Remarks by Secretary of the Treasury Janet L. Yellen at the Economic Club of New York

e e e of course Janet's many accomplishments in first are legendary and Michael you went through them uh so I won't repeat those but I will mention from a Federal Reserve point of view that uh within the FED she has held pretty much every policy maker role that exists she was a president of the San Francisco fed we had the great privilege working for her she was a Federal Reserve board Governor Vice chair and chair uh given your resume I think we can honestly say Janet has truly done it all in each of these roles Jan has showcased a unique blend of strategic Vision compassion and courage from stabilizing financial markets to promoting inclusive economic growth her commitment to societal betterment exemplifies the very essence of Leadership Excellence of the economic Club of New York proudly celebrates today those of us who have been privileged to have worked alongside Janet have immeasurably benefit benefited from her wisdom her mentorship and her example of what it means to be a public servant so without further Ado on behalf of the economic Club Board of Trustees and all of us here today it's an honor to present the 2024 Peter G Peterson Leadership Excellence award to my dear friend mentor and a truly extraordinary leader Janet Yellen [Applause] I'll you can take the stage okay thank you well John and Michael thank you so much for your wonderful remarks it's a tremendous honor to receive the Peter G Peterson Leadership Excellence award and to join the ranks of the distinguished group of individuals who were its previous awardees I'm also very glad to have the chance to speak to all of you today at a venue that since 1907 has served as one of the country's Premier fora for discussion of domestic and Global issues I last spoke here at the economic Club of New York in 2016 as chair of the Federal Reserve I discussed it a topic that was then at the heart of my work the federal reserve's pursuit of Maximum employment and price stability today I will similarly focus on a topic I see as core to my work and to the Biden administration's agenda expanding our economy's capacity to produce over the medium and long term and doing so in a manner that is inclusive and environmentally sound I first spoke about this strategy which I've called modern supply side economics over two years ago with Davos today I'd like to reflect on how we have applied it since and specifically the roles played by the public and private sectors in boosting our nation's competitiveness and economic strength we've seen a historic economic recovery since the start of this Administration economic growth has proven resilient and strong in recent quarters the labor market remains healthy with low unemployment rates Prim AG labor force participation now exceeds its prepandemic high inflation is down nearly 2third from its peak and we expect it to moderate further as rents and other critical prices price pressures stabilize American businesses have contributed to this recovery starting with their role in helping to distribute pandemic relief funds as we recovered from the pandemic business fixed investment grew even faster than our economy as a whole and now constitutes over 133% of our GDP we've also had three record years of new business applications now there are of course challenges Americans are concerned about the cost of living and too many families find it hard to make ends meet addressing this remains President Biden's top priority as we've driven our recovery we've also worked to strengthen Financial stability and respond to Urgent issues at home and abroad here too the private sector has been crucial we solicit views from Business Leaders in the financial sector as we Finance the operations of the federal government and pursue ongoing collaboration with the private sector to respond to cyber incidents and conduct cyber security exercises these are just two of many examples the US business Community has also been key to our response to Russia's invasion of Ukraine including as we continue to work to crack down on Russian sanctions evasion while driving an historic recovery and responding to Urgent issues the Biden Administration has also kept in mind the need to promote stronger and more inclusive growth over a longer time frame and as we face increasingly complex in Dynamic global economic landscape our ability to compete and spur growth requires us to tackle longstanding structural challenges over decades the United States saw slow productivity growth entrenched income inequality and significant de-industrialization with communities in many parts of the country becoming hollowed out labor force participation of prime age individuals without a college degree declined and there was a rise in deaths of Despair for too long too many American workers and American businesses haven't been able to reach their full potential to contribute to our country's strength throughout my career I've seen and participated in robust debates about the proper relationship between the government and business in addressing the challenges we've faced we've learned through experience that heavy-handed Central planning through government dictates is not a sustainable economic strategy but neither is traditional supply side economics which ignores the importance of public infrastructure education and Workforce training and government supported basic research traditional supply side economics wrongly assumes that policies such as tax cuts for those at the top and deregulation will fuel growth and prosperity for the nation at large instead it's been clear to President Biden and to me that our economic strategy cannot be driven by either the public or private sector alone modern supply side economics Embraces collaboration with the private sector targeting public