I want to thank Hewitt Shaw for that kind introduction, and thank you all for having me.
It is great to be at the City Club, and I am thrilled to be in Cleveland. It has been a great day--starting at a middle school, where I got a chance to meet with students to discuss the importance of science, technology, engineering, and math. I had a roundtable discussion with business leaders at NorTech. And I visited Vitamix, an innovative family-owned business that is manufacturing state-of-the-art products for export around the globe.
Now, I would like to spend a few moments this afternoon speaking about our economy and about creating jobs. I also would like to take some time answering whatever questions you may have.
Let me start with a few observations.
Our economy is much stronger today than it was four years ago, but we must continue to take action to help speed up growth and put more people to work.
Just over four years ago, when President Obama first took office, economic conditions were the worst our nation has seen since the Great Depression. Our economy was contracting at a 5.3 percent annual rate. More than 700,000 jobs were disappearing every month. Homes were being foreclosed. Businesses were shutting their doors. Saving accounts were decimated. And the auto industry--a cornerstone of Ohio's economy--was unraveling.
The President moved quickly to respond to the financial crisis, reignite economic growth, and revive auto manufacturers. And thanks to the President's decisive and quick actions--along with steps by the previous administration, the Congress, and the Federal Reserve--our economy is growing, and there are signs of steady improvement.
Since 2009, the economy has expanded for 15 consecutive quarters. Private employers have added 6.8 million jobs over the past 38 months, and since job growth resumed, manufacturing has registered the strongest period of job growth since 1986. The housing market has been improving for more than a year, posting clear gains in construction, sales, and prices. Our financial system is stronger, with far more effective oversight, than before the crisis.
Families continue to repair their balance sheets, with household debt as a share of personal income falling to a 10-year low in late 2012. Consumer spending and business investment growth have been solid. And we have made substantial progress reducing our federal budget deficit in a balanced way.
Yet a lot of work remains. Families are still struggling. Unemployment remains too high. Growth is not as fast as we would like. There is still more to do to put our fiscal house in order. And we continue to confront risks to our economy and national security by applying sanctions against outlaw regimes and working with the business community to guard against cyber threats. Nevertheless, as we face all these challenges, our top priority as a nation has to be growing the economy and creating good jobs in the United States.
It is important to note that this recovery is being led by the private sector. Our businesses and entrepreneurs are doing what they do best. They are expanding, innovating, and hiring. And because of their determination, our economy is poised to shift into a higher gear. But there are dangers ahead--and one of the most significant speed bumps for growth is coming straight from Washington, where some political leaders continue to generate one manufactured crisis after the next. These stand-offs and short-sighted maneuvers are a drag on our economy. And they undermine confidence, which is a key driver of economic activity.
Two months ago we saw another one of these manufactured crises come to the surface when Congress let a series of harsh, indiscriminate spending cuts known as "sequestration" go into effect. Nearly every part of the federal government is coping with an onslaught of these sudden, reckless, across-the-board cuts, and its impact is being felt in communities across our country.
In Ohio, these cuts translate into roughly 2,500 kids getting kicked out of Head Start and Early Head Start. They translate into less college aid for around 3,300 low-income students. And they translate into a loss of more than $800,000 for programs like Meals on Wheels that provide food to our most vulnerable seniors.
This is not good public policy. And it is certainly not good economic policy. These cuts will hamper growth and hinder job creation. In fact, according to the non-partisan Congressional Budget Office, sequestration will shave off more than half a percent of economic growth this year and cost us as many as 750,000 full-time equivalent jobs at a time when our economy should be increasing our GDP and adding jobs. Everyone here got a window into how significant the collateral economic impact could be with the recent news that this year's Cleveland Air Show had to be canceled, costing the local economy millions in lost revenue.
So it is high time we replace the sequester before it causes even more pain.
Earlier this year, the President put forward his budget. In it, he replaces sequestration with sensible deficit-reduction measures that eliminate unnecessary programs and close wasteful special interest loopholes. It is important that Congress enact those measures as soon as possible.
At the same time, the President's budget restores our nation's long-term fiscal health by finishing the job that was started early on in this Administration. You see, despite all the noise and rhetoric to the contrary, we have made considerable strides to pare down our deficit. Over the past two years, the President and Congress have come together to hammer out historic agreements that have dramatically reduced spending and raised revenue. And when you combine these changes with savings from interest, we have locked in more than $2.5 trillion in deficit reduction over the next 10 years. More than two-thirds of that reduction has come from spending cuts. Let me say that again--the deficit reduction we have already achieved comes from two dollars of spending cuts for every dollar of revenue.
But we can do even more to shrink the deficit over the next decade. The President's budget will lower the federal budget deficit by nearly $2 trillion more. That will bring the total deficit reduction to more than the original goal of $4 trillion, a level that independent economists believe is necessary to stabilize our finances. Our budget achieves these savings through a balanced mix of spending reductions, tax reform, and responsible changes to Medicare that will strengthen the program for future generations.
What is particularly important about our approach to deficit reduction is that it would strengthen our recovery and lay a foundation for long-term economic growth. But important as the deficit is, it cannot be our guiding star. Deficit reduction alone is not an economic policy. We have to apply the same sense of urgency to expanding our economy and getting people back to work.
Let us not forget that we are still living with the scars caused by the financial crisis. For instance, one of the lasting repercussions of the crisis has been a high rate of long-term unemployment. We know that the longer experienced workers go without a job, the more likely they are to see their skills erode and their professional contacts fade away. This can lead to even longer periods of unemployment, and it can result in lower productivity and lower output for our economy.
