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WEATHERING THE STORM: CREATING JOBS IN 

THE RECESSION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

ECONOMIC POLICY 

OF THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

ON 

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

POLICIES TO ACHIEVE SUSTAINABLE JOB GROWTH 

DECEMBER 9, 2009 

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

( 

Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html 
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

CHRISTOPHER J. DODD, Connecticut, Chairman 

TIM JOHNSON, South Dakota 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

EVAN BAYH, Indiana 

ROBERT MENENDEZ, New Jersey 

DANIEL K. AKAKA, Hawaii 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

HERB KOHL, Wisconsin 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

MICHAEL F. BENNET, Colorado 

RICHARD C. SHELBY, Alabama 

ROBERT F. BENNETT, Utah 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

BOB CORKER, Tennessee 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

KAY BAILEY HUTCHISON, Texas 

JUDD GREGG, New Hampshire 

EDWARD SILVERMAN, Staff Director 

WILLIAM D. DUHNKE, Republican Staff Director 

PATRICK BROWN, Professional Staff Member 

MARC JARSULIC, Chief Economist 

DAWN RATLIFF, Chief Clerk 

DEVIN HARTLEY, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

SUBCOMMITTEE ON ECONOMIC POLICY

SHERROD BROWN, Ohio, Chairman 

JIM DEMINT, South Carolina, Ranking Republican Member 

JON TESTER, Montana 

JEFF MERKLEY, Oregon 

CHRISTOPHER J. DODD, Connecticut 

CHRIS SLEVIN, Staff Director 

(II)
C O N T E N T S 

FRIDAY, DECEMBER 9, 2009 

Page 

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

WITNESSES 

Heather Boushey, Senior Economist, Center for American Progress Action 

Fund ............................................................................................................... 4 

Prepared statement ................................................................................... 29 

Bruce Katz, Vice President, Brookings Institution, and Director, Metropolitan Policy Program ................................................................................. 5 

Prepared statement ................................................................................... 38 

Ray Leach, Chief Executive Officer, Jumpstart, Inc. .................................... 8 

Prepared statement ................................................................................... 44 

Rick L. Weddle, President and CEO of The Research Triangle Park, 

and first Chairman of the International Economic Development Council .................................................................................................................... 11 

Prepared statement ................................................................................... 47 

(III)

(1) 

WEATHERING THE STORM: CREATING JOBS 

IN THE RECESSION 

WEDNESDAY, DECEMBER 9, 2009 

U.S. SENATE, 

SUBCOMMITTEE ON ECONOMIC POLICY, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Subcommittee met at 2:08 p.m., in room SD–538, Dirksen 

Senate Office Building, Senator Sherrod Brown, Chairman of the 

Subcommittee, presiding. 

OPENING STATEMENT OF CHAIRMAN SHERROD BROWN 

Chairman BROWN. This hearing of the Economic Policy Subcommittee of the U.S. Senate Banking Committee will come to 

order. Thank you all for joining us, the four guests, witnesses, and 

others in the audience. 

Few among us have ever witnessed the economic challenges facing this country today. We have avoided the collapse of our financial system. We were successful as a Nation with that and as a 

Senate and Congress and White House back a year ago. But millions of men and women, as we know too well, are still struggling 

to make ends meet, struggling with lower wages and depleted savings. 

Our Nation is showing some signs of economic recovery, but 

working families shield their children as best they can from the financial and emotional costs of job losses. Big banks and financial 

institutions have recovered but are still wounded and, most unfortunately, too often hesitant to lend. Creditworthy businesses are 

cutting workers because they cannot get credit. They have the capacity, they have the customers, but too often cannot get credit to 

move forward. 

Fear of the unknown is pervasive, whether it be fear of a parent’s job security or health insecurity or fear of paying for a child’s 

college education or fear of losing one’s home—all persistent problems in Mr. Leach’s and my part of the country, and really around 

this whole country. 

Since 2008, we have been accustomed to the refrain ‘‘worst since 

the Great Depression,’’ when unemployment reached 25 percent 

and economic output fell by 25 percent in the 3-plus-year period between 1929 and 1933. Earlier this year, this Subcommittee examined the lessons of the New Deal. What we heard was a range of 

perspectives in that hearing. One irrefutable conclusion was that 

the New Deal kept millions out of poverty and that investments in 
2 

our economic infrastructure paved the way for the most dynamic 

economic the world has ever since, beginning only 15 years later. 

Similarly, President Obama and Congress have taken steps to rebuild our economy and reinvest in our workers. The American Recovery and Reinvestment Act has helped our Nation weather the 

economic storm. Last week, the Congressional Budget Office reported ARRA programs have sustained as many as 1.6 million jobs 

this year. The Congressional Budget Office report estimates that 

the unemployment rate would be somewhere between 0.3 and 0.9 

percent higher without the ARRA. But there are concerns that demand will again fade. While last Friday’s slight reduction in unemployment is encouraging, there is no reduction in urgency to create 

jobs. 

Yesterday, the President outlined job creation proposals that his 

administration is considering. Congressional leaders are assembling ideas for job creation policies and will act in the coming 

weeks. I believe we need to help small business by making it easier 

to access credit. The Small Business Administration estimates that 

a new job will be created for every additional $23,000 lent to qualified borrowers. We need to encourage growth in manufacturing, the 

jobs that have, as we know, the strongest multiplier effect. One 

manufacturing jobs supports four other jobs throughout the economy. 

As President Obama noted yesterday, job creation will ultimately 

depend on the real job creators—businesses across America, entrepreneurs in Youngstown and Dayton, students in our colleges and 

universities, workers in factories in every corner of our great land. 

We have two proven job creators here with us today, alongside 

two forward-looking economic thinkers. Today we will hear our witnesses discuss what steps are necessary not just to weather the 

storm but to create new jobs. I thank each of you for your participation today and look forward to your thoughts on economic recovery, look forward to your comments on short- and long-term policies 

needed to truly jumpstart the hiring of more workers. 

I will introduce each of the four witnesses, and Senator Dodd I 

think is coming along and will make an opening statement, the 

Chair of the full Committee, in a moment, but I will introduce each 

of the four of you. Then we will begin. 

Dr. Heather Boushey is the Senior Economist at the Center for 

American Progress. Prior to joining the center, Dr. Boushey was a 

Senior Economist with the Joint Economic Committee of the U.S. 

Congress. She studies working families and trends in the U.S. 

labor market, has written extensively on labor issues, including 

tracking the recession and its impact on workers and their families, 

women’s labor force participation trends and income inequality, 

and work/life policy issues. She has testified before Congress and 

given lectures nationwide. Dr. Boushey’s research has been featured in major national and regional papers, television, and radio. 

She previously worked at the Center for Economic Policy Research 

and the Economic Policy Institute, where she co-authored ‘‘The 

State of Working America’’ and ‘‘Hardships in America.’’ Dr. 

Boushey received her Ph.D. in economics from the New School for 

Social Research and her B.A. from Hampshire College. 
3 

Bruce Katz is Vice President of Brookings here in Washington. 

He is the founding director of the Brookings Metropolitan Policy 

Program. He regularly advised national, State, regional, and municipal leaders on policy reforms that aim to advance the competitiveness of metropolitan areas. He focuses particularly on reforms 

that promote the revitalization of central cities and older suburbs 

and enhance the ability of these places to attract, retain, and grow 

the middle class. He recently served on the Obama transition team 

and is a senior adviser to HUD Secretary Shaun Donovan. Before 

joining Brookings, he served as chief of staff to Henry Cisneros, the 

former Secretary of the U.S. Department of Housing and Urban 

Development. He has also served as staff director on the Senate 

Subcommittee on Housing and Urban Affairs. He is a visiting professor of social policy at the London School of Economics, a frequent writer, and commentator on urban and metropolitan issues. 

Welcome, Dr. Katz. Nice to see you. 

Ray Leach, founder and CEO of JumpStart from Cleveland, from 

my States. Since 2003, Mr. Leach has led JumpStart, recognized 

recently by the Economic Development Administration as one of 

the most innovative venture development organizations in our Nation. JumpStart invests risk capital in early stage companies and 

provides entrepreneurs with business operation plans and guidance 

to help attract larger pools of capital and accelerate growth. My 

editorial comment: Prior to Mr. Leach coming to Cleveland with 

JumpStart in 2003, Cleveland had a reputation as one of the worst 

places to start a business in the Nation, and he has totally reversed that into Cleveland being one of the best places. His career 

began at IBM and has been principally focused on information 

technology companies. He is a Sloan fellow and earned his M.B.A. 

from MIT. He earned a B.A. in finance from the University of 

Akron in Akron, Ohio. 

Rick Weddle is President and CEO of The Research Triangle 

Park in North Carolina. Under his leadership since 2004, The Research Triangle Park has generated successful development 

projects with capital investment of more than $800 million and the 

creation of more than 6,300 new high—quality jobs averaging 

$80,000 per year. The Research Triangle Foundation has assisted 

in recruiting 18 new firms and 4 expansions to The Research Triangle since 2004. Prior to 2004, for 5 years Mr. Weddle was President and CEO of the Greater Phoenix Economic Council, assisting 

170 companies with expansions or relocations to Phoenix that created 26,000 jobs. He also spent 4 years in Toledo, Ohio, where he 

served as President and CEO of the Regional Growth Partnership, 

assisting 119 companies with expansions or relocations that created some 4,000 jobs. He recently received the Lifetime Achievement Award for Excellence in Economic Development from the 

International Economic Development Council. He is a native of 

Oklahoma. 

Dr. Boushey, if you would begin, welcome to all four of you. 

Please keep your comments to close to 5, 6, 7 minutes, and we will 

begin the questions. Thank you. 
4 

STATEMENT OF HEATHER BOUSHEY, SENIOR ECONOMIST, 

CENTER FOR AMERICAN PROGRESS ACTION FUND 

Ms. BOUSHEY. Oh, there we go. All right. I will start over. So 

thank you, Chairman Brown, for inviting us to speak to you today 

about job creation. In my remarks, I am going to focus on a few 

key highlights from my written testimony, which goes into much 

more depth on the issues at hand. 

Of course, the good news is that on Friday, we learned that the 

unemployment rate fell to 10 percent and only 11,000 workers lost 

their jobs in November. This is a clear indication that the steps 

that Congress and the administration have taken to get the economy back on track have been effective. The American Recovery and 

Reinvestment Act, signed into law last February, boosted economic 

growth in the third quarter and saved or created upwards of 1.6 

million jobs. The act was a significant accomplishment, but the economic effects of the recovery package will start to diminish beginning in the middle of 2010, well before we are fully out of the 

woods. Economists now predict that economic growth will be only 

about 2 percent for 2010 given the policy efforts already in place. 

Without additional action on the part of Congress, the U.S. economy could easily slip into an extended jobless recovery—or see the 

recovery stall altogether. 

There are a few key steps that Congress should take now to help 

boost jobs in the short- to medium-term. 

First, Congress should move quickly to ensure that the extended 

unemployment benefits included in the Recovery Act do not expire 

as planned at the end of this month. These benefits go to the longterm unemployed who now account for a historically high share of 

unemployed workers. As the chart behind you shows, nearly four 

in ten workers have been out of work and searching for a job for 

at least 6 months. 

Now, extending these subsidies to help the unemployed purchase 

health insurance or allowing States the option to put unemployed 

workers on Medicaid must also be done before the end of the year. 

Second, Congress should provide another funding boost to the 

States. State and local governments have shed almost 160,000 jobs 

over the past year, with nearly 80 percent of local government jobs 

lost in just the past 4 months. So those layoffs are accelerating, 

and these layoffs are, of course, working against economic recovery 

at the local level. The aid to the States contained in the package 

put into place last February helped, but it only addressed about 30 

to 40 percent of the gap faced by State governments. 

Third, the Federal Government could spur the creation of millions of mostly private sector jobs by directing additional Federal 

money into youth and young adult employment—such as 

AmeriCorps, VISTA, YouthBuild, and the youth service and conservation corps—child care, after-school programs, and in-home 

health services for the elderly and disabled, as well as training for 

those serving America’s youngsters, oldsters, and the disabled. 

Nonprofit groups and small businesses provide most of these jobs, 

although they are paid for by programs that are currently being cut 

by State and local governments. Funneling funds into these programs not only quickly gets people into jobs, but supports families 

and communities by providing much needed services. These pro-
5 

grams often have long waiting lists, and any new funds will be able 

to meet pressing needs. 

Fourth, the proposals that the President put forward yesterday 

that focus on promoting green jobs as a part of the overall recovery 

agenda are certainly the right way to go. Congress should establish 

a two-tier program to transform the market for energy efficiency— 

a ‘‘cash for caulkers’’ program. The first tier would promote immediate investment in energy efficiency, through super-efficient appliances and simple home improvements. The second tier, which 

should be implemented in parallel at the same time, would increase consumer awareness of comprehensive whole-home energy 

audits and retrofits. These will, of course, create substantial jobs, 

good jobs in the construction and manufacturing sectors. 

So I want to close by noting that we should consider using the 

TARP funds for job creation. We should not let the American people be scared by tactics about the long-term Federal budget deficits 

and allow those to keep Congress from doing what we need to do 

to keep the economy moving back on track in the short term. The 

deficit will rise regardless of whether or not Congress approves additional spending if we do not get people back to work. Unemployed 

people do not pay income taxes; they do not pay sales taxes if they 

do not have any money to buy things; and if their home gets foreclosed on, then they are not paying real estate taxes. Over the last 

year, we have seen tax revenues fall by nearly as much as we have 

seen expenditures go up, so certainly if we fail to act, that, too, will 

increase the deficit. 

The question is whether we will make the investments today to 

get the economy back on track or whether we will allow the scourge 

of unemployment to linger. If we do nothing, we risk not only missing an opportunity to get the 15.4 million unemployed workers 

back to work quickly, but also are harming our economy over the 

medium to long term. 

Thank you. 

Chairman BROWN. Thank you, Dr. Boushey. 

Mr. Katz. 

STATEMENT OF BRUCE KATZ, VICE PRESIDENT, BROOKINGS 

INSTITUTION, AND DIRECTOR, METROPOLITAN POLICY PROGRAM 

Mr. KATZ. Thank you, Chairman Brown, for the opportunity to 

testify. I also will focus on the highlights from my written testimony. I am going to make three points that build on President 

Obama’s presentation yesterday at Brookings that try to connect 

macroeconomic policy to metro-economic realities. 

The first point is that the American economy, like most developed economies, is a network of metro economies which envelop not 

just cities and suburbs, but a good portion of our rural areas. The 

366 metro areas in the United States house 83 percent of our population. They generate 88 percent of our GDP, and due to sprawl, 

about 50 percent of the U.S. rural population actually live in metropolitan areas because of the distension of economies. We are 

metro nation. We need to start acting like one, like China, like Germany, like Britain, with the kinds of smart policies and targeted 

investments that will enhance our competitiveness globally. 
6 

Second, the Great Recession has affected different metro economies in radically different ways. Metros like Austin, San Antonio, 

and Washington, D.C., have fared fairly well during this downturn, 

buoyed by strong health and education sectors and Government. By 

contrast, bubble real estate economies, such as Phoenix, Tampa, 

and Jacksonville, have continued to lose jobs at two or three times 

the rate of the United States as a whole over the last quarter. 

Motor metros, as you know, such as Youngstown and Akron, have 

shed jobs two and three times faster than the United States, respectively, over the last quarter. Bottom line, there is no single 

American economy. Even as economists talk about national recovery, a large number of our metro economies are still mired in recession. 

Third, Federal efforts to bolster job creation need to connect ‘‘The 

Macro to the Metro.’’ I will focus on two kinds of Federal responses. 

First, metros need the Federal Government to intervene quickly 

to prevent further job losses from the collapse of general and specific tax revenues. One critical strategy is direct fiscal assistance to 

local governments, which employ 10 percent of the Nation’s workforce. There is always a fiscal lag to recessions. The massive decline in property values has not yet shown up in local government 

budgets, which derive about 70 to 75 percent of their revenue from 

property taxes. By one calculus, property tax revenues for both 

local governments and school district could decline in the coming 

year by $35 billion. If the decline in State transfers to localities is 

as large as the decline in State revenue, local governments could 

lose another $74 billion. 

In fiscal year 2009, about 70 percent of cities dealt with budget 

shortfalls through layoffs, furloughs, and hiring freezes. This will 

only get worse as revenues decline. 

So fiscal aid to cities would keep municipal payrolls stable and 

also stall cuts in local spending on construction, procurement, and 

other areas. The simplest form is direct aid in a new program. It 

could be modeled, actually, on the old general revenue-sharing program we had in the 1970s. A second option would be to restructure 

the State Fiscal Stabilization Fund started in the Recovery Act to 

provide direct fiscal assistance to local governments through a 

passthrough. In my written testimony, I also focus on a second 

strategy for stopping job losses by enabling Federal resources to be 

used for transit operating subsidies. The Recovery Act provides a 

lot of funding for capital, none for operating. 

Now, second, metros need the Federal Government’s support in 

creating jobs that build the economy of the future, one that is low 

carbon, innovation fueled, export oriented. Investment in the next 

generation of infrastructure is critical here. I recommend that Congress expand funding for the U.S. DOT’s Transportation Investment Generating Economic Recovery—TIGER—Discretionary 

Grants, originally funded at about $1.5 billion in the Recovery Act. 

TIGER uses job creation as a metric for evaluating applications, 

and TIGER-funded infrastructure, competitively awarded, has a 

powerful ability to create well-paying jobs now and a stronger economy in the future. 

TIGER disbursements are not expected until February 2010, but 

the program is attracting substantial demand. Nearly 1,400 appli-
7 

cations received so far by DOT total $57 billion—remember, just 

$1.5 billion appropriated—and come from every State. If even onethird of these applications are projects that adhere closely to the 

objectives of the program, that represents $20 billion in high-quality projects that are ready to start, but lack funding and, again, 

build the economy of the future. 

So I believe that funding the qualified TIGER pipeline should be 

considered as part of any job creation effort. Congress should also 

consider making TIGER a permanent part of the DOT budget. My 

written testimony also recommends Federal support for the national infrastructure bank that Senator Dodd has sponsored, as 

well as industry clusters. 

So, in conclusion, the time is long past due for national economic 

policy to align more closely with metropolitan economic realities, 

given the economic primacy of our metropolitan areas. 

I thank you again for the opportunity to testify here today and 

welcome any questions. Thanks. 

Chairman BROWN. Thank you, Mr. Katz. 

We do not get our full Committee Chair here very often because 

he is so busy, so do you want to make a statement now before the 

other two panelists? 

Chairman DODD. Well, that is very generous of you, and I will 

try and stay as long as I can. 

Let me, first of all, thank my colleague from Ohio for chairing 

this work area, job creation, which is so important. And this Committee has a lot to say about it in terms of a lot of jurisdictional 

issues that we are involved in. So I find it exciting that there is 

some real attention being given to how we do this. This forwardleaning, I think all of us agree that obviously you want to do everything you can for those who have fallen through the cracks. Whether it is extension of unemployment benefits or insurance or COBRA 

extensions and the like, we have got to do that, obviously, for people. 

Certainly I believe very strongly the best social program, I have 

often said, that anyone ever imagined or came up with is a decentpaying job. There is no better social program in terms of what it 

means to individuals, families, communities, and, obviously, it is 

our job to be honest enough with people to say that a lot of these 

jobs that are gone are not coming back, candidly. And so we have 

got to be thinking about what we can do to create that new level 

of jobs in the country where the opportunities are there. 

A lot of basic research is being done in this country, and if we 

export the basic research and end up a lot of the very products 

which we have designed and created—plasma television is a classic 

example—the ingenuity that came up with that concept was created here. All the manufacturing occurs offshore. So we export our 

basic research and have to import the products that are produced 

as a result of our own technology. 

So I am excited about the ideas of marshaling the general creativity, and obviously in high technologies, the empowerment zones 

I thought was a wonderful concept a few years ago, where we targeted resources to areas and to getting into sort of the green technology zones, in effect to reward industries into, one, developing 

ideas in green technologies or utilizing green technologies. To the 
8 

extent that benefits all of us I think is sort of a creative idea if you 

think of a cluster. 

Obviously, small business, we all talk about it, and it is tremendously important, and we have got to be imaginative in how we 

support this. It is not just tax credits, and this is a difficult one 

that gets into the payroll tax area. But if you are going to encourage small businesses to keep employees they have or hire new 

ones, we have got to provide that incentive for them. 

Now, you get into, obviously, some issues and payroll tax questions, but, nonetheless, I think that is the clear incentive that 

makes the most difference for people, things like the—I love the 

creative—I think it was John Doerr who came up with the title of 

‘‘cash for caulkers,’’ a sort of intriguing idea to put some people to 

work in that area. So there are any number of concepts. 

I have got a long statement here, Mr. President, that I will ask 

to be included in the record. It goes through a number of these 

ideas, including, of course, setting up that lending facility utilizing 

some of these TARP resources that exist. Having been involved, 

deeply involved a year ago in the emergency economic stabilization 

bill, a highly criticized effort at the time, still highly criticized, I 

happen to believe we did exactly the right thing with it, and history I think will record it as such. And so I think we can honestly 

say we have stabilized the major financial institutions in the country, and clearly now, given the resources that are available, to at 

least use a substantial part of those resources to make a difference 

in job creation I think is tremendously well warranted and worthy 

of the kind of effort the President is putting into it, and those of 

us up here can help support with either our own ideas or getting 

behind these proposals. 

So this is a very timely hearing to have on some of these ideas 

that are being kicked around here, and I thank my colleague. I 

thank all of our witnesses. You are all talented people who have 

thought about this long and hard for a long, long time, and any additional thoughts and ideas you have for all of us I know you are 

sharing with us, and we really welcome them. So thank you. 

Chairman BROWN. Thank you, Senator Dodd. Thanks for joining 

us. 

Mr. Leach, your testimony. 

STATEMENT OF RAY LEACH, CHIEF EXECUTIVE OFFICER, 

JUMPSTART, INC. 

Mr. LEACH. Senators Dodd and Brown, thank you for the opportunity for me to testify on behalf of nonprofit organizations located 

throughout the United States who work with and are supported by 

public, foundation, and private sector partners who are focused on 

the transformation of regional economies. 

While all of us are encouraged by the recent news regarding a 

slight reduction in total U.S. unemployment, economists tell us 

that we are going to need to create at least 6 million new jobs in 

order to reach full employment in the United States. Economists 

also tell us that 70 percent of all new jobs in the U.S. economy are 

created by firms that are less than 5 years old. 

With this being the case, now is the time for Congress to reconsider the Federal Government’s role in the formation of new, highly 
9 

disruptive technology businesses that have the potential to create 

significant white, green, and blue collar jobs as well as completely 

new industries. 

This being the case, I believe new ideas and actions are required 

in order to for the U.S. economy to not only get back on track for 

long-term economic growth, but to also allow the United States to 

remain the world’s largest wealth- and job-creating economy in the 

decades to come. 

Recent conversations regarding the expansion of small business 

loan guarantees, reducing loan fees, providing tax credits to small 

companies who hire new employees, are a start to help more established, typically lower-growth companies. However, I do not believe 

that these initiatives will have the ability to jump-start the U.S. 

economy in such a fashion where we can get back to full employment as quickly as we otherwise could if the Federal Government 

leveraged some new ideas and initiatives. 

I appreciate the chance to share with you today an approach that 

has not been discussed to my knowledge to date with this Committee and how the Federal Government can partner with communities, States, and regions of the country to accelerate the formation of entrepreneurial ecosystems based on regional cluster collaborations and partnerships that have the potential to produce 

sustained, long-term economic transformation, growth, and wealth 

creation. 

In order to illustrate this example, I would like to talk a little 

bit about my organization, JumpStart, a nonprofit located in northeast Ohio, headquartered in Cleveland and working in northeast 

Ohio. 

It has been our mission over the last 4 years to recreate the entrepreneurial ecosystem which at one time was incredibly robust, 

particularly in the late 19th and early 20th centuries. As a result 

of JumpStart’s work, we are working on—the origination of 

JumpStart and the foundation of our initial work was from 1990 

to 2002, if you looked at the largest metropolitan economies across 

the United States, northeast Ohio was the worst-performing regional economy 10 out of 12 years between 1990 and 2002. 

