The Economic Development President

In his State of the Union speech, President Obama was using the language of economic investment -- language mayors and governors use all the time.
March 2011
William Fulton
By William Fulton  |  Columnist
Director of the Kinder Institute for Urban Research at Rice University and former mayor of Ventura, Calif.

Before President Obama finished his 2011 State of the Union address on Jan. 25, critics on both sides hammered him for language he used.

Obama framed the speech in terms of America’s global competitiveness, and he did it in centrist terms. Yet critics on the right called him a typical Democrat, using the word “investment” as a code word to mean government spending. Meanwhile, critics on the left said that his use of words like “investment” and “competitiveness” revealed that he had adopted the language of Wall Street as a sop to capitalists.

In fact, Obama was using the language of economic development. He was simply saying that the government has to play a role in creating prosperity, not by cutting taxes or cutting regulation, but by spending money on infrastructure, research and other things that are necessary for economic growth that the private sector won’t or can’t provide. No recent president has used the language of economic development as directly and forcefully as Obama did in the State of the Union address.

This is language that mayors and governors across the country use all the time. No matter what the jurisdiction’s economic base is -- manufacturing, technology, education, medical care -- state and local officeholders recognize that they live in a cutthroat global economy. And they know that it takes a coordinated effort with universities, research institutes, business organizations and other groups to stay competitive.

This approach is not partisan. Republicans and Democrats do genuinely disagree over taxes and regulation, but they do not differ over the role that government must play in competitiveness. Almost without exception, they talk about the same few things over and over again. In particular, they focus on:

Infrastructure: transportation projects, the expansion of the electrical grid and the extension of bandwidth. Transportation has been a popular focus of state and federal spending for decades.

Research and development: basic scientific and technological research that lays the foundation for private companies to bring new products to market. Indeed, governors put a lot of effort into positioning their states to win a lot of federal research funding.

Workforce readiness: better education for young people -- from K-12 to higher education -- and retooling/retraining for older workers. When was the last time you heard of a governor who didn’t want to be “the education governor”?

Although businesses have to be involved in planning these efforts, there is little question where most of the money must come from: the federal government and the states. However, the states, which must balance their budgets, have been hammered in the recent recession. So can Obama and Congress work together to ensure federal funding for these items?

The answer to that question is not at all clear. Though these issues are largely nonpartisan at the state level, they tend to get eaten alive by partisan debate.

Transportation is a good example. The federal transportation machine runs on the gas tax, but there’s no longer enough tax money to fuel the machine. There are a lot of reasons for this: better fuel economy, a leveling off of driving because of the weak economy and so forth. Almost any policy expert will tell you that to fund the nation’s needed transportation investments, the tax system has to change. Either the gas tax has to increase, or else the feds need to switch to a different method such as a tax on miles driven. But the Republicans in Congress can’t consider this, because politically they can’t favor any tax increases.

As a result, the federal government’s general fund now subsidizes the supposedly self-sustaining Highway Trust Fund. Meanwhile, there is no new transportation bill in sight.

Federal research and training money is likely to get caught in the same partisan vice. Here again, the Republicans have backed themselves into a corner. They want to make enormous cuts in the federal budget, but they have taken the defense budget, Medicare and Social Security off the table. This almost certainly means that they will have to target federal research programs. Meanwhile, the Democrats have painted themselves into a corner on the other side; they too are unwilling to touch Medicare and Social Security.

To be sure, governors and mayors are not above partisanship. State legislatures, in particular, can be just as partisan as Congress -- stuck in the same rhetorical debate over taxes, regulation and social issues. Still, states and cities have a long history of being more practical and less partisan when the chips are down—but these days, they don’t have the money to make these investments.

The bottom line is simple: If the U.S. is going to maintain its global competitiveness, the feds have to rise above partisan politics and put money into infrastructure, research and workforce readiness. Every member of Congress will have to become an economic development specialist.