Editor’s note: Acting U.S. Commerce Secretary Rebecca Blank traveled to Milwaukee Monday, where she spoke at the University Club of Milwaukee about steps to grow the American economy and create jobs. The text of her prepared remarks comprises today’s Milwaukee Biz Blog.
Thank you, Mayor Barrett. It’s a pleasure to be here with members of the University Club and other leaders from the Milwaukee area, including County Executive Chris Abele.
I just came from Ruud Lighting in Racine. They make energy-efficient LED lights. Last year, they won the President’s E Award for their success in increasing exports. Because of that success, they’re expanding their facility and creating nearly 500 more jobs here in Wisconsin.
I’ve heard more and more stories like that as I’ve traveled the country and talked with entrepreneurs, small business owners, and manufacturers.
Though more work remains, we have truly come a long way.
It’s easy to forget just how quickly our economy was spiraling downward in 2008. The financial system was on the verge of collapse. Housing prices had plummeted, as did the stock market. Consumers weren’t spending. Businesses weren’t investing.
And jobs were disappearing at a breathtaking rate. We were losing 750,000 jobs a month. That’s more lost jobs in a month than the population of Milwaukee.
Americans were rightly concerned that we could be heading into a second Depression. We needed aggressive action.
That’s why President Obama signed the Recovery Act less than a month into office. One-third of that money went to tax cuts – with over 2 million working families in Wisconsin getting relief of over $1 billion. One-third went to state and local governments that were struggling with their own plummeting budgets. It helped the Milwaukee Police Department keep dozens of officers on patrol. And one-third went to infrastructure. This County – for example – got over $83 million to help with roads, bridges, transit, and airports – creating immediate jobs and paving the way for even more commerce. Without the Recovery Act, independent economists say that we would have lost millions of additional jobs and unemployment could have been as high as 11.5 percent.
In addition, the President reached out directly to strengthen the private sector. No one was making loans to small businesses, so he increased the government-backing on SBA loans – which helped over 2,000 small businesses in Wisconsin that had nowhere else to turn.
And, of course, the President took the bold step of saving our auto industry at a time when others were willing to let it go bankrupt. This not only kept GM and Chrysler in business, but it preserved the many small and medium-sized businesses that were part of the auto supply chain. Today, our auto industry is back and stronger than ever.
As a result of all these actions and more, not only did the downward spiral stop, but we’ve now seen solid and stable economic growth for nearly three years. The GDP has grown for 12 straight quarters. Unemployment nationally – and in states like Wisconsin – has dropped by about 2 percent. And 4.6 million private sector jobs have been created over the past 30 months. Even the housing sector – which was hit hardest – has begun to recover, with new home starts, housing permits, and even home values starting to move up.
Now, we can all agree that our growth hasn’t been as fast as we’d like and that we still have work to do. It’s taken time to recover from the disaster that struck in 2008. And in the midst of our recovery we’ve hit some strong headwinds, such as the Eurozone crisis and sporadic spikes in oil prices.
But despite all these challenges, our economy has grown and will continue to grow.
Our challenge is to accelerate this economic growth, to make sure that it translates into greater prosperity for the middle class, and to make sure that everyone who wants a job has a job.
Today, I’d like to touch on four ways we can do that: increase consumer spending, spur innovation in manufacturing, increase insourcing and investments in the U.S., and grow exports.
First, we need to make sure that America’s families have the confidence and the ability to spend money on things they want and need, beyond just buying groceries and paying their bills. Things like home renovations, a new car, or just a night out on the Riverwalk. As you all know, consumer spending is the single biggest driver of our economy.
In past recessions, economic recovery was driven by rapid increases in consumer spending. Coming out of the most recent recession, consumer spending has grown, but at a relatively moderate 2.1 percent annual pace. This is not surprising given the steep losses that many families saw in the value of their homes and 401K plans. To help boost consumer spending, the President has put about $3,600 more dollars in the hands of the average family over the past few years. Middle-class families put that money right back into the economy.
But here’s the problem. Unless Congress acts, some of the tax cuts that have benefited middle class families will expire, taking money out of their pocket and making it tougher for them to make ends meet in 2013. For example, let’s say you’re a family of four with an income of about $70,000. Without Congressional action, your taxes will jump by about $2,200. Altogether, the middle class could pay about $180 billion more in taxes next year. That’s $180 billion they won’t be spending on goods and services.
That has a ripple effect – what economists call the multiplier effect. When a family puts off buying a new car, it hurts the local car dealership, it hurts the factories that make cars and car parts, and it hurts those that ship that inventory around the country.
So what’s the problem? Some folks in Congress don’t want to give these tax breaks to the middle class unless we also give breaks to the wealthiest 2 percent.
Now, we all know that this country faces major long-term challenges with our nation’s debt. The President is working hard to balance the investments we need to strengthen our economy with tough budget and revenue choices.