In 2003, the public, philanthropic, and private sector leadership 

of Greater Cleveland came together to build a strategic plan to 

build an organization ultimately that I am running today called 

JumpStart, which is a nonprofit entity that provides programs and 

access to capital, which is now recreating the entrepreneurial ecosystem to assist new innovators and entrepreneurs to realize the 

greatest economic outcomes that could result from the creation of 

new firms based on disruptive, globally competitive innovation that 

has the potential to create hundreds, thousands, and tens of thousands of new jobs in the coming decade. 

I am encouraged to report that since this is collaboration of supporters was created, JumpStart has generated significant economic 

results to date and has been able to demonstrate the promise to 

help accelerate the economic transformation of the northeast Ohio 

economy. Over the last 4 years, again, starting with very brandnew one-, two-, three-people companies, JumpStart has been able 

to create 600 jobs, and the companies that we are focused on are 

expected to create at least 3,000 new positions in the next few 
10 

years, while at the same time JumpStart has been able to attract 

over $1 billion of private sector capital to northeast Ohio’s startup 

firms. 

JumpStart’s venture development business model has recently 

been highlighted in the national media and has won multiple 

awards as a national best practice organization that has the potential to transform the economic future of our country. 

With these thoughts in mind, Congress should take lessons from 

JumpStart’s public, private, and foundation collaboration in order 

to leverage Federal resources to ensure that new and innovative 

businesses continue to be created by entrepreneurs across the 

United States via a new robust Federal program that focuses on accelerating technology commercialization, increasing access to technical assistance, education mentoring, and training for all entrepreneurs—of course, also improving access to risk capital and at 

the same time not significantly overlapping any significant Federal 

programs. 

One of the examples that JumpStart has been able to benefit 

from in Ohio is something called the Ohio Third Frontier Project. 

This is a $1.6 billion public sector initiative that is focused on creating and accelerating the research- and technology-drive economy 

in Ohio. A recent assessment of this program was performed by 

SRI International and determined that after the State expenditures 

totaling $681 million over the last 7 years have generated over $6.6 

billion of economic activity and over 41,300 jobs have been created 

in the last 7 years in Ohio, which has resulted in a $2.4 billion increase in employee wage and benefits. 

So today I am recommending that Congress create a $2 billion 

4-year initiative from currently available funds from ARRA in 

order to create the Federal Innovation, Commercialization, and Job 

Creation Network whereby existing proven nonprofit economic development organizations and higher educational institutions who 

have been able to demonstrate significant commercialization and 

economic outcomes could serve as individual regional centers which 

would manage technical assistance and capital access programs to 

benefit regional innovators and entrepreneurs who demonstrate the 

promise of launching wealth-creating new companies. 

Expected results from this program would include: first, a doubling of resources provided by the Federal Government focused on 

commercialization and the creation of new high-potential, highgrowth companies by leveraging Federal dollars to non-Federal 

public, private, and foundation partners that have an aligned vision. A special focus on the commercialization of innovation, as 

Senator Dodd commented, basic research is great, but if we are not 

creating jobs from that research, we are not getting the bang for 

the buck that the Federal Government is making such significant 

investments in, so focusing on commercialization, which has the 

promise to create a small number of jobs immediately but has the 

potential to create at least 25 new jobs in the next 36 months. 

We could also realize from this program increased private sector 

investment of over $4 billion from investors across the globe within 

the next 4 years in brand-new firms that have been created or supported from this program. 
11 

Finally, with this program, the Federal Government could realize 

the creation of at least 260,000 brand-new jobs from brand-new 

firms within the next 6 years, an additional 1 million U.S. jobs to 

be created as a result of this work by the year 2020. 

So I greatly appreciate the opportunity to share these thoughts, 

and I look forward to taking questions later. 

Chairman BROWN. Thank you very much, Mr. Leach. 

Mr. Weddle. 

STATEMENT OF RICK L. WEDDLE, PRESIDENT AND CEO, THE 

RESEARCH TRIANGLE PARK, AND FIRST CHAIRMAN OF THE 

INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL 

Mr. WEDDLE. Chairman Brown, Senator Dodd, thank you for the 

opportunity to testify today on the important topic of short-term 

policies Congress should consider or could consider in creating jobs. 

The American Recovery and Reinvestment Act has done much to 

help stimulate the economy and job growth during the downturn. 

However, with unemployment at 10 percent, continued action is 

needed. 

As President and CEO of The Research Triangle Park, the nation’s oldest and largest research park, RTP is one of the best examples of how the public and private policymakers can have a lasting impact on job creation and economic growth. Mr. Chairman, as 

you also noted in the introduction, for 4 years, I served as President and CEO of the Regional Growth Partnership in Toledo, Ohio, 

where in my work there I was able to experience and benefit from 

a number of—and operate under a number of challenges in the recovery manufacturing environment. 

As past Chairman of the International Economic Development 

Council, my comments today also represent the viewpoints of the 

world’s largest economic development organization, with more than 

4,600 members, dedicated to creating high-quality jobs and vibrant 

communities. 

My remarks today will address the following three points. What 

do the front-line economic developers see as best practices or revitalization programs that have worked well to create jobs? What 

specific recommendations can we offer to build on the success of the 

Recovery and Reinvestment Act in the short term? And what 

should we keep in mind to ensure that there is a balance between 

short-term immediate actions and the need to create long-term capacity for innovation and continued economic growth? 

First, allow me to share some data for the survey conducted last 

week of the 4,600 members of the International Economic Development Council. The data provides firsthand feedback from the field 

regarding policies and best practices in their communities. With a 

10-percent response rate, the data represents input from over 400 

communities nationwide. Roughly a third of the practitioners believe the Recovery Act has already created new jobs in their community. Another 30 percent do not believe the jobs have been created in their communities yet. And a quarter are still unsure of the 

Act’s effect on job creation. It is clear from these results that more 

needs to be done. 

I have included a number of case studies in the written testimony that reflect initial analysis from around the country of what 
12 

can be done to address this ongoing need of job creation. Allow me 

to summarize some highlights and principles we found among 

them. 

The first principle is to build on and use what we have in innovative ways. The case studies indicate we do not need to reinvent the 

wheel. Our communities have many assets upon which to build and 

we should leverage their work as much as possible. One way to do 

this is to bring jobs back home and directly incent the hiring of 

Americans now. Globalization has benefited many U.S. companies, 

yet offshoring of U.S. jobs is a gargantuan obstacle to economic development efforts. We need to place direct emphasis on hiring and 

retaining American workers. 

We can offer incentives directly to companies willing to bring 

work from an offshore location to the U.S. location marked by high 

unemployment. According to the Information and Technology Innovation Foundation, who first surfaced this idea, a forgivable loan 

program administered by EDA would be a particularly efficient 

method for not only creating jobs, but doing so in areas where the 

need is greatest. 

Second, we should expand the current Invest in America program 

housed in the Department of Commerce to become an internationally competitive marketing arm of the U.S. Government. The 

United States is the only developed country without such a national scale program. Most of the nations we compete with for investment have well-resourced programs to identify opportunities 

for foreign direct investment. To meet this market need, an initiative would require a $50 million annual investment at the Federal 

level complemented by another $50 million tranche in matching 

funds annually to U.S. States and regions specifically for attracting 

high-quality jobs and investments in the United States. 

Third, we should evaluate and align trade and exchange rate policy with job creation goals. Many trade and exchange rate policies 

seem to have been working against our national job creation goals. 

Another way to build on existing programs is to strengthen the 

innovation infrastructure in communities. This could be done with 

a combination of new ideas, like tax credits or direct incentives to 

redevelop vacant office space and retail space to provide muchneeded wet labs and other spaces conducive to innovation and discovery. 

The second principle is the idea of providing resources to those 

who are most agile and flexible. For individuals, the Committee 

could consider an out-of-the-box idea. Consider tax credits to spur 

talent mobility within the United States. Given the current housing situation, many talented individuals are stranded, if you will, 

in locations where they cannot sell their homes. It would not be unreasonable to formulate a business and individual tax credit to help 

some workers relocate to take a new job. 

Other activities could target small business and entrepreneurs, 

the key drivers of economic recovery. The small firm that gains access to needed credit or cash will be more likely to hire additional 

workers to get the job done. 

We should emphasize non-traditional financing entities, such as 

Certified Development Corporations, Community Development Financial Institutions, and Revolving Loan Funds. 
13 

And finally, for companies, we could look to build off success that 

are moving capital in the private sector. In particular, the reduction or elimination of fees on the current 504 and 7(a) loan programs have been very successful, as well as the Recovery Zone Facility Bonds. 

Now, let me turn to the final principle that focuses on both shortterm job creation as well as building our long-term innovation capacity. There is no doubt that the Federal Government’s investment in research and development is a critical tool for stimulating 

innovation and building long-term competitiveness. We need to find 

ways to target and accelerate innovation by encouraging more R&D 

commercialization. 

First, we should invest in innovation infrastructure, such as research parks, incubators, and others, as they marry short-term creation goals with the need to build strong, regional innovation ecosystems. The ideas posed in S. 583, Building a Stronger America 

Act, will directly incent the construction of new and expanded research parks. 

Another suggestion to jump-start commercialization would be to 

offer a bonus R&D tax credit in 2010 and 2011 which companies 

could choose to take against their non-corporate income tax. This 

recommendation put forth by the Information and Technology Innovation Foundation would help companies maintain research during 

this challenging economic time. 

The rationale for making such investments and incenting such 

programs is best illustrated perhaps by the story of Research Triangle Park. Fifty years ago, the leaders of North Carolina realized 

that our State was not well poised to be at the forefront of the postwar science and technology-based era. Based on the strengths of 

the State’s universities, the University of North Carolina, Duke 

University, and North Carolina State University, they created a 

place where companies could take advantage of the region’s intellectual assets with the physical infrastructure to support corporate 

R&D activities. 

We need bold new thinking on how to replicate the RTP model 

in other locations. This can be done by directing investment toward 

retaining and growing critical industries that can support highgrowth companies. We can harness the existing Federal infrastructure, such as the Economic Development Administration’s University Program or the Manufacturing Extension Partnership Networks to reach out to competitive, innovative companies. These programs provide an important link between Federal goals and the 

private sector. Additionally, the Committee could consider steps to 

allow the Workforce Investment Act to support incumbent worker 

training. This strengthens competitiveness of existing businesses 

and allows them to retain critical jobs. 

This recession is like none other that we have experienced. We 

are not just rebooting our system. We are likely moving to a new 

operating platform. As such, we should learn from these historical 

successes, but also realize that a different paradigm is needed. The 

actions taken under the initial Recovery Act and the ones this 

Committee and others recommend now are merely a downpayment. 

They are not the full solution, and even after the second or third 

round, more action may be needed. 
14 

We are at an inflection point in America today. As we emerge 

from this historic downturn and recalibrate the way we do things, 

now is a prime moment to consider what must be done to incent 

appropriate private sector behavior and move the Federal Government from just providing a few tools and helping the companies 

and communities in selected areas to becoming a full partner in the 

National Economic Recovery Strategy. 

On behalf of the economic development practitioners around the 

country, working hard to create jobs every day in competitive communities, I want to thank you, the Chairman, Senator Dodd, for allowing me the opportunity to share these thoughts. I would be 

happy to respond to questions. 

Chairman BROWN. Thank you, Mr. Weddle. 

Dr. Boushey, a few weeks ago, I was speaking to the Findlay Rotary Club and the tone of the questions illustrated a real fear of 

deficits in our country. Talk to us—you mentioned that that 

shouldn’t override what we need to do on creating jobs. Talk about 

that for us, if you would. 

Ms. BOUSHEY. Talk? I mean, I think that is a really challenging 

question, especially for everyday Americans who tend to look at 

this in the same way that they do their household budget. Oh, I 

am spending too much on my credit card. Therefore, I am in deficit. 

That is just an unmitigated bad. 

But it is not the same thing for government and I think we 

haven’t done enough to really educate the public that there is a big 

difference there. One thing I don’t think people hear enough about 

is that unemployment rises, you see tax revenues fall and you see 

demand for services go up. That in and of itself is going to raise 

the deficit. And so the rhetoric that we are hearing out there on 

the airwaves and the radio and television is all about we spend 

more and that is what raises the deficit. We don’t hear enough 

about how what raises the deficit is the poor economy that we are 

in right now and the fact that if we don’t get economic growth back 

on track, that problem will only continue to mount. 

And I think this is a really pivotal moment, because we are talking about making investments in our long-term economic growth, 

the kinds of things that my colleagues up here have been talking 

about, and also getting, in the short-term, getting people back to 

work. The sooner that we can get the economy back on track, the 

better that will be for the deficit in the medium- to long-term. It 

will require some spending now, but those investments are going 

to pay off. 

And just to add one thing, I mean, I think it is helpful when we 

are talking to—I find it is helpful when I am talking to sort of regular folks that we think about this in the same way that we do putting a child through college, that that is the kind of investment we 

are willing to take out loans for, to go into a household deficit, because we know it is going to pay off in the future. And that is the 

way we should be thinking about the challenges facing us right 

now. We will address them, but once we get the economy back on 

track. 

Chairman BROWN. Thank you. One of the, I think, most important proposals in this body from the last couple of years is Senator 

Dodd’s National Infrastructure Bank. I hear a lot about deficit, but 
15 

we don’t talk all that much about the deficit we have in infrastructure that we are passing on to our children. 

The Mayor of Columbus came to see me about a year ago and 

he said that unless we get more Federal help, like the Federal Government used to invest more in water and sewer, that every individual, every homeowner in Columbus will see double-digit percentage sewer and water bill increases for as far as he could see, and 

we know what that does to economic development. 

Explore that with me, what these deficits—what this infrastructure deficit does to the sort of the job-creating efforts for manufacturing especially, but for anything else. 

Ms. BOUSHEY. Well, there are so many different layers to it. I 

mean, just to start with manufacturing, if you are going to manufacture goods, you have to get them from point A to point B, and 

you certainly don’t want the bridge to collapse on you as you are 

driving there, right? And we know that we have got this deficit in 

terms of roads and bridges and that big picture kind of stuff. Making those investments makes it easier to transport our goods. It 

makes it cheaper. It makes it more efficient. I mean, that would 

be the first thing I would think about. 

Another piece that we need to think about in terms of infrastructure, thinking a little bit more broadly than just manufacturing, is, 

of course, our investments in education and our capacity to train 

the next generation, which is a vital component of our infrastructure that is related to our long-term economic growth. Are we creating the kind of workforce that can have those jobs of the future 

and are we making those investments today to do so. 

I mean, it really is quite a tragedy when you think about us 

being the wealthiest country on the planet and we have—here in 

D.C. for a few years we had potholes that were exploding left and 

right, creating dangerous situations, but also making it challenging 

to convince people to make those kinds of investments to locate 

their companies and to see us as a place to grow. 

Chairman BROWN. Let me ask one other slightly related question 

for you before moving on. The Treasury Department reported Monday it expects to have some $200 billion back for TARP. What is 

your sentiment about how we should reprogram TARP money, 

move TARP money in whatever ways toward economic development? How would you structure that? 

Ms. BOUSHEY. Well, I think that at the time that you all did 

TARP, that was the right thing to do. That was the right way to 

spend that money. I think it is very fortunate and speaks to the 

foresight that Congress and the administration had when those 

funds were allocated, to allocate that much money and to do what 

you did to stop the financial crisis in its tracks. 

But, fortunately, it appears we don’t need all that money. But we 

do need the money for the reverberations of that financial crisis on 

Main Street and what has happened with jobs and what is going 

on in the economy nationwide. We know that this recession was 

caused by the financial crisis and we allocated those funds to deal 

with that. That problem appears to be sort of on its path toward 

recovery, so let us reallocate those funds to the aftershocks of that 

crisis in terms of job creation and making the investments that we 

need to make to get the whole economy back on track. 
16 

I would add to that that, again, it is looking at the economy as 

a whole dynamic, that if we don’t get people back to work, we are 

going to see even more folks having their homes foreclosed because 

they can’t pay their mortgages, which in turn affects the financial 

system. So those investments that we make in job creation or in 

small business loans or whatever pieces we want to allocate to certainly will feed back into helping the financial sector over the 

medium- to long-term. 

Chairman BROWN. Thank you, Dr. Boushey. 

Senator Dodd, questions? 

Chairman DODD. No, no, just to thank you. I appreciate those 

comments. One of the difficulties, and I appreciate Senator Brown 

raising the issue of the Infrastructure Bank—the only hearing I 

have ever had here in the two-and-a-half years on this Committee 

on an issue where I saw this kind of unanimity of thought is when 

I had the President of the AFL–CIO and the Chairman of the Business Roundtable as well as the Chairman of the Chamber of Commerce all in agreement on a proposal was this long-term bank, the 

Infrastructure Bank concept, and there are a lot of different variations on how you do this. 

The motivation behind it is because I don’t see any of the means 

by which we can do this—we certainly don’t have the resources, 

even if you are in balanced budget, the idea that we could draw 

down through an appropriations process to build the kind of national or regional—we are not talking about the local infrastructure 

needs, I mean, those are important, obviously—and so there are a 

number of different ideas. 

This is not unique. Other nations have done this, and you have 

got to do it with some success. Sovereign wealth funds, I mean, 

people get nervous about the possibility they could pick up and 

take their investments and go home. It is very difficult to pick up 

and leave—take a high-speed rail system back to wherever you are 

from initially. So the idea of tapping into those resources is one 

way. 

And you have to do this. Arnold Schwarzenegger, Ed Rendell, 

two Governors who are very knowledgeable and thoughtful—Ed 

Rendell has worked on these issues for years—are strong supporters of this, as well. Chuck Hagel was my cosponsor, Republican 

cosponsor of this idea for many years. 

In fact, I often tell the anecdote that we put the bill together and 

we were trying to decide when to announce it, our latest version 

of it, anyway. And I thought we ought to wait until September and 

Chuck Hagel said, no, let us do it in August. And I said, August 

is a dreadful month to announce a new idea. No one will come. No 

one will pay attention to us. But he kept on pressing and I said, 

fine, we will do it in August. 

And so we held the press conference, and, of course, I was right. 

The only camera that showed up to cover it was the one in the 

room when we walked in. They wouldn’t have shown up on their 

own anyway. And no one paid any attention at 10 that morning. 

At 5 in the afternoon, Chuck Hagel and I were on every TV screen 

in America, because at 4 in the afternoon, the bridge in Minneapolis collapsed. And so all of a sudden, the issue of infrastructure became this huge theme across the country. 
17 

Chuck was clairvoyant, because had we done it a week later, of 

course, we would have been accused of pandering rather than having an idea to deal with some of these issues ahead of time. 

So I have been trying—the administration has been somewhat 

supportive of it, but you cannot find a period of economic growth 

in our country, I don’t believe, where we did not make investments 

in infrastructure. You just have to do this. Your point about the 

local, the sewage and water system and direct bearing on what 

that means to local taxpayers, not to mention economic growth that 

can go forward. It is the Panama Canal, or if you want to talk 

about the Lewis and Clark expedition, or you want to talk about 

the Federal Highway System. 

I mean, there is a wonderful book out by Felix Rohatyn that was 

just published recently, and he and I have done a lot of work together on this, identifying historically the investments in infrastructure that led directly to the economic growth of the United 

States. 

So I appreciate the comments. It doesn’t produce the kind of jobs 

immediately, and the topic of this hearing is, of course, in this moment of crisis, what can you do. So I acknowledge the fact that this 

kind of an idea doesn’t produce the kind of results in the shortterm, but we have got to start thinking beyond just short-term or 

we are going to be lurching from one crisis to the next in this area. 

And I happen to believe that one of the major important functions, and I will raise this as a question with you and you can all 

respond, if you would like, is the rebuilding, if you will, of the level 

of confidence and optimism among American investors, the consuming public generally. And while this idea may not generate the 

kind of jobs in the short-term, to the extent it can generate a level 

of excitement about the United States once again moving in the 

21st century forward leaning, I think has its own desired impact 

economically. 

If our country and the people see us not only coming out of a recession, but far more importantly, leaning forward and anticipating 

the future, I think that has a huge positive impact among people 

in terms of their habits, what they do, how they feel about themselves, their country, and their community. 

So I don’t know if you have any comments or thoughts on that 

subject matter, but we are having an awful time trying to convince 

people of the value of this. And again, it doesn’t take a lot of public 

monies to leverage an awful lot of private capital. That is the great 

beauty of it. Any comments you want to make on that point? Yes? 

Chairman BROWN. I would like to first make one. I understand 

the infrastructure with the Interstate System and the canals and 

the railroads, but what was the infrastructure for Lewis and Clark? 

I missed that part, Mr. Chairman. 

Chairman DODD. Well, thank God that—— 

Chairman BROWN. Did something come out of that that I didn’t 

know about? 

Chairman DODD. Sure, called Manifest Destiny. 

[Laughter.] 

Chairman BROWN. All right, fair enough. Never mind. We will 

proceed. 
18 

Chairman DODD. Well, I want to just make one point, by the 

way. Had Thomas Jefferson had the Congressional Budget Office 

around—— 

Chairman BROWN. He wouldn’t have gone. 

Chairman DODD.——he wouldn’t have gone. If they had scored 

the Lewis and Clark expedition or the Louisiana Purchase, we 

would still be 13 colonies running around. I mean, the scoring on 

that, Jefferson smuggled through, both in the Lewis and Clark expedition and the Louisiana Purchase. The Louisiana Purchase was 

the entire budget of the country for 1 year, the entire budget, that 

one acquisition. And you can imagine CBO, poor Doug Elmendorf 

having to score that at that time. 

[Laughter.] 

Chairman BROWN. All right. Any comments on Chairman Dodd? 

Mr. Katz, yes? 

Mr. KATZ. I want to focus on one aspect of the Infrastructure 

Bank, because it is not just about investment and it is not just 

about long-term sustainable productive growth. It is about reform 

of how we allocate resources. 

When the American Recovery and Reinvestment Act, the funding 

of about $27 billion for highway funding was sent down to the 

States, most States tend to allocate transportation spending according really to a political logic. You have 33 Senate districts and 66 

House districts, which I think is the number in Ohio—— 

Chairman BROWN. Thirty-three and 99. That was pretty good. 

Mr. KATZ. Let us just spread it around, as opposed to a market 

logic as to where are we going to get the highest return on investment and how do we make decisions based on evidence, based on 

data, whether it is high-speed rail, whether it is transit, whether 

it is new highway expansion, whether it is smart grid, et cetera. 

I think where the United States has gone awry over the past 15, 

20, 25 years compared particularly to our European competitors is 

that we are not making infrastructure investments with a view toward the long-term and as a means toward economic competitiveness and sustainable growth. We are making it really pursuant to 

an old-style log-rolling exercise, particularly at the State level. 

So my view about the Infrastructure Bank, it is invest and reform, and let us make decisions again based on merit and evidence 

rather than the politics. 

Chairman DODD. I would like you to look, as well—I didn’t mention this—at what I call our Livable Communities Act. It doesn’t 

have many cosponsors here, but it has attracted tremendous attention nationwide because it, again, does exactly what you are talking about. It goes to the issue of how then land use issues, providing grants to States to kind of make that intelligent plan, much 

as North Carolina did with the Triangle 50 years ago. Terry Sanford, who I loved serving with here, when he was Governor of 

North Carolina was brilliant in that regard. 

Kay Bailey Hutchison, our colleague on this Committee, she and 

I have had long conversations. In Texas, the idea of a high-speed 

rail system between Dallas, Houston, and San Antonio, that triangle, and then having the sustainable development occur within 

that triangle in terms of intelligent land use and livable community 
19 

development in that State makes all the sense in the world. But 

it is the transit system that begins to try it together. 

Charlotte, North Carolina, a classic example of how a light-rail 

system has transformed that city economically, that investment. 

Now, the highest real estate values are along that light-rail system, 

contrary to what we grew up with. Of course, living near the railroad tracks was going to be reducing the value of properties. 

Today, it increases the value of properties. Just examples. 

Chairman BROWN. Thank you. 

Yes, Mr. Leach. 