interventions to create a supportive environment for businesses and to fuel private sector Investments we've also used public policy to address climate change and to encourage the private sector to reach people and places that historically had not received sufficient investment this broad-based approach brings benefits not just for American workers and families but for businesses and the economy as a whole I'll Focus today on how we're applying modern supply side economics to Spur greater us competitiveness and growth across three key areas infrastructure human capital and labor force participation and investments in R&D and strategic Industries I'll start with infrastructure an important contributor to our economy's productive capacity according to one analysis a 10% increase in the stock of Core Physical infr structure increases productivity by more than 2% yet when President Biden came into office infrastructure investment as a share of GDP had fallen by more than 40% since the 1960s well we should be able to travel between major US cities with ease assume the goods we order will arrive on time and find talent to support scaling business businesses instead airports became outdated ports were constrained and there was uneven access to high-speed internet I've heard the business Community repeatedly emphasize the obstacles these shortfalls cause and how they hinder our competitiveness there's widespread consensus that our country's outdated infrastructure slowed the flow of people and goods holding back the US economy the Biden Administration is making massive Investments to change this the bipartisan infrastructure law is enabling ambitious projects to improve America's roads ports and highways it's also our government's largest ever push toward affordable and Universal internet access this is in addition to the American Rescue plan's many Investments including a treasury program for internet and other critical capital projects that will reach over 2 million American households and businesses in total state and local capital investment as a share of state and local spending grew more from 2022 to 2024 than in any 2-year period since 197 9 the private sector is making complimentary Investments real private spending on construction for transportation for example began to rise shortly after the bipartisan infrastructure law was passed that arrested a yearslong decline over the past two years it's increased by almost 20% and this is the scale of investment needed to help Drive our future growth our investments are also advancing our core objective of reaching people and places that had been left behind historically we had seen higher infrastructure investment in states with higher median household income but that's not what's happening now treasury analysis shows that bipartisan infrastructure law funding is going in Greater amounts to states with lower median household incomes and the lowest rated infrastructure where improvements are most needed and funding has been spread broadly for example while only five states accounted for about 2third of investment in public transit in 2019 those five states account for only 40% % of bipartisan infrastructure law spending this matters not only because of fairness reaching people in places that had been left behind also has the potential to to yield larger aggregate gains under the basic economic premise that returns to investment in any given Place exhibit diminishing returns put simply investing in people in places where there had not been sufficient opportunity can yield the largest bank for the buck alongside infrastructure the labor force is of course a critical factor in our economy's capacity to produce and therefore to our nation's competitive strength and here too we've seen significant challenges labor force partic ipation especially of men has declined over the past two decades the historic increase in women's labor force participation was a success story contributing meaningfully to our country's growth but women still face significant challenges to full participation such as lack of affordable child care there are also significant barriers to the availability and accessibility of good jobs in the 1970s three out of four jobs required at most a high school diploma now two out of three jobs require more than a high school diploma limiting opportunity for the majority of Americans over 25 who do not have college degrees there also had not been enough in investment in alternative Pathways to good jobs Workforce Development funding to States adjusted for inflation declined by 30% from 2001 to the end of 2020 like poor infrastructure inaccessibility of higher education and Workforce Development has not only affected the lives of individuals and families in my engagements with businesses I hear about the difficulty they have in finding the right talent to fuel growth so the Biden Administration is making generational Investments and pursuing policies to change this as well treasury is encouraged using state and local fiscal recovery funds for Workforce Development the inflation reduction act provides tax incentives for companies to hire apprentices supporting the expansion of these Pathways and in line with modern supply side economics the president's budget proposes ambitious policies to support strengthening the labor force from guaranteeing affordable highquality child care to expanding grants to reduce the cost of college across the country these programs are being implemented and scaled with a particular focus on meeting private sector demand in fact potential employers are often directly engaged in developing and delivering training and then hiring from that training pool in Milwaukee and Cleveland Rockwell Automation offers a 12-week program to equip veterans with technical skills for advanced manufacturing jobs in Idaho Micron