So if we’re serious about deficit control, we need to be smart and targeted with public dollars. We should give tax relief only where it’s needed.
We’re asking Congress to return the top 2 percent to tax rates that they paid throughout the 1990s, a time when we had the fastest economic growth in U.S. history. This provides some additional revenue to help balance the budget, while protecting America’s middle class. It just makes sense.
And Congress should act now, before the end of the year, to provide consumers with more certainty about what their tax situation will be in 2013. That will help American families make informed spending choices and help drive the biggest engine of our economy.
But an economy built to last requires more than just strong consumer spending. So let me turn now to a second key area: manufacturing.
We were losing manufacturing jobs at a furious pace before the recession even hit. What’s remarkable is that manufacturing is now a particularly bright spot in our recovery, with more than half-a-million jobs created since January 2010– over 25,000 here in Wisconsin. These are good jobs that pay well, with good benefits. In other words, a strong manufacturing sector strengthens economic security for middle class families.
So our question today is this: How do we ensure that American manufacturing continues to grow and lead the world?
This morning I cut the ribbon at the International Manufacturing Technology Show in Chicago. So I know the answer to this question – It’s innovation that will keep American manufacturing in the lead.
As we’ve watched the U.S. economy reinvent itself to compete in a tougher global environment, it’s become increasingly clear that America’s ability to make things and our ability to innovate are tied closely together. If we want to stay at the front-end of innovation, we have to have production located nearby.
High-end manufacturing… that is, manufacturing that relies on high-tech new processes or that makes new products, is what’s going to keep U.S. manufacturing competitive.
Already, 70 percent of our private sector R&D is funded by manufacturing, and 60 percent of our exports are from manufacturing, and about 70 percent of our manufacturers rely on patents to protect their innovations.
So – looking forward – where should we focus?
For starters, the President is actively working to reverse the erosion we have seen since 1980 in federal support for basic research and development, much of which supports our manufacturing base. His goal is to double federal dollars in R&D over a five years period and we’ve made a good start on that.
But another problem has emerged in recent years as companies have become more risk-averse. It’s this: Too many game-changing ideas still aren’t making it from the lab to the market.
Let me tell you about one initiative that the Commerce Department has been helping lead – aimed at fixing this problem and improving tech transfer.
In his 2013 budget, President Obama has proposed a National Network for Manufacturing Innovation. The idea is to set up 15 institutes around the country, each of which brings together a regional coalition of research centers and universities with manufacturers and local tech transfer groups. Together, they’ll collaborate on the most promising research areas and speed the tech transfer process.
We just launched a pilot for this Network in eastern Ohio, western Pennsylvania, and northern West Virginia. It’s focused on additive manufacturing, also known as 3D printing.
Has anyone heard of 3D printing? This technology helps entrepreneurs print customized consumer products and machine parts, it helps doctors print medical devices and even organ models, and it has the potential to help our military make parts as needed, instead of having to stock thousands of unique pieces of equipment at sea or on remote bases.
This pilot institute will set a research agenda, driven by private sector needs. It will encourage researchers and entrepreneurs to take risks, test prototypes, and, yes, hit brick walls, and get back up to try again. This is a great public-private partnership, with funding from the Federal government, two states and many manufacturers.
We’re tracking this pilot closely, so we can learn how best to help fund and establish these sort of public-private collaborations. And we’re pushing Congress to enact the President’s full plan to establish 15 institutes across the U.S. – each focused on a promising area of technology that will help American manufacturers stay ahead of the curve.
Investing in innovation is only one important way to support a stronger, more innovative manufacturing base. Let me note two other areas in which, we need to invest: our infrastructure and our workforce. Three quick examples.
With interest rates this low, we can and should put construction crews back to work building the roads and bridges we need to transport our manufactured goods. A dozen national studies have described the dangerous deterioration on American infrastructure. Now is the time to address this problem. The President has proposed a National Infrastructure Bank that would help co-fund projects with state and local governments.
With businesses needing well-trained workers, we can and should link together more of our community colleges and manufacturers to create a pipeline of workers to today’s high-tech shop floors. I think Milwaukee County Technical College is here. This Administration has worked to help community colleges and businesses work together to create career ladders for graduates.
And with other countries nipping at our heels, we can and should double down on inspiring more young people – especially women and minorities – to enter fields that are crucial to innovation and research, the STEM fields of science, technology, engineering and mathematics. For instance, we gave the University of Wisconsin at Milwaukee a 1.6-million-dollar grant – in part – to help train more leaders in this region’s water technology cluster last year.
We must move forward with these crucial public investments if we want a globally-competitive manufacturing base in the 21st century.
Third, and closely tied to manufacturing, we need to foster an attractive climate to increase investment into the U.S. There are two parts to this. We want U.S. firms to expand here at home and bring jobs back – sometimes referred to as insourcing or reshoring. And we want foreign-owned firms to locate their next plant in America through foreign direct investment.