Mr. LEACH. Sure. I wanted to make a comment on the forward 

leaning. I embrace and encourage the forward leaning idea and the 

fact that the country and existing and future partners with the 

Federal Government want to lean forward along with you, certainly 

in regards to some of my commentary. 

A great example of this is the Foundation Community in Ohio 

and Michigan that collectively have pulled together about $170 million of philanthropic resources to be completely focused on transformative economic development initiatives in those two regions. So 

those two communities, certainly in the philanthropy in those communities, are forward leaning, for sure. This is an initiative that 

these kinds of entities have never seriously considered and pursued, at least at this scale. 

So again, the opportunity to engage, of course, with philanthropy, 

but also with the corporate community in partnership with the 

Federal Government. Now is the time to build these partnerships, 

aggregate this level of resources to create the scale of opportunities 

that we have before us. 

Chairman BROWN. Thank you. 

I want to go back to Mr. Katz. You said something in your testimony about we are a metro nation. You mentioned real estate metros and you mentioned motor metros, others. You said, we are a 

metro nation. We should act like one. What do you mean by that? 

Mr. KATZ. Well, when you look at what drives prosperity and 

productivity, I think it comes down to innovation, and I think this 

really builds on what everyone has been saying here. Innovation, 

human capital, education and skills, infrastructure, and, let us say, 

the quality of place. Those assets are not uniformly distributed 

across the American landscape. They tend to concentrate in pretty 

intense ways in a relatively small number of places, here, as in Europe, as in China, as in India, as elsewhere. There is an agglomeration effect, essentially, where two plus two equals five. The benefits of density. 

So if you look at the top 100 U.S. metros alone, they sit in only 

12 percent of the land mass of the country. They are very energy 

efficient. They house two-thirds of the population. They generate 

three-quarters of the GDP. But what comes to those key assets is 

about 78 percent of patents, 94 percent of venture capital and innovation, about three-quarters of our knowledge workers when you 

talk about human capital. When you talk about infrastructure, 

these are the air hubs. They are the freight hubs. They are the seaports. And obviously when you talk about quality of place, they 

tend to have the transit, the cultural institutions, and so forth. 
20 

So the world may be flat, as Tom Friedman says, but the assets 

that drive national economies forward tend to concentrate at hyper 

levels in a relatively small number of places. So when nations want 

to get smart about growth and productivity and sustainability, 

what they have to do is to help their major metros leverage their 

own assets in the pursuit of national goals. It is a different kind 

of way of looking at national economic policy. 

Chairman BROWN. Thank you. 

Chairman Dodd was talking about the innovation that you talked 

about and how innovation—what innovation can do with job creation. I was, a month or so ago, I was meeting with a group of Silicon Valley executives that are very interested in the climate 

change bill, you know, John Doerr’s comment that if you price carbon, large amounts of capital will be unleashed. As I was talking 

to these executives, some of them were already wealthy. All of 

them, I think, expected to become wealthy because of the climate 

change legislation, which I appreciate and I am fine with. 

But what I wasn’t so fine with was any plans they really had to 

take this innovation and make sure that those jobs stay in this 

country. What are your thoughts on not necessarily climate change, 

but as several of you said and Chairman Dodd said, so much innovation has come about by great minds in our country coming out 

of great universities, coming out of great university settings, incubators, all kinds of venture capital firms, all the kinds of things 

that have happened, but the manufacturing then goes overseas. 

What do we do here, particularly coming out of climate change, 

that these jobs, these manufacturing jobs stay here? 

Mr. KATZ. I think there are a lot of examples from abroad that 

we really need to adopt in the United States, and really for about 

30 years, we have basically said we are not going to have industrial 

policy in the United States because we don’t want to pick winners 

and losers. 

I think there are a whole set of policies that are really general 

in nature that don’t sort of bear the burden of prior mistakes. So 

if you look to Germany, if you look to some of the European countries, they are investing heavily in vocational education, in education and skills that directly relate to the clusters of innovation 

that emerge in their major metros like Stuttgart or Hamburg or 

elsewhere. They are investing in institutions that have really a 

Federalist relationship—Federal government, State government, 

cities and metros, and nonprofits, because Germany pretty much 

looks like us in terms of its governance system. They are investing 

in institutions, both public and nonprofit, whose job it is to really 

help extend innovation to the marketplace and commercialize products for domestic production. 

So the United States sort of decided it is going to be a laissez 

faire activity here. We will invest in advance R&D, but we won’t 

simultaneously invest in the kinds of institutions, intermediaries, 

that can provide not just the capital, but the skills training, the 

marketing efforts for domestic and global markets. So we have 

been basically tying one or two hands behind our back as we proceed. 

So I think there is a lot to learn here, and the good news is we 

are the most innovative economy in the world and we are about to 
21 

see a step change in innovation with clean energy, with infrastructure, with a whole set of other emerging sectors. So now what we 

have to do is sort of finish the conversation, extend out the policy 

envelope, and in a Federalist way, really leveraging up local nonprofit private sector energy and discipline, create the new ideas 

and inventions and processes, but then create the jobs at home. 

Chairman BROWN. So, Mr. Weddle, if taking off on what Mr. 

Katz said, in your comments about the new clean energy economy 

holding the promise of a manufacturing renaissance, a lot of us are 

deeply disturbed about the Texas wind farm, that we put tens and 

tens and tens and tens of millions of dollars, of taxpayer dollars for 

this wind farm. Yet, some 2,000 jobs probably, unless we can stop 

it, will be created—unless we can change and redirect it, will be 

created in China to make those wind turbines. 

How do we assure that we are not creating more demand as we 

do this, for China-made wind turbines? Or am I just wrong? Is that 

not a problem? 

Mr. WEDDLE. Well, I would agree with—first of all, I would agree 

with everything that Bruce just said about the whole idea of deliberating taking some steps to make sure that we benefit from the 

innovation that we get. I think we have been too hands-off for too 

long. Maybe that worked when we were the only game on the planet, when we could drive everything according to our own design. I 

do not think it works in a world where there is more parity. 

We are at the cusp right now of the first era in humankind 

where we have unbundled profitability and prosperity. There was 

a time when you, if you had profitable companies, you had prosperous people and communities, and that does not necessarily work 

because of the globalization that has occurred. 

So I think we have to review our trade policies and review our 

tax policies. I do not have all the answers to that, but I think wellintentioned, well-minded, thoughtful people can figure out how to 

make sure that we do harvest some of the value that comes from 

innovation. 

Look only right now at the advance, the funding that has gone 

into basic research in the last two or 3 years, which was a sea 

change from the 5 years before that, but it has gone in there without thinking through how are we going to harvest that intellectual 

property. Are we going to put in place the innovation infrastructure 

in our communities, so that our community leaders can harvest 

that IP? 

I think it is just a question of setting some goals and then reverse engineering those goals and looking at the policies that make 

that happen. Other countries do this, and it is not rocket science. 

So I think we have to. 

I do not think we have to take for granted that you have to just 

accept that as a policy from our corporate leaders because we have 

to ask the question, are our interests aligned and are our interests 

bundled together, and I think that is a good starting point for discussion. 

Chairman BROWN. You had talked about a cluster strategy. I 

think of the city you used to live in, that Ray knows a lot about 

too, Toledo. Toledo has the largest number of solar energy manu-
22 

facturing jobs of any city in America. It is a bit of a cluster. It is 

potentially that, certainly. 

What do you advise to a city like that, so that they really can 

have that sort of cluster strategy for economic development? Where 

do they go? 

Mr. WEDDLE. Well, in my oral and in my written remarks, I said 

it is time for the Federal Government to move from just providing 

tools and assistance to a few communities, a few places, and become a full partner in these strategies. There is no harmonization 

of economic strategy from Federal to State to community to metro 

level. 

Toledo, with all due respect, they are having to do all that by 

themselves. And region by region by region in America today, we 

are competing with countries. We are not just competing with other 

cities or other areas. So the Federal Government needs to be more 

of a full partner to help, I think, move some of the resources down 

to the metropolitan level, so that these cluster strategies can be 

well resourced in that regard. 

I am sure you have a similar comment on that, Bruce, in that 

regard. 

Everything that Toledo has done they have done on their own, 

fundamentally, in saying that they wanted to develop these technologies and try to do it. But they have an aging infrastructure, 

their resources are constrained, and it is difficult to make those 

local investment decisions at scale, I guess is what I am saying. 

Chairman BROWN. Mr. Leach, would your Federal Innovation, 

Commercialization and Job Creation Network play into that? 

Mr. LEACH. It would. In fact, I think one of the realities, especially the role that the Federal Government has played historically 

and looking forward, is the resources they are providing are extremely precious for basic research, and they would be very precious and incredibly powerful and make a significant impact in the 

vision that I shared today. 

I think one of the things that we are struggling with as a Country, which relates to many of the comments here, is the practice of 

accelerating technology and commercialization. We have the ability 

to do that now, at least at the beginning stages, with nonprofits 

and with intermediaries that exist across the United States. It does 

not need to go from the basic lab directly to the private sector, and 

that there are partners with the Federal Government, or could be, 

are today and could be increasing partners with the Federal Government who care very much about economic transformation, commercialization and place and want to make sure that those jobs 

and the economic wealth that is created through that transformation has resonance and can make an impact. 

I think one of the things we are struggling with to some degree 

as a Country is this is especially in the trenches with these 

innovators and entrepreneurs. We have relied on the private sector 

to assist entrepreneurs, to move their companies forward. When we 

do that, you are immediately giving it to the private sector, and 

you would have less influence in that construct in terms of where 

the ultimate jobs are created. 

So this incremental movement of a stronger industrial point of 

view from the Federal Government, I think, will more significantly 
23 

benefit the Country, but it is an evolution. And this program that 

I have envisioned would very much put that in place. 

Rick commented about Toledo having a vision and being alone, 

and, certainly from the University of Toledo point of view and the 

regional growth partnership, they have provided significant leadership. Having said that, the State of Ohio has also. The public sector 

has made very, very large investments in their vision, in that region’s vision, as they have in northeast Ohio, central Ohio and 

other parts of the State. 

So the State of Ohio’s Department of Development gets this. I 

mean they have built a strategy around this approach. There is no 

reason why the Federal Government could not partner and piggyback on that strategy and bring resources, as Rick shared, also as 

a full partner. 

Chairman BROWN. Tell me how, Mr. Leach, in Ohio—and I am 

sorry for the parochialism, to the other three of you—that there is 

discussion that Ohio would be the site of the first, just off the coast 

of Cleveland, Lake Erie could be the first site of wind turbines, a 

field of wind turbines anywhere on fresh water in the world? There 

are fields of wind turbines in salt water with a different set of 

issues, of course. 

How does the Third Frontier and how do your efforts lead to that 

happening? Talk through the scenario of how you sort of capitalized that. 

Ohio is the site now of a number of wind turbine manufacturing, 

component manufacturers. There is little assembly of wind turbines 

in the United States, ergo, the China field in Texas. Talk about the 

process of how that happens and how you helped to make that happen and how Third Frontier, how the State can help make that 

happen. 

Mr. LEACH. Sure. Well, the Third Frontier does have a particular 

focus on energy. Historically, they have had a very large focus in 

the fuel cell space, and over time they have had an increasing focus 

in wind. 

The way the structure works in Ohio is the private sector shares 

ideas and collaborates with the public sector and other supporters 

of these types of initiatives, and they roundtable around what are 

the most important things we could work on collectively that could 

generate not just innovation but ultimately commercialization and 

jobs in Ohio. 

There is a private sector commission. It is called the Ohio Third 

Frontier Commission, which there is certainly some public leadership on the commission, but there are six members of a nine-panel 

commission that bring the private sector judgment and influence to 

these projects. 

So they look at the opportunities. They post RFPs and provide 

opportunities to stakeholders in the State and also outside the 

State that like to make investments in these projects, and they rate 

them. They leverage the National Science Foundation experts in 

these particular technologies and industries, to rate what is the 

total economic impact of such projects, not just in relationship to 

attraction of private sector investment, but also what is the ultimate job impact on these kinds of projects. 
24 

So they are bringing very, very significant private sector due diligence and analysis to these projects, or rating them, and therefore 

then funding them based on the commercialization impact in Ohio, 

obviously, and that is how they are rated. 

So they are bringing, again, very significant private sector discipline. The State is not picking winners and losers. The State is 

bringing resources, certainly leveraging on a 10 to 1 basis the private sector resources in these projects, but they have a very, very 

disciplined process. 

There is no reason why the Federal Government could not rely 

on a parallel process or provide resources to the States and have 

the States add that to their existing resources in order to make 

larger impacts. 

Chairman BROWN. Thank you. 

Mr. Weddle, you, in your written testimony, talked about the role 

of incubators in North Carolina, Ohio, and the National Association 

of Incubators—I am not sure that is the right term—is located in 

Athens, Ohio. There are incubators in Ohio that have played a significant role but particularly a fairly unheralded role because people do not know a lot about them because they start very small 

businesses and many of them grow. 

What are the keys to building a successful network of business 

incubators? And go especially to the Federal role, out of EDA or 

whatever you think the Federal role should be in stimulating the 

growth of incubators. 

Then the numbers are pretty stunning, how little Federal investment leveraged properly, locally, translates into a significant number of jobs. But talk that through for us. 

Mr. WEDDLE. Most incubators operate on a shoestring because 

they are underresourced, and the whole idea is they do not make 

a lot of money. If anything, they require subsidy or some operating 

expense in that regard. We have a successful network of incubators 

in Research Triangle Park, but they all have their own set of parameters with which they were started and funded. 

I think the Federal Government could play an important role in 

providing funds for either acquiring the space, setting up the space, 

outfitting the space, making it so that it would be able to be provided for startups, spinoffs out of universities or out of companies. 

We have to remember that not all startups come out of universities. The history of the 1,600 startups in Research Triangle Park 

is that more came out of the companies and the park than out of 

the universities, in terms of that growth pattern. 

But it is really hard to get the space reserved, to get it outfitted, 

so that you can provide very, very flexible terms and mentoring activities for the companies. I think the Federal Government could be 

a good partner in providing direct grants to nonprofits, to establish 

those kinds of activities. 

Chairman BROWN. Thank you. 

Mr. Katz and Dr. Boushey, I will ask them a question. Then I 

would like you all to think about the last question I am going to 

ask and have all four of you answer that, about what is the one 

or what are the two things that you think are most important for 

this Congress to do to help create jobs in a sort of medium range, 

not just short term, but obviously the crisis is now. 
25 

So think through that as I ask Mr. Katz and Dr. Boushey this 

question first. What in the Recovery Act was the most important 

thing for industrial States? What did we do in the Recovery Act 

that mattered most in States like Ohio, Michigan, Wisconsin, western Pennsylvania, those States? 

California and Texas are the largest manufacturing States, but 

they do not necessarily think of themselves that way. The States 

that really were industrial States, what were a couple of things the 

Recovery Act did? 

Mr. Katz, you first, then Dr. Boushey. 

Mr. KATZ. Well, the jury is still in a sense. 

So, first, fiscal stabilization; about $48.6 billion was in the Recovery Act to help State Governments. A large portion of that went to 

education. Other parts went to general government aid. So, again, 

it gets to this general issue of as we think about creating jobs 

through the front door, you should not be losing jobs through the 

back window. In the early phase of the Recovery Act, I think fiscal 

stabilization has played a very big role. 

There are other bonding mechanisms, like the Build America 

bonds which have really been taken up by the market in a substantial way, that both help on the capital side, but also reduce debt 

service. That has been of help. 

I think the jury is out about what is going to happen in the next 

six to twelve months because we have substantial funding coming 

down the pike in not old-style infrastructure—you know, filling potholes on freeways and county roads—but really the next generation 

infrastructure, when we talk about high-speed, when we talk about 

smart grid, when we talk about health care information technology. 

I think the question will be not just whether the States, but 

these metropolitan areas, this sort of interesting mix of nonprofits, 

universities, private sector firms, cluster associations, local government have had the vision to take advantage of the Federal funding. 

So we are going to see an uneven application of the Recovery because the capacity across the Country is quite different. 

Chairman BROWN. Dr. Boushey? 

Dr. BOUSHEY. Yes, my answer is going to echo Bruce’s. I mean 

I think when you look at where we spent the funds, of course, a 

third of it was on tax cuts. Some of that was good spending. Some 

of it, we would have done anyway, the extension of the AMT, for 

example. 

But you know the biggest bang for the buck was the money that 

we spent on unemployment insurance. That was 16 percent of the 

Recovery Act dollars, the aid for the least among us, those hit 

hardest, and that I am sure had some of the biggest bang in those 

hard-hit industrial States with the super high unemployment 

rates. So, when I think of Michigan, I think of the UI program, not 

necessarily helping the kinds of things we have been talking about 

here today, in terms of the innovation or specific companies, but 

certainly helping the whole landscape and providing the biggest 

local dollars. People have money in their pocket. 

And then the aid to the States, I think I would put as the second 

most important one because it really was, again, big bang for the 

buck, lots of money. 
26 

I do not think that is to discount all of the other kinds of programs here, but in terms of the largest ones that is what I would 

say. 

Chairman BROWN. Thank you. 

I will start with Mr. Weddle and move to your right. Just give 

us the one or two most important things you think Congress should 

do in the next 3 months for job creation. 

Mr. WEDDLE. Thank you. I am happy to make a couple of comments, and I think I agree with most everything everybody else 

says. This is a pretty well-aligned panel, I think, today. 

I think restoring or providing additional funding to States and 

cities is going to be vital because their revenue base is really going 

to show some wear and tear about the middle of this next year, but 

I would require two things in that. 

One, I would require that we find some way to align the Federal 

Government and State strategies and plans together a little bit better, rather than just throwing money, and I would also make sure 

there was an economic development component to that. There was 

no economic development component to earlier stimulus plans. 

And then second, I think, because I think it is an out-of-the-box 

and an innovative idea, the expanding the Invest in America Now 

program to a $100 million scale, nationally drives a stake in the 

ground and says we are going to compete on this planet for new 

jobs and investment from everywhere. 

And I think those would be two interesting things to try to do. 

Chairman BROWN. Thank you. On the Invest in America, could 

you, in writing for us, contrast? That was going to be one of my 

questions, and we were kind of running out of time for you specifically. But contrast what other countries do that is so much more 

inventive or thorough than we do on this. They sort of invest, and 

you said there was something in the Commerce Department or 

somewhere that we could do. 

Mr. WEDDLE. For example, we have a half a million dollar budget 

for the whole Country. 

Chairman BROWN. Right, right. See what other countries do. 

Mr. WEDDLE. We will be happy to do that. 

Chairman BROWN. I would be very interested to see that. 

Mr. Leach, thank you. 

Mr. LEACH. I would say to equip the EDA, the SBA and other 

Federal agencies in the absence of larger, more robust, something 

new program as I talked about earlier, to have additional significant resources that are focused on the commercialization of new 

technologies and equally, if not more importantly, require these 

agencies and their partners to reach out to non-Federal sources 

who have aligned interests and very significant resources, who will 

aggressively partner with these Federal agencies. 

Chairman BROWN. Thank you. 

Mr. Katz. 

Mr. KATZ. I will answer less programmatic, more at the paradigm level. I think what we need is a narrative about what the 

next American economy looks like that could really galvanize State, 

local, metro action, private and public. 

So Larry Summers gave a speech in July. About 80 percent of 

his speech was focused on the retrospect of what was done to pre-
27 

vent the collapse. A very small portion focused on what comes next. 

But what he said is we will be export-oriented, less consumptionoriented. We will be focused on innovating in what matters, not financial engineering. We will be low-carbon, and, hopefully, we will 

be opportunity-rich. 

If you take those four pillars of the next economy—export-oriented, innovation-fueled, low-carbon and opportunity-rich—that is 

the ticket around which to organize a whole set of policies, innovation policies, human capital policies, infrastructure policies, not 

just at the Federal level but in a Federalist system. 

I think we have lacked that clear, coherent direction and vision 

from the national government, frankly, for decades. And I think 

now we need to have it, and then the programs will follow. They 

are almost derivative of that vision. 

Chairman BROWN. Thank you, Mr. Katz. 

Dr. Boushey? 

Dr. BOUSHEY. Yes, again, I am going to follow Bruce and agree 

with him. I mean I think there are a couple things. First of all, in 

the medium term, passing that UI extension has just got to be critical, and I know that is coming up next week, but I think that is 

super important. Second, making sure that we continue to provide 

more funding to the States is an important piece. 

A couple other points, I mean one is that I think we should not 

be afraid of deficits. We should spend that TARP money on some 

of these job creation programs, but we need to make sure that we 

are focused on a strategy that does not waste it, that is about longterm investments. 

You know we have talked a lot. I mean there has been a kind 

of disconnect here this afternoon, with the short term and the long 

term in the sense that it is as though these things that we are 

talking about on the long term, the more innovation front, are not 

really also about short-term job creation. But we need to sort of remember that economists think that the unemployment rate is not 

going to come down to a full employment level until 2014, 2015, 

and it could be even longer than that. 

So I do not think that those are in any way in conflict as long 

as your time horizon is not like 20 years. As long as we can do 

some of these things in like 2 to 6 years, I think that is all consistent. 

Then finally, I want to just tap into what Bruce said about this 

notion of galvanizing, and what Senator Dodd said about optimism. 

I think that focusing especially on the alternative energy piece, 

which has this sort of very sexy, new ideas, that we are going to 

get our economy on a better path, that both helps manufacturing, 

that can create a strong U.S. manufacturing base, but also deal 

with the very important issues of climate which are being discussed right now. 

And finally, I had one more piece which is that on this notion 

of less consumer-driven economy, we also need to be really focusing 

hard on the kind of financial regulation that is going to be happening over the next few months, that you guys are going to be 

doing here in the Senate and the House. Focus on getting Wall 

Street back where it belongs, which is in service of our productive 

economy, not the other way around. 
28 

I mean for too long we have allowed this economy built on financial bubbles to be the so-called creator of growth, and we can see 

that that has just been a house of cards. The focus of the financial 

sector should be to provide capital for productive investments, and 

thinking about financial regulation that gets us back on that track 

has to be a key component of the backdrop for a lot of what we 

have been talking about here this afternoon. 

Chairman BROWN. Well said, thank you. Thank you all. 

The record will remain open for 7 days—so, anything that you 

want to add, including my request to you, Mr. Weddle, anything 

you want to expand on. All your testimony, of course, is entered in 

the record, as were the comments you made. 

Thank you very much. I appreciate all of your joining us here 

today. 

Subcommittee adjourned. 

[Whereupon, at 3:30 p.m., the hearing was adjourned.] 

[Prepared statements supplied for the record follow:] 
29 

1Deborah Solomon, ‘‘U.S. Economy Gets Lift From Stimulus,’’ The Wall Street Journal, September 2, 2009, available at http://online.wsj.com/article/SB125185379218478087.html; Josh 

Bivens, ‘‘How We Know the Recovery Package is Helping’’ (Washington, D.C.: Economic Policy 

Institute, October 2009) available at http://epi.3cdn.net/bb4f1bd7339f12b9a3l4im6bxb5c.pdf. 2 Recovery.gov. 

3 Carmen M. Reinhart and Kenneth S. Rogoff, ‘‘What Other Financial Crises Tell Us,’’ The 

Wall Street Journal, February 3, 2009, available at http://online.wsj.com/article/ 

SB123362438683541945.html. 4Michael Ettlinger and Michael Linden, ‘‘Deal with It: A Guide to the Federal Deficit and 

Debt’’ (Washington, D.C.: Center for American Progress, September 2009) available at http:// 

www.americanprogress.org/issues/2009/09/pdf/deallwithlit.pdf. 

PREPARED STATEMENT OF HEATHER BOUSHEY 

SENIOR ECONOMIST, CENTER FOR AMERICAN PROGRESS ACTION FUND

DECEMBER 9, 2009 

Thank you, Chairman Brown and Ranking Member DeMint, and Chairman Dodd 

and Ranking Member Shelby, for inviting me to speak to you today about the recession, the nascent recovery, and job creation. My name is Heather Boushey and I’m 

a Senior Economist at the Center for American Progress Action Fund. 

