policy. we have to have it. we look at the future, and they also said that we have to have a long-term investment strategy, because we know that we have to modernize and replace the entire utility infrastructure, so they talked about the broad areas, but they also talked about things like the importance of broadband or the importance of alternative energy. so those are the kinds of industrial policies, and it is not picking winners and losers in a narrow sense. but it is sort of in broad sectorial terms saying that there are certain things that need to be done. >> i'd like to invite people to come up to the microphone and i will pose one more question and then we will take questions from you. identify yourself, please. and laura, you have been worried and concerned about the income and equality and become such a toxic issue that it is driving a at lo of the anger and frankly anger on the right and the left that i have seen. i'm interested, is there a way to get at that other than the

tax issues? i mean, we tend to look at the issues of rolling back taxes or charging taxes on one side or another, and are there ways to more structurally remedy income and equality in the u.s. through job provision? through education? other portals? >> well, i think that it is -- i have heard a number of things about income inequality today from the audience, and lelt met get to a couple of reactions to get to what you say. and yes, it is true that other societies, developed countries have seen similar trends, and we do have to accept the notion that some of of the inequality is due to globalization and technological change, but actually not nearly as much as you think. because, the income and equality between say a college educated worker and unskilled worker, that premium has been growing over time, and significant, but it cant no explain the top 1%,

and it cannot explain the top 0.1% which is really the pull away part of the income distribution in the united states. that is a phenomena which is unique no the united states. so i think that we just need to accept that. there are and also i would say that the evidence is not that it is movie stars and sports heroes, athletes, but if you look at the numbers, it is primarily as lawyer, doctors and primarily chief executive officers and people in the financial services industry. that is what it is. so we could, you need to identify and then sort of decide what if anything are the facers to -- are the factors behind it. one other fact that i would put out there or a reference, because i think it is a very good piece of work is a book called winner take all politics by paul pearson and jacob hacker.

>> yes, one of our guys. >> and basically, this lays out pretty clearly the argument for why the u.s. ends up having the biggest inequality problem and lays it at the doorstep of money and politics in the united states. we haven't talked at all about money and politics here, but we do know that we in the election, we will see it more clearly than any other election, that those interests that can can be well represented by money can become very powerful advocates of their position. and as you have increasing income inequality think about what that means about the representation of the middle and the bottom, if you have a political system where money plays such a significant role. so the argument of the hacker and pearson book laid out clearly that we have lost the ability to represent middle class interests in policy making because of the role of money in policy making. i leave that to you as something to look at.

>> jacob, when i say one of the guys and i mean in the new american foundation sense. and laura is a member of the board where i am also involved and jacob is a professor at yale. >> and paul from berkeley. >> and involved with the issue of the so-called public option and the health care can debate, and he is a kenniesque inspired progressive, but when i listen to jacob and often i am inspired to listen to him, but the world he describes on the kind of commitment to education, the commitment to pensions, the commitment can to keeping every place, and it is as if everyone wants to keep all of the social safety net, and all of the pieces there and not only there, but build them bigger in terms of the redefining the next eraf of social contracts, but when you are looking at the budgets and having hard choices, i would like to ask you and i would like to call on richard vague to come up to ask the questions, but i would like to ask you what you would counsel those on the

progressive left who want the return of the great society? what are they getting wrong and what hard choices are they unwilling to make? >> well, another thing that i heard today that is related to this is this issue of instead of focusing so much on what you can give people what you need to give people when they are in stress situations is how you can help them make investments in themselves and their children so that they in the future will have less stress situations. so i do actually believe that, and it is a tragedy. i do belief in the importance of focusing on education above all else, i guess. and the tragedy part of this is if i go back, and if i go back my first involvement in the debate about competitiveness was actually working on a commission set up by president reagan and john young, then the ceo of

hewlett-packard, a republican involved which is how bree got started. the two issues on the competitive list, number one and two. one, we needed a stable macro environment, and you have heard today most of the day how we have not had a stable macro environmental though the last several years, we have had a crisis and a recovery and fragile recovery, and the second one was dealing with oural chal have not made anywhere near the progress we should have made. if you look today the rate of educational attainment of young men has basically stabilize. the high school dropout rate has increased. the employment level share of working-aged men who are working declined significantly in part

