Richardson Would be Bold at Commerce
If New Mexico Governor Bill Richardson is named Commerce Secretary by President-elect Barack Obama—as reports over the weekend indicate— his record suggests that Commerce could push for a much bolder role in supporting such strategic industries as renewable energies, nanotech, and green vehicles by investing alongside corporations and universities.
Richardson is one of the nation's most aggressive proponents of public-private economic partnership. After he became New Mexico's governor in 2003, he launched one of the most rule-bending development programs in the U.S., toppling old barriers between the private and public sectors.
Tapping billions amassed over the years through royalties and taxes on natural resources extracted from publicly owned land, Richardson's administration put up hundreds of millions of dollars in state money to provide venture capital to technology start-ups in everything from solar-power equipment to medical devices. New Mexico took a 5% equity stake in Eclipse Aviation, an Albuquerque-based maker of light aircraft. Richardson offered generous subsidies and interest-free loans to Hollywood studios to lure film production work. And he invested $250 million to build a "space port" to host commercial space travel by Richard Branson's futuristic venture, Virgin Galactic.
States compete with nations
Contacted Friday, a spokesman at Richardson's office in Albuquerque said the governor would not comment as to whether he would advocate such policies if selected as Obama's Commerce Secretary. Yet when interviewed in June by BusinessWeek about his economic development philosophy, Richardson suggested that Washington may embrace greater government collaboration with industry. "In a Democratic Administration, you will see a shift toward more public private-partnerships," he said.
At the time, Richardson had dropped his own bid for the Democratic Presidential nomination and endorsed Obama.
Richardson noted in June that U.S. states now must compete with Europe and Asia, "where there are stronger partnerships between business and government" and where "governments invest directly" in industry. He expressed frustration that Washington was doing little to boost America's competitiveness by offering tax incentives to invest in solar power, for example, or to train more engineers and grant temporary work visas to skilled foreigners.
"I felt we should be a laboratory of innovation in incentives," he said. "We are in a highly competitive global world, so we have to promote public-private partnerships. What we say is: 'Look, if you come to New Mexico, we will invest with you. That has been my philosophy, and it is working.'" Again, Richardson's spokesperson said these comments only regard New Mexico's strategy, not about what the federal government ought to do.
Eclipse Aviation—and some winners
It is not clear whether Obama shares Richardson's philosophy. For one, the New Mexico governor was not considered Obama's first pick for the Commerce post. Obama's finance chief, Penny Pritzker, was rumored to be his preferred choice for Commerce Secretary, but had to drop out because of business conflicts. Richardson was seen as a contender for Secretary of State, a post apparently given to Hillary Clinton. As Commerce chief, however, Richardson will be in a strong position to influence the shape of Obama's strategy for achieving his goal of creating 2.5 million new jobs in the next two years.
Richardson's approach has not been without controversy. The state's $30 million investment in Eclipse Aviation—which has run into a severe cash crunch and is seeking long-term investors in order to survive—looks like a mistake.
And hefty subsidies for the film industry, now common in most states, have been criticized as corporate welfare around the country.
But the New Mexico economy has improved overall during Richardson's tenure. The unemployment rate, once the nation's highest, now stands at 4.5%, better than the national average of 6.5%. New investment from Hewlett-Packard (HPQ), Fidelity, and Germany's Schott Solar are each expected to create more than 1,500 fresh jobs. One big lure: Companies get a 10% tax credit on all wages and benefits tied to any new job that pays more than $40,000 per year. New Mexico's film industry, meanwhile, has surged. The state says 80 movies will have been shot there this year, compared to one or two annually before the incentives were put in place.
focus on federal research labs
Besides subsidies, credit also goes to one of Richardson's first moves as governor: sharp cuts in income and capital gains taxes. "I am very unapologetic about being a pro-business, pro-tax-cut Democrat," he said in June. Richardson also has invested heavily in infrastructure—also expected to be a top priority in the Obama Administration. Soon, for example, a high-speed train linking Sante Fe with Albuquerque will commence operation. New Mexico also is planning one of the nation's largest systems to transmit electricity from renewable energies such as solar and wind.
Another element of Richardson's strategy has been to leverage the state's three research universities and its major federal laboratories—Sandia and Los Alamos. Both labs are controlled by the Energy Department, and were under Richardson's supervision when he was Energy secretary. Sandia and Los Alamos both play big roles in university-industry collaborations in solar, biofuel, and other renewable energy initiatives in New Mexico. They also helped the state build a 172 teraflop-per-second supercomputer. (One teraflop represents a trillion calculations per second.) It is billed as the world's most powerful supercomputer available for use by private companies.
Richardson believes America's national labs can play a much bigger part in making U.S. industries globally competitive. Traditionally, national labs have focused heavily on national security needs. "I believe that in a Democratic administration, there will be more emphasis on using national labs in biology and energy research," he said. The Bush Administration, he added, "has emphasized the defense side too much."
He advocates easing some rules that make it difficult for scientists in national labs to create new companies and collaborate with private industry. "They have made some strides, but they need to do more," Richardson explained. "There are restrictions that impede them from doing anything serious."