MMA Convention Remarks of Knight Kiplinger

(from Maine Townsman, October 2007)

EDITOR’S NOTE: This following is the text of the keynote speech delivered by Knight Kiplinger at the Opening Luncheon of the 2007 MMA Convention.

It is a great pleasure to be with you today in a state that you love – and that I love to visit.

I have been coming to Maine regularly for 37 years, as a journalist and tourist. My first visit was around 1970, when I was a young reporter at the Griffin-Larrabee News Bureau in Washington. The bureau was run by a Maine native, Don Larrabee, and it provided Washington coverage to all the major newspapers of Maine – the PortlandPress-Herald, BangorDaily News, and other dailies. I had the honor of observing and writing about such fine public servants as Margaret Chase Smith, Ed Muskie and Bill Cohen.

In the three decades since the ‘70s, in many summer visits, I have explored the coast of Maine, from Kittery to Eastport. I have hiked the cliffs of Monhegan Island, picked blueberries in Washington County, witnessed a sunrise on Cadillac Mountain, watched wooden boats being made at the Maritime Museum in Bath, and felt the towering sea spray at Schoodic Point.

Taking a Fresh Look at Maine

But it’s been more than three decades since I followed the affairs of Maine as a Washington correspondent, and I don’t pretend that summer visits as a tourist, however frequent, are a substitute for serious study of your state. So in preparation for this visit, I immersed myself in some intensive study of Maine, poring over statistics and reading reports.

I want to tip my hat in appreciation to the authors of two in-depth studies in particular – the Brookings Institution report, Charting Maine’s Future, published last year; and the 2007 report of the Maine Economic Growth Council, published earlier this year under the auspices of the Maine Development Foundation. Both of these are models of insight, clarity and common sense, the likes of which I rarely see. Many of my statistics come from these reports, but in the interest of time, I won’t cite them each time.

I want to talk today about Maine’s economic future. I am chastened in this challenge by the wise words of Yogi Berra, who once remarked, “Forecasting is difficult – especially of the future!”

Maine ’s Recent Past

First, a snapshot of your recent past. Since 2001, your state GDP – the value of what it produces in goods and services – has usually been growing between 1% and 2% a year, well below the growth of the broad U.S. economy. Personal income has grown a little too, but also at a slower rate than the nation. Net job growth has been OK. Maine outperformed the nation during national recession of 2001-‘02, but lagged the nation over the last two years. Declining manufacturing jobs have offset gains in other fields, notably health care and government. Maine’s jobless rate of 4.8% is just slightly higher than the national rate of 4.6%; both are probably headed upwards in the coming year.

The brightest bright spot in the Maine economy has a boom in its international exports, which have been rising at double-digit annual rates, only slightly less than the nation’s surging exports. Maine’s leading exports continue to be paper and wood products, electronics, and seafood. (I’ve read that Maine is the world’s #1 exporter of blueberries and toothpicks.)

All in all, we see a state economy that hasn’t done badly – that is, it’s not contracting, but slowing growing, in total production, jobs, and personal income. But it hasn’t done as well as many of its fellow states in the nation – or even its peers in New England, such as New Hampshire and Vermont, with whom it has much in common geographically and culturally.

Resumption of Population Growth

The most notable new trend in Maine is, wonder of wonders, solid population growth. After negligible net gains in the 1990s, Maine is now seeing some pretty decent growth...doubling its own annual growth rate since 2000. At a .7% average annual rate, it’s still growing more slowly than America – which grows about 1% a year – but in the New England region, Maine’s recent growth has surpassed all but New Hampshire.

This isn’t due primarily to natural increase – the annual surplus of births over deaths. And it’s not due to foreign immigration, which has been strong virtually everywhere in American except Maine. Your state has the lowest percentage of foreign-born citizens in all of the United States, at about 3%.

No, Maine’s population growth is due largely to in-migration by fellow Americans from other states, especially New Hampshire and Massachusetts. Relative to the small size of your current population, Maine has recently ranked 5 th behind Nevada, Arizona, Florida and Idaho in net per-capita in-migration.

While a gratifying number of these new arrivals are in the prime of their working lives – 25 to 44 years old – more of them are affluent retirees. All these newcomers, of all ages, tend to have higher levels of education than the current Maine population, and when they get here, they earn more. This is good for Maine – even if the newcomers get a little pushy in their demands for public services just like those that they enjoyed back from they came from.

