President Obama’s Economic Recovery Board: First Meeting

President Obama’s Economic Recovery Board: First Meeting


The President:
It is good to see
all of you again. I know that many of you have
been busy working with Paul and others on some of the financial
issues that we continue to confront in the economy. We’re pleased that we’ve
seen some progress, that there is some return to
normalcy in certain aspects of the financial markets. We think that that will
be helpful overall. But obviously one of the things
that I’ve been concerned about since I took office is looking
beyond the immediate crisis in front of us to find out what is
a sustainable economic model post-bubble and bust. How do we create sound
fundamentals on issues like education, on health care, and
the topic that we’re going to discuss today, energy, as well
as all the innovation that’s required around
these various areas, so that moving forward we
don’t find ourselves in a unsustainable economic model? And we have seen this week some
fairly extraordinary steps being taken around energy,
which are promising. Yesterday I stood out in the
Rose Garden and announced that the automakers, the unions,
state and local officials, as well as the
federal government, were coming up with a uniform
national fuel efficiency standard that will provide
certainty to the automakers and take a real bite out of our
level of oil dependence and over time reduce our
dependency on foreign oil. At the same time, you’ve got an
energy committee in the House of Representatives which is making
more progress than we would have ever expected around the issue
of greenhouse gases and carbon pollution. So you’re seeing
industry, labor, and government working
together more cooperatively, in a better spirit, than we’ve
seen in a very long time. But this is a huge,
complicated, difficult issue. I know that sometimes the
slogans about clean energy and green energy may be a little
more forward-leaning than the realities of the numbers of
jobs that are currently being produced or the technologies
that are currently available. So one of the roles that I
thought we could play today is to try to flesh out a little
bit what can we get done; where are immediate
opportunities that we should be taking advantage of; what
are some major challenges; how realistic are some of our
projections around clean energy, and how much of them are
dependent on technological breakthroughs that
we don’t yet foresee; and how does this affect those
who are not in the energy sectors but have, nevertheless,
a significant interest in how this will affect overall
economic growth. So I wanted to start
with John Doerr, who’s done as much work on
this as anybody as a venture capitalist, but somebody who
sort of digs in and gets his hands dirty on these issues
and understands the technology behind a lot of these questions. John, why don’t you share with
us sort of more broadly how you’re thinking about
some of these issues? Mr. Doerr:
Well, thank you
for making energy, and energy and climate
such a priority. It’s today’s discussion and it’s
very important to everybody on the board. There’s agreement in our group
that energy touches everybody’s lives, every activity
in the country. And so it’s very important
for us to get this right. I put together a paper based on
input from some members of this board. We’re going to discuss it
further today and this week and now. It’s focused on the
economic consequences, whether we act or do
not act, for America. And it speaks to jobs. And it also talks about
something that we haven’t heard much about today, and that is
how getting this right can have a large effect on the America’s
worldwide economic leadership, and if we get it wrong, we’re
going to stay where we are today, which is not
really in the race. You’ve taken a position, the
administration has taken a position, squarely in favor of a
market-based system to deal with the costs of carbon and climate,
the so-called cap and trade position that my sense, from
conversations not — of our group is that we favor that,
though there are some differing opinions. We think it’s very
important to act now, that there’s an issue with
carbon emissions that we’re behind where we want to be,
behind other nations in the world in dealing with this. Also, if we act now and send
very clear signals to our business community and the
nation then we can get investment now that
will create jobs now, as this kind of a regime
or system develops. We think that putting a price
on carbon is the most important thing we can do, but it’s not
the only policy that should be adopted. Getting more work in research
and development funding — that’s an area that’s been
neglected — is an important thing to do. And the Department of Energy,
as part of the stimulus bill, and others, is moving
in that direction. We think enlisting our
utilities nationwide, make them allies in getting
more energy efficiency, is a very important step — and
we’ve got more work to do there. And, finally, making sure that
our cars and our buildings are the most efficient in the world
— the action that was taken yesterday — is very important
to a comprehensive solution to this climate crisis
we’re dealing with. I want to close with my
views, on an optimistic note, and that is that we are seeing
breakthroughs in the technology that not only can get
us where we need to be, but that can make sure that
America is the worldwide leader in developing the jobs and the
businesses and the wealth from this industry as it was
the case with the Internet. The President:
Jeff, do you want to talk about this from a big manufacturing company that both uses
energy, but also works on the technologies that might
save energy usage? Mr. Immelt:
Mr. President, I think clean energy is the most exciting, fastest-growth industry
of the 21st century. We’ve got about 70
energy-efficiency products, about $18 billion in
revenue this year. We have 50,000 jobs between
GE and our supply chain, lots of small- and medium-sized
companies in this country and around the world. Technology is out
there to be had. I think we have to have a
broad aspiration to lead in technology. It includes what I call big
base-load technologies, like coal gasification
and nuclear; real advancement in renewables;
technologies that drive efficiency like the smart grid. And it’s out there to be had. The leadership is
out there to be had. This ought to be something that
we aspire as a country to do. I think things that help that
are actually a price for carbon and unleashing the technology
that can be applied, as John, said, to energy. If you go back 50
years in this country, the amount that’s been spent in
energy R&D is dwarfed by health care, NASA, other places. I think if we can take the
ingenuity and the innovation of the United States, apply it to
this technical revolution that’s going to be going on,
give us certainty, give industries certainty
around a price for carbon, or the rules of the road,
I think we’re going to be surprised by how many
great jobs this creates. I would say these 50,000 jobs in
this brutal recession are the most robust jobs we have. We’re shipping products
around the world. We ship about 150
heavy-duty gas turbines. Three will go to the U.S.; 147