because of the median wage has declined, but the point is that in part because the skill development, curriculum -- of what works to keep a dropout to stay in school potentially is link through a career path that is not through a four-year career path, but through a technical training career path into a one-year specialized prom grapt a community college which is designed very much with the interest of a sector and interest of the business in mind. so one of the ways that the jobs counsel talked about industrial policy was the importance of having community colleges focus on skills in areas where you could say that over the next ten years on advanced manufacturing skills what are we missing. on health care workforce skills

what are we missing and then setting up a very specialized program with the help of the community and the help of the businesses that will employ these workers and even with the businesses providing apprenticeships that is an industrial policy. you are taking the industrial base to try to help people to invest in those skills that will get them jobs in that skill. so i would say education. >> richard vague and then this gentleman. i mentioned richard vague, because richard vague helped institu instigate -- instigate the idea of the conference and i will not say he is responsible for a bunch the debt in the country. >> jobs. >> and he is the founding ceo of first bank and created the affinity banking system, so all of you with airline mileage and for all of you addicted to points, this is the guy who

created it. >> thank you so much for your comments. i do want the note before i talk about the jobs that allen meltzer talked about a recent study of seven countries with totally different tax policies that more or less demonstrates that the tax policy is the lesser factor in the difference of the 1% and the 99%. and he said, and i think it is a jermai germain that it is the entrance of new employees into the market that is decimating the structure of the bottom 99% and that leads to the validity of that. so that leads to the invention of the future that creates jobs. when you think of where the economy is going to go not just for the united states, but for the world over the next generation or two, it is genetics, and robotics and nano technology, and james pinkerton

talked about how 80% of the health care costs are tied up in cancer, and diabetes, and alzheimer's. if we had an industrial policy that laser focused resources on those seven areas, all of which represent profound change, profound invention in our society, we would be a jobs machine. so is that type of industrial policy possible in the united states? >> so a couple of things. first of all i want to say on the tax policy point. i don't mean to imply and i was not implying, because i don't agree with the position that our inequality problem is the result of the tax policy. i don't want anybody to take away that impression. the 6 million or additional workers of india and china have indeed been one of the reasons why middle income jobs have eroded.

what i said is that the other developed societies faced exactly the same problem, so why is the case the income inequality of the u.s. between the top and the bottom is so great? that is a fairly, and the only other country that comes close to us is the uk. i think we have to ask that question, because everybody else is subjected to globalization, too, but it manifests itself to the united states in an extreme equality, and on the point of the new technologies, i have always been a huge supporter of things like putting additional funding into the nist, and to putting it into edarpa and darpa, a nd there are many ways if you go into the history of the u.s. history and the evolution of the major new

sectors over the past 50 years, you will see that the government has played a major role as a supplierff of basic research funding, as a supplier of supporting the training of the scientists and doctors and engineers who actually do the research with the research funding. the government has been a major source of support in terms of procuring, procurement. just buying the stuff as a big buyer as it comes out of the door. so actually, if you look at the office of science and technology policy and look at the president's science and innovation budget, you will see to the extent that they have been able to do it, again within the political constraints, they really would and the idea of supporting particular attention on research in energy, on nano technology, on continued support for innovation and research in health i think that i'd agree with you completely that the

government of the united states has been a major source of that and should continue to be, and this administration, every time that the president has talked about budgetary priorities including the most recent state of the union address he has said clearly, i am going to have to cut significantly the u.s. is going to have to cut significantly spending, but while we do that, there are three areas that we should absolutely increase the spending in, and science and technology and those initiatives have always been one of those areas. >> and i want to mention one more thing before i go to this gentleman. i spoke to the president of m.i.t. and ursula from the bureau of parks laying out how to do it with laser specificity

