San Jose Mercury News: Lt. Governor Newsom unveils economic plan

Newsom unveils plan to fix ailing economy

By Karen de Sá
San Jose Mercury News

Posted: 07/29/2011 12:01:00 AM PDT

California Lt. Gov. Gavin Newsom arrives in San Jose Friday to unveil his plan to hoist the state out of its economic abyss -- borrowing on the successes of Silicon Valley's global reach and the need to restore long-absent state leadership in job creation.

The plan aims to expand exports, green industry and new manufacturing in a state with a foreclosure-riddled housing market and the nation's second-highest jobless rate. It comes after several months in which the Democratic second-in-command searched for effective economic-development strategies in dozens of countries, from Singapore to Germany. Newsom also traveled to six other states, even making a trip to Texas with 14 Republicans.

In California, dozens of agencies oversee some aspect of employment, but they have no coordination or accountability -- something that left him "dumbfounded," Newsom said in an interview Thursday.

And despite the dictates of the global economy, California has no trade or export agency and no overseas representation, unlike 35 other states. Pennsylvania alone has 23 state representatives in foreign capitals, Newsom noted.

As far as jobs and economic development, "there's no agency and there's no plan," Newsom said after surveying dozens of economists, academics, and business and labor leaders. "I was stunned. I just couldn't believe it."

The future economy should be "more export-oriented, more new manufacturing-oriented, more clean economy-oriented, and more high skill-oriented," said Lenny Mendonca, a former chairman of McKinsey & Co., a San Francisco-based economic think tank that contributed to the report.


"The most important thing is that the state actually has a plan and does something about it," he added. "California can no longer rest on its laurels of a history of being a beautiful place with great talent and great universities -- that's terrific, but we're in a global marketplace now and we've got to compete for jobs just like everybody else."

Newsom calls for a 180-day "action plan" aimed at prompting longer-term reforms through legislation and executive orders. The recommendations, which will be presented today at the San Jose-based Wyse Technology firm, include:

Creating a single Cabinet-level office with a "jobs czar." The office would serve businesses and promote regionally distinct economic development strategies.

 Eliminating a bevy of state commissions with overlapping and fragmented missions.

 Forming "regulatory strike teams" to resolve problems businesses face in receiving permits and navigating often-conflicting local, state and federal rules.

Newsom calls for stepping up exports and re-establishing an official state presence in international markets, beginning with China. He would promote innovation through patent expansion and smooth the way for increased manufacturing.

California's economic competitiveness was a major issue in last year's gubernatorial battle between Democrat Jerry Brown and Republican Meg Whitman.

Whitman, the former CEO of eBay, argued that California's regulations were strangling economic growth and that the state needed to be more like freewheeling Texas. Brown conceded that there was a need to streamline regulations but cautioned that California needed to be cautious in jettisoning rules designed to protect the environment.

Stephen Levy, a report contributor from the Center for Continuing Study of the California Economy, said focusing on "a high-road innovation strategy for California" is a better approach than bashing its bad business climate, or pretending California is Texas or Arizona.

The report's focus on "innovation, entrepreneurship and exports rises above the level of the stale business climate debate we've had that mirrors what's going on in Washington, D.C.," Levy said. "It develops a strategy based on our strengths."

Several other observers noted that while the plan sounds good, it could well join a pile of dusty reports and commission findings on what should be done in California.

But Newsom, a former gubernatorial candidate who is widely expected to run for governor in the future, promised that won't happen this time.

"I want no association with anything like that," he said. "Nothing disturbs me more than politicians preaching jobs, jobs, jobs but not producing."

While the report highlights the need for a better-trained and -educated state workforce, it also points to the necessity of foreign-born workers -- particularly those with engineering expertise.

Although 52 percent of Silicon Valley technology firms were started by foreign-born entrepreneurs, the nation's H1-B guest worker visa program is limiting the flow of critically needed skilled workers. The program reached its 65,000-person quota in the first four months of 2011 fiscal year, according to Newsom's report.

California's $1.9 trillion economy is the largest in the nation and one of the largest in the world. The state is home to 50 Fortune 500 companies and leads the nation in venture capital.

Yet the new report says "the state remains unable to effectively educate and train a workforce skilled enough for the Next Economy, leaving positions unfilled in the midst of record-high unemployment." It blames "every segment of the education pipeline" for "producing an inadequate supply of the skills needed."

Wyse Technology CEO Tarkan Maner, whose company specializes in cloud computing, lamented his ability to hire locally because of the state's educational system.

"In China, South Africa, Indonesia and Brazil, the government is spending money to connect every single student to the Internet," Maner said. "But in San Jose, in the capital of Silicon Valley, the mayor was nearly in tears in my office recently telling me only a small percentage of San Jose students are connected."