Barletta, Pennsylvania Mazie K. Hirono, Hawaii
Kristi L. Noem, South Dakota Jason Altmire, Pennsylvania
Martha Roby, Alabama
Joseph J. Heck, Nevada
Dennis A. Ross, Florida
Mike Kelly, Pennsylvania
Barrett Karr, Staff Director
Jody Calemine, Minority Staff Director
C O N T E N T S
Hearing held on February 1, 2012................................. 1
Statement of Members:
Kline, Hon. John, Chairman, Committee on Education and the
Prepared statement of.................................... 3
Miller, Hon. George, senior Democratic member, Committee on
Education and the Workforce, prepared statement of......... 7
Payne, Hon. Donald M., a Representative in Congress from the
State of New Jersey........................................ 4
Statement of Witnesses:
Bernstein, Jared, senior fellow, Center on Budget and Policy
Prepared statement of.................................... 58
Johnson, Kellie, president, Ace Clearwater Enterprises....... 50
Prepared statement of.................................... 52
Malloy, Hon. Dannel P., Governor, State of Connecticut....... 17
Prepared statement of.................................... 19
Mitchell, Dr. Matthew, senior research fellow for economics,
the Mercatus Center at George Mason University............. 66
Prepared statement of.................................... 68
Snyder, Hon. Rick, Governor, State of Michigan............... 9
Prepared statement of.................................... 11
Mr. Kline, letter, dated February 1, 2012, from Associated
Builders and Contractors, Inc.............................. 6
Governor Malloy, response to question submitted for the
Ross, Hon. Dennis A., a Representative in Congress from the
State of Florida, questions submitted for the record....... 87
Governor Snyder, response to question submitted for the
Tierney, Hon. John F., a Representative in Congress from the
State of Massachusetts:
Hon. Deval L. Patrick, Governor, State of Massachusetts,
prepared statement of.................................. 40
Woolsey, Hon. Lynn C., a Representative in Congress from the
State of California:
Press release, ``California Workplace Safety Program Can
Reduce Injuries When Inspectors Enforce It,'' January
26, 2012, the RAND Corp................................ 84
Study, ``An Evaluation of the California Injury and
Illness Prevention Program,'' the RAND Corp., Internet
address to............................................. 85
FOR JOB CREATION
Wednesday, February 1, 2012
U.S. House of Representatives
Committee on Education and the Workforce
The committee met, pursuant to call, at 10:05 a.m., in room
2175, Rayburn House Office Building, Hon. John Kline [chairman
of the committee] presiding.
Present: Representatives Kline, Biggert, Foxx, Goodlatte,
Walberg, DesJarlais, Bucshon, Gowdy, Roby, Heck, Ross, Kelly,
Payne, Scott, Woolsey, Hinojosa, McCarthy, Tierney, Kucinich,
Davis, Bishop, and Altmire.
Staff present: Katherine Bathgate, Press Assistant/New
Media Coordinator; James Bergeron, Director of Education and
Human Services Policy; Casey Buboltz, Coalitions and Member
Services Coordinator; Ed Gilroy, Director of Workforce Policy;
Benjamin Hoog, Legislative Assistant; Marvin Kaplan, Workforce
Policy Counsel; Barrett Karr, Staff Director; Ryan Kearney,
Legislative Assistant; Rosemary Lahasky, Professional Staff
Member; Brian Newell, Deputy Communications Director; Krisann
Pearce, General Counsel; Molly McLaughlin Salmi, Deputy
Director of Workforce Policy; Linda Stevens, Chief Clerk/
Assistant to the General Counsel; Alissa Strawcutter, Deputy
Clerk; Loren Sweatt, Senior Policy Advisor; Joseph Wheeler,
Professional Staff Member; Aaron Albright, Minority
Communications Director for Labor; Tylease Alli, Minority
Clerk; Kelly Broughan, Minority Staff Assistant; John D'Elia,
Minority Staff Assistant; Livia Lam, Minority Senior Labor
Policy Advisor; Brian Levin, Minority New Media Press
Assistant; Celine McNicholas, Minority Labor Counsel; Richard
Miller, Minority Senior Labor Policy Advisor; Megan O'Reilly,
Minority General Counsel; Julie Peller, Minority Deputy Staff
Director; Michele Varnhagen, Minority Chief Policy Advisor/
Labor Policy Director; and Michael Zola, Minority Senior
Chairman Kline. A quorum being present, the committee will
come to order.
Well, good morning, and welcome to the first Education and
Workforce Committee hearing of the new year. I would like to
thank Governors Snyder and Malloy for participating in today's
hearing. Your experiences at the state level offer some really
important insight to this committee in Congress, and we
appreciate having you here with us.
And I talked to both of you before the hearing, and thank
you. I want to thank you again. It is always very special for
us when we have leaders here who can bring their experiences to
A year ago, the committee met to examine the state of the
workforce. It was our first hearing of the 112th Congress and
reflected our commitment to make job creation and American
competitiveness top priorities.
Much has happened since we met in January of 2011.
Unemployment was 9.1 percent. Today, it stands at 8.5 percent.
Nearly 14 million workers were unemployed. Now 1 million fewer
workers are unemployed. The number of long-term unemployed--
those out of work for 27 weeks or more--has also declined from
6.2 million to 5.6 million.
These facts may demonstrate modest progress, but far too
many Americans continue to face significant hardship in this
tough economy. The number of Americans participating in the
labor force is at its lowest level in 28 years. More than 8
million individuals are working part-time because full-time
jobs are unavailable, and 1 million ``discouraged'' workers
have abandoned their job search entirely.
Simply put, we are experiencing the weakest recovery since
the Great Depression. As the Wall Street Journal recently
noted, the recovery of the 1980s led to 18 straight months of
growth greater than 5 percent. Yet our own recovery over the
last 2.5 years has averaged just 2.5 percent. The nation should
be firing on all cylinders; yet our economy remains stuck in
In many ways, the current administration has made matters
worse by promoting the politics of fear and uncertainty. Costly
regulations that fail to enhance the welfare of workers,
bureaucratic actions that favor powerful special interests at
the expense of employers and employees, and politically
motivated decisions that destroy tens of thousands of good-
paying jobs are part of what Governor Mitch Daniels described
as a ``pro-poverty agenda.''
To help restore certainty and confidence, the House of
Representatives has approved more than 30 bipartisan jobs
proposals in the last 12 months. The bills touch upon virtually
every part of the economy, from labor relations and energy
security to tax relief and fiscal responsibility. No single
proposal represents a silver bullet but each helps remove
government barriers to economic growth and job creation.
While more than 25 House-passed jobs bills face obstruction
in the Democrat-led Senate, a number of our legislative efforts
have reached the president's desk. In January, I had the
privilege of joining Speaker Boehner on a trip across Latin
America, including a stop in Colombia to visit with its
business leaders and elected officials. Thanks to the
bipartisan effort of this Congress, working with the president,
Colombia will soon import--duty free--goods and products built
by American workers.
Speaking of our trade agreements with Colombia, Panama, and
South Korea, the president stated, ``American automakers,
farmers, ranchers, and manufacturers, including many small
businesses, will be able to compete and win in new markets.''
We need to build on this success and explore new opportunities
to help workers thrive in the global economy.
I am hopeful job training reform is an area in which we can
work together to strengthen the competitiveness of the
workforce. For the nation's long-term unemployed, 7 months
without work can feel like a lifetime. Effective job training
support can help workers get back on their feet and back to
work. The need for a leaner, more efficient workforce
investment system has never been more urgent. I was pleased to
hear the president call for reform in his State of the Union
address, and we stand ready to take action.
Already, my colleagues have introduced three proposals that
lay the foundation for a 21st-century job training system. A
key component of our effort is the consolidation of dozens of
federal workforce programs into four flexible funding streams.
Streamlining these programs will enhance support for workers,
offer a better trained workforce for employers, and promote
better use of taxpayer dollars. The president suggested the
need for even greater consolidation, and we are happy to
consider a responsible plan to do that.
In fact, I sent a letter to Labor Secretary Solis this
morning that asks for more details about the president's new
job training proposal. I look forward to receiving a timely
response so we can improve the nation's workforce investment
system without delay.
Over the last several years, we have seen a lot of failed
policies and broken promises, starting with a so-called
stimulus plan that created debt, not jobs. And I know there are
sharp differences in this Congress, in this House, and on this
committee. However, it is not enough to shout from the stands
and criticize the plays being called on the field. I encourage
all members, on both sides of the aisle, to stay engaged, offer
positive solutions, and work to find common ground.
Again, I would like to thank our witnesses for joining us,
and I will now recognize my distinguished colleague, Mr. Payne,
for his opening remarks.
[The statement of Chairman Kline follows:]
Prepared Statement of Hon. John Kline, Chairman,
Committee on Education and the Workforce
Good morning and welcome to the first Education and the Workforce
Committee hearing of the new year. I'd like to thank Governors Snyder
and Malloy for participating in today's hearing. Your experiences at
the state level offer important insight to this committee and Congress,
and we appreciate having you here with us.
One year ago, the committee met to examine the state of the
workforce. It was our first hearing of the 112th Congress, and
reflected our commitment to make job creation and American
competitiveness top priorities.
Much has happened since we met in January of 2011. Unemployment was
9.1 percent; today it stands at 8.5 percent. Nearly 14 million workers
were unemployed; now one million fewer workers are unemployed. The
number of long-term unemployed--those out of work for 27 weeks or
more--has also declined from 6.2 million to 5.6 million.
These facts may demonstrate modest progress, but far too many
Americans continue to face significant hardship in this tough economy.
The number of Americans participating in the labor force is at its
lowest level in 18 years. More than 8 million individuals are working
part time because full time jobs are unavailable and one million
``discouraged'' workers have abandoned their job search entirely.
Simply put, we are experiencing the weakest recovery since the
Great Depression. As the Wall Street Journal recently noted, the
recovery of the 1980's led to 18 straight months of growth greater than
5 percent. Yet our own recovery over the last two and a half years has
averaged just 2.5 percent. The nation should be firing on all
cylinders, yet our economy remains stuck in neutral.
In many ways, the current administration has made matters worse by
promoting the politics of fear and uncertainty. Costly regulations that
fail to enhance the welfare of workers, bureaucratic actions that favor
powerful special interests at the expense of employers and employees,
and politically motivated decisions that destroy tens of thousands of
good paying jobs are part of what Governor Mitch Daniels described as a
To help restore certainty and confidence, the House of
Representatives has approved more than 30 bipartisan jobs proposals in
the last 12 months. The bills touch upon virtually every part of the
economy, from labor relations and energy security to tax relief and
fiscal responsibility. No single proposal represents a silver bullet,
but each helps remove government barriers to economic growth and job
While more than 25 House-passed jobs bill face obstruction in the
Democrat-led Senate, a number of our legislative efforts have reached
the president's desk. In January, I had the privilege of joining
Speaker Boehner on a trip across Latin America, including a stop in
Colombia to visit with its business leaders and elected officials.
Thanks to the bipartisan effort of this Congress, working with the
president, Colombia will soon import--duty free--goods and products
built by American workers.
Speaking of our trade agreements with Colombia, Panama, and South
Korea, the president stated, ``American automakers, farmers, ranchers
and manufacturers, including many small businesses, will be able to
compete and win in new markets.'' We need to build on this success and
explore new opportunities to help workers thrive in the global economy.
I am hopeful job training reform is an area in which we can work
together to strengthen the competiveness of the workforce. For the
nation's long-term unemployed, seven months without work can feel like
a lifetime. Effective job training support can help workers get back on
their feet and back to work. The need for a leaner, more efficient
workforce investment system has never been more urgent. I was pleased
to hear the president call for reform in his State of the Union
address, and we stand ready to take action.
Already, my Republican colleagues have introduced three proposals
that lay the foundation for a 21st century job training system. A key
component of our effort is the consolidation of dozens of federal
workforce programs into four flexible funding streams. Streamlining
these programs will enhance support for workers, offer a better trained
workforce for employers, and promote better use of taxpayer dollars.
The president suggested the need for even greater consolidation, and we
are happy to consider a responsible plan to do that.
In fact, I sent a letter to Labor Secretary Hilda Solis this
morning that asks for more details about the president's new job
training proposal. I look forward to receiving a timely response so we
can improve the nation's workforce investment system without delay.
Over the last several years, we've seen a lot of failed policies
and broken promises, starting with a so-called stimulus plan that
created debt, not jobs. And I know there are sharp differences on this
committee. However, it is not enough to shout from the stands and
criticize the plays being called on the field. I encourage all members,
on both sides of the aisle, to stay engaged, offer positive solutions,
and work to find common ground.
Again, I'd like to thank our witnesses for joining us, and I will
now recognize my distinguished colleague George Miller, the senior
Democratic member of the committee, for his opening remarks.
Mr. Payne. Good morning.
Mr. Chairman, thank you for calling this very important
hearing on job creation. And welcome to Governor Malloy and
Governor Snyder. I am pleased we will be hearing from two state
executives about their efforts to expand job opportunities. You
are right there where the rubber meets the road.
And I am pleased we will have an additional panel of
experts to advise this committee on how best to move forward on
this very important issue of creating jobs.
Last week in his State of the Union, President Obama
challenged us to work together to move the economy forward. I
couldn't agree more. Job creation is the most urgent issue for
millions of families and businesses across the country.
In 2008, our economy went over the cliff. The recession,
brought on by Wall Street greed, was long and deep. Almost
immediately, 4 million jobs were lost. Another 4 million were
lost before things started to turn around.
It took strong and decisive action by the last Congress,
working with the Obama administration, to pull our country back
from the abyss. The action made a real difference. The private
sector has created more than 3 million jobs in the last 22
months. Consumer confidence is edging up and signaling
continued economic growth. Manufacturing employment has grown
for the first time since the late 1990s.
Despite calls from some to let the domestic auto industry
fail, we took bold action and actually saved millions of
American jobs. Our auto industry is back on the upswing, making
great cars, investing in new factories, creating thousands of
new jobs, all because we intervened.
And while rising health costs have been a drag on our
economy, we did take action. We passed the Affordable Care Act.
Not only does the law give businesses and health care providers
new tools to bring costs under control, it will expand health
care coverage to 32 million Americans. This is an amazing feat.
And health care reform is no job-destroyer. On the
contrary, since the Affordable Care Act was signed into law, we
have seen half-a-million new jobs created in the health care
sector. This is a much different story than what our country
was facing just a few years ago, when our economy was
hemorrhaging 750,000 jobs a month.
And so our nation's economy is headed in the right
direction. But of course, we all know that there is more action
that needs to be taken. Now is not the time to put on the
brakes. We need to work together for a fair and sustainable
recovery and to rebuild those ladders of opportunity for every
While today's hearing is timely and appropriate, I fear
another year of wasted opportunities is before us. I say this
because a little more than a year ago, this committee held a
similar hearing on the economy and job creation. During that
hearing, a governor and economists across the political
spectrum agreed that rebuilding roads, schools, and bridges
have significant benefits for jobs and for building the
But in the years that followed, the House failed to act on
jobs. Instead of a jobs agenda last year, all we saw was
political brinksmanship. The kind of politics that hurts
building jobs, that shuts down the FAA, putting thousands of
workers out of work, jeopardizing thousands of construction
workers' jobs in the process. It resulted in our nation's
credit being downgraded for the first time in our history.
It has jeopardized Americans' unemployment insurance. It
has threatened the extension of payroll tax cuts. And now we
are seeing a highway bill from House Republicans that falls
substantially short of what our nation needs. Our roads and our
bridges are crumbling. It does not even contain a buy America
provision so that jobs created are jobs that can be created
here in the United States.
Again, Mr. Chairman, this hearing comes at an opportune
time. I hope it will help us turn the corner. I urge my
colleagues on the other side of the aisle not to allow another
year to go by without action.
I have read the comments that Speaker Boehner wants to use
this year to put the Obama administration on trial. I hope
Speaker Boehner's comments are a commitment, rather, to
oversight and that we will be able to work together in an
effort to grow our economy and to create new jobs.
The American people aren't interested in another year of
politics and political infighting and congressional inaction on
jobs. There is nothing wrong with political differences and
policy differences. Sometimes we agree with these and we agree
on the other side of the aisle in cases. But sometimes we don't
agree. That is the nature of democracy. That is why we have
different political parties.
But during tough times, we should at least try to work
together to develop consensus, not roadblocks, and that is the
case at all levels of government.
Thank you, Mr. Chairman. I will yield back.
Chairman Kline. I thank the gentleman.
Pursuant to committee rule 7(c), all committee members will
be permitted to submit written statements to be included in the
permanent hearing record. Without objection, the hearing record
will remain open for 14 days to allow statements, questions for
the record, and other extraneous material referenced during the
hearing to be submitted in the official hearing record.
[An additional submission of Chairman Kline follows:]
Associated Builders and Contractors, Inc.,
Arlington, VA, February 1, 2012.
Hon. John Kline, Chairman; Hon. George Miller, Ranking Member,
Education and Workforce Committee, U.S. House of Representatives,
Washington, DC 20515.
Dear Chairman Kline and Ranking Member Miller: On behalf of
Associated Builders and Contractors (ABC), a national association with
74 chapters representing more than 22,000 merit shop construction and
construction-related firms, I am writing in regard to the full
committee hearing titled, ``Expanding Opportunities for Job Creation.''
ABC members appreciate the committee's interest in improving
America's business environment to foster job growth. The construction
industry is still struggling to combat a staggeringly high unemployment
rate of 16 percent.
One significant way for government entities to create opportunities
for employers in the construction industry to expand and hire is to
eliminate government-mandated project labor agreements (PLAs) on
taxpayer funded construction. These special interest schemes discourage
competition from qualified nonunion contractors and their workers. When
a government entity requires a PLA on a construction project, they are
essentially tilting the playing field in favor of contractors that
agree to use organized labor. On government-funded or assisted
projects, this means that the 86 percent of the private construction
workforce that chooses not to join a labor union cannot compete on an
equal basis for projects funded by their own tax dollars.
Governor Rick Snyder and Governor Dannel Malloy have contrasting
records with regard to government-mandated PLAs. ABC believes that
these policies will have significant impacts on the construction
industry in their states in the future.
Although less than 22 percent of the construction workforce in
Michigan has decided to join a labor organization, numerous public
entities were choosing to require contractors to sign a PLA with a
labor union as a condition of performing public work. In July 2011,
Governor Snyder signed legislation barring the state and other public
entities from requiring contractors to sign an agreement with a union
in order to perform public construction. Michigan is one of 11 states
to ban government-mandated PLAs, with seven doing so in 2011 alone.
This law is already improving the business climate for construction
firms in Michigan. PLA requirements on several projects were lifted
almost immediately, giving employers in the construction industry a
much needed opportunity to compete for projects and grow their
workforces. This law also ensures that taxpayer funds are used as
efficiently as possible. PLA requirements have been found to increase
construction costs by as much as 18 percent. By eliminating PLA
mandates, public entities can use these savings to fund other
The Malloy administration has supported job killing PLA mandates
and recently signaled its intention to implement a PLA requirement for
future expansion and renovation of the University of Connecticut
hospital system. Additionally, the Malloy administration is under
significant pressure from organized labor to require or encourage the
use of PLAs on future construction. ABC believes that requiring
contractors to sign a PLA in order to perform public construction
reduces job opportunities for the vast majority of the construction
workforce that chooses not to join a labor organization. We hope that
Governor Malloy will choose to allow fair and open competition to
dictate how taxpayer funded projects are awarded in the future.
At the federal level, ABC believes that President Barack Obama
should considering following Governor Snyder's lead and reverse his
Executive Order 13502, which encourages federal agencies to require
PLAs on projects costing more than $25 million. When mandated on
federal construction projects, PLAs limit the ability of merit shop
construction firms to compete and deprives them of the opportunity to
create new jobs.
We appreciate you taking the time to address this vital issue and
believe Governors Snyder and Malloy, along with the other witnesses,
have important insights to share with this committee. We look forward
to working with you on future job growth initiatives.
Corinne M. Stevens,
Senior Director, Legislative Affairs.
[The statement of Mr. Miller follows:]
Prepared Statement of Hon. George Miller, Senior Democratic Member,
Committee on Education and the Workforce
Good morning, Mr. Chairman.
Last week, this committee held a rare hearing on creating job
opportunities for the American people.
The first panel consisted of two governors: One Democrat and one
Republican. Despite party and regional differences, the governors
delivered a positive message about cooperation and economic progress in
their respective states.
They both unequivocally rejected the path of divisive politics.
When it comes to seeking solutions for a stronger, faster economic
recovery, they did not recommend inaction.
Instead, they both made a compelling case that past efforts here in
Washington, like the Recovery Act and the auto rescue, saved this
country from an even deeper crisis.
Michigan's Republican governor specifically highlighted legislation
authored by Congressman Frank that helps to provide capital to small
Governor Snyder said that in Michigan, this one piece of
legislation allowed the state to use $30 million in public funds to
leverage nearly $86 million in private capital for small businesses.
These loan enhancements were spread across three programs. All
together, they supported the creation of nearly one thousand new jobs.
In addition, despite calls from some to let the domestic auto
industry fail, both governors agreed that the federal rescue of the
American auto industry was essential. Governor Snyder noted that
inaction would have brought down the entire industry. Because of the
federal government's role, the American auto industry is back on top of
its game and creating thousands of jobs.
Their message to Congress was ``work together.'' Put aside divisive
Our nation's future economic growth is dependent on productive
partnerships and shared responsibility between federal, state, and
local governments and the private sector.
I couldn't agree more.
Last week's hearing showed us that there are real opportunities
where we can work together to rebuild our economy and reignite the
This committee should be exploring ways we can assist governors to
improve their states' infrastructure and to modernize and repair our
nation's schools. Targeting resources to fix crumbling schools not only
helps student learning, but also saves struggling small contractors
from bankruptcy and creates private-sector construction jobs.
We could be exploring ways we can work together to modernize our
nation's job-training programs or find a bipartisan solution to ESEA
We could be helping local governments save the jobs of teachers,
police, and firefighters.
We could be exploring ways to help small businesses with their two
most important challenges: getting access to credit and creating more
But that's not what this hearing is about.
Today is just another legislative day dedicated to divisive issues.
It's not about working together to find solutions to real problems.
Today, the President's efforts to keep a vital government agency
fully functional will surely be criticized. The rights of workers will
be attacked. Labor unions will be attacked. An agency's efforts to
enforce the law or modernize the law will be attacked.
By now, we all know the drill. And so does a very frustrated
So, instead of working together to find solutions to real problems,
let's proceed with the majority's sixth hearing on the National Labor
I yield back.
Chairman Kline. For introductions of our first
distinguished panel of witnesses, I yield to Mr. Walberg of
Michigan to introduce our first witness.
Mr. Walberg. Thank you, Mr. Chairman.
On November 2, 2010, Michiganians elected Rick Snyder, a
successful businessman with no experience in politics--I think
that has changed--to lead the state as governor. Through his
relentless positive action and focus on accomplishing what he
pledged to do, Governor Snyder has delivered.
During his first year in office, he worked with lawmakers
on both sides of the aisle to eliminate the state's $1.5
billion budget deficit and create a $460 million surplus, and
As a true believer in the power of the private sector,
uniting, not dividing all sectors, he has proven his commitment
to Michigan's future through his support of education and real-
world training for job-seekers and removing unnecessary
government-made hurdles. These types of bold actions were
direly needed in Michigan, and Governor Snyder, doing what he
promised--an unusual tact--has acted quickly to put our state
back on the path to prosperity.
And for that, I say thank you.
On a more personal level, by the age of 23, this
businessman-turned-politician earned his undergraduate degree,
MBA, and law degree from the University of Michigan. Go blue.
After spending time teaching and working as a tax
accountant, Governor Snyder led a struggling company called
Gateway, led them to grow from just over 700 employees
struggling with great challenges to a Fortune 500 company with
more than 10,000 employees.
As a fellow Michiganian, I look forward to working with
Governor Snyder in 2012 as we help to grow Michigan's economy.
And may I add, it has been a pleasure to watch a governor who
doesn't believe that it can't be done and when it is the right
thing to do. And through relentless effort, relentless positive
action, he has been able to make unbelievers believers in the
possibility, as well as the ultimate opportunity of Michigan
regaining its primacy as a manufacturing state, as a technology
state, as an education state, and the best state in the world
to live and do business.
We welcome you, Governor Snyder.
Chairman Kline. Thank you, Mr. Walberg.
You notice we do a lot of that ``Go Blue,'' ``Go Red.'' I
don't know. Maybe it is the Education Committee, we can't stop
It is my pleasure now to introduce our second witness, co-
panelist, Governor Rick Snyder. He was sworn into office as the
48th governor--I am sorry. We just introduced that guy.
Mr. Walberg. I think I did that well, didn't I, Chairman?
Chairman Kline. Actually, you did it extremely well. I am
not sure about the ``Go Blue'' thing, but very, very well.
Governor Dan Malloy--let's get the right guy here--took
office as the 88th governor of Connecticut on January 5, 2011.
Prior to his election, Governor Malloy worked as a prosecutor
in Brooklyn, New York, serving 4 years as assistant district
attorney. In 1995, Governor Malloy was elected and served 14
years as mayor of Stamford, Connecticut. Now, that was a real
job, no question about it. Governor Malloy, received his
undergraduate and law degrees from Boston College.
Welcome to you both.
Before I recognize each of you to provide your testimony,
let me, once again, briefly explain our lighting system. You
will each have 5 minutes to present your testimony. If you go
over, I will not be gaveling you down. If I start to get
nervous up here, you will hear a gentle tapping.
When you begin, the light in front of you will turn green.
When 1 minute is left, the light will turn yellow. When your
time is expired, the light will turn red. After everyone has
testified, we here members will each have 5 minutes to ask
questions and have them answered from the panel.
So, at this time, we will start with Governor Snyder.
Governor, you are recognized.
STATEMENT OF HON. RICK SNYDER, GOVERNOR,
STATE OF MICHIGAN
Governor Snyder. Thank you, Mr. Chairman. And it is an
honor to be here. Thank you for the invitation, and I want to
thank Representative Walberg for his fine representation of our
state, along with Representative Kildee.
I am here to really talk about the topic that is most
important in our state, and I appreciate the opportunity to
share that with you, which is more and better jobs.
If you look at where Michigan has come from, we led the
nation in unemployment. If you go back to September 2009, our
unemployment rate was over 14 percent. I am proud to say that,
in December this last year, it was 9.3 percent, but as already
been commented, that is not good enough. The goal is more and
And the opportunity today, the way I view it is, is not to
come and criticize the federal government and talk about how
great Michigan is, but to come in the interest of partnership.
