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Transcript of Meg Whitman on Enterprise Zone Visit

Here is the transcript of the Meg Whitman interview. Audio posted here.

Lou Desmond: Now the whole reason that you here is because is because last time you were here I asked you what you knew about the Enterprise Zone program and you had a some familiarity with it that it was basically a program that helped businesses in California be competitive. I said look, I would love to have you out the next time you’re in Southern California to introduce you to some businesses that are benefitting from the San Bernardino Valley Enterprise Zone because this is our local zone, of course, we have one in the Coachella Valley as well I have listeners out there, and they are working on one in the high desert. But this is the most active one here in this region right now. So, were at Cannon Safes what did you learn here today about the enterprise zone program?

Meg Whitman: Well first of all I can’t thank you enough for inviting me to come. It was completely your idea and I bet you were a little surprised when I showed up weren’t you?

LD: Yea I was

MW: So, Cannon Safes is quite a remarkable California success story. You know, one of the last, you know fully integrated manufacturers of safes here and thanks to the Enterprise Zone. I mean, the CEO was very clear that he wouldn’t be here had it not been for the enterprise zone which offered him some tax benefits and incentives to hire people. And so they’ve got 200 people who work basically 20 hours a day. Demand for safes right now is high because of the economic uncertainty.

LD: Isn’t that funny how that works?

MW: Yes, well when people are nervous they want to protect their documents and their you know goods, so he’s got a lot of demand for his safes and it was great to see it, you know many of the folks have worked for this company for 20 years 25 years, tremendous loyalty, very low turnover, and as a result its economical to manufacture in California because the company pays well and the benefits are good the turnover is almost none so he has tremendous expertise so it was great fun to see.

LD: And great productivity. Now you just said something that I am going to go straight to. You said people are nervous, that’s why they’re buying safes, why are they nervous?

MW: I think its completely economic uncertainty. And what I mean by that is, are you still going to have a job three months from now, six months from now, and everyone knows someone who’s lost a job who’s hours have been cut back, who’s company left for Arizona or Colorado or Utah and I think that’s fundamentally the source of peoples’ anxiety.

LD: I wish people weren’t nervous don’t you?

MW: Oh absolutely.

LD: I think that’s holding a lot of businesses back from making decisions because they’re nervous about what’s going to happen tomorrow. As far as what you saw from his comments about doing business in California and the enterprise zone what can we emulate or do better what the enterprise zone is doing?

MW: Well it’s creating incentives for businesses to stay in California, and as you know we lose more businesses to Colorado Arizona, Texas, Utah because its cheaper and easier to do business. And effectively in miniature, what an enterprise zone has done is frankly what we should do across the board in California, which is make it more affordable to do business here. You know, create reasons for businesses to be here. What I say on the campaign trail every day, is if we do not put Californians back to work, if we don’t change the business climate in California, there’s no way out of this mess. And in a microcosm, the San Bernardino Enterprise Zone, that’s exactly what’s happening.

LD: So as far as Cannon Safes and exactly what he had to say, Mr. Baker, in terms of being the owner of Cannon Safes, what specific things did he say to you cause I couldn’t hear everything that he was telling you when we were doing the tour of the facility that uh he would like to see happen or that the enterprise zone does that helps him in specifics?

MW: Yeah, well first just tax incentives to stay here so, you know, tax incentives on the building he just moved into — this brand new building which is really lovely and very efficient for him – it’s got, you know, the rail right outside, it’s got the big bays for the big trucks to come in and out. He runs very lean, you know, it’s called lean manufacturing, very few days of inventory. And then he’s got some incentives to hire people who were out of work, incentives to hire people who were on welfare before, and so there’s some incentives to hire, and he’s hired 40 people since January of this year which he may be the only business in California that’s been hiring people.

LD: Well I hope there are more businesses that are hiring people. He’s certainly a success story in terms of getting people back to work and getting them off services. Isn’t that just much better than having people on services? I mean what is it up in Sacramento that they don’t understand about the fact that it is much better to have somebody have a job in the private sector and not need services than to be putting together program after program after program to help people who don’t have work?

MW: I mean you and I are on the same page on this. The much better thing is to create a better business environment where companies want to stay and grow here where they hire people because the job is the best welfare program anyone ever had. You know typically they will get health insurance there’s the dignity of being able to work 40 hours a week and support your family and that’s what I saw on the factory floor this morning.