expanded its first ever registered apprenticeship program and last month in Arizona I visited Mesa Community College to learn about their semiconductor technician quickart program which is taught by Intel employees as with infrastructure We Care not only about boosting the supply of a key factor of production but also about reaching people in places where there previously was not sufficient opportunity across the country we're encouraging Workforce Development programs to Target populations that have traditionally faced barriers to employment and emphasizing best practices such as providing wraparound services like Transportation stipend and child care again this is motivated not just by a commitment to fairness but by an understanding that reaching those who would not had opportunity can bring much greater economic gains I'll end with our efforts to boost spending on research and development and to bolster American competitiveness in Cutting Edge industry Ries like semiconductors and clean energy R&D has significant economic benefits one recent study found that government R&D accounts for roughly 1/4 of business sector productivity growth since World War II yet there's ample evidence it's under supplied including due to a significant decline in federal R&D spending in 2020 the government's R&D spending was less than 1% of GDP that's half of what it was in the 1960s and the US share of global R&D has declined it was 31% in 2020 compared to 69% in 1960 the US has more generally been widely perceived as suffering a loss of international competitiveness in key Industries such as semiconductors and clean energy this partly is a result of concerted foreign subsidy programs which have not only caused economic losses but have also exacerbated economic insecurity insufficient investment in key Industries had also made our critical Supply chains too vulnerable we've seen the consequences of this in recent years such as in the shortage of goods and their volatile prices in the context of the pandemic and Russia's invasion of Ukraine in response to these challenges we've pursued a strategic combination of direct Investments and market-based incentives the chips and science act authorized funding to restore America's leadership in semiconductor manufacturing including substantial investments in research and development the inflation reduction Act is far in way our most ambitious effort to address the existential threat from climate change instead of broad-based tax cuts for top earners in corporations it works by offering significant tax incentives to fuel private investment in the clean energy transition Global investment in clean energy reached a record level of over $1.7 trillion in 2023 offering massive opportunities for American workers and businesses we're providing the private sector with the stability needed over long enough time Horizons to invest in clean energy with the understanding that government intervention can then be scaled back as Clean Energy Technologies become cost competitive I've heard from many American businesses that these incentives are allowing them to pursue projects that otherwise would not have been viable we've worked to fuel private sector involvement in the transition to clean energy in other ways as well from releasing a set of principles for net zero financing and investment last fall to guide financial institutions pursuing the transition to Net Zero to publishing just last month key principles to support the development of high integrity voluntary carbon markets we're starting to see the impacts of our policies there's been an especially notable surge in manufacturing construction since the IRA and chips and science act were enacted the composition of business investment growth has shifted dramatically with Factory construction contributing almost onethird and computer electrical and electronic factories the key source of the increase and these are the industries that the chips Act and the IRA support including semiconductors and batteries for electric vehicles and The Surge and Manufacturing construction is unique in the United States that's suggestive evidence that the legislation is likely having its intended impact more generally private companies Finance over $850 billion in manufacturing and clean energy Investments since the start of this administ Administration and the private sector is responding to policies designed to Spur investment in a wide swath of the United States the IRA offers an energy Community bonus namely a greater tax credit for projects in communities historically reliant on fossil fuels such as coal since the IRA was passed for 45 billion dollar of Investments per month have been announced in these communities compared to two billion before the IRA the IRA also offers a lowincome communities bonus and that also seems to be having its intended impact since the IRA was passed 75% of announced clean energy Investments have been in counties with Med incomes below the US aggregate median income and 84% have been in counties with college graduation rates below the US aggregate rate this broad reach canash sharply to the outcomes we saw under traditional supply side economics our approach to increasing competitiveness in key domestic Industries has been criticized as protectionist some see the United States as withdrawing from the global economic stage I'd argue in response that since the start of this Administration we have acted on our belief that Global integration including through trade continues to be broadly beneficial for American consumers and businesses we do not intend to withdraw from global markets but there are significant risks relating to overc concentrated Supply chains and we should especially respond when foreign subsidies threaten the viability of domestic firms in strategic sectors at President Biden's direction I've been