We have a philosophy in Michigan, as Representative Walberg
said, of relentless positive action, which means no blame, no
credit, find common ground, solve a problem, and do it in a
relentless fashion. And that has been successful.
So I want to compliment the federal government on a couple
of programs we have partnered to together on, including the
state small-business credit initiative. It has been a very
successful program. And also good work going on with the
Export-Import Bank to do credit for small business.
In terms of things in Michigan that we have move forward
with, because the way I view more and better jobs, the role of
government is not to create jobs, but to create an environment
where the private sector can be successful and employ people,
and so we have worked hard to create the best environment, and
that began with having a balanced budget, where we actually
start paying down long-term liabilities in our balance sheet
requirements. And I clearly encourage Congress and the federal
government to look at ways to deal with the deficit and the
debt elimination that is required. That would be one of the
greatest things that we could do for our employers in Michigan
and the country.
We did tax reform. We eliminated tax credits. We made a
simple, fair and efficient tax system. We are doing regulatory
reform. We have done unemployment insurance reform, workers
comp reform. We are doing infrastructure reform as we speak.
And the topic of specific nature I would like to cover is
And the reason I use the word talent instead of workforce
is, while I believe workforce development is very important, it
is inadequate as a solution to deal with unemployment.
Workforce tends to deal with creating opportunities and giving
people skills. That is simply not good enough.
The talent topic is what really matters, and there are
three C's, in my view. There is, first, creating; second, there
is collaboration; and, third, there is connecting. And we need
to do well on all three of those if we are to do our jobs
In terms of creating talent, that is the topic of, again,
traditional workforce development, giving people skills, and
our education system, which we don't call K-12. We call it P-
20, which goes prenatal through lifelong learning. And it is
about creating an integrated environment to give the best
skills possible to the most talented people in the world,
Michiganders and Americans.
With respect to that, though, as I said, we need to do
more. So we have created a number of programs on collaborating.
We have created programs such as Pure Michigan Talent Connect
and Pure Michigan Business Connect. Pure Michigan Talent
Connect is really a program where we created a portal for our
employers to post the jobs they have now and for the future,
what skills they need, and how to partner together. It is also
about skilled trades. We have had union involvement of both the
carpenters and the operating engineer partner with us on these
programs. So those are all very good.
So if you go down the list, the one of critical nature that
is overlooked too often is connecting. And I encourage you to
go to mitalent.org, a portal we launched last fall, which is
literally to say it is not about jobs being open. It is about
We have 70,000 open jobs in Michigan today. We could drop
our unemployment rate by almost 2 percent by filling those
jobs, and that was not something readily available to our
citizens in helping them plan a career. So connecting is
There are two specific items I would mention to the
committee for your consideration, one on the Workforce
Investment Act, about potentially looking at new ways to do
that. Too often you hear governors saying, ``Give us a block
grant,'' or you get the traditional model of federal government
of prescriptive programs.
I recommend a middle ground. We want to be held
accountable. We want metrics and measures to say we are
succeeding, but I ask that be done in a portfolio-based
approach of metrics and measures, not prescriptive programs nor
just block grants.
The last thing I would mention is a critical issue that
would help immediately, which is on the immigration front.
Immigration is a very difficult issue, but I would encourage
consideration of a very narrow opportunity, which is to create
a STEM green card for advanced-degree people with doctorates
and such in engineering and other fields. If we could have
those people available, what a difference that would make.
I have personal experience with this, given that I did
startup companies. We are educating these people and telling
them to leave our country. They are job-creators, and there are
broad-based opportunities for success there.
So with those two specific ideas in mind, I hope you look
at them very seriously. I appreciate the opportunity to share
what we are doing in Michigan. We are helping reinvent our
state. It is about more and better jobs, and we want to be good
partners with you in success.
[The statement of Governor Snyder follows:]
Prepared Statement of Hon. Rick Snyder, Governor, State of Michigan
Good afternoon, Mr. Chairman and Members of the committee. I
appreciate the invitation to join you this morning and discuss the
critical issue of expanding opportunities for job creation. Thank you
for the invitation. Also, I would like to thank you all for your public
service and the work that you do. I would especially like to thank
Congressman Tim Walberg and Congressman Dale Kildee for their work on
behalf of our home state of Michigan. I look forward to your continued
cooperation in reinventing Michigan.
I am excited for the opportunity to be here today to strengthen
what I believe is a critical partnership for Michigan in expanding
opportunities for job creation--the partnership between states and the
federal government. The Constitution of the United States establishes a
system in which the states are unequivocally the laboratories of
democracy, and powers not granted to the federal government are
reserved to the States and the people. In order for us to optimize that
system, it is important that the federal government allow states the
flexibility needed to innovate. However, it is also important that
states reciprocate by sharing their lab results from time to time. So I
am here today in partnership, and I would like to briefly highlight a
few areas where the state and federal government have positively
impacted our economic development and contributed to our recovery.
I would also like to outline several of the successful steps we
have taken in Michigan to create a stable environment where businesses
can grow and create jobs. As many of you are aware, Michigan has
endured some significant challenges in the past decade--accounting for
nearly half of the nation's job loss during that span. Therefore, I
hope our foundational work in meeting those challenges, such as tax and
regulatory reforms, addressing our budget deficit, and paying down our
long-term debt, can be informative to other states and the federal
government. Moreover, I believe our focus on talent in Michigan will
make for a useful discussion that is particularly relevant to the
It is my belief that our greatest resource in Michigan is our
people. We have great confidence that if we empower the talented
citizens of Michigan through what I refer to as the ``Three Cs,'' they
will unleash an Era of Innovation. By Connecting, Collaborating and
Creating, we believe Michigan will be a leader in efficiently
integrating the goals of talent and economic development in the 21st
Finally, as a series of next steps, I would like to offer up
Michigan to serve as a pilot for state innovation. We take great pride
in our heritage of innovation and entrepreneurship, and there are
several areas within this committee's jurisdiction--such as the
Workforce Investment Act--and beyond, where we would relish the
flexibility to serve as a laboratory for innovative solutions.
There are a few specific examples of positive outcomes that I hope
will provide a path forward illustrating the types of partnerships
between state and federal governments worth pursuing. One such example
is the State Small Business Credit Initiative (SSBCI). In September
2010, Congress enacted the Small Business Banking and Jobs Act of 2010.
The law included the $1.5 billion SSBCI to fund individual states loan
enhancement efforts. Michigan, and particularly the Michigan Economic
Development Corporation (MEDC), was the driving force behind the
creation and passage of the federal program which allocates funds to
states to support small business loans.
Michigan was allocated approximately $80 million to operate its
loan enhancement initiatives including the Collateral Support Program
(CSP), Loan Participation Program (LPP), and the Capital Access Program
(CAP). Since receiving its initial tranche of funding in July 2011,
those programs have led to significant results for companies in
Michigan. Specifically, in seventeen CSP deals, an initial $14,657,074
investment resulted in unleashing $44,084,000 in private funds and the
creation of 628 jobs. The LPP resulted in eleven deals using
$15,068,520 in public funds to garnering $33,680,937 in private
investments and created 435 jobs. Finally, through CAP, 109 deals have
been brokered, leveraging $255,894 in public funds to raise $7,907,663
in private dollars, creating 118 jobs. The MEDC has since shared that
success nationally by assisting approximately 20 states, including the
US Virgin Islands, to establish loan enhancement programs.
Additional examples where we have seen early signs of positive
outcomes include an Export Financing Incentive Program to assist
Michigan companies in growing their export business. The program works
with companies alongside the Export-Import Bank of the United States,
and uses a small amount of public resources to defray the incremental
cost difference between domestic and foreign working capital loans. The
program also increases business profit by lowering costs and induces
entry and expansion into foreign markets.
Finally, the U.S. Small Business Administration (SBA) State Trade
and Export Promotion (STEP) program has also become a part of Michigan
Economic Development Corporation's continued economic gardening
strategy to support existing Michigan companies' efforts to create new
jobs. As members of the committee are aware, export sales help
diversify a company's customer base, provide long-term stability, and
support higher paying jobs.
Besides looking abroad at export opportunities, however, there is
plenty that we have already done in Michigan during the past year to
lay a foundation for economic recovery. In fact, we are hopeful that
our efforts can serve as a model for the federal government. Taking
responsible steps toward putting the nation's fiscal house in order
would amplify the efforts being made in the states.
Specifically, in Michigan we approved a structurally balanced
budget that eliminated the state's $1.5 billion deficit without using
one-time accounting gimmicks. We are paying down our long-term debt and
saving for the future for the first time since 2004. Additionally, we
eliminated the job-killing Michigan Business Tax and replaced it with a
flat rate that is simple, fair and efficient--ending unfair double
taxation of small businesses.
The impact of small businesses on job creation cannot be
overstated. Small businesses in Michigan account for ninety-eight
percent of jobs created as recently as 2009. With that in mind, we have
also embarked upon an aggressive initiative to reinvent our state's
regulatory system. Excessive and burdensome regulations have long
served as an impediment to job creation and economic growth. By
launching an Office of Regulatory Reinvention to review and streamline
regulations, we are establishing a culture in state government that
emphasizes customer service above all, and is more conducive to
business growth and job creation.
Our efforts over the past year have contributed to the creation of
80,000 private sector jobs, and our unemployment rate which was as high
as 14.1% in September of 2009 has dropped to the current 9.3%. As a
result, at a time when sovereigns are facing downgrades across the
globe, Fitch Ratings improved Michigan's credit outlook to positive,
and Bloomberg recently reported Michigan's economic health second best
in the nation. We fully recognize our challenge remains steep, and we
will not rest knowing many Michiganders are still struggling. However,
we continue to relentlessly move forward having established a stable
environment where businesses can plan long-term, invest and grow.
Ultimately, we are working to create a future where our young people
can raise families of their own and our talented people are well-
aligned with the job opportunities of the 21st century's economy.
At the core of Michigan's reinvention is a commitment to ensuring
that our talented future generations have career opportunities in our
state. I believe an honest assessment of our nation's current economic
condition reveals that we have failed to think strategically about the
relationship between economic development and talent. Job creators are
finding it challenging to grow and develop without the right talent,
and job seekers are struggling to connect with the right opportunities
that leverage their skills. While the struggle to connect talent with
employers is multifaceted, the primary reason employers are struggling
to fill jobs is a mismatch between skill attainment and skill demand.
We must commit to addressing these challenges, and the good news is we
can do so through the Three Cs: Connecting, Collaborating, and
With technology today, connecting people with opportunity is more
achievable than ever before. Addressing the current talent mismatch
demands new tools that ensure economic development and talent
enhancement are occurring in tandem. In Michigan we have launched a new
tool that will better connect and develop Michigan's talent: Pure
Michigan Talent Connect.
Pure Michigan Talent Connect is a web-based talent marketplace
found at www.MiTalent.org. It features tools that job creators and job
seekers need to make better-informed decisions. Market analysis and
input from economists have been used to identify labor trends and high-
demand career paths for dislocated workers, college students, high
school students, and those entering the workforce after a long
separation. Ultimately, the new site creates a central hub linking
private and public stakeholders. It will help connect Michigan's talent
with opportunities for education, training, and employment. And it will
allow employers to discover and retain Michigan talent that can help
their companies grow and flourish.
Today, job seekers must think strategically about career paths.
Pure Michigan Talent Connect allows Michiganders to create an
electronic talent portfolio early in their educational career, driving
everything from curriculum choices to career paths. I have asked the
Michigan Department of Education, the MEDC, and the Workforce
Development Agency to work together to encourage students, parents, and
educators to use MiTalent.org. For those who do not have web access at
home, MiTalent.org will be accessible at local libraries and Michigan
Works! offices. We recognize, however, that the need to better align
talent with opportunity is not simply for students.
For decades, our talent has excelled in managing and meeting the
needs of manufacturers and large firms. With the downsizing of
Michigan's largest businesses, some of our talent has found it
difficult to transition into a new position, smaller firms, or a
different industry altogether. We know that to fuel our economic
reinvention we must provide small businesses the talent needed to grow,
and we must provide our citizens the opportunity to continue developing
Last year I asked the Michigan Economic Development Corporation to
create ``Michigan Shifting Gears,'' a career-transition program for
professionals who want to leverage their experience to pursue exciting
small-business opportunities. Michigan Shifting Gears is a three month
career-transition program that involves an executive education,
mentorship, and internship. It gives individuals the tools, networks,
and training to repurpose their skills and rapidly re-enter the new
Thus far, Shifting Gears has had great success, with approximately
fifty percent of participants gaining employment within three months.
With experienced leadership in the small business pipeline, we are
building a solid base for job creation. As such, I have also asked MEDC
to apply this model to address the critical need for computer
programming talent by creating Shifting Code. Currently, Michigan's
shortage of programmers stifles the growth of high-tech companies and
our ability to expand our portfolio of high-tech job creators. To
address this problem, Shifting Code will create a supply of high-demand
programmers while simultaneously giving small businesses the technology
assistance they need. Innovative programs and technological tools
alone, however, will not solve the challenge we face.
Developing a comprehensive strategy that coordinates Michigan's
economic and talent development also requires broad collaboration.
Stakeholders, coalescing around the mutual interests of job creation
and economic growth, will enable our businesses to compete, grow, and
create more opportunity. I am grateful to our businesses and labor
organizations for embracing the collaborative spirit. For example, in a
state where we reject the thought that manufacturing is history, and
instead recognize it is a critical part of our future, I have committed
to partnering with the International Union of Operating Engineers
(Local 324) and the Michigan Regional Council of Carpenters and
Millwrights to increase attainment in the critical skills necessary to
maintain our status as a leader in vocational talent. Through such
collaboration we continue to develop some of the best skilled-trade
talent in the country in Michigan.
Another proud illustration of the collaborative spirit in our state
has been the launch of Pure Michigan Business Connect (PMBC). The
program is a public-private initiative that provides Michigan
businesses with new ways to buy and sell, raise capital, and connect
with each other through an alliance of the Michigan Economic
Development Corp., state agencies, and major Michigan companies and
organizations. There are four primary components to PMBC: New market
development--programs and services to expand market opportunities for
Michigan companies; Business Support Services--providing services to
companies through various programs and initiatives including legal and
accounting, website consultation, marketing, PR and communication
support; Financial services--information and access to a continuum of
capital resources (i.e. private sector lenders, MEDC programs); and
Talent--uniting workers and companies with talent needs and
opportunities. Approximately 894 companies have requested services
through PMBC, and we have received commitments from banks to provide
business opportunities totaling $7 billion for expansion and hiring.
The fact that the program more than doubled in less than six months has
underscored just how important collaboration is to spurring innovation,
entrepreneurship, and job creation.
In Michigan, we have recognized that not only is our history rooted
in entrepreneurship, but our future and many of the solutions to the
challenges we face are tied to entrepreneurship as well. Along those
lines, we know we cannot continue to insist that the only option for
the unemployed is to simply seek work somewhere else. Frankly, it is
not a viable option for those that lost their job in a field that will
not return. Because I so strongly believe in this, I have urged our
state legislature to support giving the Unemployment Insurance Agency
the ability to allow self-employment assistance to be utilized for
entrepreneurship. For displaced Michiganders facing the most serious
challenges returning to the labor force, we must aggressively seek more
creative solutions to providing opportunity. Oregon has been a leader
in implementing self-employment assistance and has already seen great
success. Survey data from 2004--2009 showed that 77% of self-employment
assistance participants who started a business remained in business.
This program is an investment in individuals and another tool to spur
innovation and support states' reinvention. Congress should consider
allowing states further flexibility to pursue such reforms and empower
the unemployed by fostering a culture of entrepreneurship.
With all the benefits of collaboration we have seen over a
relatively short period of time, there are still areas where we have
not measured up. One such area where local, state, and the federal
government, along with the business community, should work better
together is solving the unacceptably high unemployment rate of our
veterans. Veterans bring a unique set of skills which benefit our
communities and our economy. They have real-world work experience and
transferrable technical expertise. Moreover, veterans possess
leadership skills and a work ethic that have been tested at an early
age under extreme circumstances. The fact is we have not properly
connected veterans returning from Iraq and Afghanistan with the
opportunities available to them.
In Michigan I have directed the Veterans' Services Division of the
Workforce Development Agency to partner with Department of Military and
Veterans Affairs to create a seamless delivery system for veteran
benefits and employment services. This initiative will include co-
locating veteran employment representatives and veteran service
officers who help access VA benefits, including the Post 9-11 GI Bill.
We will better coordinate with federal and local partners to connect
veterans with the education and employment opportunities that their
sacrifices have earned.
Additionally, I encourage Members of Congress to follow Michigan's
example by promoting the benefits of hiring veterans and challenging
your constituent businesses to reach out to veterans. I have asked
employers of veterans to also commit to helping those they employ more
fully access their benefits. While our skilled trades are already doing
a great job through programs like Helmets to Hardhats, we can do more.
Our veterans would be assets to any employer. We must not squander
veteran talent, but instead develop and retain it.
Connecting and collaborating are two definitive steps toward
expanding opportunities for job creation. The equally important third
step is creating a talent pool prepared to meet the demands of the 21st
Century by more efficiently integrating the goals of talent and
economic development. Today's young employee will have multiple careers
in his or her lifetime. This makes it more crucial than ever that the
skills they attain in their post-secondary education are both
marketable and transferable. Maintaining a skill set that is
transferable among industries will help talent better prepare for our
changing economy and more quickly connect with employment.
I am committed to partnering with Michigan's public colleges and
universities to provide a post-secondary education that is marketable
and transferable. A recent report by the Center for Michigan concluded
that Michigan graduated 20% too few computer and math professionals,
14% too few health care professionals, and 3% too few engineers in
2009-2010. Among our shortage, there is a common message. Addressing
these deficits will require Michigan to invest in the development of
science, technology, engineering, and math (STEM) as well as health
industry talent. Otherwise, these shortfalls hold the potential to
stunt Michigan's projected economic growth.
Just as talent must think strategically about a career path,
government must think strategically about its investment in our talent
pipeline. Support of post-secondary education should be concentrated in
areas that enhance our economic development strategy and provide our
students with the opportunity to thrive. We need to stop overproducing
in areas where there is little or no occupational demand and encourage
students and educational institutions to invest in programs where the
market is demanding a greater investment in talent.
The current imbalance creates a population of young talent that
cannot find work, is saddled with debt, and many instances are forced
to leave their state and search for work elsewhere. This is an outcome
we cannot afford. I have also reached out to the Workforce Development
Agency, local Workforce Development Boards, and Michigan Works to shift
their efforts to a demand-driven employment strategy. Today, they are
reorganizing around our major industries, including manufacturing,
energy, healthcare, information technology, and agriculture, to better
collaborate with businesses, our colleges and universities, and our
public school system. Business and community leaders, driven by data,
are working to create a skilled workforce that meets the needs of job
providers. In partnering with local community colleges, non-profits,
and business leaders to address talent development from early childhood
through post-secondary education, we can achieve the goal of having
more citizens credentialed in these critically important industries.
To grow our economy businesses will need the right talent. To build
a bright future for our young people, we must arm them with the right
skill sets to succeed today and tomorrow. We can do more at the
earliest stages to help students achieve academic success. We have been
spending money without delivering the results that are essential to
giving our young people a bright future. It is time that we viewed our
educational system as P-20 instead of just K-12. We have begun to take
the steps necessary to fully integrate Michigan's public education and
create a P-20 system that prepares our students to compete for the best
jobs available today and tomorrow. We need to establish a system that
focuses on real achievement for all of our children. We cannot leave
children without the tools for success in their adult lives, and we
also need to encourage better and faster opportunities for children
that can go farther and faster in our system.
My final request for Members of the Committee today is to consider
a few next steps concerning two specific issues within the jurisdiction
of Congress. First, it is my understanding that this committee will
soon be considering a reauthorization of the Workforce Investment Act
(WIA). I strongly encourage Members of the Committee to reach out to
your state's Governors and engage in a dialogue concerning the
importance of the fifteen percent for statewide activities in Workforce
Investment Act Title I formula funding. Bipartisan support exists
amongst Governors that redirecting funds away from statewide activities
is detrimental to efforts to advance innovative workforce development
initiatives. Thus, I encourage continued conversation between Members
of the Committee, Governors, and state Workforce Development Agencies.
Rather than focus solely on funding levels, however, I would like
to suggest further that the reauthorization of WIA provides an
important opportunity for partnership with states to aggressively
address the realities of the 21st Century economy and job training.
Specifically, the WIA reauthorization presents an opportunity to create
a demand-driven workforce system that cultivates a labor force
possessing the necessary skills employers require. Burdensome and
bureaucratic performance measures should be replaced by meaningful key
indicators of performance focused on desired outcomes and
accountability. Such indicators should support innovation and allow
states the flexibility to implement programming to meet local and
regional economic demands.
It is my understanding that a package of bills recently introduced
by Mr. McKeon, Ms. Foxx and Mr. Heck include several promising
proposals, and I will look on with great anticipation at how the
committee proceeds on those proposals. However, I would also encourage
the committee to consider some of the following examples of demand-
driven, meaningful measures for the workforce system:
Number of Training Modules Created for Specific Employers
or Groups of Employers: The purpose of this measure is to capture the
level of partnerships occurring between workforce development, economic
development, educational, and employer partners resulting in the
creation of demand-driven training.
Number of Industry-Recognized Credentials Issued: The
purpose of this measure is to quantify how many employer valued
diplomas, licenses, certificates, or degrees are issued through the
Percentage of Jobs Filled: The purpose of this measure is
to track the percentage of jobs that the system is able to fill for
employers who request assistance with finding qualified workers.
Number of New Business Start-Ups: The purpose of this
measure is to capture the level of activity occurring in terms of new
businesses opening their doors and creating jobs.
Employment Rate of Individuals Receiving Training: The
purpose of this measure is to quantify the percentage of individuals
who receive demand-driven training and are able to obtain a family-
sustaining job upon completion of training.
Average Wages of Those Receiving Services: The purpose of
this measure is to track the resulting wages of individuals who
received services from the system.
Success, as measured by key indicators such as these, will result
in a demand-driven system where existing employers have access to the
talent they need to meet their employment needs, where workers have the
right skills to enable them to obtain family-sustaining employment, and
where new entrepreneurs have the confidence to invest their capital to
create new jobs.
A final, purely federal issue that I strongly believe falls within
the purview of expanding opportunity for job creation is attracting
global talent and investment. Immigration laws are established at the
federal level, so it is important that Michigan partner with the
federal government to better attract highly educated foreign talent and
investors. I realize immigration can be a divisive issue, but common
ground already exists across party lines about the need for investment
and job growth. That mutual interest should not cease at the simple
mention of immigrant talent.
Highly educated and skilled immigrants are a key component to
filling skill gaps and helping our American businesses flourish. Many
Michigan businesses are growing, but finding the right talent can be an
obstacle. Retaining and attracting the best possible talent from around
the world will fuel faster growth, help secure and create jobs for
Americans, and strengthens us against our global competitors.
Early last year I announced the Global Michigan Initiative which is
a collaborative statewide effort--spearheaded by the MEDC and the
Michigan Department of Civil Rights--to retain and attract
international, advanced degree and entrepreneurial talent to our state.
I did so, in part, because one-third of high-tech businesses created in
Michigan over the past decade were started by immigrants. Major
Michigan-based companies like Dow Chemical, Meijer and Masco were
founded by immigrants and have a long, established track record of
innovation and significant job creation. Of course, these statistics
are not unique to Michigan. A recent report by the Partnership for a
New American Economy in June 2011 indicated that 40% of the 2010
Fortune 500 companies were founded by immigrants or their children. The
data is conclusive: advanced-degree immigrants and foreign investors
spark job creation.
Unfortunately, inflexible immigration laws increasingly delay
foreign investors and impair job growth. We need to remove those
barriers, and need action from the federal government to do so.
Specifically, the EB-5 foreign investor program provides international
investors the chance to live here as they invest in our economy and
create jobs. However, the program is set to expire in September 2012. I
urge you to work together with your fellow Members of Congress and the
Department of Homeland Security to renew and make permanent the EB-5
Immigrant Investor Regional Center program. I would also recommend
modifying the requirements so that an investor may qualify by creating
at least five jobs and investing $500,000. We should not deter
attracting eligible, willing investors to our states.
In addition to investment, foreign talent contributes to Michigan's
economy by meeting employer demand in career fields where we currently
lack critical skills. According to the National Science Foundation and
the Congressional Research Service, the foreign student population
earned approximately 36.2% of U.S. doctorate degrees in the sciences
and approximately 63.6% of the doctorate degrees in engineering in the
U.S. in 2006. Much of this talent is cultivated in our universities.
Michigan excels at attracting and educating global talent for high-
demand careers, and international students make a significant
contribution to our state's economy. In 2010, Michigan ranked 9th
highest among states hosting foreign students at public universities.
Moreover, the net contribution to the state's economy by foreign
students during 2010-2011 was more than $705 million, according to the
Institute of International Education. We cannot afford to lose these
valuable members of our talent base to overseas competitors after years
of development here.
While foreign talent can readily obtain a student visa, remaining a
member of the Michigan community is made extremely difficult for those
desiring to do so under current immigration laws. The difficulty also
significantly disrupts businesses that rely on these skilled and
talented individuals. The federal government sets a cap of 65,000 on
new H1-B temporary work visas, and there are only an additional 20,000
new H1-B visas available to individuals with U.S. advanced degrees.
These caps are arbitrary and fail to recognize the harm done to local
economies when states are forced to send away talent they have spent
years developing. Today, I am asking Members of Congress to work to
permanently raise the cap on immigrant professionals and eliminate the
cap for those holding a master's degree or higher from U.S.
Lastly, and perhaps most urgently, I encourage Congress to focus
directly on addressing our critical skills gap, and pass proposed
legislation to create a STEM education ``green card.'' Creating an
avenue for permanent residency status, through green cards, for
foreign-born students who have earned graduate degrees in science,
technology, engineering and mathematics (STEM) fields will allow us to
retain the best and brightest foreign students. In doing this we can
slow the practice of STEM professionals being educated in our schools
and going back to their home countries to compete against U.S. firms.
A recent study sponsored by the American Enterprise Institute and
the Partnership for a New American Economy found that for every 100
Science Technology Engineering and Math (STEM) foreign workers added to
the workforce, an additional 262 jobs were created for U.S. natives
during 2000-2007. It is time to enact this legislation and allow these
valuable members of our higher-education communities to become
permanent, contributing members of our companies and communities.
The simple truth is that tomorrow's opportunities cannot be
realized with yesterday's skills.