go to the rest of the world. So this is actually — The President:
This is an area where we could develop a strong export market. Mr. Immelt:
I think we have to think about it that way, Mr. President. We’ve got to move now. Other countries around the world
are doing the same things. And there’s no reason why we
should concede leadership to other people. The President:
How far behind are we technologically, though, in countries, John? Mr. Doerr:
I would say that
innovation exists here. You know, Europe’s at 10-percent
renewables; we’re at 2 or 3 percent. Other nations of the world,
like China, Finland, France, are building nuclear power. We haven’t started yet. We’re doing the first whole-gas
gasification plan in 25 years in Indiana. So the brains exist
in this country. I think what we have to use is
our domain to really build cost positions and competitiveness
that can be globally competitive. But they’re the types of
products, Mr. President, that we can build great
export industries around. The President:
Rich, I know from
a labor perspective, one of the biggest concerns you
guys have is the decline in manufacturing. Mr. Trumka:
Absolutely. The President:
And we’ve actually got a task force that’s working up some ideas about stabilizing and then
growing our manufacturing base. This is one area where we’re
seeing some potential. I’m wondering if you just wanted
to touch on sort of how the AFL-CIO is thinking about clean
energy and its potential for creating solid
middle-class jobs. Mr. Trumka:
I think I can probably echo everything John said and what Jeff said. We see it as a tremendous,
tremendous potential for us to lead. Our members are going back
and being retrained to do weatherization, all sorts of
green things to save energy, a whole type of new training
to get them up to speed on the skills that they need. The problems that
we’re talking about, I think we are
disadvantaged a little bit. We’re disadvantaged by the tax
code that your administration started looking at. We’re disadvantaged in some ways
by the trade agreements that your administration has
already started looking at. And we look at — with
greening right now, we think a couple of things,
a couple of trap doors would actually — should
actually look at. One is we really think that
this has to run on two tracks. Not only do we think it has
to be done in this country, but simultaneously has to
be done internationally. Elsewise the jobs that we create
we could ultimately lose because we’re disadvantaged
internationally if they don’t. People who — when the
Kyoto Treaty was adopted, or at least asked to be
adopted, everybody said we’re disadvantaged by it, and so
there was a lot of opposition. The other thing is we think
that all of this needs strict monitoring so that while you’re
monitoring you can tell if we’re on course or not,
and if we’re not, we have to have language that is
a trap door so that the economy doesn’t get derailed by
surprise along the way. Our members are excited. We’ve already started creating
the training programs and the jobs. They were already starting
to help green the country, and we think it’s a win-win-win
for this country and for the people of this country. And we applaud your
leadership in the area. The President:
I want to open it up — Martin, I’d be interested in your views on this. I mean, this is one of those
areas where you can have some pretty fierce economic debates
around the efficacy of a cap and trade versus a carbon tax;
whether the government getting involved in this area helps
significantly sparking a clean-energy revolution, or
whether this is going to happen due to innovation in the private
sector without government catalyzing it. So to the extent that there’s
any skepticism in the room and you’re always good for that — (laughter) — I wanted to make sure that
that got put on the table and that we had a realistic
conversation about some of these policies. Mr. Feldstein:
Well, I think a cap and trade
or carbon tax would undoubtedly stimulate conservation
and green technology. I don’t think there’s
any doubt about that. I think about two
aspects of this. One is the impact on consumers. There’s a range of estimates,
but the Markey-Waxman kind of reduction, a 20 percent
reduction from roughly current levels of CO2, the estimates run
from $400 per capita increased cost to about $1,500 — about
three-quarters of the EPA is the low end and an MIT technical
study is the high end. About three-quarters of that is
extra revenue that would go to the government. What’s clear is you have to
raise the price to consumers to get them to cut back. Three-quarters of that would be
revenue to the government that could be given back or could
be used to support spending programs. The other quarter are real
costs to put in place this new technology. So I think it’s very important,
in thinking about this, to recognize the magnitude of
that cost increase and the distribution. The other point is about whether
you auction or give away some of these permits. The price has to go
up by the same amount. The cost to the consumer has
to go up by the same amount, whether you auction it
off or you give it way. So I have a hard time
understanding the giveaway strategy, because it seems to me
that just says we’ll take some of the money that would
otherwise be collected by the government, that revenue, and
give it to some of the firms that win this lottery
to get some of these — The President:
Well, as you know,
during the campaign, my original proposal was a
100-percent auction so that you didn’t have the potential for
political considerations or gaming of the system. The way I think that the
Waxman-Markey bill is trying to address this is you’ve got
regional differences that have to be accommodated — some of
it has to do with how do you, if not hold the
consumers harmless, then assure that the rebates or
the allocations that are awarded are leveling out the
cost to consumers. So it ends up not being as
arbitrary as I think it might seem in the abstract. In the particulars, there
are just some regions in the country, particularly in
the Midwest and the South, where their options for ramping
up energy efficiencies quickly are very different from
California or some of the Northeast cities. And so you want them
to make adjustments. On the other hand, if the
adjustments are too onerous, too quick, not only is it
brutal on those states, which are already
having trouble, but politically it
ends up being — Mr. Feldstein:
So this is for regulated electricity, basically? The President:
Mostly around the
electricity issue. Mr. Feldstein:
Because for gasoline
and other products — The President:
For gasoline that
makes less sense. Now, I haven’t seen all the
details of the bill yet. Carol, you may end up
having a better sense. Larry, do you want to
chime in on this one? Mr. Summers:
Having been taught by
you when I was a student, I understood very well the — The President:
Marty really doesn’t
like to admit to that. (laughter) Mr. Feldstein:
I take great pride in my students — Larry high on that list. Mr. Summers:
I think the broad agreement that people in the business community discuss and so forth was the
one the President articulated, which was the essence that
the giveaways were to come in situations in which regulated
