February 9, 2011
Host: Ted Simons
Arizona’s Economic Competitiveness
Guests: Category: Business/Economy
- Former Intel Executive Craig Barrett talks about what he believes Arizona must do to compete for jobs and grow its economy.
| Keywords: economy
Ted Simons: Former Intel chairman of the board and CEO Craig Barrett worked in an industry that demands educated talents. One of Barrett’s missions is to help improve that talent pool by encouraging the U.S. to develop top students, scientists, and engineers. To that end, Barrett helped author a report titled "Rising Above the Gathering Storm." Here to talk about his ideas is Craig Barrett. Good to see you again. Thanks for joining us.
Craig Barrett: Nice to be back.
Ted Simons: What did this report set out to do?
Craig Barrett: The report really was driven by the national academy of science engineering institute of medicine, and it really looked at the competitiveness of the United States in the 21st century. How do we compete education wise, research wise, environment wise with other countries. Like the likes of China and India, Europe, Japan. The first report came out in 2005, it was not a flattering report, it basically said we are not stacking up well from a competitive standpoint. We did a follow-up report in 2010, five-your update, and the subtitle of the five-year update was "rising above the storm, approaching a category 5." That gives a hint we said five years after the first report was published, we're in worse shape than when we initially published.
Ted Simons: Why are we in worse shape? What's going on out there?
Craig Barrett: The rest of the world is looking at the 21st century as the century of knowledge and education, of innovation. And the important things there are educating your work force; you know that the quality of life, the standard of living, the average salary you get is going to be dependent on the average education of your work force. We can talk about where the U.S. resides in this area. The generation of new ideas, investment in research and development, that's fallen dramatically as a percentage of our gross domestic product over the last 20 or 30 years. And the environment. The environment is a lot of things. Intellectual property protection, corporate tax rates, the environment to invest in innovation, why would anyone want to come to the United States, or if your in the U.S. invest in the U.S. in a business?
Ted Simons: And the recommendations regarding the report, I want to get to those in a second, but let's stick with education here and what -- we get reports -- we've heard about this for a while, the rest of the world is beating us up down and sideways in a variety of categories. Is anyone even trying to change, or are we all just sitting around throwing ideas against the wall and watching them?
Craig Barrett: It's an interesting problem. The first major report on this topic, "the nation at risk" came out 30 years ago, three decades ago. Basically it said exactly the same thing our report said, "rising above the gathering storm," which was K-12, public K-12 system is broken, people that are coming out of it on average are substandard to the rest of the world, we need to do something dramatic. That was followed up by another report that astronaut John Glenn chaired, "before it's too late," in the 1990s. National governors association have met two or three times, issued reports, "rising above the gathering storm" issued a report. The issue is, you don't need another report. The solutions to education are really pretty simple. Every great performing education system in the world has three characteristics. Great teachers, teaching is a well-respected profession in those countries where education works, it has high expectations, that is, you set your expectation level at the international level, not comparing Arizona to California, or New Mexico, or different school districts in Arizona, you compare Arizona to Singapore, Japan, Finland, Korea, and the last thing you need is a little tension in the system. And tension in the system, you pay for performance, you have feedback loops to help struggling students, struggling teachers, if you go through the U.S. K-12 system on average, you do not have great teachers. There are some great teachers, but on average, if you look at math and science especially, you usually have a problem. You have very low expectations. And we don't pay for performance. When the bush administration put no child left behind, the most mild mannered assessment of students and of teachers, you heard the political outcry, everybody hated it. Everybody in the system hated it because it started to expose the system. So we fail on all three categories to have a great high-performing education system.
Ted Simons: Yet we'll hear from teachers, and I mean like hard-core, in the classroom teachers, they're ground level folks, and they're saying in general they don't feel appreciated. That teaching is not a prized profession. Whether it's pay, whether it's reaction from society, whether it's political attacks, whatever. They don't feel appreciated. Is that a valid concern?
Craig Barrett I think that's an absolutely valid concern. As I said to start, teachers have to be an appreciated profession in the society to make education work. And that's -- you have to attract good people into this system, and let's set the pay issue aside for a moment. A lot of people will go into teaching, it pays OK. It pays around medium level, for -- salaries in the United States. But people are not so worried about I think the pay issue, as the respect. The professionalism associated with that. You refer to teachers as nerds or eggheads or what have you, and you can't do, teach. These are the phrases we use. We have to turn that one around. We have to start attracting the best and brightest kids into teaching.
Ted Simons: Let's get to your recommendations, then, because there's four in the report. The first is to increase the talent pool by increasing science and math in K-12. It includes something like 10,000 teachers for 10 million minds. 10,000 teachers for 10,000,000 minds sounds great. Who pays for them?