particularly focused on responsibly managing the US economic relationship with China countries around the world look to the state of our two economies but also our interactions because they're crucial to Global growth together China and the United States represent 40% of global output and have the two largest financial systems in the world I believe that America's fundamental economic strength means that the United States has nothing to fear from healthy economic comp competition as I hear frequently from American businesses China represents a huge market for American manufacturers and firms supporting over 700,000 American jobs President Biden and I reject the notion that decoupling would be in any way beneficial for the American economy at the same time we can only realize the potential benefits of our economic relationship if there's a Level Playing Field I am particularly concerned about China's enduring macroeconomic imbalances China is a global Outlaw in terms of its very high savings rate 45 to 50% of GDP for roughly 20 years and that is roughly twice the oecd average such high savings reflect a lack of sufficient domestic consumption demand and risk leading to an expansion in China's external Surplus at present China is directing an increasing share of savings into manufacturing specifically China's industrial policies Channel savings into unusually high investment rates in select Industries leading to excess capacity now this Dynamic is actually a problem for China as excess capacity usually indicates the presence of economic inefficiencies as resources are trapped in less productive firms and industries and in fact the share of firms losing money in China has been rapidly increasing recently hitting a level not seen since the early 2000s China already accounts for 30% of the world's manufacturing output and it cannot rapidly grow that share without causing displacement globally and China cannot assume that the rest of the world will rapidly absorb huge quantities of excess production to the detriment of domestic Industries and other countries this capacity threat this over Capac capacity threatens American firms and workers along with those around the world we saw in the past how overc capacity can decimate businesses here at home and we're now seeing the risk of that happening again in key industries that matter to our long-term growth such as electric vehicles lithium ion batteries and solar but also across a range of manufacturing Industries the scale of China's subsidies and Industrial policies it's hard to quantify due to lack of transparency but even conservative estimates suggest that they far exceed that of other countries which is why we see economies ranging from Advanced to Emerging Markets launching trade investigations and China's overc capacity risks our supply chains being artificially overc concentrated posing additional security and economic concerns China also pursues a variety of unfair Trade Practices from restrictive investment policies to economic coercion that further undermine Fair competition if China continues on this path I fear that its policies May interfere significantly with our efforts to build a healthy economic relationship I've heard these concerns from American and foreign businesses so even as we maintain our broad trade and investment relationship with China I will continue to represent the interest of American workers and businesses and press my Chinese counterparts on these issues bilaterally and multilaterally that's something I did during my trip to China in April and at the G7 last month at the same time the United States will continue pursuing an approach I've called furing which involves deepening ties with a wide range of trusted partners and allies in order to diversify our supply chains and support long-term growth this also creates significant opportunities for our private sector ultimately I believe the modern supply side economics approach applied to the areas I've spoken about today and to others is putting us on the right path to building an economy that serves us well for the long term collaboration between the public and private sectors is at the heart of this approach I've seen the potential of such collaboration throughout my career and we've worked over the past three years to really ize it the challenges we Face are deeply rooted it will take time for the Investments the public and private sectors are making to fully pay off as we look ahead we will continue to partner with American businesses especially as we navigate shifts from geopolitics to the ongoing energy transition to developments in cyber and artificial intelligence I believe our efforts will help us regain our economic strength in areas where we've underinvested and extend it further in other areas and do so in a way that benefits all Americans and I look forward to our continued work thank you so much um for having me here today and thank you so much for this honor well thank you so much for sharing your views and perspectives on a wide range of issues that are really important uh for our country um let me start you started with uh talking about the state of the economy and so could you talk you know someone who's followed the US economy and been an an astute Observer of the US economy what are how do you see the US situation and Outlook and and what do you think are some of the indicators you think are particularly relevant to you as you think about the economy especially for the the members of the economic Club of New York so I'd start by saying that I I it's worth comparing how the US is doing with how other advanced countri countries our G7 peers and other Advanced countries are doing we're enjoying the strongest recovery of any advanced nation and our uh strong growth is really lifting growth globally um it's worth recalling that last year um almost