utilities were primary examples where you were going to be
plenty able to pass on the price — there’s a little bit of stuff
that has the character of our companies and the
international competition. And there isn’t something
parallel to that in the world. So at least the principle was
you don’t get to pass it on and get the windfall. But a situation where it’s
not going to passed on, then it’s natural for
there to be a compensation. You might disagree at some
point on the application of the principle, but that is — the
sort of economic principle if you would that we’re
trying to assume. And I think that’s a logical — Ms. Browner:
I think what Mr. Waxman has
done to date in the bill — it’s still in markup, things are
still changing — is about 35 percent of the allowances that
would otherwise have been auctioned are during a
transition period given to the electric utilities,
as the President said, to offset the
impacts on consumers. Another 15 percent have been
reserved for trade sensitive — trade-intensive
industries, recognizing that because of
the global nature of their competition there are
some transition issues. And then some smaller amounts
have been given to other sectors — there’s this very clear
understanding that these transitions are going to be
an important way of helping industries find the kind
of new technologies, the innovations that will allow
us to ultimately drive down the cost. The President:
Jim, you’ve got some thoughts
as a big manufacturer that operates internationally. You probably see some of
these as opportunities, but I know you may
see some risks as well, so I’m putting you in a
competitive disadvantage. Mr. Owens:
You surprised me. I guess Caterpillar is the
third-largest producer of things that make kilowatts after GE and
Siemens; we make small ones, but — and we’re a big
exporter also for the U.S. In fact, combined heat and power
applications of both small turbines and small gen sets are
big sellers in — actually more outside the United
States than inside, partly because of the
way we regulate emissions site-specific, as opposed to
looking at combined emissions and energy efficiency. So there are some things here
that we could do to help our country be more competitive
using the technologies that are out there. I agree with Jeff. I think we have the technology,
we have the smarts here, and the product technologies,
the economic incents of what’s needed. And that’s why I think of us
in industry support a clarity around a carbon price, because
that’s going to drive a lot of innovation and a lot of
efficiency and will get with the program of reducing
carbon emissions. Our concern and one of the
things we’ve been very engaged with the U.S. cap initiative discussing is, we need to approach this in an international context. I think if we move unilaterally
as the United States with a significant cap and trade
program that drives up the cost of carbon here significantly,
and our international competitors, the countries
don’t move with us, it’s going to create competitive
problems for the core — let’s call it the base industries
— steel, aluminum, cement — the core feeder
stock, if you will, for the manufacturing
industry in this country. But I think if we take
that leadership role, as you’ve articulated it, and go
to Copenhagen with that in hand as showing our commitment
to move forward, I think there’s a good chance
that we’ll find the Indians and the Chinese, for example, the
two largest emerging markets — and big growth markets, by
the way, for U.S. exports — likely to want to work with us. And I think there’s more
opportunity for collaboration on the international scale than
some people are giving us credit for here. The President:
That’s what we’ve been seeing. Mr. Owens:
I think it’s out there. The President:
I want to bring maybe
some of the finance guys, because you crunch the numbers,
you’re looking for opportunities where it makes sense to
invest, where it doesn’t. Mark, how is this looking
from a investor perspective, from a — Mr. Gallogly:
Well, one way to think
about it is to start and say, what’s the size of
the opportunity? And we produce about 1,000
gigawatts of energy — of electricity in
the United States. And so we’ve got
— we’re at 1,000, we’re going to grow 1 or 2
percent, something like that, a year, so by 2020, we’re
somewhere around 1,200. So that 200 increment — of that
1,000, by the way, 800 of it, of the 1,000, 800 is based on
— produces carbon emissions. So if we’re growing another 200,
and we’re trying to get to 20 percent, one way to
think about it is, all of the new stuff has
to be in alternatives. That’s one way to — and it’s
about 20 gigawatts a year. That’s a lot of money, that’s
a lot of capital required to produce 20 gigawatts. At the same time, we’re in the
middle of a credit crisis, and the big project
financers have been UBS, Banque National Paris, RBS, all
of the big European and Asian banks, all of them
pulled out of the market. So there’s a natural disconnect
between the amount of capital needed and the size of
really big, big facilities, things that Jeff
is talking about. And I think one thing we need to
consider — it’s a little bit built into the Waxman proposal that we need to think through — is whether there’s a role to attract private capital into those buildings — into that building initiative and have some role for federal government, because, as something that Marty
is really focused on, I think appropriately,
it drives down the cost. And the question is, what’s
the incremental cost to the consumer; what’s the likelihood
politically this is going to work? And if you can drive the cost
down by having a more favorable capital structure, which has
real risk from investors but has a lower cost of
aggregate capital, then you’re going to increase
the likelihood you actually — which is what your first
question was — realistically hit these numbers, because
you’re going to start building 20 a year soon, really soon, if
you’re going to make this goal work. The second thing I think that
could really impact this is whether you have a
national standard or not. I know the administration
supports a national standard, a national energy
standard for alternatives. There’s a real — there’s been
real success on a state by state basis, but many states, as
you pointed out earlier, don’t have alternatives, don’t
have the ability to produce alternatives. In the Southeast there’s not
a lot of — if you’re in the Southeast, not a lot of winds,
not a lot of real sun power, so you’re not going to see much
alternative generation there. And energy moves across states
— and so you’ve got to figure out a way, just as you’re
thinking through emissions for auto on a national basis, to
think about a national standard for energy. I think if you did those two
things, in addition to carbon, then you have a realistic
likelihood of achieving the goals. If you don’t have those
three coming together, I think the likelihood is
less — materially less. The President:
Roger? Mr. Ferguson:
Mr. President, thank you. I’d like to point
out three things, again coming from finance. First, I think a number of
people would say that once you think about not just the
cost, but also the benefit, and there’s a general view
I think among the economics profession that there’s a net