Craig Barrett: It's an investment for the future. The plan basically said; let's create scholarships for college students who are proficient in math and science, to go into the teaching profession. Let's pay their scholarship; put them through school, they commit to go teach in the classroom. Science and math are really the Keystones of the 21st century, the knowledge-based industries. If you're not proficient in science math, you're kind of out of it. So we need -- not everybody is a science and math major, but you need a lot of science and math majors, and you need people competent in those subjects. The way to start is to get teachers who are competent.
Ted Simons: OK. How do you get kids who are interested in this world of instant gratification and computer stuff this, and Twitter and Facebook and the whole nine yards, how do you get to kids to be interested in science and math?
Craig Barrett: There are lots of ways. In fact there's an organization that was just created six months ago called change the equation. I happen to be chairman of that. It's a combination of 110 major U.S. corporations who have banded together to say, we're going to try to help the public sector here by promoting math and science as interesting topics, kind of out of the school environment. Think robotics competitions, think science fairs, think of interesting kids and what science and math can do not in the classroom, necessarily, but even out of the classroom. Arizona's good example of this, there's a national science fair called the science talent search that Intel sponsors. It has its -- the 40 finalists are going to Washington, DC next month. There's actually a kid from Chandler. One of the -- Arizona is in the final 40. There's another great science fair which is the international science and engineering fair. Intel sponsors that one. It's going to be here in Arizona three times between 2013 and 2019. This is an international science fair with kids from 55 or 60 different countries. 15 of the hundred of the smartest kids you'll ever find, they don't speak the same language verbally, but they speak the same language scientifically. When they come together there's so much energy in the room, it's astounding. But if you go to a first robotics competition, you can see kids getting into this, getting excited about it. Seeing what they can do with math and science. And competitive environment, or just doing it. That's what these corporations are trying to do. Change the equation is designed to help kids get interested in math and science, see what you can do as a possible profession, and then get involved in school.
Ted Simons: Another recommendation, basic research, enhance that particular commitment, if you will. Talk to us about that.
Craig Barrett: Basic research is a research that goes on in universities. Intel or Microsoft has a huge research budget. Six, $8 billion. The national science foundation, the government entity, supports basic research in our Universities, Arizona state, U of A, NAU. Other universities. We've recommended that the national science foundation be doubled over a period of five years. It's been basically flat in the area of the physical sciences and engineering for decades. So while the rest of the world has been investing, the rest of the world has been growing their universities and there are indeed capability, the United States has been somewhat stagnant in this area. And the recommendation is, we need to compete with the rest of the world. We need to support our Universities.
Ted Simons: How do you tell that to Washington when Washington right now is looking to cut wherever they can because of budget deficits, and economic concerns?
Craig Barrett: I admit it's a difficult message to sell today. But this message started to be delivered 20 or 30 years ago. And we've been consistently delivering it. I don't think the current budget crisis is the major stumbling block. I think rather it's the fact that Washington runs on a two-year cycle. If you invest in basic research, the output comes six, eight, or 10 years later if you fund a bridge, a highway, a building, it's an instantaneous gratification. Politicians are elected on instantaneous gratification. Politicians will support -- look at the stimulus program. Roads, asphalt-ready, shovel-ready. How much discussion was there, let's support basic research for the 21st century. That's the message we've been giving. That's the message rising above the gathering storm gives.
Ted Simons: Another one of your recommendations is to develop and recruit top students and scientists and engineers. How do you find them, how do you keep them?
Craig Barrett: The U.S. Universities are still the best in the world. The Stanford’s, the MiTs, the Michigan’s, Arizona State is rising in capability, U of A. They have the best engineering schools in the world. Historically, foreign students have voted with their feet and come to our universities. The problem now is, if you look at an engineering department at Stanford or MiT, the majority of the kids are not U.S. nationals. They're foreign students, still. So we attract these foreign students, very bright, we give them a great education, and then what do we do? Go home. We're not going to give you a green card. We're not going to give you a Visa. Go home. This is crazy. Taxpayer money helps educate these people. They're the best and brightest in the world. What we ought to do is something that Intel proposed about 15 years ago, is staple a green card to every diploma giving -- in the math, sciences, engineering area, to a foreign national, just if they graduate from a U.S. University, staple a green card and say, we welcome you. There's actually a bill in Congress now which is the staple act which says exactly that. But it's taken us 15 years to get it there.
