DotGov utilizes social media to get citizens involved with their city.
DotGov utilizes social media to get citizens involved with their city. - 
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JEREMY HOBSON: Investors and analysts are evenly divided about whether a big U.S. city or state will default on its debt this year. That's according to a new poll from Bloomberg. States across the country are facing huge budget shortfalls and they're handling them in all kinds of ways.

Let's bring in our Economics Correspondent Chris Farrell, who's here with me at the mothership in St. Paul. Good morning.

CHRIS FARRELL: Good morning.

HOBSON: So it's not all cut, cut, cut Chris. There are other things going on?

FARRELL: Look that's the headline and those cuts are big, people are loosing their jobs, renegotiating contracts. But beneath the surface, I think the mantra's going to be innovation, innovation, innovation.

HOBSON: In what way? Have you looked up and found a specific example of that?

FARRELL: OK, so if you go to West Des Moines and this is in some sense an old example, but we're going to see a lot more of it. Ten years ago, more efficiency, redesigns contract, outsourcing trash hauling. You've heard that story a lot.

HOBSON: Yeah absolutely.

FARRELL: But they learned over the past 10 years, when they renegotiated the contract, they put in that learning experience, but more importantly, the contract is now being run by a regional agency, and that's a greater efficiency freeing up staff to do other things.

HOBSON: Greater efficiency, that's one thing. What else is going on?

FARRELL: Well, let's go to Manor, Texas.


FARRELL: Now Manor, Texas, is a little bit outside of Austin, and it's sort of the epicenter of DotGov. You've heard this expression or as I prefer "government-by-tweet." And everyone's trying to tap into the power of social media -- Facebook, or what does the citizen know. And so they're trying to tap into ideas and perhaps you see something that needs to be repaired. You upload it, get that photo off to the Department of Public Works. Again, it's an intriguing idea.

HOBSON: But sending a photo off to the Department of Public Works that's not going to reduce multi-million dollar deficit.

FARRELL: Well, this where you're going to hear a lot over the coming year about "clusters."


FARRELL: So clean tech in Colorado is a classic example with this new governor. President Obama, when he gave his talks, State of the Union address, talked about innovation. Well, clusters are you have something in your region where you have a strong business presence. Lots of suppliers, universities, lots of knowledge. This is where you're going to concentrate your resources. It's bi-partisan, it's going to grow.

HOBSON: Put everyone together in the same place and it's nice to be together this time with you in St. Paul. Marketplace Economics Correspondent Chris Farrell, thanks so much.

FARRELL: Thanks a lot.

Follow Chris Farrell at @cfarrellecon