Michigan's greatest assets are the adaptability, ingenuity, and
intellect of its people. These qualities, coupled with our abundant
natural resources, industrial might, and technological leadership, will
make Michigan a formidable force in this century's global economy. The
challenge we face is to align the aptitudes and career passions of job
seekers with the current and evolving needs of employers. The solution
is to reinvent the way in which we prepare our children for successful,
fulfilling careers, reshape the manner in which our citizens look for
work, and redesign the way in which employers obtain the skills they
Attacking this challenge demands the unyielding commitment of
stakeholders across the board. The Administration, Congress, states,
businesses, communities, nonprofits, schools, parents, and universities
must embrace the shared responsibility of helping young people build
connections to the world that let them--and our state--flourish. Based
on their history of selfless contributions to the betterment of our
state, there is no doubt that they will step up to the plate.
Chairman Kline. Thank you very much, Governor.
STATEMENT OF HON. DANNEL MALLOY, GOVERNOR,
STATE OF CONNECTICUT
Governor Malloy. Chairman Kline, Representative Payne, and
members of the committee, thank you for inviting me to testify
today and to speak about what Connecticut is doing to get our
When I took office last January, Connecticut had the
largest per capita deficit of any state in the nation, and we
had had no job growth for 22 years, a distinction we shared
only with Michigan. This is an unwanted distinction, I might
Over the last 13 months, we have made tough decisions to
get our fiscal house in order. We passed a budget that bridged
a $3.5 billion deficit. We implemented Generally Accepted
Accounting Principles, GAAP. We negotiated an agreement with
our state's public employees that will save taxpayers $21.5
billion over the next 20 years. And we cut spending by $1.7
billion, and we raised revenue.
Just last week, we announced a commitment to increase the
size of our pension payments, a move that will avoid a balloon
payment of $4.5 billion in just 20 years, and one that will
save taxpayers nearly $6 billion over the next 20 years.
We have set our state on a road to recovery. And while I
know we still have a long way to go, we are seeing signs of
improvement. Our unemployment rate has fallen to 8.2 percent,
the lowest point in 2.5 years, and by over 1 percent during the
last year. During the last year, we also experienced job
growth--9,000 new jobs--for the first time since 2008.
In Connecticut, as is the case across the nation, the issue
obviously remains job creation. One of the first actions we
took on the jobs front was an initiative called First Five.
First Five is designed to attract large-scale business
development projects by augmenting and combining the state's
best incentive and tax credit programs for the first five
companies to create 200 jobs within 2 years or invest $25
million and create 200 jobs over the next 5 years.
We convened a special session on jobs. We passed a
bipartisan bill, with only one negative vote in each of the
chambers,that will move Connecticut forward.
Our jobs bill includes a Small Business Express Program,
where we are investing $50 million per year to help
Connecticut's small businesses access much-needed capital. The
investment is already paying off. The first company to access
the credit is planning to double its workforce as a result of
We enacted a Job Expansion Tax Credit program, providing a
$500 tax credit to employers for each new employee, or a $900
credit for new hires if that employee is disabled, unemployed,
or a veteran. And I must say, I am particularly concerned about
helping our returning veterans, and especially our disabled
veterans, find jobs upon their return from service.
We expanded the capacity of our Manufacturing Reinvestment
Account program, allowing small manufacturing companies to
deposit domestic gross receipts into interest-bearing accounts
to use for business expenses.
But when it comes to job creation, we didn't stop there.
Early on, I announced a plan to develop Connecticut's version
of a research triangle, focused on bioscience. This research
triangle is coming to life more quickly than any of us thought
Shortly after my Bioscience Connecticut initiative was
announced, we began to have conversations with Jackson
Laboratories, a world-renowned, Maine-based research institute
that does pioneering work in the field of personalized
medicine. Just 2 days ago, in fact, our Bond Commission
authorized $291 million in state funding for Jackson
Laboratory's new $1.1 billion personalized medicine project on
the campus of the University of Connecticut Health Center in
Farmington. The Jackson Laboratory for Genomic Medicine will
accelerate the development of new medical treatments tailored
to each patient's unique genetic make-up. Permanent jobs
associated with the facility are projected to total more than
6,800 over 20 years, including thousands of new construction
During the coming 2012 legislative session, we will tackle
the next component of our economic development strategy:
In the next few days, I will announce a set of proposals
that will put my state in the forefront of this debate. From
reforming tenure to addressing how we help students in low-
performing districts, everything is on the table. If our kids
are going to compete in the 21st-century marketplace, we can't
put these reforms off any longer.
I am encouraged and optimistic about the progress we have
made in Connecticut and the prospects for future growth. We
still have much work to do, and I will be tireless in pursuing
pro-growth economic strategies while being a responsible
manager of the state's budget.
Chairman Kline, thank you very much, to the committee
members and yourselves, for allowing me to testify, and I look
forward to your questions.
[The statement of Governor Malloy follows:]
Prepared Statement of Hon. Dannel P. Malloy, Governor,
State of Connecticut
Chairman Kline, Ranking Member Miller, and Members of the
Committee, thank you for inviting me to testify about what we in
Connecticut are doing to accelerate economic recovery and foster job
When I took office last January, Connecticut had the largest per
capita deficit of any state in the nation and we'd had no net job
growth over the last 22 years, an unwanted distinction that my state
shares only with Gov. Snyder's state of Michigan. Over the last
thirteen months, we've made tough decisions to get our fiscal house in
order. We passed a budget that bridged a $3.5 billion deficit,
implemented Generally Accepted Accounting Principles, and reached an
agreement with our state's public employees that will save taxpayers
twenty one and a half billion dollars over the next 20 years. We cut
spending by $1.7 billion dollars and raised revenue. Just last week, we
announced a commitment to increase the size of our pension payments, a
move that will avoid a balloon payment of $4.5 billion dollars in just
20 years, and one that will save taxpayers nearly six billion dollars
over the next twenty years.
We've set our state on the road to recovery, and while I know we
still have a long way to go, we are seeing signs of improvement. Our
unemployment rate has fallen to 8.2%--the lowest point in two and a
half years--and last year we experienced job growth--9,000 new jobs--
for the first time since 2008.
In Connecticut, as is the case across our nation, the issue of the
day is and remains job creation.
One of the first actions we took on the jobs front was an
initiative called ``First Five,'' a package of tax incentives intended
to spur job creation. First Five is designed to attract large-scale
business development projects by augmenting and combining the state's
best incentive and tax credit programs for the first five companies
that create 200 new jobs within two years, or invest $25 million and
create 200 new jobs within five years.
But First Five was just one part of what needed to be a wholesale
change in the way we approached job creation. Working with our partners
in the legislature, we took the extraordinary step of convening a
special session on jobs, the result of which was a bipartisan bill that
we believe will make Connecticut more competitive in the global
marketplace. That bill passed in one day legislative session, with just
one no vote in each chamber of our General Assembly.
Our jobs bill includes the Small Business Express Program. We're
investing $50 million per year to help Connecticut's small businesses
access much-needed capital. The investment is already paying dividends,
with the first company to access the credit planning to double its
workforce as a result of the funding.
We enacted a Job Expansion Tax Credit program, which provides a
$500 tax credit to employers for each new employee, or a $900 credit
for new hires if that employee is disabled, unemployed, or a veteran.
I'm particularly focused on helping our returning veterans,
particularly our disabled veterans, find good jobs upon their return.
For their service, we are all in their debt, and we should do
everything we can to help their transition to civilian life.
And we expanded the capacity of the Manufacturing Reinvestment
Account program, which allows small manufacturing companies to deposit
domestic gross receipts into interest-bearing accounts to use for
These initiatives encourage the private sector to create jobs and
make Connecticut a more attractive place to grow or start a business.
But when it comes to job creation, we didn't stop there.
Early on, I announced a plan to develop Connecticut's version of a
research triangle. By utilizing the world-class resources we have in
two of our state's most iconic institutions--the University of
Connecticut and Yale University--that research triangle is coming to
life more quickly than any of us thought possible.
Shortly after my Bioscience Connecticut initiative was announced,
we began to have conversations with Jackson Laboratories, a world-
renowned, Maine-based research institute that does pioneering work in
the field of personalized medicine. Just two days ago, in fact, our
Bond Commission authorized $291 million in state funding for Jackson
Laboratory's new billion dollar personalized medicine project on the
campus of the University of Connecticut Health Center. A collaborative
effort between Jackson Laboratory, the State of Connecticut, the
University of Connecticut and Yale University, the Jackson Laboratory
for Genomic Medicine will accelerate the development of new medical
treatments tailored to each patient's unique genetic makeup. Permanent
jobs associated with the facility are projected to total more than
6,800 over 20 years, including thousands of new construction jobs.
During the 2012 legislative session, we'll tackle the next
component of our economic development strategy--education reform. In
the next few days, I will announce a set of proposals that will put my
state at the forefront of this debate. From reforming tenure to
addressing how we help students in low performing districts, everything
is on the table. If our kids are going to compete in the 21st Century
marketplace, we can't put these reforms off for another day.
I am encouraged and optimistic about the progress we've made in
Connecticut and the prospects for future growth. We still have much
work to do and I will be tireless in pursuing pro-growth economic
strategies while responsibly managing the State's budget.
The federal government is and should continue to be a partner with
States in this effort.
As your committee considers legislation to reauthorize the
Workforce Investment Act and the Elementary & Secondary Education Act,
I encourage Members of both parties to work together and with your
counterparts in the Senate to reach consensus so that legislation can
be signed into law this year.
Regarding WIA, don't consolidate programs or cut funding for
programs simply to meet a deficit reduction target. Consolidation of
programs may allow states more flexibility to deploy resources to meet
the needs of our workforce, but not if you cut overall funding. For the
long-term unemployed, in particular, the need for current job skills is
paramount. And as I said before, I'm particularly concerned that we do
everything we can to assist our returning veterans. The unemployment
rate among these heroes is unacceptably high. We should not scrimp on
retraining our unemployed and underemployed workers to fill jobs in
high-growth industries. And those jobs are out there waiting to be
filled. I hear that all the time from Connecticut employers. But they
need a highly-trained workforce. Only then will we achieve sustainable
economic growth that benefits all Americans.
In his most recent State of the Union address, President Obama
outlined sensible, pro-growth policies that dovetail with what we're
striving to achieve in Connecticut: Returning our primary and secondary
education system to preeminence; Ensuring that our community colleges,
technical schools, and job training programs work hand-in-hand with
business and industry to train workers for the jobs that our employers
need to fill right now; Encouraging businesses, particularly
manufacturers, to continue their operations in the United States or
return their operations to our shores; Addressing the high cost of
energy by diversifying our portfolio and investing in new, alternative
energy technologies; and strategically Investing in research and
As a nation, our economy is growing and jobs are being created.
Congress can help accelerate this process. Business profits are back to
their highest point since the Great Recession started. But national
unemployment remains high and is depressing domestic demand for the
goods and services our nation's businesses are producing. Stimulate
that demand. Congress can extend the Payroll Tax cut and federal
Unemployment Insurance benefits through the end of this year and keep
money in the hands of people who will spend it now. In addition, I urge
Congress to pass legislation that incentivizes companies sheltering
profits overseas to repatriate those profits if they translate into
more jobs. Given the economic and fiscal turmoil in Europe, and the
lingering effects of the tsunami in Japan, the United States is a safe
haven economy among the developed nations of the world and we should
take advantage of that. In addition, to accelerate job growth in
construction trades and to help clear the stock of homes on the market,
the first time homeowner tax credit should be restored and extended.
Finally, I recognize that the overarching debate in the Halls of
Congress is the budget deficit. This problem wasn't created overnight,
and fixing it will be a long-term process. This must be a bipartisan
process that recognizes that neither side can get everything it wants;
else deficit reduction and long-term economic growth will not be
sustainable. That is the course I pursued when I set out to close the
largest per-capita state budget deficit in the nation. But the
political fights over the past year that have driven the federal
government both to the brink of shutdown and default do not serve our
country well. The uncertainty stemming from those tumultuous fights
reverberated among State and local governments, in financial markets,
and around the kitchen tables of our citizens. It is not too late to
proceed in a sensible, strategic, and bipartisan fashion. I urge both
sides to do so.
Chairman Kline, Ranking Member Miller, members of the Committee,
thank you for the opportunity to testify. I look forward to addressing
Chairman Kline. Thank you very much, Governor, both
governors. We really do appreciate your time and your insight.
It is fascinating that you share a distinction that maybe a lot
of people wouldn't want to share, but it looks like you are
addressing it in exciting ways.
Because we have people coming and going, I am going to
defer my question period. I understand Mrs. Foxx has agreed to
defer hers for a few minutes. And so I will recognize Mr.
Walberg for questioning.
Mr. Walberg. Thank you, Mr. Chairman. And had I been given
the opportunity to defer, I might have, but I appreciate the
opportunity to go.
Governor Snyder, again, thank you for being here.
Appreciated your opening comments, as you talked about
developing employment talent, the three C's, having a B-12
education system, so forth and so on, that we are certainly
concerned with and, from my perspective, would much rather see
states embodying all these concepts and moving the knowledge
and talent and workforce P forward as opposed to the federal
government so involved.
And so let me ask you if you could develop even further
your ideas, as well as concerns, along the line of what federal
education regulations are making it harder for you to
accomplish your goals in Michigan, and in what ways on the
positive side can we be of greater support, encouragement, aid
and comfort to you as a state executive and with the state
legislature, moving that whole idea of developing a workforce
that is trained and ready and expanding.
Governor Snyder. Well, I appreciate your question,
Representative Walberg, because it is a real challenge that
there are many federal programs--there are dozens of federal
programs. And we actually spend a lot of time on
administration, overhead, a lot of additional costs, rather
than actually helping people. And in too many cases, we are
giving people skills and training where there may not even be
And so this is where the connecting part comes in, as I
mentioned. We have 70,000 open jobs in Michigan. We have a lot
of people that want to find a job. But, one, that mechanism
didn't previously exist in terms of a role the government can
play, in terms of a clearinghouse coordinator, not a money
spender. And then, secondly, the piece of that is, is we should
never tell people what they have to study, but shouldn't we
create a path where they can find success by having good
So on this Web site, for example, we have a career skill
matchmaker, and we have a career investment calculator, so
people can literally look at different careers to say what they
should go into, because there are opportunities and jobs.
So, again, if you were to redo programs instead of making
them prescriptive, but to have programs that say we are going
to hold you accountable for connecting with jobs, if you were
going to hold us accountable to see how many employers are we
working with and developing joint programs with, those are all
great metrics, and then just give us the flexibility to deliver
on that and partner with you on doing that.
Mr. Walberg. In my role as the chairman of the Workforce
Protection Subcommittee, we provide oversight to various
aspects of the Department of Labor. One of those primary
programs within the Department of Labor is OSHA.
In the course of some of our hearings, we have found out
that many states have, like Michigan, MIOSHA, Michigan OSHA,
that is given the primary responsibility for regulating the
onsite workforce protections program, working with job
In my travels around the district, I have talked with many
employers who are finding great benefit, great help, great
partnership with MIOSHA, as the inspectors work with them, as--
and in the past have been much more partnering with them, as
opposed to citing them and fining them.
In recent days, we have been hearing an uptick specifically
coming from OSHA encouraging MIOSHA to be more involved with
citing and finding and hearing the concept of regulation
through shaming, as it were. If that has been noticed by you,
how are you continuing to focus the real partnership that a
state regulator can be in helping employers and employees in
making sure that, while we have a safe workplace, we have a
workplace to come back to the second day?
Governor Snyder. No, excellent question. And what I would
say is this is something that I found even at the state
government, because MIOSHA is performed over OSHA in Michigan
by far, in terms of that, but that was not good enough, that
there is too much of a culture even out of Lansing--because
most employers don't want to have someone show up and say, ``I
am from Washington,'' or, ``I am from Lansing, and I am here to
As a practical matter, what we are trying to do now is
create an environment where the goal of our people is to
perform their fiduciary duty and to do that very responsibly,
but it is not to punish people. It is to have people succeed.
And so the philosophy that we are doing training with all
of our workforce people, all our MIOSHA and all state
employees, is to empower them more, where actually they feel
that they are a value-added contributor in partnership with
their employers and helping most employers to succeed.
The average businessperson is a good, honest person. There
are some bad people out there, and we should really go after
them. But instead of trying to create barriers, let's help them
solve their problem.
And in one program I would recommend people might want to
look at is something we did in Michigan in the agricultural
sector. It is called MAEAP. It is the Michigan Agricultural
Environmental Assurance Program, which was to help farmers
actually get pre-certified. They go through a certification
program and they get a credential to say, this means you are
doing essentially best practice. And if you have an issue,
before we can penalize you, we are going to review your records
on how we can help you be successful before they even have to
worry about being punished, because they have made a good
investment, and being smart and thoughtful.
Chairman Kline. The gentleman's time has expired.
Mr. Payne. Let me thank you for your very interesting
Let me ask both of you this question. We all know too well
that many public schools and community colleges across the
country are in desperate need of repairs, and the folks who can
make those repairs are ready, willing, and able to work, very
anxious. Every governor knows the challenges--and we do, too,
in Congress--is paying for it.
The Americans' job act directly addressed this need with a
commonsense approach to both fix schools and put folks back to
work. It is a win-win across the board. Specifically under the
AJA, the president seeks to invest $25 billion in school
infrastructure that will modernize at least 35,000 schools,
putting thousands of unemployed Americans back to work.
Both Michigan and Connecticut stand to benefit from this
proposal, and I am confident that both of you support it, and
that is going to be my question. Under AJA, Governor Snyder,
Michigan will receive nearly $1 billion for school repairs and
would support as many as 12,000 new jobs in your state.
And, Governor Malloy, under the AJA, Connecticut stands to
receive nearly $200 million in funding for school
infrastructure and will support as many as 2,400 jobs in
I just wonder if--starting with you, Governor Snyder--doyou
support this act? And Governor Malloy? And perhaps why?
Governor Snyder. Thank you for that question. What I would
say is a couple things. One is, is there are infrastructure
requirements where we do need to invest. Our schools, our
colleges, we have many other places with our communities where
they need to invest.
A couple things, though, that are typically missing are the
right metrics and, again, measures. You have to forgive me. I
am an old accountant, so I like to measure things in terms of
knowing what we are doing. But one of the challenges is, is we
have had numerous cases in the past where people would build
capital facilities without having the operating sources to
actually use those facilities or apply them.
So in many respects, we need to be much more thoughtful
about making sure, what are the highest and best asset
allocations, as opposed to simply making sure we are doing
projects, and that they are going to the jurisdictions that can
need them most? We have certain school district that would take
part potentially in these programs that really don't need those
resources, that have great facilities, and others that are
How can we make sure they are there? And how do we make
sure those follow-up funds for maintenance, for all those
things are in place? Because one of the great things I have
found in our budget that has been overlooked is proper
maintenance for even state facilities from prior years. And we
are getting caught up on that.
Governor Malloy. Let me be clear. I would be more than
happy to take $200 million. And I will take part of the
governor's billion dollars if he doesn't want to use it.
I constantly hear from the businessmen in my state, when
they travel around the rest of the world, how great other
countries' infrastructure is, and specific reference many times
made to China, as well as certain European countries. There is
a reality about the United States that we have failed to invest
properly in the maintenance of our infrastructure, but also
building new infrastructure.
We are suffering from a 25 percent unemployment rate in
some of the building trades. Any program that would allow us to
put contractors and construction workers back to work would be
a good program on its face. But the idea of tying that to
improving our educational system is an exemplary idea.
Mr. Payne. Thank you. Similar question. The American
Society of Civil Engineers awarded the United States a D in the
condition of our infrastructure, as you have been mentioning.
The--in 2009, ASCE estimated that the U.S. must spend $2.5
trillion over 5 years to meet the country's most basic
infrastructure needs, not to catch up, just the basic needs.
By conservative estimates, every $1 billion in public
infrastructure investment creates 23,000 well-paying jobs. The
Congressional Budget Office estimates that every dollar of
infrastructure spending generates on average a $1.60 increase
in our overall GDP. Critical transportation and energy projects
have even larger multiplier effects.
Giving this, I would like to ask you both, how are you
partnering with the federal government and leveraging existing
public investment in transportation to upgrade roads, rail,
ports, and reinvest in the overall infrastructure in your
Governor Snyder. Yes, we do need to invest more in
infrastructure. And I did a special message in October of last
year on that topic to our state. In roads and bridges, for
example, I said we needed $1.4 billion more a year in
investment in our state, and that is an important component.
Again, the issue is, how do we partner on doing that? And I
would like to compliment Secretary LaHood for his efforts in
the state of Michigan. He has been very proactive and good,
talking about helping develop a regional transit authority in
southeastern Michigan that we are now asking for state
legislation to move forward on that, because Detroit and metro
Detroit has been lacking in that for decades. So there is an
opportunity to partner on that.
What I would also say is, again, I would make the approach
that there are better ways to do things than we currently do
things, with the prescription measures that you can find in
some of the highway bills, though, compared to giving us more
flexibility. We still have multiple situations where we may be
making a great investment in a rest stop that we don't really
need as opposed to a bridge. And the ability to have
flexibility in making those decisions would be helpful to our
Governor Malloy. Let me comment--recently, a community in
our state--Stamford happens to be my hometown--received the
TIGER grant in an approximate amount of $10 million. That
federal government support will be matched 5 to 1 by the
I will also tell you that Connecticut is spending more of
its own dollars in rebuilding its train system on a matching
basis than any other state in the nation. I am quite certain
that if you send infrastructure investment dollars to the
states, we are capable of putting thousands of construction
workers and private contractors back to work.
Chairman Kline. The gentleman's time has expired.
Mr. Bucshon. Thank you, Mr. Chairman.
Governor Snyder, thanks for being here, and the same to
The state legislature in Indiana has recently--and this is
a state issue--taken up right-to-work, which is a controversial
subject, as you know. Governor Snyder, are there any
discussions in your state, which neighbors me, concerning this
type of action at the state level?
Governor Snyder. It is under discussion. There are a number
of legislators that are promoting that. In my perspective, as I
have made it clear, it is not on my agenda.
Right-to-work is an issue that is a very divisive issue
people feel very strongly about. And as Mr. Walberg mentioned,
I am the relentless positive action person, so we have many
problems in Michigan that are much more pressing that I want to
find common-ground issues we can work together on before we get
into divisive issues. And we are showing great success.
We balanced the budget. We did tax reform. We went through
a whole list. Important items this year that I would prioritize
include the transportation package I mentioned about
infrastructure, and we have a package on public safety. We need
to do a better job on that area in our state.
So right-to-work is an issue that may have its time and
place, but I don't believe it is appropriate in Michigan during
Mr. Bucshon. Well, because we have had to deal with that
issue, as you probably know, on this committee as it relates to
South Carolina. And do you think that--and I don't want to put
you on the hot seat--but do you think there is evidence out
there to show that it creates--that it helps states compete not
only with--with other states within the United States, but
compete globally for--for businesses? Do you think a right-to-
work-type situation is helpful?
Governor Snyder. I think there is a lot of information out
there. And one of the things I am interested in is trying to
understand what is factual information and what is kind of
perception, because in many respects, I would use some of the
success in Michigan as an example. The auto industry is a very
competitive industry now, in terms of their labor agreements
and such. So on the face of it, I don't automatically have an
answer, but I believe it is something that we should all take
the time to understand before simply people kind of revert to
their traditional positions on it.
Mr. Bucshon. Thank you. I just want to make a final closing
comment, and then--thanks for your answer.
You know, we hear a lot about the United States comparing
ourselves with other parts of the world. And I would just--at
this point, comparing what we do here to--to Europe's probably
not something I would recommend, because even though I do have
business leaders also telling me that infrastructure is better
in other parts of the world, their financial situation is dire,
as you know.
And in China, comparing ourselves to China in a lot of
areas, realize that they are rebuilding their country on the
American taxpayers. Right now, we are paying tremendous amounts
of interest on our debt to China, and they are using that money
to rebuild their infrastructure.
So I think, until we can honestly address our mandatory
spending programs in this country and to have an honest
discussion about what the direction this needs to--country
needs to go in financially, we are going to continue to find
that we struggle to find money for things that all of us agree
that we need to spend money on, including our infrastructure.
I yield back.
Chairman Kline. Thank the gentleman.
Mr. Scott. Thank you, Mr. Chairman.
I thank both of our governors for being with us today.
Governor Snyder, you mentioned 70,000 job openings in Michigan.
Have you reviewed these openings to ascertain whether your
workforce has the education or the qualifications for those
jobs or whether investments need to be made in education so
that people--so there will be a match between the workforce and
the job openings?
Governor Snyder. Yes, of the 70,000 opening jobs, I would
emphasize to you--and I encourage you to go look--these are--
most of these are good jobs. You are talking like nurses,
computer programming, accountants. These are well-paying jobs,
and the skilled trades--one I always talk about is welder. If
you are a welder in Michigan, you can get a job in about 20
minutes in any corner of Michigan.
So there are a couple of aspects. One is, is this is the
missing element from workforce development. That is why I call
it talent and connecting, is we launched mitalent.org to make
that connection, because there is a mismatch of where people
might be and where those jobs are that people simply didn't--
weren't aware of them.
The second thing is, is the site is just not about
transactions, which is just finding a job. It is about career
planning. And to go to your point about saying, if we have
employers signing up to participate in this program that they
see, there is a lot of demand and we are not seeing those
filled, we should be working with our community colleges, in
particular, our skilled trade unions, other programs to say,
how can we get in alignment to get those people the proper
training so they can succeed?
Mr. Scott. Governor?
Governor Malloy. I just would like to comment on that. It
clearly--for a long period of time in our country, we have
failed to properly train a replacement workforce, particularly
as some of our states are rapidly aging. And anything we can do
to support our community colleges, in particular, which have
the fastest turnaround, as well as the ability to offer
certification programs, would be greatly appreciated.
Mr. Scott. Well, are we finding that employers can't find
people qualified for the job openings?
Governor Malloy. I think, in precision manufacturing--and I
think the governor would agree--that that is a particular
problem. And, unfortunately, too few of our schools became
invested in training that replacement workforce.
Mr. Scott. And so investments--what I am hearing is
investments in community colleges to make sure that our
workforce can qualify for the job openings would be an
important aspect of this committee's work.
Governor Malloy. I believe that is true, as well as support
of vocational programs in our high school level, as well.
Governor Snyder. You know, one thing I would add is I would
also encourage you to look at two programs we have in Michigan.
One is called Shifting Gears, and the new version is called
Shifting Code. So these are for very experienced workers that
were in large companies, for example.
Shifting Gears was geared for people that were middle-level
and higher in terms of professional, managerial technical, and
large companies. And our goal is to encourage entrepreneurship.
And so we created this program, and it has been very successful
to say, you can't ask someone from a large company to go join a
start-up overnight and have a chance to succeed.
