WASHINGTON – It is great to be here with you all to discuss the important decisions we face as a nation and to talk about the President’s proposals to strengthen the middle class, increase the momentum of the recovery, and speed the pace of job creation.
Let me start by saying a few words about current economic conditions.
The economy is in better shape today than it was four years ago when the President came into office, and while we still have a lot of work to do, the economy is moving in the right direction.
Since its trough in the summer of 2009, the U.S. economy has not only made up for the lost output during the recession, total growth over this period has taken real GDP nearly 7½ percent above its low point during the recession.
Over the last 35 months, the private sector has added 6.1 million jobs, and since job growth resumed, we’ve seen the creation of almost 500,000 manufacturing jobs. That’s the strongest growth in manufacturing jobs since the mid-1990s.
The economic recovery has been driven by the private sector. The balance sheets of businesses are robust. Productivity is stronger than it was before the crisis. American companies like Apple and Caterpillar are starting to move operations back to the United States. And we are buying more American cars today than we have in five years.
What had been a significant drag on the economy—the housing market—is now steadily improving. The positive signs are real: historically low mortgage rates, a near record level of housing affordability, improving builder confidence, a declining inventory of homes for sale, and an uptick in housing prices.
And we are building a stronger foundation for the future: Americans are saving more than before the crisis, our budget deficit has started to decline as a share of the economy, and we are borrowing less from the rest of the world. Relative to GDP, our current account deficit is now half the level it was before the crisis.
So we’re making progress. Let’s not forget, four years ago, America was deep in crisis. Our economy was contracting at a 5.3 percent annual rate. In the month the President was sworn in, we lost 794,000 jobs. The improvements we see today are a result of the actions taken by the President—along with Congress, the Federal Reserve, and the previous administration—to put out the fires of the financial crisis, rescue the auto industry, and restart economic growth.
Looking ahead, we have good reason to expect that progress will continue. Economists and business leaders anticipate further growth and further job creation. But the ongoing brinksmanship in Washington over how to bring down the deficit should give us pause. As the President explained in his State of the Union address, Washington’s been going from one manufactured crisis to the next, and it has damaged consumer confidence and affected business decisions.
And as I’m sure everyone here will agree: These political stand-offs must come to an end.
Now, of course, our economy is going to be tested. Shocks are bound to come. In the last year, for instance, threats to the economy included a jump in energy prices, a severe drought during the summer, Superstorm Sandy, and the sovereign debt crisis in Europe.
But what we cannot do—what would be a grave and unnecessary mistake—is to deliberately throw sand in the gears of our recovery.
Right now, deep, indiscriminate spending cuts—known in Washington as “the sequester”—are set to take place on Friday. We’re talking about cuts to education, nutrition assistance, and support for small businesses. Just think, 10,000 teacher jobs could be lost. Six hundred thousand women and children would lose vital nutrition assistance. Loan guarantees for small businesses would be cut by up to $902 million.
Illinois will lose approximately $33.4 million in funding for primary and secondary education, putting around 460 teacher and aide jobs at risk. In addition, about 39,000 fewer students would be served and approximately 120 fewer schools would receive funding.
Illinois will lose about $1.4 million in funding for job search assistance, referral, and placement, meaning around 50,780 fewer people will get the help and skills they need to find employment.
Congress must replace these arbitrary and across-the-board cuts before they cause serious harm to the middle class and to our economy.
Make no mistake: We must get our fiscal house in order. The President is committed to reducing the deficit so we don’t pass on crushing debt to future generations. And he has put forward a balanced, responsible plan for getting this done.
We should remember that we have already made important progress on deficit reduction. Despite how gridlocked Washington appears, Democrats and Republicans have come together and cut the deficit by $2.5 trillion over the past two years. This has been done through a mix of spending cuts and revenue increases. In fact, when you take into account savings on interest payments, the deficit reductions we’ve already achieved reflect a ratio of spending cuts to revenue increases of 3 to 1. In other words, for every dollar raised through revenue increases, we have cut spending and interest payments by three dollars.