Similarly, joblessness among young people, which has come down from an all-time high in 2010, is still too high. For too many young people, long periods without work means they may never catch up with their peers in terms of earnings. This, again, is bad for our country's economic productivity and output--and could lead to an economy that underperforms, where growth and job creation are below their potential.
But we do not have to settle for weaker growth and fewer jobs. We do not have to set our sights lower or sit back and watch our global competitiveness wither and our middle class grow smaller. Not when both parties in Washington can come together to secure a better economic future.
The point is, there is a path ahead that will allow us to both shrink our deficits and fuel opportunities for workers and businesses. The President will talk about this path forward when he travels to Texas later this week. The President will emphasize--as he did in his State of the Union address--that if we want to increase prosperity today and the prospects for long-term growth, we have to strengthen the middle class. And the way to strengthen the middle class is to zero in on three central things--bringing more jobs to our shores, giving American workers the skills needed to do those jobs, and making sure hard work amounts to a decent living.
I would like to highlight a few of the areas where we can make investments to strengthen the middle class. And it is important to remember that these investments are all paid for. In other words, they do not add a dime to the deficit.
When I talk to business leaders, one of the first things they tell me is how important our infrastructure is to what they do. Businesses cannot operate effectively when roads, bridges, ports, and pipelines are crumbling. So we want to create what we call a "fix-it-first" program to get repairs started on things that have long been deferred--like the nearly 70,000 structurally deficient bridges across the country. This would put contractors and construction workers on the job as soon as possible, and we could start making these essential repairs right away. And to keep taxpayers from shouldering the entire burden of these upgrades, we would establish a program to attract private capital so that we can make the repairs that will deliver long-term benefits for our businesses and our economy.
Our strategy to accelerate the pace of economic growth and job creation also includes strengthening the manufacturing sector. Our businesses make some of the best designed and best built products in the world. Our manufacturing workers are second to none. But we need to take steps so that we are making more things here that the world wants to buy.
The importance of manufacturing is well understood in Ohio, where manufacturing is the largest sector of the economy. Earlier today, I visited Vitamix where high-skilled workers are putting together high-tech products for export to more than 100 countries including China, Britain, and Germany. Innovating, designing, building, and exporting goods around the globe. That is what we mean when we talk about advanced manufacturing. And it is the kind of thing Ohio is known for and America is known for. We just need to do more of it, in more places.
To expand our country's manufacturing base, we will make our tax code more competitive. Right now, companies get tax breaks for moving jobs and operations overseas. That needs to change. Our approach would put an end to these unwarranted tax breaks and start rewarding companies that open up operations and generate jobs in the United States.
At the same time, we are calling on Congress to make the Research and Experimentation tax credit permanent. This tax credit propels private investment in research and technology, and it helps unleash innovations in our country that lead to future industries, future jobs, and future breakthroughs in production and engineering. The power of this tax credit is clear, and we want to finally make it permanent so companies can plan with confidence for future investments.
We also want to jump start more centers for high-tech manufacturing. These innovation hubs bring businesses, colleges, and agencies like the Department of Defense together to focus on world-leading manufacturing technologies. Last year, we started our first manufacturing innovation institute not far from here in Youngstown, Ohio. That area was hit hard when companies started moving production overseas. And today a defunct warehouse is now an advanced lab where new workers are mastering 3-D printing technology. So we have seen the potential of these manufacturing centers, and our plan would set them up in 15 more hubs around the country.
As important as it is for our businesses to generate the jobs of tomorrow, it is equally as important for our workers to have the necessary skills to get those jobs. That is why we want to introduce incentives for high schools to create classes that focus on science, technology, engineering, and math. We also want to reward schools that work with colleges and businesses to design programs that prepare students to enter the workforce. And since we know re-training programs can be instrumental in getting unemployed workers back on the job, we want to encourage local community colleges to tailor skill-building programs to the needs of local companies.
Infrastructure, Manufacturing, Worker Training--these are all part of our blueprint to step up growth and get more Americans back to work. But that is not all. We also must continue to take advantage of our domestic energy sources, safely and responsibly. As we have seen with the shale boom here in Ohio, we have been steadily increasing domestic energy production over the last few years. Today, the United States is less dependent on foreign oil than any time in nearly two decades, we are producing more oil at home than we have in 10 years, and we are producing more natural gas than any time in history. The President has been clear that he wants to continue this trend and build on the progress we have made in recent years, and the administration is taking steps to continue to streamline permitting, while also ensuring that industry relies on best practices that make sure expanded production goes hand in hand with safety.
At the same time, energy from renewable sources, like wind and solar, doubled in the President's first term, and we will continue to invest in these important technologies. By taking these measures, we will help develop more industries here at home and lower energy costs for households and businesses while creating good paying jobs.
So those are some of the moves we can make to reinforce our economic strength now and well into the future. Our plan is full of common-sense ideas. But there is no easy solution here. The students I met with today who are studying science are still going to have to buckle down and make the most of their education. The businesses leaders I met with are still going to have to innovate and figure out new ways to beat the competition. And the employees I met with at Vitamix are still going to have to work hard every day and take care of their families.
Now, I know everyone here has faith that those students, business leaders, and workers are going to do the things they have to do. That is because--to put it simply--this is how our country works. Our people are strong. Our businesses are tough. And our economy is resilient.
In recent times, we have been tested by recession and drought, terrorism and financial turmoil. Yet time and again, we have not just survived, we have prospered. And we will continue to prosper because we will continue to confront the challenges that come at us.
Thank you very much.