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  • ENTERPRISINGSTATES

    CREATING JOBS, ECONOMIC DEVELOPMENT,

    AND PROSPERITY IN CHALLENGING TIMES

    A Project of the U.S. Chamber of Commerceand the National Chamber Foundation

  • 1ContentsExecutive Summary

    The Jobs Imperative: Power to the States

    Needed: An American Approach to JobCreation

    What is the Best Role for the FederalGovernment in Job Creation?

    Innovation and Enterpreneurship Are theKey to Solving the Jobs Imperative

    The Vital Role of Infrastructure and BasicIndustries

    The Critical Role of States

    Conclusion: The Power of States to Lead theJobs Imperative

    The States and Economic Development

    Measuring States: A List of the TopPerformers

    Growing Jobs: How Do They Do It?

    Entrepreneurship and Innovation

    Exports and International Trade

    Infrastructure

    Workforce Development and Training

    Taxes and Regulation

    State Budget Crises

    Measuring the States: The Metrics

    State Performance

    About the ReportThe report was prepared by Praxis Strategy Group andJoel Kotkin. Authors from the Praxis team include DeloreZimmerman, Mark Schill, Doug McDonald, Matthew Leiphon,and Dave Roby. Bret Swanson authored parts of the report.Zina Klapper provided editing and additional research. PraxisStrategy Group is an economic research and developmentstrategy company that works with leaders and innovators inbusiness, education and government to create new economicopportunities. Joel Kotkin is an internationally recognizedauthority on global, economic, political and social trends. Hisbook The Next 100 Million: America in 2050 explores how thenation will evolve in the next four decades.

    About the U.S. Chamber of CommerceThe U.S. Chamber of Commerce is the worlds largestbusiness federation representing the interests of more than 3million businesses of all sizes, sectors, and regions, as wellas state and local chambers and industry associations.

    About the National Chamber Foundation

    of the U.S. Chamber of Commerce, is dedicated to identifyingand fostering public debate on emerging critical issues. Weprovide business and government leaders with insight andresources to address tomorrows challenges.

    About American Free Enterprise. Dream Big.NCF has partnered with the American Free Enterprise.Dream Big. campaign to spur the creation of 20 million jobsover the next decade restoring the 7 million jobs lost tothe current recession, and creating the 13 million new jobsthat our growing nation will need in the next 10 years. Itis a comprehensive, multiyear campaign to support freeenterprise through national advertising; grassroots advocacy;citizen, community, and youth engagement; and researchand ideas leadership.

    The opinions and conclusions expressed or implied inthe report are those of the research agency. They are notnecessarily those of the National Chamber Foundation andthe U.S. Chamber of Commerce.

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  • 2May 3, 2010

    Dear Colleague,

    The National Chamber Foundation has partnered with the American Free Enterprise. Dream Big. campaign to spurthe creation of 20 million jobs in the next decade restoring the 7 million jobs lost to the current recession, andcreating the 13 million new jobs that our growing nation will need in the next 10 years.

    Each individual state will play a pivotal role in achieving this goal by creating the conditions for competition,innovation, and productivity through a focus on education and training, science and technology andinfrastructure. Enterprise-friendly policies at the state level can facilitate local job growth by championingentrepreneurship and mobilizing effective partnerships for improving the conditions for business and job growth.

    Our study connects the success of free enterprise to our nations economy by correlating key policy inputs and bestpractices in state-driven economic development with job creation and other substantive economic outputs. Briefcase studies of each state highlight policies and strategies that work. From the interviews we conducted for thesecase studies, it is clear that the states are making job creation a high priority, and are implementing meaningfulchanges in their approaches to job creation. While this varies by state, there is a renewed focus on creating morefavorable conditions for business growth.