All together, the deficit reduction we have already locked in is more than half the $4 trillion target that economists generally believe is necessary to stabilize our finances by the end of the decade. To finish the job, we would combine sensible changes to entitlement programs with tax reform that gets rid of loopholes and deductions.
Now, we know that the aging population and the upward trajectory in health care costs make Medicare the biggest driver of our long-term debt. That’s why the President has put specific proposals on the table to reform Medicare. He wants to reduce subsidies to prescription drug companies while asking more from the wealthiest retirees. And he wants to reduce Medicare’s bills by focusing on quality of care rather than quantity of services provided. The President is ready to reform Medicare as long as the program continues to protect seniors who count on it to survive.
As the President said, “Our government shouldn’t make promises we cannot keep—but we must keep the promises we’ve already made.”
To shrink the deficit even further, we have proposed tax reforms to eliminate scores of loopholes and deductions. We want to limit tax breaks that allow billionaires to pay lower rates than hard-working families. We also want to reform the business tax code so that we can lower tax rates while creating incentives for companies to bring jobs back to the United States.
So the President has a comprehensive plan to get our deficits under control in a balanced way— with spending cuts and revenue, and with everybody doing their fair share. And he remains committed to working with Congress to get this done.
But as important as it is to restore fiscal sustainability, it cannot be our only priority. Deficit reduction alone doesn’t amount to an economic strategy. The unemployment rate is still too high. Economic growth needs to be accelerated.
In his State of the Union address, the President outlined his plan for a stronger, more competitive economy. It’s a plan that boosts American manufacturing, supports entrepreneurs, expands domestic energy production, spurs trade, and brings jobs to our shores. This is a plan that will not only help strengthen the middle class, it is fully paid for. That is, when combined with the President’s strategy for balanced deficit reduction, none of these proposals will add a dime to the deficit.
Now, here’s how President Obama’s plan for a stronger economy works.
First, we want to make America a magnet for new jobs and manufacturing. After shedding jobs for more than 10 years, manufacturers are once again opening up operations in the United States and creating jobs here at home.
To accelerate this trend, we should fix our aging infrastructure—our roads, bridges, ports and pipelines—so companies can get supplies and move goods more efficiently.
This morning, I saw firsthand the importance of infrastructure to businesses and economic growth when I visited the UPS consolidation hub southwest of the city. For UPS and for so many other businesses, smooth roads, modern rail links, and reliable airports are critical—and they affect companies’ ability to grow and create jobs. UPS estimates that for every five-minute daily delay that UPS trucks spend stuck in traffic, it costs the company $105 million a year. That’s money lost in wasted fuel and lower productivity—money that could be used to invest, expand, and hire more workers.
If we want to compete in the global economy, we can’t settle for deteriorating airports, deteriorating tunnels, deteriorating roads, and deteriorating bridges. The Mayor understands this. That’s why his administration has been busy rehabilitating the city’s infrastructure. By making these investments, you’re making Chicago more appealing to businesses and improving the quality of life for residents. Look at the Wells Street Bridge over the Chicago River. Like so many other bridges in the country, this bridge was in need of repair. And the good news is, work is underway to reconstruct this vital bridge.
Now, to get more of these needed upgrades started throughout the country, the President wants to create a “Fix-It-First” program. This program would put construction workers on the job as soon as possible to start tackling our most urgent repairs. But there’s no reason the American taxpayer should shoulder all the costs of these repairs. So the President would establish a Partnership to Rebuild America program to attract private capital to help pay for these upgrades.
It’s true that our economy is stronger when we modernize our roads, bridges, and airports. It’s equally true that our economy is stronger when we increase domestic energy production. We’ve made considerable progress over the last few years to decrease our dependence on foreign energy. And we can make even more progress by investing in battery technology and wind and solar power; by speeding up new permits to expand natural gas production; and by creating a new Energy Security Trust Fund to get our cars and trucks off oil completely. Not only will these moves help make sure the industries of the future are developed right here at home, they will help lower energy costs for families and businesses while creating jobs.