benefit of taking active efforts now to mitigate climate
change, CO2 emissions, and this would be
one element of it. Secondly, that we think about
this from the standpoint of another part of finance,
which is insurance. The insurance industry and
reinsurance industry has seen insurance losses going up quite
dramatically as a result of changing in climate,
that kind of thing. So I think you would find a
number of parts of the financial services sector that would
broadly be supportive because they think it’s good economic
policy as well as social policy. I think a third, again thinking
about it from the standpoint of the insurance industry and other
parts of the financial services sector, cap and trade has
a number of appeals to it. One is that it is
certainly market based. Secondly, setting a cap gives
you a broad direction of where you’re headed. And third, to pick up a point
that’s come up a few times, I think broadly if you think
about this as an international problem, cap and trade, as
you’ve already observed, may have the advantages of being
something that can be applied successfully across a number
of political jurisdictions. And so, looking at the
industry I represent broadly, which is finance and insurance,
I think you’d find many people supporting these directions. The President:
One of the things that when our energy team gets together we talk about is that the
lowest hanging fruit, the area where technology
is already available, is on the efficiency side. We don’t need breakthroughs as
much as we just need the proper incentives to take
advantage of that. And so I wanted to maybe just
talk about that for a moment. And I’d be interested, Penny,
from a real estate perspective, because buildings, it
turns out, alongside cars, is the area where there
is just enormous waste. On the other hand, the real
estate industry as a whole, residential and commercial,
are obviously under — feeling enormous pressure right now. And so the question is whether
there is an appetite for retrofitting old buildings,
dealing with energy efficiency in what is already a difficult
economic environment. Are there some additional things
that we need to do if in fact we’re going to move
in that direction? Ms. Pritzker:
Mr. President,
you’re exactly right. The real estate industry is
a large contributor to the production of emissions, and so
something that we need to take into account and to
address this issue. I think given the stress that
the commercial real estate industry is under, as well as
the residential and housing market, I think we’re going to
need incentives to motivate people to be able
to find the capital; it’s very difficult to access
capital for such retrofitting. And so I think there potentially
needs to be some kind of incentive plan that might
encourage activity now — job creation comes with that — at a
time when the industry probably doesn’t have the money or
potentially the will — and I don’t think there’s an aversion,
or the industry is certainly not against this; it’s a question of
is it realistic to get it done right now. I think incentives are
enormously — I think you could put a lot of people
to work doing this, because it’s not only for the
residential but also large commercial buildings. There’s enormous
work to be done. The President:
Carol, do you want to talk to us briefly about some of the steps that we’re already taking on the
efficiency front and are there questions for this group that
we’re still puzzling over? Ms. Browner:
Well, on the efficiency front, I think many of you are aware that the President’s Recovery Act did
include about $6 billion for weatherization, and that program
is getting up and operating. We’re seeing job creation across
the country; very positive. To Penny’s point, the states
also are now starting to receive their block grants, and some
of that money could be made available in terms of some of
the commercial real estate and kind of efficiency investments
in commercial real estate. Waxman-Markey does include
a renewables and efficiency standard. What they’ve done is they’ve
blended it together; right now it’s a total
of 20 percent renewables, up to 8 percent can come from
efficiencies at least — so you could get 12 percent renewables
and 8 percent efficiency. I think it’s a carefully
crafted provision to the bill. We’ll see where it goes as the bill continues to move forward. One of the things we’ve
been interested in is, are there other such
efficiency — yesterday, the President exercised his
executive authority in pressing his national car standards to
an historic level of reduction. Are there things we could
do on the efficiency side? We understand there are other
things you all are aware of where we have some executive
authority that the President could exercise — The President:
John, did you want
to comment on this? Mr. Doerr:
There’s two thoughts. And I think the most powerful
one would be somehow to use your bully pulpit to get the nation’s
utilities to be rewarded just as much or more from saving
electrons as they’re now rewarded for
producing electrons. The President:
California utilities have done some interesting work on that. Mr. Doerr:
The California experience
with this has been terrific. The President:
Would you describe that real quickly in case people aren’t familiar with it. Mr. Doerr:
This program is
called decoupling. And we know that our utilities
right now are rewarded based on the return on their investment. So if we can get them to invest,
to reduce the demand for electricity — they’re powerful,
powerful engines in our economy. They have a 100-percent
market share. They touch every
building, every consumer. They know how much
energy everyone uses. They have very, very
large cash flows, and they have very
low cost to capital. And let me connect that dot
with the jobs opportunity. If you through your authority
or your influence or through further incentives, more than
the $6 billion in the stimulus bill — said to each
state, tell you what, if you adopt this decoupling, if
you’ll reward these utilities for saving electrons, and if
so, I’ll give you some federal incentive, with a small amount
of federal money you’ll change their policies forever. And the beauty of the utilities
is they’re publicly accountable and they can very rapidly employ
across our nation a million out-of-work construction
workers to go insulate homes, for example. And once we’re insulating
our homes and our offices, we’re no longer taking American
wealth and tossing it into the air by trying to heat the
atmosphere — is a really dumb idea. That money instead goes into
the economy and creates jobs, and people buy services, as
opposed to trying to heat or cool the great outdoors. So using these incentives to
change the rules of the road, and particularly of
those for utilities, I think Carol would agree
has enormous impact. We’ve done a little. We can do a lot more. We can do it quickly, and they
can create a lot of jobs. The President:
Let me bring in some of the folks who I haven’t had the chance to hear from — Robert,
any thoughts on this from a banking perspective? Mr. Wolf:
Well, I would just say that we’re contemplating here a market-based solution
on cap and trade. And I would just say we have