I’d like to start with the good news. On Friday, we learned that the unemployment rate fell to 10.0 percent and only 11,000 workers lost their jobs in November, 

both numbers were better than had been expected. This is unambiguous good news 

for workers and their families. 

This data provides an indication that the steps that Congress and the Obama administration have taken to get the economy back on track have been effective. The 

American Recovery and Reinvestment Act signed into law last February has worked 

its magic and injected momentum into the economy, boosting economic growth in 

the third quarter and saving or creating upwards of 1 million to 1.5 million jobs.1

Recovery dollars will continue to pump up demand and add jobs to the economy as 

the remaining $553 billion is spent in 2012.2

But we are by no means fully out of the woods. There are indications that employers are beginning to need to ramp up hiring, but have yet to actually do so. We need 

Congress to be vigilant in continuing to promote job creation and reducing the hardships among those hardest hit by the recession. 

The economic effects of ARRA dollars will start to diminish beginning in the middle of 2010—well before we will be fully out of the woods. Economists now predict 

economic growth of only about 2 percent for 2010 given the policy efforts already 

in place. This is a clear indication that without additional action on the part of Congress and the Obama administration, the U.S. economy could easily slip into an extended jobless recovery—or see the recovery stall altogether. 

The economic recovery could result in a longer period of job losses and slower job 

creation compared to the past two recessions. The nearly 2-year-long Great Recession began with the collapse of the U.S. housing bubble and ensuing financial crisis, 

which led to a recession that was deeper and more protracted than other kinds of 

recessions.3 Even now, we continue to see global financial markets subject to debtrelated shocks that could potentially upend this economic recovery by hampering access to credit. On top of this, the massive deleveraging going on in households 

across the United States is putting sharp limits on the potential for consumption 

to grow quickly. 

Further, those without a job continue to face extremely daunting challenges in 

finding new work. The typical unemployed worker has been searching for work for 

20.1 weeks, and a record 5.9 million of those workers have been searching for work 

for at least 6 months, 38.3 percent of the total unemployed. We need to ensure that 

we do not leave any demographic groups behind during economic recovery. The unemployment rate among teens is 26.7 percent, it is 15.6 percent among African 

Americans, and 12.7 percent among Hispanics, and 15.0 percent among those without a high school diploma. 

Combined, this suggests a need for additional actions, even though it will contribute to Federal budget deficits. However, government spending in 2010 that gets 

people back to work would be the best thing for restoring fiscal balance in the coming decade.4 High unemployment adds to government expenses as more families 

need assistance from all levels of government, including unemployment benefits and 

food stamps, help with health care bills, and help coping with a home mortgage foreclosure. And unemployed workers do not have earnings on which they owe taxes, 
30 

5Michael Ettlinger and Michael Linden, ‘‘Who’s to Blame for the Deficit Numbers?’’ (Washington, D.C.: Center for American Progress, August 2009) available at http:// 

www.americanprogress.org/issues/2009/08/pdf/deficitlblame.pdf. 

a trend which has contributed to this year’s rise in the deficit. While tax revenues 

fell by 17 percent in 2009, spending increased only a bit more—18 percent.5

One way to address the long-term deficit concerns is to legislate the ways we will 

pay for job creation as we legislate job-creation provisions. Yesterday, President 

Barack Obama put on the table using unallocated funds from the Troubled Asset 

Relief Program to pay for job creation. Alternatively, Congress could establish a tax 

on the U.S. financial services industry to raise an additional $150 billion a year. 

In my testimony below, I focus on two issues. First, an outline of what we can 

learn from the implementation of the recovery package so far. Overall, the recovery 

package boosted economic growth, but the elements of the package were not uniformly effective. As we debate the challenges of a slow-growing economy, focusing 

on the elements that provided the biggest bang for the buck is the best way forward. 

Tax cuts, in particular, have relatively small ‘‘multipliers,’’ that is, for every dollar 

of Federal spending, the effect on the overall economy is small than for other kinds 

of spending, such as that targeted to those hit hardest by the recession and aid to 

the States that are highly budget-constrained due to falling tax revenues and growing demand for services. 

Congress’s approval of a 2-year recovery package continues to look like it was the 

right decision. The effect of the Recovery dollars will not peak until mid-2010, but 

the economy will need a steady infusion of demand. Now is the time to consider 

whether further job creation measures are the right course of action. Given the challenges of a slow-growth economy, and continued high unemployment and State fiscal problems, both of which work against the nascent economic recovery, focusing 

on job creation is the right path. Below, I present a menu of the best options for 

creating jobs in the short- to medium-term based on the Center for American 

Progress report released last week, ‘‘Meeting the Jobs Challenge: How to Avoid Another Jobless-or Job-Loss-Economic Recovery.’’ Below, I summarize our recommendations that report goes into in greater detail. There are a few key steps, 

however, that Congress should take now to help boost jobs in the short- to mediumterm: 

• Continue to help those hurt most by the recession. Congress should ensure that the extended unemployment benefits and COBRA subsidies passed in 

the recovery act do not expire as planned at the end of December. These benefits go to the long-term unemployed, who now account for an historically high 

share—more than one-third-of unemployed workers. Extending the subsidies to 

help the unemployed purchase health insurance—or, better yet, allowing States 

the option to put unemployed workers on Medicaid—must also be done before 

the end of the year. 

• Support State and local governments. The Federal Government should provide another funding boost to the States. State and local governments have 

shed almost 160,000 jobs over the past year (November to November), with 

nearly 80 percent of the job losses at the local level occurring in just the last 

4 months. These lay-offs are working against economic recovery at the local 

level. All but two States had or still have shortfalls for fiscal year 2010, totaling 

$190 billion. The aid to States contained in the recovery package was clearly 

helpful, but it only addressed only about 30 to 40 percent of the gap faced by 

State governments. 

• Expand national service and provide support for needed services. The 

Federal Government could spur the creation of millions of mostly private-sector 

jobs by directing additional Federal money into youth and young adult employment (such as AmeriCorps, VISTA, YouthBuild, and the youth service and conservation corps), child care, after-school programs, and in-home health services 

for the elderly and disabled as well as training for those serving America’s 

youngsters, oldsters and disabled. Nonprofit groups and small businesses provide most of these jobs, although they are paid for by programs that are currently being cut by State and local governments. Funneling funds into these 

programs not only quickly gets people into jobs, but supports families and communities by providing much-needed services. These programs often have long 

waiting lists and any new funds will be able to meet pressing needs. 

• Promote sustainable growth and green jobs. To promote new green jobs, 

Congress could establish a two-tier program to transform the market for energy 

efficiency—a ‘‘cash for caulkers’’ program. The first tier would promote imme-
31 

6 Center for American Progress, ‘‘Recovery and Reinvestment 101 Update,’’ (Washington, D.C.: 

Center for American Progress, August 2009) February 27, 2009, available at http:// 

www.americanprogress.org/issues/2009/03/pdf/recoverylreinvestmentl101.pdf; Congressional 

Budget Office, ‘‘Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output as of September 2009’’ (November 2009), available at http:// 

www.cbo.gov/ftpdocs/106xx/doc10682/11-30-ARRA.pdf. 7 Center for American Progress, ‘‘Meeting the Jobs Challenge: How to Avoid Another Jobless— 

or Job-Loss—Economic Recovery,’’ December 2009, available at http:// 

www.americanprogress.org/issues/2009/12/pdf/jobloptions.pdf. Mark Zandi says that increased infrastructure spending has a multiplier of 1.57. 8Deborah Solomon, ‘‘U.S. Economy Gets Lift From Stimulus.’’ 

9 Executive Office of the President, ‘‘The Economic Impact of the American Recovery and Reinvestment Act of 2009: First Quarterly Report,’’ September 10, 2009, available at http:// 

www.whitehouse.gov/assets/documents/CEAlARRAlReportlFinal.pdf; Recovery.gov. 

diate investment in energy efficiency, through super-efficient appliances and 

simple home improvements. The second tier implemented in parallel would increase consumer awareness of comprehensive whole-home energy audits and 

retrofits, which create substantial and sustained numbers of good jobs in the 

construction and manufacturing sectors. 

• A tax cut to spur spending. To promote spending by those who have income, 

Congress could offer a partial tax moratorium to taxpayers with adjusted gross 

income below $150,000 for a married couple or $75,000 for an individual. Personal income taxpayers could be offered the opportunity to pay $2,000 less in 

their 2009 Federal income taxes but would be required to pay the sum back 

over the next 3 years. This idea has the virtue of costing very little overall for 

Federal budget purposes since it is simply deferred taxes and would be likely 

to be spent quickly by taxpayers who choose that option. 

If we do nothing, we risk not only missing an opportunity to get the nearly 16 

million unemployed back to work quickly, but also harming our economy over the 

medium to long term. The deficit will rise regardless of whether Congress approves 

additional spending; the question is whether we will make the investments today 

to get the economy back on track or whether we will allow the scourge of unemployment to linger. 

The American Recovery and Reinvestment Act 

The recovery package pumped $787 billion into the U.S. economy and included a 

variety of mechanisms for getting the economy back on track, among them:6

• Aid to the unemployed, which boasts the biggest bang for the buck in terms of 

spurring economic demand (16 percent of the total package). The multiplier for 

this kind of spending is between 0.8 and 2.2. 

• Aid to State and local governments to help them avoid layoffs and maintain 

services (11 percent). The multiplier for this kind of spending is between 0.5 

and 1.7. 

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

• Investments in infrastructure, which are still ramping up and coming on line, 

as these projects take longer to get up and running (23 percent). The multiplier 

for this kind of spending is between 1.0 and 2.5. 

• Investments in a green economy, which not only creates jobs but also paves the 

way for long-term economic sustainability (18 percent). The multiplier for this 

kind of spending is between 1.0 and 2.5.7

These recovery dollars were a key factor in the economy seeing positive economic 

growth in the third quarter, rather than no growth at all. The Wall Street Journal 

quotes Jan Hatzius, chief U.S. economist for Goldman Sachs & Co. predicting that 

the U.S. economy would grow by 3.3 in the third quarter and that, ‘‘ ‘Without that 

extra stimulus, we would be somewhere around zero,’ ’’8

This is consistent with the Administration’s own findings. The Council of Economic Advisors shows that the nearly $200 billion in recovery dollars pumped into 

the economy as of the end of October added roughly 2.3 percentage points to real 

GDP growth in the second quarter of 2009 and most likely added even more in the 

third quarter.9 They estimate that without the recovery package, the economy would 

have shed over a million more jobs than it actually did. 

The Recovery dollars have been spent on a wide variety of projects around the 

country. Here’s a sample of some of the projects: 
32 

10 U.S. Department of Education, ‘‘U.S. Department of Education American Recovery and Reinvestment Act Report: Summary of Programs and State-by-State Data’’ (November 2, 2009) 

available at http://www.ed.gov/policy/gen/leg/recovery/spending/arra-program-summary.doc. 11 Ibid. 12 Congressional Budget Office, ‘‘Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output as of September 2009’’ (November, 2009), available at http://www.cbo.gov/ftpdocs/106xx/doc10682/11-30-ARRA.pdf. 13 U.S. Department of Education, ‘‘U.S. Department of Education American Recovery and Reinvestment Act Report: Summary of Programs and State-by-State Data.’’ 14 Ibid. 15 U.S. Department of Transportation, Office of Public Affairs, ‘‘Highway Investment Hits $20 

Billion: Recovery Putting People to work on Investments with Long-Term Benefit,’’ Press Release, November 3, 2009, available at http://www.dot.gov/affairs/2009/fhwa3409.htm. 

Education. Grants in education have saved or created valuable education programs, improved access to higher education, and helped prevent a decline in education quality. The Department of Education has found that the American Recovery 

and Reinvestment Act provided a total of $48.6 billion for the State Fiscal Stabilization Fund, or SFSF, to be administered by the Department of Education to help sustain and create jobs and advance education reforms.10 As of early November, 2009, $35.4 billion of the SFSF allotment had been obligated by the Department of Education to States and $13.2 billion is expected to be obligated in the coming months. 

SFSF funds were able to restore nearly 100 percent of the 2008–2009 budget gaps 

and a significant portion of the 2009–2010 shortfalls.11 The Congressional Budget 

Office estimates that the money distributed to SFSF has an estimated output multiplier of 0.7 to 1.9.12

Examples of saved or created programs:13

• Stimulus money helped Alabama budget maintain the funding level for the heralded Alabama Reading Initiative, a ‘‘shining star of modern-day education in 

the State.’’ 

• In Arkansas, Little Rock School Board opted to spend a bulk of its received 

stimulus money on ‘‘reading recovery’’ programs, after-school tutoring, and 

math and literacy coaches. Most of the special-education funds would be spent 

on classroom materials and equipment, professional, development, and summer 

reading programs. 

• In Maryland, Gov. O’Malley announced that he would provide more support 

community colleges to keep up with increased enrollment. 

• Leominster High School in Fitchburg, MA, started an Alternative Education 

Program. Officials had discussed creating the program for over 2 years, but ‘‘the 

School Committee decided to move forward with the idea earlier this year, after 

learning that the district would receive around $900,000 in Federal stimulus 

money for special education. A portion of the money was used to cover the cost 

of starting the program.’’ 

• Stimulus funds also provided the prize for the Race to the Top program, a $4 

billion contest incentivizing State innovation in education reform. 

Recovery dollars have also improved access to higher education:14

• ARRA funds were used to mitigate tuition increases at public universities in at 

least 31 States. 

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

• At the University of Minnesota, an expected tuition increase was cut by about 

half. The Minnesota State College and University System, which includes the 

State’s community colleges, reduced a planned tuition increase from 5 percent 

to 2 percent. 

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

• SFSF has allowed Auburn University in Alabama to mitigate tuition increases 

that would have been required to bridge the gap created by reduced State appropriations. 

Infrastructure investments. Investments in roads are crucial to supporting 

business and building infrastructure. Federal Highway Administrator Victor 

Mendez has predicted that ‘‘[b]y addressing many long-overdue repairs to America’s 

roads and bridges,’’ we are ‘‘improving the economy and local quality of life while 

strengthening the nation’s infrastructure.’’15 Of the $26.6 billion available for Federal highway and bridge projects under the American Recovery and Reinvestment 

Act, more than 75 percent has now been obligated. To date, nearly 8,500 highway 
33 

16 Ibid. 17 Ibid; Recovery.gov, ‘‘Featured Stories: Stretch of I–40 Gets Needed Makeover in Albuquerque Area,’’ September 24, 2009, available at http://www.recovery.gov/News/featured/ 

Pages/NMI40.aspx. 18 ‘‘$62.5B in Tax Relief,’’ Recovery.gov, September 27, 2009, available at http:// www.recovery.gov/News/featured/Pages/Estimated$625BinTaxReliefFromtheRecoveryAct.aspx. 19 Ibid. 20 Internal Revenue Service, ‘‘The Making Work Pay Tax Credit,’’ accessed on December 7, 

2009, available at http://www.irs.gov/newsroom/article/0,id=204447,00.html. 21 ‘‘$62.5B in Tax Relief.’’ 22 Internal Revenue Service, ‘‘American Opportunity Credit,’’ accessed on December 7, 2009, 

available at http://www.irs.gov/newsroom/article/0,id=205674,00.html. 23 Ibid. 

projects have been approved and nearly 5,000 are underway. In early November, the 

Federal Highway Administration crossed the $20 billion mark in approved obligations for highway, road and bridge projects.16

Examples:17

• In August, construction began on the $26.2 million I–279/Fort Duquesne Bridge 

preservation project in Pittsburgh, PA, designed to improve the safety of the 

bridge that serves an estimated 81,000 drivers each day. 

• In September, work got underway in San Bernardino, CA, on a massive billiondollar project, using $128 million in ARRA funds for additional lanes on I–215 

to reduce traffic congestion that had been crippling the local economy. 

• Also in September, work began on the three-mile extension of Minneapolis’ 

Trunk Highway 610 to I–94. When completed, this project will reduce traffic 

congestion and improve area residents’ quality of life with sound walls and a 

pedestrian bridge. 

• Last month in Nelsonville, OH, construction started on the 8.5-mile, four-lane 

highway to divert interstate traffic from local streets. The project is using $138 

million in ARRA funds and is the largest Recovery Act underway in Ohio to 

date. 

• The New Mexico Department of Transportation has broken ground on a major 

highway and interchange reconstruction project on Interstate 40. On May 21, 

2009, Albuquerque-based Mountain States Constructors Inc. was awarded a $24 

million contract—$14.8 million of which comes from Recovery funds—to build 

one overpass and four ramps, and to reconstruct Paseo del Volcan and Central 

Avenue just west of Albuquerque. When the project is completed in May 2010, 

the existing climbing lane will extend seven-tenths of a mile further to better 

accommodate the trucks and heavy vehicles that frequently travel through the 

area. The I–40 project has created 78 Recovery jobs so far. 

Tax cuts. In total, Treasury estimates that $62.5 billion in tax relief was available through ARRA tax provisions by the end of August 2009.18 The Making Work 

Pay provision accounts for 37 percent of this total.19 In 2009 and 2010, the Making 

Work Pay will provide a refundable tax credit of up to $400 for working individuals 

and up to $800 for married taxpayers filing joint returns. This tax credit will be 

calculated at a rate of 6.2 percent of earned income and will phaseout for taxpayers 

with modified adjusted gross income in excess of $75,000, or $150,000 for married 

couples filing jointly.20

Other individual Credits account for 19 percent of the dollars available through 

ARRA tax provisions.21 Among these, the American Opportunity Credit will allow 

more parents and students to qualify for help paying for college expenses over the 

next 2 years. The AOC modifies the existing Hope Credit for 2009 and 2010 so that 

it includes more Americans, including many with higher incomes and those who owe 

no tax. It also adds required course materials to the list of qualifying expenses and 

expands coverage to 4 years of post-secondary education instead of two. Many of 

those eligible will qualify for the maximum annual credit of $2,500 per student.22

The full credit is available to individuals who have modified adjusted gross income 

of $80,000 or less, or $160,000 or less for married couples filing a joint return. The 

credit is phased out for taxpayers with incomes above these levels. These income 

limits are higher than under the existing Hope and Lifetime Learning Credits.23

Energy. The ARRA includes a program launched in late October 2009 which allocates $3.4 billion program for 100 Smart Grid Investment Grant awards. Federal 

funds will be matched by industry funding for a total of public-private investments 

worth more than $8 billion. These grants represent the largest single grid modernization investment in U.S. history. The Department of labor announced at the 
34 

24 U.S. Department of Labor, ‘‘U.S. Secretary of Labor Hilda L. Solis Announce $138 Million 

for Smart Grid Technology,’’ Press Release, October 28, 2009, available at http://www.dol.gov/ 

opa/media/press/opa/opa20091326.htm. 25The White House, ‘‘President Obama Announces $3.4 Billion Investment to Spur Transition 

to Smart Energy Grid,’’ Press Release, October 27, 2009, available at http:// 

www.whitehouse.gov/the-press-office/president-obama-announces-34-billion-investment-spurtransition-smart-energy-grid. 26 Ibid. 27 Ibid. 28 U.S. Department of Labor, ‘‘U.S. Secretary of Labor Hilda L. Solis Announces $138 Million 

for Smart Grid Technology.’’ 

29 ‘‘Webb and Warner Announce Nearly $15.7M in Stimulus Funds for Investments in Fredericksburg’s Smart Grid Technology,’’ Press Release, October 28, 2009, available at http:// 

webb.senate.gov/newsroom/pressreleases/2009-10-28-01.cfm. 30 ‘‘Stabenow, Levin Praise More Than $103 Million in Smart Grid Grants for Michigan,’’ 

Press Release, October 27, 2009, available at http://stabenow.senate.gov/press/2009/ 

102709LevinStabenowPraiseMoreThan103MillioninSmartGridGrantsforMichigan.htm. 31 Ibid. 32 Jen Balboa, Sacramento Municipal Utility District, ‘‘SMUD and regional partners win $127.5 million in Federal grant money,’’ News Release, October 27, 2009, available at http:// 

end of October that applicants from 49 States have been selected to receive awards 

and are expected to create tens of thousands of jobs.24

Of these funds, approximately $1 billion will build infrastructure and expand access to smart meters in order to provide consumers access to dynamic pricing information, which would enable them to program smart appliances when rates and demand are at their lowest such as late at night, et cetera.25 Another $2 billion will 

go to projects that integrate various components of a smart grid in a single system, 

or cut across project areas. These include smart meters, smart thermostats and appliances, syncrophasors, automated substations, plug in hybrid electric vehicles, renewable energy sources, etc. Another $400 million will fund grid modernization 

projects to reduce the amount of power wasted in transit from power plants to 

homes, and $25 million will enlarge the manufacturing base for components of 

smart grid systems.26

An analysis by the Electric Power Research Institute estimates that smart grid 

technologies could reduce electricity use by more than 4 percent by 2030. That 

would mean a savings of $20.4 billion for businesses and consumers around the 

country, and $1.6 billion for the State of Florida alone—or $56 in utility savings per 

person.27

Examples of Smart Grid Technology Grants: 

• $138 million was awarded to NV Energy for smart grid technology. Matching 

funds increase the value of this project to $298 million. This statewide project 

will link 1.45 million electric and gas meters across 54,600 square miles of service territory, delivering more than $65 million in benefits annually to 2.4 million Nevadans.28

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

• The Detroit Edison Company was awarded $83,828,878 to fund its 

SmartCurrents program. The program includes the deployment of a large-scale 

network of 660,000 smart electricity meters and will implement the Smart 

Home program, which will provide customer benefits such as dynamic pricing 

to 5,000 customers and smart appliances to 300 customers.30

• The Whirlpool Corporation in Benton Harbor, Michigan received $19,330,000. 

The funds will support the manufacturing of smart appliances to accelerate the 

commercialization of residential appliances capable of communicating over a 

home network with other smart technologies. These appliances will allow customers to defer or schedule their energy use, which can lower consumer costs 

and reduce peak electricity demand.31

• $127.5 million was awarded to the Sacramento Municipal Utility District. The 

smart grid stimulus Federal grant program of Sacramento, California’s capital 

city, will explore how to design, run and manage an urban smart grid utility 

system with different types and sizes of clients. California will match the stimulus subsidy with funds to improve building automation systems, energy efficiency and retrofitting projects that are already in schedule, including several 

buildings in downtown Sacramento.32
35 

www.smud.org/en/news/Documents/09archive/stimulus-10-27-09.pdf; EcoSeed, ‘‘Sacramento reaps $127.5 million from smart grid stimulus,’’ EcoSeed, November 16, 2009, available at 

http://www.ecoseed.org/en/general-green-news/green-business-news/green-business-news/5145. 33Office of the Secretary, U.S. Department of Homeland Security, ‘‘Creating Jobs While Making America Safer U.S. Department of Homeland Security Recovery Act Plan’’ (2009) available 

at http://www.exercise.dhs.gov/xlibrary/assets/recovery/DHSlRecoverylPlanlFinall2009- 

05-15.pdf. 34 Ibid. 

National Security. President Obama committed $3.5 billion for the Department 

of Homeland Security in the ARRA. These funds will go to guarding against terrorism; securing our borders; smart and tough enforcement of immigration laws and 

improving immigration services; preparing for, responding to, and recovering from 

natural disasters; and unifying and maturing the Department of Homeland Security. The Coast Guard received the largest proportion of these funds at $1.4 billion, 

Transportation Security Administration $1 billion, the U.S. Customs and Border 

Protection was budgeted close to $1 billion, FEMA $615 million, and the DHS Management Directorate received $200 million, and Immigration and Customs Enforcement received $20 million.33

Examples of recent awards by programs:34

• U.S. Coast Guard funding received from the Recovery Act will support multiple operational communities and accommodate the dynamic state of mission 

needs related to alteration of bridges, shore facility construction, and vessel repair acquisition. The Recovery Act funds will allow for completion of four bridge 

alteration construction projects. Additionally, shore facility construction and 

vessel repairs will be performed to preserve existing capabilities. Completion of 

these projects will facilitate safe and efficient navigation along the Nation’s waterways, create jobs in the construction sector, and create a $240 million stimulative impact on the construction industry. 