Our plan would also make the Research and Experimentation tax credit permanent. The R&E tax credit fuels private investment in research and technology in the United States, and it helps spark innovations that lead to new industries, new jobs, and new breakthroughs in production and engineering. Just about everyone recognizes the power of this tax credit, and we’re asking Congress to make it permanent once and for all.
If we’re going to make the United States a magnet for jobs and manufacturing, we must forge trade deals that are free and fair. That’s why the Administration is working to open up markets in both Asia and Europe for America’s businesses. Negotiations are moving forward on a Trans-Pacific Partnership, which, when completed, would boost exports and level the playing field in the burgeoning markets of Asia. At the same time, we are setting the stage for talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union. The goal of these partnerships is to create high-standard agreements that will open markets for our businesses and add to the millions of American jobs that are currently supported by trade with Asia and the EU.
The second piece of the President’s blueprint to strengthen the economy is to help Americans acquire the cutting-edge skills that the job market of the 21st century demands. To do this, the President wants to make preschool education available to every child across America. We know that every dollar we invest in high-quality early education can save more than seven dollars down the road in higher earnings that yield more revenue and lower government spending on social services and crime prevention.
We also want to invest in secondary education so that our students have the opportunity to build the skills they need for today’s high-growth, high-wage jobs. Our plan will encourage schools to create classes that focus on science, technology, engineering, and math so more students can go on to fill the high-tech jobs that are available now and in the future. And our plan will reward schools that partner with colleges and companies to establish programs that prepare students to enter the workforce.
We’re seeing that kind of partnership here in Chicago where five new high schools have teamed up with local colleges and with companies like IBM, Motorola Solutions, and Microsoft to equip our kids with the skills that businesses are looking for right now. We know this works—it’s time to do it in more places and to reach more students.
Finally, the third piece of the President’s strategy to strengthen our economy is to reward the hard work of every American. That means making sure full-time workers aren’t living in poverty. It also means making sure responsible homeowners aren’t rejected when they try to take advantage of current interest rates.
For workers, the President wants to raise the federal minimum wage, in stages, to $9.00 an hour in 2015, and index it for inflation. This idea, which is supported by businesses like Costco, would increase the incomes of millions of families, and give full-time workers a ladder into the middle class. For homeowners, we want to let those who have never missed a payment on their mortgage refinance at today’s historically low rates. This would give responsible homeowners the chance to save $3,000 a year.
Putting money in the pockets of workers and homeowners will help families pay their bills. It will also help propel our economy forward. The fact is, helping minimum wage workers and responsible homeowners are things leaders of both political parties have endorsed in the past, and there’s no reason Congress shouldn’t act on them today.
The proposals I just laid out are part of President Obama’s approach to growing our economy and strengthening the middle class. It’s a powerful jobs and growth plan. And it fits entirely within his balanced framework for deficit reduction. It’s important that our leaders in Washington come together to not only create a path to fiscal responsibility, but also to take these steps today so that we can have a more prosperous tomorrow.
Before I close, I just want to point out that when I come home to this great city—I was born and raised in Evanston—I am reminded of some undeniable truths about this country. We have the best universities. We have the best research facilities. We lead the world in technological advances and medical innovations. We attract entrepreneurs from all over the globe. Investors clamor to put their money here. Our businesses are second to none. We have the toughest and most creative workers in human history. And our economic system is the biggest, strongest, and most resilient in the world.
There are, of course, important challenges before us. But if we make our country a magnet for jobs and manufacturing; if we give our people the skills they need to do those jobs; if we guarantee that hard work leads to a decent living; and if we reduce our deficit in a balanced way, there’s no doubt we will overcome them.