on these issues, but the problem is when you talk about it to a certain degree, you are talking and it which in the political environment which i don't know if i mentioned it earlier in the day, and last night, someone said, steve, while you havehav r designed an erudite conference, and one of the reasons is because we want to raise the level of inputs into that conversation and debate, but there is a sense that the smart, strategic investments somehow undermine real people out there trying to work the real jobs. and i -- i know it is wrong, but i do have family in oklahoma and texas and kansas, and not to knock oklahoma, and texas and kansas, but there are a lot of folks who don't get that kind off policy as being in their interest and they feel distant from it. >> it is very, very difficult in

this period of time, because as a number of speakers have said, the way that people feel about the e kconomy, they feel about government. we are in a painful and slow process of recovery and for most americans a truly awful period. it is important to recognize again and again that it wasn't that great before 2007. that 2002-2007 has the dubious distinction of being a recovery period where median real family income fell. where real median income for male workers fell. so you are not talking about a period where people were indeed borrowing a lot, and they were indeed trying to break through the budget constraints by borrowing which is part of the

problem, and we can talk about the liquidity which allowed them to do it and all of the things that we have heard about today which in the nasty storm of things coming together created a mess. but people are not feeling very good, so if you say, hey, how about let's invest in while we are cutting your medicare, let's invest in a robotics program, and somebody said, why so much trouble getting the message out. that is a difficult message to deliver. >> and as i mentioned three times you can have a quick question and answer. >> i am curious about the industrial policy and hear about t. boone pickens talking about the lack of american policy and what are some countries that you have in mind that have industrial policies and germany with the middle stand and the obviously resilient manufacturing sector and just give us insight on that and what do we learn from them? do any of the countries get

industrial policy right? or better? we can focus on the things that we can do better which will affect a number of industries and i actually at this point to focus on the skills gap and the continued need to increase our spending on research and innovation which will get to robotics and without saying that robotics should be the focus, because it will happen, the scientific community is moving in that direction. and on infrastructure and if i think about the energy, i'm afraid what i would say to that is that the most fundamental thing that the society can do to generate an energy conservation policy or a change in the use of

energy policy towards less carbon intensive fuels and the most fundamental thing to do is to change the price of energy. and to change the price of carbon energy in particular to both encourage conservation and encourage alternative energy forces. those issues came up in the debate about the energy bill and you can see that this is another area where we are extremely politically divided, but i think that the societies that have done it better have started with a higher significantly higher price of energy as a way to prod people to use less energy and use al teternative energy. conservation is the low hanging fruit. obviously, one of the this nice things that the president's jobs council i thought was effective and i urge all of you to go to the website and read the

reports, because of the listing of the administration can do and what the administration did here which is not emphasized enough today is where they could take action which did not require enough resources and require congress. they did it. one of the things is that they did with the commercial improvement of 20%, and bill clinton has picked this up as an initiative and governments around the country are working on this with the financial services industry and the owners of commercial buildings and this is an initiative called the better buildings initiative which is a commercial initiative the to try to encourage energy conservation which is a very important part of the industrial policy and energy. let me leave it at that. >> ladies and gentlemen, dr. laura tyson. thank you so much. and now we have dr. kirkland and dr. larry summers at the stage and this is a treat for us at the end of a long day, and not

only here to keep everyone here, but to give everybody a drink and we decided to have wine and all that later, but come on up and we will say a few words about rick and larry. rick kirkland is the senior managing editor at mckenzie and formerly of "fortune 500" and an old friend. it was a year, year and a half ago before dr. summers left the administration, mckenzie hosted an event at the ritz-carlton and hosted by larry, and there was an article held up looking at trade and what was different, and what had we learned that we had not thought about before. i heard larry summers give one of the most and he seemed to be thinking out loud without worry about the political repercussions about what he might be saying and it is one of the most extraordinary meetings, because he was exploring questions about do we need to be

there in how to fit the national objectives and so, also, he spoke recently in a conference sponsored by the conference of new institute thinking and martin wolf the financial times interviewed him and another thinking out loud moment, and when you spend time with larry summers you get someone who has not only thought about policies, but engaging people who have thought in other ways which is different from the larry summers that we have often got the meet in the media. so rick, the floor is yours. >> thank you, steve. >> thank you for that set-up. >> thank you, steve, for that introduction mostly. >> well, i will add to that. >> and there are others who say that people come to hear me talk is that it is a little bit like going to the auto race, you never know what kind of crash will take place. so it is a rather mixed virtue that you describe.