So it is almost cultural adjustment training, because they
have all the skills they need to be successful in being
entrepreneurs or being parts of start-up companies. So we have
done that with Shifting Gears, and it has gone so well, we are
now creating one called Shifting Code, because there are
computer programmer jobs readily available. And this would work
well for people that are my age, very experienced people, and
to get them successful in a new career.
Mr. Scott. A couple of years ago, we had the Recovery Act
that gave a lot of money to states. The only way the state can
balance its budget is essentially to fire people or stop
funding projects so somebody else can fire people. Can you say
a word about how much money each of your states got and what
would have happened to your state budget had you not gotten aid
under the Recovery Act?
Governor Malloy. Well, in my case, the monies that flowed
to the state did, in fact, replace state funds. Obviously--and
I would argue that my government in the state of Connecticut
did too little to respond beyond using those funds.
Having said that, there is no doubt that we would have
fewer teachers in our school system today if we had not
received those funds and that we would have continued a process
long underway in Connecticut of shifting the burden to local
communities, who rely almost exclusively in our state on
property taxes to survive.
It is one of the reasons that in balancing a $3.5 billion
deficit, which was structural in nature, because all of the
surplus funds from past years were being used, as well as the
ARRA money was being used, to displace state expenditures,that
I had to take a different kind of approach to balancing that
Governor Snyder. Yes, what I would say is, unfortunately,
in my view, too much of those dollars were used for replacement
dollars for operating government. As a practical matter, we
faced $1.5 billion deficit when I came because they weren't
there, and we cut the deficit.
What I would have preferred to have seen is actually those
dollars could have gone to infrastructure or other investments
that were more treated as one-time funds that could have made a
difference in the long term.
Mr. Scott. But you would have had to cut your budget even
more than you cut your budget had you not had those funds. Is
Governor Snyder. Again, if you look back at the prior few
years, though, I view it as a foregone opportunity.
Chairman Kline. Gentleman's time has expired.
Mrs. Roby. Thank you so much, Mr. Chairman, and thank you
to both of the governors for being here today. We appreciate
your time. We know it is valuable.
So, Governor Snyder, I just want to talk to you a little
bit about Medicaid, kind of switching gears to health care, and
as we know that, the new health care law significantly expands
Medicaid, and it is going to put a real financial burden, not
just on the federal government, but of course, on the states,
as well. And it is significantly underfunded. And many of us
are concerned that states cannot afford to devote these scarce
resources to their Medicare programs.
So I am just curious if you can comment on any particular
consequences that you see this current health care law having
in Michigan from your perspective in state government. And how
are we going to pay for these increased costs, not just on the
federal level, but how are the states going to be able to
handle this? And have you talked to your other colleagues,
governors, other governors, as well, about Medicaid expansion
and the impact that that is not just going to have on your
state, but all across the country?
And with that, I will listen to your answer.
Governor Snyder. No, I appreciate that question. And two
dimensions in particular. I did a special message on health and
wellness last September, because it is critically important.
One, it is critically important to the quality of life of our
citizens, but it is a huge societal cost and what it is doing
to our budget situation, in terms of the growth of health care
There are things that I don't believe have been addressed
enough why it has been a focus on other issues in Medicare and
Medicaid, in particular the dual-eligible situation is one
where if people were working better together, there is an
opportunity to hopefully provide better care at a much lower
cost, if we had more flexibility or partnered better with the
The simplest thing I say on health and wellness, though,
that people often overlook is just personal responsibility and
wellness. I launched a program called Four-by-Four. And to be
blunt, I signed up to lose 10 pounds. I gave all of my
statistics out that they wanted on blood pressure and
cholesterol. And if you ever want to see your blood pressure
during the middle of a press conference, it does go up.
And the point was, really, if you looked at in the state of
Michigan, we have a dashboard where we show 32 percent of our
population is obese. If we brought that down, if we dealt with
obesity and overweight and did basic things on health and
wellness that we have personal responsibility for, we could
probably cut our health care costs in this country by half. So
a lot of this should be us focusing on doing things that we can
all do together and playing a coordinating clearinghouse role,
leadership role, and not a spending role.
Mrs. Roby. And from the state budgetary process of where
you are, knowing that this is the current law of the land, what
direction are you heading in preparing for the impact that
these increased costs are going to have, despite the, you know,
broad brush strokes of what we know, personal responsibility,
but there are specifics that can be done, as well?
And I am just curious. I am from the state of Alabama. And
this is a huge concern for us, for our governor and our state
legislatures. They move into this next session about the
negative impact that this is going to have on our state
Governor Snyder. Yes, it is a major question, because,
again, it gets back to the concept of unfunded mandates. And I
hear that from our local governments all the time. So it is
that food chain question.
And we are struggling with that, because it is like you
have to make choices, and we have to be fiscally responsible
for the long term, because that is really the question now. And
to help deal with that, we have done a lot of reforms to
essentially deal with our long-term liabilities, like post-
retiree medical and other costs.
But, again, this will just make it more difficult for us to
Mrs. Roby. Mr. Chairman, I yield back.
Chairman Kline. The gentlelady yields back.
Mrs. McCarthy. Thank you, Mr. Chairman. And thank you for
having this hearing. I think it has been very interesting
hearing from both governors. You certainly agree on an awful
lot of things, and the way that you both have been working
toward your state to get your people back to work and looking
at the different initiatives is--to be very honest with you,
that is the initiative that we need to see here. And I hope
that, as we go into this New Year, that Congress can work
together to get things done for the country, not for political
parties. And I think both of you are perfect examples of that.
Governor Snyder, I think one of the things you brought on
constantly was to have the flexibility to work between your
state and the federal government, which is important. And I
know that, you know, we have been hearing an awful lot on some
of the resources that we gave out to try to bring this
recession back has been working.
So I guess my first question to you is on the flexibility
point. Do you believe that the federal government, the
intervention in the auto sector infringed on this principle,
the principle meaning about the flexibility and working
together in the partnerships? The decision is widely recognized
as a success and one that did save thousands of jobs. Would you
characterize this particular program as a success?
Governor Snyder. Yes, with respect to the auto question,
which is critically important to Michigan, because we are--I am
proud to say, we are the auto capital of the world--if you
looked at it in terms of perspective, what I have said and what
I believe is, if it would involved one individual company, it
wouldn't have been appropriate, because that is what bankruptcy
processes are for.
This was a situation that merited additional involvement
and attention, because it wasn't about two companies. Those two
companies would have brought down the entire industry, that I
am not sure Ford would have survived if the supply base would
have collapsed. So it was a broader issue.
Then you get into the specifics of how it was done. And
what I would say is, is one choice was taken. There are other
choices that were viable. And I don't see any value from my
perspective of trying to second-guess or quarterback after the
fact on those.
It was important something was done and that our industry's
viable now. And so that was a success in that regard.
Mrs. McCarthy. And I agree. Listen, you know, this
particular recession I think caught everybody way off-guard.
And, you know, some were looking at solutions that were done in
the 1930s. That is not the world we live in today. There is a
global economy out there, so we have to work together.
The other thing that both of you have stressed is
education. That is why many of us sit on this particular
committee, the future. And you talked about the different
initiatives that--the educational needs, and especially for
those that are out of work.
I spend a lot of time with my schools in BOCES, which,
unfortunately, an awful lot of parents think it is not good to
send their child to a vocational school. And yet when I went
and visited them and saw the jobs that they were training for,
mainly because they have partnerships with the businesses in
the area, where are the jobs going to be in 3 years, 4 years, 5
years? That is something that I think that we need to see a lot
more done with that.
But I also--reading the testimony, Governor, I saw that you
had said that consolidating programs or cut funding for
programs simply to meet a deficit reduction target,
consolidation of programs, allow more states more flexibility
to deploy resources to meet the needs of our workforce, but not
if you cut overall funding.
And I think that is important, especially as we are seeing
the states right now cutting back on education, making
decisions on whether they are even going to cut back on school
time, which this is not the time to do it. If you could address
that, I would appreciate it.
Governor Malloy. Well, as someone who has served in
different governmental capacities for a number of years--and
frequently had to interface with the federal government--I came
to understand that the combining of programs normally was
attached to the reduction of funds flowing for the stated
If you are combining programs to create synergies and there
is a desire to maintain the funding, I am sure we can spend the
money very effectively in our states to put people back to
work. But if we are combining programs simply to cut money out
of those programs, I can assure you, we need that money.
I would also like to tell you that in Connecticut, we call
the president's effort around the auto industry ``Obama-car.''
And I want to comment that I think it was a strategic
investment--that it had implications even in our own state. The
support of manufacturing in the United States is terribly
important. And I absolutely agree with the governor that the
assistance given to that industry reverberates in all of the
states where there is precision manufacturing currently taking
Chairman Kline. The gentlelady's time has expired.
Mrs. McCarthy. Thank you.
Chairman Kline. Mrs. Foxx?
Mrs. Foxx. Thank you, Mr. Chairman.
And I want to thank both of the governors for being here
today, also, and I want to pick up on something that my
colleague, Mrs. McCarthy, brought up a minute ago. I would also
highlight that comment in Governor Malloy's presentation where
he said, 'don't consolidate programs or cut funding for the
program simply to meet a deficit.'
If you or someone on your staff will read carefully the WIA
bill which we have prepared, it shows very clearly that we
don't intend to cut any funding. However, we intend to get a
lot more value for what is being spent. And I think it is
really important that we point that out, because there is no
intention to cut the funding there.
I will, though, also point out that federal dollars are not
manna from Heaven. They are taxpayer dollars which are simply
brought to the federal government, a lot of them wasted, and
then some of them sent back to the states. I believe that in
most cases the money could be spent much more effectively if
they were simply going to the states to begin with.
But, anyway, let me, again, thank you all for being here.
And I want to say, particularly to Governor Snyder, I
appreciate the very positive comments you made about the new
WIA bill, which has been introduced, and which we hope will
move forward in this session.
I want to point out in the summary that I have about the
bill that it mentions--allows governors, empowers governors,
all throughout that bill, we do a lot to give much more
authority to the states. We allow competitive grants,
consultation with the governors. Throughout, again, we have
changed, I think, the entire perspective of how we would
operate these programs.
And I appreciate the fact that you have talked about talent
development or creating talent, because I rail against using
the term ``job training'' and training individuals, because as
my colleagues have heard me say often, you train dogs and you
educate people. And I like the idea of talent. And I think that
is a good word we need to try to put into the bill somewhere,
if we can, along with the term ``workforce development.'' And I
like that perspective. And I would say to you, we need a lot
more accountants and more people who want accountability and
results and bring a fresh perspective to this issue.
I would like to ask each of you--and I know you are not
prepared to answer this question today--but I was in the State
Senate in North Carolina for 10 years. And one of the things
that the Republicans proposed over and over was the
consolidation of all of these workforce programs so that we
could save money at the state level in administrative costs.
And particularly, Governor Malloy, I would like to get some
feedback from you, when you go back to Connecticut, and from
Governor Snyder, also, on how much money could you save at the
state level with this consolidation? And what efforts would you
see the state being able to promote that you are not able to
promote now under the existing structure?
Because I want us to start this consultation with the
governors right now. Please give us your feedback. The state of
North Carolina would have saved a lot of money even 10 years
ago when we talked about this. And so I would like to ask you,
would you, Governor Malloy, send that information back?
Governor Malloy. Sure.
Mrs. Foxx. Governor Snyder?
Governor Malloy. Sure. I am sure my staff behind me has
already made a note of your request, and we certainly will
attempt to do that.
Let me be very clear: I believe in consolidation. As
governor of the state of Connecticut, in my first budget, I
proposed a consolidation of 30 separate state agencies,
actually doing that by over a third. And in this budget that I
am presenting on February 8th, we do it again.
And I want to be very clear: Consolidation for the purposes
of identifying funds to attack problems that exist and to do
away with duplicate requirements is something that I absolutely
Having said that, with respect to the WIA program, we have
used that program very effectively in a number of different
ways around job funneling, job training, and talent
acquisition. So I look forward to working with the Congress of
the United States on that very point. I think we can, in fact,
I am not against flexibility, but I have to share my
experiences garnered over a 25-year period of time. Frequently
when I have seen the federal government combine programs, it
has led to reductions in the monies available to apply to local
issues, where I served for 14 years as the mayor of Stamford,
and now I fear on a statewide basis in state government.
Mrs. Foxx. Mr. Chairman, I would just like to say to
Governor Snyder, thank you for highlighting the fact that there
are 70,000 open jobs, because I think that is the case all over
this country. And more needs to be said about that to show that
we need to match talent. We need to educate people as to where
the jobs are. And I think--I hope you will continue to do that.
Chairman Kline. The gentlelady's time has expired. I know
that Governor Snyder was itching to comment, and I am sure you
will get a chance coming up here.
Ms. Woolsey, you are recognized.
Ms. Woolsey. Thank you, Mr. Chairman. And thank you to both
of our governors. I am sorry I left. The Science Committee has
just--the Republicans have just disallowed ABC, HBO, and an
independent news network from covering the fracking hearing. So
as a member of that subcommittee, it was important to go up and
try to turn that around. We did not prevail. So I am sorry I
missed your testimony.
So, Governor Snyder, Michigan, thank you for having a
successful independent state OSHA, and because--so does
California. And I think our OSHA program is steps ahead of the
federal program, and the feds continue to learn from these
I understand that, while I was gone--that is why I told you
why I was gone--Chairman Walberg--I am the ranking member on
his Subcommittee of Workforce Protection--mentioned that there
is an overlay of federal regulations over state regulations.
And I don't know if he specifically referred to OSHA.
But just recently, he has said that he was in his district,
he visited one of his companies who had just been visited by
the state OSHA program, and right behind that, the feds' OSHA
came. Well, we have done an investigation. I mean, we have
tried to find out what company that was and why they were
there, because that would not be appropriate.
Have you looked into that at the state level? I mean, why
would that happen? Why would we be wasting money in that
regard? And do you know any more about it than I do sitting
right here today?
Governor Snyder. No, not that particular situation.
Ms. Woolsey. Well, okay, I think it is worth looking into.
We have asked over and over for the chairman to tell us what
the company was and--so we can figure out how that all
happened. So I think that would be an example of great waste of
funds and the wrong use of federal regulators. But thank you
Governor Malloy, you in Connecticut are on the cutting-edge
in so many ways. And you have a progressive--you have
progressive work-life policies and a new law that requires
businesses to pay sick leave when employees can't work due to
illness. I would like to hear straight from you if the state
economy has been compromised or if the state economy and health
care system have benefited in regard to this sick leave policy?
I mean, have you lost jobs?
Governor Malloy. No. Since the passage--and ultimately, the
enactment--of that law, we have actually gained jobs and
lowered our unemployment rate in the state of Connecticut. It
is a special program. It takes a period of time for employees
to earn the right to paid sick time.
But let me be very clear: We did it not as a matter of
convenience, but we made the ultimate decision that having
people who prepare your food come to work sick doesn't make any
sense. People who care for your parents or grandparents in a
nursing home coming to work sick doesn't make any sense. And
people caring for our children in daycare programs coming to
work sick does not make any sense.
Ultimately, we decided that we would be a healthier state,
a safer state if we moved in that direction with respect to
service employees. And that is exactly what we did.
Ms. Woolsey. And the cost to the state?
Governor Malloy. I don't believe there ultimately is a cost
to the state. The idea that people are going to abuse a program
simply because it exists really is not supported by the data.
Ms. Woolsey. Thank you. Thank you very much.
And just quickly, Governor Snyder, do you agree that the
federal government plays a major role in helping improve the
economy? Did the feds not help the auto industry in Michigan?
Governor Snyder. Well, the auto industry was a unique
circumstance, and that was successful, and I was asked that
earlier, so I appreciate the question.
What I would say is that one of the things holding back our
economy very clearly, talking to any Michigan employer, is the
challenge of dealing with the federal deficit here. And that is
an issue that needs to be resolved, because as a former
businessperson myself, the number-one thing you want from
government is certainty and confidence that you know what you
are dealing with. And if you don't know what the rules are, you
are not going to take undue risk.
And this is a risk sitting out there for all our employers.
So I really encourage Washington to address that issue, because
that is holding back job creation in our state.
Ms. Woolsey. Absolutely, and the lack of customers is also
Chairman Kline. The gentlelady's time has expired.
Mr. Heck. Thank you, Mr. Chairman, and thanks to both of
you being here today. And I appreciate your testimony.
Governor Snyder, I was really interested in your comments
on workforce investment and your job connection program. Being
one of the--having the companion WIA bill along with Mrs. Foxx,
my bill deals with governance and policy over WIA.
And the question I have is, how were you able--or what kind
of response did you get to the idea that you were going to have
to move people from the jobs they might have been in to jobs
that were going to exist?
And I ask that because I represent southern Nevada. We have
the dubious distinction of having the highest unemployment rate
in the nation, driven largely in part by the 70,000
construction jobs that we have lost over the last several
But we had a field hearing on workforce investment out in
Las Vegas. And I asked one of the local analysts, economists
what they thought about those 70,000 jobs, and would they ever
come back? His answer was, no, we will never be back to that
level of construction in Nevada where we will have those jobs.
Next to him on the panel was a representative of one of the
buildings and trades unions. And I asked that gentleman, what
was he doing to prepare his members for the jobs that will
exist, since it is apparent the jobs that did exist aren't all
coming back? And the answer was, well, we just need you to
spend more money on infrastructure so we can put them back into
jobs that did exist.
So what did you do differently in Michigan to get the buy-
in of moving people from what did exist to what will exist?
Governor Snyder. Well, I appreciate the question,
Representative. And I appreciate your sponsorship, along with
several other members here, of the ideas about putting metrics
in workforce investment. And I clearly support that.
It is an ongoing process. It is not done yet. But a lot of
it is, is getting the facts out to people. And I will go back
to an illustration that I mentioned earlier about a welder
being a job that anyone--if you are a welder, you can get a job
in 20 minutes in Michigan. And how many people knew that?
But the other part is, is if you go to the average parent
or the average student or someone even out in the workforce, do
they actually know what a welder does? Do they actually know
how much a welder makes? Do they actually know where a welding
program is? The answer is no.
And so that is why this portal concept of this Web portal
that--mitalent.org is so powerful, because we are putting those
career skill tools on there and then we are going to try to
encourage people to get the facts.
And I will give you one question that is really
interesting, if you go back to the auto industry illustration,
that the auto industry is hiring, and they are actually
concerned about having enough workforce for the future, but now
they have to get over the perception that you don't want to be
in the auto industry because it goes through difficult
And if you want a job in an auto plant nowadays, you can't
simply just say, ``I am coming out of high school, and I am
going to work.'' Quite often, you need to go to a community
college and get a couple of years of technical training to work
on the floor of an auto plant today.
So those are all kinds of things that is an ongoing
process, but I am proud to say I think we are helping lead the
country in being proactive. And that is why I encourage--
workforce development is great, but it is not enough. Talent,
the three C's, connecting, collaborating, and creating.
Mr. Heck. Again, and, Governor Malloy, any similar efforts
in Connecticut? Or how are you moving, getting people from jobs
that may have existed in Connecticut to the jobs that you
foresee in the future in Connecticut?
Governor Malloy. We attacked this issue--by the way, I
agree with the governor on this point, as I have on many of the
points that he has made. In our bipartisan jobs bill, we
actually allocated funds to take an award-winning program at
one of our community colleges, Asnuntuck, which has been in
existence this program for 12 years, training in precision
manufacturing and re-training folks who may have lost their
jobs in lower-lever manufacturing to be in precision
manufacturing, with a 98 percent to 100 percent placement rate
upon completion of that program.
But what I found when I became governor is that that
program had not been replicated in any of the other community
colleges in the state. In our bipartisan job program that we
passed and I referenced in my prior testimony, we are going to
replicate that program in three additional community colleges,
with operating dollars, and we are going to replicate it in
three of our vo-tech schools in the state, so that we will
actually graduate people from high school or from community
colleges who will be prepared to take those precision
manufacturing jobs. Why that connection was never made, I don't
But I want to make one quick point on that. One of the
reasons I consolidated our community colleges, of which we have
12, with our four regional universities within the state and
our online university is to make sure that our higher
educational program in the state of Connecticut is more
responsive to the needs of the companies, start-ups, and long-
term companies that are finding it difficult to get the right
And so I think both the governor and I are working on that
program, having identified it as a tremendous need. We have
thousands of precision manufacturing jobs going unfilled in
Connecticut right now as we speak. I hope that that will not be
the case in a relatively short period of time, and that is why
we are putting so much emphasis on rebuilding and redirecting
our community college programs.
Mr. Heck. Thank you. And thank you both. I congratulate you
on your innovative programs.
Thank you, Mr. Chair. I yield back.
Chairman Kline. The gentleman's time has expired.
Mr. Hinojosa. Thank you, Chairman Kline and Congressman Don
I am pleased to see such a distinguished first panel of
governors here for our committee discussion on job creation.
Today, I want to urge my colleagues to work in a bipartisan
manner on a jobs agenda that creates jobs at home, educates our
young adults, and reignites the American dream. I certainly
support that last discussion that you had on supporting the
federal investment made in community colleges.
As you know, U.S. Congress has not reauthorized WIA, which
we passed in 1998. I think that is shameful. Governor Malloy,
in your testimony, you urge us to reauthorize it. What are your
top--and this question is to Governor Malloy--what are your top
three priorities that we in Congress should look at to reform
WIA and improve the job training program for the next 5 years?
Governor Malloy. Well, let me say that WIA is an important
program, which I think Connecticut has used quite effectively.
And so I am not here to criticize the program. What I am saying
is,we have done the right thing. We have used the dollars to
train and continue to train folks to take positions that they
were formerly unqualified for.
We have an award-winning program around the employment of
veterans, which is of special concern, given how many veterans
are returning from the two wars that we have been engaged in.
I am sure that this committee is capable of making that a
stronger and better law, but I, again, will reiterate that it
needs to be sustained. Flexibility is okay as long as
flexibility is not coupled with a reduction in the funds that
are made available.
I think both--the governor of Michigan and myself are
capable of directing those funds to be properly spent in our
states. We both identified a common problem that we recognize.
And so I just would really urge the committee to get its job
done. And let's get a law renewed and let's make sure that
those dollars are flowing to our states so that we can put
people back to work and train them properly.
Mr. Hinojosa. Well, you need to know that, in the 13 years
that we have operated with that 1998 WIA act, we saw lack of
accountability and we saw that in some areas, some regions of
the country, the WIA money they got, used 60 percent of it for
fixed costs, administration, all sorts of fixed expenses, and
only 40 percent or less was used for training of the adults.
And so I think that that needs to certainly be reformed and
that we could put a cap at, say, 40 percent or less for the
fixed expenses and have 60 percent for actual training.
But you mentioned returning veterans. And I am pleased,
because I agree with you that we must do everything possible to
assist these veterans in acquiring good jobs and careers, with
so many of them already coming--have come back from Iraq and
then a few will start coming back from Afghanistan. We really
need your thoughts on how you plan to reduce the unemployment
rates for veterans in your state.
Governor Malloy. Well, I am sure the governor and I both
agree that this is an important societal issue. People are
returning from the two wars and deployment, in many cases with
very good skill sets, but, again, those skill sets may not
match what is needed. So we need to make it affordable and easy
for our returning service personnel to access programs in our
community colleges, certificate programs or programs that will
qualify for degrees, and we actually just need to make a
Our Labor Department in our state is doing that. I have
asked all my commissioners to be mindful of that. We are
talking to all of our private and public universities to make
sure that they understand that this is a special obligation
that we owe to the people who have served us.
Mr. Hinojosa. I agree with you.
Let me ask a question of Governor Snyder. You know that we
are very concerned about our young teenagers and young adults,
particularly Latinos and African-American. Their unemployment
rate is so very, very high. What are you doing in your state to
address that problem and that group so that they can get jobs?
Governor Snyder. That is a very timely question, because we
are doing our budget message next week, and one element of that
that will be included is something geared at the structurally
unemployed. Because you are right on, in terms of saying,
particularly our young people in our urban areas, we need to do
And so part of our view is, is let's put a very focused
effort on that. One area in particular that I think is worth
drilling down on is the concept of supply chain analysis. And
that is an illustration of asking our current larger employers
to say, who do you buy from? Who do you do work with? And there
are opportunities to make things work.
One illustration that we use was as simple as laundry. We
have a very large health care community in metro Detroit that
does tons of laundry. We actually found that some of them
actually have their laundry done out of state. And why aren't
there opportunities for entrepreneurs that create organizations
that would be very good at employing entry-level-type positions
to create jobs right in some of these communities?
So in one of those ways, again, it is not about the
government, but us playing that coordinating resource to say,
can we work with companies and their supply chain analysis? And
we have created a program statewide called Pure Michigan
Business Connect, but can we put that in particularly
Mr. Hinojosa. Your suggestions are good, but I want to be
sure that you all are on the same page with us, that the
African-American young teenagers and young adults and the
Hispanic are the two that have the highest unemployment rates,
and we have got to focus those efforts that you just gave us on
being able to address them.
Chairman Kline. The gentleman's time has expired.
Mr. Ross. Thank you, Mr. Chairman.
Speaking of economic development, I want to thank Governor
Snyder, because my hometown is Lakeland, Florida, the spring
training home of the Detroit Tigers for the last 75 years, and
we are at that time of year now where your constituency is
migrating to my area for economic development purposes, and I
thank you for that. [Laughter.]
To both governors, the NLRB decision in specialty health
care case allows for the creation of many unions. Like-kind
vocations can now unionize, as well as the NLRB's promulgation
of rules that expedite the voting for unions from 90 days to 14
days. These are significant impacts for organized labor. And I
think it would have significant impacts on job creators.
And my question to both governors--and I will start off
with you, Dr. Snyder--is, do you support these efforts by NLRB?
And how will they, if they happen, impact your efforts as a job
Governor Snyder. Yes, one of the challenges--it would be
much like some of the other issues--is I view that as just
creating divisiveness, because all you are going to do is
create environments where people are at conflict. And we
shouldn't be wasting time on things where we are going to get
into conflict. We have too many important issues to solve. We
waste way too much time on arguing about things rather than
finding common ground and solving problems.
Mr. Ross. Would you see any reason to change the status
Governor Snyder. No. My view is, is let's find areas where
we agree on. I mean, if you listen to the testimony here, you
can hear about infrastructure issues, so many things, workforce
development, on showing results. Let's find--again, relentless
positive action is my motto. Let's find common-ground solutions
where we agree, solve our problems, show results, and we will
find we are closer together. And we have got a lot of things to
work on before we get into fights.
Mr. Ross. Governor Malloy?
