Remarks by: SANDY K. BARUAH, ACTING ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT KENNEDY SCHOOL OF GOVERNMENT- HARVARD UNIVERSITY, CAMBRIDGE, MASSACHUSETTS

MONDAY, NOVEMBER 21, 2005

Thank you, Arn, I appreciate the opportunity to be here today to present, and get feedback on, a proposal by President Bush to, for the first time in over a generation re-think how the Federal Government delivers community and economic development assistance to America’s economically distressed communities.

It is a special pleasure for me to be here at the Kennedy School. Growing up John F. Kennedy was a hero of mine. Not too long ago, a vast majority of graduates from the Kennedy School sought careers in public service. I hear that now that number is down dramatically. That is unfortunate, because the public policy issues facing our Nation and our World are as important today as any time in our history. The quality of our Government is directly related to the quality of people who serve in Government – like any industry, talent is needed.

Frankly, we are all culpable. Between the 24-hour media cycle, partisan rancor, the intense competition for power, the image of government as a wasteful, bloated and slow-to- react bureaucracy -- we have made public service a rather distasteful option for our brightest graduates.

As someone who has been in-and-out of the public and private sectors for 20 years and is currently enjoying the warm embrace of the Senate Confirmation process, I am likely not only part of the problem, but one of it’s victims as well.

One of the things that attracted me about working for President Bush is that not since Eisenhower has there been a President equally interested in the policy of governing (the what Government does) and the management of governing (the how Government does what it does).

Today, I’m here to discuss a classic Bush initiative – classic in the sense that it marries both the policy and management aspects of government.

President Bush believes that the Federal Government has a useful role in economic and community development to help those communities that have not fully experienced the American Dream to be in a better position to reach that goal.

To help make it easier for communities across the nation to bring their economies into the 21st Century, the Bush Administration has been working to design a modern approach to delivering important Federal economic and community development resources.

The Strengthening America’s Communities Initiative is a policy initiative by President Bush to place, for the first time, a serious emphasis on regional economic development approaches and focus Federal efforts on communities with the most dire need.

Ultimately, this proposal is about helping communities that are most in need, and it’s about doing so in a more effective and efficient manner.

As for efficiency or clarity, I think we can call agree that the Federal Government does not offer either to any great extent. This is the “maze” that currently confronts America communities attempting to access Federal community and economic development programs. It’s an eye chart only your eye doctor could love.

There’s widespread duplication and overlap across these programs, and, while the basic mission of these programs are similar since all are grant programs aimed at economic and community development organizations—the regulations, eligibility standards, application procedures, deadlines, and reporting requirements differ and even conflict with each other.

For many of America’s distressed communities, the current maze presents an impediment to a more prosperous economy.

As stewards of Federal programs geared to help communities, it is incumbent upon us to ask the tough question: “Is the Federal government as effective as possible in helping American communities build prosperity—especially in a new century that presents new economic challenges and opportunities?” I think reasonable minds can agree, the answer is no.

As we began to examine this issue, we realized we were not alone in our belief that we can and we should do better. Think tanks ranging from the conservative Heritage Foundation, to the liberal leaning Progressive Policy institute, to Alan Greenspan, to serious scholars on American competitiveness such as the Council on Competitiveness, Michael Porter and Mark Drabenstott have all called for reform of the current system – as has the Government Accountability Office.

The Strengthening America’s Communities Initiative is built around several key concepts that guide our thinking, with an overarching theme that we can and should do better.

The concept of doing better is easy to say, but hard to implement in a government environment. Government, by design, is slow to adapt – and that’s both good and bad.

In my experience, Government is always looking for good. Government sees a problem and then develops a mechanism to address the problem, and that can be good. The issue in Government is not getting to getting to good – that’s easy. It’s getting to better or best that is the real challenge.

Here’s what I mean. When I started with the Bush Administration in 2001 and I’d ask my new Federal colleagues about a program, the response was always “we’re doing good.” And the good was demonstrated in one of two ways:

1. I’d get an anecdote – an example of how this Federal program has made a positive difference. Okay, fine.

2. Second, sometimes I’d get a quantifiable number. “This program has created X of something.” Wonderful – good compared to what?

In the private sector we have comparisons. In Government we have only Government to compare ourselves to. It’s like if Ford determined how well they are doing by only examining a Taurus to determine if they were building a good product.

Sure in a vacuum, a Taurus is perfectly fine piece of transportation. Compared to a Honda Accord or VW Passat, we begin to look at the Taurus a bit more critically.

Let me put the good vs. best challenge in another way. If we were to lock the door of this room and all of us had to collectively build from scratch the Federal delivery system for community and economic development assistance, I guarantee two things. First, we would not agree on every issue – and in fact come to the table with differing viewpoints. But secondly, I guarantee that we would not end up with a system as Byzantine as the one we have today.

Under this umbrella of “we can and should do better,” let me outline the five principles that the Bush Administration considers problematic with today’s Federal delivery system.

1. The current system disadvantages the very communities the Federal government is targeting for assistance.

The current system of 18 separate economic and community development programs presents a barrier in the form of a maze for smaller communities and communities with limited financial resources.

