 Thank you, Jamie. That was that was a very kind introduction and I actually remember We had invited you down in the Clinton administration to a conference on the new economy and Was briefing president Clinton before it and said you're going to be talking to Jamie Galbraith He's going to be saying, you know, you can Unemployment rate maybe 4% but don't worry mr. President. They can keep cutting interest rates keep getting it down You'll never get inflation and we're like try to control yourself and don't look too much like you agree with him But but president currently agreed with you then we don't comment on monetary policy today But there's a with a 10-year lag the administration is allowed to So thanks a lot for having me today. Thanks for everything that all of you do and all of you work on and Was really excited about the topic of jobs investment and Rebuilding America and wanted to use that as an opportunity to step back talk about some of the biggest challenges that we face and give you some perspective of what the administration has done and You know is continuing to try to do to address those challenges You know if you look back a couple decades I think the biggest thing we've dealt with is a double whammy and The double whammy is the productivity slow down that began in the early 1970s and the increase in inequality that began in the mid to late 1970s and when you take the two of these together and Add on top of these secular trends the very large cyclical challenge of the Great Recession you get a sense of Just how big the task of digging out of this is going to be the productivity slow down is best captured in the statistics on total factor productivity Which measures how much output you get from a given amount of capital and labor and In economics, it's the closest thing we have to a free lunch From 1948 to 1973 Total factor productivity increased 2.2 percent annually, but from 1973 to 1987 it slowed to zero point five percent annually and that led in 1987 Robert Solo who's on on your board to famously write you can see the computer age Everywhere, but in the productivity statistics It's gotten somewhat better since Bob wrote those words with total factor productivity Doubling to a 1.0 percent annual rate since 1987 but that's still less than half of the post-war Golden age average You add to that That not only is the pie growing more slowly But we have been increasingly dividing it up more unequally due to a combination of technological change globalization trends in education Institutional changes like the erosion of the inflation adjusted minimum wage and the decline of union membership The statistics in this regard are often repeated, but nonetheless striking The ratio of household income at the 95th percentile to the 50th percentile was roughly flat through the mid 1970s, but it's since grown from 2.7 to in 1975 to a record 3.75 in 2012 that's the equivalent of a zero point nine percentage point growth gap between Those incomes and that's basically on par with the magnitude of the slowdown that we've seen in Productivity so you lose a point on your income due to the productivity slowdown You'll lose in effect another point on your income due to the increased inequality and the fact that that productivity Reduced productivity such as it is is disconnected from compensation growth The facts are even more stark at the top of the income distribution and You can see this in the recently updated numbers for Manisayas of the University of California at Berkeley showing the top 1% of Tax units received 19.3% of the total income excluding income from capital gains, which can be volatile from year to year in 2012 the largest share since 1928 and up from 17.5% in 2011 and if you look at that gain in the income share that was 1.8 percentage points of income share gained in a single year Half of that gain that went to the top 1% half of that game went to the top 1% of the top 1% So that is 0.9 percentage point of national income share Increase for the top one one hundredth of 1% in a single year So this product this trend of increased inequality is a long-standing one going back many decades and It's one that we're not going to be able to stop on a dime, you know and has been continued Now you add to the two of these the deep cyclical downturn in 2007 to 2009 including the loss of over 700,000 jobs per month in the depths of the crisis and an unemployment rate that reached 10% and You see what happens to household incomes? what happens to which which are On top of the decline in the previous economic expansion and you see what happens to things like the pre-tax and transfer Poverty rate, so that gives a sense of just how much we have to get ahead of us To deal with so now I want to talk a little bit about the response and The agenda going forward to deal with all of this and want to divide that into four areas First is accelerating the return of the economy to its potential the second is Expanding the economy's potential the third is Policies that address what economists would call the post-tax and transfer Income inequality incomes and poverty and then finally what economists would call policies that address pre-tax and transfer incomes or what would more colloquially be described as Strengthening the middle class creating ladders of opportunity to move people into the middle class So the first of these is accelerating the return of the economy to its potential This has been a major focus of the president's policies from the recovery act through the many other jobs measures like