seen in the over the counter and exchange trade in markets that
we have to make sure that there are disciplined
regulatory reforms; that we understand the
disclosure requirements; that it’s globally coordinated. I mean, we don’t want to redo
the OTC derivative problem we just came out of, or
the credit crisis. So I would just say that, since
we are going to use market-based discipline, we should be very
thoughtful before we decide what exchange we don’t want, who can
be the market participants. We saw it during the energy
crisis a year ago when the market went from 50 to 150, that
when you take a small asset class and you make
it investable, as an invested asset class
and a tradable asset class, you have a lot of volatility
and you may have inflation that shouldn’t happen. So I would just say we have
to be — I think we should fast-forward it because
of the importance, but I do think we should make
sure that we understand what we’re going to be trading and
who are the participants, because, as we know from
the industry I’m in, once we see something that’s
an openly traded free market, we will have many more
participants than we thought. And I think we have to be very
careful on it, therefore. And I know that we’re going to
add that to some of the language in something we’re going
to be sending you soon. The President:
That’s important. Larry, we’ve been talking about
how we — the mechanisms to avoid some of the problems
that Robert was discussing. Mr. Summers:
Absolutely, yes. We’ve been working very much to
have the right kind of framework in so that the markets function
in the right — function in the right way, yes. The President:
David, have you got
anything to add on this? Mr. Swenson:
I think the discussion really underscores the importance of having healthy
financial markets. And we’re talking about the big
project finance opportunities and the fact that the
big money is not there, but it’s true on the other
end of the spectrum, too. A number of our
venture capitalists, including John Doerr and his
partners at Kleiner Perkins, are involved in
clean tech investing. And in the venture
capital world, it’s unusual because it’s far
more capital intensive than a lot of the other activities
that they pursue. But the fact that the IBM
markets are dead or in remission or wherever they are — the fact
that they’re not functioning really has a direct impact on
the venture capital end of the spectrum, as well. So the sooner we
heal these markets, the better for our
energy policies. Mr. Immelt:
There are some ideas around the stimulus, around an energy bank, to get back to
Mark’s point earlier, that I think business
would invest side by side. I think that’s the way to
accelerate some of these projects, is to get the
financing for big projects going forward. And I think not
in a stimulus way, in terms of just
purely government, but taking an energy “bank” and
allowing private business to invest side by side
on these projects, whether it’s smart grid or
wind power or any of those. I think that could be a
stimulative impact to get that going. I know some of those discussions
have been going on with the Department of Energy. And then beyond that, just
ramping up the ex-im to get behind some of these
products as we globalize. I think that’s another tool that
we’ve got to get things going faster. The President:
Right. Monica, do you want to talk
about this from a small business perspective? Are you seeing an interest among
small businesses on the energy front? I’ve seen some small businesses
that are starting to take advantage of some of the
retrofitting and weatherization opportunities. Ms. Lozano:
Just two things I would say. There are productive jobs, and a
lot of the workers who have been displaced from manufacturing and
construction find this an area where they see
great opportunity. So we need to provide not just
the retraining and the capacity building for those
sorts of jobs; this is a gateway to
middle-class work, and so as you’ve said,
in fact, Mr. President, these jobs can cover a very wide
gamut and small business is looking particularly at this
area because of the great focus on it. So, one, from the point of view
of retraining and job creation that leads to middle-class work
I think is really important. The other one of the incentives
for small business is to begin to participate in
the opportunities. Clearly there’s a lot of
incentive for large business; the financial markets are
going to be working at it. Small business needs to feel
that there’s an opportunity for them to participate. The stimulus package, a lot of
the money has to go out in the next two years. There’s a general feeling that
if you don’t have a capacity to partake you’re going
to be left behind, and so they’re looking for
partnerships between small and large business that can actually
bring them to the table to access this opportunity. So those would be the two things
— one is the job creation that leads to good middle-class work. And the second one is the
incentive for small business to actually participate in
partnership with the large businesses. The President:
What I’d like to do, I think — how much time do we have? I think we have probably about
10 minutes — 10, 15 minutes. What I’d like to do is broaden
the conversation a little bit. I want to make sure
that Charles, Anna, Laura — I haven’t
heard from you guys, so feel free to — Bill — feel
free to talk about energy. But this — Monica offers
actually a pretty good segue. One of the things that we’re
wrestling with is, how do we deal with job creation
and employment? We expect that — and I’m not
making any predictions here, because this is being
Web-streamed — (laughter) — we expect that there’s going
to be some stabilizing of the economy, that the contraction
will end and begin — the engines of the economy
will start to turn again. But as all of you know,
employment’s a lagging indicator. We have shed a huge number of
jobs during this deleveraging period. And the concern that we have is,
even in a stabilized situation, there is the prospect of higher
unemployment for some time to come. And so I’ve been really pushing
my economic team around the issue of job creation and,
alongside the issue of job creation, being able to create
career paths for people so that they’re upgrading their jobs
and upgrading their incomes, because one of the problems
that we saw during the ’90s, even with very low unemployment
and robust job creation, what you weren’t seeing was
significant increases in real incomes. So those are two areas that
we’re spending a lot of time thinking about. Clean energy is obviously a huge
opportunity for job creation. We’ve talked about that, but if
people want to broaden it to some other areas or give us
suggestions of things we should be looking at that you haven’t
been seeing us look at or pay as much attention to,
that would be helpful. So, Charles, do
you want to start? Mr. Phillips:
Sure. I’ll talk to energy, because
the technology industry, everything we make uses energy
24/7 and we need a lot of power. And I think what’s changed
in the last five years is, we used to design data centers
with computers in them, and we did that based on where
network access points were. And our customers over time
would come to us and say, these things use too much power;
