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Remarks at Raleigh and Durham Chambers of Commerce, Durham, North Carolina

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AS PREPARED FOR DELIVERY
Thursday, September 20, 2012
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Acting Commerce Secretary Rebecca Blank
Remarks at Raleigh and Durham Chambers of Commerce, Durham, North Carolina

Thank you, Governor Perdue and Ken (Atkins). 

It’s great to be here with the Durham and Raleigh Chambers. And thank you to our hosts here at the Foundation.

The Triangle has been a center for innovation and economic growth and job creation for decades, and while we’ve been through some tough economic times, it’s clear that this area is once again serving as a vibrant location for new ideas and new businesses.

  • As Governor Perdue announced several months ago, companies like Avaya are adding dozens of good-paying jobs.
  • Young businesses like Entegrion are working with our military to develop life-saving products.
  • And local startups are emerging in fields ranging from software development to the arts. 

Though more work remains, compared to where we were only a few years ago in our economy, we have truly come a long way.

It’s easy to forget how quickly our economy was spiraling downward in the fall of 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 every month. To put that in perspective, that’s the population of the city of Raleigh… plus Durham, plus Chapel Hill.

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. Over three million working families in North Carolina got $1.7 billion in tax relief.
  • One-third went to state and local governments that were struggling with their own plummeting budgets. This kept 200 North Carolina police officers on the job.
  • And one-third went to infrastructure. In fact, $100 million went to a tech nonprofit just around the corner from here which is bringing high-speed broadband to businesses, colleges, libraries, and hospitals around the state. Without the Recovery Act, independent economists say we would have lost millions more jobs. 

In addition, the president directly reached out to support the private sector.

  • For example, lenders weren’t making loans to small businesses, so he increased the government-backing on SBA loans.  This gave over 2,500 North Carolina businesses the credit they needed to keep their doors open and start hiring again.
  • 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, it’s back and stronger than ever.

As a result of all these actions, not only did the downward spiral stop, but we’ve now seen stable economic growth for nearly three years.  

Unemployment nationally–and in states like North Carolina–has dropped about two percent. . . and 4.6 million private sector jobs have been created over the past 30 months, including over 100,000 here in North Carolina.

  • 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 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–not just buying groceries and paying bills, but also big-ticket items like home renovations or a new car. 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 this most recent recession, consumer spending has grown, but at a relatively moderate 2.1 percent annual pace. This isn’t surprising. Consumers had been on a debt-spree in the 2000s and needed to rein in their spending and rebalance their household finances. The steep losses in the value of people’s homes and 401K plans also made families cautious about spending.

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 helped middle class families will expire, taking money out of their pocket and making it tougher for them to make ends meet in 2013.

Let’s say you’re a family of four making $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 why hasn’t Congress acted?

Some folks in Congress don’t want to extend tax breaks to the middle class, unless we also give breaks to the wealthiest two percent.

Now, we all know that the U.S. faces major long-term challenges with debt. 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–the middle class.

We’re asking Congress to return the top two perecent to tax rates that they paid in the '90s, a time when we had the fastest economic growth in U.S. history. This will provide 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 certainty about what their tax situation will be in 2013. That will help American families make informed spending choices and drive the biggest engine of our economy.

But an economy built to last requires more than just strong consumer spending. So let’s turn to a second key area: manufacturing. (And it’s great to see Terri Ratcliff and Phil Mintz from our Manufacturing Extension Partnership here in North Carolina.)

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 10,000 in North Carolina. We still have much work to do, but we’re heading in the right direction. These are good jobs that pay well, have good benefits, and strengthen economic security for working families.

So our question today is this:  How do we ensure that American manufacturing continues to grow and lead the world?

In a word, the answer is innovation.

As we’ve watched the U.S. economy reinvent itself to compete in a tougher global environment, it’s 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 productsis, is what’s going to keep us competitive.  

The importance of innovation to manufacturing is clear: 70 percent of our private sector R&D is funded by 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 working to reverse the erosion we’ve seen since 1980 in federal support for basic research and development, much of which supports our manufacturing base.  He set a goal of doubling federal dollars in R&D over 5 years, 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.

I’ll share one initiative that the Commerce Department is helping lead–aimed at fixing this problem and improving tech transfer.

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.

I just went to Ohio to launch the pilot for this Network. It’s focused on additive manufacturing, also known as 3D printing. If you haven’t heard about 3D printing, you soon will. 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. 

It’s a public-private partnership, with funding from federal and state governments, and many manufacturers.
We’re going to be tracking this pilot closely, so we can learn how best to help foster these sort of collaborations that will help speed innovation in promising areas of technology.

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.

  • With interest rates this low, we can and should put construction crews back to work building the roads and bridges we need to transport goods.  A dozen national studies have described the dangerous deterioration on American infrastructure.  Now is the time to address this problem.  In fact, 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 community colleges and manufacturers to create a pipeline of workers to today’s high-tech shop floors. This administration will continue to work to help these colleges and businesses collaborate 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. In fact, the Commerce Department just awarded $2 million for a STEM-focused building expansion at Richmond Community College in Hamlet. 

We must move forward with all of 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:

  • One, we want U.S. firms to expand here at home and bring jobs back–sometimes referred to as insourcing or reshoring.
  • Two, 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.

Last year, the U.S. received $227 billion in foreign direct investment, money that flows into businesses in this country, and this is a sharp increase over the year before.

There are many factors driving these growing investments to the U.S.:

  • 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 the trend toward U.S. investment.

On the domestic front, 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 both staying in the U.S., if you’re a U.S. firm, or investing in the U.S., if you’re a foreign firm.

Again, I believe that we are poised for a boost in both domestic expansion and foreign direct investment in the near future. And we know that when a company builds a new factory here, the likelihood of 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 “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. And it's great to see members of our North Carolina U.S. Export Assistance Center as well as members of the team based here in Raleigh.

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. We want to build on the fact that, from 2009 to 2011, the number of export-supported jobs in the U.S. increased by 1.2 million.

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.  Just yesterday, we announced that $13.7 billion was spent by international visitors in July. That means we’re up nine percent year-to-date.

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, North Carolina gets a boost whenever someone visits the Outer Banks, or the Smokies, or comes here to the Triangle for a big conference.

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’ve developed a National Strategy on Travel and Tourism, and as you may have heard just yesterday, we’ve already made great progress with efforts like reducing visa-processing times.

In addition to sector-specific efforts, another way to promote exports is to focus on key overseas markets where demand for U.S. 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.  Among the companies that came along was LORD Corporation, based near here in Cary, which makes products that reduce noise and vibration in transportation systems.

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.

And make no mistake. We’re taking action when we see that American businesses and workers don’t have a level playing field. For example, we have doubled the rate of trade cases against China compared to the previous Administration. As you saw just this week, we just launched an action against China at the World Trade Organization for illegally subsidizing their autos and auto parts.

The president and I will continue to fight for American exporters because we know that when they can compete fairly on the global stage, they can win.

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. exports and U.S. insourcing.
  • 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 bring more jobs and more prosperity to working families in Raleigh-Durham, throughout North Carolina, and across our great nation.  

So, let’s work together to ensure that America remains the global economic leader of the 21st century. Thank you.