the payroll tax cuts and extension of unemployment insurance to the broader financial rescue and housing efforts All told these policies have contributed to 44 straight months of private sector job growth a total of 7.8 million jobs and an unemployment rate that has fallen steadily by about three quarters of a point per year This has been stronger than what we've seen in many countries around the world and many previous recoveries From financial crises because as we know It's especially difficult when the problem that leads you into a crisis Is over leveraging to have some of the normal cyclical mechanisms like borrowing and investing in housing and buying cars That rapidly speed you out of the recession But even though it's better than what you've seen in some countries around the world Some of what you've seen in financial crises in the past We don't expect our country to be graded on a curve and it's clear that a lot more work remains to be done Part of that work involves the overall stance of Fiscal policy and I think there's some reason to be cautiously optimistic here in that this past year We had a decline in the deficit by 2.7 percentage points of GDP That's about as large as a single year of deficit reduction that we've seen and over the last four years We've seen nearly six percent of GDP off the deficit the largest four-year contraction in the deficit since the end of World War two And while it's good to be returning Towards fiscal sustainability and stabilizing the debt that rapid deficit reduction has created a significant headwind for the economy and for the private sector and for economic growth I Think the good news is that no matter how our fiscal issues are resolved for FY 2015 you're not going to have nearly as Contractionary a fiscal stance going into next year and the pace of deficit reduction Won't be nearly as large and what we'd like to see is more upfront Support for aggregate demand more upfront investment in infrastructure and jobs and No, not that same rapid pace of deficit reduction in the short run and instead pay for those items over the medium and long run at the Center of those proposals or proposals that address You know just first of all as I said the overall Magnitude of aggregate demand so something like relieving the sequester is important not just because it's poorly designed from a policy perspective that it cuts infrastructure cuts education cuts research but also that You know, it's the wrong time profile of deficit reduction It includes the importance of upfront measures like Investing in a fix-it-first program fifty billion dollars of upfront infrastructure Investment and it includes things like relief for teacher jobs, which is an area that we've seen significant layoffs We're starting to see some rebound, but we're still I think six or eight hundred thousand Jobs teacher jobs short of where we were when the economy peaked And then finally we also have more work in terms of speeding the recovery to potential in the area of Housing we're building about nine hundred thousand houses a year Steady-state housing we should be building about one point five million a year Credit may have been overly loose going into the crisis now There's a lot of evidence the credit is overly tight a lot of households that have D-leveraged that are in a position to invest in housing Haven't been able to and we want to give them that opportunity The even more fundamental question though is what we can do to promote a return to long-term growth and Even people, you know, who are mostly focused on inequality should care a lot If we had managed to maintain The same productivity growth that we had had from 1948 to 1973 and continued it after 1973 Incomes would be 69 percent higher and there's no reason not to believe they'd be 69 percent higher across the board So even if you had had the same magnitude of Increase in inequality, we'd all feel a lot better about it if everyone's incomes were shifted up 69 percent part of increasing Our long-run potential an important part of it is Public investment. I think if you ask why productivity growth was so strong from 1948 to 1973 Public investment of which the centerpiece was the interstate highway system and what that did to America as a country was certainly an important part of that story and then also capitalizing on a lot of the investment Inventions and discoveries that were done by the government in the course of fighting World War two that were then repurposed for civilian use like for example the jet engine so we really coasted for several decades on pent-up federal innovation and on continued public investment Since then though we've seen a big decline in public investment and As a share of the economy and you look at the national income and product statistics, and I think it's gone from My memory is about four percent of GDP down to less than one percent of GDP so we're going to have to spend more and The president has a proposal to take the savings from unwinding the wars in Iraq and Afghanistan and Devote half of those savings to reinvesting in infrastructure Here at home through a surface transportation reauthorization that would be More than five hundred billion dollars Over the next six years it would be about a 40 percent increase over what we're Investing in that area right now But I think we also have to be honest with ourselves and realistic that there's going to be an upper limit in terms of how much extra federal dollars we can put into infrastructure and That's why when thinking about that type of public