The newly arrived retirees are helping keep Maine the oldest state population in America, with a median age of about 41, nosing out Florida for the top spot. They don’t require schools, and they’re not a big social services burden. On the other hand, they’re less useful to Maine’s economic development than young adults are. The most sought-after age cohort – well-educated young adults – are not coming to Maine in droves, and a fair number of your home-grown youths leave for more-exciting urban places, like Boston and New York.

This means that, even with moderate population growth, the labor market is pretty tight in Maine, with many businesses hungry for eager young workers to fill vacancies. You in government will face this problem big time, as your Baby Boomer civil servants start to retire in large numbers.

There are some signs of improvement in Maine’s attraction to young adults, however. Some recent research indicates that 55% of Maine high school graduates who go to college out of state eventually return to Maine to start or further their careers. But the obverse is notable too: almost half don’t return to Maine. This Maine brain drain – and ambition drain – will likely improve with an improving state economy, over the long run.

A Slowing National Economy

In the near term, there are new storm clouds on the horizon of the state and the nation: A serious slowdown in the national economy, driven by a major decline in homebuilding and home sales and rising rates of foreclosure as once-low adjustable rate mortgages are reset at higher levels. U.S. employment growth has slowed dramatically. Consumer spending is hardly growing at all.

The dreaded “R word” – recession – is in the air. But my colleagues and I at Kiplinger believe that the U.S. will narrowly avoid a national recession, which is defined as a sustained period (six to nine months), of actual contraction in national output, not just slower growth.

Why no recession this time, just five years after the last one? Well, consumers – whose spending accounts for two-thirds of U.S. GDP – are getting a little tired from years of overspending. But there will be no massive collapse of consumer spending. While U.S. job creation is not robust right now, it will just about offset job losses across the whole economy, so total employment will not decline. And those who are employed will continue to see wage gains that nicely outpace the rate of the inflation.

Business spending is holding up pretty well, as is government spending. Corporate earnings, while not continuing the sizzling double-digit annual growth of the past four years, will nonetheless continue to rise by strong single-digit rates next year. Most businesses have strong balance sheets, without excessive debt. The Fed will provide some stimulus with as many short-term rates cuts as are required.

An unappreciated strength of the U.S. economy right now – and a big factor in keeping growth barely positive – is strong overseas demand for American exports: great American-made manufactures like aircraft, heavy construction machinery, chemicals, electronics, power generation equipment, medical devices, plastics, pharmaceuticals, farm and wood products, pollution remediation devices, and much, much more. It’s a myth that manufacturing is dying in America; output steadily rises, produced by fewer workers, due to soaring automation and productivity.

Weighing all the strengths and weaknesses in the balance, I foresee continued national growth, but at a very low level...barely 2%. It won’t feel very good. And two important sectors, homebuilding and autos, will continue to struggle.

How Will Maine Fare?

Maine should brace itself for some version of the national slowdown now underway. If you’re lucky, you’ll do about as you did in the last national recession, when Maine experienced a shorter and milder slump than the rest of America, because it hadn’t undergone the craziness of the dot-com technology mania of the late ‘90s. This time, Maine didn’t experience as much overbuilding and real estate speculation as many other states, so perhaps it will not suffer as much. Generally, Maine doesn’t fly as high and as fast, so you don’t fall as far and as hard.

But you can expect more softening of real estate, auto sales and general retail, with the resulting slowing or decline in sales tax revenue. Personal and corporate income tax receipts might flatten too. And an up tick in the unemployment rate will boost the cost of a wide array of social services for the jobless. And if home prices decline in some communities, owners will reasonably expect this to be reflected in their next property tax assessments.

All of this will put a lot of pressure on state and municipal budgets all over America, including Maine. Some state governments around America – such as Michigan – are responding with tax increases, while others are scrambling to find ways to their trim their spending. Most are doing some of both.

There may be silver lining for Maine in the long decline of the dollar in international currency trading. Perhaps lots of American tourists will be discouraged by the weak dollar from traveling overseas, so Maine and other U.S. destinations will enjoy a surge in tourism by our own citizens, as well as foreigners enjoying their strong loonie, euro and yen. And I expect that global growth will remain strong, even as the U.S. economy slows, so the demand for Maine’s exported products will continue to growth at a strong clip.

Maine ’s Long-range Prospects

Looking further out at the longer-range prospects for the Maine economy, I see a continuation of a very healthy diversification that’s been going on for the last 20 years.

Gone on the days when Maine was overly dependent on paper and lumber, and such simple manufactures as shoes and textiles. The big job declines in those industries have been painful, but they are pretty much behind you.