2. The current Federal direct grant system is unfair to some of America’s more distressed communities.

For example, the current Federal Community Development Block Grant formula is over a generation old and does not direct resources in an equitable manner.

Cities with virtually the same levels of distress receive widely different levels of assistance, and communities with very low poverty levels receive funds year after year as an entitlement—resources that could be going to more distressed communities. The communities with real need deserve better.

3. The current Federal model has not demonstrated strong results at the macro level – we should expect more from our taxpayer dollars.

Some of the communities that have received the most development assistance over the past generation continue to be the same places that are most economically disadvantaged, raising the question of how effective these Federal programs have been.

4. The current Federal approach bifurcates community, economic, urban and rural development programs over five cabinet departments.

The existing program bifurcation leads to similar interests competing over the same limited Federal resources — community development programs are bolstered (or reduced) and the expense (or benefit) of economic development programs. Same for urban and rural.

The SACI concept, for the first time, creates a single place in the Federal system where everyone concerned about community and economic development issues—rural and urban development issues—can come together and focus their attention. No more would we have to rob rural America to fund urban development projects, or sacrifice community development programs to fund economic development programs.

5. Most importantly, the current approach is fundamentally misaligned with the realities of the world-wide economy in which we all live.

The opportunity and challenge of the world-wide economy calls for a new focus on economic regions. For economies to prosper, communities must work in a regional, collaborative fashion – building on regional competitive advantages.

The new system will reward those regions engaged in collaborative, regional development practices that identify shared regional assets and build strategies for capitalizing on these assets to build regional competitive advantage.

Essentially, the Strengthening America’s Communities Initiative takes 18 of the 35 Federal economic and community development programs—these are only the direct grant programs that focus on community and economic development and make grants to local government entities, and non-profits—and combines them into a new consolidated program.

The process will be greatly simplified, with administrative costs at the local level considerably reduced, and represents administrative savings at the Federal level as well.

SACI will reduce the burden on communities to access critical resources, no longer requiring them to navigate a maze of 18 programs.

There will be a “one-stop-shop” at the Department of Commerce with two programs—the Direct Grant Program and the competitive Challenge Fund Program, with four primary streams of funding, which are:

1. Direct grants to “places” such as cities and communities that meet the distress criteria;

2. Grants to states, which they will sub-grant to smaller eligible communities primarily in rural areas;

3. Competitive grants to communities that are taking pro-active steps to become “development-ready” and are demonstrating progress;

4. Bonus or incentive funding to groups of communities and counties that collaborate in a regional partnership—a mechanism to support regional partnerships.

Beyond the funding streams, let me highlight some of the program principles we want to instill in the new program:

• Consolidation of grant authority – the primary grant authorities in the 18 separate programs would be housed in the new consolidated program.

• Local control – local governments would be responsible for determining what projects would get funded with these Federal dollars.

• Shared accountability – Local governments and the Federal Government would agree on performance metrics and specific areas of impact. Continued participation in the program would be contingent upon satisfactory results.

• Targeting to need – Federal funds would be prioritized to America communities with greater degrees of distress. More affluent communities would not participate in the program.

• Incentives for regional collaboration – For the first time, there will be a meaningful Federal incentive for economic regions to come together and collaborate on a shared economic growth strategy.

• Focus on involving the private sector – For it is the private sector that creates the jobs that employs the people that allow healthy, vibrant communities to thrive. The Government can help, but Government effort alone will not get the job done and cannot be effective without robust private sector participation.

• Robust regional delivery systems – The President believes that Federal programs should be kept close to the people they serve, not be held hostage in Washington. He made this point clear in his “President’s Management Agenda.” Therefore, we envision using a robust network of regional offices likely staffed by a combination of Federal professionals from disciplines such as community, economic, urban and rural development – delivering a holistic approach to regional development.

Finally, let me mention that we’ve had help in crafting this plan, and to give credit where credit due, let me provide you a quick briefing on the Secretary’s Advisory Committee on Strengthening America’s Communities.

Secretary Gutierrez appointed 17 members to a non-partisan Advisory Committee, charged with providing the Administration their best thinking on the challenges of 21st Century community and economic development and how the Federal Government could best adapt.

The Advisory Committee issued its report in July of this year. The report focused on three key areas:

• Bringing Federal policy into the 21st Century.

• Targeting to need and responding to opportunity.

• Assuring flexibility, accountability, and results.

Some of the Committee’s recommendations include:

• Make regional competitiveness the overriding goal of Federal economic development policy.

• Provide incentives for innovation-based regional strategies.

• Allow sub-regional organizations to receive Federal assistance directly, providing request is consistent with regional strategy.

• Target Federal funding to communities and regions of greatest need.

• Coordinate and consolidate workforce, economic and community development efforts.

• Add new measures for eligibility and allocation to better gauge community distress and relative need.

• Establish a cabinet-level inter-agency counsel to coordinate Federal economic and community development activities.

Our job as members of President Bush’s Administration is to make the case for change, to ask the tough questions and realize that we can and should do better.

This can’t be done without resources, and since we are spending taxpayer dollars, stewards of the public trust like me and my colleagues owe it to the communities we serve and the taxpayers who foot the bill to be innovative in finding ways to make a positive difference.

Thank you again for the invitation to be here today, and I am pleased to take your questions and hear your comments.