During the 2010 elections, one campaign phrase resonated across the country again and again: “Where are the jobs?”

Nearly a year later, with the economy slowly starting to rebound, the question remains, “Where are the jobs?”

The recession and financial crisis took a great toll on employers, leading them to shed jobs by the millions. A year after the administration’s “summer of recovery,” 14.7 million Americans, or 9.1% of the workforce, are unemployed. While there are some signs of economic recovery, employment isn’t one of them.

Washington may have helped boost the economy a little bit with the stimulus bill, but overall its public policy choices have made things worse, not better, many business leaders say.

A chief roadblock to a full recovery that includes robust job creation is the tremendous uncertainty caused by a tsunami of new regulations, mandates, and taxes. The health care and financial reform laws alone will result in billions of dollars in new taxes and fees, hundreds of mandates, and thousands of complex regulations. The Environmental Protection Agency and the Department of Labor are rolling out hundreds of additional regulations on everything from greenhouse gas emissions to workplace safety. Causing further anxiety is the administration’s 2012 fiscal year budget proposal that would raise taxes on successful small businesses.

In addition, Washington has failed to make the necessary targeted investments to spur economic growth and new jobs.

As a result, businesses are hunkering down, unwilling to hire and invest as they survey the ominous tax and regulatory landscape.

While Washington has been unable to execute a jobs strategy, business leaders and governors are filling the void, leading the policy discussion and, in the case of some governors, delivering concrete results.

Business Leaders Shape the Debate

In January, President Obama formed the 26-member President’s Jobs and Competitiveness Council and later set a goal to create 1 million jobs within two years. “Job growth is going to be driven by the private sector, but we can make some smart decisions to encourage businesses to feel like this is the right time to invest and that America’s the right place to invest,” Obama said at a council meeting.

Council member Matt Rose, who also is a member of the U.S. Chamber’s board of directors and chairman and CEO of BNSF Railway Company, agrees that the private sector is the answer. To get it moving and creating jobs, the government has to get capital into the hands of job creators and invest in infrastructure, according to Rose.

Even with historically low interest rates, banks are hesitant to lend because of new restrictions in the financial regulatory reform law, Rose says. “There’s a very strange credit grip on the economy. Government can’t make banks lend, but they can do the other thing, which is prevent them from lending,” by requiring higher reserve ratios, for example.

While the council hasn’t yet made any infrastructure recommendations, Rose stresses the need to invest in the critical roads, railways, and waterways that facilitate commerce. Adequate investment requires increasing the federal fuel tax, which has remained constant since 1993 and is producing declining revenues due to higher fuel efficiency; allowing toll roads; and tapping private investment, according to Rose. “We’ve done a poor job of educating the public on how roads are paid for, and now we’re paying for it with inaction.” 

Small business owner Darlene Miller of Permac Industries in Burnsville, Minnesota, also a member of the president’s council and a member of the U.S. Chamber’s Council on Small Business, is urging the administration to invest in manufacturing and training. She says that her company, which manufactures precision machine parts, has four to six job openings, but she can’t find employees with the skills she needs.

At Miller’s urging, the council has recommended that the federal government start a pilot project with technical colleges nationwide using a curriculum focused on the skills—technical math, computer-aided machining and design, and high-tech machining and manufacturing processes— that job creators like Miller need. If the pilot program spreads to a half a dozen states, then Miller says the number of jobs created in the first two years would be 6,000.

The council also asked that the federal tax code be changed to allow training of advanced manufacturing workers be a depreciable expense under Section 179 of the tax code.

Governors Deliver Results

Amid budget crises and a slow economic recovery, governors are pushing their own job creation agendas and are finding success in attracting businesses and growing their economies by redesigning government, curbing spending, modernizing the tax system, and eliminating onerous regulations. Free Enterprise magazine interviewed four governors to learn what they had done to improve their states’ economies.

Gov. Rick Scott (R-FL) inherited a $3.7 billion deficit when he took office in January. Today, Florida is running a $1.1 billion surplus, which was achieved without raising taxes. “We just went through every agency and looked at how we were spending the money. It just keeps adding up, and you look at how you spend every dollar. That’s what you have to do when you own a business,” Scott told Free Enterprise magazine. Scott’s administration has reviewed more than 11,000 regulations and has identified more than 1,000 for repeal.

Scott’s first months in office focused on what he called the “jobs budget” and a pledge to veto any provisions that do not create private sector jobs. A priority was to consolidate the state government’s economic development efforts into a single, highly focused agency that uses public-private partnerships to improve efficiency, remove duplication, and ensure continued access to industry expertise.

Similarly, Gov. Bob McDonnell (R-VA) says that he found ways to cut spending and reorganize government to bring his state’s $6 billion budget shortfall under control and return spending to 2006 levels. The budget package centered on steep cuts to government programs and services, use of federal stimulus dollars, access to rainy day funds, new fee structures, and changes to contribution rates and pension structures for Virginia state employees. “It just shows that conservative fiscal policies really do work,” McDonnell said.

With his budget under control, McDonnell is investing in programs that act as tools for job creation, including funding for a research and technology innovation program, increased resources for small business financing authorities, focused investments on incentives for the commonwealth’s tourism industry, and more funding for workforce and industrial site development efforts.

Gov. Scott Walker (R-WI) has concentrated on attracting business to his state by providing an environment of certainty around regulations and taxes. When he came into office, Walker called for a special legislative session focused solely on jobs, passing major tax relief for job creators, health savings account tax relief, tort reform, and regulatory reform.

Walker says that he is now looking to the federal government to provide some certainty in the form of getting the federal deficit under control. “There’s got to be some long-term structural changes. We put in place structural changes that will balance not just this budget but those for generations to come, and they’re doing the exact opposite at the federal level.”

Jobs, education, and curtailed spending have been at the forefront of Gov. Jack Markell’s (D-DE) efforts since becoming governor in 2009. Over the course of 14 months, Delaware lost two car plants and a refinery. “Those employers represented the best chance for high school students in Delaware to enter the middle class,” he says.

To cut spending, Markell put together a team of legislators, union leaders, and administration officials to work together to achieve $130 million in savings over five years. “We had the same challenges in Delaware that every other state had in terms of having to achieve savings in pensions and health care. But we took a different approach and invited the unions to the table and laid out for them the magnitude of the challenge.”

The state now finds itself with a surplus of about $320 million, and Markell is deciding how to balance the allocation of these surplus funds between tax reductions and targeted investments. Shortly after Free Enterprise’s interview with Markell, he signed legislation to provide a $1,250 per employee tax credit to financial institutions that hire 200 or more state residents. Delaware is a financial services hub, and many residents employed by the industry lost their jobs following the financial crisis.

Today, Fisker Automotives has taken over one of the auto plants with plans to make hybrid cars in the state next year. The other plant was purchased by the University of Delaware, which turned it into a science and technology campus. In addition, Sallie Mae and Perdue Agribusiness, a subsidiary of Perdue Inc., announced that they were moving their headquarters to Delaware. The state also received an award of $107 million in Race to the Top funds, which are federal block grants for education innovation and reform, and is implementing a plan to improve early childhood education.

But an even bigger change needs to occur, according to the governors, and that’s partnering with the administration to get businesses to create more jobs. “Our constituents don’t care if their problem is a problem of the town, the county, the state, or the federal government. All they know is if they’ve got a problem, they expect all of us to solve it,” Markell says.

To learn more about what states are doing, read the U.S. Chamber’s Enterprising States report.