Governor John Baldacci talks about the national deficit, the economy, and the future

After July’s National Governors Association meeting, Governor Baldacci sat down for an exclusive interview about the national deficit, the economy, and the future.

By Ramona du Houx

August 27th, 2010 

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Governor John Baldacci at the University of Maine's AEWC center. Photo by Ramona du Houx
At the National Governors Association meeting held this summer was energy a topic of discussion?

“Energy was a focus of economic development at the conference. We discussed the importance of pursuing a clean-energy future, which will enhance the quality of life and place for our citizens, as it diminishes our carbon footprint. While clean energy is developed from our natural resources, we talked about the importance of keeping these resources sustainable for future generations. In Maine we want to grow ecotourism, expand value-added goods and energy opportunities, while protecting our natural resources.

“It’s understood from the federal government on down that developing clean energy is a key component of economic recovery; as the Industrial Revolution transformed the world, so could a clean-energy revolution.

“The economic development discussions continued on from a discussion we had on fiscal responsibility and the federal deficit, where former Senator Al Simpson, a Republican, and Erskine Bowles, a Democrat, discussed the work of the president’s National Commission on Fiscal Responsibility and Reform. Consolidation became a huge topic of discussion.”

How so?

“In Massachusetts they are trying to consolidate their rural school districts’ administrations of services, so they could better afford it. I welcomed them to our world. Restructuring and consolidation of administrative services is the world we must continue to step into. Maine is better prepared than most states, but not completely. We’ve still got too much administration in local, school, county, and State governments. There’s not enough coordination and too much duplication. On the federal level, they have the same problem — on a much larger scale.

“Bowles said that all federal revenues go to pay for Medicaid/Medicare and Social Security. The rest of what the federal government does is paid for with loans. State governments can’t function that way; we have to balance our budgets every year. The federal government doesn’t.

“We have to reduce the federal deficit, and at the same time states have to balance budgets. We can’t raise taxes, and we cant put the most vulnerable at risk. That leaves one logical course of action — we have to become a lot more efficient. We have to stretch resources, get more value out of our resources, and trim our sails. We have to establish partnerships, looking to businesses, nonprofits, and individuals, to work with to do what needs to be done. That’s healthy and helpful.

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Former Senator Al Simpson (R) and Erskine Bowles (D) work together on a presidential commission of 18 to bring down the deficit. Courtesy photo NGA

“There is a sense that government will do it all, and some people want to sit back and let it happen. But that’s not the role of government. With the economic times we live in, I think more people realize we need all hands on deck, working together.”

You were a member of Congress when Bowles was Clinton’s chief of staff. Partisan politics was around then too, but you still managed balance the federal budget and begin to pay down the national debt for the first time in modern history. How did it get done then?

“It was hard, but we balanced the budget. The seriousness of the debt/deficit is such we have to start to fix it now. If we don’t, it will only get worse. We can start to do what we need to do a little bit at a time. When Clinton left, we had a surplus as far as the eye could see. Then we had 9/11, and we had to weed out the Taliban to protect America. A lot of other policies from the Bush administration contributed to the deficit. We need to get back to what makes sense.”

When you first came to office, you faced a $1.2 billion structural shortfall and through fiscal responsibility, streamlining services, and consolidation, you fixed the problem and went on to have surpluses until the recession hit. What advice did you give the commission?

“I asked them to spread the awareness of the seriousness of the debt/deficit across the country. So many people will be negatively impacted, if we don’t take measures now. The more Simpson and Erskine get out and talk, the more helpful it will be to people. They are committed to their mission and to get the word out. Democrats and Republicans working together for the same goal, which will help the entire country, is a great thing. Our country is more important than our political parties.”

You had to adjust the budget a few times, due to the recession. Where are we now [in July]?

“Working with the Legislature in a bipartisan way, we’ve been able to put Maine’s interests first. We’ve weathered the most difficult economic storm since the Great Depression.

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Governor John E. Baldacci listens to a panel discussion at the National Governors Association meeting, July 10, 2010. Courtesy photo NGA
“But we will be facing a half-a-billion-dollar shortfall from the stock market — not from education costs, not because of healthcare costs — because the stock market hasn’t performed as it was expected. With retraining, pensions, and benefit costs, the State will have to come up with half a billion more dollars.

“Revenue levels are now at the same level as 2007 — three years ago. There’s probably a billion difference since then and now. We need our economy back. The stimulus has been helpful to offset some of the shortfall, but there’s always more to the story. Unemployment is at eight percent, nationwide it’s nine and a half, so we are doing better. But we have a long road ahead. Someone said, ‘Hey, you’ve got the stimulus.’ I said, ‘Give me back my economy.’

“We’ve lost 25,000 jobs in the recession; we will get up to 3,000 jobs with the stimulus. We are trying to get by with fewer dollars, by consolidating and by not raising taxes, while we continue to protect the most vulnerable. Our consolidation efforts are making Maine stronger; our efficiencies are delivering better quality services. In the past we have been able to reinvest the savings into needed programs. And bonds have leveraged funds for innovative companies, to conduct research and grow with the Maine Technology Institute, to conserve land with the Land for Maine’s Future program, and to grow higher-education opportunities.

“But we have to become even more efficient, be more frugal, to stretch the dollars we have.”

Are Pine Tree Zones still helpful?

“Yes, incentives always help. Jobs are still being created, because Maine has a well-earned reputation for quality, integrity, and a highly skilled workforce. They are the best. Brunswick Landing just welcomed Kestrel aircraft, which will employ 300 skilled workers. Stetson Cannery has a new owner that will produce value-added lobster products. Wind energy is expanding and Ocean Renewable Power Company will be generating electricity for the grid, next year. There are bright lights out there.”

In 2009, exports dropped 24 percent, after four years of steady growth, due to the recession; is there hope there?

“So far in 2010, we are beginning to see the export market turn around. Through the first half of the year, exports were up 44.7 percent. And, more impressively, pulp exports were up 200 percent, and paper exports were up 72 percent, which is critical to rural Maine. And semiconductor exports are up 23 percent.

“In June, I announced a new initiative to attract more foreign direct investment in Maine. In partnership with the private sector, the effort will focus on attracting investments in Maine’s renewable-energy and advanced-materials fields. The work will be done by the Maine International Trade Center and was made possible by a cooperative effort between the Department of Economic and Community Development and a private company in Monmouth, Maine, named Tex Tech.

“The initiative also builds upon the successful trade mission to Germany and Spain that reinforced to the world that Maine is a good place to invest in the energy sector. So far, less than a year after the trip, companies based in Maine that participated in the European Energy Mission and trade shows in Vietnam, Dubai, and Germany reported more than $23 million in export sales — which is an all-time record.

“Maine’s energy sector has great potential for growth. Again, it will be a focus on the trade mission to France this year.”