all economists I think it's fair to say we're predicting that we would have a recession that's something we have avoided and we now continue to see solid economic growth the labor market remains strong we haven't had a period with unemployment um at are below 4% for almost 50 years as long as we've had now at the same time I I see pressures in the labor market is having gradually eased firms are having less trouble than they were a year or so ago hiring wages are rising but they're increasing less rapidly we're seeing fewer quits and a less frenetic pace of hiring I think covid caused considerable um disruption in the labor market to both demand and supply and the labor market is now normalizing and looks pretty much like it looked and was very strong prean pre pandemic um we continue to add jobs at a very solid Pace um 3 million last year another 1.2 just in the first five months of this year and business investment is also very strong and I see positive signs that the Outlook will remain encouraging um manufacturing construction which I noted has played a large role in the strength of business investment and um more recently we've seen a pickup in spending on high-tech equipment in R&D um firms are observing persistently High returns to their capital and new business formation is at historic rates 16 million jobs over the first three years of the administration and I think that shows confidence in the economy um inflation um which we're all focused on has eased considerably headline inflation is down almost 2/3 from its peak and core inflation is also trended down on balance and um I certainly expect further progress to be made um especially as rents and other critical price pressures uh reced over time that said Americans are clearly very concerned about the cost cost of living and um addressing the High Cost of Living remains a top economic priority for the president um we know that there are areas of their budgets where Americans are really having troubl making ends meet and so President Biden has put forward a a kind of affordability agenda that focuses on some areas that have really been getting worse and very problematic I'm thinking here of Health Care energy housing um these are areas where child care where we're committed to working with Americans so that they can feel more secure about their economic circumstances so you in your remarks you emphasized you know the role of the private sector um in terms of uh increasing American competitiveness but broadly about the inest you just said these things investment R&D productivity expanding the economy's potential really um so where do you see for again for a a group of Business Leaders either here or online you know where do you see the greatest opportunities for American businesses uh and you're currently in in the future well I mean I see just enormous um opportunities in many sectors of the economy Artificial Intelligence being um an example of something where there are tremendous opportunities but let me focus on one area that that is important to the administration and that's clean energy and the inflation reduction act that I've referenced is surely the most significant climate legislation in our nation's history and it's created tremendous opportunities and is will continue over time for American businesses it is fueling investment in renewable energy um it's propelling us toward uh achieving our our climate goals and as I mentioned it's creating opportunity in parts of the country that haven't seen it for a while um I've been traveling around the country to visit some establishments that were either expanded or opened up because of the inflation reduction Act last fall I was in North Carolina visited a firm called lient which has expanded its us uh lithium hydroxide manufacturing capacity by 50% because of the IRA in March I was in Kentucky and visited um a firm called Advanced Nano pro products which is producing parts for a gigantic V battery um plant that's located near there and of course we're seeing a battery built in the Midwest and South that's um emerged because of the IR and then I recently was in Atlanta where I visited a firm called suniva which was did path breaking work in developing solar cell technology but was driven out of business in 2017 because of Chinese dumping of solar panels but because of the IRA fortunately the plant although they had shut and locked the door um the plant was still there and they've reopened it and are um going back to making uh Sals so there are important business opportunities and um I think one of the important things it's it's both that there are a significant set of tax incentives for the production and investment in clean energy but also we had some that were at a lower level but it was uncertain year to year would they be renewed every year they had to be renewed now we have a program that will create certainty for the next decade which is very important um I think for firms investing and starting next year rather than subsidizing particular Technologies like solar and wind we're moving to something called a technology neutral approach so that um Innovation if firms are Innovative in developing new technologies to um produce energy in a renewable way technologies that you know none of us have even thought of yet um they'll be eligible for subsidies too um we're very busy at treasury we've already issued 60 or 70 pieces of guidance proposed uh rules for um what's necessary to qualify for these credits one of the great features of these credits is sometimes tax credits um are awarded to businesses that they don't have income and can't use it but there's a feature of these tax credits called transferability which enables a firm that gets a credit but doesn't need it to sell it to another firm with a tax liability that does need it and I think this is a very business friendly