the cost of energy is going up. So what has changed now
is they care about power. And so it’s forced us to
design products differently. So I think this is a great
example of if the right incentives are in place that
people will respond with innovation. So we design products now where
computers share power supplies, for instance. We design chips differently. But the power needs of
the technology industry — and in fact, all industries because they all rely on the products — it’s only going to increase because the chips are getting faster, they
dissipate more heat, designing things closer together, they need more power. Same thing on storage; it’s
growing 15 percent a year. We keep the data longer
because of compliance issues. You can’t get rid
of data anymore. So this is going to be an issue
for a long period of time to come, and it’s becoming a
constraint to the growing technology industry, because we
are 100 percent power dependent. And so we’re always looking
for alternative sources. And so if we can go from 3
percent to 10 percent of some alternative sources of energy,
that actually adds a lot of flexibility on how you
can build a computer, how you build data centers. But no one talked about
this five years ago, and now every single
conversation — before people can decide where to
build a data center, they want to know how
they can get the power. The President:
So it’s not just my
10-year-old daughter, keeping her iPod plugged in and
not taking it out of the socket. (laughter) That’s just one small
manifestation of the larger problem. Mr. Phillips:
Right, and ours
have to stay on 24/7, so we consume a lot of power. And so if we can get
alternative sources, I think it actually opens
up the road for our industry. The President:
That’s interesting. Anna. Ms. Burger:
So I think that it’s pretty clear that moving to a low-carbon, green economy
can create lots of jobs. Of course, whether they’ll be
good jobs or bad jobs is still the question. And I think what we do
about it can have an impact. I think it’s also going to
cause a huge transition. We’ll be creating jobs,
we’ll be changing jobs, and some people
will be losing jobs. And we need a plan
for that transition. I think that the Vice
President’s Task Force on the Middle Class, their first
hearing in Philadelphia was about green energy
and green jobs, actually had the same finding
that our Change to Win federation report had, which are
that we need to really think about how to make
these jobs good jobs; otherwise they won’t be. There was a U.N. report that does the same basic thing that says we really need to think about how to transition this. Part of it is the whole idea
that training — and I think it’s great that there’s money in
the Recovery Act for training, because we really need to figure
out how to make sure that people in the communities have access to training so it becomes a job entry point, a job
transition point, and a movement into good jobs. I also think that we need to
really think about how to make sure that workers have
a voice in the job. What we found — what the Vice
President found, what the U.N. and the ILO found and what we found was, generally speaking, the jobs that were good jobs in
green energy were union jobs. Those that weren’t, were not. And there were lots of
expectation in workers that we can deal with in terms of how
those jobs are structured, how the grants are provided, and
what the government’s role is. And so as we move forward, I
think that your leadership in bringing business and labor and
government together to say, how do we collectively
solve this, is exactly what we need
to do here in our country, in partnership around the world,
because whatever we do is going to have a rippling impact, but
whatever they do is going to have an impact on us. And if we really can bring this
real partnership together — that is about what’s
good for workers, what’s good for business,
what’s good for our government, and what’s good for the future
of our planet — that it will force us to change our behavior
and really have an impact short term and long term. And so I just want to end with
three quick examples and just on things that we can do now, in
terms of real estate commercial properties. Now, when workers have a voice,
they can actually have ideas about how they can
do things better. So our local in New York and
California now bargain in energy standards — energy
efficiency standards. They have a whole training
program where they train their janitors and their engineers
in terms of how to retrofit, how to save energy. And they actually set a goal in
their contract about saving 20 percent of the energy in their
buildings through a certain period of time. They’ve now started
a whole recycling, which they do not only for
the buildings themselves, but also for their tenants,
which is another way of doing that. The work that’s been done
in California around the L.A. Ports — because we all know
that the air pollution from the ports and across our
country is terrible. It’s bad for the community. It’s bad for our planet. It’s bad for our
kids with asthma. And it’s bad for
the truck drivers. And so how do we
restructure that? The partnership that’s gone
on between the environmental communities, the truck
drivers with the Teamsters, and the broader community has
really come up with a new model that will have
energy-efficient trucks, which will be good
for the workers, good for the community — The President:
Energy-efficient trucks
that aren’t just sitting there idling. Ms. Burger:
So a change in the whole mechanism of how you do it is important. There’s a school in Washington
State I think now where the janitors came up with a
program with the kids, where they just now ended
up lowering the energy use, and recycling. The laborers — we’re doing a
program in New Jersey where they’re really doing a training
program that is recruiting from the communities. And so it’s not leaving
poor people behind. We really need to figure
out as we create jobs, how do we have a pathway for
people who are without jobs to give them an
opportunity to step up, have a job with a real skill. And how we do that for the
weatherization programs can have a long-term impact. I think that there are lots of
ways if people — public workers can get together and talk a lot
about what they could do to retrofit their buildings, to
have better energy practices, to really think about greening. So I think that this partnership
opportunity is here because you’re leading it. And I think that if
we all come together, we can actually
move this forward. The President:
Bill, any thoughts on some of the general questions that we’ve been asking? You have, obviously, experience
in regulating big markets. We’re looking at
creating a market here. Robert raised some questions
about the potential problems involved. I’d be interested in
your views on that. Mr. Donaldson:
Obviously, there are some major changes that have to be made in the whole regulatory system and
the way our markets operate. If I can divert from
that a little bit, I think there’s — your use of
the bully pulpit to convince people that the energy situation
is going to be a focus of the government — I think that
can be used to stimulate the entrepreneurial desires