Maine’s state GDP today – the annual value of what it produces in goods & services – is distributed very broadly across different industries, from high-tech manufacturing and boat building to tourism, health care and financial services. Maine is the headquarters or major site of numerous world-class companies that are prominent in a wide array of industries: L. L. Bean; Unum/Provident insurance; Fairchild and National Semiconductor in microelectronics; Bath Iron Works; mapmaker DeLorme; IDEXX in biotech and Jackson Laboratories in genetic research.

Maine’s economy has never been based primarily on large employers, and that’s even more so today. It ranks very low among all states in the number of its firms employing more than 500 workers. It is now, and probably will continue to be, an economy of small and medium-sized businesses. Nothing wrong with this, since much of the job creation vitality in America today is in small business, as large, bloated corporate bureaucracies shed jobs.

It’s exciting to see a lot of entrepreneurial energy all over Maine today: a revival of boat-building, often using new composite materials developed in Maine; start-ups in electronics; firms developing technologies for making biodiesel from crops and converting wood to ethanol; new kinds of high-value agriculture, including organic crops; specialty processed foods; and aquaculture. Many of these new companies are spin-offs of research at the University of Maine and other state colleges. None of these start-ups is a household name yet in Maine, let alone America, but who knows – something they may surprise you.

Positioning Maine for Success

How Maine should position itself for prosperity in the next five, 10 or 20 years?

You should start by asking yourselves some of these questions:

— Do you want Maine’s population to grow, and if so, by how much, and where? It’s not a silly question; in some places, all over America, growth is a dirty word; they tend to the places where growth has been strongest in recent years, and is therefore controversial; I gather that growth is viewed as a mixed blessing in some parts of Maine too.

— If you’d like to limit population growth, are you OK with its implications – a rapidly graying population, tight labor markets, and low economic growth?

— Do you want to let Maine’s people live anywhere they wish, which has always been the American tradition? Or do you want to encourage them (or force them) to stay in urban service areas, blocking them – by land-use restrictions – from spreading out to less-dense areas, as Americans tend to do when left to their own devices?

— Are you serious about developing and attracting the new, high-wage knowledge-based businesses jobs that all states are seeking?

— If so, are you willing to spend what it takes on higher education, worker retraining, R&D promotion, and even tax incentives to lure relocating businesses?

— Finally, are you willing to address the state’s reputation – well deserved – as a high-cost place to do business, in terms of state and local taxes, and costs for energy and health care?

Maine’s answers to these questions will determine its prosperity in the decades to come. And remember, every state and region in America is working on the same challenges, with varying degrees of commitment. From the Sun Belt to the Frost Belt, economic development competition is fierce, which is tough for any one state, but great for America as a whole.

The key components of economic development anywhere are these three factors:

1) a skilled, industrious labor force;

2) a hospitable business climate, with a moderate tax and regulatory burden. Note the word “moderate” – not necessarily the lowest in America, but not the highest either;

3) a high quality of life for workers and their families...good local schools, culture, public safety, healthy environment, excellent recreation and other leisure activities.

Economic Development Pre-Conditions

Let’s see where Maine stands on these today. Taking the last first, you’ve got a wonderful quality of life: low crime rates, fabulous leisure and activities, lovely towns and countryside, breathtaking coastal and mountain scenery; excellent performing arts, museums, galleries and historical resources. By national standards, your public schools are producing above-average students. Your community colleges are being overhauled to make their education more relevant to the job skills of your employers. Your private colleges – such as Bowdoin, Colby and Bates – are nationally renowned for their rigor. The University of Maine – while not ranking with such top public university systems as Illinois, Michigan or California – is attracting more federal dollars for research than it used to.

How about your labor force? It’s pretty well educated, with a good work ethic. About 35% of adults over 25 holding some sort of post-secondary degree – associate’s, bachelor or advanced line with the national average. But Maine lags the New England regional average, which is 42%. The lag is most pronounced in advanced degrees – master’s and doctorates, which are critical to the labor needs of high-technology businesses of all sorts.

Does Maine’s small population and low density put it at a disadvantage in economic development? Yes and no. In some ways geography matters less today in business development, because the Internet has made it possible for many kinds of knowledge businesses to be based just about anywhere there are brains and a Web connection – Silicon Valley or Lewiston, Boston’s Route 128 or Augusta.

