Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Governor McDonnell: Confusion and Uncertainty Best Describe the President’s Economic Agenda

Congress is out on vacation, the President has a jobs "plan" that he will announce in September, and 17 percent of Americans are out of work.

C-suite insiders tell me it is the lack of leadership and the jobs picture that are weighing on the economy and they are not impressed that DC is out on vacay while millions of people are struggling to put food on the table. But like the real estate market, where different parts of the country are healing faster than others, the economy is also one big puzzle made of up of many different pieces. Some states are fairing better than others. Why? Because of the leadership and the business climate they are creating, according to my sources.

In a recent Pollina Corporate Real Estate Inc. report, nine out of the top 10 pro-business states, are led by GOP governors. These rankings echo similar findings by CNBC's own America's Top States for Business. I caught up with the new chairman of the Republican Governor's Association and Governor of CNBC's number one ranked state, Gov.Bob McDonnell (R-Virginia). McDonnell recently took over the RGA when Texas Governor Rick Perry announced his candidacy for President of the United States.

LL: Job creation is one of the key themes this election as the true unemployment rate is around 17%. What are these States that were ranked in the top Pro-Business States are doing right?

Gov. McDonnell: In Virginia, we’ve focused like a laser on making the state more attractive for business to invest in. That begins with keeping taxes low and litigation and regulation to a minimum. Most of the other top-ranked states are following a similar job-growth prescription.

LL: The Democrats and Republicans have very different views on how to jumpstart jobs. What would you like to see come out of Washington?

Gov. McDonnell: I'd like to see policies that reward investment and job creation, and allow our job creators to keep more of what they earn so they can use that capital to expand and innovate. That's how we will get new jobs created and our people back to work. Also, job creators small and large need to have the confidence that the rules aren’t going to change. Sadly, confusion and uncertainty seem to best describe the President’s economic agenda. Lack of conviction and certainty are what job creators hate most and what forces capital to the sidelines. Washington needs to do a better job of instilling confidence in the private sector, and it’s possible to do so even with divided government. Here in Virginia, I have a Democrat-controlled state Senate and a Republican majority in the Assembly, but we’ve been able to come together to get things done on the important issues.

LL: There are many things a state can do to become more business-friendly. What is the number one thing on that to-do list?

Gov. McDonnell: A governor needs to be a tireless advocate for his or her state. Everywhere I go I tell the “Virginia story” about why Virginia is a safe and smart state in which to expand or open a business. We also consistently and regularly stand up to prevent any chipping away of the cornerstones of economic success - limited litigation, stable and predictable regulation, a tax structure that rewards success, and a strong Right to Work law that makes it clear to employers that this is a state in which job creators can grow and expand.

LL: You have taken over as Chairman  of the Republican Governor's Association as Texas Governor Rick Perry (R-TX) announced his campaign for President. The Lone Star State recently became the first in the nation to achieve its pre-recession employment levels. Some would say it was easy to achieve that success because Oil is a major employer in that state. Do you think that comment diminishes what the Governor has accomplished?

Gov. McDonnell: Not one bit. That argument doesn't make sense to me.

Are folks saying that the paychecks that come from those oil jobs are somehow not real? Tell that to the families who depend upon them!

Every state has local attributes it can and should maximize to grow its economy and create jobs. Good for Texas and Rick Perry for leading in the energy field. In this economy we need every good paying job we can get. Also, even if you take energy jobs out of the equation, Texas is still increasing jobs faster than any other state, thanks to Governor Perry’s policies. The reason is simple. Like Virginia, Texas has low taxes, limited litigation and stable regulation.

LL: Would you like to see Governor Perry win the GOP nomination for President?

Gov. McDonnell: I think Governor Perry would be a very strong candidate, and we have a number of candidates who would be strong nominees. I’ve said that I’m not going to think about endorsing anyone until after November, but I do think governors are uniquely qualified to be President.

LL: What are some of your Governor colleagues telling you about their worries if any about the SP downgrade?

Gov. McDonnell: The S&P downgrade frustrated many governors, who saw our states’ credit ratings threatened by the dysfunction in the nation’s capital. For example, in Virginia, sound stewardship of the state’s finances has resulted in the Commonwealth holding a AAA bond rating since 1938. All three bond rating agencies praised Virginia's fiscal situation during a January visit by leading lawmakers and me to New York City. However, despite the Commonwealth's prudent actions at home, Moody’s Investor Service recently placed Virginia and four other states on review for possible downgrade if the federal government’s credit is downgraded first. The sole reason: federal issues.

At the same time, we’ve had encouraging news out of states like Michigan, Florida and Ohio, which thanks to the budget reforms instituted by the new Republican governors, have seen their credit ratings upgraded this summer. If states maintain budget discipline, we can also maintain strong credit ratings.

LL: What is the biggest challenges facing states right now?

Gov. McDonnell: Creating an environment that encourages job creation and balancing our budgets.

LL: The President's health care reform law suffered another blow last week after the Atlanta Court of Appeals ruled it is unconstitutional to force Americans to buy health insurance. What is your outlook on this as the Supreme Court will most likely see this case next year?

Gov. McDonnell: Virginia was one of the first states to sue the federal government over Obamacare, and we believe it is unconstitutional. The decision in the appellate court was certainly encouraging, but we know the legal battle is far from over. Ultimately this will be decided by the Supreme Court of the United States and for the sake of finality and certainty that needs to happen as quickly as possible.

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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."