Thank you, Roger, for that kind
introduction, and thank you all for coming this morning. It is a pleasure
to be here at the Economic Club of New York, which has been at the center of
economic policy discussions for more than 100 years. I appreciate this
chance to discuss some of the challenges and opportunities we face.
We meet today during a period of
fundamental change in our economy. Our population is growing older.
The skills needed in today’s workforce are shifting. Global competition
for business and investment is becoming more intense. And technological
innovation is happening at a rapid speed.
Our core responsibility is to make
sure our economy is as vibrant and robust for our children and grandchildren as
it was for previous generations. And the ultimate test for all of us will
be how inclusive tomorrow’s economy becomes and how widely our economic gains
The American story has always been
one of embracing change — capitalizing on groundbreaking ideas, inventions, and
events to build a better future for the next generation. And the
combination of our innovative spirit and smart public policy has always been a
recipe for success in this country.
After the industrial revolution and
the steam engine increased productivity and efficiency, it was leaders like
Teddy Roosevelt who fought for an eight-hour workday to improve working
conditions. After electricity transformed cities, it was FDR who brought
power to farm lands, mountain communities, and other remote areas of the
country. And after innovations in engineering led to the creation of the
automobile, it was Dwight Eisenhower who changed the United States forever by
building the Interstate Highway System, boosting commerce and productivity,
giving Americans of all walks of life new choices about where to live, work,
Yet, many today wonder whether
something that has always been true in our past will be true in our
future. There are questions about whether America can maintain strong
rates of growth and doubts about whether the benefits of technology, innovation
and prosperity will be shared broadly.
We have the capacity today, as in
our past, to address these concerns as long as both the private sector and the
public sector commit to policies that strengthen workers, innovators, and
investment. It is up to each of us—government and business—to make choices
that will secure our future.
Today, I want to discuss how we can
meet the challenges of the 21st Century by focusing on things we can do to
expand the potential of our economy and allow anyone willing to work hard to
We meet at a time when structural
not fiscal challenges demand our immediate attention. This Administration has
always been committed to meeting our obligations in a fiscally balanced and
responsible way. We have made tough choices to shrink our budget deficit
by more than half. And over the next 10 years, we are on a path that will
put our debt as a share of the economy on a declining trajectory and reduce our
deficit to below 3 percent of GDP.
Of course, we have all known for
decades that Social Security, Medicare, and Medicaid face long-term challenges
stemming from an aging population and the cost of health care. And we
will need to address these challenges to make sure the promises at the core of
these programs remain ironclad. But we are not grappling with a rapidly
widening budget deficit that requires urgent short-term action, nor do we face
an economy in free fall. We are already seeing a slowdown in rising
healthcare costs. So in the debate over entitlements and how much revenue
we need in the medium and long term, we will be better served if we concentrate
first on building a firm foundation for future economic growth. The
crisis we face today is the need to make sure the economy is expanding fast
enough to support a growing middle class and greater opportunity for all
Americans. Investments that boost growth and job creation today,
tomorrow, and 25 years from now will put us in a stronger position to address
our future fiscal challenges.
Evidence continues to mount that
our economy is gaining traction. After a slow first quarter, partly
because of a harsh winter, we, along with most forecasters, expect the
underlying strength from the end of last year to continue and lead to a much
stronger second quarter and second half of this year. Nevertheless, we
cannot escape the fact that millions of Americans continue to struggle, and
their pain reminds us that our work is not yet finished. Unemployment is
still too high and economic growth is still too slow. And for too many
families this hardly feels like a recovery.
As we work to accelerate growth and
create jobs, we face economic challenges already in motion well before the
economic crisis. For example, the labor force participation rate has been
falling for some time now. After decades of increases as women entered
the workforce, the labor force participation rate turned down in 2000, and the
decline accelerated during the recession. Increases in the level of
income inequality similarly predate the recession, but since the recovery
began, while corporate profits and non-farm productivity have risen, hourly
compensation only just started rising, and not by enough to make up for lost
ground. As our economy grows and our workers become more productive, this
progress needs to reach the lives of more hardworking Americans.
From 1948 to 2007, the U.S. economy
grew, on average by 3.4 percent a year. The Congressional Budget Office
now projects that after the economy settles back to full employment, the
economy will grow at a rate of 2.1 percent—or only at about two-thirds the
But here is something we
know: The choices we make over the years to come can alter this
Economists describe economic
potential as our capacity to produce goods and services. And we can only
expand our potential if we focus on the three pillars that have made the U.S.
economy a global powerhouse: the dynamism of our workers, investments that make
us more productive, and our capacity for innovation.
