REMARKS AS PREPARED FOR DELIVERY SANDY K. BARUAH ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - JOLIET, ILLINOIS REGIONAL CHAMBER OF COMMERCE - JOLIET, ILLINOIS

FRIDAY, MAY 23, 2008

AS PREPARED FOR DELIVERY

OPENING

o Pleasure to be here – first time in Joliet.

o As a public service, I’ll refrain from making any Blues Brother references.

o Two particular reasons I’m pleased to be here:

1. Joliet is taking a regional approach to business development, as evidenced by the fact that this is the Joliet Regional Chamber of Commerce – and is an approach the Department of Commerce strongly supports.

2. I am here with my dear friend Marguerite Murer who hails from Joliet – and any city that can turn out an individual as outstanding as Marguerite is one great place. As you know, Marguerite is back in Illinois after service to President Bush in senior White House posts. The President’s loss is certainly Illinois’ gain. By the way, Marguerite is recently engaged and her finance, Tony, is a Joliet boy as well. Congratulations to them both.

II. ECONOMIC PICTURE TODAY

We meet at a time when many Americans are concerned about the economy. Gas prices are high by U.S. standards ($3.79) – and seem to continue to rise. This is driving the price of not only getting to work, but food and other costs up. The truth is, that after six years of record economic growth, our economy is indeed growing at a slower pace than the President, me, and you, would like.

Up until earlier this year, the U.S. was engaged in the longest job expansion in our history – over 50 months of continuous job growth. Over the course of almost seven years our economy endured the bursting of the “dot.com” bubble, the terror attacks of September 11th, some high-profile corporate scandals, a global war on terror, and the worst natural disaster in U.S. history in the form of Katrina. Despite these formidable odds, our economy was strong and beat all the odds – and I’m proud that President Bush’s policies kept our economy growing at record levels. It didn’t just happen – the President and his team were focused on keeping our economy growing.

Even today, where we are all watching the economy closely and when real people are facing real challenges; our unemployment rate is 5%. Interestingly, 5% is the rate that many economists, certainly the ones I knew in grad school, considered to be “full employment.” In fact, in the 1990’s, when our unemployment rate dipped to 5%, it was heralded as a clear indicator of a strong and growing economy. Oh, how things change.

Today, our economy is still growing – not something you’d realize by just listening to the media. But there is no doubt that it is growing at a slow rate – slower than anyone would like.

To address the challenges our economy is facing, the President is helping homeowners through the FHASecure program which has so far helped 200,000 families refinance their homes – and expects to help about half a million families keep their homes by the end of the year.

In addition, the Bush Administration helped with the creation of the public-private partnership called the HOPE NOW Alliance, which is a cooperative effort among mortgage counselors, servicers, and investors to help struggling homeowners keep their homes. The HOPE NOW Alliance covers over 90% of what’s known as the “subprime” mortgage market.

Of course, the big news is the economic stimulus package – the $160 billion bi-partisan deal created by President Bush which is putting rebate checks into the bank accounts of hard working Americans of up to $1,800 for a family of four. These checks began hitting bank accounts the first week of May and by this Summer, the Treasury Department expects to have sent rebate checks to 130 million American households.

This economic stimulus is above and beyond the tax cuts President Bush enacted during this time in office. The Bush tax cuts have returned over $1 trillion to American taxpayers and small businesses – and despite these unprecedented tax cuts, tax revenues are up more than 37% over the last three years.

These tax cuts, by the way, have resulted in the removal of 5 million Americans from the tax rolls – their taxes have been eliminated entirely. If the President’s tax cuts are not made permanent, these lower income Americans will once again be added to the tax rolls.

III. LOOKING FORWARD – FIVE NEW REALITIES

Of course, all this is looking backward. The question for the Joliet region is where to from here? For it takes both smart pro-growth national policies and forward-looking regional action in order for economic growth to occur.

Let’s consider for a moment what the future may hold for the American economy in the 21st century worldwide marketplace, and what steps we might take to address the economic development realities in the years to come. As I see it, there are 5 realities of 21st century economic development we must understand and respond to.

Reality #1 of the 21st century economy: While perhaps the most obvious, it’s also the most important; and it’s that we are truly in a Global Economy, or as New York Times columnist Tom Friedman says – the world is…flat. In the new flat global marketplace, competition is not just from the company next door, or the city next door; our competition today comes from any person on any point on this globe with a good education, a good idea, and a good Internet connection.

I know they told you there would be no math today, but I have pop quiz for you: Which is of the following products is the most American?

o Pontiac GTO

o Toyota Siena

o Ford Mustang

What’s more American? A Toyota Camry built in the United States, or a Ford Fusion built in Mexico? You know, they build Fords in Germany. What’s more German, a Ford built in Germany, or a BMW built in South Carolina? Interesting questions, with perhaps no right answer.

Part of the reality of the flat global economy is that 95% of our potential customers for American businesses live in a country not called America. The vast majority of our customers – current and potential – live outside America.

That’s why Free Trade Agreements – FTAs – are so important to those of us interested in economic growth and job creation. When President Bush took office, we had Free Trade Agreements with just 3 countries – Israel, Canada and Mexico. Today, we have free trade agreements with 15 countries with 3 more pending Congressional approval.

FTAs help our companies, farmers, manufacturers, and workers gain access to new markets around the world – access to the 95% of our potential customers that don’t call America home.