of people out there. There are lots of
small businessmen, venture capital-type people who
will see — if they’re convinced it’s a long-term program,
will see opportunities to put businesses together. So I’m focused on that great
mass of small-business people out there who can divert what
they’re doing now into this area of — I mean, the opportunity to
go into the housing market and buy a defunct house and fix it
up — I think there’s going to be businesses
developed to do that. So I’m looking
from the bottom up. There’s going to be plenty
of stuff from the top down. But mainly, people have to be
convinced that it’s going to be an opportunity that’s not going
to go away — it’s going to be a focus for a long period of time. Mr. Immelt:
Just to add to what
Bill said, Mr. President, I think not just on energy,
but to take pride in being a productive technology
manufacturing base — I mean, you mentioned middle-class jobs;
the best middle-class jobs we have in this country
are manufacturing jobs. And I think a long-term notion
that we would go gently into a service economy that’s been
held over the last 30 years, I just think hasn’t worked. And so I think that is another
piece we have to work on. Rich and I don’t agree on
anything, fundamentally — (laughter) — right? I mean, we wake up in the
morning disagreeing about everything there
is to disagree on. But I think the one thing we
agree on is that when you have — we ought to create a sense of
ownership and pride of a very productive high-tech
manufacturing base in this country. Mr. Feldstein:
For those of us who work
in the service industries, like education or health care,
we don’t want to knock that too much. Mr. Immelt:
No, no, no — Mr. Feldstein:
That’s been the only thing that’s provided jobs — Mr. Immelt:
I just think there’s going to have to be some balance — Mr. Wolf:
Jeff, one thing I think
it’s — obviously growth in manufacturing is critical. But we should realize
that finance, insurance, real estate — which is
called the acronym FIRE, unfortunately — we’ve lost over
half a million jobs in a year and a half. That’s 10 percent
of all jobs lost. So I know that we have to focus
on the labor and the middle class and how to
gain manufacturing, but we have been a growth and
service industry for a decade — that we’ve lost, as
Laura said, you know, 10 percent-plus of our jobs. So I think you need that
balance on both sides. Mr. Immelt:
When I came to work
for GE in 1982 — Mr. Volcker:
Increase our
productivity rating — The President:
Well, I think the fact that some really good math whiz kids are going into engineering as
opposed to derivatives is not a terrible thing. Mr. Volcker:
— more engineers — The President:
But I think that there’s no doubt that manufacturing is not going to return to the share of
the economy that it was in the 1950s, regardless of
what our policies are, just because our manufacturing
is extraordinarily efficient compared to what it was. On the other hand, what is true
is that if we are going to at least have a larger element
of exports, for example, as a proportion of our economy,
which I think we’re going to need — we’ve had this idea that
we can just be the consumers of everything and not —
and borrow and spend. And at some point, we’ve got
to start selling something. Some of that is going to have
to be top-notch products. Some of it will be services and
that helps our current economy as well. But if on energy, for example,
we’re just importing Spanish windmills or wind turbines, as
opposed to some that are made here in the United States,
that would be a shame, and I think we need to
take advantage of that. Penny, you wanted to jump in. Ms. Pritzker:
I just wanted to underscore something Anna said. We’ve some of the best
innovation in terms of clean activities in our hotels coming
from our employees and it’s come from the bottom up. We challenged our employee base
to come up with creative ideas of how to do cleaning
without using chemicals, how to better recycle,
how to use less. And so I think there’s a really
interesting opportunity to use the bully pulpit and to
highlight how the partnerships are working at the local
level in some very major — The President:
Telling some good stories, yes. Ms. Pritzker:
— and to really celebrate that and raise the pride as to this is really an important
endeavor in our country. The President:
Good. Laura, I wanted to get you in
here and — you’re a wonderful generalist, as well
as a specialist. One thing I was interested in is
how this fits into what you’re seeing internationally, because
there is a concern voiced by Rich, but I suspect Jim and
others are going to be concerned about it, we’re moving in an
area where, as Marty said, there are going to be some
increased costs related to this. And if we don’t see some
concerted action on the other side, we’re going to be
placed at a disadvantage. Ms. Tyson:
Well, I would tie it back to the beginning of the conversation. I think that it’s really
important to go to Copenhagen from a leadership position,
because if we try to do something on our own, or if
Europe tries to do something on its own, but we don’t get
emerging market buy-in, we will end up in a world where
we’re going to have carbon tariffs, compensating
border, offsetting border, interventions in trade — things
which we would be much better off in terms of efficiency and
getting a global outcome on carbon to get a
global agreement. So my first thing is let’s
really move towards that as a way to hold off a much worse
situation where we don’t have a global solution and we have a
bunch of trading restrictions that intervene. So that would be my first point. My second point, thinking about
it in terms of a couple other trade policy areas, I think
there has been — someone raised already, it’s been raised in the
jobs group — looking more at what we can do with ex-im as
a way to promote our exports. It gets to the issue of the
small- and medium-sized businesses in the
following sense — I mean, the truth about employment in
the United States over the next decade is the same truth about
employment in the last decade: It’s primarily small- and
medium-sized businesses, whether it’s goods or services,
and it is going to be primarily services. It is not the case that — so
our jobs task force is going to have to look at high-wage
strategies for services as well as for manufacturing. And I’m perfectly sympathetic,
actually completely sympathetic with the view of building
as much as we can, strengthening our
manufacturing base. But that will be leaving the
share of manufacturing probably steady, the share of
manufacturing employment and total employment probably
continuing down. So I think we have to be
realistic about the jobs and say, okay, we want to really
build the strength of our manufacturing exports and
our manufacturing sector, and that will create wonderful
jobs throughout the economy. So Ex-Im Bank and what we do at
Ex-Im Bank becomes an issue for manufacturing and exports. But also, I think we
have to be very careful. One of the things that
I’ve concerned about, looking around the world, is
a lot of countries — most countries now who are our
competitors are talking about the importance of green
energy and green jobs, and some of them have
a head start on us. And, you know, there are