I’m very optimistic that we will see substantial increases in both of these areas over the next several years. In my travels both at home and abroad, I’m hearing from more and more CEOs who say that the U.S. is the best place for their next investment. At the Commerce Department, we decided to try to compile a list of examples. Within a week we had literally hundreds of examples. As you know, the President came to MasterLock here in Milwaukee in February to highlight how they’ve brought back 100 jobs recently.
On a broader scale, the U.S. received $227 billion in foreign direct investment that flowed into businesses in this country last year, and this is a sharp increase over the year before.
There are many factors driving this. Some CEOs cite strong U.S. domestic energy production and our long-term energy outlook. Others say that our financial sector is better repaired and has found a stronger footing than elsewhere. Some point to the unsettled issues in the Eurozone, and the slowdown in growth in Asia. Some say it’s due to our strong universities, our R&D base, or our supply chains. Still others cite our intellectual property protections, or our stable legal and regulatory environment. And, of course, the U.S. continues to have the largest consumer-driven economy in the world.
We need to do everything we can to add momentum to this trend. That’s why the President is calling on Congress to end tax breaks for companies that ship jobs overseas and – instead – give tax breaks to companies that bring jobs back.
And – through an effort called SelectUSA at the Commerce Department – we’re working to market the value of staying in the U.S. (if you’re a US firm) or investing in the U.S. (if you’re a foreign firm.)
In particular, we’re going to work more closely with foreign firms that want information on investing here. We’ll connect these firms with economic development leaders in cities and states like this one – folks who are eager to nail down U.S. investments by leveraging local incentives.
In the near future, I predict that the U.S. will maintain a strong competitive advantage in keeping and attracting more factories and jobs. And we know that when a company makes a big investment here, the likelihood of those jobs staying here long-term is very high.
So let’s take full advantage of this moment.
Finally, one of my favorite phrases to describe the mission of the Commerce Department is that we want to “Build it Here, and Sell it Everywhere.” To ‘sell it everywhere’, means strong U.S. exports – a fourth and final area I want to touch on.
Today, U.S. exports are at all-time record levels – hitting $2.1 trillion last year. We’re on track to break that record again this year. Perhaps more importantly, from 2009 to 2011, the number of export-supported jobs in the U.S. increased by 1.2 million.
As you know, the President has signed new trade agreements with Korea and Colombia. These agreements are estimated to create billions of dollars in new business and thousands more jobs here at home.
As we look forward, we must continue to think strategically about which sectors and which international markets to focus on.
An example of a sector-specific focus is travel and tourism to the U.S. – an area where we have seen growth for 29 straight months. Not everyone understands that when foreign citizens travel to the U.S. and spend money buying our goods and services, that counts as an export.
As you know, the Milwaukee economy gets a boost whenever someone visits here to go to an international conference to see a slice of Americana at the Harley Davidson Museum (represented here today), or to tour one of your famous breweries.
I’m leading an effort throughout the Administration and with industry leaders to bring even more tourists to experience all that America has to offer. We just released a National Strategy on Travel and Tourism, and we’re moving forward with efforts ranging from big efforts like improving the visa process… to simple things like better airport signage.
And I should note that the Commerce Department just gave an award to a Madison-based organization to increase tourism from Japanese tourists who visit the Mississippi River valley – which leads me to say that another way to promote exports is to focus on key overseas markets where demand for our good and services are growing fast.
India is one of those. In the Spring, my Department led a trade mission to India, bringing U.S. companies that were interested in helping the world’s largest democracy meet its burgeoning infrastructure needs. I should note that one of the focus areas was energy, one of India’s key challenges as we all saw in the news just over a month ago.
In fact, Ruud Lighting itself – where I just went – recently formed a partnership with a distributor in India. So we must continue to think in smart and creative ways about how to help American companies increase their exports. Because everything we sell abroad means more dollars and more good jobs here at home.
Clearly, overall, we need to take steps to ensure that our economy is – as the President likes to say — built to last.
We need immediate actions such as extending lower taxes for the middle class, and taking advantage of low-interest rates to invest in things like infrastructure.
We need near-term policies that build on the progress we’re making in areas like U.S. investment and U.S. exports.
And, yes, we need substantial investments that strengthen our long-term competitiveness, ranging from increased funding for R&D, to greater support for STEM education and workforce training, and more.
To get where we want to be, we need smart policy action by the public sector, but we also need the ongoing hard work, creativity, and entrepreneurship that the American private sector has always provided– including that of the business leaders in this room.
If we make smart choices now, we will lay the foundation for stable, long-term growth that will benefit families and businesses throughout this city, the state of Wisconsin, and throughout our great nation.
So, thank you for your commitment to these issues. We are all going to need to work together if we want to ensure that America remains the global economic leader of the 21st century.