>> and larry, i wanted to add and describe if people didn't know who you were that you were -- okay. we will stop the introductions there, and all right. we have not spent a lot of time between now and the election, but we have been reminded that the stakes are high for the next president once he is elected. you have the end of the bush tax cuts. you have the payroll tax cut, and you have the sequestering kicking in and the debt ceiling sitting out there, and your former colleague bob rubin has measured ate it as an important moment for the country, and ed rendell said if we don't do something in the next five months we are cooked. how would you put as the next big priority? >> i am not sure that there is one priority, and if i have learned anything over the years,

it is that nine months is a long time and that the world may look differently in november than it does right now, but i would make these three points. first, the single most important determinant of almost every aspiration that the country has whether it is healthy government finances or rising wages for middle-class families or whether it is reducing poverty or whether it is maintaining leadership in the world, is the rate of growth is the economy over the next decade. so, if we do not succeed in maintaining sustained economic growth at a rate that puts a rising fraction of the population back to work, we will not succeed in anything else.

including we will not succeed in repairing the government budget situation. so maintaining a policy focus on assuring an adequate level of demand and growth and whether that is exports or reforming and spending appropriately on infrastructure, whether that means appropriately designed tax reform is a critical issue. but in our concern with posterity, let us not forget that we get to posterity through the next few years that if our economy stagnates as japan's did after several false starts, as america's did in 1937, that is what is going to be the most serious threat to the nation's fiscal health and not much else.

so frankly, i'm very encouraged by this statistics of the last few months. i'm more encouraged than i have been any time -- but there are no certainties, but it is terribly important that we maintain the momentum of growth. that is number one. >> does it look self-sustaining to you? >> i don't think that it's right to make an absolute declaration on that question. but i have more confidence of it being more self-sustaining than i did in 2010 or i did in 2011, and it feels like the pieces are coming together, but i would still say that the risks are much more on the side of the

economy being too cool than they are on the economy being too hot. >> second thing i'd say is that doug elmendorf in a recent presentation i saw him give reduced our budget problem to something simple in a way i had not heard put this way before that i e found very helpful. he basically said that that there are things that you can do with the doe mesic discretion and things that you can do with the defense, but a lot of the toothpaste is out of those tubes. so, in essence, what we have to do in 2022 to have the nation's finances in a sustainable place is to either cut the entitlements by a quarter or raise revenues by 1/6 or a combination of the two things.

as best i can tell that analysis is about right, and it is the nature can of the problem, particularly as regards entitlements, but also regards revenues that it is very difficult to act suddenly. people need to know what is coming. and in the case of health care, we are going to end up needing to experiment a fair amount, because the truth is the world doesn't completely know. how to predict or control health care costs. there has been some recent encouraging development with respect to medicare costs on the one hand, and the independent payments advisory board which was a huge controversial issue is being scored for ten years at $3 billion right now. which suggests that it is not an issue of quite the magnitude

that people thought at the time. health care is an area where we have to feel our way. social security, we can measure the things and it is a matter for political choice. health care is a matter for continued experimentation and analysis. which brings kn s me to the thi thing. if you ask me what is the ish ssue that unites the broadest range of economic concerns in the united states, it seems to me that it is tax reform. because it is tax reform that is central to the revenue and the budgetary challenge. it is the tax code and the incentives that it provides that are central to spending decisions which go to demand and growth. it is taxes that are central, and their progressivety that are

central to issues of equity and fairness in this society. look, i am going to say only one thing here that is going to touch on someone running for president. i think that you will get the reference. i don't believe that anybody is under any obligation to pay more than they owe. the tax code is what it is, and nobody should take advantage of it, but they should be in favor of changing it, but it is stunning an unconscionable that there exists $50 million i.r.a.s in the united states when there is a contribution level of 2 $200,000 and i cannot imagine that the law was broken, but if ever there was an example of