• Transportation Security Administration funding received from the Recovery Act will support two programs: the procurement and installation of checkpoint explosives detection equipment; and the procurement and installation of 

checked baggage explosives detection systems. TSA developed its $1 billion plan 

with a risk based approach that accelerates deployment of in-line baggage handling systems and enhances detection of liquid threats in carry-on baggage. 

• U.S. Customs and Border Protection funding received from the Recovery 

Act will help CBP meet its mission of keeping terrorists and their weapons out 

of the United States, and securing and facilitating trade and travel, while enforcing immigration and drug laws. In addition to helping support the multiyear modernization strategy that includes reconstruction of up to 23 existing 

CBP-owned land ports of entry as well as repairs and alterations at a minimum 

of an additional 10 locations primarily along the northern border of the United 

States, the Recovery Act also provides resources needed for CBP to continue deploying cutting edge imaging technologies that allow safe and efficient inspection of cargo and vehicles entering the United States. 

• Federal Emergency Management Agency funding received from the Recovery Act will provide funding for grants to help those in greatest need, thereby 

reducing the loss of life and property and protect the Nation from all hazards. 

This includes $100 million for the Emergency Food and Shelter National Board 

Program; $150 million for Public Transportation and Railroad Security Assistance; $150 million for Port Security Grants; $210 million for Assistance to Firefighters Grants for modifying, upgrading, or constructing non-Federal fire stations; and $5 million expansion in authority for Community Disaster Loans. 

Maintaining the Focus on Job Creation 

Job creation must remain our top priority. The Jobs Summit that President 

Obama held last week was important as it focused directly on this most pressing 

problem. There are three ways to think about the goal of job creation: 

• Policies that directly boost employment and reduce unemployment; 

• Policies that help to those most in need, which often have the largest bang for 

the buck in terms of impact on economic stimulus; and 

• Policies that create jobs while laying the foundation for a strong and sustained 

economic recovery. 

Directly boosting employment and reducing unemployment 

The options that would create jobs the most quickly and reliably involve the most 

direct public policy tools available to Congress and the Obama administration to 
36 

preserve public employment, increase private employment closely associated with 

public spending, and create incentives in public programs to reduce the numbers of 

unemployed. They include: 

• Providing Federal funds to States, localities, and schools to reduce job losses 

and maintain valuable services. 

The aid to States contained in the ARRA was clearly helpful, but it only addressed about 30 to 40 percent of the gap faced by State governments. As a result, at least 42 States cut services and 30 States raised taxes in 2009. These 

actions are not helpful as the private sector tries to build on today’s nascent 

economic recovery. 

Additional aid to State and local governments and school districts boasts clear 

advantages over many of the alternatives. First, the added resources will immediately and directly boost employment in a very hard hit sector. Distinct from 

the private sector, job cuts are being forced exclusively by impossible budget situations, not by a lack of demand for services. Ameliorating those budget dilemmas will result in more jobs. Second, additional aid will prevent further cuts 

to State and local education systems-investments that will pay dividends far beyond the current recovery. 

• Targeting new job creation in sectors with special investment needs, including 

national service employment, private- and public-sector employment in child 

care, and after-school programs, and elderly and disabled care, alongside more 

training for health professionals. 

These jobs, which are largely provided by nonprofit groups and small businesses, are paid for by programs that are currently being cut by State and local 

governments. These programs also serve needs where there is almost always 

more demand than supply. Indeed, the Bureau of Labor Statistics projects that 

these kinds of jobs will be among the fastest growing in the years to come. Investing in these jobs will help pave the way for long-term economic growth by 

saving and then creating new jobs with long-term career paths and steady personal income growth. 

• Creating community jobs such as those undertaken by nonprofit groups to help 

distressed individuals or communities. 

• Creating jobs in needed infrastructure investment, including foreclosed homes 

and schools. 

• Reducing the numbers of unemployed by encouraging early retirement to reduce 

unemployment through social security, job sharing, and saving primary- and 

secondary-school teachers’ jobs by offering early retirement. 

Support for those hardest hit 

Helping those who are most in need is both the right thing to do and good for 

the economy. Channeling funds to the unemployed has a direct impact on communities as unemployed workers spend these funds. This not only helps the unemployed and their families, but helps the overall economy since without aid, unemployed workers who are rendered destitute, have no income, and no assistance from 

the government are not active consumers contributing to economic recovery. 

The economic hardships faced by communities hit hardest during the Great Recession also threaten long-term social and economic damage. They threaten the cohesiveness of neighborhoods and institutions such as schools and churches. These 

things matter from an economic perspective—saving a neighborhood is less costly 

than restoring it both financial and social terms. 

Doing more to ensure that families in need get the assistance they need not only 

boosts local economies by pumping money into them and helps the national economy 

by spurring economic demand, but also helps families until job creation starts back 

up. So in the second section of the report we recommend the following options to 

spur support for those hit hardest by the Great Recession: 

• Extend the unemployment compensation provisions for the long-term unemployed contained in the ARRA recovery package, which are set to expire at the 

end of 2009, to at least the end of 2010. 

• Ensure that the unemployed have access to health care by extending the Federal program that subsidizes health insurance coverage for the unemployed. 

Creating the conditions for a strong and sustained economic recovery 

The economic recovery following the recession in 2001 was the weakest in the 

post-World War II era in terms of job gains and income growth, leaving the typical 

family worse off in terms of income in 2007—the year the most recent recovery 
37 

peaked—than they were in 2000, at the prior economic peak following the 1990s expansion. The reason: the George W. Bush administration and a conservative-led 

Congress pushed through tax cuts for the exceedingly wealthy that did not trickle 

down to create broad-based economic growth and job creation while also failing to 

supervise our financial sector amid an explosion of ill-considered lending. 

This time, a progressive administration and Congress understand that health care 

reform, prudent regulation of the financial sector, improving education, and addressing the long-term issue of climate change and energy independence will, together, 

pave the way for a more vibrant economy in the medium to long run. Integrating 

these goals into our short-term goals of job creation where possible should continue 

to be a priority. 

This third section of the report presents two options that focus on one of those 

pillars of our future economic growth, the clean-energy transformation of our economy, through: 

• A ‘‘green bank,’’ or more specifically a Clean Energy Deployment Administration 

that would finance new green-energy projects and home and building green retrofits to boost energy savings and job creation. 

• A new $30 billion Federal revolving loan fund, as outlined in the Investments 

for Manufacturing Progress and Clean Technology Act now before Congress, to 

help small and midsized component parts manufacturers retool their plants and 

retrain workers to serve the growing global market for low-carbon energy technology. 

Tax provisions to spur job creation 

Tax cuts are not as direct, fast-acting, or reliable a way to create jobs or spur 

growth as the other options presented above. Nevertheless, as a politically viable 

means of encouraging job creation in the private sector with a minimum of administrative overhead, they are sometimes the best option. They also can, in some cases, 

be designed to pay for themselves over a period of time. 

There are some tax cuts that are more likely to spur private-sector jobs growth, 

specifically: 

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

• A two-tier residential and commercial building retrofit program featuring a 

‘‘cash for clunkers’’ program for household appliances and a ‘‘home star’’ certification program for deep energy efficiency retrofits for entire residential and 

commercial buildings. 

• An expansion of currently effective industrial retrofit measures that provide tax 

credits for investment in clean energy manufacturing. 

• A 1-year extension of the current fix to the Production Tax Credit for renewable 

energy to ensure that this important tax credit continues to have impact, and 

that includes manufacturers of significant components such as wind turbines 

and blades to extend its benefits to cover domestic manufacturing supply 

chains. 

• A job-sharing tax credit that would encourage employers to reduce hours rather 

than laying off workers. 

• Changes to the Low-Income Housing Tax Credit to revive the stalled credit 

market and spur investment in shovel-ready and much needed affordable housing projects. 

Conclusion 

The recovery package has pumped billions of dollars into communities across the 

nation. As expected, it took quite a few months for the effects to start to be seen, 

but now we know that these funds had positive impact on economic growth in the 

third quarter and the economy lost only 11,000 jobs last month, after losing more 

than twice as many every day last January as President Obama took office. 

But, we cannot stop focusing on job creation. Unemployment remains excruciatingly high, especially among young workers, workers of color, and older and displaced workers. The last two recessions led to ‘‘jobless recoveries’’ and the unemployment rate did not peak for about a year and a half after the recession was declared 

officially over by the National Bureau of Economic Research. We run a grave risk 

of not creating sufficient jobs this time around as well; projections are now that we 

will not get back to ‘‘normal’’ rates unemployment until far into the mid-teens of 

the next decade. 
38 

PREPARED STATEMENT OF BRUCE KATZ 

VICE PRESIDENT, THE BROOKINGS INSTITUTION, AND

DIRECTOR, METROPOLITAN POLICY PROGRAM

DECEMBER 9, 2009 

Thank you Senator Brown and members of the Subcommittee for the opportunity 

to testify before you this afternoon. I am Bruce Katz, Vice President and Director 

of the Metropolitan Policy Program at the Brookings Institution. 

Yesterday at Brookings, President Obama laid out three priorities for new investments to create jobs, including bolstering small business growth, added investments 

in transportation and communications infrastructure, and rebates for home energy 

efficiency retrofits. These are important steps, but, as the president himself noted, 

there is no silver bullet or single law that will address our current situation. There 

is more to be done on several fronts, and my testimony will address some complimentary and overlapping issues. 

I will make three main points today. 

First, the American economy, like most developed economies worldwide, is a network of metropolitan economies, which envelop not just cities and suburbs but a 

good portion of our rural areas. Because the American economy is metro-led, Congress and the Administration must understand that national recovery will also be 

metro-led, and so will depend on restoring economic health and vitality in our metropolitan engines. 

Second, the Great Recession has affected different metro economies in radically 

different ways. The bubble-led economies in the Sun Belt and the auto-dominated 

industrial economies in the Great Lakes have borne the brunt of this downturn. It 

is important to recognize that, even as economists talk about national recovery and 

unemployment numbers improve, a large number of our metropolitan economies are 

still mired in recession. 

Third, Federal efforts to bolster job creation need to connect ‘‘The Macro to the 

Metro.’’ Our research shows that metros need two kinds of Federal responses. 

They need the Federal Government to intervene quickly to prevent further job 

losses from the collapse of general and specific tax revenues. It would be the height 

of folly to focus on creating new jobs in the near term while ignoring the fact that 

metropolitan areas are on the verge of losing municipal jobs due to a steep and foreseeable drop in tax revenues. 

Metros also need the Federal Government’s support in creating jobs that build a 

balanced, productive future economy, which is low carbon, innovation-fueled and export-oriented. There can be no return to normal after this recession since what preceded it was anything but normal. 

So let me start with the broader metropolitan frame. 

Our research and that of others shows that our nation’s metropolitan areas, which 

encompass cities, suburbs, exurbs, and a large portion of our rural communities, are 

the engines of the national economy. As Harvard Business School Professor Michael 

Porter notes, there is really no such thing as the ‘‘U.S. economy,’’ but rather a network of interlinked metropolitan economies across the country. 

There are 366 metro areas in the United States, housing 83 percent of our population and generating 88 percent of our GDP. 

The top 100 metros alone sit on only 12 percent of our land mass but house twothirds of our population, generate three quarters of our GDP and concentrate the 

advanced research institutions, innovative firms, talented workers and sophisticated 

infrastructure that are needed to compete globally. 

The majority of the GDP of 44 of our 50 States is generated by their metropolitan 

areas. Ohio is a quintessential metro State since the largest seven metropolitan 

areas alone generate 80 percent of State GDP. South Carolina’s five largest metropolitan areas are responsible for 60 percent of State GDP, and its full complement 

of 10 metros contribute 82 percent of State GDP. In Oregon, the Portland metro by 

itself generates 59 percent of State GDP. 

We are a Metro Nation, and we need to start acting like one. 

Second, metros vary considerably in size, assets, economy, and in how hard they 

have been hit by the recession. Some specialize in finance and real estate, others 

in manufacturing and production, still others in advanced services. Some act as 

hubs for the movement of goods; others for the development and commercialization 

of ideas. 

Since April of this year, Brookings has made a quarterly assessment of the impact 

of the downturn on each of the top 100 metros. Our latest Monitor, to be released 

December 15, shows what the recession looks like from the ground up. 
39 

1 Using quarterly census data from 1997 to present, we estimated this by regressing annual 

growth rates in local revenue on growth rates in housing prices, the unemployment rate, holding 

the quarterly level of revenue constant. For every 1 percentage point increase in national unemContinued 

We find that every metro is struggling to convert GDP growth into new jobs. Employment continued to decline in 87 of the nation’s top 100 metros through the third 

quarter of this year, and unemployment varies dramatically from metropolitan region to metropolitan region, ranging from a high of 16.7 percent in Detroit to a low 

of 4.8 percent in Omaha. 

The metro focus shows that how long the road to recovery will be. Only six metro 

areas in the top 100 (Albuquerque, Austin, McAllen, San Antonio, Virginia Beach, 

and Washington DC) have exceeded their peak pre-recession output. Only one metro 

area (McAllen) has exceeded its peak pre-recession employment. 

We have also seen intense variation in economic pain. The housing collapse has 

been felt in the sun-drenched, bubble real estate economies such as metros like 

Phoenix, Tampa and Jacksonville, which have continued to lose jobs at two to three 

times the rate of the United States as a whole over the last quarter. The auto collapse has devastated the ‘‘motor metros’’ concentrated around the Great Lakes. Detroit, which has been hemorrhaging jobs throughout this decade, has had more than 

twice the rate of job loss as the Nation as a whole since the beginning of the recession in December 2007. Youngstown and Akron, which have also outpaced the national rate of job loss throughout the recession, have shed jobs two and three times 

faster than the United States, respectively, over the last quarter. 

By contrast, metros I mentioned earlier like Austin, San Antonio and Washington, 

D.C. have fared fairly well during this downturn, buoyed by strong health and education sectors and government. 

This variation reinforces the point: there is no single American economy. 

Finally, any further Federal response on job creation and economic recovery must 

connect ‘‘The Macro to the Metro’’ if it is to be successful. More specifically, the Federal Government must address the needs of metros and their contribution to the 

economy in two ways. 

In the immediate term, the Federal Government must act quickly to stop additional job losses that are large and foreseeable. We must not overlook the importance of job retention in a rush to job creation. 

Thinking more broadly, the Federal Government must catalyze job creation that 

helps build the next economy and sets the country on the path toward long term, 

sustainable growth. We cannot return to the unbalanced, consumption-led growth 

of the past decade, driven by unsustainable, speculative increases in housing values 

and reckless engineering of new loan products and secondary market vehicles. True 

economic recovery will depend on the Nation finding a different economic path, one 

that is more productive, sustainable and inclusive. Given this framework, we recommend that this Subcommittee and the Administration and Congress consider five 

discrete interventions that prevent further job losses and help build the next economy. 

Stop Additional Job Losses 

While the recently released unemployment numbers indicate that hemorrhaging 

of jobs has been staunched somewhat, the brutal fact is, because of the delayed effects of the recession on local budgets and its continuing effects on the ready availability of capital, our metros will see significant job losses absent Federal intervention. It does no good to bring in new jobs through the front door if we’re losing them 

out the back window. 

Strategy 1: Direct assistance to cities and towns 

One critical strategy for job retention is direct fiscal assistance to local governments, which employ 10 percent of the nation’s workforce. 

Local government finances, local government employment, and private sector jobs 

that depend on local projects are on the verge of a crisis. Local government finances 

typically feel the full impact of larger macro trends 18–24 months after their onset 

because property tax assessments lag the real-time decline in property values. For 

fiscal year 2006–2007, local governments generated $370 billion in revenue from 

property taxes, according to U.S. Census data. Property values have fallen 9.5 percent since then, meaning that the local budget gap may be as large as $35 billion— 

and this excludes declines in sales and income taxes, which have dropped by $3 billion, according to Census data. Brookings research projects another $15 billion in 

total revenue declines over the third and fourth quarters of this year.1 Roughly 70 

to 75 percent of that should be from property tax losses. 
40 

ployment, local revenue is predicted to fall by 0.35 percentage points. Likewise, a 1-percentage 

point decrease in housing prices is associated with a 0.38 percentage point decrease in revenue. 2 Christopher Hoene and Michael Pagano, ‘‘City Fiscal Conditions in 2009’’ (Washington: National League of Cities, 2009). 3 Ibid. 

4Transportation Equity Network and Transportation for America, ‘‘Stranded at the Station: 

The Impact of the Financial Crisis on Public Transportation,’’ Washington: 2009. 

At least $50 billion would be required to make up for these local revenue shortfalls, but that would do nothing to address the massive losses in transfer payments 

from States, which make up one third of local government budgets. If the decline 

in State transfers is as large as the decline in State revenue, local governments 

could lose another $74 billion, for a total local government shortfall of $124 billion. 

A National League of Cities survey found that in FY2009, 67 percent of cities 

dealt with budget shortfalls through layoffs, furloughs, and hiring freezes—a response that might be expected to continue without some sort of intervention, possibly leading to massive reductions in jobs and vital services.2

But fiscal aid to cities would not just keep municipal payrolls stable. It would also 

stall cuts in local spending on construction, procurement, and other areas that directly affect private sector firms that provide construction, printing, and other services. NLC reports that 62 percents of cities delayed capital projects in FY2009 due 

to budget shortfalls.3 Bringing these back online would provide jobs in site management, planning, and technical assistance, as well as construction. This local spending also advances national priorities such as infrastructure improvements, retrofits 

and other ‘‘green jobs.’’ 

Fiscal assistance to cities and towns could take several forms. The simplest is 

probably direct aid, in a new program that is separate from but analogous to the 

State Fiscal Stabilization Fund in ARRA. A model could be the general revenue 

sharing program (GRS) that was in place from 1972 to 1986. This system had the 

obvious benefit of providing a fast-moving response to local government liquidity crises. But it also had the virtue of targeting aid where it was most needed, through 

a formula that took into account localities’ tax effort, population, and per capita income. If re-enacted for a short term today, the program would address the coming 

local government fiscal crisis and help keep municipalities and counties from cutting 

back in ways that could place a significant drag on the nation’s nascent recovery 

just as the Recovery Act spending trails off late next near. 

A second option would be to restructure SFSF to provide direct fiscal assistance 

to local governments that are entitlement communities. This approach would allow 

a local pass through to be carved out of an extended or expanded SFSF program. 

Using SFSF in its current form would not be a particularly effective vehicle for providing relief to local governments. SFSF did not have any straight pass-through to 

local governments, so funds were not directly used by cities and towns. SFSF did 

probably forestall cuts that State governments would have made in local aid, so 

probably provided indirect benefit. However, a direct benefit is needed now. 

Strategy 2: Transit system operating subsidies 

Perhaps the best example of the folly of focusing exclusively on job creation and 

ignoring job preservation comes from our nation’s transit systems. As the Federal 

Government’s Recovery Act funds aimed to create so-called shovel-ready, temporary 

construction jobs, transit agencies are facing the likelihood of laying people off from 

stable, permanent positions. 

No fewer than 51 transit agencies around the country are facing some combination of service cuts, fare increases, and layoffs.4 Transit systems that are vitally important for moving workers in major metros like New York, Washington, Philadelphia, and Atlanta have all recently considered job and service cuts as well as far 

increases to close millions of dollars in deficits. St. Louis had to suspend nearly half 

of its bus service and one-third of its rail service, and laid off nearly one-quarter 

of its staff, even though in 2008 ridership on the region’s buses grew by almost 9 

percent, one of the largest gains in the Nation over that time. While the Recovery Act provides $8.4 billion to be spent on transit this year, Federal rules stipulate that this money can be spent only on capital improvement 

projects and not to finance gaps in day-to-day operating expenses for transit agencies in urbanized areas with populations greater than 200,000. While capital is of 

course critical to transit service, operating costs are also vital to cover the salaries 

of the workers who keep the system running, as well as the debt contracted to pay 

for capital projects, and are generally about twice as high as capital expenses for 

the largest transit agencies. 

The Federal Government should step in and change the rules so that transit agencies can spend transit capital stimulus dollars on operating expenses. Certainly, 
41 

5 An analysis of Recovery.gov data from FY2009 Q4 reveals that CDBGs created 4,773 jobs at a cost of $7,214 each, while the average other grant did so at a cost of $56,220 per job. The 

general finding here seems to be corroborated by analysis of FY2005–2008 data from regular 

budget cycles. 

agencies have capital needs as well, but particularly in these stressful economic 

times they should have the short-term flexibility to use those Federal dollars to 

meet their immediate problems. 

These two strategies—direct municipal aid and transit operating subsidies—would 

provide a Federal finger in the dike, keeping jobs in sectors that are being battered 

by forces that are not entirely within their control. They would stop the hemorrhaging of jobs. 

They will not, however, be sufficient to address the hyper-unemployment levels 

among some categories of metropolitan workers, particularly Hispanic and African 

Americans, younger people, and people with less education. These groups will only 

experience real relief with the implementation of focused job-creation strategies 

through proven programs like the Community Development Block Grant. CDBG is 

a well-understood program that provides communities with flexible, easily deployed 

resources to address local development priorities. 

In the current recession, CDBG funds have been a tremendously efficient source 

of job creation.5 If program rules were relaxed to allow more funding for jobs and 

job creation, CDBG could a potent way to deliver public sector employment jobs relatively quickly. Many cities have an established network of community-based facilities experienced in managing and handling CDBG funds that could help bring a 

public-sector employment program up to scale. Further, if a summer jobs program 

were a part of this initiative, it could be put in place in short order, as has been 

done in past years. The fiscal year 1998 summer jobs program, funded at $871 million, provided jobs and training for 480,000 disadvantaged youth. 

Build the Next Economy 

As Congress acts to stem further job losses, it must not overlook the long-term. 

We need to lay the groundwork not just for jobs for the next year, but jobs for the 

next generation. 

In the midst of rising unemployment, increasing poverty and battered industries, 

we need high aspirations for the next economy. 

This next economy should be a low (or at least less) carbon economy, as we struggle with the threat of climate change. 

It should be innovation fueled, as we strive to make quantum leaps on everything 

from clean technology and renewable energy to high speed rail, the smart grid and 

health care information technology. 

And it should be less driven by domestic consumption and more oriented toward 

exports, particularly to rising nations like China, India, and Brazil that are rapidly 

urbanizing and industrializing. 

These three factors will play to the strengths of America’s metros, because it is 

in metros where you find the transit systems and density that reduce carbon emissions. It is in metros where you find the well-educated workers, the concentrations 

of research institutions, and the streams of Federal funding that support innovation. 

And it is in metros that you find the ideas and products that are valued and sought 

abroad, and the rail, port, and logistics networks that move these products to markets overseas. 

Strategy 4: Next generation transportation 

Our competitor nations understand the importance of having state-of-the-art, 

seamlessly integrated infrastructure systems, from roads to rail to ports to planes. 

A new approach to infrastructure is not only a competitive necessity for our nation’s 

metros, it also is critical to helping metros realize a number of national goals, such 

as a reduction in carbon emissions. 

Congress should continue to fund, as a matter of course, the U.S. DOT’s Transportation Investment Generating Economic Recovery (TIGER) Discretionary Grants, 

originally devised for the Recovery Act. The $1.5 billion TIGER program will fund 

competitive grants to support nationally, regionally, or metro-significant projects 

that may facilitate linking transportation, housing, energy, and environmental concerns, such as greenhouse gas emissions. The projects will be rewarded based on 

their ability to preserve and create jobs, invest in transportation infrastructure that 

will provide long-term economic benefits, and assist those most affected by the current economic downturn. In short, these are the type of projects designed to support 

a new long term vision for infrastructure in this country. 
42 

Typical DOT programs do not require formal evaluations, but TIGER provides the 

regulatory structure to improve employment impacts because it uses job creation as 

a metric for evaluating applications. In the short run, this ensures that TIGER 

funding creates construction-related jobs in a time of great need. But as the economic recovery stabilizes, and TIGER takes its place as a regular part of DOT’s 

budget, the job creation criteria could be broadened to balance short and long-term 

job creation. TIGER-funded infrastructure impacts have a powerful ability to create 

well-paying jobs now and a stronger economy in the future. 