    As you will soon see, some common themes emerge such as the streamlining of regulatory and permittingprocesses, analysis of current tax policies, an increased attention on business creation and support for existingcompanies, and a strong emphasis on incentivizing private sector investors primarily with tax credits. Science andtechnology- based economic development and clean-tech initiatives are proliferating in virtually all of the states.Productivity and competitiveness initiatives, while not necessarily job creating, are being used aggressively tostrengthen and retain strong companies who already anchor state economies. There is widespread support for

    investment (FDI).

    create jobs and economic growth. At the Chamber, we are more committed than ever to promoting jobs through freeenterprise and education. Learn more at FreeEnterprise.com.

    Sincerely,

    Margaret SpellingsExecutive Vice PresidentNational Chamber Foundation

    A LETTER FROM OUR EXECUTIVE VICE PRESIDENT

  • 3EXECUTIVE SUMMARY

    The message of Enterprising States is that the 50 littleRepublics matter. State policies matter. Governors, state

    government has been driving stabilization policy duringthe recent recession, it is the states [and territories] thatwill lead a crucial new growth strategy in the next decade.

    to create 20 million jobs over the next decaderestoringthe 7 million jobs lost to the current recession, and creatingthe 13 million new jobs that our growing nation will needin the next 10 years. And while the Federal governmentwill affect the situation on the ground in broad strokes andfrom a distance, Governors and state and local government

    growth strategies that can match the speed of the globaleconomy and achieve this growth imperative.

    Fiscal challenges can force important policy choicesabout taxation and spending priorities, and states mustbalance those decisions against the need to retain andattract private enterprise. In fact, many states have shown

    of Enterprising States are likely to surprise and provepowerful examples for the next wave of state-level policyinnovation.

    Consider: the State of North Dakota, perhaps anafterthought to some, was a national leader in job growthover the last decade. Montana, meanwhile, leads in manymeasures of entrepreneurship, Tennessee in severalmeasures of taxes and regulation, and Minnesota onworkforce development and training. Some states, likeTexas and Utah, are strong across the board in botheconomic policiesand economic results. And despite aMidwestern manufacturing meltdown, a State like Indiana

    regulatory policies, proving it can be done.

    America is a vast country made up of hundreds of diverseeconomies, writes study co-author Joel Kotkin. The

    be paramount. It is local knowledge and local energy

    entrepreneursthat will make the difference. Washingtoncan focus on a few overriding national priorities, but mostof the new ideas, new companies, and new jobs will comefrom local initiative.

    broad, long-term American trend. U.S. employment hasbeen shifting not to mega corporations but to individualsand smaller units; between 1980 and 2000, the number ofself-employed individuals expanded tenfold to comprise 16percent of the workforce.

    In the coming decades, the U.S. will enjoy a demographicdividend of more immigration and higher birthratescompared to most developed nations. This dividend ofhuman capital could be a chief U.S. economic advantage ina global economy. But only if we match this demographicdividend with a jobs dividend.

    States are much more active than the Federalgovernment on the job creation and economicdevelopment front. While the policies vary by statethere is renewed focus nationwide on creating morefavorable conditions for business growth.

    State priorities vary considerably. Some are strongin innovation. Others in exports or workforcedevelopment. Some have weathered tough times withrelative success. Others were not prepared for anextended downturn. The recent recession, however,leaves a number of important lessons and gives allstates a chance to reassess, reboot, and adopt provenstrategies for the future.

    High tax rates do not lead to either healthy economiesor budgets. On the contrary, many states with thehighest tax rates and most onerous regulatory regimes

  • 4have experienced the worst budget crises. Taxpayersand businesses are leaving these states. States withmore favorable tax and regulatory climates did notexperience budget problems nearly as severe.

    Many states have implemented initiatives forstreamlining red tape to help businesses sort throughthe many layers of government regulation and haveincentivized private-sector investors primarily with taxcredits.

    Targeted investments in infrastructure projects at thestate-level can create growth-friendly environments incommunities.

    Science- and technology-based economic developmentand clean-tech initiatives are proliferating amongstvirtually all of the states.

    Productivity and competitiveness initiatives, while notnecessarily job creating, are being used aggressivelyto strengthen and retain strong companies who alreadyanchor state economies.

    There is widespread support