Ted Simons: Do you -- the U.S. has, over the years, we have such little time, I really wanted to get into this especially -- we hear these stories, we're failing at this, we're behind the scenes on this, and we're trailing in that. And yet when it comes to innovation and creativity, America always prides itself on being the ones that find the bill gate’s and the ones that find the inventors. Are we still that country and are we going to lose a little bit of that if we become test oriented, science oriented? Where does innovation play in all this?
Craig Barrett: It really helps if you want to be innovative, to understand the problems you're trying to solve. And that's where math and science and engineering education becomes so important. You can be a Mark Zuckerberg and drop out of Harvard, or Bill gates and drop out and Microsoft. That's the exception. Most entrepreneurs have a good solid education. And what we want to do is build on what the U.S. has had historically. Great Universities, great Universities do two things. They educate people, send them off in the economy, and spin off ideas. That's the basic research. Bright people, good ideas, that's the foundation of innovation and entrepreneurship. You mix in a little venture capital money, you mix in a societal attitude which is no fear of failure, you go to Silicon valley today and you look at a new business proposal, most of the principles on the business proposal have three failures on their resumes from prior start-ups. In the U.S., there's a gold star by each one of those failures, because it's experience. You know what not to do next time. We're about the only country in the world that still treats failure that way. But other countries are learning. To give you one very simple example, Intel is the biggest high-tech venture capital country in the world. And the -- and invest more money in more high-tech venture start-ups than anybody else in the United States. We used to invest 90% of our money of our effort in the United States. Today it's only about 50% in the U.S. Where is the other 50%? China, India, so when you look at those countries, don't think they are just low labor costs, mass manufacturing. They're filled with entrepreneurs as well, who are well educated.
Ted Simons: We've only got about 30 seconds left. Very quickly, when it comes to Arizona, education, innovation, the future, are you optimistic?
Craig Barrett: There are some positive signs, but if you look at the current metrics, you would be pessimistic. Our K-12 system is way down on the ladder in the U.S. But there's some good things happening there. ASU, U of A are coming up. If I had one message to give your viewing public, it's, during this budget crisis we have, lets not chicken choke our education investment. Take the Universities, set them free, let them charge market competitive tuition, the state can still provide scholarships to poor students. But let’s set them free so that they can grow and be wealth creation centers for the state.
Ted Simons: It’s good to see you again. Thanks for joining us.
Craig Barrett: My pleasure.
- A mid-week legislative update with Arizona Capitol Times reporter Jim Small.
- Jim Small - Arizona Capitol Times
| Keywords: legislative
Ted Simons: A bill aimed at prompting legal action to change the interpretation of automatic birthright citizenship fails to get out of the senate judiciary committee and house speaker Kirk Adams introduces changes to public employee retirement systems. Here with the latest from the capital is Jim Small A. reporter for "The Arizona Capitol Times" and a regular on "Horizon" mid week legislative update. Jim good to see you. Thanks for joining us. Let's get going now, let's start with the pension program. What speaker Adams is doing here, a variety of changes, correct?
Jim Small: Yeah. This would be a very dramatic overhaul of the way state pensions work. And it important to note while the pensions are managed for the state, this affects government workers at all levels. Counties, cities, everyone from folks who work down in city hall, to police and firefighters, to city street workers, to folks who work for the government, work for say the house and senate or the governor's office.
Ted Simons: Among the ideas, raising the age of retirement. That would be for new-hires only?
Jim Small: Correct. Pretty much all these changes are going to be prospective, going forward. Because the constitution doesn't allow you to change the benefits of people who are already retired, or who are already in the system. So it would be for people who are hired after the effective date of the law, which I think for some is 2012, others, it's a little bit farther down the line. But it would raise the retirement age, make it change the formula for when you're able to retire, which basically means people are paying into the system a little bit longer and drawing out less, because they're retiring at a later age.
Ted Simons: Cost of living adjustments, those things either -- do they go away completely?
Jim Small: Yes, this calls for those to be scrapped entirely. That's one issue I think you'll get -- they'll get a lot of blowback. Even if it were to go through and they would say no more cost of living adjustments, I've talked to a couple people who really feel that is an issue that could be litigated very quickly. You could have retirees who say, look, I worked for 25 years and was promised to get X and now I'm not getting cost of living, so they would take it to court.
Ted Simons: There is a lump sum payout, this is confusing, but if you work past retirement age you have the option of getting these lump sum payouts. Do I get that right? If so, why does that have to go away? What’s going on?
Jim Small: The one you're referring to, it's for the public safety officers. It's for police and fire. And folks like that. And what it allows them to do, if they work 20 years they can basically defer their retirement and take a lump sum payment, but promise to work for another five years, and it was instituted as a way to keep some of the veteran firefighters and police officers working a little longer, to help improve public safety. So they weren't rotating them out at an age where maybe they're only 45 years old and they've got another few years, but they qualify for retirement. It is a little bit of an expensive proposition, and I think that's the point that speaker Adams is going after, that this costs a lot of money, and if we just raise the retirement age and say, you can't retire until you serve 25 years, you don't have the need for this extra five-year program.