TIGER disbursements are not expected until February 2010 but preliminary 

USDOT analysis shows that the program is shiningly popular. The nearly 1,400 applications received so far total $57 billion and come from every State. If even onethird of these applications are projects that adhere closely to the objectives of the 

program, that represents $20 billion in high-quality projects that are ready to start, 

but lack funding. 

TIGER should be a permanent part of the DOT budget, starting with a $20 billion 

appropriation, so that these and other critical projects can be realized. There are 

many potential vehicles for an expanded TIGER program. One is the FY2011 budget. By then there should be more information about the projects funded through the 

first wave of grants, including job creation and retention. This information will help 

refine the job creation criteria for future grants. TIGER could also be funded 

through a short-term reauthorization of the current surface transportation law, 

SAFETEA–LU which expires at the end of this month. Or the new spending on infrastructure that President Obama proposed in yesterday’s address could include a 

new round of TIGER funding. 

Strategy 5: National infrastructure bank 

Another important idea to support broad competitiveness goals is a national infrastructure bank (NIB), which would serve as targeted mechanism for financing infrastructure. A development bank in essence, a NIB would have to balance the rateof-return priorities of a bank with the policy goals of a Federal agency. Ideally, it 

would improve the Federal investment process and focus on multi-jurisdictional or 

multi-modal projects with regional or national impact. For these types of infrastructure projects, the NIB could provide Federal funding in terms of grants, loans, and 

loan guarantees. 

Another important idea to support broad competitiveness goals is a national infrastructure bank (NIB), which would serve as targeted mechanism for financing infrastructure. Congress should pass the National Infrastructure Bank Act to establish 

an independent Federal entity to evaluate and fund infrastructure projects ‘‘of substantial regional and national significance.’’ A White House Press release following 

the President’s speech yesterday spoke of supporting ‘‘financing infrastructure investments in new ways, allowing projects to be selected on merit and leveraging 

money with a combination of grants and loans . . . ’’ The NIB would provide grants, 

loans, loans guarantees to projects requiring Federal investment of at least $75 million. The Federal Government would provide initial capital of $60 billion that NIB 

would use to issue bonds, with the proceeds used to finance major projects proposed 

by public entities. The NIB Act should be passed and funded at just under $61 billion. 

Strategy 6: Cluster initiatives 

As SBA administrator Karen Mills wrote last year before joining the Obama Administration, 

Due to rising global competition, the nation’s capacity for generating stable, 

well-paying jobs for a large number of U.S. workers is increasingly at risk. 

In this environment, regional industry clusters represent a valuable source 

of needed innovation, knowledge transfer, and improved productivity . . . 

Many U.S. industry clusters are not as competitive as they could be, to the 

detriment of the nation’s capacity to sustain well-paying jobs. 

Clusters encompass both existing industries and the emerging industries, such as 

alternative energy, that will grow to meet the challenges of the next economy. In 

fact, strong clusters promote the product and process innovation, technology transfer 

and knowledge sharing that help industries shift from the now to the next, and 

move from making tires to making polymers or making auto glass to making solar 

panels. 

The Federal Economic Development Administration’s fiscal year 2010 budget request seeks $50 million for a regional innovation clusters initiative that would 

award competitive, bottom-up grants to strengthen local efforts and establish a national clusters research and information center. The House appropriations bill 
43 

6 As a compromise, the conferees should also accept the higher House funding level for EDA 

assistance programs ($255 million), which would allow conferees to split the difference between 

House and Senate appropriations for public works. 

trimmed that back to $10 million, while the Senate pared it to $35 million. To ensure that a fully rounded clusters program becomes operational, House and Senate 

conferees on the Commerce-Justice-Science appropriations bill should agree to the 

Senate funding level for the EDA economic adjustment, technical assistance, and research/evaluation accounts, which would allow the clusters effort to be funded at 

about $35 million.6 A well-designed and implemented EDA clusters program would 

serve as an important symbol and demonstration of a new Federal approach to economic policy. 

Two other bills currently in Congress would encourage the development and success of industry cluster initiatives, and they should be passed in some form to bolster the productivity and competitiveness of America’s regional and metropolitan industries. The SECTORS Act of 2009 (‘‘Strengthening Employment Clusters to Organize Regional Success Act’’) would award grants to local industry-based organizations to enhance the competiveness of the industry, improve workforce skills, and 

coordinate State and local economic development activities. The SECTORS Act appropriately recognizes the employment aspects of clusters, calling for Federal support for 

[I]dentifying and aggregating the training needs of multiple employers, 

helping postsecondary educational institutions and other training providers 

align curricula and programs to meet industry demand, and improving job 

quality through improving wages, benefits, and working conditions for 

workers. 

I’m sure the Chairman is quite familiar with the bill, which he introduced with bipartisan support. 

Likewise, the Senate and House both referred a bill to Subcommittees on Technology and Innovation that would promote the construction of research parks with 

$7.5 million for each of 4 years. The title said it all: ‘‘A bill to provide grants and 

loan guarantees for the development and construction of science parks to promote 

the clustering of innovation through high technology activities.’’ Passing this bill 

now would promote innovation by encouraging the concentration of technology industries, but it would also create short-term jobs in construction related industries. 

Conclusion 

I will conclude with these summary thoughts. 

I think the time is long past due for national economic policy to align more closely 

with metropolitan economic realities, given the economic primacy of our metropolitan areas. 

In the near term, that will require Congressional action to deal directly and forcibly with the coming fiscal storm in our nation’s metros, given the foreseeable declines in tax revenues as economic stress (and declines in income, sales and housing 

values) undermines State and municipal finance. This metro focus also requires deliberate and purposeful action to build the economy and the future. 

I spoke at the beginning of my testimony about the variations in assets and economic strength between metros. We must also recognize variations in institutional 

capacity. Some municipalities and counties lack the staffing and experience to design and implement various Federal programs. Some metropolitan areas, particularly in older industrial sections of the country, have been in economic decline for 

decades. The Federal Government, therefore, must acknowledge this variation in capacity and take steps to put in place a national network of firms, non-profit organizations, and individuals that can provide technical assistance to make sure our national project of economic renewal can reach its fullest potential. HUD has already 

started doing this with regard to neighborhood stabilization funds but more intensified efforts are needed in such areas as energy retrofit, transportation and education. 

I thank you again for the opportunity to testify here today, and welcome any 

questions. 
44 

PREPARED STATEMENT OF RAY LEACH 

CHIEF EXECUTIVE OFFICER, JUMPSTART INC. 

DECEMBER 9, 2009 

Mr. Chairman and members of the Subcommittee, thank you for taking the time 

to engage in a broad dialog regarding the current U.S. economy’s economic challenges, and for inviting me to testify on behalf of non-profit organizations located 

throughout the United States, who work with and are supported by public, foundations and private sector partners who are all focused on creating economic wealth 

and jobs via the acceleration of the transformation of State and regional economies 

under significant economic and employment distress. 

All of us are encouraged by the recent news regarding a slight reduction in total 

U.S. unemployment, yet I believe everyone also recognizes that we have a long way 

to go in order to create at least 6 million jobs which economist tell us would equal 

full employment. While it appears that perhaps the worst of the recent recession 

might be behind us, I would strongly encourage this Committee to use this crisis 

as an opportunity to reconsider our national economic policy regarding the Federal 

Government’s role in support of the formation of new, highly disruptive technology 

businesses that have the potential to create significant white, green and blue collar 

jobs as well as completely new industries. 

I would be remiss if I did not share that I believe the recent expansion of small 

business loan guarantees is a positive action that I would strongly recommend Congress to continue to support. I would also strongly encourage Congress to dramatically expand high-skill immigration quotas to enable the world’s brightest and most 

capable individuals to stay in or come to the United States to work for the benefit 

of the U.S. economy. I also believe that a wide range of tax credits, not only for hiring new employees, but also to individuals making angel investments in very small, 

high-technology startup businesses is something that Congress should support and 

encourage. 

Yet, today I wanted to share with you, an approach that has not been discussed 

to my knowledge, to date, with this Committee and that is how the Federal Government can partner with communities, States and regions of the country to accelerate 

the formation of entrepreneurial ecosystems that have the potential to produce sustained long-term economic transformation, growth and wealth creation. This approach hones the ability to quickly and efficiently create, support and grow new 

technology-based companies. Recent reports from the Kauffman Foundation and others tell us that over 75 percent of the new jobs in our economy are done so by firms 

which are less than 5 years old. The balance of my testimony today will focus on 

how the Congress can leverage current programs, partnerships and organizations to 

accelerate the creation and growth of firms that have the potential to employ hundreds, thousands and tens of thousands of workers in the years ahead. 

In order to begin explain this approach; I would like to introduce you to my organization, JumpStart Inc. We are a 501(c)3 non-profit organization headquartered in 

Cleveland, Ohio, whose mission is to recreate a robust and active entrepreneurial 

ecosystem in Northeast Ohio, which encompasses over 4 million residents and has 

been a major center for manufacturing over the last six generations. 

Going back to a 50-year period of time between 1875 and 1925 years ago, cities 

in our region of Ohio including Cleveland, Akron, Youngstown, Lorain and Canton 

were centers for innovative entrepreneurs who created globally competitive companies that were incredible wealth and job creators. Due to these significant successes, 

communities like Northeast Ohio found that they no longer needed to rely on new 

innovative firms for their own economic vitality throughout the majority of the 20th 

century. Unfortunately, over time the principal firms in Northeast Ohio ultimately 

became victim of new disruptive innovations that became products of new domestic 

and internationally based firms and the increasing challenges of globalization. As 

result of this process, which began to accelerate in the last thirty-five years, not 

only did Northeast Ohio’s significant firms who employed hundreds of thousands of 

citizens begin to lose their competitiveness and shed employment, but at the same 

time this economic condition exposed the Northeast Ohio region for its lack of a public or market-based entrepreneurial ecosystem. These entrepreneurial ecosystems 

are critical to wealth creation based on the formation of new businesses as their 

function is to engage and assist innovators and aspiring entrepreneurs to help them 

perfect their inventions, access financing to help take their products to market and 

to help the company’s founders find manufacturing, sales and management talent 

to join the company that would enable the new business to grow and therefore more 

significantly benefit society by creating increasing employment and tax receipts. 
45 

As a result of the absence of an entrepreneurial ecosystem in Northeast Ohio, the 

region has struggled with this critical economic transition and has found itself near 

the bottom of many national economic rankings. In fact, Entrepreneur Magazine 

ranked Northeast Ohio as the worst large regional economy for entrepreneurial performance for almost twelve years in a row from 1990–2002. 

This is when a new chapter in the economic history of Northeast Ohio began to 

emerge as corporate and philanthropic leadership in Northeast Ohio came together 

in 2003 to begin to better understand what needed to be done to recreate a new 

set of actors and initiatives that could accelerate the re-creation of a robust entrepreneurial ecosystem that could promote, support and invest in disruptive technologies being created at local universities, centers of research and from the inventive and industrious citizens of Northeast Ohio. 

Bringing together a broad group of partners, including local, regional and State 

government as well as the corporate and philanthropic community resulted in a 

broad-based strategic plan to create JumpStart Inc., an non-profit entity that would 

work and invest to help re-create an entrepreneurial ecosystem and assist new 

innovators and entrepreneurs but do so in a way that would seek not a maximum 

financial return from its activities, but instead work to realize the greatest economic 

outcomes that could result from the creation of new firms based on disruptive, globally competitive innovation that had the potential to create hundreds, thousands 

and perhaps tens of thousands of new jobs in the coming decades. 

I am encouraged to report that since the creation of JumpStart in 2004 it has generated significant economic results to date and has been able to demonstrate the 

promise to help accelerate the economic transformation of the Northeast Ohio economy. Since 2004, JumpStart has engaged with over 7,000 first-time innovative entrepreneurs providing them with approximately 100,000 hours of pro-bono technical 

assistance delivered by experienced, serial technology entrepreneurs from 

JumpStart’s team. It has made significant direct investments in 42 high potential 

startup companies that have already created over 600 jobs and are anticipated to 

create at least another 3,000 positions in the next few years. JumpStart has also 

helped to create a broad-based group of community-driven as well as private sector, 

profit-motivated investors that are making an average of 60 investments in new 

companies annually which have resulted in a total investment of over $1 billion in 

Northeast Ohio startup firms since 2004. 

JumpStart’s business model has recently become nationally recognized, as it has 

been discussed by media outlets including the New York Times, the Wall Street 

Journal, BusinessWeek, Forbes, PARADE Magazine and the Chronicle of Philanthropy. It also has won numerous national awards including the Economic Development Administration’s 2009 Excellence in Economic Development Award for Urban 

or Suburban Communities as well as the State Science and Technology Institute’s 

2009 Excellence in TBED (technology-based economic development) Award for Increasing Access to Capital. Yet, at this same time JumpStart estimates it could 

make an even greater economic impact. We estimate that there are at least another 

50 firms located in our region that deserve investment from the ecosystem in Northeast Ohio each year, but are currently having to wait until more resources are either secured by non-profit, economical development organizations, like JumpStart, 

or the less likely outcome of being able to access private for-profit resources are attracted to the region. 

There are a handful of critical components to JumpStart’s success but none of 

them are as important as the public/private and foundation partnership that has 

been formed in Northeast Ohio in order to aggregate the resources required in order 

to build an organization with the ambition and outcomes of JumpStart. In Northeast Ohio, we are fortunate to have a group of over 80 foundations who have come 

together to form what is the called the Fund for Our Economic Future. This collaboration of regional foundations has pooled together over $60M in total resources to 

focus on a wide range economic development initiatives including over $20M focused 

on the creation of an entrepreneurial ecosystem that can accelerate Northeast Ohio’s 

transformation. 

As critical as this group is, an even more important player in the emerging economic transformation is the State of Ohio’s Third Frontier Program, a $1.6 billion 

dollar public-sector initiative that has made an incredible impact on the technology, 

research and innovation commercialization economy in Ohio. A recent assessment 

of the program performed by SRI International, found that after State expenditures 

totaling $681 million to date, over $6.6B of economic activity and 41,300 jobs have 

been created resulting in $2.4 billion in employee wage and benefits. This leverage 

represents a 22 percent return on investment per annum to the State and nearly 

a $10 return for every dollar of State investment. The projects that this program 

has helped to fund have also helped increase Ohio’s gross domestic product by 
46 

$440M per annum and these annual revenues are anticipated to continue to grow 

to at least $900M by 2013. At this same time, high tech employment growth in Ohio 

has outpaced almost all other Midwestern States and venture capital investment in 

Ohio has grown over 20 percent since 2003 versus only an average increase of 8 percent nationally increase during this period of time. 

The combination of these two actors—Northeast Ohio-based philanthropic foundations and the State government has created a powerful collaboration that is making 

a tremendous difference to Northeast Ohio’s current and future economy. This leadership in Ohio provides a great demonstration of what leverage can do to accelerate 

the growth and formation of new businesses that create opportunities and jobs. 

To ensure that new and innovative businesses continue to be created by entrepreneurs not only in Ohio but across the United States, a broad set of Federal programs should be developed that focus on accelerating technology commercialization, 

increasing access to technical assistance, education, mentoring and training for entrepreneurs and improving access to risk capital. Unfortunately, current Federal 

programs have particular limitations that often times do not achieve job-creation 

outcomes. These limited existing programs include the following: 

• The SBIR and STTR research-support programs which have a limited focus on 

commercialization, especially when the economic outcomes are to occur via the 

creation of new firms or the deployment of Federal research into young, less 

mature firms. 

• Current Small Business Administration’s (SBA) loan programs that are principally focused on less innovative, incumbent firms that benefit from secured 

loans (which are typically more helpful to maintain jobs versus dramatically 

growing new jobs). 

• Technical assistance programs provided via the SBA’s Small Business Development Center programs which tend to focus on even smaller firms that do not 

have the capacity, in general, to generate a significant number of jobs in the 

next 5–10 years. 

• The current Small Business Investment Company (SBIC) programs which are 

focused on providing mezzanine capital to investment firms who invest in established firms, the SBA needs to strongly consider new equity-focused programs 

that would support non-profit venture development and venture capital funds 

that are looking to bring substantial co-investment to new innovative firms that 

have the potential to create significant wealth and jobs. 

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

• The absence of robust State, foundation and private-sector partnerships is preventing and limiting the Federal Government’s ability to accelerate the creation 

of new technology-based companies and jobs. Many States have made substantial investments in organizations who are perfectly suited to partner with the 

Federal Government agencies and programs yet there exists no strategic, tactical and robust collaboration amongst the practitioners and experts in the 

States that focus on assisting innovative, principally technology-based, firms 

who have the potential to dramatically grow regional and ultimately our national economy. 

In order to address the shortfalls of the Federal programming outlined above, 

Congress should create a $2B, 4-year initiative from currently available funds from 

the original ARRA bill in order to create the Federal Innovation, Commercialization and Job Creation Network program where existing proven non-profit 

organizations and/or institutions who have been able to demonstrate significant 

commercialization and economic outcomes could serve as individual Centers within 

the network as well as to collaborate with parts of the country that do not have 

established and proven partners already in place to create new Centers. Each of 

these organizations would be required to provide matching non-Federal resources 

from local, State, or regional public and/or private sector partners. Key attributes 

of the new approach would include: 

• Federal resources would be immediately matched and aligned to parties that 

have a similar vision and prioritization on commercializing disruptive innovation and supporting high-potential innovators and entrepreneurial firms. 

• The program will have a special focus on the commercialization of innovation 

which has the promise to create a small number of jobs immediately but also 

has the potential to create at least 25 new jobs within 36 months. 
47 

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

• The program would provide a logic framework to build partnerships to support 

significant economic outcomes including increased private sector investment, 

revenue and employment growth in the next 4 years. 

• We believe that there are at least 40 non-profit organizations in the United 

States that could meet the requirements to become a federally supported Center. Each partnering non-profit would have to be able to demonstrate a history 

of delivering significant economic outcomes (job creation, capital attraction, increased revenues) from its work preceding Federal support. 

• Regions of States that do not have existing non-profit organizations or collaborations that could qualify as a Center would be encouraged to build new strategic plans and collaborations that would have the ability to realize the goals 

of the program. Once these initiatives are formed and non-Federal resources are 

secured, the Federal Government could consider supporting these organizations. 

Mr. Chairman, I believe that the economic outcome of such a program outlined 

above would make a dramatic impact on all regions of the country—urban, suburban and rural. By partnering with established, proven organizations that can bring 

significant leverage to the table, anticipated benefits and economic outcomes would 

include: 

• Leveraging existing infrastructure and expertise. 

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

• Dramatically strengthen technical resources for high-potential technology entrepreneurs. 

• Create innovation and commercialization infrastructure in areas that currently 

are underserved. 

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

• Increased private sector investment of at least $4B from private sector investors 

across the globe within 4 years in firms created and/or supported from the Federal Program. 

• Creation of at least 260,000 new jobs within 6 years at 1.25× the current national average annual wage. An additional 1,000,000 U.S. jobs to be created as 

a result of the work of the work of the network by 2020. 

I greatly appreciate the opportunity to present to this Committee. I look forward 

to the opportunity to continuing the dialog on how we can dramatically increase programs that support commercialization and entrepreneurial progress so that we can 

create an increasing number of globally competitive and wealth-creating jobs in the 

United States. 

PREPARED STATEMENT OF RICK L. WEDDLE 

PRESIDENT AND CEO OF THE RESEARCH TRIANGLE PARK, AND FIRST CHAIRMAN OF THE INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL

DECEMBER 9, 2009 

Chairman Brown, Ranking Member DeMint and Members of the Committee, 

thank you for having me here today to testify on behalf of economic development 

professionals throughout the country. 

My name is Rick Weddle and I serve as President and CEO of The Research Triangle Park (RTP), the nation’s oldest and largest research park. As the home of 

more than 170 companies involved in cutting-edge research and development in a 

variety of industry sectors, RTP is probably one of the oldest and largest-scale examples of how public and private policy can have a lasting impact on job creation and 

creating long-term economic competitiveness. 

I am also speaking as an economic development practitioner with over 30 years’ 

experience. During my tenure, I have worked with regions and communities in five 

States to help reinvent, reposition and redirect themselves. These activities have cumulatively resulted in the creation of more than 26,000 jobs with a total payroll of 

$1 billion. 

Finally, as the first Chairman of the International Economic Development Council 

(IEDC), my comments today represent the viewpoints of the world’s largest organization serving the economic development profession with more than 4,600 members. 
48 

The diverse membership of IEDC is dedicated to creating more high-quality jobs, developing more vibrant communities, and generally improving the quality of life in 

their regions. 

I am here today to share with you my thoughts and the learning of the economic 

development community on how to create jobs and reinvigorate our struggling economy. I have organized my testimony around three questions that should be considered as we develop new policy that aims to create jobs and rebuild national competitiveness. 

What have we learned from the Recovery Act that can help inform future decisions? 

In February 2009, Congress passed the American Recovery & Reinvestment Act, which provided $787 billion dollars to tackle the severe recession triggered by the 

collapse of the financial sector and real estate market. The Recovery Act was designed in a rush to provide resources to triage the economic crisis, resulting in a 

package of tax cuts, formula-based fund transfers and direct grants and loans, most 

of which would be channeled through existing programs. The act had grand ambitions to simultaneously meet five goals: 1) to create and retain jobs; 2) to rebuild 

infrastructure; 3) to invest in science, health and technology; 4) to assist those most 

hurt by the recession; and 5) to stabilize State and local budgets to maintain service 

delivery. Overall, the main drive of the stimulus is to boost demand as the catalyst 

for economic renewal and job creation. 

Given the actual brevity of the Recovery Act’s implementation thus far, any identification of lessons learned can only be tentative at this point. I have broken the 

lessons into what is generating positive results for economic development and where 

the challenges remain on the ground. 

On the positive side, Recovery Act investments so seem to be achieving the following economic development objectives. 

• They are reigniting stalled projects of strategic importance. 

In some communities, Recovery Act investments have jumpstarted development 

projects that had been stalled due to lack of credit in the private sector and/or insufficient public funds. In Dayton, Ohio, for example, Community Development Block 

Grant stimulus dollars coupled with waste water infrastructure dollars combined on 

the ground to restart a multi-use development district, entitled Tech Town, which 

had been put on hold due to the lack of public funds. Restarting this project not 

only has the capacity to generate short-term jobs through construction, but also represents a long-term investment in the economic transformation of Dayton, which 

has long been struggling to rebuild after the decline of manufacturing. I will return 

to this example later in my testimony. 

• They are allowing communities to maintain relevant projects that otherwise 

might have been cut. 

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

that was slated for closure in response to budget cuts. 

• They have enabled business expansion through strategic infrastructure investments. 

Whereas investing in infrastructure upgrades creates short-term jobs, strategically targeting those investments to enable businesses to expand enhances the overall economic development impact of that investment. For example, local economic 

development professionals in Youngstown, Ohio, lobbied the State to invest some of 

its Recovery Act transportation allocations to relocate a national rail line which divided the property of V&M Star Steel. By moving the rail line, the company was 

then able to double its operations and create 400 permanent jobs. Notably, however, 

for this to occur required State-local coordination and engagement, which can be a 

trouble spot. 

• They have incented regional coordination. 

The lure of Recovery Act dollars has encouraged communities to establish regional 

alliances and coalitions to tackle big, commonly shared problems. The Chicago Metropolitan Planning Council spearheaded a coalition of non-profit business and civic 

groups, real estate developers and the metro mayors’ caucus to create a 17-town region in Southern Chicago to align resources, including Recovery Act dollars, to collectively rebuild. Similar regional initiatives are visible in the San Francisco Bay 
49 

area, where local political and transportation leaders have come together to bid for 

Recovery Act high-speed rail funding. 

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

Recovery Act dollars also have served to attract additional public, private and 

community resources. For example, the California Emerging Technology Fund committed to use a portion of its seed funds to match and leverage Recovery Act funds 

to meet broadband, digital literacy and other goals. 

• They have increased the dollars available for basic research, a building block of 

competitiveness in an innovation-based economy. 