approach and it's really beginning to generate um a large market so um researchers have estimated that we need something like three trillion a year in Global Investments to reach nit Zero by 2050 so there are a lot of opportunities here sure thank you um so you you mentioned geopolitics a bit with the uh Russia's war on Ukraine uh and you and the US economic relationship on on with China so when you how do you how do you engage with American businesses uh as you navigate these uh complex uh challenges you talked a little bit about that but maybe for this audience you could elaborate a bit on that so well let me start with Russia so we are uh trying to play an important role working with our allies to address Russia's brutal um treatment and aggression against Ukraine and one of the ways in which we're able to do that is by putting a sanctions regime in place to try to prevent Russia from getting the well two pieces to it one is trying to make it difficult or impossible for Russia to get the military equipment or um materials it needs to build its own military supplies we want to make that as difficult as possible and second we want to try to reduce Russia's Revenue that it's using to support its military and fight the war and really this is a mission that can only be accomplished by working with the private sector we have in place a set of export controls that the government works closely with the private sector to put in place and the treasury Department is responsible for a sanctions program and here too we count especially on Financial in institutions but also on firms um to make sure that these sanctions are working in the manner that we want we developed a an Innovative price cap um that tries to limit the amount that Russia can earn on selling oil globally we wanted Russia to sell oil globally because we didn't want Global oil prices to rise what had the idea that we could try to limmit the amount that Russia receives and um that too involves working with Western service providers businesses that are provide normally would provide insurance and other um trade finance and so forth uh for these oil shipments um and we said you can go on doing that but only if the price that Russia is getting for its oil is is below $60 a barrel so cooperation with the private sector has been critical and I guess in the case of china I'd say we've met with many businesses that are operating in China uh to understand both the opportunities that they see there American businesses and foreign businesses um to try to understand the ways in which they feel um there huge opportunities but the playing field isn't level and I've taken their concerns directly to top Chinese leadership um as I mentioned we're particularly concerned about this macroeconomic imbalance that is you know China used to invest enormous amounts in infrastructure and real estate and the real estate sector of course now with is um declined and infrastructure spending the Returns on that have diminished drastically and so those savings that used to be channeled into those sectors are really now going into advanced manufacturing and this is a problem as I described not just for us but for many businesses around the world so I think we're down to just the last question and only one minute but this is a question I think a lot of our audience wants to hear especially the I'll say younger but I mean pretty much uh uh anybody who is uh we have fellows we have students who are joining us and you know what's your advice uh to anyone who's thinking about entering a career of public service and I have to ask this personally when you were in high school student at Fort Hamilton did you have any idea that You' be sitting here Secretary of the Treasury and speaking to the world about the economy well I think could for Hamilton um no I I had absolutely no idea but when I took my first economics class in college it was love at first sight and I I knew that I wanted to do economics and hope that I would be able to have a career in public policy because I saw economics as a field that but is both interesting in its own right and really important in um pursuing the public interest and improving welfare and anyone thinking of going into public service I recommend it just immensely highly um I think the mission of government in terms of um trying to work with the private sector and to address economic social health challenges uh broad range of challenges it there's a real role for government it's not that government should replace the private sector but there's a role for government and the private sector and the work is fascinating and it's important and um what I found in government is um a true sense of mission that and John I you know having had the pleasure of working with you and knowing that you spent most of your career also in public service you know you you're faced with important and seriously consequential challenges you go to work and find a set of colleagues who are completely committed to the mission of doing everything they possibly can I remember when you and I worked together during the financial crisis um you know how we felt the weight of the importance of what we were doing and trying to address it and a sense of camaraderie that people feel uh working on critically important projects together the people that I've dealt with in public service are just immensely motivated talented committed and you know what I look for in a job is you know a sense of identification with the mission with the people with the organization and I found that and you know whatever whether your interest is in economics or um in other areas energy Health whatever the they're a wonderful jobs and it's a really rewarding Choice yeah and you've been a role model for so many Americans and around the world and public service so thank you for everything you my pleasure