Governor Malloy. You know, I just want to say that I
believe the right to unionize is actually guaranteed by our
Constitution. And taking steps to allow individuals to come
together for the purposes of collective bargaining should not
be seen as an evil, just as I would not argue----
Mr. Ross. No, I agree. But in terms of changing the status
quo, I think--would that not negatively impact your efforts as
Governor Malloy. Well, you know, if you look at the history
of this discussion, there was a movement around card-check,
which was not successful. Card-check came about because of the
frustration of folks who would want to become organized, that
once they got to the point where an election was to be held,
there was no timeliness in the holding of that election or of
that vote. So anything that would speed the vote taking place I
think actually works to the favor of the work environment. You
get a yes or a no. People----
Mr. Ross. So you have no problem with expediting it to 14
days for union elections?
Governor Malloy. No, I think an expedited process--the
exact time of which, I think, could be open for----
Mr. Ross. And you don't feel that would impact your efforts
as a job-creator?
Governor Malloy. I don't. Actually, the gentleman from
South Carolina talked about the right-to-work state or
movement. Quite frankly, Connecticut's unemployment rate--as I
sit here today--is lower than South Carolina's. And we have a
more unionized workforce. So I think that people will make an
argument around their belief, but they are not always
substantiated by the facts.
Mr. Ross. Let me ask both governors. You have the
requirement for a balanced budget, don't you, in Michigan and
Governor Malloy. All states do.
Mr. Ross. You--okay.
Governor Snyder. Yes--not good enough, though, if you look
Mr. Ross. I agree with you. And something else that we
have, on the federal level, state level, and local levels, of
course, is our pensions. And my question--and you addressed,
Governor Malloy, in your opening statement, and I appreciate
that, with making reforms. Is your pension plan in Connecticut
a defined benefits plan or defined contribution plan for state
Governor Malloy. It is a defined benefits plan.
Mr. Ross. And is that something that you think needs to be
changed to a defined contribution plan so that there is an
opportunity to make sure that it is fully funded?
Governor Malloy. No, I would--my approach is different. If
state government had honored its commitment and properly funded
the program over a period of time, I would not have inherited a
program that was 41 percent, 42 percent funded.
Mr. Ross. But the fact that they cannot fund it, is that
not indicative of the fact that it was not an appropriate
measure that the state should have taken and now should
renegotiate, because how else are you going to fund these?
Governor Malloy. No, I fundamentally disagree that defined
benefit programs are, by definition, an evil. They do----
Mr. Ross. Well, I have not said it was an evil. I am just
saying that it is a burden on your state, in terms of funding.
Governor Malloy. They do require discipline. And in the
absence of that discipline--for instance, one of my
predecessors had negotiated language that did not require the
pension plan to be funded on a true actuarial basis. In fact,
in my opening remarks and in my testimony, I point out that we
would have had a $4.4 billion balloon payment on that pension
obligation negotiated by one of my predecessors. Obviously,
that is wrong.
Mr. Ross. One quick question before I go, because I see my
time is running out.
I firmly believe in states' rights, and I think that that
is very important. There is a measure recommended by the
president's debt commission, the Simpson-Bowles commission,
which eliminates all corporate tax loopholes and would reduce
the corporate tax rate flat to 28 percent.
Now, I believe that something like that would not only be
an incentive for economic development within our country, but
it would allow states to leverage to use tax policy to compete
with other states for economic development. How do you both
feel about that?
Chairman Kline. The gentleman's time has expired. I am
Mr. Tierney. Thank you, Mr. Chairman.
Mr. Chairman, as you know, Governor Deval Patrick of
Massachusetts was invited today to testify but was unable to
make it. I would ask unanimous consent that his written
testimony be allowed onto the record.
[The information follows:]
Prepared Statement of Hon. Deval L. Patrick, Governor,
State of Massachusetts
To the members of the Committee on Education and the Workforce: I
regret that I am unable to join you today in person to discuss this
critical subject of expanding opportunities for job creation. Job
creation is the single greatest challenge facing our Commonwealth and
our Nation. Thank you for accepting written testimony in my absence.
Like every state coping with the Great Recession, we cut spending
and headcount, and slimmed down or eliminated programs. But we also
chose to invest in education, in health care and in job creation--
because we all know that educating our kids, having health care you can
depend on, and a good job is the path to a better future. Indeed,
having spent most of my career in private business, I understand that
growth comes from investment, not cuts, and that government must do its
part to help people and businesses help themselves.
As a result of that strategy, we moved from 47th in job creation in
2006 to 5th in the nation in the last two years. Our state's economy is
growing faster than the national rate. Our students lead the nation in
overall achievement and the world in math and science. We lead the
nation in health care coverage with over 98% of our residents insured.
And we have not only closed our budget gaps, eliminated our structural
deficit, and achieved the highest bond rating in our history, but
also--with labor at the table--made the kinds of meaningful reforms in
the public pension system, in municipal health benefits, in our
schools, and in our transportation bureaucracy that had eluded my
predecessors for decades.
I would like to explain briefly why this strategy of public and
private investment and collaboration is working in Massachusetts, has
worked under President Obama, and could do even more with closer
collaboration between the Congress and the administration.
Under President Obama, our country is growing jobs again and
steadily recovering from the global economic recession. We have added a
total of 3.2 million private sector jobs over the last 22 months.
American manufacturing is creating jobs for the first time since the
1990s and our American auto industry is stronger than ever. Today,
American oil and gas production is the highest it's been in eight
Thanks in large part to the good news on the national level,
Massachusetts is making gains in our economic recovery. In the past
year, Massachusetts has added 45,600 private sector jobs and our
unemployment rate dropped to 6.8%, well below the national rate of 8.5%
and the lowest monthly rate since December 2008.\1\ A recent Business
Journal analysis ranked Boston first in the nation and Worcester third
in the nation for job growth for the second quarter of 2011.\2\ Of the
top 20 cities in America for economic recovery, according to the
Brookings Institution, three are located in Massachusetts: Boston,
Worcester and Springfield.\3\
None of that is by accident. It's because we have a strategy built
on making both investments and reforms for the future.
We invest in education because it is the single best investment
government can make. In each of our state budgets since I took office
in 2007, we have set new records for support for our public schools.
The ARRA funding enabled us to keep this commitment through the worst
of the Great Recession. In addition, as a top scorer in the National
Race to the Top Competition, Massachusetts was awarded $250 million and
an additional $50 million through the President's Early Learning
Challenge. We use these funds to bolster our efforts to increase
educator effectiveness, turn around underperforming schools and provide
educators with the tools they need to ensure that all students are
prepared for success in the classroom and beyond. We will continue to
invest in our education because we believe it is an investment in our
One of the most pressing challenges facing our Commonwealth and
this country is a skills gap. Jobs (especially middle skills jobs) go
unfilled because many of those seeking work lack the skills to join the
new, knowledge-based economy. I share President Obama's belief that
community colleges are uniquely qualified to fill that gap. I am proud
to partner with the President on his initiative to utilize the talent
and resources of our community colleges to develop programs that fit
the needs of the modern workplace and help people get back to work.
Our Commonwealth chooses to invest in innovation because we know it
is how we will compete and win in the global economy. For example,
through our $1 billion, 10-year Life Sciences initiative, we have
already invested over $200 million in public resources and generated
more than $700 million in private investment and thousands of new
jobs.\4\ Our clean energy sector has seen a near 7% growth rate over
the course of a year,\5\ thanks in part to the near quarter of a
billion dollars in clean energy and weatherization investments through
the American Recovery and Reinvestment Act (ARRA).\6\ In these and
other innovation sectors, state and federal government support for
basic and applied research has been critical. Continuing these efforts,
the President outlined a series of energy proposals in his State of the
Union last week and I look forward to working with him and the Congress
to move these forward.
Finally, we invest in infrastructure because it is the foundation
upon which everything is built. Through $1 billion in ARRA funding for
transportation related projects,\7\ and a robust state capital program,
we have invested in critical infrastructure: road, rail, bridge,
broadband and other projects in every corner of our Commonwealth. These
have created jobs for thousands, and also a platform for private sector
growth into the future. Like every other state, the list of neglected
maintenance and modernization is long. The Congress could help the
economy now and beyond by substantially increasing investment in public
ARRA has undoubtedly helped. Since the beginning of the program,
over 93,300 individuals have received an ARRA-funded paycheck in
Massachusetts.\8\ Even as the ARRA winds down, we were able to report
to the President just this week that during the last quarter, nearly
9,900 individuals received an ARRA-funded paycheck. On a national
scale, ARRA is responsible for producing or saving as many as 4.7
million jobs in 2010.\9\ These were meaningful jobs as teachers, public
safety officers and construction workers, doing meaningful work. Rarely
in neither my business life nor my public one have I met serious
business persons and entrepreneurs who believe that the government has
no role to play in economic development in good times, let alone
economic recovery in tough times like these.
At the same time, we have seized the moment to make significant
reforms in state government, to deliver services more efficiently and
Three years ago we streamlined our sprawling transportation
bureaucracy saving the state millions while improving customer service
and accountability.\10\ Though our transportation system is still
underfunded, we are better positioned to make the case for new funding
because we can show that chronic and conspicuous waste and duplication
has been eliminated.
In 2010, we passed the next chapter in education reform to set new
standards for teachers, encourage a greater level of classroom
innovation, and close persistent achievement gaps. We are seeing the
results all around the Commonwealth in higher test scores and better
Last year, I signed the third phase of pension reform legislation
that raised the retirement age and ended the ability for state
employees to ``double dip.'' This reform will generate over $5 billion
in pension fund savings over 30 years, including an estimated $2
billion for cities and towns,\11\ and make the system sustainable into
Last summer, we passed municipal health care reform to deliver
meaningful savings to cities and towns to help them better maintain
services for their residents while preserving quality and affordable
health care for municipal employees. The reform allows cities and towns
to redesign employee health care plans to get the same or better
coverage and more advantageous cost. We are on track to far exceed the
initial estimate of $100 million in savings for local governments
statewide, a portion of which is shared with employees through health
reimbursement accounts, wellness programs and other similar
These reforms have or will deliver meaningful cost savings. Many
have been proposed in the past, but we have been able to get them done.
Collective bargaining is not an obstacle to reform. Indeed, labor has
been at the table as true partners to help achieve these results.
In no case is that more evident than the story of Massachusetts
health care reform. In 2006 then-Governor Mitt Romney, working together
with a Democratic state legislature, a Democratic United States
Senator, and a broad coalition of business, labor and health care
leaders and advocates came together to invent our health reform bill--
and the coalition stuck together to adjust it as we implemented and
refined it. That bill was an expression of shared values, our belief
that health care is a public good and that everyone in Massachusetts
deserves access to it.
Today, thanks to effective implementation, more than 98% of
Massachusetts residents have health care coverage, including 99.8% of
our children.\13\ Many more private companies offer their employees
insurance now than before the bill was passed. More than 90% of our
residents have a primary care physician.\14\ People no longer have to
fear having their insurance cancelled when they get very sick and need
it most, or that a serious illness will leave them bankrupt.
Health care reform is good for economic growth. Before health care
reform, and before the recession, Massachusetts was 47th in the nation
for job creation.\15\ Five years later, with expanded coverage and in
the midst of the recession, we rank 5th.\16\ Matt McGinity, the CEO of
a small technology company in Natick, outside of Boston, bought health
insurance through a program created by the Commonwealth Connector, our
version of the Health Exchange. The program, called Business Express,
is an online service to help small businesses easily shop for private
health care and find the best possible value. Using Business Express,
Matt was able to compare health plans side-by-side and avoid a 23%
premium increase his current insurer was proposing. He and his
employees saved $9,300.
I met a young entrepreneur last year who moved his business up to
Massachusetts from Florida because, with a young family, he wanted to
be able to start his venture without worrying that his children would
not have health insurance. Universal coverage helps our competitiveness
and attracts new people to Massachusetts.
As the cost of health care rises nationwide, we have taken
aggressive steps in government and in collaboration with the industry.
To rein in sharp increases proposed two years ago, I directed the
state's Commissioner of Insurance to reject excessive premium hikes.
Insurers sharpened their pencils and rethought their approach. Two
years ago, average premium increases were 16.3%. Today, they are
1.8%.\17\ Hospitals and insurance carriers have reopened their
contracts and cut rate increases, in some cases by more than half. We
created limited network plans to give consumers opportunities to get
great care in neighborhood settings at lower cost.
The rising cost of health care is not unique to Massachusetts and
we have more to do to address it. We need to put an end to the ``fee-
for-service'' model. We need to stop paying for the amount of care and
start paying instead for the quality of care. Working with the
legislature, we expect to pass health care cost containment legislation
later in the year to give us more tools and flexibility to manage
consumer costs without returning to rate regulation. Just as we lead
the nation in health care reform, I believe Massachusetts will crack
the code on health care cost containment.
We have a lot of good news to share, but there is more we can do.
But the point is that our successes in Massachusetts are a direct
product of our ability to work together--my administration and the
Legislature, state government and federal government, government and
business, labor and business. That's because we have decided to turn to
each other, rather than on each other. On the whole, our state
Legislature has given me the tools I have asked for. I can only imagine
how much further we'd be if the Congress had given the President the
tools he asked for, when he asked for them. According to at least one
source, the U.S. economy would have received a two percent boost under
the President's jobs plan this fall and the unemployment rate would be
one percentage point lower than it is now.\18\ We would be out of this
recession sooner rather than later.
Nationally there are actions we must take:
We need prompt extension of the payroll tax cut, the Temporary
Assistance for Needy Families (TANF) program, and federal funding for
extended unemployment insurance benefits. These provisions provide high
levels of economic benefit for millions of Massachusetts residents and
are critical to our continued progress.
I ask Congress to work together in a bipartisan way to reauthorize
the Elementary and Secondary Education Act and the Workforce Investment
Act so that we can prepare our country for the jobs of today and
tomorrow. Investing in education and skills training is how we will win
I ask Congress to reconsider the proposed Infrastructure Bank, and
other means to make significant re-investments in our public
We need to take a closer look at our tax code and use it to reward
companies that create jobs in America, rather than punish those that
do. We need to take action to encourage more businesses large and
small, to invest or reinvest in the American workforce. We each need to
invest in our people again.
I support proposals to reform our tax code, so that it is simpler
and fairer. I believe that should also include a reasonable increase in
the share that the highest-income Americans currently pay. Like the
President, I celebrate the good fortune of others and am blessed to
have had some of my own. The answer to good fortune is not guilt--it is
responsibility. We all have a responsibility to ourselves, our
communities and our country. Once we all accept that responsibility, we
can better make the kinds of investments that will grow jobs and
strengthen our economy, for now and for the future.
Why is all this important? Because I believe, as does the
President, that government is not about solving every problem in
everybody's life, but rather about helping people help themselves. I
ask Congress to give the President the tools he needs to finish the
job. In the midst of economic challenge, we can build a stronger
country than we started with--not just for ourselves but for
generations to come.
I look forward to hearing the committee's findings and I hope that
together we can work together to grow jobs for our future.
\1\ Executive Office of Labor and Workforce Development.
Massachusetts Unemployment Rate Drops to 6.8%. 19 January 2012.
\2\ Boston Business Journal. Boston is No. 1 in quarterly job
ranking of major metros. 8 August 2011.
\3\ Brookings Institute. MetroMonitor. September 2011.
\4\ Massachusetts Life Sciences Center. Massachusetts: A Healthy
Choice for Innovative Life Sciences Companies. Sept. 2011.
\5\ Massachusetts Clean Energy Center. 2011 Massachusetts Clean
Energy Center Industry Report. October 2011.
\6\ Massachusetts Recovery and Reinvestment Office. Recovery Act
Spending in Massachusetts. 31 Dec. 2011
\7\ Massachusetts Recovery and Reinvestment Office. Massachusetts
Funding Overview. 31 Dec. 2011
\8\ Massachusetts Recovery and Reinvestment Office. Recovery Act
Jobs in Massachusetts. 31 Dec. 2011.
\9\ See, http://www.cbo.gov/ftpdocs/119xx/doc11975/11-24-ARRA.pdf
\10\ Office of Governor Patrick. ``Governor Patrick Signs Bill to
Dramatically Reform Transportation System.'' 26 June 2009.
\11\ Office of Governor Patrick. ``Governor Patrick Signs Pension
Reform Legislation.'' 18 November 2011.
\12\ Office of Governor Patrick. ``Governor Patrick Signs Municipal
Health Care Reform to Save Millions for Massachusetts Communities.'' 12
\13\ Commonwealth Health Insurance Connector Authority.
\14\ Massachusetts Health Care Reform 2011 Progress Report. 2011.
\15\ MassTaxpayer's Association. US States Job Growth:2002-2006.
\16\ ``We are fifth in job growth (as a percentage of total
employment) for 8/09 to 11/11.'' Data compiled from the Bureau of Labor
\17\ Weisman, Robert. ``Harvard Pilgrim Cuts Health Premium Rate
Increase.'' Boston Globe. 31 Jan. 2012.
\18\ Goldman Sachs Group Inc., Moody's Analytics Inc. and JPMorgan
Chase & Co. 10 Sept. 2011.
Chairman Kline. Without objection.
Mr. Tierney. Thank you very much.
Governor Snyder, Governor Snyder in particular, I note in
Governor Patrick's written testimony here, he is quite proud of
the fact that Massachusetts made certain gains, as you are with
the work that has been done in Michigan. He has a quote in
there, that growth comes from investment, not cuts, and
government must do its part to help people and businesses help
themselves. And he goes on to talk about Massachusetts was 47th
in job creation in 2006. Now even during the last couple of
years of recession, it has got to fifth on that. And he is
proud that students lead the nation in overall achievement in
both math and science and that we lead the nation in
Massachusetts in health care coverage, covering over 98 percent
of our people on that basis, that he has closed his budget gap,
eliminated structural problems on deficit on that, and has a
higher bond rating than they have ever had in Massachusetts on
He talks about adding 45,600 private-sector jobs in
Massachusetts and that the unemployment rate dropped from 8.5
percent to 6.8 percent, all on what he says is his strategy,
building on investments and reforms, whether it is pension or
health care, in those areas.
He talked about the Recovery Act, being helpful in allowing
him to maintain his commitment to education, his commitment to
innovation, where he put $1 billion over 10 years into life
sciences and $250 million into clean energy, was able to work
with basic and applied research issues and infrastructure on
But I noted in looking at michigan.gov, that you don't take
a backseat to much of that, and you have done well on that with
your recovery funds. Your governor--previous governor said that
54,000 jobs were created. And I noted that you had actually,
back in May of last year, made note of the fact that there was
a serious investment in your rail in Michigan.
And your quote was that accelerated rail service has the
ability to enhance our economy, environment, and overall
quality of life, and that an investment of that magnitude
spurred economic development in your communities, in that you
are able to say that it was critical to Michigan's recovery. Do
you agree with that still?
Governor Snyder. Yes, I have said--actually, I gave a
message saying--calling for $1.4 billion of additional
investment in transportation infrastructure in our state. The
one thing that goes with that, because one of the challenges
is, it is a difficult economic environment is--a lot of our
citizens don't believe we have demonstrated best practice and
how we are deploying those dollars.
So one of the things that goes along with that is us being
more prudent about showing that we have metrics, we have
measures, we are being held accountable, and we are being
transparent in those features, but they go together.
Mr. Tierney. That is good. And I also noted that, on the
Recovery Act, you had $1.35 billion in advanced battery grants,
and now Michigan claims to be the leader in automotive
batteries on that. Does that still hold true?
Governor Snyder. What I would say on the battery credit is,
it was done when I got there. One thing is, I am not a believer
in picking winners and losers or using tax credits at the state
level, in particular.
To go to the earlier representative's comments, we re-did
our tax system to make it simple, fair, and efficient, so we
have wiped out almost all tax credits that we offered to
corporations and eliminated a tax that was on unincorporated
entities and put in a flat 6 percent corporate income tax. And
my belief is that it will be a better job greater than having
the Michigan business tax, which was the dumbest tax in the
Mr. Tierney. Well, the Recovery Act monies that you put
towards the advanced battery grants, does that still remain in
Governor Snyder. That is in use. Again, they are there. I
hope they succeed. It is great to have them in Michigan. But
one thing, when I looked at the budget this year and I have a
budget for the next several years, I start at minus $500
million in the hole to cover the cost of those credits.
Mr. Tierney. How many teachers do you think you were able
to retain on the payroll and your various cities and towns in
Michigan as a result of the Recovery Act money that was
allocated to education?
Governor Snyder. I view that as just speculation, because
the question--and, again, this is the way I felt about the
dollars, in many respects, is too often we use those for
operating costs as opposed to good capital investments that
were one-time dollars that we could have put in the long term,
while at the same time we adjusted our cost structures, because
we now shown we can adjust those cost structures, be more
efficient, and give better service to our customers, and
actually hopefully provide better education.
Mr. Tierney. And, Governor, do you agree with that?
Governor Malloy. Well, what I would say, specifically, in a
budget that I inherited, a prior administration had used $270
million of ARRA money to cover a cut to local governments in
support of local education--or education, pre-K through 12, in
the state of Connecticut.
That $270 million, if I had not covered that in reworking
the budget and addressing the $3.5 billion deficit, would have
led to a loss of thousands and thousands of jobs for teachers,
administrators, and paraprofessionals in our school system, our
school systems. So let me assure you that it was one of my
highest priorities to make sure that we bridged that gap that
had occurred, which is another way of saying they used the ARRA
money to keep teachers employed.
Mr. Tierney. Thank you.
Chairman Kline. The gentleman's time has expired.
Mrs. Biggert. Thank you, Mr. Chairman. Thank you for
holding this hearing. And thank you both for being here.
Governor Snyder, I certainly share your frustration with
the highly skilled international students who have gone through
our graduate schools and then--I call it the brain drain,
reverse brain drain, and they are having to go home and do the
creativity and the innovation that we need in those foreign
countries, rather than remain here. And I hope that we will be
able to--Congress will put aside the partisanship and really
work out a way to keep them here.
But I am also very concerned about our students and why
they aren't meeting the requirements that we think they should,
and particularly I think we all--most of my colleagues and I
really think that the STEM education is really important. And
we need to find a way to get more students interested in that.
And I was--one of the studies that--the gathering storm,
the National Academy has put out, was saying that we need to
have the creativity and that innovation if we are going to be
competitive in the global economy.
And I don't think we are when we see Finland as the number-
one school in that area. And I think the United States ranks
24th or 28th, I forget which, but it is very low, that we need
to do something about that. And you talked about the
significant lack of college students in Michigan in the STEM
type of program. Why do you think that that has happened?
Governor Snyder. Well, one, it comes back to the concept of
accountability and measurement and student growth. What I have
said clearly in Michigan--and we did education reform this last
year on a significant basis--because it needed to be done as--
we spend a lot of money there, but we are not getting outcomes
that are acceptable. Only 17 percent of our kids were college-
ready. If you go to our community colleges, about 60 percent of
the kids have to take a remedial class before they are
qualified to take an entry-level class. That is a travesty.
And a lot of it, if you look at it, there is not enough
emphasis on student growth, and it is not just about
standardized tests. My view is, is students should have a
portfolio of work that travels with them that they can really
And our goal is, is not to create competition between
districts, but the measure we want to have in Michigan is to
say, what do we need to do to create an environment where we
can measure to see that each and every student is getting at
least 1 year's worth of education each and every year, and then
giving them some of these other tools with connecting, about
showing them where careers actually are?
Because, to be blunt, most parents and kids think of
doctor, lawyer, teacher, nurse, all the standard things, and
how many people ever thought about being a marketing person or
accountant or a computer programmer, where the jobs are? So
that is where we need collaboration to work together, so that
is where I talk about talent and the three C's.
Mrs. Biggert. Do you think that we--when do you start that?
I mean, would you start in preschool, kindergarten, to really--
Governor Snyder. Yes, I re-characterize it. I don't use the
term early childhood, K-12, community college. I call it P-20.
Our goal is literally prenatal through lifelong learning. And
we have erected barriers and silos to make it difficult for
these kids to go through our system that are mainly artificial
constructs of either money or old institutions and lack of
And so we are working hard on creating a fairly seamless
system for people to move through it. We call it anywhere,
anyplace, anytime, any way that you get your education, and it
is a great opportunity. Cyber schooling, cyber learning in
particular, married with traditional education, done right is a
Governor Malloy. I would agree with the governor. And that
is exactly what we are doing in Connecticut, as I appear before
you. We need a seamless system. We need to make it easy for
people to acquire the skill sets necessary for our
corporations, our employers to succeed.
I do want to join your comments with respect to the ability
to retain talent that we are training in this country. It
really is a travesty that we are not retaining that talent once
we have educated it here and have people who express a desire
to remain here and to be part of our filling a void that
I do want to also say that I think we need to speak to our
young people differently about what it takes to be successful
in the world. We have precision manufacturing jobs in both of
our states that pay in excess of $100,000, and yet we are
unable to pay those. We have children who say they want to be a
pilot someday, but we don't explain to them that that is going
to require STEM skills.
We need to have a different conversation from our earliest
moments, but certainly from the time a child arrives in our
school system, and we need to help direct those young people to
areas that are going to lead to full employment. We have not
done that. And that is why we have a structural deficit with
respect to the skill set or the talent set necessary to match
the employment needs that our country currently has.
We can't do that rapidly enough to fill that void. It is
one of the reasons that we are, in fact, giving a credit to new
hires or for new hires, because we as a state understand that
not having done a good job in training a replacement workforce,
it is not--it is in our best interest to subsidize an employer
being engaged in that training.
Mrs. Biggert. I thank you both.
Chairman Kline. The gentlelady's time has expired.
Mr. Altmire. Governor Malloy and Governor Snyder, thank you
both for being here. I realize--we all realize this is a
difficult time for you, budget season coming up. You are going
to be called upon to make very difficult decisions, as we are
here in this committee and in this Congress.
I wanted to revisit a difficult decision that we had to
make, Governor Snyder, which you have addressed a couple of
times now, and you mentioned in response to Mr. Tierney's
question about the need for best practices in deploying
taxpayer dollars and how critically important that is, to make
sure that it is a wise use of taxpayer dollars.
And in answering the question earlier, you emphasized your
support for paying attention to the deficit, making sure that
we are reducing the deficit. I supported the balanced budget. I
voted for it when it was on the House floor, and I think that
was the right decision.
But we do occasionally have to make extraordinarily
difficult decisions on allocating federal resources, one of
which was the auto recovery plan. And you have talked about it
a couple of times, but I just wanted to get your sense in
thinking about whether or not, was that an appropriate use of
taxpayer resources? Did this Congress do the right thing in
promoting the auto recovery plan?