Ted Simons: How underfunded are the state retirement systems right now? How serious an issue is this?
Jim Small: Well, certainly some of them are more underfunded than others. The one for elected officials, for state legislators, for state officials, city council members, is very much -- that's funded about 60% Of what it pays out. Others are a little -- in a little more healthy shape, the best is about 83%, which is the general state retirement system. Help for retirement systems can be between 100%, some down to 85%. But there's no doubt these are not taking in enough money -- they're paying out a lot more than they're making, some of that is because of the benefits that are being paid, other parts of it are because the economy crashed. So that did hurt some of the investments this money was in.
Ted Simons: So what kind of response now are we getting from public employee groups?
Jim Small: They're clearly not happy with this. These are things that in some cases they’d work hard to get. Certain benefits they worked hard for over the past 20 years, there's going to be a lot of resistance to this idea from the unions. I don't think that's a surprise to anybody. The bigger question is going to be, what kind of resistance is speaker Adams going to find in his own caucus, in the senate, among Republicans and even with the governor's office? This is a plan that he spearheading, and he put this together himself, and he said he's briefed other folks, but didn't gather their input beforehand, and bring them to the table to help craft this.
Ted Simons: Are there rumblings he could be tough sledding here?
Jim Small: I think it's only natural that there probably will be some divisions. There are a number much people who have been looking at the retirement issue in various formats who have their own ideas as to what they want to do with it. And so I think now all this issue – this stuff is all out on the table, so it's a matter of, OK, here's the plan, let's try to work on it see if we can come to some kind of an agreement.
Ted Simons: Speaking of tough sledding, a couple of birthright bills, senate judiciary committee, interesting goings on there, because a lot of folks thought the birthright question was going to come maybe not sail through, but certainly have a more welcoming audience. What happened there?
Jim Small: It was heard, on Monday afternoon, and a hearing testimony, lasted about three hours, and they ended up not voting on the bills because it was clear to those who were paying attention they weren't going to have the votes. It was six Republicans and two democrats, and there were two Republicans who were going to vote against it, which would have made a 4-4 vote and killed the bills right there. So instead of doing that, they went ahead and held them after they did all their testimony, and they recently just moved them out of the judiciary committee and into the appropriations committee, which is also has a high Republican advantage and is probably a little more of a friendly arena for those bills.
Ted Simons: We should mention both bills, one defines -- creates an Arizona citizen and the other requires Arizona to join a compact with other states regarding citizenship for those two birth certificates, and these sorts of things. The two Republicans that asked the most questions, is this the kind of thing that could come back -- was this an indication of courage on their part that could slap them there a little bit later on from the president?
Jim Small: Well, sure, I think any time you go against the president and against leadership on an issue, you run that risk. Certainly. Adam Griggs acknowledged that earlier this week, look, this is something that could hurt me politically, whether it's at the capitol or its at the ballot box, but I think it's important enough that I can't just sit by and let this happen. So that was why you saw him take the stand he did. And it will be interesting to see how it moves forward. Most people expect it will come out of the appropriations committee, but whether it is able to get enough votes to pass on the floor I think is a completely different kettle of fish.
Ted Simons: Last question, real quickly, a choice made now for the redistricting panel, Russell Pearce made his choice, Tucson Republican?
Jim Small: Tucson Republican Richard Stertz, who has been in the news in the past several days, a couple stories both here in Phoenix and in Tucson, about some tax lien issue he had in the past, and some unpaid taxes he currently has right now for some property in Tucson.
Ted Simons: And these are not so much that he had these problems, but he was asked about the problems on his application for the commission and he said there were no problems, and now we find out there are problems.
Jim Small: Right. This was stuff that was omitted from that form, which did ask a lot of probing questions, and asked for a lot of information, and it wasn't there. Obviously it was not an issue that was a big enough flaw for senator Pearce, he decided that Mr. Stertz had the best qualifications and would do the best on the committee.
Ted Simons: And real quickly, there was also some concern that he's very close with Jesse Kelly down there, GOP congressional candidate in the last election and question marks there as well.
Jim Small: Yeah. And he did have -- does have ties to Jesse Kelly, he works for a company that recently hired Jesse Kelly to work for them, and he also was a member of a group that funded some attack ads against Kelly's opponents in both the Republican primary and in the general election.
Ted Simons: All right. Jim,good stuff. Thanks for joining us.