Basic research is the primary source of the new knowledge that ultimately drives 

the innovation process. Economists estimate that up to half of U.S. economic growth 

over the past five decades is due to advances in technology. A study of recent U.S. 

patents found that nearly two-thirds of the papers cited in these patents were published by researchers at organizations supported by Federal funds, and these linkages have been growing at an accelerating pace. The major Federal R&D funding 

agencies all received significant funding through the Recovery Act, the first real increase in Federal research funding in 5 years. 

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

The recession exposed many weakness in the U.S. economy, such as the severe 

problems in the automotive sector, revealing the need for investments in long-term 

economic transformation. Some Recovery Act dollars are enabling this level of transformation. One such example is the Economic Development Administration’s allocation of Recovery Act dollars to the University of Arizona to support the startup 

phase of its Bio-Science Park, which will be located in a distressed urban neighborhood. This is a critical investment in the innovation infrastructure this country 

needs to remain competitive in the short- and long-term. I will return to this case 

later in my testimony. 

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

value. 

When the Recovery Act has added greater flexibility to existing programs, we 

have seen positive results. The Richland, California, program discussed earlier was 

funded by the Workforce Investment Act’s Youth Activities fund, whose spending 

criteria had been broadened by Recovery Act legislation to include 18- to 24-yearolds in youth activities. Equally, the new SBA provisions have been working well, 

allowing some financing to enter the market. 

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

While there have been a lot of questions recently about the reliability of the job 

creation figures surrounding Recovery Act investments, it is clear that when awards 

have been made, jobs have been created and retained. Some new programs, such 

as Recovery Zone Bonds, have proven to be quite effective and have received public 

and private sector praise. Moreover, the Recovery Act’s stabilization of State and 

local budgets has helped retain a significant number of jobs that otherwise may 

have been lost. The bigger issue is public perception, which I will return to when 

we look at the Recovery Act’s challenges. 

On the same day as President Obama’s Jobs Summit, the International Economic 

Development Council (the association representing the economic development community), RTP and DCI International issued a survey to over 4,000 economic development professionals across the country to find out if Recovery Act dollars had created jobs in their regions. A 10-percent response rate, representing over 400 communities nationwide, returned the following results: 34 percent noted that jobs were 

created in their region from the Recovery Act, 31 percent responded no jobs have 

resulted from Recovery Act dollars, and 25 percent noted that job creation has not 

yet been determined. 

While the Recovery Act has positive lessons to offer, it also faces challenges and 

limitations. Moving forward, these lessons need to be considered if the government 

is to create jobs and strengthen the economy. 

• There are significant misperceptions about the Recovery Act. 

Information gaps about what the Recovery Act is designed to do, when the money 

will be available, how much money will be available and what it can and cannot 

do abound, resulting in significant misperceptions by the public. The bulk of the Recovery Act is not designed to create jobs, but to stabilize the economy. The dollars 

available to create jobs are to be disbursed over a 2-year period, so it functions, in 
50 

effect, as a slow trickle of funds—as opposed to a great blast, which is what the public was expecting. In addition, some States have not drawn down all the available 

funding, delaying that potential impact and leading to further misperceptions about 

the Recovery Act’s effectiveness. Finally, some of the newer programs, such as 

health information technology, were never mandated to be disbursed earlier, but 

were given time to enable the programs to develop. Given the complexity of the program, insufficient time has been devoted to educating the public as to its potential 

and its limitations. 

• Speed has been emphasized at a high cost. 

While speed has not always been achieved, speed is still used as an indicator of 

success, which may have consequently prioritized deadlines over transparency, 

strategy and new business development. To meet the need for speed, communities 

may put forth projects which are shovel-ready, but not part of a larger plan that 

targets longer-term sustainable growth. While such projects may create short-term 

jobs, one-off, disconnected investments will not have the same transformative impact on a community as projects that strategically align grants, strategy and resources toward a bigger goal. Finally, the need for speed meant that contracts were 

allocated to existing, often larger companies, thus missing an opportunity to invest 

in startups, minority- and female-owned, and other very small businesses that may 

be emerging as some currently unemployed individuals look to create their own enterprises. 

• An overall lack of public alignment has hindered implementation. 

A lack of administrative capacity at the Federal, State and local levels has created 

challenges to the implementation of the Recovery Act. At the Federal level, many 

agencies found themselves with significantly more money than they had administered before, plus the need to create new regulations, all in a very tight timeframe 

with insufficient staff. On State and municipal levels, budget deficits often left insufficient staffing resources available to apply for or monitor Recovery Act funds, 

which have more stringent reporting requirements than regular Federal dollars. Unfortunately, the States and localities already struggling with budget shortfalls before the Recovery Act passed were also the least positioned to put together a strategic approach to accessing and using stimulus dollars. 

• The definition of distress can be too inflexible. 

When the Recovery Act was passed, economic conditions were different than they 

are today. For example, a number of States—such as West Virginia, Wisconsin and 

Oklahoma—experienced their worst unemployment declines since the passage of the 

Recovery Act. Unfortunately, the act’s criteria for some programs, such as Recovery 

Zone Economic Development Bonds, relied on 2007–2008 data for determining allocation levels; thus, those States that were hardest hit afterward have access to 

fewer resources, even though they have equal challenges today as those that were 

hit by the recession earlier. 

• Federal funding silos have been maintained. 

Most of the Recovery Act investments were channeled through existing agencies 

and existing programs, often at different levels of governments, making it difficult 

to integrate the funding streams at the local level into strategic efforts that can revitalize distressed places and nurture significant job creation. While some communities and regions did manage to access multiple funding sources, different and 

often more complicated reporting requirements adds complexity and significant capacity challenges to measuring the outcomes. Moreover, since States are major recipients and allocators of the funding, it keeps them in charge, and their decisions 

may not be in aligned with local needs. 

• Insufficient funding has been directed to economic development organizations. 

Despite the focus on job creation, most Recovery Act dollars were not allocated 

to economic development organizations, which work daily in the trenches to create 

and retain jobs. Economic development is often countercyclical, with States and localities able to allocate more money to it during prosperous times and forced to 

make cuts during economic downturns. Yet it is precisely in a challenging economy 

when economic development investments are most required. It is tantamount to cutting back the police force while crime is rising. 

• Reporting requirements may deter small business engagement. 

The Recovery Act’s heavy focus on reporting both challenges public sector capacity 

and influences the ability of the private sector to use funds. For example, the report-
51 

ing requirements apply even to contractors receiving under $25,000 of the total contract value. Because the reporting requirements call for staff time to oversee compliance, smaller contractors seem hesitant to bid on stimulus-funded projects. This is 

particularly troublesome, as small businesses are ripe targets for job creation. 

• Measuring job creation is complicated and unreliable. 

In public perception, the success of the Recovery Act is measured by its ability 

to create jobs and to do so quickly. Yet not only is it extremely difficult to measure 

job creation from public investment generally, its real impact can only be measured 

over time, often significant time. 

What’s working around the country that is creating jobs and transforming 

the economy? 

Please allow me to start with the story of The Research Triangle Park. Fifty years 

ago, the leaders of North Carolina recognized that our State and the Triangle region, in particular, were not poised to be at the forefront of the post-war, science 

and technology-based era. As such, they made a big bet and established a place 

where educators, researchers, and businesses could come together as collaborative 

partners to change the economic composition of the region and State, thereby increasing the opportunities for the citizens of North Carolina. The vision was to attract research companies from around the Nation to locate in a parcel of land surrounded by the State’s research universities-the University of North Carolina at 

Chapel Hill, Duke University, and North Carolina State University. The resulting 

‘‘Research Triangle Park’’ would be a place where companies could take advantage 

of the region’s intellectual assets and that provided a ready physical infrastructure 

for corporate R&D activities. 

In the fifty years since, the mix of long-term investment in education and a commitment to building a conducive environment for innovation and technology-based 

economic development has paid off. RTP has grown to be a globally known center 

of innovation. Currently, there are more than 170 companies and research and development facilities in RTP, with more than 42,000 employees with combined annual salaries of over $2.7 billion. The average salary in the Park is $56,000 annually, nearly 45 percent more than regional and national averages. Companies represented in RTP include IBM, GlaxoSmithKline, Cisco Systems, BASF and Credit 

Suisse. In addition, a number of U.S. Federal agencies have a presence in the Park, 

including the U.S. Environmental Protection Agency, the National Institute of Environmental Health Sciences, and the U.S. Forestry Service. 

While RTP is an essential model for understanding what works out in the field, 

there are other equally important models that we can learn from. When asked in 

the survey and through other feedback mechanisms which programs they have seen 

have had the most impact to date, economic development practitioners listed funding for infrastructure projects, a focus on small business and fostering entrepreneurship, and freeing financing and extending credit as the most effective programs. 

These results remind us that private companies create jobs. Thus, the quickest, most 

effective way to create jobs is to provide companies with the capital they need to 

find new markets, expand production and ultimately hire new staff. Below are several different examples of how jobs were created at private companies with assistance or funding from economic development groups or government. 

Our first set of cases centers on the importance of non-profit financial intermediaries for extending both debt and equity credit to enable small business expansion. 

Kentucky ‘‘ezone’’ helps create jobs by providing funding and support to 

entrepreneurs: From July 2008 through June 2009, the Northern Kentucky ezone 

(a division of Northern Kentucky Tri-County Economic Development Corporation) 

created 189 jobs through its work with entrepreneurs in the region. The ezone assisted 29 new high-tech companies in Northern Kentucky and assisted in generating 

$14 million in investment for client companies from venture and angel funds. Additionally, $2.1 million in investments in ezone client companies came from Kentucky 

Science and Technology Corporation and other public funds. 

SBA loan program helps manufacturing company create/retain 50 jobs: 

San Diego-based CDC Small Business Finance is an SBA 504 lender. In 2009, it 

helped Campbell Certified, Inc., a structural/architectural steel fabrication company 

in San Diego County, obtain an SBA 504 loan that enabled it to buy a $1.7 million 

facility, expand operations, and create/ retain a combined 50 jobs. 

The second set of useful practices focuses on effective measures for helping small 

businesses export and integrate into the global economy, which enables them to 

enter new markets, expand and grow jobs. 
52 

Attracting foreign direct investment and helping export-ready companies: Economic developers in Portland, Ore., are helping clean tech and green building companies access emerging foreign markets by launching regular communication 

with State foreign representatives to develop specific company targets abroad and 

for investment in Portland. They also launched an International Roadshow to bring 

all of the foreign representatives of the State back to Portland for a week to meet 

with qualified export-ready companies from the city, and help them find partners 

in these global markets that will generate significant export sales and increase jobs 

for Portland companies. 

Loan guarantee enables the creation of new jobs at Illinois company: In 

June 2009, the Export-Import Bank of the United States announced that it would 

provide a long-term loan guarantee to back American Plastics Technologies Inc.’s export sale of equipment to make intravenous solutions, injectable medicines and bottled water to Nigeria. The loan guarantee supports the creation of 40 jobs. Sixteen 

U.S. suppliers from across the country, eight of them small businesses, are participants in the APT export. (While this is not a local example, it illustrates the value 

of loan guarantees to expand export markets.) 

The next set of cases highlights entrepreneurship, innovation and commercialization. These are all activities that expand regional economies by creating new jobs, 

new companies, and in some cases new industries. Economic developers foster this 

growth by connecting entrepreneurs, technologies and fledgling companies with 

funding and resources that can help bring new products to market. 

Oklahoma non-profit helps expand the technology-based economy of the 

State: i2E, Inc. provides Oklahoma companies with comprehensive commercialization services, proof-of-concept funding and seed/startup funding. Over its 10-year existence, it has assisted 425 commercialization clients and helped clients to attract 

$345 million of private capital. In a recent economic impact survey, responding clients reported creating 998 jobs at an annual average wage almost double the State 

average. 

Business incubator provides comprehensive services to emerging science 

companies: The San Jose BioCenter gives emerging science and technology companies access to world-class facilities and support typically only available to larger 

firms. Since opening in August 2004, the incubator has assisted 60 clients and graduated 14 companies. Six of the 14 BioCenter graduates have purchased or leased 

entire buildings and now employ between 30 and 400 people in the Bay Area. 

Program fosters business startups in rural Iowa: MyEntreNet uses web 

technology to provide online networking and resources to entrepreneurs who are 

otherwise isolated by distance. Through the service, they connect with other entrepreneurs, technical support, training and information on obtaining funding. In 2008, 

321 jobs were created with the help of MyEntreNet and related business incubation 

services. 

It also makes sense to target business assistance to strengthen core industries 

that create good jobs. Targeting manufacturing as well as energy, health and others 

not only creates jobs quickly, but does so in a way that builds competitive advantage 

for longer-term economic gain. 

Richmond, Va., business retention program identifies and assists expanding businesses: From July 2008 to June 2009, the Greater Richmond Partnership’s 

business retention program was able to find and build on good news in the business 

community. Outreach efforts helped to identify 111 expanding businesses and 167 

firms with plans to add staff in the coming 12-month period. These firms intend to 

create more than 1,600 new jobs and make capital investments in excess of $88 million. The program is working with these businesses to ensure that they have access 

to the resources and information they need to realize their plans. 

Economic developers help wind-power company create manufacturing 

jobs: Mariah Power, a Reno, Nev.-based company, decided to manufacture its turbines in Manistee, Mich., due to a unique partnership with a local manufacturer, 

a highly skilled workforce, and extensive assistance and funding from local and 

State economic development groups. A former auto parts manufacturing facility run 

by MasTech Manufacturing was retrofitted to produce the turbines after nearly closing operations due to the crisis in the automotive industry. A $400,000 Community 

Development Block Grant, provided by Manistee County in partnership with the 

State, enabled the upgrade of equipment needed to produce the turbines, and the 

company also received venture financing. The company has created 60 manufacturing jobs in Manistee over the past year and plans to add another 120 jobs in 

2010. 

Economic development groups in Michigan collaborate to grow green 

jobs: In Saginaw County, Mich., Saginaw Future, Inc., Michigan Economic Development Corporation, and the Saginaw County Chamber of Commerce collaborated to 
53 

facilitate a $1 billion investment from Hemlock Semiconductor (which makes 

polycrystalline silicon, a key component of solar panel construction), in order to help 

establish a new industry cluster, create jobs and spur an economic resurgence. The 

groups worked together to address company concerns, provide tax credits, job training assistance and other incentives. Saginaw Future and its partners also are investing in workforce development and research and development initiatives. 

In addition to assisting businesses, another valuable way to create jobs quickly 

is through real estate investments, particularly in large, strategically designed 

projects. These create short-term construction jobs but also boost long-term competitiveness and economic diversification, leading to permanent, high-wage jobs. The 

focus here should be on commercial property, another market that is in decline, and 

innovation infrastructure, to enable long-term economic revitalization and competitiveness. 

Redevelopment of a former auto manufacturing site for mixed-uses and 

high-tech companies continues in Dayton: Tech Town is a 30-acre, mixed-use 

district under development on a former GM manufacturing site. Located close to 

Wright Patterson Air Force Base and within a Historically Underutilized Business 

(HUB) Zone, the goal is for the district to become a place where business, academia 

and government work together strategically to take technologies developed at 

Wright-Patt and other regional R&D facilities and apply them to commercial uses. 

Stimulus CDBG funds are helping keep the project moving, which has the goal of 

diversifying and strengthening the region’s economy. 

Tech park construction jumpstarted to foster the growth of companies 

related to the University of Arizona-Tucson: The University of Arizona-Tucson 

received $4.7 million grant in Economic Development Administration stimulus funds 

for phase-one infrastructure improvements at the Arizona Bioscience Park. The biosciences facility is designed to be part of a larger, mixed-used development that includes a hotel and conference center, retail and residential development. It also is 

intended, in conjunction with the university’s existing Science and Technology Park 

and business incubator, to support the growth of high-growth, high-tech companies 

in the region based on university assets. Funding was awarded in late August; construction is expected to begin soon. 

Cleveland Flats East Bank project moves forward despite credit woes: 

Cleveland Flats, designed to be a model sustainable, walkable, mixed-use community on former brownfields sites, has gained new life with new sources of funding, 

including a $30 million HUD 108 loan and $25 million in Recovery Zone Bonds for 

infrastructure. The Recovery Zone infrastructure funding allows tax increment financing revenues to be converted from infrastructure to direct project subsidy and 

a repayment source for the HUD 108 loan. With private financing scarce and expensive, this creative financing covers the project gap so it can proceed. 

What new thinking should Congress consider when crafting a new jobs 

package? 

Let me share some suggestions for short-term job creation. I will first take a few 

moments to discuss some of the key principles that I believe should guide our 

thoughts as next steps and additional programs are identified. These are: 

• Build on and use what we have in innovative ways 

• Provide resources to those who are the most agile and flexible 

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

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

• Focus on changing private-sector behavior 

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

• Incent the hiring of Americans now. 

Globalization is a reality which has benefited many U.S. companies, yet the offshoring of U.S. jobs is a gargantuan obstacle to economic development efforts. As 

we move forward, we need to place a direct emphasis on hiring and retaining American workers. The new green economy promises manufacturing jobs for renewable 

energy machinery such as wind turbines and solar panels. We need to ensure that 

these manufacturing jobs are here in the United States, and not in China or elsewhere. Any job creation package should encourage companies to hire American 

workers, a goal which can be accomplished through a combination of incentives and 

a review of U.S. trade relationships. 
54 

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

• First, we can offer incentives directly to companies if they are willing to bring 

work from an offshore location to a U.S. location marked by high unemployment. According to the Information and Technology Innovation Foundation 

(ITIF), which issued this idea, a forgivable loan (it becomes a grant if the company creates and retains the jobs), administered by the EDA, would be a particularly efficient method not only for creating jobs, but for doing so in areas 

where the need is greatest. 

• Second, we can evolve the current Invest in America program, housed in the 

Department of Commerce, into an internationally competitive marketing arm of 

the U.S. Government, similar to the agencies found in most of the nations we 

compete with globally for foreign direct investment (FDI). This initiative would 

require a $50 million initial investment, complemented by another $50 million 

that could be made available as matching funds to States and regions specifically for international marketing purposes to attract FDI. 

• Third, evaluate and align trade and exchange rate policy with job creation 

goals. Many trade and exchange rate policies seem to have been working 

against our national job creation goals. We need to think about whether or not 

we should: keep defending the dollar; more stringently enforce trade regulations 

and intellectual property protection; and reexamine some of our bilateral trade 

relationships to ensure that they support job creation, rather than hinder it. 

Specifically, we should ensure that we are not subsidizing competition by establishing lucrative trade agreements with countries that lack parity in terms of 

environmental and worker protections. We cannot demand that every country 

we trade with have the exact same labor and environmental laws that we do, 

but trade agreements should be made with the cognizance that the absence of 

such laws in other countries substantially lowers the cost of business without 

upholding the standards we as a nation believe are essential. 

• Target and reach small businesses and entrepreneurs. 

Federal policy also needs to more fully recognize the importance of entrepreneurs 

and small business as job creators. Businesses of all sizes are still facing issues with 

access to capital and means to finance new deals. A small firm that receives an influx of cash will be more likely to hire additional workers to get the job done than 

a larger firm with greater existing capacity. Thus, getting resources to small businesses and emerging entrepreneurs needs to be a government priority. Finding ways 

to make it easier for small businesses, including very small businesses, to access financing, contracts, export markets and other resources for growth is the single most 

useful tactic the government can adopt to create jobs quickly. 

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

• First, we should emphasize non-traditional financing entities—such as certified 

development corporations, community development financial institutions and revolving loan funds—instead of relying on banks to provide working capital for 

small businesses. One way to support non-traditional financial institutions is by 

allowing them to offer SBA 7(a) programs. Another effective strategy is to extend the New Markets Tax Credits (NMTC) through 2014 with annual adjustments for inflation, and increase funding to existing programs that are already 

working in this area, such as SBA 7(a) and 504 programs. 

• Second, issue Federal tax credits to stimulate seed and venture investments to 

support entrepreneurs and small companies. Quick infusions of capital can also 

help to create jobs quickly. 

• Third, build on successes that are moving capital into the private sector. In particular, the reduction/elimination of fees on the 504 and 7(a) loan programs has 

been very successful at bringing more lenders in the program and getting working capital into the hands of small businesses. In addition, Recovery Zone Facility Bonds have also worked to help private companies access financing. 

• Include counts of early stage and startup companies in job creation measures. 

This expands our understanding of how and where jobs are being created in the 

economy, and may also allow us to identify emerging industries. 

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

• Accelerate innovation through R&D and commercialization. 

There is no doubt that the Federal Government’s investments in research and development (R&D) are a critical tool for stimulating innovation and building long- 
55 

term U.S. competitiveness. To create jobs more quickly, we need to find ways to target and accelerate innovation by encouraging more R&D and commercialization. 

There are multiple ways to achieve this goal. 

• Invest in innovation infrastructure such as research parks, incubators and others means, as they marry short-term job creation goals with the need to build 

strong regional innovation eco-systems. One idea is to create a direct loan program or loan guarantee program to invest in such infrastructure. 

• Spur partnerships between universities and the private sector by establishing 

Federal research grants. Place incentives in current agency programs for publicprivate innovation partnerships. 

• Offer a bonus R&D tax credit in 2010 and 2011 which companies can choose 

to take against their non-corporate income. This recommendation, also put forth 

by ITIF, would help companies maintain their research during challenging economic times, allowing them to retain and possibly grow science jobs while investing in the company’s long-term competitiveness. 

• Another ITIF recommendation that deserves consideration is to allow information technology investments to be expensed in 2010. This would help not only 

to boost a company’s competitiveness through productivity gains, but also enable them to buy safer, more energy-efficient equipment. 

• Finally, finding new ways to work with universities, Federal labs, hospitals, the 

SBIR/STTR program and large companies (with patents they are not using) to 

accelerate commercialization is a critical area where new thinking and the identification of best practice models is particularly imperative. 

• Provide support for competitive businesses and industries. 

We need bold new thinking on how to create jobs in a way that also supports our 

long-term competitiveness, and that means ensuring that some investment is directed to keeping critical industries strong and supporting high-growth industries 

and companies. There are several tools and strategies to accomplish this. 

• Harness existing Federal infrastructure such as the EDA University program 

or the Manufacturing Extension Partnership (MEP) networks to reach out to 

competitive, innovative companies and help them weather the storm, then expand. These programs work locally with companies and provide an important 

link between Federal goals and the private sector. 

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

manufacturing firms. 

• The Federal Government might consider providing additional resources to State 

programs to support fast-growth, innovative companies, as ITIF also recommends. 

• Allow flexibility with Workforce Investment Act (WIA) funding awarded to 

States to support responsiveness to regional and State needs, especially for incumbent training. This strengthens the competitiveness of existing businesses 

and allows them to retain critical jobs. Part of a jobs bill needs to include methods to retain existing jobs as well. 

• The Federal Government should make a concerted effort to find new ways of 

supporting and rebuilding our manufacturing industry. In our December 3 survey of the economic development community, manufacturing was identified by 

the highest number of respondents (39 percent) as the industry that has been 

hardest hit by the economic crisis. 

• Work more aggressively with the economic development community and more 

fully engage us in the jobs dialog and as funding recipients. This group of dedicated professionals, of which I am proud to be a part, works daily on the front 

line in their States, regions and communities to create and retain jobs, build 

companies, and develop innovative eco-systems that keep regional economies 

running. They know what potential projects could benefit most from an infusion 

of cash, which company is set to grow and what infrastructure would have the 

most strategic economic impact. They are first responders to the economic crisis 

and need to be a more integral component of any jobs bill then they have been 

in the past. 

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

local economic transformation. 
56 

1 Rick L. Weddle, In Testimony Before the Subcommittee on Economic Policy, December 9, 

2009, 2 pm hearing: ‘‘Weathering the Storm: Creating Jobs in the Recession.’’ 

• Include issues of flexibility, capacity and speed in the design of any short-term 

job creation policy. 

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

• Set realistic expectations for any jobs package and ensure they are understood 

by the public. Public confusion and discontent with the Recovery Act is due in 

part to unrealistic expectations as to what it can really accomplish. 

• Build greater flexibility into program design and the definition of distress. 

Where flexibility was available, Federal programs had a greater scope and impact. There may be additional areas where efficiencies and flexibility can be 

found. For example, the Federal Government can streamline or waive environmental reviews of building projects if States have similar or more rigorous processes. 