Governor Snyder. Yes. As I had mentioned, Representative,
already, that in many respects, it wasn't about one individual
company. It was actually the entire auto industry that was in
jeopardy, and that would have been a major catastrophe for our
The solution was successful. It is great to see the success
of the auto industry.
In hindsight, you can go back to say there could have been
other ways to do it that probably would have been more
efficient. I don't waste time on that analysis. It is done. And
the exciting part we should be proud about is the auto industry
is moving ahead.
And we need to be supportive of that, but that is the point
about making sure they have the right skill trades to succeed.
So that is why I am excited to testify here today is, is they
have a major talent question. And to be open, workforce
development on its own is not a good enough answer. We need to
do a better job of collaborating and connecting with them.
Mr. Altmire. I appreciate that. And I asked that question
once again to ask this question to both of you. A couple of
decisions we are going to have to make in short order deal with
the extension of unemployment insurance and transportation and
infrastructure on a federal highway bill.
Starting with unemployment insurance, could I ask Governor
Malloy and then Governor Snyder, how important is that to your
individual states that that gets done? What is your opinion of
what we should do? And if it does not get extended, what would
be the impact to the citizens of your state?
Governor Malloy. Well, let me begin with the quick answer.
If it is not extended, 51,000 people will be without benefits
in the state of Connecticut at the end of February. That number
will grow to 71,000 by August. It would have an extremely
detrimental effect on our state's economy, and it might be a
destroyer of relationships, of homes, cause apartments and
houses to be lost. I urge you to address this issue as rapidly
as you can.
I can't imagine being one of those 51,000 people in my
state who is on the verge, potentially, of losing that benefit,
the sole benefit that keeps family and home together. And
obviously, the lost purchasing power of 51,000 people in my
state would be reflected in all aspects of commerce in our
You know, we have an extraordinarily--for our state--high
unemployment number, even at 8.2 percent, and even having
fallen by over 1 percent in the past year. But we are making
progress. There is a better day ahead of us, but to suddenly
cut 51,000 people, or 71,000 by August off, I think would
actually slow the recovery very substantially.
Mr. Altmire. Governor Snyder?
Governor Snyder. Yes, what I would say is, is I don't
believe it is really appropriate for me to make that call, in
many respects, on unemployment, on transportation, because
there are so many good things. You can go individually and take
one of these things and make a good argument.
But the challenge is to prioritize, because we need to be
like a family, where we don't have unlimited resources, and so
the challenge isn't to say they are all good things, but what
has to be done and what do we have to give on? And that is
where I encourage Congress to work together with the
administration to come up with a solution.
That is what I had to deal with last year, when I had $1.5
billion deficit. We partnered with the legislature on making
tough calls. We made tough cuts to some programs that in many
respects ask for sacrifice from people. At the same time, I am
proud to say we stood firm on Medicaid reimbursement and
actually adding dollars to child services.
Were the other things we cut also good things? They were
probably good things, but we had to do our job in a difficult
circumstance, and I encourage everyone to work collectively to
make that happen.
Mr. Altmire. Thank you, Mr. Chairman.
Chairman Kline. I thank the gentleman.
I thank you both governors for your time, and your
testimony, and answering our questions, and sometimes re-
answering the question. I applaud your efforts in trying to
connect education and job training to the jobs that are out
And, Governor Snyder, you used the word ``talent.'' I think
that word, ``talent,'' is going to start bubbling up here all
over the place and three C's and so forth, but both of you
trying to make that connection, which we have seen broken,
frankly, all across the country.
We have held field hearings in Pennsylvania and in New York
and Nevada, as Dr. Heck said. And so often what we hear is that
the community colleges, the for-profit colleges, the
universities are not connecting with where the jobs are and
what businesses need. You have both addressed that issue. And
we are going to continue to look at that.
Again, I thank you both very, very much. And we look
forward to talking to you again. And we will ask the second
panel to come forward.
It is now my pleasure to introduce our second distinguished
panel of witnesses.
Ms. Kellie Johnson is president of ACE Clearwater
Industries, a company of 210 employees that builds complex,
formed and welded assemblies for the aerospace and power
generation industries. Ms. Johnson serves on the board of the
National Association of Manufacturers and as the chair of
National Association of Manufacturers' Small and Medium
Manufacturers Group. She also serves as a member of the U.S.
Department of Commerce's Manufacturing Council.
Dr. Jared Bernstein is a senior fellow at the Center on
Budget and Policy Priorities. Prior to this position, he served
as chief economist and economic adviser to Vice President Biden
and was a member of President Obama's economic team. Before
joining the Obama administration, Dr. Bernstein was a senior
economist and the director of the Living Standards program at
the Economic Policy Institute in Washington, DC.
Between 1995 and 1996, he held the post of deputy chief
economist at the U.S. Department of Labor. Dr. Bernstein holds
a PhD in social welfare from Columbia University.
Dr. Matthew Mitchell is senior research fellow for
economics at the Mercatus Center at George Mason University.
His primary research interest include economic freedom and
economic growth, government spending, state and local fiscal
policy, public choice, and institutional economics. That is
Dr. Mitchell currently serves on the Joint Advisory Board
of Economists for the Commonwealth of Virginia. Dr. Mitchell
received his PhD and his master of arts in economics from
George Mason University. He received his undergraduate degrees
in political science and economics from Arizona State
University. And I have no idea what those school colors are, so
we will move on.
Before I recognize each of you to provide your testimony,
let me again explain our lighting system. I think most of you
were here before. It is a green, yellow, red system, green when
you start, yellow when you have got a minute left, and red when
your 5 minutes are up. Please try to wrap up your testimony
when you see that red light, to sort of finish your thought,
and then we will go, as we did before, through members and have
a chance to ask questions.
So we will start--we will go in the same direction. Ms.
Johnson, you are recognized.
STATEMENT OF MS. KELLIE JOHNSON, PRESIDENT,
ACE CLEARWATER INDUSTRIES
Ms. Johnson. Thank you, Chairman Kline, and distinguished
members of the committee. I greatly appreciate the invitation
to participate in the hearing today.
As Chairman Kline mentioned, I am Kellie Johnson, president
of ACE Clearwater Enterprises. We manufacture complex
components for the aerospace and power generation industries at
three locations in Southern California. The company was started
by my grandfather more than 60 years ago, and we employ over
200 of the best men and women in our industry.
Today, I would like to discuss the issues that are facing
the small and medium manufacturers in the United States. And as
a manufacturer, I was heartened by the considerable emphasis
President Obama put on manufacturing and competitiveness in his
State of the Union address. And if we are to make good on
President Obama's pledge to make America the best place on
Earth to do business and the premier location for manufacturing
investment, we must take immediate action to reclaim
manufacturing as the foundation of the American economy.
When jobs are the number-one issue on everyone's mind, we
know that manufacturing is a known and proven solution. It is a
catalyst that generates American jobs across many industry
sectors. We know it is what has helped create and sustain the
middle class. And it is a hard-working engine that drives our
But manufacturers in America faced a competitive crisis. It
is 20 percent more expensive to do business in the United
States than it is compared to our nine major trading partners.
It is 20 percent more expensive, and that excludes labor.
And this cost gap is not the work of our competitors, but
it has been self-inflicted by Washington. It has been self-
imposed, this cost gap. We have added to our cost burdens. We
have erected new regulatory barriers and done little to spur
the innovation that has for so long been America's greatest
advantage in the global economy.
There is an enormous and growing set of threats to
manufacturing competitive, and our success will depend on the
method and extent to which we work together to address these
issues. Many of the problems are not new, but what has been
missing is a shared strategy for decisive action. Now is a time
for urgent attention and action if we are going to prevent more
American manufacturers from closing their doors.
There is a perception from manufacturers that we are
operating in a hostile work environment with the overreach of
the NLRB and the EPA. As manufacturers, we need a positive
message from Washington. Manufacturing is at a pivotal point in
our country's history, especially for the small and medium
manufacturers that make up the supply chain.
As an aerospace supplier, we operate in an environment
where tightly integrated supply chains need to be the reality.
We have become integral partners, not just suppliers in the
value chain. But increasingly, my customers will migrate to
places that care about manufacturing and where the most robust
infrastructure and supply chain exists to conduct their
The uncertainty of our regulatory and economic environments
makes it almost impossible for short-or long-term growth,
especially for capital-intensive industries like manufacturing.
As manufacturers, we know firsthand our regulations are
challenging, time-consuming, complex, redundant, and change a
lot. Taxes, fees, mandates, and regulations are currently
enacted without considering their cumulative and dynamic
impact. The more unpredictable the business environment, the
less likely it will be a competitive place to do business. We
need stable and predictable pro-growth policies to create jobs
and remain competitive.
ACE Clearwater last year spent $250,000 on compliance
costs, environmental compliance costs, in addition to over
$40,000 in consulting fees. We have more than 42 labor laws
that we comply with that have their own set of sub-tier
compliance standards, as well, which requires us to use third-
party administrators on many of our programs and to retain
legal services that amount to more than $52,000 annually.
And I mention all of this because the compliance costs for
small business is about 125 percent more than it is for large
companies. We do not have the advantages of the economies of
scale, and so therefore our costs are disproportionately
higher. And the reality of these costs are driving innovation
out of the supply chain, because we are doing all we can just
to stay in business.
And innovation, as we know, in this global economy is a
strategic must. If we lose our ability to innovate, we lose the
ability to manufacture. And without manufacturing, innovation
is just a good idea.
As manufacturers, we have been running hard for the past
decade to stay competitive. We have cut our costs from our
supplies to our energy usage. We have leaned out our processes,
and we have made huge investments in people and technologies.
Over the last 8 years, ACE Clearwater has invested more
than $1 million each year in people, facilities, and equipment.
And during that time, many states, like California, my home
state, lost a large percentage of their industrial base and
earned anti-business reputations.
My concern is, as California goes, so goes the rest of the
country. Our utility costs are 50 percent higher. We have lost
33 percent of our industrial base over the last decade. And
once the home of aerospace for the United States, we no longer
has an OEM headquartered there.
But I believe government can play an extremely important
role along with business in shaping the competitiveness of
manufacturing. The NAM recently released a manufacturing
renaissance, four goals for economic growth, and I believe we
could find common ground on how to achieve these goals in order
to lower the cost of doing business in the United States and
make us more competitive.
I see that my red light is almost on, so I will make it
really short. I just want to end by saying that, in my written
testimony, I have many ideas and suggestions for improvements
going forward, and I would just ask you please to take a look
at those, and that we need to bring rationalization and balance
to manufacturing, because our competition is global, relentless
and unforgiving. But we are resilient, tough, innovative, and
driven to succeed.
If we act with a common purpose to fuel innovation and
rebuild our industrial base, we will ensure American
manufacturing remains the best in the world.
Chairman Kline. Thank you, Ms. Johnson.
Ms. Johnson. Thank you.
Chairman Kline. And all of your written testimony will be
included in its entirety in the record.
Ms. Johnson. Thank you.
[The statement of Ms. Johnson follows:]
Prepared Statement of Kellie Johnson, President,
Ace Clearwater Enterprises
Good morning Chairman Kline, Ranking Member Miller and
distinguished members of the Committee. Thank you holding this hearing
I am Kellie Johnson, president of Ace Clearwater Enterprises based
in Torrance, California. Established in 1949, Ace Clearwater employs
205 people who manufacture, in three facilities located in Southern
California, complex formed and welded assemblies for the aerospace and
power generation industries. I have been leading Ace Clearwater since
1985 and am proud of the fact that it has become the manufacturer of
choice for some of the United States' largest aerospace companies.
I also serve as a member of the National Association of
Manufacturers' (NAM) Executive Committee and Chair of NAM's Small and
Medium Manufacturers Group. In addition, I am the Co-Chair of the
Manufacturing Council's Subcommittee on Competitiveness. On behalf of
small and medium-sized manufacturers, thank you for the opportunity to
discuss the current concerns and struggles facing manufacturers today.
The United States is the world's largest manufacturing economy,
producing 21 percent of global manufactured products. Manufacturing
supports an estimated 17.0 million jobs in the U.S.--about one in six
private-sector jobs. Nearly 12 million Americans (or 9 percent of the
workforce) are employed directly in manufacturing--this is roughly the
equivalent of the entire populations of Pennsylvania, Illinois or Ohio.
Based on these numbers, the NAM developed a ``Manufacturing
Renaissance,'' setting forth a four-point plan for economic growth and
jobs, which will enable the U.S. to compete and succeed in the global
economy. The plan focuses on ``investment, trade, the workforce and
innovation. It sets a path for sustained global competitiveness.'' The
goals are as follows:
Goal 1: The United States will be the best place in the
world to manufacture and attract foreign direct investment.
Goal 2: The United States will expand access to global
markets to enable manufacturers to reach the 95 percent of consumers
who live outside our borders.
Goal 3: Manufacturers in the United States will have the
workforce that the 21st-century economy requires.
Goal 4: Manufacturers in the United States will be the
world's leading innovators.
I would like to focus my testimony today, however, on the issues
facing small and medium-sized manufacturers. There are several
structural cost disadvantages that our largest trading partners do not
face. These costs and disadvantages stem from the imposed costs from
Washington through constantly changing regulations. As an example of
the disadvantage, according to the Small Business Administration the
costs for small business to comply with these regulations are 110
percent higher than those of medium-sized companies and 125 percent
higher than large companies.
We need a positive message from Washington and our success will
depend on the method and the extent to which we can cooperatively
address the concerns and consequences of these regulations affecting
manufacturers like Ace Clearwater. The uncertainty of our regulatory
and economic environments makes it almost impossible for short or long-
term business growth, especially for a capital intensive industry like
manufacturing. As a result, my customers may make the decision to
migrate to places they believe care more about manufacturing.
The regulations coming out of Washington are challenging, time
consuming, complex, sometimes redundant, constantly changing and
uncertain. For example, take the health care law passed two years ago.
There is so much uncertainty about how this law will be implemented it
makes future planning for businesses and employees nearly impossible.
As manufacturers, we need stable and predictable pro-growth
policies to create jobs and remain globally competitive. We find
ourselves, however, stuck between the rock of crushing economic
circumstances and the hard place of inflexible and proliferating
regulations. The result and consequence of the current environment is
that innovation is being driven out. If we, as manufacturers, lose our
ability to innovate, we lose the ability to manufacture.
Particularly troublesome, the National Labor Relations Board (NLRB)
has issued a number of decisions and new rules, which alter the
landscape of employer-employee relations. In some cases, the Board
overturns decades-old precedent of labor law. This is creating friction
in employer-employee relations where it need not exist and adds
confusion and uncertainty into the workplace.
The National Labor Relations Board has issued two rules in the last
year that bring into question whether it is acting within its authority
and following the charge given to it by Congress. First, the posting
notice rule was issued despite the Board having no notice posting
authority authorization. In a further overreach, the Board fabricated
an entirely new unfair labor practice and extended the statute of
limitations on all unfair labor practices if there is non-compliance on
the posting notice. The National Association of Manufacturers filed
suit against the Board for this overreach and was later joined by the
Coalition for a Democratic Workplace, The National Federation of
Independent Business and the National Right to Work.
The second rule employers have serious concerns about, compresses
the time from which a petition for representation is filed and the
actual election is held. Commonly referred to as ``quick-snap'' or
``ambush'' elections, the effect of this new rule is to stifle open
dialogue between employers and employees and restrict or outright strip
rights employers currently have to ensure fair elections are held. Most
importantly, it denies employees a reasonable amount of time to
consider all the information they need to make a fully-informed
decision about whether they want to join a union. The U.S. Chamber of
Commerce and the Coalition for a Democratic Workplace, of which the NAM
is a leading member, have filed suit against the NLRB implementing this
Other actions of the Board, including its decision to file a
complaint against Boeing Company for building a new facility in South
Carolina, are also of great concern to manufacturers. Many have
indicated they are considering them when making decisions about hiring
new employees and investing in new facilities here in the U.S. Indeed,
the NAM surveyed its members and found nearly 70 percent said these
actions would make it more difficult to expand and hire new workers.
Actions of the Occupational Safety and Health Administration,
(OSHA) are also on the minds of manufacturers. OSHA is not only
proposing to make reporting requirements more cumbersome, duplicative
and costly, but their methods of enforcement have become more
adversarial rather than trying to form cooperative relationships with
business owners. This approach only frustrates and confuses employers
and lends itself to an environment of skepticism.
To be compliant with the newest regulations and rules takes time
away from running the day-to-day operations of a business. Resources
are constantly rerouted away from customers, resulting in lower
productivity and lower customer satisfaction. As a result, customers
will go to other places that will be able to fully devote attention to
Manufacturers are also confronting an avalanche of additional rules
and regulations from the Environmental Protection Agency (EPA) which
are further preventing manufacturers from creating jobs and spurring
economic growth. Many of the EPA's regulations impact electric
utilities thus increasing the costs of energy for manufacturers and
consumers. As an energy-intensive sector, even slight energy cost
increases can have a big impact on our members' global competitiveness
and ability to create jobs. Furthermore, manufacturers are dealing with
a host of regulations directly impacting their own facilities. These
regulations increase the cost of doing business by requiring
manufacturers to install expensive pollution control technology or cut
back on production.
I would like to highlight the following EPA regulations as key
examples of the agency's overreaching regulatory agenda and its impact
Utility MACT and Cross State Air Pollution Rules--
Manufacturers are extremely concerned about the EPA's recently-
finalized Utility MACT rule, which put strict limits on emissions from
power plants. Some plants have already announced they will have to shut
down as a result of the new rule, and there also may be grid
reliability problems as utilities work to comply with the rule. Even
the EPA admits there will be a significant negative impact: according
to its own analysis, the regulations could cost on average $10.9
billion a year and could result in the loss of hundreds of thousands of
In today's tough economy and competitive global marketplace, not
all manufacturers will be able to absorb the increase in electricity
costs that result from this expensive regulation. Some plants may shut
their doors while others will sharply decrease production or abandon
plans to expand the facilities.
Recently, manufacturers were pleased that a federal court
recently stayed implementation of the Cross-State Air Pollution Rule
(CSAPR) which would require power plants in 28 states--including states
in the South, Midwest and Mid-Atlantic--to reduce emissions that
contribute to ozone and fine particle pollution. Had the court not
granted the stay, the rule would have gone into effect on January 1, an
extraordinarily short period of time between the finalization of the
rule and its implementation.
CSAPR, coupled with the Utility MACT rule, will have significant
impacts on the economy. The National Economic Research Associates
(NERA) recently modeled the combined economic impacts of both the
rules. Costs for the electric sector to comply with the two rules are
projected to be a staggering $18 billion per year. The study estimates
that nationwide average retail electricity prices rise by 11.5 percent,
and heavy manufacturing states such as Ohio can expect prices to rise
by approximately 23%. Manufacturers find it extremely difficult to plan
for future investments when utility sector regulations threaten to
increase the price of the electricity.
Boiler MACT Regulations--Manufacturers must also deal with
a MACT regulation that imposes stricter emission standards on
industrial and commercial boilers and process heaters. An industrial
boiler--a closed vessel found in a factory, refinery, or large
institution that is fired to generate steam--is critical to the
manufacturing process. As a result, these regulations will cut across
many sectors of the NAM membership, including the forest and paper,
chemical, agri-business, steel, and petroleum refining sectors.
The development of these regulations has created significant
uncertainty for manufacturers. In December of last year, the EPA issued
reconsidered rules, but they still need significant work to be
achievable by business sectors across America. In fact, the overall
capital cost of the Boiler MACT rule remains over $14 billion for
manufacturers, and, as a result, over 200,000 jobs will put at risk.
Many manufacturers will have trouble retrofitting their existing
boilers to meet the tight three-year compliance time frame.
Serious legal uncertainty also exists because of a January 9th
court decision which overturned the EPA's stay of the March 2011 rules.
This decision has resulted in confusion about the regulations and will
force companies to comply with rules that the EPA is already working to
change through the reconsideration process.
Manufacturers believe that legislation is really the only way out
of this confusing regulatory morass. The NAM applauds the House for
passing The EPA Regulatory Relief Act of 2011 (H.R. 2250), and we
strongly urge the Senate to pass the companion bill, S. 1392. These
bills would stay the March 2011 rules, extend the compliance timeframe
from three to five years and provide the agency with an additional
fifteen months to reissue achievable and affordable rules. We believe
this legislation will provide manufacturers with the certainty they
need to do what they do best--make things and create jobs.
Regulating Greenhouse Gas Emissions Under the Clean Air
Act--If the traditional challenges with air quality regulations were
not enough to discourage manufacturers from hiring new employees or
investing in new equipment, then the decision to regulate greenhouse
gas emissions as a pollutant under the Clean Air Act certainly will.
This is unlike any regulation manufacturers have ever experienced. In
the past, technology has helped to develop cheaper methods to ``scrub''
pollutants from our smokestacks. But greenhouse gases cannot be
scrubbed from emissions; it can only be reduced through reductions in
output or fuel switching.
The easiest way to reduce greenhouse gas emissions from stationary
sources is to reduce economic output. That is a recipe for job losses.
And although these regulations start with the largest new and modified
facilities including energy intensive manufacturers and utilities, the
stage has been set to regulate even the smallest manufacturers and
possibly existing facilities through the New Source Performance
Standards--or NSPS--program. The possibility creates an overhang of
uncertainty that casts a dark shadow on the future of manufacturing in
this country. We thank the House of Representatives for passing the
Energy Tax Prevention Act of 2011 (H.R. 910) to prevent the EPA from
regulating greenhouse gas emissions under the Clean Air Act.
Manufacturers face tremendous uncertainty during this period of
unprecedented regulatory overreach from the Environmental Protection
Agency (EPA). Regulations that raise electricity costs and production
costs will prevent the manufacturing sector--the nation's job
creators--from leading us through these tough economic times. The
Agency must use its discretion to pull-back on these job-killing
Government can support manufacturers and play an extremely
important role in shaping our competitiveness. For this to happen, I
believe there needs to be a real transparency to the regulatory
process, as well as an independent economic analysis for the potential
impact and unintended consequences for newly proposed regulations.
Additionally, Congress should provide a predictable review process for
out-of-date, duplicative, redundant, and ineffective regulations.
Education and job training is another area where effective
government policies could assist employers, but often miss the mark. We
have created an education system that is almost completely separate
from the economy at large. Traditionally, it was the job of schools to
educate children and assist in creating responsible citizens, and it
was the job of companies to train employees.
Today, companies, especially smaller businesses with fewer training
and HR resources, cannot afford the luxury of time-intensive training
programs for their workers. They need employees who have the knowledge
and skills to contribute right away. We need to look at federal
workforce training opportunities that often do not address the skills
that are in demand by employers. Programs such as the Workforce
Investment Act need to train workers to credentials that are in-demand
by the private sector.
The only way to address this challenge is to align education,
economic development, workforce and business agendas so they work in
concert to develop the talent necessary for business success in the
global economy. To address this need we should focus workforce funding
towards industry-recognized credentials that empower companies to know
they are hiring someone with the skills to succeed.
The NAM, through its Manufacturing Institute, is working with
community colleges, vocational institutes and other post-secondary
institutions across the country by organizing, aligning and translating
those credentials into corresponding educational courses that can be
integrated into high school and community college degree programs of
study. So, an individual can see that if he or she takes the following
classes, they will have the skills to earn a nationally-portable,
industry-recognized certification and be qualified to work in the
following jobs at the following salaries.
As the world's largest manufacturing economy, the United States
requires long-term investments in transportation and a comprehensive
21st infrastructure strategy to help ensure our future competitiveness
in international markets. Competitors in Asia, Europe, and South
America continue to ramp up investments in all types of infrastructure
while we struggle to maintain crumbling highways, obsolete bridges,
aging public transit, overstressed water and wastewater systems and
outdated air traffic control technology.
While our nation faces many fiscal challenges, making key
investments in infrastructure should not be delayed. Manufacturers rely
on a productive system of roads, rails, ports, inland waterways and
airports for receiving raw materials and shipping finished products to
customers throughout the United States and the world. The nation loses
4.8 billion hours of extra time a year due to traffic tie-ups and
traffic congestion costs Americans $115 billion a year in wasted time
The needs of the system are enormous and require innovations that
include capital budgeting and planning, prioritizing and funding
transportation projects of regional and national significance, a
welcoming climate for private infrastructure investment, new federal
bonding approaches, environmental permit streamlining and elimination
of redundant state and federal regulations that promote greater
flexibility to the states.
Thank you for the opportunity to testify before the Committee today
and to provide manufacturing's perspective of the concerns with the
current environment and processes facing manufacturers today and also
to provide you with insight on how we can move forward in the right
direction to ensure American manufacturing remains the best in the
Chairman Kline. Dr. Bernstein?
STATEMENT OF DR. JARED BERNSTEIN, SENIOR FELLOW,
CENTER ON BUDGET AND POLICY PRIORITIES
Mr. Bernstein. Chairman Kline, Ranking Member Miller,
members of the committee, I thank you for the opportunity to
testify today and applaud you for holding this hearing on the
issue that matters to most Americans right now, opportunity,
jobs, and the living standards of the broad middle class.
The current economy continues to expand in real GDP terms,
as has been the case since the second half of 2009. Employment
growth turned positive in March of 2010, and since then, the
private sector's added 3.2 million jobs on net.
As my submitted testimony shows, the rate of GDP
contraction and job losses diminished shortly after the
interventions of both the federal government, through the
Recovery Act, and the Federal Reserve, through monetary
stimulus. Moreover, nonpartisan research has shown that
government and Federal Reserve policies have played an integral
role in this reversal.
Yet, while the economy is moving in the right direction--
and has even developed some momentum in recent months--the
unemployment rate fell by--and the unemployment rate did fall
by almost 1 percentage point over the past year from 9.4
percent to 8.5 percent, the underlying growth rate of the
expansion is still too slow to deliver middle-class families
the economic opportunities they need to meet their family
budgets, much less to get ahead.
Moreover, given the importance of restoring middle-class
economic prosperity, we must recognize that growth itself is
necessary, yet not sufficient. GDP or productivity growth alone
has not sufficiently lifted the incomes and living standards of
the middle class.
In the business cycle expansion of the 2000s, productivity
grew 19 percent, real GDP grew 18 percent, but the real income
of middle-class working-age households actually fell in real
terms. Middle-class income trends were much more favorable in
the 1990s, as median incomes of working-age households
increased 10 percent, an addition of about $5,600 in today's
dollars. Employers added about 23 million jobs over the 1990s
cycle, compared to 5.5 million over the 2000 cycle.
I raise this comparison here for a few reasons. In the
2000s, policymakers aggressively adapted supply-side, trickle-
down measures characterized by large tax cuts favoring the
wealthy, deregulation, under the assumption that financial
markets would self-monitor and persistent budget deficits even
during an expansion.