On the other hand, it seems that that creative people – scientists, engineers, artists, computer programmers, designers, etc. – are gregarious; they like to congregate in places with a high density of fellow creative people and businesses, and this tends to be in and around big cities with a good quality of life – like Washington, Boston, San Francisco, and Minneapolis. The creative class likes cities more than suburbia. his is why states everywhere, including yours, are appropriately concentrating their resources on revitalizing their older cities.

Maine is doing well in this regard. From my observations in recent years, your cities – while small by national standards – are increasingly vibrant, pleasant places to live and work. But continuing progress is impeded by high urban property taxes and inflexible building codes that make in-fill development, both residential and commercial, very challenging.

Some of the highest-growth, most dynamic cities and states in America are highly diverse by race and ethnicity. Maine, by contrast, is the least-diverse state in America – about 96% “euro-white”...non-Hispanic whites of British or European descent. Blacks, Latinos, Asians and Native Americans comprise barely 1% each. This lack of diversity might give some large employers pause about setting up shop in Maine, if the company’s current or prospective workforce is highly diverse.

As I noted earlier, Maine is not a notable destination for immigrants, whether highly skilled tech workers or low-skill workings seeking jobs in agriculture, construction, food processing or domestic service. This is a mixed blessing for Maine. You don’t have the assimilation issues and social service costs that high-immigration states must contend with. On the other hand, you aren’t getting the benefit of the talent and burning ambition that characterize so many young immigrants from Asia, Latin America, Africa and Eastern Europe.

Overall, Maine is looking pretty good on quality of life and adequacy of workforce. Now let’s look at the business climate of the state. This is where things get pretty sticky.

Maine ’s Business Climate

There are many ways to measure a state’s business climate, and each one gives differing weight to various cost factors – wages, energy and health care costs, rents, taxes, etc. Maine’s ranking varies from one to the other. But there is no escaping the fact that Maine is a high-cost place to do business – and American business knows it.

As the Maine Economic Growth Council wrote in their 2007 report: “The cost of health care and the tax burden in Maine stifle the creation of wealth and business profits, and act as deterrents to doing business in the state. Maine must bring them in line with the rest of the region and the U.S.”

Bruce Katz, of the Brookings Institution, made similar observations when he introduced their superb report, Charting Maine’s Future, last October. The Brookings study called for “a reduction in taxes that are stifling creative activity” in Maine. It was referring to state income taxes and high local property taxes in Maine’s older communities. At the same time, Brookings suggested higher and broader taxation of services, especially those used largely by tourists and summer residents, as well as higher property taxes on vacation homes owned by out-of-state folks. I concur in these recommendations.

According to the Tax Foundation, in 2006 Maine’s state and local taxes comprised an estimated 13.5% of personal and business income. That’s the highest among all 50 states, and runs about three percentage points higher than both the United States average and Maine’s neighboring states in New England.

Maine hasn’t always been #1, but over the last 30 years it has almost always ranked in the top 10 states for total tax burden. It vaulted to the #1 position about a decade ago, mostly because other states have done more to address this problem than Maine has.

Maine’s goal should be to get its tax burden down to the middle of the pack, where there is some protective cover – maybe the second quintile. You don’t need or want to be near the bottom.

So why is Maine’s tax burden so high? Is it because the state’s per-capita personal income is much lower than other states, so even a modest level of government services comprises a high percentage of that income? Or it is because government in Maine – state and local – is spending relatively more than other states in providing basic public services to its citizens?

It looks as if the answer is “some of both.” In 2005, Maine’s per-capita personal income – about $31,000 – was about 11% lower than the national average. Over the last 10 years Maine’s ranking in personal income has bounced around between 33 rd and 37 th among the states – in the lower quarter. It should be noted that your neighbor, New Hampshire, ranked 6 th in America in per-capita income in 2005, and Vermont has made impressive gains over the last decade, rising from 33 rd to the middle of the pack, 25 th.

Maine ’s High Cost of Government

How about your cost of government? No doubt about it, it’s high compared with other states, even other rural states. This is most pronounced in state government, and much less so in local government, where you MMA folks exhibit frugality, with liberal use of citizen volunteers and low-cost local vendors.

While Maine has an enormous number of local government units for a small state, fragmentation of governance does not seem to mean inefficiency in management.

Across America, high governmental expenditures are usually associated with social factors like high crime, a high rate of poverty, expensive assimilation of immigrants, pollution remediation, or a large school-age population. But Maine, blessedly, isn’t notable for any of these special governmental burdens.