We can debate how to invest, but
there is no debating that investment in these three critical areas is the key
to our long-term growth. And how we make these investments will shape the
economy and the opportunities of our children and grandchildren.
A Workforce of the Future
First, our workforce. Our
workers are the most creative, hardworking, and resilient in the world, and
they are the backbone of our economy. But the growth in our workforce has
slowed considerably. From 1948 to 2007, we added approximately 93 million
people to the workforce, or 2 percent per year. Since the recovery
started, the average annual growth in the workforce was just 1 percent.
And since 2008, the labor force
participation rate has actually fallen by 2.7 percentage points. The
Council of Economic Advisors has estimated that about half of the decline is a
result of our aging population. And the fact that Baby Boomers who
contributed to the economy are leaving the work force to enjoy well-deserved
retirement is a good thing; they are already on track to work longer than
previous generations. But we should not allow a lack of employment
opportunities or outdated skills to push a generation of workers into early
retirement. We also need to make sure that young adults coming of age
after the Great Recession are not trapped in a no man’s land as the long-term
For every job opening in the
economy, there are now 2.2 unemployed Americans. But that will not always be
the case. And among the unemployed, about one out of every three
unemployed workers has been out of a job for more than six months. We
know that after a long period without work, you are much less likely to
re-enter the workforce than if you have been jobless for just a short period of
time. But if the long-term unemployed give up on the labor market,
it is not only an individual tragedy, it means we lose their productive
economic capacity forever.
Now, as daunting as these
challenges are, we can confront them.
Let’s start by looking at something
that every business can do. The President has called on CEOs of large
corporations to make a good-faith effort to hire from the ranks of the
long-term unemployed. Because of misperceptions and screening policies,
it is hard to even get an interview after a long period without work and these
workers can sometimes face outright discrimination. We need to give the
long term unemployed a fair chance for a new start.
The Administration and a group of
bipartisan lawmakers have been pushing to restore the lifeline of emergency
unemployment insurance for the millions of long-term unemployed. And
while Congress has not yet acted, it remains a fact that this assistance would
go right back into the economy, benefitting American businesses and creating
But we also need to do a better job
helping workers who want to re-enter the workforce. For workers born
decades before anyone knew what an “app” was, we need to make sure that worker
training, career counseling, and job placement are available so that we don’t
throw out years of experience just because we need to update the tools in their
toolkit. And we need to make sure that business is engaged in the choices
we make in government training programs, so that these programs promote skills
needed in the workplace.
To be effective, it must be a group
effort, and the Administration has brought local governments, businesses, and
community colleges together to increase apprenticeships and job training
initiatives, and we have taken action to reform federal training
programs. In addition, there is now a bill moving through Congress that
is supported by Democrats and Republicans in both the House and Senate to
overhaul worker training programs.
As we modernize the way we prepare
workers for today’s economy, we also must modernize our tax system so that it
encourages more men and women to hold onto their jobs. The Earned Income
Tax Credit has done a lot to help families get a start, and to make it possible
to live on entry level wages. But right now, we want to expand
it so childless workers who are just starting out can stay in the workforce,
see the value in keeping a job, and become lifelong contributors to our
economy, while helping employers retain workers. Strengthening programs
like family leave and early childhood education will also make it easier for
mothers and fathers with young children to stay in the workforce. The
largest increases we saw in the labor force in the last century came as women
entered the workforce. Supporting families is a proven way to tap into
our human capital resources. And we need to raise the minimum wage so
working full time at least gets you above the poverty line.
Of course, we cannot repeal the
Baby Boom, but we can address the resulting decline in the labor force by
addressing our outdated, economically backwards immigration system. There
are millions of people around the world who dream of coming to the United
States to do what Americans have done since the beginning of our country—work
hard, play by the rules, raise a family, and contribute to our vibrant
economy. And throughout our history, the rich tradition of welcoming
immigrants to our country has been a hallmark of our economic success.