Today, such supply-side trickle-down arguments are
resurgent, despite the evidence noted above. One is tempted to
recall the admonition that those who forget the past are doomed
to repeat it.
Fiscal and tax policies were especially different in the
1990s, as taxes were raised on the wealthiest and cut for the
poorest among us, and the fiscal budget achieved multi-year
surpluses for the first time since the 1950s.
The trickle-down regulatory agenda--what I have called YOYO
economics--``you are on your own''--presumes that the growth
chain starts at the top of the wealth scale and trickles down
to those at the middle and the bottom of the scale.
But there is a much better theory suggesting that to
generate robust, lasting, and broadly shared growth, an
economically strengthened middle class is essential.
In my written testimony, I present evidence to this effect.
Let me use the rest of my time, however, to talk about policies
that I think help in this regard.
Every one of the policy areas I am about to mention--some
of which complement my colleague, Ms. Johnson's, ideas--are
arguments that members of the committee can use to help reduce
income security, push back on income inequality, and improve
the mobility of the middle class.
Extend the payroll tax holiday and unemployment insurance.
Policymakers of both parties have widely agreed upon the need
for this relief through the end of the year. Failure to provide
it would add to the underlying fragility of the nascent
Invest in infrastructure investment. It is my understanding
that a bill to repair and modernize the nation's public schools
and community colleges will soon come to the floors of both
This plan is called FAST, Fix America's Schools Today. It
addresses three big problems: the backlog of maintenance
repairs in strapped school districts across the nation; the
high unemployment among construction workers and other laborers
who do this type of work; the energy efficiency in many public
schools, where billions of taxpayer dollars are wasted through
bad roofing, aging boilers, and poorly insulated windows. I
urge legislators to give this idea a close look.
Manufacturing policy, as my colleague has mentioned, skills
enhancement, which was a large part of the earlier
conversation, improving workers' bargaining power. As with
international trade and taxation, the union organizing playing
field is badly tilted against those who would like to exercise
their right to collectively bargain.
A recent rule change by the National Labor Relations Board
will help workers who have petitioned to form a union to have a
more timely election. In a climate where employers who oppose
unions can and do block them--block such elections with
impunity, this rule removes some of the above noted tilt.
I thus urge the committee to take the policy steps to re-
link the economic prosperity of the American middle class with
the productivity and growth they themselves are helping to
[The statement of Mr. Bernstein follows:]
Prepared Statement of Jared Bernstein, Senior Fellow,
Center on Budget and Policy Priorities
Chairman Kline, Ranking Member Miller, and members of the
Committee, I thank you for the opportunity to testify today and applaud
you for holding this hearing on the issue that matters most to most
Americans right now: opportunity, jobs, and the living standards of the
broad middle class.
Introduction: Current Conditions and the American Middle Class
The current economy continues to expand in real GDP terms, as has
been the case since the second half of 2009. Employment growth turned
positive in March of 2010, and since then the private sector has added
3.2 million jobs on net; including the public sector, net job growth is
2.7 million. As the two figures below show, the rate of GDP contraction
and job losses diminished shortly after the interventions of both the
federal government through the Recovery Act, and the Federal Reserve,
through monetary stimulus.
Moreover, nonpartisan research like that of the Congressional
Budget Office has shown that government and Federal Reserve policies
have played an integral role in this reversal.
Yet, while the economy is moving in the right direction, and has
even developed some momentum in recent months--the unemployment rate
fell by almost one percentage point last year, from 9.4 percent to 8.5
percent; the more comprehensive underemployment rate fell by 1.4
points, from 16.6 percent to 15.2 percent--the underlying growth rate
of the expansion is still too slow to deliver middle-class families the
economic opportunities they need to meet their family budgets, much
less to get ahead.
As the President stressed in his State of the Union address,
private sector employers have been adding net new jobs every month for
close to two years, over three million so far. Of course, many more
jobs were lost in the great recession, and I suspect that every policy
maker in this room wants to see that growth rate accelerate.
Growth and the Middle Class: Necessary But Not Sufficient
Yet, if we're talking about middle-class economic prosperity, we
must recognize that the growth is necessary yet not sufficient. GDP or
productivity growth alone has not sufficiently lifted the incomes and
living standards of the middle class (the next section explore the
feedback loop between middle-class prosperity and a stronger economy).
This is a long term problem, though it was especially evident in the
business cycle expansion of the 2000s. Measuring from annual peak-to-
peak years of the cycle--2000-2007--productivity grew 2.5 percent per
year on average (19% overall) in those years and real GDP grew 2.4
percent per year (18% overall) but the real income of middle-class,
working-age households fell half-a-percent per year, or 3.4 percent
Middle-class income trends were much more favorable in the 1990s.
Though the real income of working-aged households fell in the recession
of 1990-91, it soon reversed course and grew 10 percent--an addition of
about $5,600 dollars in today's dollars--over the full cycle. Employers
added 22.7 million jobs over the 1990s cycle, compared to 5.5 million
over the 2000s cycle.\1\
\1\ Since income data from the Census is an annual measure, those
comparisons use annual data. These job growth comparisons are from
monthly cyclical peaks, as defined by the National Bureau of Economic
I raise this comparison here to a few reasons. First, the national
economic policy backdrop was very different over these two decades. In
the 2000s, policy makers aggressively adapted supply-side, trickle-down
measures, characterized by large tax cuts favoring the wealthy,
deregulation under the assumption that financial markets would self-
monitor, and persistent budget deficits even during an expansion.
Fiscal and tax policies were especially different in the 1990s, as
taxes were raised on the wealthiest and cut for the poorest among us,
and the fiscal budget achieved multi-year surpluses for the first time
since the 1950s.
Second, these observations are highly germane to the current
national debates over jobs, oversight of financial markets, and tax
policy. Supply-side, trickle down arguments are particularly resurgent,
despite the evidence noted above. One is tempted to recall the
admonition that those who forget the past are doomed to repeat it.
Third, these comparisons raise the critical question of what
measures would be most advantageous for this committee to pursue in
terms of reconnecting growth, productivity, and middle class
prosperity. I will speak to this question in the last part of my
testimony, but first, let us examine the other side of that question.
Middle Class Prosperity and the Health of the Economy
The trickle-down, deregulatory agenda--what I have called YOYO, or
``you're on your own'' economics--presumes that the growth chain starts
at the top of the wealth scale and ``trickles down'' to those at the
middle and the bottom of that scale. But there is another theory,
supported by evidence like that above, suggesting that a much better
way to generate robust, lasting, and broadly shared growth is through
an economically strengthened middle class.
At the most basic level, this growth model is a function of
customers interacting with employers, business owners, and producers. A
recent article by highly successful venture capitalist Nick Hanauer
described this interaction as follows:
I've never been a ``job creator.'' I can start a business based on
a great idea, and initially hire dozens or hundreds of people. But if
no one can afford to buy what I have to sell, my business will soon
fail and all those jobs will evaporate.
That's why I can say with confidence that rich people don't create
jobs, nor do businesses, large or small. What does lead to more
employment is the feedback loop between customers and businesses. And
only consumers can set in motion a virtuous cycle that allows companies
to survive and thrive and business owners to hire. An ordinary middle-
class consumer is far more of a job creator than I ever have been or
ever will be.
How does this dynamic interaction show up in the macroeconomy?
Economist Alan Krueger, currently serving as Chair of the President's
Council of Economic Advisers summarized these findings in a recent
speech, in a section on the consequences of economic inequality.
Less robust (or debt-financed) consumption. Seventy
percent of the US economy is accounted for by consumer spending, so if
that part of GDP lags, economic growth slows. It is also the case that
the propensity to consume out of current income is higher among lower-
income households (i.e., compared to wealthier households, they're more
likely to spend than save their income).
Based on an estimate of these relative propensities and the large
shift in the share of national income that accrued to the top 1 percent
over the past few decades, Krueger calculates that aggregate
consumption could be 5 percent higher in the absence of such large
income shifts. Applying rules of thumb on the relationship between
aggregate growth and jobs, and assuming both economic slack and that
this income was not simply replacing demand elsewhere in the economy,
this extra consumption growth could reduce unemployment by 1.75
percentage points, implying about 2.6 million more people with jobs.\2\
\2\ As consumption is 70% of GDP, and each point of GDP above trend
reduces unemployment by half a point, this calculation is .7*.5*5%, or
Krueger cites an important caveat about this type of calculation.
In the face of stagnant earnings in the 2000s, many in the middle class
borrowed to make up--or more than make up--the difference, in which
case middle-class consumption did not fall as much as it would have
absent this leverage. To point out that this method of improving middle
class living standards is both unsustainable and extremely risky is an
Inequality and longer term growth. Krueger also points to
recent research showing that ``in a society where income inequality is
greater, political decisions are likely to result in policies that lead
to less growth.'' Nobelist Mancur Olsen also hypothesized about this
relationship decades ago.
As more income, wealth, and power is concentrated at the top of the
income scale, narrow coalitions will form to influence policy decisions
in ways less likely to promote overall, or middle-class, well-being,
and more likely to favor those with disproportionate power and
resources. In the current economics debate, we clearly see these
dynamics in a tax code that bestows preferential treatment on those
with large amounts of assets, like capital gains and stock dividends,
relative to wage earners.
Trickle-down economics, inequality, and incomes. Another
piece of evidence with implications for rebuilding a strong middle
class comes from new work by economists Emmanuel Saez et al. As shown
in the figures from their paper (see Appendix), they use international
evidence from a wide variety of advanced economies to examine two key
links in the logic of the supply-side chain.
First, they look at the relationship between the top marginal
income tax rate in these countries and the change in income inequality.
They find a strong negative correlation: in countries like ours that
cut the top marginal tax rate, income is a lot more skewed (and note
that this refers to pretax income, so the result is not a direct
function of the tax policy changes).
But the critical question for supply-side is whether these high-end
marginal tax rate reductions lead to faster income growth (we've
already seen that they lead to more income inequality). The bottom
figure shows that they do not. Real per capita income growth across
these countries is unrelated to the changes in tax rates.\3\
\3\ Note that the income measure in their research is a broad
average (real per-capita GDP growth); given that this measure is itself
driven upwards by the growth of inequality, a median measure
(insensitive to large accumulations at the top of the scale) would
likely be even less correlated to tax changes, if not negatively
The above points emphasize an economic rationale for a growth model
more favorable to the middle class. More broadly shared growth would
not only score higher on a fairness criterion; it would provide a more
reliable and durable structure for overall growth itself. It is no
accident, in this regard, that the era of heightened inequality
coincides with the arrival and persistence of what I've called ``the
shampoo economy:'' bubble, bust, repeat.
But our emphasis on growth should not crowd out that of fairness,
and in this regard, some of the most important recent work in this area
has stressed the relationship between inequality and mobility, the
latter being the extent to which individuals' and families' economic
positions change over the life cycles. Again, I will briefly summarize
the relevant findings.
Economic mobility. Some policy makers, often in seeking to
dismiss the inequality problem, argue that the US has enough income
mobility to offset increased inequality. We may start out further
apart, they argue, but we change places enough that it doesn't matter.
This argument fails, however, both in terms of logic and evidence. The
existence of mobility cannot offset increased inequality; for that to
occur, mobility itself must be accelerating. There is no evidence to
support such acceleration and some new, high-quality work suggests a
slight decline in the rate of mobility.
The US has considerably less income mobility than almost every
other advanced economy. In particular, as stressed in a recent New York
Times article, parental income is a stronger predictor of the success
of grown children in the U.S. relative to other advanced nations--i.e.,
we have less intergenerational mobility than other nations.
Putting some of these themes together, I have hypothesized that
there are causal linkages between inequality and immobility. To the
extent that those who have lost income share in recent years suffer
diminished access to the goods, services, and general living conditions
that would enhance their mobility, we would expect to see economic
results like those cited above.
Here, I'm thinking about everything from access to quality
education, starting with pre-school (such early educational
interventions have been shown to have lasting positive impacts), to
public services, like decent libraries and parks, to health care,
housing, and even the physical environment. The new research linking
mobility and inequality may well find that as society grows ever more
unequal, those falling behind are losing access to the ladders that
used to help them climb over the mobility barriers they faced.
Policies Designed to Rebuild the Middle Class
It is widely maintained by some policy makers that it is up to the
private sector to provide the middle class with the opportunities they
need to get ahead. Given that most economic activity and jobs are not
directly associated with government, this is of course true. But the
idea that this implies no role for government is both wrong and
dangerous, in the sense of ceding the playing field to our competitors
who are not bound by such firm ideology. This insight is particularly
germane given the trends presented above regarding job and income
growth, inequality, and mobility.
In fact, government must enforce fair rules of the road, whether it
comes to the selling of financial products or the rights of workers to
collectively bargain with their employers. There is a role for
government to ensure that basic needs, such as access to affordable
health care and a secure retirement, are most efficiently met.
Government must also offset market failures, including recessions,
insufficient supply of skills in the workforce, and barriers to entry
for potentially expanding industries. Finally, the system of funding
government must be fair in the sense that middle class families do not
face a proportionally larger tax federal tax burden--higher effective
tax rates--than those with many more financial resources.
Every one of these policy areas provides policy makers like the
members of this committee with the opportunity to help reconnect growth
and middle class prosperity, restore some degree of income security,
and push back on the inequality and immobility trends documented above.
The massive market failure of the great recession provides
important lessons to policy makers, both regarding the lack of
financial oversight that helped to inflate the housing bubble and the
stimulus measures, most notably the Recovery Act, that helped to
generate the historically large swings from negatives to positives in
growth and jobs as shown in the first table above.
But more such measures are needed. While the economy is improving
and unemployment is slowly coming down, at current growth rates, it
will take many years to reach full employment. The following measures
can help build on the momentum we have and accelerate the recovery:
Extend the payroll tax holiday and unemployment insurance.
Policy makers of both parties have widely agreed on the need to payroll
relief through the end of the year ; failure to do so would add to the
underlying fragility of the nascent expansion.
Invest in infrastructure investment. As part of the
American Jobs Act, the President proposed a national program to repair
and modernize the nation's public schools and community colleges. This
plan is now a legislative initiative called FAST--Fix America's Schools
Today--soon to be introduced in both chambers. FAST addresses three big
problems: 1) the backlog of maintenance repairs in strapped school
districts across the nation, 2) the high unemployment among
construction workers and other laborers who do this type of work, and
3) the energy inefficiency in many public schools where billions of
taxpayer dollars are wasted through bad roofing, aging boilers, and
poorly insulated windows. I urge legislators will give this idea a
Manufacturing policy: In his State of the Union address,
the President presented some ideas, including tax incentives and trade
enforcement measures, to help incentivize the insourcing of
manufacturing work in America. In fact, manufacturers have added over
300,000 jobs over the past 21 months, and anecdotally, some producers
say that perhaps they have overplayed the outsourcing idea and are
interested in producing closer to where they sell (rising
transportation costs and narrower international wage differentials may
also be in play here).
In this regard, policy makers could help tap this development by
closing international tax loopholes that incentivize multinationals to
build factories abroad. The President's most recent budget recommended
to the so-called super committee in September, proposes $110 billion in
loophole closures that would both level the playing field for domestic
manufacturers and help relieve our fiscal situation.
Trade enforcement, including actions against countries that manage
their currencies to artificially support their exports and block our
imports, is another essential piece of this puzzle.
Note that these measures simply level the playing field and are in
no sense protectionist--they do not provide unfair advantages to
American firms nor do they block imports.
Skills enhancement. This committee has a long history of
interest in policies to ensure that the skills of American workers
match those demanded by today's employers. Ranking Member Miller's
Pathways Back to Work bill supports a subsidized employment program
targeted at unemployed adults, modeled on a successful Recovery Act
program that employed over 250,000 workers in 2009-10 (TANF Emergency
Fund). This bill also provides work-based job-training for the long-
term unemployed and summer jobs for younger workers.
President Obama also stressed the importance of workforce
investment through what is typically called ``sectoral employment
strategies.'' As opposed to generalized training that too often leaves
participants unprepared for actual jobs, sectoral strategies link
trainers, often through partnerships with community colleges, with
local employers who provide granular information about future demand
needs. Research by Georgetown University professor Harry Holzer shows
these programs to be far more effective than traditional training
programs that are too often detached from what's happening in local
Improving workers' bargaining power: As with international
trade and taxation, the union organizing playing field is badly tilted
against those who would like to exercise their right to collectively
bargain. A recent rule change by the National Labor Relations Board
will help workers who've petitioned to form a union to have a more
timely election. In a climate where some employers who oppose unions
can and do block elections with impunity, this new rule removes some of
Finally, it is important to note one area of public policy that has
incorrectly been singled out in recent years as a factor holding back
job growth and hurting the middle class: the regulatory climate. While
onerous regulations should always be rigorously reviewed for proof of
their net positive benefits, it is clear from the evidence that it is
weak demand, not regulation, that's preventing faster job creation.
Data from the BLS Survey of Layoff Events show low and declining
shares of layoffs attributable to government regulations. A year ago
(2010q3) less than half of one percent (0.44%) of layoffs were related
to government regulations, according to employers. In the most recent
quarter for which data are available, the share of layoff events
attributable to government regulations fell to zero (technically, the
number reported was too small to meet BLS sampling criteria), as did
the shares of unemployment insurance claims and all other
\4\ A layoff is an event involving the filing of 50 or more initial
UI claims by an employer during a 5-week period, with at least 50
workers separated from a job for more than 30 days. Separations include
job losses from such an event, whether or not the worker claimed UI.
Employers themselves, particularly small businesses, report in
various surveys that poor sales (aka, weak demand) has been a much more
important constraint then regulations. Recent analysis by the Treasury
Department provides this summary:
``In the September survey of small business owners by the
National Federation of Independent Businesses, more than twice as many
respondents cited poor sales (29.6 percent) as their largest problem
than cite regulation (13.9 percent).
In an August survey of economists by the National
Association for Business Economics, 80 percent of respondents described
the current regulatory environment as ``good'' for American businesses
and the overall economy.
[I]n a recent Wall Street Journal survey of economists, 65
percent of respondents concluded that a lack demand, not government
policy, was the main impediment to increased hiring.''
This testimony has stressed that, even as the economy is improving
and the American people are digging their way out of the Great
Recession, unemployment is still high and economic growth still
relatively slow. Compared to the massive losses in early 2009, we're
much improved. But compared to an economy that's providing what I
believe members of this Committee would recognize as gainful
opportunities for middle class workers and their families, we've got a
ways to go.
Importantly, that view does not suggest that GDP growth alone is
sufficient, though it is of course necessary. As recently as the
business cycle of the 2000s, we saw middle-class, working-age
households lose ground in terms of their real income, even while
productivity growth was relatively strong. My testimony amplifies a
number of policy ideas currently under discussion that I believe will
help to reconnect growth and middle class prosperity.
But arguments and evidence above also point to the importance of a
strong middle class for growth itself, positing a feedback loop.
Businesses cannot create jobs without customers, and in a climate of
high levels of income concentration, the customer base becomes too
narrow. In this regard, I present above a set of arguments connecting
higher levels of income inequality with less satisfactory growth
outcomes. Similarly, there is reason to believe that high levels of
inequality negatively affect mobility, by both lengthening the distance
disadvantaged families have to climb and shortening their ladders.
While more research clearly is needed to get a better handle on
these interactions between broadly shared prosperity and better growth
and mobility outcomes, the circumstantial evidence is quite strong. I
urge the committee to take the policy steps to re-link the economic
prosperity of the American middle class with the productivity and
growth they themselves our helping to generate.
Chairman Kline. Thank you.
Dr. Mitchell, you are recognized.
STATEMENT OF DR. MATTHEW MITCHELL, SENIOR RESEARCH FELLOW FOR
ECONOMICS, THE MERCATUS CENTER AT GEORGE MASON UNIVERSITY
Mr. Mitchell. Great. Good morning, Chairman Kline,
Representative Payne, and members of the committee. It is an
honor to speak with you today.
The economy is sick, and the natural question for both the
economists and the well-intentioned policymaker is, what
economic medicine will help? Unfortunately, economic
understanding of how government can revive an ailing economy is
limited. It is not unlike our knowledge of surgery in past
centuries. The instruments are blunt, we are not very adept at
using them, and there is a good chance that the intervention
will cause more harm than good.
While we may not know how to instantly breathe life back
into a sick economy, we do know a great deal, however, about
how government can create the sort of environment which is
conducive to growth. That is, we know the sorts of habits that
make for a healthy economy.
Let me begin with what we can and can't do in the short
run. You might not know it listening to some, but the truth is
that there is a lot that we economists do not know about fiscal
stimulus. While there is a general agreement that the increased
debt associated with stimulus is costly and unproductive over
the long run, there is less agreement about whether stimulus
spending--the stimulus spending that it finances is helpful or
harmful in the short run.
Reasonable economists using reasonable techniques have
found that stimulus spending enhances private-sector growth,
but reasonable economists using reasonable techniques have
found that stimulus destroys or crowds out private-sector
I cannot tell you what level of risk is acceptable to take
with the American economy, but there is risk in further
stimulus. One reason for caution is that the optimistic
estimates seem not to apply to the current situation.
For example, economists find that stimulus is ineffective,
one, when a nation is operating under a flexible exchange rate;
two, when it is open to trade with other nations; and, three,
when it is highly indebted. All three conditions apply or soon
will apply to the United States.
Economists also find that multipliers are large only when
stimulus is temporary. They also find that it is large only
when stimulus measures are modest, that is, there are
diminishing marginal returns to stimulus.
This is especially relevant in today's context, when
government has already undertaken multiple massive stimulus
projects. There are real risks associated with too much
stimulus. A recent study of 91 countries found that, ``those
governments that use fiscal policy aggressively induce
significant macroeconomic instability, and that instability in
turn diminishes economic growth.''
One problem is that there is a wide gulf in the way that
stimulus advocates say stimulus ought to be implemented and the
way that it actually is implemented. Lawrence Summers has noted
that stimulus ``can be counterproductive if it is not timely,
targeted and temporary.'' In reality, however, it is very
difficult to simultaneously meet all three criteria.
On timeliness, we know that 18 months after the 2009
stimulus passed, more than half of the money slated for
investment had yet to be spent. As far as targeting goes,
numerous studies have now found that the distribution of
stimulus funds had no statistical relationship to local area
unemployment rates. The funding simply didn't go to those areas
most in need.
And as far as temporary goes, studies suggest that most
stimulus spending boosts last far longer than intended.
Instead of implementing a quick fix, we should be creating
the conditions that are necessary for long-run economic health.
One of the most effective ways to do this is to permit our
citizens a generous degree of what economists call economic
freedom, that is, permit them choice, free and voluntary
interaction, open-market competition, and the rule of law.
These ideas may sound vague, but thankfully in the past several
decades, economists have made them more concrete by developing
and testing objective measures of freedom.
Could we please bring up my first slide?
One widely cited measure is that developed by Gwartney,
Lawson and Hall. Their index rates 141 countries on factors
such as the size of government, the extent of regulation, the
stability of monetary policy, the degree of openness to trade,
and the protection of property rights. This shows the positive
and statistically significant relationship between freedom and
per capita GDP.
Per capita income of the average person in the freest
countries is more than seven times that of the average person
in the least free. The per capita income of the poorest 10
percent in the freest countries is more than eight times that
of the poorest 10 percent in the least free. In other words,
economic freedom is valuable for the average person, but it is
particularly valuable for those who are least well-off among
In contrast with the literature on stimulus, there is a
remarkable consensus in the studies of economic freedom. One
recent review of 45 studies concluded that, ``Regardless of the
sample of countries, the measure of economic freedom, and the
level of aggregation, there is a solid finding of a direct
positive association between economic freedom and economic
Could we please bring up the next slide?
The literature demonstrates that the prosperity of the
United States is neither accidental, nor inevitable. It is the
result of decades of robust and expanding economic freedom.
Unfortunately, that freedom has been in precipitous decline for
about a decade.
It can be restored by making the tax code more efficient,
equitable, and easy to comprehend, by bringing spending in line
with taxation to make policy sustainable, by eliminating
regulations that detract from or divert human capitol into
unproductive activities, by lifting restrictions to
international trade, and by reaffirming our commitment to
equitable treatment of businesses. No bailouts, no handouts, no
special treatment, and no special punishment.
In conclusion, millions of Americans are unemployed or
underemployed. Millions more have given up looking for work
altogether. It is only natural to want to perform emergency
surgery on our sick economy, but we know from experience that
intervention can sometimes cause more harm than good.
Thank you for the opportunity to testify today. I look
forward to your questions.
[The statement of Mr. Mitchell follows:]
Chairman Kline. Thank you all for your testimony.
Listening to the testimony, particularly of Dr. Bernstein
and Dr. Mitchell, I was thinking back to many, many, many years
ago--in fact, decades ago--when I was in school down in
Houston, Texas, at Rice, and I was studying economics, was
majoring in biology, and I took economics, because I thought it
was an easy course. And you had to take some electives, and I
enjoyed it. It was interesting to me. And then I got to be a
senior and found out that I had to employ calculus to really
make this work, and it got a whole lot more complicated.
And listening to both of you, it is clear what I knew even
then, but has been underscored over the years, there can
sometimes be very, very large differences in how economists
look at sometimes exactly the same data to come up with very,
very different conclusions. And we have some of that here.
And it causes me to have great sympathy for Ms. Johnson,
who is trying to make a business work, while the economists and
politicians are battling.
So my thanks to you for the great job that you are doing in
keeping over 200 people employed and trying to struggle your
way through this and struggling with all the issues of getting
legal advice, and trying to decipher rules, and watching those
rules and regulations change, and trying to keep up with it,
and trying to have your business not only survive, but to grow.
But I am going to let the economists have a little bit of a
discussion here. I want to go to Dr. Mitchell, because Dr.
Bernstein introduced the concept of YOYO economics, ``you are
on your own.'' How would you characterize that, in comparison
to the sort of free-market principles which I understand that
you are advocating?
Mr. Mitchell. Well, you know, it is interesting. On the
topic, say, of trickle-down economics, I have to admit that
there is no respectable economist that I know of, actually, who
advocates anything close to trickle-down economic policies. So
perhaps we are in agreement here.
There really isn't a school or an academic journal that
publishes regularly or teaches its students that what we ought
to be doing is, from the top down, directing resources to the
wealthy somehow in the hopes that they will turn around and
There is a well-respected school of economics which says
that we ought to treat all people equally and that we shouldn't
single out some for particular special treatment one way or the
And so what I would actually say is, while there isn't any
economic school that teaches some sort of top-down, trickle-
down economics, unfortunately, governments do quite often
practice top-down economics. And by that, I mean, you know, you
studied biology, as you said. In some ways, I think a free-
market perspective views the economy as an ecosystem. It is a
bottom-up process that is largely driven by consumers.