LD: Jay Craig, an economist who is on the show all the time says you know its not that hard to understand it’s a lot better when somebody has a job and they’re putting money back into the system then simply taking money out of the system. AB32 are you still committed to absolutely stopping that monstrous thing from happening?

MW: You know I was I think the very first candidate to call for a one year moratorium on AB32. You know this I see it every day that companies are moving out of California because no neighboring state has anything like AB32, and we’re putting California once again at an economic disadvantage. You know, everyone thinks of Oregon as a pretty green state they have nothing like AB32, and so you know you’re seeing companies move out. We should own the green technology in California, but AB32 is not the way to own that. We should do some targeted tax incentives for that industry. By the way, you know the solar industry, you know what their biggest impediment is to growth in California? To put solar arrays in? It’s environmental regulation. You know, the tortoise in the desert, and we could own solar here, but actually our environmental regulations are keeping us from being — from creating the next terrific environmentally sound industry.

LD: That’s and irony that I hit on, on the show every now and then, for example, in far northern California, Shasta County area, they were talking about doing this giant wind farm they could not get any route from the wind farm to getting power down to the Bay Area, they just couldn’t get it approved, so they quit and they gave up. So its funny, you have environmental singers saying like you said: we need to be doing solar, we need to be doing wind, we need to be doing this, but then we actually go to implement that and the same environmentalists stop you. How do we fix Sacramento? I mean what do we need to do? And I’m telling you, I had a frank conversation with the people on your staff today and I said: she says the right things — great, but Sacramento is so broken and the power is so vested in the unions and the legislators that they hold into them how do we break that cycle?

MW: Well first of all it’s about leadership. In the end it’s about leadership. It’s about what great leaders do is they focus on a small number of things they inspire people to make change for the positive and that’s what I aim to do. And first is we’ve got to focus on a small number of things. Sacramento is so broken that if we go to Sacramento and try to boil the ocean, you know, solve every problem, we’re going to get killed by the incumbent bureaucracy, by the legislature. So the number one priority is jobs. If we do not, as I said, put Californians back to work…

LD: Ok so steps, give me 1,2,3 things you want to do right away.

MW: So, first thing is a moratorium on all new regulations. As I have traveled the state more regulation is strangling businesses of all sizes. From AB32 to, you know, you name it, there are regulations that are killing every business.

LD: Right, regulations on regulations

MW: And competing agencies to regulate the same thing. So a moratorium on all new regulations. And then, let’s dissect this and say, ok, what can we reduce, how can we harmonize regulatory authority? And lets put some sanity back into this. And then what we should do is what Texas did, is create a master application where you as a business person put all of your information in, and then there is a state agency that helps you get the permit you need for building, or the permit that you need for expansion. And AB32, of course, would be on the first day I would say…

LD: What about what a lot of businesses are talking about which is tax cuts?

MW: Absolutely. So we need to do two kinds of tax cuts, and I want to do them in sequence. The first tax cut, if you believe we got to put people back to work, then let’s do targeted tax cuts that lead to hiring. For example, let’s eliminate what I call the “factory tax” which is in California. We are one of only three states where you have to pay a sales tax on the manufacturing equipment that you buy to manufacture in California. So Cannon Safes you saw those huge drill presses…

LD: Those cost hundreds of thousands of dollars if you buy a lot of equipment.

MW: And it’s the best reason I know to go to Nevada or Arizona. So let’s eliminate the factory tax, so if you’re a manufacturer, and you’re thinking about expanding you’ll expand here as opposed to Arizona, and you might stay here as opposed to going to Arizona or Nevada. So that’s one thing. Another is, how about we reduce or eliminate the LLC tax. So if you’re and entrepreneur, do you know the first thing, before you hire a person, before you make a product, you pay $800 LLC tax.

LD: Yea I did it. Three times

MW: And you pay it every year

LD: Right

MW: So these are the kind of… I want to extend the R&D tax credit to 20% in California so it comports with the national average. So what we do is targeted tax cuts to get hiring going, then we cut government spending so we create some capacity to invest, and then we really jump start the economy even further by doing an across the board tax cut. But the reason I don’t want to start with an across the board tax cut is we can’t afford it. With the 20 billion dollar budget deficit we’ll run that budget deficit to 30 billion and we’ll have an even higher debt and as you know debt in California may well sink the whole state.

LD: Well like you said we’re going to have to grow our way out of this problem and that’s going to mean creating new jobs in California like some of the first things you had to say. Glad you could come out and um meet Cannon Safes and also some of the folks that run the San Bernardino Valley Enterprise Zone thank you so much.

MW: Well it was great to be here.

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