investment It's also really important to ask what we can do number one to make sure we're spending our money Better on higher rates of return projects and number two that we're Leveraging our money and leveraging private capital and you see countries around the world Australia Canada a lot of countries in Europe do a much better job of Attracting private capital Into their country and the president's focused on something that we've called a rebuilding America partnership that takes things like an infrastructure bank like the TIFIA program in the Department of Transportation that provides loan guarantees for investments in roads and bridges and some of the tax and other impediments to Bringing private capital into America and putting some federal money in leveraging that several times and investing more Increasing the economy's potential is also going to depend on Private investment and when you think about private investment It's not just the quantity of private investment you care about but you're going to care a lot about the quality of it as well And there's a lot of things In the president's agenda that I'll just really tick off and not speak in much more detail about that I think matter for that. I think business tax reform Matters and the goal of business tax reform is not to lower the average tax rate on businesses It's a budget neutral proposal But it's to make the tax code more neutral between different types of investments So right now if you invest in a manufacturing structure, you're taxed at around 25 percent You invest in an oil or gas structure. You're taxed at less than 10 percent That type of distortion doesn't make sense So you want to have a more neutral tax rate on the type of investment whether it's debt or equity It's important to make sure you're more neutral about whether you're choosing to invest overseas or invest here in the United States Right now we have tax advantages for investing overseas the presidents, you know all of the above strategy on Energy what that's doing in terms of renewables natural gas matters not just for climate and You know our planet's future but also for our economic growth in the near term The slowing of health costs matters a lot for Increasing productivity of the economy an agenda to increase our technology I think investments in wired and wireless broadband have been part of the reason why we've seen that total factor Productivity rise from what it was in the late 70s and early 80s, and I think that will continue to be important But no matter what we do in terms of returning the economy to its potential and No matter what we do in terms of expanding the economy's potential We're still going to have Unacceptably high inequality. We're still gonna have unacceptably high poverty and We're still gonna have a lot of barriers for families trying to Enter the middle class and so I want to talk first about addressing post-tax and transfer tax and transfer what economists would call tax and transfer policies and I think this has been a really underappreciated success of public policy in the last couple decades and I think you've had some conservatives that have wanted to deny that the war on poverty has made any success and I think you've had some not many on the left who are You know focused appropriately on incomes and have missed part of the story of some of the triumphs of public policy And to put that in perspective There was a new paper by researchers at Columbia that came out last week that takes the new supplemental poverty measure and extrapolates it back and If you look at that measure and actually take out all our policies look at your incomes not counting social security Not counting unemployment not counting food stamps not counting EITC You see an amazing thing the poverty rate in 1967 Was 31 it was 32 percent The poverty rate in 2011 was 31 percent the poverty rate barely budged in about 45 years If you just look at people's income That's pretty depressing When you think that per capita GDP doubled over that period But then you look at what our policies did In 1967 taking into account social security food stamps We didn't have refundable tax credits then all the different policies we have the poverty rate was 27 percent So that was only a small reduction in the poverty rate due to our policies by 2011 the post-tax and transfer poverty rate had fallen to 16 percent so we have nearly so we've cut poverty in half in the last 45 years and we've cut it in half entirely a hundred percent because of the expansion of public policies and that's things like food stamps the earned income tax credit that Better rewards work the partially refundable Child tax credit which also rewards work That's a pretty amazing achievement the president has tried to do a little bit to build on and add to that The most important is the Affordable Care Act which will obviously have a very substantial impact on inequality as it's experienced by families both in a social insurance sense of providing a You know safety net for everyone and in particular one targeted You know at low-income households, but also benefiting middle-income households We've expanded things like the EITC for married couples for families of three or more children and increase the refundability of The child tax credit and a lot of that has been paid for with measures like returning To the Clinton era tax rates for high-income households and making sure that within Medicare or your taxing, you know Unearned income for high-income households in addition to taxing earned income So going