Where that process--the signals get lost is when central
planners attempt to direct capital and labor so that people
don't--it is not consumers who are saying where the jobs of
tomorrow are, but rather it is people in government trying to
say where the jobs of tomorrow should be.
Chairman Kline. Thank you. I have got another quick
question for you. I am sure there will be a number of questions
for Dr. Bernstein, and he can re-defend YOYO, if you would like
In your testimony, again, Dr. Mitchell, you expressed some
skepticism that the president's call for another $105 billion--
I have got that by adding several of his proposals together--
adding another $105 billion in federal spending bill will
result in real benefits for the American economy. In fact, he
said it may be risky.
Would you like to expand on that?
Mr. Mitchell. Sure. And, actually, this might be a good
opportunity. I have an additional slide; we might bring that
up. So I am going to try to make this as non-wonky as possible.
Chairman Kline. There is no calculus.
Mr. Mitchell. There is no calculus, I promise. So one of
the things that is important when you are trying to evaluate
stimulus measures is what economists call the multiplier.
Simply put, this just says it is--you can think of it as your
return for government spending. So we are going to go into a
deficit, we are going to borrow, and we want to know, what is
the impact on the economy?
So what this chart shows--each one of these bars represents
a separate study. And the important thing to keep in mind is,
if the results suggest that the multiplier is larger than one,
then that means government spending actually multiplies or adds
private-sector economic activity. If it is less than one,
however, it detracts from, crowds out, diminishes private-
sector economic activity.
So the horizontal bar there is the one mark. Each one of
these vertical bars represents the high and low estimate of the
different study. This is just a sample of recent studies over
the last several years.
Now, that does not at all to me look like a slam-dunk, we
know that stimulus definitely always works and crowds in the
private sector and makes--multiplies the private sector. To me,
I look at that and I see an enormous amount of disagreement. I
see even within studies there are estimates that suggest--that
have a very wide range.
So if you look at that, you can see--by the way, I would
note that the median estimate is below one, that stimulus
actually crowds out private-sector economic activity, but in
some of the worst examples, it can destroy--$1 of government
spending can destroy as much as $2.80.
So that is what I mean when I say this is risky. I am not
saying that there aren't well-respected economists who
sometimes think stimulus is helpful. But it is a risk. It is
not something that economists agree on.
And I would say one other quick point. There are many
things on which economists do agree, benefits of free trade,
the fiscal problems with the U.S. and over the long run. You
are going to find widespread agreement. There are frequently
polls of members of the American Economic Association on these
matters, and you find lots of things on which economists agree.
Fiscal stimulus just isn't one of them.
Chairman Kline. Thank you. My time has expired.
Mr. Payne. Thank you very much. And I commend you for your
knowledge on this calculus business. I am going to stay away
from it. It wasn't one of my strong suits in college.
But I would like to ask Ms. Johnson, I commend you for
bringing forth the family business for 60 years and being
successful. But looking at your testimony, you do bring up, of
course, all these impediments, talk about how the OSHA, of
course, is troublesome and bothersome and frustrating and
confusing and many issues you have to keep up with. Of course,
you certainly feel that we could do without the EPA and their
programs of slowing down job creation, and on and on.
But let me--and I could ask a lot of questions about both
of those--but let me just focus on your testimony regarding the
National Labor Relations Board. You testified in your
testimony, you contend that the NLRB unlawfully issued a rule
regarding the posting of notices on employee rights. First,
does your company post notices of employee rights regarding the
minimum wage, OSHA, workers' compensation, and laws prohibiting
Ms. Johnson. Yes, we absolutely do. As a federal
contractor, it has been a requirement of ours.
Mr. Payne. Do you consider these postings to be burdensome?
Ms. Johnson. Burdensome in the sense that there are
inspectors that would come through and verify that our posters
are displayed, that they are the right size, that they are not
hidden away in a dark corner somewhere, the fact that there
doesn't seem to be trust.
Mr. Payne. And, you know, the good companies do suffer from
the bad companies, because they are not all as great as your
company seems to be. In some places, they do put them in the
dark places or in a room where no one can get in, they tell me.
Let me just ask you this, that is posting one additional
notice regarding employee rights under labor law burdensome?
Ms. Johnson. We have been doing it for many, many years, so
it has become a practice of ours. I think that, for those
companies that have not been required to, it could be a burden,
Mr. Payne. Your testimony says that the NLRB acted without
legal authority to require this notice posting regulation. And
I just wanted to know--and you probably are aware--that the
National Labor Relations Act states that the board shall have
the authority from time to time to make, amend, and rescind
such rules and regulations as may be necessary to carry out the
provisions of the act.
What about the--what prohibits the NLRB from issuing a
notice advising employees of their rights, even if it is
another one, whether they are rights of the labor people or the
Ms. Johnson. Well, I just think that it is just adding
another burden to businesses and that it is an example of
overreaching when there have been laws in place that companies
have been complying with and then they decide that they are
going to change it. It is a perception that businesses have
that independent agencies are overreaching in their authority
Mr. Payne. But wouldn't you agree that if all workers are--
know the rules and feel that everything is posted, that really
develops harmony? We ran a small business of about 50 people
and had to put up all of those regulations and had to let the
OSHA people come in, and they used to do tests on decibels of
sound. It was a problem because we had rotating actions in a
large printing operation, and the workers didn't want to wear
the pieces, but it couldn't be over 80 decibels, so it was a
problem, but it was to protect the worker----
Ms. Johnson. Absolutely.
Mr. Payne [continuing]. And we enforced that for the
worker, even though it was a nuisance. But I think that,
overall--and just the last thing, before my time expires--you
also mention that you--in your testimony, that the NLRB issued
regulations that compress time between the--when a petition for
representation is filed and the actual elections are held. And
you called this ambush elections. And I just wonder if you
could elaborate on that.
Ms. Johnson. I would be happy to, because I first would
like to go on record saying that, as a small business--and I
know that this is a term that is overused--but people are our
biggest asset. Our number-one priority is our workforce. That
makes our company great. If companies have access to capital
and can invest in technology, that is not going to make them a
world-class company. It all comes down to people.
I am not aware of any attempts of organization, my company
over the last 60 years--when people are our number-one
priority, as is their safety. And in fact, on a weekly basis,
our director of operations in his report, the number-one metric
that he reports out on are any kind of safety occurrences or
accidents. And in fact, last year, one of our key metrics was
to improve our safety record by 50 percent so that it is less
than two incidents per year. And that is a goal that we were
able to achieve at one of our divisions last year, and we are
But without a doubt, people are our greatest asset. Their
safety is number one.
Chairman Kline. The gentleman's time has expired.
Mr. Walberg. Thank you, Mr. Chairman. And thank you to the
panelists for being here today. And appreciate your insights.
Ms. Johnson, it is a pleasure to hear from you again. I
think you were here back in 2007. I sat and listened to you
extol the wonderful opportunities and the passion of
manufacturing. And I have used the illustration many times
without asking your permission of you, going into middle
schools and telling students what they could get experience in
manufacturing and the opportunities that were there, and even
seeing some of the parts that they produce go to the moon, or
go into space.
And so I would like to foster that passion, as opposed to
just dealing with excessive government regulation, impingements
upon you doing those things. And I will inform you that I am
going to use with manufacturers your quote, without innovation,
manufacturing is just a good idea. So thank you for being here.
Let me ask you some questions, and in my district in
Michigan, a manufacturing state that has gone through some
tough times, and now just hearing from our governor how we are
turning that around and seeing the value of manufacturing
I hear so often from my manufacturers and businesspeople,
small-businesspeople, of the challenges they face with
uncertainty and the ever-increasing burdensome regulations, not
just simply regulations that are necessary, but the advancing
and increasing and more and more regulations.
It was a little more than a year ago that our president
announced his intentions to review and repeal a number of
regulations. Have you seen any tangible evidences of this
review? And is it the fact that it is working? Or has the
review caused less uncertainty in your field?
Ms. Johnson. Thank you for that question. And I very much
appreciate the compliments and the fact that you can remember
me from 2007----
Mr. Walberg. A guy my age, that is a very important thing.
Ms. Johnson. Same for my age. You know, no, I have not seen
any of these rules being retracted. In fact, you know, I would
just recommend to the committee that at this point in time we
just, you know, stop, look and listen, you know, and take it
all in, as we have been trying to climb out of this recession.
What we hear constantly in the news is more and more
regulations coming our way. And we take the health care law,
for example. The only thing that we know at this time is that
our costs have gone up, when, in fact, you know, the
regulations have not even been written yet.
And I was reading in the Wall Street Journal just last week
that it says that President Obama's regulators are currently
have some 149 major rules underway which are those that cost
more than $100 million. So my experience is, no, I have not yet
Mr. Walberg. Okay, let me continue on with that. You noted
in your testimony that Washington regulations are time-
consuming, complex, uncertain, changing. I guess from that, can
you estimate how much it costs a business to hire experts or
counsel to navigate your business through the maze of
Ms. Johnson. Well, currently we have two different
consulting firms that we work with in regards to environmental
compliance. And we have a labor attorney that is on a retainer.
And between those three, it is well over $150,000.
Mr. Walberg. Just for those areas?
Ms. Johnson. Yes. Yes.
Mr. Walberg. Do you receive any positive help from the
federal agencies in assisting you with compliance and
Ms. Johnson. Well, you know, and that is a great question
to ask, because the times that I am in Washington and the
opportunities I have to meet with different representatives of
these agencies, there is so much work that is being done to
inform employers what is going on in Washington and how they
are there to help.
And I know, for example, at the manufacturing council
meeting a couple of weeks ago, we met with representatives from
the EPA, and they said that they are redesigning their website
so that we could have real-time status of projects that are
And I think that there needs to be some way to get this
information outside of the beltway to the employer so that we
understand it, but at this point in time, we have not sought
out any help from the federal level.
Mr. Walberg. Or found it available yet?
Ms. Johnson. Or finding that is available.
Mr. Walberg. Okay. What percentage of your business is
Ms. Johnson. Very little of it. We are somewhat fortunate
in the fact that, you know, we are split about 50/50 in terms
of commercial and military and aerospace. And a lot of that has
However, you know, our fear is, as some of our customers
are helping companies overseas develop their aerospace
industry, that the supply chains are going to exist there, as
well, and we have no intentions of moving our business
Mr. Walberg. Thank you.
Chairman Kline. Mr. Scott?
Mr. Scott. Thank you, Mr. Chairman.
Mr. Bernstein, we heard earlier today about investments in
education needed to fill the 70,000 vacancies in Michigan. Can
you tell me the economic benefits of investments in education?
Mr. Bernstein. Sure. It is probably one of the best
understood and most widely agreed upon relations in labor
economics. For every extra year that a person has of formal
schooling, their earnings are typically 7 percent or 8 percent
higher. And the idea that education complements higher skills,
higher earnings, has become all that more important in recent
years as technology and employer skill demands have increased
pace. So the fact that we are helping workers improve their
levels of education is very closely linked to their
employability and earnings.
Now, I will just say--let me just add one point--if you
just have the education without the jobs, you are all dressed
up with nowhere to go, so there is a supply side. We want
workers with good skills. There is also a very important demand
side. Right now, we have too many people chasing too few jobs.
Mr. Scott. Well, they indicated that the 70,000 jobs in
Michigan--you know, it wasn't that clear, but it sounded like a
lot of them were going unfilled because the employers couldn't
find people properly qualified.
Mr. Bernstein. Certainly heard that recently. I think there
are definitely pockets throughout the country where there is a
mismatch between the skills that the workforce on the ground
has and the skills an employer demands, employers demand.
But speaking more broadly, we definitely have a demand-side
problem, as well. I mean, historically there are one or two job
openings per--or one or two unemployed people per job openings
in recent months. That ratio was as high as six. Now it is down
to four, for unemployed people per job opening. So it is a very
tough game of musical chairs, broadly speaking. But, yes, sure
there could be----
Mr. Scott. And it is also even worse when there is a
Mr. Bernstein. Exactly.
Mr. Scott. Now, if you invest in education,that has
economic stimulative effect, too. If you gave money to a
community college, for example, to improve educational
opportunities, could you say a word about what that would do to
employment? I mean, they would have to hire people.
Mr. Bernstein. Well, for years--and this committee has been
in the thick of it--the federal government has played a role in
helping support training programs. What we now know--
summarizing research that I reference in my submitted
testimony--is that the type of program you describe,
Congressman, are among the most effective.
We have found--it is called sectoral employment and
training strategies. And Ranking Member Miller's Pathway to
Opportunity bill also speaks to this, I think, sweet spot in
education and training policy.
The idea is to link up employers at the most local level
with community colleges so that the employers themselves can
identify in the most granular terms the kinds of jobs they are
going to be fielding in coming months and years. It is a very
different approach to training than a kind of blanket, soft
skills, basic, you know, here you go, some training, good luck
out there. It is a much more granular look at the occupational
demands of future labor opportunities. That kind of sectoral
employment strategy, linking employment and community colleges,
I think is the way forward.
Mr. Scott. And the community college, when it receives
money to provide the training, has to hire adjunct professors,
people have to buy books, and even that expenditure has short-
term positive effects on the economy.
Mr. Bernstein. I think that is right. I mean, clearly there
is very much a demand for precisely this kind of training. And,
in fact, if you look at one of the constraints that--we talk a
lot about community colleges in this town. If you look at one
of the real constraints community colleges face right now is
that they are actually way overcapacity in many places
throughout the country. Part of that is a function of the
downturn, lots of people going back and getting more schooling,
but part of it is very much the emphasis groups and committees
Mr. Scott. Let me see if I can get another question very
quickly. The state and local governments have been laying off
people because of their balanced budget requirements. Can you
say a word about the importance of the federal government
providing revenue-sharing so that they would stop laying people
Mr. Bernstein. Absolutely. We have seen this almost every
month for the past few years. We have added private-sector
jobs, while the public sector has shed literally hundreds of
thousands of jobs over the past few years, and it is because
they are facing budget constraints.
One of the most successful programs in the Recovery Act was
state relief for towns and cities, preventing layoffs,
teachers, police, sanitation workers, firefighters, key workers
in the community. And in the American Jobs Act, the president
provided--introduced an extension of exactly that type of help,
and it is very much in the interest of providing some boost for
what is still a fragile recovery.
Chairman Kline. The gentleman's time has expired.
Ms. Woolsey. Thank you, Mr. Chairman.
You know, we are going to be hearing a lot more, as we have
today, about burdensome regulations and how the federal
regulations impact negatively on business. And I think one that
we are going to hear about over and over is OSHA's proposal to
develop an injury and illness prevention program, a rule that
would require employers to implement a plan to routinely find
and fix hazards before workers are hurt, instead of waiting for
OSHA to find violations. And the opposition--the opponents will
claim that this is simply going to pile up paperwork and it be
a new regulation that we don't need.
Well, to justify the opposition, some have mischaracterized
the study by RAND Corporation on California's injury and
illness prevention program and stated that it had little impact
on worker safety, because, indeed, it is preventative.
But what the RAND Corporation found, as noted in a memo
that--a press release, actually, that they sent is that
California's program can help prevent injuries to workers, but
only if it is adequately enforced. Their press release said
that when inspectors found failures to comply with provisions
to train workers, identify and abate hazards, indeed, there is
a 20 percent decline in accidents and injuries.
So, Mr. Chairman, 20 percent is not a minor impact. It is
not a burdensome regulation. It saves $74 billion every year in
workers' compensation-related costs. And, in fact, if employers
could cut 20 percent off this cost, which--it would be about
$15 million per year that would improve their competitiveness.
So I don't want to trivialize the value of injury and
illness prevention programs. I want us to step up to the fact
that there are regulations that help and will make a
With that, Mr. Chairman, I respectfully request leave to
place the January 26, 2012, RAND press release into the record.
[The information follows:]
California Workplace Safety Program Can Reduce
Injuries When Inspectors Enforce It
For release Thursday, January 26, 2012
A longstanding California occupational safety program requiring all
businesses to eliminate workplace hazards can help prevent injuries to
workers, but only if it is adequately enforced, according to a new
study by the RAND Corporation.
The first-ever evaluation of the California Injury and Illness
Prevention Program found evidence that the program reduces workplace
injuries, but only at businesses that had been cited for not addressing
the regulation's more-specific safety mandates.
``We found the safety effects to be real, but not very large,''
said John Mendeloff, lead author of the study and a senior public
policy researcher for RAND, a nonprofit research organization. ``We
think that the most important reason for the limited impact of this
program is that inspectors often did not go beyond a review of the
employer's written document.''
When California Division of Occupational Safety and Health
inspectors did investigate further and found failures to comply with
provisions to train workers, identify and abate hazards, and
investigate injury causes, the average injury rates at targeted
businesses declined more than 20 percent in the following two years,
However, these provisions were cited in only about 5 percent of
Cal-OSHA inspections, RAND researchers found. In the other 20 percent
of inspections where a violation of the rule was cited, it was only for
the section requiring the employer have a written program. Such a
violation carries an average penalty of $150.
The California Injury and Illness Prevention Program, which became
effective in 1991, requires all employers to adopt certain procedures.
These include communicating to employees about risks, carrying out
regular workplace surveys and abating the hazards that are found,
training employees about how to work safely, and investigating the
causes of the injuries that occur. In contrast, almost all other safety
standards address specific hazards--for example, those dealing with
protection against falls.
The program has been the most frequently violated Cal-OSHA standard
in every year since 1991, being cited in about 25 percent of all
inspections. The California program is also one possible model for
federal OSHA's current rule-making effort to develop a safety and
health program rule.
The RAND study notes that higher penalties for noncompliance with
the program and more extensive activities to make employers aware of
their obligations could enhance compliance. However, two other
approaches could have a greater impact: having inspectors conduct more
in-depth assessments of employer programs and having inspectors link
the violations they find and the injuries that have occurred to the
program by asking ``Why weren't these prevented by your Injury and
Illness Prevention Program?''
The study found that employers who were cited for violations of the
Injury and Illness Prevention Program in one inspection usually came
into compliance in future inspections. However, the overall percentage
of inspections finding program violations did not change over time.
Moreover, the percentage of first-time inspections finding
violations was the same in 2007 as it was in 1993. These findings
indicate that information about the program requirements failed to
reach many employers, they failed to be convinced to comply by the
threat of penalties, or both.
The 20 percent reduction in injuries following citations for the
specific requirements of the California Injury and Illness Prevention
Program translates to about 1 injury per year at a workplace with 100
employees. Most estimates of the value of preventing a work injury are
in the range of $15,000 to $50,000. The RAND study did not find
evidence that the statewide workplace fatality rate had decreased after
the introduction of the program standard.
The study of injury effects was carried out using several different
injury data sets. In all cases, inspections were included in the data
if ``before and after'' injury rates could be obtained for the
inspected business. The study was limited to workplaces in the
manufacturing, transportation, utilities, wholesale trade and health
care sectors. It included inspections through 2006.
The study, ``An Evaluation of the California Injury and Illness
Prevention Program,'' can be found at www.rand.org. Other authors of
the study include Amelia Haviland and Regan Main of RAND, Wayne B. Gray
of Clark University and the National Bureau of Economic Research, and
Jing Xia formerly of RAND.
The study was sponsored by the California Commission for Health,
Safety and Workers' Compensation, a public body with management, labor
and public representatives located in the state's Department of
The study was conducted within the RAND Center for Health and
Safety in the Workplace, a research center within RAND Law, Business
and Regulation. RAND Law, Business and Regulation, a division of the
RAND Corporation, is dedicated to improving policy and decision making
in civil justice, corporate ethics and governance and business
about the rand corporation
The RAND Corporation is a nonprofit institution that helps improve
policy and decisionmaking through research and analysis.
[The summary, as well as the complete document, ``An
Evaluation of the California Injury and Illness Prevention
Program,'' may be accessed at the following Internet address:]
Chairman Kline. Without objection.
Ms. Woolsey. Thank you very much.
Ms. Johnson, are you the beneficiary, as a small woman-
owned business, of the women-owned small business federal
Ms. Johnson. Yes.
Ms. Woolsey. And has that worked for you, or has it been an
undue burden? Is it difficult to comply with?
Ms. Johnson. Not necessarily. And I think that, in fact, it
probably works more in favor for our customers, who have some
offset programs where they have to divert or contract with
their minority-owned or women-owned businesses.
Ms. Woolsey. So they contract with you----
Ms. Johnson. Correct.
Ms. Woolsey. So there are programs that actually work in
favor of those like yourself and others?
Ms. Johnson. You bet there are. And I would agree with your
injury and illness and preventative program, as well. There is
no doubt that there are regulations that are necessary. We are
not disputing that by any means.
But just we are talking about the difficult and uncertain
economic times that we are in right now and that just with so
much that we hear in the news and the media and the noise. It
is just--we need to just stop for a second and figure it out.
Ms. Woolsey. All right, I appreciate you.
So, Dr. Mitchell, in figuring out, can you list the
regulations that you would eliminate from the most to least
Mr. Mitchell. Sure. And thank you for asking, because I
think this gives us an opportunity to highlight, I think,
something that is important to understand about regulations.
Both on the left and the right, there is a tendency to think
about the cost of a regulation is the burden of filling out the
Ms. Woolsey. Yes, or----
Mr. Mitchell. And I am sorry?
Ms. Woolsey. Or the savings is----
Mr. Mitchell. Yes, and people will weigh that against the
savings. So conservatives will go and count up, you know, the
costs of compliance.
Ms. Woolsey. We are in yellow light. Will you list the
regulations you would eliminate from most to least important?
Mr. Mitchell. Okay. Well, I would say that the regulations
that are most important to eliminate are those that favor
entrenched interests, because that is the hidden cost of
Ms. Woolsey. So, example. What is the----
Mr. Mitchell. Regulations almost always--and this is
important that has won Nobel Prizes----
Ms. Woolsey. Okay, give me an example of that regulation.
Mr. Mitchell. Sure. I mean, I think that there is a lot of
opportunity in the health care law, for example, to look at
ways in which regulations that were passed very quickly--and
apparently subject to not particularly good analysis----
Ms. Woolsey. Well, an example. An exact example.
Mr. Mitchell [continuing]. And privilege--they privilege
Ms. Woolsey. Okay, like the insurance industry.
Thank you, Mr. Chairman.
Mr. Mitchell. Yes, exactly.
Chairman Kline. The gentlelady's time has expired.
We are wrapped up with our questions here. Before I thank
and excuse the panel, I would like to recognize Mr. Payne for
any closing remarks he might have.
Mr. Payne. Well, thank you very much.
I think that you have all added to the hearing today. I
appreciate your coming and spending time.
I would also like to commend the governors. I thought that
they had a very balanced approach. And I think that we really
need to see how we can get America back on the job track. I
think that a lot of the bickering that goes on is really
discouraging to American people. And there are things that we
can do together to help our nation in this time, and I just
hope that at some point in time, the Congress will come
together and try to put American people first.
Also, I would like to agree with one of the governors that
mentioned Secretary LaHood was doing an outstanding job, and I
have to agree that he is one of the more accessible and
energetic and forward-thinking members of the cabinet. I just
wanted that to be on the record.
Thank you. I yield back.
Chairman Kline. I thank the gentleman. And, of course, Ray
LaHood has been a friend of many of ours for a long time. It
shows the value of the education you get here in Congress when
you move to the cabinet.
I want to thank the witnesses. I think that it underscored
some of the differences that we have and some places where we
might come together. As I mentioned in my opening remarks, I
think there may be an opportunity where we can come to
agreement in streamlining and consolidating programs, as the
president suggested, to make them work better, to match up the
needs of employers with the output, if you will, of schools.
The testimony also underscored some fundamental
differences. Sometimes it is bickering that we engaged in here.
And that, I think, is really unfortunate. Sometimes it is
fundamental differences and how we--what we think is best for
the American people and best for the economy and the best way
to get Americans back to work. That debate will continue. And
you have been very helpful in our consideration of those
things. Again, I want to thank the witnesses.
And there being no further business, the committee stands
[Questions submitted for the record and their responses
Washington, DC, March 28, 2012.
Governor Dannel P. Malloy, State of Connecticut,
210 Capitol Avenue, Hartford, Connecticut 06106.
Dear Governor Malloy: Thank you for testifying at the Committee on
Education and the Workforce's February 1, hearing on ``Expanding
Opportunities for Job Creation.'' I appreciate your participation.
Enclosed are additional questions submitted by Committee members
following the hearing. Please provide written responses that answer the
questions posed no later than April 16, 2012, for inclusion in the
official hearing record. Responses should be sent to Benjamin Hoog of
the Committee staff, who can be contacted at (202) 225-4527.
Thank you again for your contribution to the work of the Committee.
John Kline, Chairman.
Question Submitted for the Record by Congressman Dennis A. Ross, a
Representative in Congress From the State of Florida
Question: Governor Malloy, President Obama's bi-partisan fiscal
commission, Simpson-Bowles, recommended in December of 2010 that
corporate tax loopholes be eliminated and that the corporate tax rate
be reduced from thirty-five percent to twenty-six percent. This
proposal would allow states leverage in incentivizing economic
development by allowing them more opportunities to attract corporations
to do business. Do you support these recommendations made by the
Simpson-Bowles Commission and why, or why not?
Washington, DC, March 28, 2012.
Governor Rick Snyder, State of Michigan,
P.O. Box 30013, Lansing, Michigan 48909.
Dear Governor Snyder: Thank you for testifying at the Committee on
Education and the Workforce's February 1, hearing on ``Expanding
Opportunities for Job Creation.'' I appreciate your participation.
Enclosed are additional questions submitted by Committee members
following the hearing. Please provide written responses that answer the
questions posed no later than April 16, 2012, for inclusion in the
official hearing record. Responses should be sent to Benjamin Hoog of
the Committee staff, who can be contacted at (202) 225-4527.
Thank you again for your contribution to the work of the Committee.
John Kline, Chairman.
Question Submitted for the Record by Congressman Dennis A. Ross, a
Representative in Congress From the State of Florida
Question: Governor Snyder, President Obama's bi-partisan fiscal
commission, Simpson-Bowles, recommended in December of 2010 that
corporate tax loopholes be eliminated and that the corporate tax rate
be reduced from thirty-five percent to twenty-six percent. This
proposal would allow states leverage in incentivizing economic
development by allowing them more opportunities to attract corporations
to do business. Do you support these recommendations made by the
Simpson-Bowles Commission and why, or why not?
[Whereupon, at 12:40 p.m., the committee was adjourned.]