So the state’s high expenditures must be explainable by other factors: Perhaps it’s Mainers historic preference for a high level of governmental service. Or perhaps it is inefficiency in the delivery of those services. Most likely, it’s some of both.

The Brookings study last year stated flat out that the number-one government efficiency challenge in Maine is the high cost of K-12 education, due to the large number of separate school districts and excessive numbers of school administrators. Is Maine getting dazzling student performance for these very high per-pupil expenditures? No, not dazzling, but Maine can be proud that its students are comfortably above national averages.

After education, Brookings said, “state spending on health and corrections appear both heavy and possibly inefficient,” compared with peer states that are small and largely rural. Ditto for state spending on higher education administration, financial administration and public buildings.

Maine’s school consolidation plan is a good first step towards reining in or even reducing its K-12 administrative expenses. But the devils are in the details, and it won’t be easy. Perhaps the state’s corrections system will be next.

What about health care? I was surprised to learn that Maine is #1 among all 50 states in the percentage of its population that is covered by Medicaid. Medicaid is designed to give poor people better access to health care, but Maine’s poverty level is no higher than the national average. So I can only assume that Maine has greatly broadened eligibility for Medicaid to citizens well above the poverty line, with very generous benefits. While this is socially progressive and very admirable, I wonder whether the state can really afford it – now and especially in the future.

Crowded-Out Public Needs

What the Brookings report highlighted in great detail is that state expenditures in a few key areas – especially education, health and human services – have risen several percentage points in recent years to 80% of the state budget. Meanwhile, spending on everything else has fallen to just 20%. The “everything else” that is being crowded out includes programs that are essential to Maine’s future prosperity: R&D spending, transportation infrastructure, economic development promotion, job retraining programs, and environmental conservation.

While the Brookings study was very critical of overspending by state government, and generally complementary of the frugality of local government, I hope that you in the MMA will also look for ways to deliver services more efficiently to your citizens.

I know that that providing government services in rural areas, to a widely dispersed population, will always cost more, per capita, than providing similar services in a compact, densely settled state. It is difficult to boost efficiency, achieving what academics call economies of scale.

But trying to achieve these economies of scale is a worthy goal, however challenging it will be, both managerially and especially politically. No doubt there are some ways, in some public services, that neighboring communities can share the purchasing and administration of certain functions. I know you’ll continue to explore this as fiscal pressures mount.

Disincentives for Business Development

Does Maine’s high tax burden scare off entrepreneurs and businesses looking to relocate or place a new office or factory in Maine? Not by itself, it doesn’t. After all, research shows that other things matter more than taxes in economic development – such as a good supply of skilled labor at moderate wages, a high quality of life, and fine schools. And many other states with fairly high tax burdens – such as California, Maryland, New York and Massachusetts – are very attractive to high-tech business. But high taxes are a big negative for Maine, in combination with high energy costs and employer health care premiums.

Your high top tax rate on personal income – at 8.5%, the 8 th highest rate in America – kicks in at a very low income level...about $18,000 for single people and $37,000 for joint filers, which is well below the median household income level in America and in Maine.

This high income tax rate, according to Brookings, “prompts widespread complaints that may be sending negative signals to retirees, relocating workers, and high-income individuals, potentially discouraging residency” in Maine.

As the Brookings report notes, “tax rates and burdens do become important reference points, both within and outside the state – reference points that can become key facts in a self-fulfilling narrative about a state’s business climate.” In short, high taxes are a big PR problem for Maine.

Maine needs to address this PR problem – which is one of both perception and reality. The only way you can get your tax burden number down is by holding government spending to a lower rate of annual increase than personal income growth – which has not been the case in recent years. Or, for a more ambitious improvement, by flat-lining governmental expenditures as personal income grows.

Where to Cut, Where to Expand

And the only way the state is going to accomplish this is by cutting costs in some areas – such as K-12 education, the penal system, health and general administration – and shifting the money to other goals. I am not implying that this is easy. Far from it, it’s the most difficult thing for government to do, because every area of government has its constituencies and zealous defenders.

On taxes, you probably need to do something dramatic to get national attention, such as a big cut in your personal and corporate income tax. It took Massachusetts many years to reverse its old reputation as “Taxachusetts,” but the economic results have been well worth the effort.

I agree with economists who argue that a community gets the greatest economic benefit from putting high taxes on consumption – what people buy, especially discretionary goods and services – and very low taxes on earnings and savings. Don’t tax hard work, creativity and frugality, but tax high living.