forward. There's more scope in terms of public policy that Directly addresses poverty that directly addresses inequality that directly helps lift up the poor in the middle class But I think you know we have to be realistic that the biggest challenge for us in this area is going to be defending The gains we made Already from the people who want to dismantle and cut things like the EI to see or radically cut things like Nutritional assistance and so a lot of what you're doing there isn't necessarily you're going to make a whole leapfrog forward That's as big as what we've made in the last 45 years and what we've made in the last couple years But it'll be defending the gains we've already made. I think the bigger place That we can push forward on a going forward basis is the final area of Policy that I'm going to talk about and that's what we can do in terms of pre-tax and transfer incomes and mobility and a Lot of the policies in this area take a while they're what's more fundamental They're what matters more, but they don't turn on a dime in the same way that you know Refundable tax credits for example do there's one very important exception though, and that's the minimum wage And I noted before that the poverty rate was basically unchanged for the last 45 years You know one really important part of that story is that the real value of the minimum wage eroded by 23 percent between 1967 and today we cut the minimum wage by 23 percent so in some sense it shouldn't be surprising That that among other factors Didn't make as much progress on poverty as we would like basically didn't make any If you look at the minimum wage now in real terms, it is the same level that it was in 1950 So in 60 years the minimum wage has gone up zero adjusted for inflation in that 60 years the productivity of our economy has well more than doubled our Wages have doubled and the minimum wage has been flat. It's had its ups and downs in the interim But over that 60-year window it's been flat so one thing we need to do is raise the minimum wage and Raise it in a way that would take families that are below the poverty line with the tax credits I was talking about earlier Above the poverty line and that's something that the congressional proposals would do Lot of the other things that we want to do to affect incomes. I think are more profound more long-lasting More broad in their significance, but take longer as well and the centerpiece of that is Education and on education. I think we have to worry about education at every level But the big new investment we saw first an expansion of K through 12 than an expansion of federal investment In college and the big front going forward is going to be preschool and what we can do to have Preschool for all in this country something that has been shown to have among the highest rates of return of any investment in education But we'll also need to improve high school invest in things like career academies Make college more affordable help Help people Continue college and then lifelong education and matching to jobs I think the other thing that's going to matter for inequality is mobility and Mobility not just in the sense of your income rising But your ability to move from job to job and move to places with more opportunity And I think it's been an underappreciated thing Tim No, actually had a very good piece has a very good piece in this month's Washington monthly About how the decline in mobility we see in the jolts data Which shows the turnover in the labor market that we see in mobility between states and there have been several good studies from the Federal Reserve is Reducing what is the bigger source of wage gains that we've had in the past the main way That people see their wages go up is not that they get a raise on their current job It's that they move to another job that they're better matched for they have higher productivity That helps growth and they get a piece of that In the form of a higher wage when you have less turnover in labor markets less movement between states You'll have less of that and how to restore that type of mobility and dynamism. I think is an important part the bigger picture So, you know in conclusion, I think the bad news is this double whammy of long-term Productivity slowdown and an increase in inequality Compounded by the Great Recession I think the good news is that many of the policies that address these issues are Complementary win-win and or even win-win-win, you know, if you invest in infrastructure It helps the economy return to its potential more quickly but it also expands that potential and Provides jobs for middle-class families Increasing the supply of skills through investments in education and training not only reduces inequality. It also Expands growth and you know, I could go on We've made a lot of progress in digging out of the Great Recession we've made progress in Making some of those invest public investments in encouraging that private investment We've had some important policies that have further built on several decades of progress in terms of public policy reducing poverty and helping the middle class but You know as everyone in this room knows there was a lot a lot more to do and that win-win-win philosophy of Returning the economy to its potential expanding potential and policies that directly and indirectly Reduce inequality and expand opportunity will be you know central to the president's approach going forward So with that I'm happy. I'm not sure how much time you have but whatever time you have I'm Happy to