embedded in a lot of what they’re doing, local content
restrictions — that is, in order to serve the green
economy of the home country, you require local content
provision of that service. Now, some of this is local
content by definition. I mean, utility is
a local content, refurbishing a home
is a local content. Where you buy a wind turbine
is not local content. Do you make it so — so I think
we have to be very careful. There’s a whole set of
trade-related issues around the development of this green
economy that we’re going to have to keep track of. The last thing I’ll just say is
that we are working with your — we’ve just started to work with
the manufacturing task force and we already, despite what I said
about — I’m not convinced we can have a significant change in
the trajectory of manufacturing jobs, but I think we can do a
tremendous amount to strengthen U.S. manufacturing as a sector and we will be working with that task force. And one of the first things that
came up, interestingly enough, is this issue of how you help
the small- and medium-sized business sector, that I said is
very important in manufacturing, access the programs and
policies of the U.S. government. We are spending — I mean, the
stimulus bill is a massive investment by the government
in the U.S. economy. It is much harder for small-
and medium-sized businesses to access that support. And we need to think
very carefully about, can we get that better? So that’s going to be one of
the focuses of the effort. The President:
We’re out of time. Jim, you want to jump
in real quick; Mark, you want to jump in, and
then Paul, I’d let you — Mr. Owens:
I’ll be just very brief. One of the things, don’t forget,
is that small- and medium-sized companies are big suppliers
of Jeff and myself. Roughly, for every job we have,
there are three jobs at small- and medium-sized company
suppliers feeding us. We exported, for example, last
year $16 billion worth of product. So a lot of our small- and
medium-sized companies don’t know they’re exporters,
but they’re exporters. (laughter) And it’s very important that
we continue to look at global manufacturing competitiveness. And I think, as a country,
if we’re going to be a great country 20, 30 years from now,
we’ve got to shift the paradigm a little bit here. We’ve got to save more and
invest more and export more. We can’t have the U.S.
consumer have the huge deficits. You asked about what do we have
to do structurally different going forward. That’s one of the reset
buttons we’ve got to hit. And that’s a tough one. It’s tough for political leaders
to help bring about that change, and I think the business
community has got to be part of helping the public understand. We’ve got to save
more, invest more, and grow our international
competitiveness as a key to our future success. The President:
Mark. Mr. Gallogly:
I was just going to add something to follow up on what Laura said. If you think about the
competitive dynamic internationally for green, since
other parts of the world are just growing their demand for
energy just much faster than we are — so China is
high single digits, low double digits — and
because they have a centralized authority that can
allow for, for example, a smart grid being put in
place much faster than we can, those two things will naturally
result in them developing better technologies faster, because
their whole market actually has more demand. So we’re fighting a fight that
will require us to be more on our game than we have to be in a
general sense because they have a natural, clear advantage both
governmentally and demand-wise. The President:
Paul. Mr. Volcker:
Well, I think we’re seeing a remarkable degree of consensus in this group on this
particular problem. I’m not going to add anything
on the technical side, but let me just make two
points on this issue. It’s going to take — it’s going
to take a lot of investment over time. But one thing I’m sure of, we’ve
got room for that investment. When this economy normalizes and
the financial markets normalize, Jim is quite right, we’re not
going to live on consumption we’ve got to fill up that hole
in consumption with investment, which will make us more
internationally competitive. And I don’t have any doubt that
this is going to be a good thing in terms of supporting
economic activity. The only other point I’d make,
any time this is discussed and the cost, there isn’t enough
emphasis, it seems to me, on the cost of what happens
if we don’t do anything. If any of these projections
are halfway correct, it’s going to cost amounts of
money that makes this stuff we’re talking about trivial. And I don’t think that that’s
impressed enough upon — I know it’s got resistance so it’s hard
politically, but there it is. The President:
I haven’t found anything
that was easy politically yet. (laughter) Mr. Volcker:
We’ll produce that
at the next meeting. Mr. Goolsbee:
I’m sure I speak
for the whole group. We’ve been very excited. This has been a real unique
opportunity I think for the government but also for us to
get to know each other and to have this outside perspective. Our ability to operate as an
advisory committee does depend on coming up with things that
are of interest to you and to top policy-makers. So if you ever have subjects,
or Christy, Carol, Larry, if you guys ever have subjects
you want to hear from us, if you convey them to our
illustrious chairman or to me or to any of us, that
helps us do our part. The President:
You guys have
done a terrific job. Obviously there have been a
bunch of smaller groups that are working intensively
with our economic team. They’ve got five or six
things already on the plate. This has been
extraordinarily helpful. I appreciate all
of you coming in. If you can keep your
seats just for a moment, we’re going to bring a pool
spray in just to record who it is that was in the meeting,
although we’ve had some press folks in here taking
assiduous notes, I’m sure. Go ahead. (the press pool comes in) The President:
Hello, everybody. Well, you will have a record of
everything that was said here, so we don’t need to repeat it. I just want to publicly
thank this group, chaired by Paul Volcker,
staffed by Austin Goolsbee. They are doing
extraordinary work, separate and apart
from meetings with me, on a whole range of issues. We talked about energy today,
but they are helping to advise us in our approach to the
financial regulations regulatory regime that we are looking to
put before Congress this year. They are helping us in thinking
about employment, manufacturing. There is a whole host of issues
that this group is providing wonderful expertise for. And interestingly enough, as
Paul mentioned at the end of this discussion, there is
impressive consensus — not perfect consensus, but an
impressive overlap of views about the importance of us
getting out front on energy — the enormous job-creation
potential that exists; the requirements to create a
more efficient energy system in order for us to
remain competitive. And I’m excited about
the opportunity. We’ve seen some great
progress this week. We’re going to see more because
of the contributions that are made around this table. So thank you very
much, everybody.

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