Quite simply, immigration reform is
good economic policy. The nonpartisan Congressional Budget Office has
estimated that the immigration reform bill, which passed the Senate on a
bipartisan basis last year, would increase the labor force, boost GDP by 3.3
percent* over the next 10 years, and improve our fiscal position by $158
billion, strengthening the Social Security and Medicare trust funds. It
will also create a new wave of consumers who will fuel demand and generate
economic activity. And we know that immigrants and children of immigrants
are more likely to start new businesses. Forty percent of the Fortune 500
and countless tech firms have been started by immigrants or their children.
America has a world-class education
system, but we need to continue to address the uneven access to quality
education. When it comes to early, middle, and high school education,
many of our children are ill-served. The President wants to expand
ConnectEd and other programs that provide students from rural and urban
communities with access to the latest technology to make sure that the digital
divide does not leave a large portion of our students behind. As the
President asked when he introduced ConnectEd, “In a country where we expect
free WiFi with our coffee, why shouldn’t we have it in our schools?”
We know that we are making
progress. National high school graduation rates have hit new highs, driven by
increases among minority students. We also know that post high school
education is the key to economic opportunity. For many, four year
colleges are the right answer. But for others—we need to make sure they have
the right choices to gain the skills needed for the 21st century
economy. Associate degrees, industry-accepted certifications, and
earn-while-you-learn apprenticeships are the right approach for many. The
truth is, we have to create more higher education options. For instance,
we should ask ourselves if earning an undergraduate degree in three years might
be a better, more cost-effective option for some students to get their
education. And we need to focus on ways to make higher education more
affordable, including making student loan debt more manageable.
Investing In America
Now let me talk about
investment. For years we have heard that businesses need more confidence
in the future before they will invest again – but indices of both consumer and
business confidence are stronger now than any point in a long time.
Instead of facing recurring government crises, we have a path for predictable
and stable policy for the next two years. And capacity utilization is rising
again. Now is the time to take a fresh look at opportunities to invest in
Investing in our country —in plant
and equipment - has always driven our potential.
From 1948 to 2007, nonresidential
fixed investment grew at an average annual rate of 8 percent, fueling our
industrial base and the booms of the 1950s, 60s, 80s, and beyond. But
during the recent recession, nonresidential fixed investment fell sharply, and
since the recovery began, has only grown at an average annual rate of 5
percent*. American businesses are sitting on historically high levels of
cash, and what we need now is for businesses —including many of you in this
room— to come off the sidelines and make investments in our future.
Meeting with foreign leaders, I am
told over and over how the foundation of our economy makes the United States an
ideal place to invest -- our stable rule of law, strong protections for
intellectual property, research institutions, vibrant supply chains, proximity
to large consumer markets and our thriving energy sector. To get long
term investment back where it should be, you need to do your part, and we need
to do ours.
To encourage domestic investment,
the President wants to reform our tax system by lowering statutory business tax
rates and leveling the playing field so that investment flows to where its
return is greatest, not simply where taxes are lowest. We need a tax code
that stops rewarding companies when they open up operations overseas and starts
rewarding companies for bringing operations home.
Now, we often think about American
firms investing elsewhere, but in 2011, the President started an initiative
called SelectUSA to bring more job-creating investments to the United
States. And today, when surveyed, businesses around the world rank the
United States the best place to invest.
To make investing in America even
more appealing we need to make infrastructure investments a priority again. Building our roads, railways,
bridges, and ports has been one of the most historically bipartisan ways to
create jobs today and lay a foundation for future economic expansion.
I grew up in Queens, and could walk
two blocks to the subway for a 20-minute ride to midtown. In fact, many
afternoons in high school, I did just that. So I understand what good,
reliable transportation options mean to families, workers, and businesses.
But it does not matter whether it is Long Island City, Kansas City, or Salt
Lake City, strong infrastructure is essential for strong economic growth.
Congestion hurts businesses and workers, and it costs time, money, and energy.
And when you think about how our
ports are not ready to handle modern supertankers even as the Panama Canal is
being made deeper, how the vast majority of our water pipe network was
installed after the Second World War, how our mass transit systems are both
inadequate and in need of repair, and how more and more of our bridges are
regularly cited as public dangers, there is no question we need to get this
Other countries understand this,
and they are making the kind of investments that we keep putting off.
That is why we are pushing for the
reauthorization of funding for highways. It is also why the President has
put forward a proposal to create an infrastructure bank to make smart and
effective investments, with public and private partnerships. The American
Society of Civil Engineers projects that, by 2020, the deficiencies in our
infrastructure will cost business more than $1 trillion every year in lost
sales. To pay for this, the President would use one-time transition
revenue resulting from business tax reform, which is a double win, making the
United States an even more attractive place to invest.