And I see no good economic reason to tax the consumption of tangible goods but not services. Goods and services should be treated similarly. But the sales tax rate can vary by kind of merchandise...little or no tax on basics like food, drugs, haircuts and items of clothing under a certain price. Higher rates can be levied on luxury goods and services consumed mostly by the wealthy.

Taxing Visitors More

I agree with those who feel that Maine should put much higher taxes on spending by out-of-state visitors and seasonal residents – those whom Mainers quaintly label as being “from away.” The poster child for this fiscal approach is Nevada, which has no personal or corporate income taxes, but supports most public services with taxes on tourists. That’s an extreme example, of course, dependent as Nevada is on gambling taxes, but Maine could learn from the general concept.

It’s been noted that Maine, among all 50 states, has the highest percentage of second homes – an estimated 16% of all dwellings. And of these second homes in Maine, 70% belong to out-of-state owners. It would make sense for your state to ease the property tax burden on full-time Mainers and shift more of it to non-residents, by jacking up all property taxes and simultaneously enlarging the homestead exemption, to essentially freeze taxes on locals.

Maine’s passionate visitors, like me, come here to enjoy the great quality of life and scenic beauty that Maine offers, so why shouldn’t we pay more to support that quality?

Maine could hike its sales tax on lodging to at least the regional average of 8%, but ideally, even higher – into double digits. Hospitality taxes could also vary by season – higher in the summer and fall, lower in winter and spring. And Maine should seriously consider taxing summer property rentals and aircraft chartering.

I imagine the hospitality industry will howl, but I don’t think these higher sales taxes will dampen tourism at all. Tourists to New York City grumble about 13% lodging taxes, but they keep on coming to the Big Apple, because it’s unique. Maine is unique, too, so don’t sell yourself short. Hold your heads high, and charge what you’re worth.

The goal of all this government streamlining and tax reform should be a lower total tax burden on the citizens of Maine. If it’s done right, it will free up current government funding – and still generate plenty of revenue – for higher future public investment in goals that are now being short-changed.

Envisioning a New Maine

All over Maine, thoughtful people in business, government and academe are looking beyond the state’s current challenges at a future economy that might be very different from today’s – a 21 st century knowledge-based economy.

This will be an economy that is based largely on high-valued goods and services created by highly educated workers. We tend to think of this as a services-based economy, and indeed, services are of increasing importance to Maine and the whole nation. But it’s too restrictive to define the knowledge economy just as a services economy.

Today’s manufacturing is, arguably, even more of a knowledge sector than services, driven as it is by scientists and engineers and their patents and new processes. Manufacturing, I believe, will always be an important part of America’s – and Maine’s – future. Any list of the hot high-tech sectors of tomorrow includes sophisticated manufacturing businesses, such as alternative energy, microelectronics, biotech and advanced materials. Maine should grab its share.

America in Transition

I’m the sort of guy who sees the glass of water to be half full, not half empty. Yes, America is going through an historic transformation. So is Maine. Transformations are always bewildering, often painful. And they are often mistaken for permanent decline.

A quarter-century ago, during the economic dark days of the late ‘70s and early 1980s, the gloom was thick in America. Commentators said America was going into a long, permanent decline, that Japan and Europe would leave the U.S. in their dust. My colleagues and I at Kiplinger said this pessimism was unwarranted. We said that America was being bold to put its house in order before other industrial nations had the foresight and courage to do the same. We Americans were taking our bitter medicine, I said, and it would make us stronger. America was doing what it does so well...reinventing itself.

Japan and Europe, I argued, were clinging to old ways of doing things, postponing the massive economic restructuring – especially reducing trade barriers and deregulating markets – that would be essential for future success in a tough global economy.

The last 25 years of global history proved the doomsayers wrong about America. It was Japan and Europe that fell behind. It was America that indeed led the world in innovation, job creation and economic growth among the large modern economies.

A Work in Progress

And we’re not finished yet, because America is always a work in progress. Our nation, and your wonderful state, still face many difficult challenges. But the first step towards overcoming them is facing up to them and acknowledging that transformation is never easy. From what I can see, Maine is doing just that. I’ve rarely seen such thoughtful introspection and spirited debate in a state.

You’ve got the talent to pull this off, and a long state tradition of resourcefulness and civic cooperation. I hope that you also have the will.

The coming years will be as fraught with danger as they will be rich in opportunity. You have my best wishes that you in Maine will be among those states that have the courage and adaptability to prosper in the challenging times ahead.