One of the jobs I believe that economic development organizations have, including chambers of commerce, is to educate their companies on how to take advantage of the benefits of Free Trade Agreements – because only a small percentage of businesses today are exporting.

Reality #2: Competition is intense, and the pace of change will continue to accelerate. We live in a dynamic, changing world. While some may wish for the simpler, slower times of our past, the world doesn’t work that way. Think of this: it took 55 years for the automobile to spread to one-quarter of the U.S. population. It took only 7 years for the Internet to reach that same milestone. Imagine how quickly we will adopt the next big thing.

The nature of innovation itself is changing: innovation is becoming multidisciplinary as different technologies converge, creating new fields…fields that didn’t even exist a decade ago. People smarter than me debate where bioinformatics or nanotechnology will take us, but all agree that they will become major drivers of the U.S. economy.

This new reality where cycle times for products and ideas continue to shrink will require all institutions – public, private, educational, and non-profit – to continually adapt and change. Those that don’t are at risk. Those that do have the opportunity for reward.

Reality #3: Yes, the world becomes a bit more complicated every day. In order to respond to this increased complexity, we must realize that we have reached a point where the components of economic competitiveness can no longer be pursued separately. Just as technologies are converging to create new fields of innovation, so are the components of economic competitiveness merging to shape economic growth in the 21st century. This reality holds two important lessons for the local and regional level:

First, the idea of workforce development, community development, economic development, and educational programs occurring in separate silos can no longer be tolerated. The interconnected challenges of these components of competitiveness must be tackled in concert.

Second, in our new 21st century global economy, we must acknowledge what we all learned on the school playgrounds of our youth, that we are stronger when we stand together than when we stand alone.

Standing together means that we need to look beyond traditional institutional and political jurisdictions – the city boundary, the county line, even the division between States – and work together. Because the competitiveness of America’s companies is in large part tied to the competitiveness of the economic regions in which they do business.

Reality #4: Public-Private partnerships become more critical every day. While governments at all levels, universities and other non-profit institutions are important players, let’s not forget that the private sector is the most important element of any successful economic development strategy. Unless the private sector is ready, willing and able to invest in a community, economic growth simply will not occur, regardless of how much government spends. The private sector should not just have a seat at the table, but should actively be engaged as full partners in strategies for economic growth.

The private sector should be helping to shape – within the parameters of public accountability, of course – the development strategies that will lead to more higher-skill, higher-wage jobs. If the private sector is not fully engaged as a partner for long-term economic development, it is the responsibility of the private sector to demand to be included in the economic development planning activities that will directly impact the economic fortunes of the region.

Reality #5: At the end of the day, it is the ability to innovate that is the only possible sustainable competitive advantage in the 21st century. It’s not location. It’s not even the cost of doing business. Factors such as these will continually shift in a dynamic worldwide economy. But if a nation can maintain its edge in innovation, it will grow and prosper.

America is clearly the world’s leader in innovation. The spirit of discovery is one of our national strengths. From Edison's light bulb to Jarvik’s artificial heart to the iPod to the frozen pizza, we have brought more technological breakthroughs to the marketplace than any other nation – and this has made not just America, but the world, safer, healthier, more productive and more prosperous.

Companies – by necessity – must continually innovate to stay one step ahead of their global competitors, especially as the pace of change in our global marketplace continues to accelerate. If they don’t, they will cease to exist. And the challenge will not go away by ignoring the reality or by closing off America to the rest of the world.

Meanwhile, government, education, and non-profit leaders have the same responsibility to adapt their approach to fit the changing times. Unless government and our other institutions can offer flexible and innovative programs and tools, we risk putting the regions we serve at a competitive disadvantage in the global marketplace. Innovation is just as important in the public and non-profit sectors as it is in the private sector.

In our dynamic, global economy, we can no longer rely on business models or government approaches designed for yesterday’s environment. If we know one thing about the future, it is that being able to adapt – at both an institutional and individual level – will be the key to our success. It comes down to our ability to innovate. For our ability to innovate is our – and another nation’s – only potential sustainable competitive advantage.

If innovation and the ability to adapt are the keys to our success, let’s be careful about where we look for solutions. Some look to government for solutions. And certainly, government is important – there is no doubt about that. But let’s remember that government, especially at the Federal level, is a blunt instrument. It is slow to react and resistant to change. While this is by design, it is also problematic in our fast paced global marketplace.

What drives innovation are businesses and the entrepreneurial spirit of individuals. Policies, from both a Federal and local government perspective, should always strike the right balance between ensuring government executes its important responsibilities while ensuring that the private sector and the individual operate in an environment that encourages the risk of capital, encourages new ideas, encourages the advancement of lifelong learning, encourages the quest to penetrate new markets, and encourages the hiring of new employees in endeavors that result in more higher-skill, higher-wage jobs. That’s what drives our economy – and I thank you for your role in this important work.

IV. CLOSE

It has been my distinct pleasure to be here in Joliet with my dear friend Marguerite Murer. Chambers of commerce are great organizations – you are the ones that risk your capital and hire people for good jobs that pay mortgages and put kids through college. In addition, members of Chambers of commerce are engaged in the community and are the leaders of the important community efforts that make a place a home. Thank you for the important role you play as the economic engine of America.

On behalf of the President of the United States, it has been my sincere pleasure to be with you today.

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