This Administration recognizes how
imperative this is. That is why we have cut the red tape that slows
progress. For example, by fast-tracking the new Tappan Zee bridge, the
Administration helped the project reach the construction phase in a mere 18
months, shaving as much as three years off the schedule. The first span
is now expected to open in 2016—just two years from now—and the bridge should
be fully completed by 2018.
When CEOs are deciding where to
locate, they need to know that roads are efficient, that railways can move
their products, and that ports are deep enough to handle the demands of a
global economy. And it just makes sense that partnerships between the
government and the private sector should be part of the solution. Again,
the choices that we make—or fail to make—will shape the economy of our future.
American Innovation and Productivity
Finally, let me discuss the
important role technology plays in our economy. Between the end of World
War II and 2007, the contribution to economic growth from technological change
has averaged just over 1.2 percent a year, or enough to double output about
every 60 years. The truth is, technology has the ability to transform the
economy in ways we can only imagine today. Still, there are those who
fear the IT revolution will mean a permanent state of high unemployment and
low-wage jobs. But, history tells a very different story. There has
never been a time when technological gains have caused decades of unemployment
in the United States, but it is true that the transitions can be hard, and
managing today’s technological transition is critical.
We need a deep commitment to
Science, Technology, Engineering and Math education so that the next generation
has the skills to keep making innovations, and the training to be analytical
and innovative in a competitive and global market. And Federal support
for cutting edge research and development remains critical if we are to remain
the leading innovator in the world.
Just think, the productivity of the
American worker is now about four times what is was at the beginning of the
20th Century. This means that we should need only one-fourth of the
workers we had in 1900 to produce everything we produced then. Yet the
innovations of the early 20th Century that led to this increase in productivity
did not lead to a time when three-quarters of our labor force was ever
underemployed or unemployed. What happened time after time is that when
innovation and productivity drove change and economic growth, our workers
adapted and more people were needed for new jobs.
Over the past year, I have visited
a number of factories in our resurgent manufacturing sector. From
electronics to consumer appliances and from auto parts to information
technologies, what American plants can produce is amazing. But more
amazing still is how much each worker in those plants is producing because of
the skills they have and the cutting-edge technology they use.
Technological innovation and
entrepreneurial spirit has long been our great strength. And our policy
choices can make this just as true for the future. Yet we face a number
of challenges in the years to come. We need a credible long-term funding
plan for basic research in this country. We also need to reform our
intellectual property rights system in order to reward real discovery,
discourage patent trolling, and allow scientific advancements to get into the
hands of those that need them. Research and development are critical to
unlocking private sector innovation, and that is why this administration and
lawmakers on both sides of the aisle want to reward long-term investment and
make the R&D tax credit permanent.
Better Foundation for the Future
Even as we are working hard to get
back to full employment, we cannot afford to simply live up to our potential,
we must expand it. Many of the policies I have just discussed have
bipartisan support, and they will help secure our economic future.
And the pendulum in Washington may
be swinging back, at least a bit. After years of mistrust and gridlock, in the
last six months Democrats and Republicans have found common ground to do a
number of key things—passing a farm bill, setting our budget priorities,
funding the government, and extending the debt ceiling. We now have an
opportunity to forge ahead on things that have broad bipartisan support, like
infrastructure investment and tax reform. You need to demand that Washington
does its part.
When Henry Ford rolled out the
Model T, he could not have imagined where it would lead. In the 1990’s,
we could not see the huge impact of technology on productivity that we later learned
was revolutionizing the workplace. And today a breakthrough is happening
somewhere in America -- perhaps in a garage or a dorm room. If we take
the right steps, our economy will be primed to take advantage of the next
innovation. Doing so will require an engaged American workforce, a
business sector investing in America, and a government whose policies are aimed
at the future and shared prosperity.
So what economy are we leaving to
the next generation? The choices we make will answer that question.
Economists—who almost never agree—all agree about what determines the long-run
success of an economy. The labor force, the capital stock, and
technological innovation. Those components have always been the driving
force, the source of the “Wealth of Nations” to use Adam Smith’s words.
While government can eliminate obstacles and provide important tools, the
government is not what makes an economy. The private sector is the
defining feature of our economy, and the joining of sound policy with a surging
private sector will determine our economic future.