• Work with agencies that already have a track record in achieving job-related 

outcomes, such as the Economic Development Administration and the CDFI 

Fund. 

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

Thank you for the opportunity to testify today. I would be happy to answer any 

questions the Committee may have. 

SUPPLEMENTAL REPORT OF RICK WEDDLE 

FUNDING FOR INVEST IN AMERICA TO ATTRACT INVESTMENT, CREATE JOBS AND STIMULATE GROWTH INDUSTRIES: A COMPARATIVE REVIEW OF THE STRUCTURE, FUNDING AND PROGRAM FOCUS OF COMPETITOR NATION INVESTMENT PROMOTION

AGENCIES

Overview and Introduction 

The information compiled below is a supplemental report generated upon the request of Chairman Brown, following my testimony on creating jobs in the recession 

to the Senate Banking Committee’s Subcommittee on Economic Policy on December 

9, 2009. As the Committee will recall, I worked with the International Economic Development Council (IEDC), of which I am a former Chairman, to compile the analysis presented in my original testimony. For this document, I again called on IEDC 

to pull together this research on Foreign Direct Investment (FDI) and other countries’ approach to it. As noted during my original testimony, the United States is 

the only developed economy without a major FDI attraction function. Specifically, 

this report addresses the following recommendation from my original testimony on 

the Federal role in revitalizing our economy: 

We can evolve the current Invest in America program, housed in the Department of Commerce, into an internationally competitive marketing arm 

of the U.S. Government, similar to the agencies found in most of the nations we compete with globally for foreign direct investment (FDI). This initiative would require a $50 million initial investment, complemented by another $50 million that could be made available as matching funds to States 

and regions specifically for international marketing purposes to attract 

FDI.1

In support of this notion of increased funding for the Invest in America program 

as a tool to attract investment, create jobs and stimulate growth industries, I have 

compiled a comparative review of the structure, funding and program focus of competitor nation investment promotion agencies to benchmark our efforts stand and 

frame recommendations for short-term action. 

This report is structured as follows: 

1) Why National-Level Inward Investment Promotion? A brief overview of 

the rationale for pro-active efforts at the national level to promote inward foreign investment. 
57 

2Silvio Contessi and Ariel Weinberger, Foreign Direct Investment, Productivity, and Country 

Growth: An Overview, Federal Reserve Bank of St. Louis Review, MARCH/APRIL 2009, p 74. 3World Bank Group Advisory Services, Investment Climate, Global Investment Promotion 

Benchmarking 2009 Summary Report, P 11. 

2) How Does the United States Compare? A data-driven argument for the 

timing and job creation impacts of a well-funded national investment promotion program. 

3) Country Comparisons of National Investment Promotion Agencies. 

Profiles of the national inward investment promotion agencies the United 

Kingdom, Ireland, France, Spain, Brazil, Canada, the Netherlands and Finland. For purposes of comparison, a summary of the current scope of Invest 

in America is also included. 

4) Conclusions/Further Recommendations. A summary of findings and specific suggestions for ramping up Invest in America. 

Why National-Level Inward Investment Promotion? 

• Foreign investment brings outside capital & job creation, drives exports, and is 

also linked to positive externalities like knowledge transfer and competitionsparked increases in the productivity of domestic businesses. 

• The balanced budget requirements and persisting shortfalls facing individual 

U.S. States may constrain their ability to independently attract foreign direct 

investment (FDI). 

• Time is of the essence in capturing the highest-value outbound investment from 

rapidly growing emerging markets. 

According to empirical research, as markets globalize, ‘‘the most productive 

firms become multinationals earlier, while firms that are relatively less productive enter host economies later,’’2 as international market entry becomes more 

feasible. 

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

Today’s shrinking economic environment makes effective promotion of foreign 

investment an especially competitive activity for countries. The current global 

economic slowdown and associated financial instability are expected to significantly reduce flows of FDI in 2009 and beyond. The extent of FDI decline will 

ultimately depend on the depth and duration of the economic slowdown. However, companies are already reluctant to make medium-term investments— 

many projects have been postponed or even canceled, and some estimates suggest that FDI flows could fall by as much as 30–40 percent in 2009. 

As the pool of FDI shrinks, there will be more competition for fewer projects. 

The ability of [Investment Promotions Intermediaries] to influence investment 

decisions with timely and relevant country and sector information and facilitation efforts will be more crucial than ever.3

How Does the United States Compare? 

• While in dollar values the United States remains the top recipient of inward 

FDI flows (see Figure 1), as total global flows of FDI increase and more nations 

compete for finite investment opportunities, the United States share of overall 

global investment has begun to shrink (see Figure 2). 
58 

• The United States lags behind other nations in terms of growth rate of inward 

FDI. The five countries with the largest average year over year percent increase 

in FDI from 2006–08 were the Netherlands, Brazil, Russia, Spain and Saudi 

Arabia. The United States ranked 13th during this same period while India and 

China ranked 6th and 9th respectively. 
59 

• Mergers & Acquisitions (M&A) of existing U.S. firms, assets and divisions account for the vast majority (see Figure 4) of incoming FDI, eclipsing Greenfield 

activity. However, Greenfield FDI vastly outpaces M&A in terms of job creation. 

Investment promotion to increase the amount of Greenfield FDI would have 

strong impacts on job creation. 

Country Comparisons of National Investment Promotion Agencies 

Below, the national inward investment promotion agencies of 8 countries are 

profiled: the United Kingdom, Ireland, France, Spain, Brazil, Canada, the Netherlands and Finland. These countries were selected as they represent competitor nations for total global flows of FDI and/or nations with faster year on year growth 

rates of incoming FDI than the United States. Each is instructional in terms of approaches to investment promotion, and each reflects a stronger financial commitment to the effort. For purposes of comparison, I begin with an overview of the current scope of the Invest in America program. 

Invest in America 

While in the past, the sheer size of our economy did not necessitate a focus on 

international investment promotion, in reaction to the pressures of globalization, the 

United States is starting to play catch-up in the race to target FDI. The Department 

of Commerce’s March 2007 roll out of the Invest in America Initiative reflects this 

new drive to capture FDI through a coordinated national effort. 
60 

4The parent agencies have gone through a series of changes: through November 2007, UKTI 

fell under the Trade and Industry Committee and through June 2009 the Department for Business, Enterprise and Regulatory Reform. 5 UK House of Commons Trade and Industry Committee, UKTI’s 5-year strategy: Government 

Response to the Committee’s Sixth Report of Session 2006–07, July 2007, p. 3. 6Source: UKTI Autumn Performance Report, December 2007, p. 13–14. 

The Invest in America Program is housed within the United States and Foreign 

Commercial Service (USFCS) Office of the International Trade Administration. At 

present the program has an estimated annual budget of under $1 Million and a direct staff of 3 full-time employees. Invest in America also delivers its services 

through Federal Government staff at existing international USFCS posts in target 

FDI source markets. 

In terms of investment promotion services, the office: 

• Conducts investor outreach and education 

• Performs Ombudsman assistance and foreign investor after-care when approached 

• Engages with national and sub-national partners to enhance the investment 

policy environment 

• Trains USFCS staff on dealing with foreign investor prospects 

At present, Invest in America is not equipped to promote the United States as 

a destination for investment on a broad scale through branding and public relations, 

an activity conducted by all the IPAs profiled below. Invest in America also does 

not perform lead generation or deal facilitation (such as match-making and site selection assistance) as these are efforts already performed by State and sub-State entities. 

Given the rationale for pro-active national investment promotion efforts as outlined above, Invest in America is a solid and established platform from which to 

capture a growing percentage of global FDI flows and increase the number of inward Greenfield activities. The following profiles of other similar agencies provide 

guidance on the expansion of Invest in America to support U.S. competitiveness in 

the long-term and job creation and economic revitalization in the short-term. 

United Kingdom 

The United Kingdom’s national-level investment promotion activities are housed 

within U.K. Trade & Investment (UKTI). UKTI’s parent agencies are the Foreign 

& Common Wealth Office (FCO) and the Department of Business, Innovation and 

Skills.4 Within the UKTI, Investment Promotion activities are led by the Directorate 

of Investment, which spearheads efforts to market the U.K. economy internationally 

and partners with Regional Development Agencies (RDAs) to supplement their FDI 

attraction, retention and expansion efforts. The aim of UKTI’s inward investment 

promotion efforts is to help the United Kingdom ‘‘benefit from different forms of foreign direct investment not just in terms of the creation of jobs, and the injection 

of capital, but also through the competition and ‘knowledge spillover’ effects that inward investors have on the rest of the economy.’’5

UKTI’s total operating budget per annum is listed as £256 million ($416 million). 

A portion for programming (£89 million/$144.7 million) is allocated directly from 

Parliament, the remaining funds are transfers for administration and staffing from 

the parent agencies, the predominant portion £135 million pounds (219 million 

USD)—comes from the FCO and includes the London HQ budget. For the current 

budget year, £15.4 million ($25 million) of UKTI’s programming budget went directly toward inward investment efforts, including marketing the United Kingdom 

abroad, production of publicity materials and advertising. In addition, 17.2 million 

pounds ($27.9 million) flowed to FDI attraction in the form of assistance grants to 

RDAs. 

UKTI has 2,500 staff and advisers including those overseas, based out of embassies, high commissions, consulates and tradeoffices. To agency aims to merge delivery of both trade and investment promotion services across its overseas operations 

and maintains staff in 150 foreign offices including 22 in the Asia-Pacific region, 12 

in Canada and the United States, 17 across Europe, 2 in Latin America and the 

Caribbean, 1 in the Middle East and 1 in Sub-Saharan Africa. 

The Inward Investment Services provided through the Directorate of Investment 

include:6

• Promoting the United Kingdom’s assets to prospective investors and using regional and local analysis to advise onsite selection. Recruitment efforts focus on 

six target industry sectors. 
61 

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

• Facilitating collaborative technology partnerships between United Kingdom and 

foreign businesses. 

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

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

• Serving as a source of international investment policy and regulatory expertise. 

Ireland 

Industrial Development Agency (IDA) Ireland is the primary national entity with 

responsibility for the attraction and development of foreign investment in Ireland. 

In terms of structure, IDA Ireland is an autonomous statutory Agency which operates under guidance from the Ministry for Enterprise, Trade and Employment. This 

government ministry is the primary source of funds to the agency and is empowered 

to issue general policy directives and receive reports on activities. IDA Ireland is 

governed by a small Board (approx. 15 members) composed of private sector leaders 

representing the target sectors, as well as IDA Ireland’s Executive Director and the 

Assistant Secretary of the Department of Enterprise, Trade and Employment. The 

Board is responsible for setting the broad policies of the organization and for overseeing its operation. 

IDA’s annual budget is Ö186 Million ($266.7 Million), broken down as follows: 

• Ö9 Million in grant assistance ($12.9 Million) 

• Ö37 Million for administration & general expenses ($53 Million) 

• Ö11 Million for programming (marketing, consulting, promotions and advertising) ($15.7 Million) 

• Ö46 Million for Industrial Building Charges ($65.9 Million) 

IDA Ireland operates 10 regional offices in Ireland and 17 offices outside of Ireland. These are in Boston, New York, Atlanta, Chicago, Mountain View, Irvine, Sao 

Paulo, London, Paris, Frankfurt, Mumbai, Moscow, Shanghai, Taipei, Sydney, Tokyo 

and Seoul. Worldwide, the agency has a staff of 260, the overwhelming predominance of which (202) are based in Ireland, with 33 staff in America, 11 in Europe 

and 14 in Asia. 

IDA Ireland’s services are directed at prospective investor companies, promoting 

the country’s suitability as a location for new investment or expansion projects by 

providing information on doing business in Ireland and insight on the dynamics of 

individual regions. Investment recruitment efforts focus on 5 high-value sectors (Life 

Sciences, Software and Services, International Financial Services, Information Communication Technologies, Cleantech) and attracting Research, Development & Innovation (RD&I) projects. Core functions include: 

• Compiling and distributes detailed sector-based intelligence. 

• Connecting businesses to local service providers, local public sector contacts and 

institutes of education. These can include introductions to companies already 

operating in Ireland and introductions to relevant university departments, 

training colleges, or third part service providers such as tax specialists, estate 

agents, banks and recruitment firms. 

• Working on a continual basis with foreign investors facilitated by IDA to retain 

and support them. 

As indicated in the budget breakdown above, IDA Ireland also has funds for direct 

assistance grants to companies locating in Ireland, to support capital development 

and job creation surrounding an investment. Matching grants are also available 

through IDA for existing foreign companies that are undertaking major training initiatives. 

France 

The Invest in France Agency (IFA) was created in May 2001 and is overseen jointly by the Minister of Economy, Finance and Industry and the Minister for Regional 

Development. These parent agencies collaborate to define IFA’s strategic priories, 

objectives, and indicators, and are responsible for determining IFA’s annual budget. 

Approximately 99 percent of IFA’s funding comes in the form of allocations of government funding through these parent agencies. The remainder comes from regional 

partners (sub-national IP entities) to support their participation in prospect-development events arranged by IFA. 
62 

For 2009, IFA’s budget was approximately Ö22.2 Million ($31.8 Million); Ö200,000 

of this comes from transfers from regional partners. For 2010, an additional Ö5 million has been added to the agency’s budget for a new communications campaign. 

IFA’s budget breaks down as follows: 

• 70 percent for human resources 

• 20 percent for operation costs 

• 10 percent for communication (with this share increasing in 2010 to reflect the 

new campaign) 

Staff wise, in 2007 IFA had 60 employees at their central Paris office and 79 staff 

distributed across 21 foreign offices. Among these, most are stand alone offices with 

multiple staff, though a few are housed within embassies, consulates and/or commercial service posts. In 2008, IFA’s combined worldwide staff grew to 160. Of these 

21 foreign offices, 7 are located in Europe (Benelux, Germany, Italy, Russia, Scandinavia, Spain, and United Kingdom), 7 in Asia (China, India, Japan, Korea, Singapore, and Taiwan), 2 in the Middle East (Israel and United Arab Emirates) and 5 

in North America. 

Invest in France staff provide the following services: 

• Investment facilitation through every step of the process of opening operations 

in France. This support includes information about legal regulations, analysis 

of eligibility for public financial support, & connections with local authorities 

and industry clusters. 

• Site selection 

• Ombudsman assistance 

• After-care to investor companies 

Spain 

Invest in Spain was created in 2005 as an independent agency housed within the 

Ministry of Industry, Tourism, and Trade to enable the public sector to provide a 

better response to the challenges posed by the growing integration of international 

markets and the resulting increase in competition to attract the best investment 

projects. Invest in Spain’s budget for 2008 was Ö7.55M ($10.8M). In 2008, Ö7.2M 

($10.3M), or 95 percent of the agency’s total budget, was supplied from transfers 

from the General State Budget. The remaining 5 percent, or Ö350,000 ($500,000), 

came from income generated through sponsorship and agreements. 

Invest in Spain has 43 designated staff in its domestic HQ in Madrid, its only 

direct office, and draws on a network of investment officers working in Economic 

and Commercial Offices in Spanish Embassies across the world. In addition, the 

agency contracts for representation directly with in-country investment and site selection consultancies in eleven target countries: Canada, the United States, Mexico, 

Brazil, France, Germany, the United Kingdom, the Netherlands, Sweden, Japan and 

India. With these two networks combined, the total representation of Invest in 

Spain spans 95 offices worldwide. 

The agency provides investment facilitation services at no charge directly to prospective businesses, as well as delivering after-care to existing foreign investors to 

maintain their presence and encourage reinvestment. In addition, Invest in Spain 

works with other entities which attract investment at the regional and local level 

to establish channels for cooperation. 

Specific functions performed include: 

• Promoting Spain as a destination for investment and providing information on 

doing business in the country 

• Lead generation 

• Connecting potential investors to relevant business networks, chambers and 

other private service providers 

• Providing technical support in the form of partner and location searches and 

talent recruitment 

Brazil 

Apex-Brasil is Brazil’s trade and investment promotion agency. It took its current 

form in 2003, becoming an autonomous public agency under the Ministry of Development, Industry, and Foreign Trade to further promote and coordinate trade and 

FDI. 

For 2010, the total budget for Apex-Brasil as a whole will be R$286 Million 

($160.9 Million). According to figures released in 2008, inward investment promotion was allocated R$50M ($28.1M) from within the total Apex-Brasil budget. 
63 

7Press Release, December 18, 2008. Apex-Brasil increases resources provided to investment 

and exports promotion in 2009. source: http://www.apexbrasil.com.br/portallapex/publicacao/ 

engine.wsp?tmp.area=149&tmp.texto=4965. 8 ApexBrasil: Brasilian Trade and Investment Promotion Agency, 2009, Who We Are, p.2. 9Finnish Ministry of Economic Affairs, August 2006, Action for Acquisition, p. 3–4. 

This was aimed at supporting 29 planned events to be performed in 13 target countries, along with the provision of an estimated 226 actions of business intelligence, 

such as sector studies, market studies, and investment opportunity studies.7 According to conversations with Apex-Brasil investment staff, this number was later adjusted downwards an undisclosed amount to reflect the onset of global recession. 

Apex-Brasil employs 300 people across both its trade and investment promotion 

(IP) departments. The IP department has 17 dedicated employees in the headquarters in Brasilia, and shares staff members in Apex-Brasil’s offices in Havana, 

Miami, Moscow, Brussels, Beijing, Warsaw, and Dubai, merging both trade and investment promotion functions from these locations. In addition, Apex-Brasil has liaisons in Brazilian embassies in other locations abroad. 

In terms of services, Apex-Brasil: 

• Performs lead generation in target sectors, focusing on ‘‘companies and projects 

that offer technological innovations and new business models, strengthen industrial supply chains, have a direct impact on national job creation and improve 

the volume and diversity of Brazilian exports.’’8

• Provides investment facilitation and assistance with doing busienss in Brazil. 

• Acts as a liaison between prospective investors and key local and regulatory 

bodies. 

As part of Apex-Brasil’s strategy to ramp up inward-FDI, in 2009 the agency initiated a partnership with the World Bank Group to deliver training and technical assistance to improve the capacity of the Brazilian States to attract investment. In 

this arena, Apex-Brasil’s focus is to decrease the fragmentation among the range 

Federal and State entities working to attract investment, with the long-term goal 

of facilitating a more integrated approach to FDI attraction. 

The Netherlands 

The national inward investment promotion entity for the Netherlands is an operational unit of the Dutch Ministry of Economic Affairs called Netherlands Foreign 

Investment Agency (NFIA). NFIA works directly with businesses to attract new locations and facilitate expansion projects. Funding for NFIA flows through the Ministry of Economic Affairs; currently the annual budget is Ö11.5 Million ($16.5 Million). According to agency officials, NFIA plans to use these funds in 2010 to attract 

projects worth Ö500 Million ($718.6 Million) in FDI and create 2,500 new direct jobs. 

NFIA has one national office, its headquarters in The Hague. In addition, NFIA 

has 19 local offices spread among the United Kingdom, Turkey, the United Arab 

Emirates, the United States, Japan, Korea, China, Taiwan, India, Singapore and 

Malaysia. NFIA directly employs 100 people worldwide, including 30 in The Hague. 

Beyond these direct staff, the agency partners with embassies, consulates and other 

entities that represent the Dutch government abroad to deliver its services and message. NFIA also maintains a broad network of domestic partners, including municipalities, provinces, regional development agencies, ports and airports, research centers, and technical institutions. 

The agency provides the following assistance to prospective investors at no cost: 

• Promoting the advantages of the Dutch business environment, particularly as 

a launch pad for Europe 

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

• Site selection and match-making assistance 

• Work to enhance the investment policy environment 

As organizational priorities set forth by the parent agency in 2006,9 NFIA has 

broadened their services to: 

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

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

• Establishing additional offices in emerging market countries, such as India and 

China. 
64 

10http://www.european-american-business.com/2009/1l37.php. 

Canada 

The Invest in Canada Bureau is one of the three initiatives inside the Department 

of Foreign Affairs and International Trade (DFAIT). Its current incarnation dates 

back to 1998, when it was created to attract FDI to Canada. Invest in Canada now 

meets this goal by undertaking four main functions: working to improve the investment climate, marketing Canada as an investment location of choice, offering services to foreign investors and coordinating aftercare functions once companies have 

made an investment. 

The total planned budget for DFAIT in 2009–2010 is $214.6 Million CAD ($201.8 

USD), with the largest portion ($161.3M CAD/$151.7USD) going toward operating 

Canada’s international platforms. $4.5M CAD ($4.2M USD) of the DFAIT budget is 

dedicated to programming for the Invest in Canada program; staffing and administration expenditures are not included in this figure, but are integrated within 

DFAIT’s annual budget. 

At its headquarters, Invest in Canada has 51 employees working in investment 

promotion. DFAIT has 13 regional offices throughout the Nation and abroad, it has 

missions and posts totaling 156, with 50 offices located in the Americans, 42 in Asia 

and Oceania, 34 in Europe, 15 in the Middle East and North Africa, and 15 offices 

in Sub-Saharan Africa. These offices outside of Ottawa provide a range of DFAIT 

functions including the delivery of the investment promotion program in the field. 

It should be noted that the Invest in Canada Bureau also works with provincial/ 

territorial governments and municipalities in foreign investment attraction efforts. 

For example, it awards funding to Canadian communities of up to 50 percent of the 

costs of improving their investment attraction activities. 

Finland 

Invest in Finland was founded in 1992 as an independent agency housed within 

the Ministry of Employment and the Economy (MEE), which provides its funding. 

Invest in Finland has an annual budget of Ö3.1M ($4.44M). 

Invest in Finland employs 18 people at its headquarters in Helsinki, its only office 

in the nation. The agency also has an independent office in Sweden and shared offices with the Finnish Export Association in four other target countries. In addition, 

Invest in Finland works in partnership with entities in more than 50 countries, including consultancies, chambers of commerce, and economic development organizations, to gather information, generate leads and serve potential investors. Invest in 

Finland draws on international business development professionals with experience 

in target industry sectors to serve as in-country consultants. 

Service-wise, Invest in Finland: 

• Performs match-making services, linking investors with Finnish research universities and institutions, with a target of attracting companies interested in 

R&D activities. 

• Provides investment facilitation to business free of charge. These services cover 

every stage of setting up a business in Finland, ranging from initial data collection and opportunity analysis to networking and the actual business launch. 

• Assists with partner search to support inward Mergers & Acquisitions. According to the European Council of American Chambers of Commerce, ‘‘This covers 

the whole process of identifying possible businesses and delivering background 

information, to organizing meetings and giving advice on a wide range of practical issues.’’10
65 

About IEDC—IEDC is the world’s largest non-profit membership organization serving the economic development profession. From public to private, rural to urban, and local to international, 

our members represent the entire range of economic development experience. IEDC is dedicated 

to helping economic developers do their job more effectively and raising the profile of the profession. Building strong, sustainable communities is an endeavor requiring innovative strategies, 

tools, and techniques, and IEDC research, programs and services have been developed to meet 

this need. 

Conclusions/Further Recommendations 

As illustrated by the organizational summaries above, the developed countries 

which capture the lion’s share of inward FDI invest strongly in their IPAs, making 

the Invest in America (IIA) office underfunded in comparison to its peers. With additional funding, IIA would be able to better supplement and complement the efforts 

of State and sub-State entities, especially in the form of matching grants in the face 

of public sector budget constraints and travel freezes. With additional staff and 

leverageable funding, IIA is well placed to attract foreign investment in high-growth 

sectors which will ultimately spin off into increased productivity and sustainable 

jobs at a time when the United States urgently needs to stimulate growth in the 

industries of the future. Drawing on the various models presented above, combined 

with an understanding of the unique political and structural environment in which 

Invest in America operates, I recommend that the Committee consider $100 million 

in additional funding to IIA, $50 million of which would serve as matching grants 

to support State and sub-State efforts. The remaining $50 million would do well to 

expand Invest in America operations by funding dedicated inward investment promotion officers in major foreign markets, expanding in-country investor outreach efforts particularly via cultivating relationships with significant investors, providing 

expanded ombudsman services to potential investors, and establishing a dedicated 

after-care team to work with existing priority investors to maintain and expand 

their presence in the United States.