together and the japan-like experience for the united states economy is a growth rate of 2.5%. >> if i could add one point there, productivity growth in the u.s. for gdp over the last year has been negative. the trend over the long run may be 2.5%, but because capital formation in the business sector has been so depressed and because we went -- we had a huge boom in productivity in the recovery we may be looking at several years. a very depressed trend growth. certainly sub2%. perhaps sub1.5%. labor force right now with the aging population is growing about 0.75%. maybe we get a little bit of rebound in labor force participation to discourage workers, but there's no question that productivity growth is going to be quite -- could very well be quite depressed over the next several years which says 2.5% gdp growth, which is pretty close to consensus gives you a fair amount of improvement

in employment, okay, and one final point is that the data on employment are very much at odds with the data on income right now. employment is growing at a pretty rapid pace. income has been surprisingly depressed. although the revisions are starting to come in upward. historically there's been an average of something like 2%, 3% points upward recision to income over time. >> we're going to have audience questions as well. we better get on to another question. >> i just want to very quickly, you mentioned capital spending and that's actually an important point and it ties to dr. palley's point about changed economic paradigm. one thing that's not discussed enough in the debate, there are people who talk hopefully about business innovation and businesses will spend more and that will have to take care of it. our intuitive understanding is the household sector saves and businesses spend the household sector savings and that's why you don't like government

spending too much, because the fear is it will crowd out business investment. in fact, we've had business continues to be a net saver, corporations have over $1 trillion of excess cash on their balance sheets, and even in the last expansion the business sector was a net saver. that's unheard of. you know, the short term incentives that major corporations have these days are actually impeding the processes that would be more helpful for economic growth. >> i'm glad you mentioned businesses, because if you go down the road here in washington, d.c. to the chamber of commerce or to the national association of manufacturers, you'll get the perspective that regulation and regulatory uncertainty is a very big inhibiting factor to the return to the recovery. and an explanation of the lateness of the recovery. thomas, do you agree with that? is regulatory uncertainty been holding back growth? the epa and -- responsible for this?

>> this is a third, fourth or fifth order factor. i think it's a nonfactor. >> it's a first on talking point. >> i'm surely the chamber of commerce will raise this. number one thing. political body. economic policies are designed to serve the interests of their people. this is not a supply side recession. we have massive unused capacity. our profit rates are at the highest in history. the profit share is at the highest in history. pushing the profit share higher does nothing. this is a demand side of recession. we need to solve the demand. in fact, in an economy you can have too high profits. this is something we need to get on the public discussion. i can promise you a capitalistic economy with 0 percent will fail and it will fail, too. there is something in the middle. we have to find where that is. that's about the distribution of income. that's where we've got it wrong. in fact, we have too much profit right now, as yves pointed out, firms are saving that profit. it's not coming back in the form of capital spending.

what will happen is, if this goes on too long, this comes back to your then the demand shortage will kick in again and you will get another ratchet down in terms of investment spending. this is a very classic mechanism that's not part of what's going on. one last point. i do think we have to change the discussion from sustainable recovery, which is much too small a box, to shed prosperity. shared prosperity. that's what we lack. i think we have get a sustainable recovery -- even in sustainable is questionable. everyone here, business sector people, former business sector people, said that we need the crutch of 6% to 10% government deficits, plus continuous rounds of quantitative easing. it's a pretty stretching the meaning of the word to call that sustainable. i think we probably can get by with something less than that. but how do we get shared prosperity on the agenda? that's the type of recovery we should be talking about. i think we should be raising people's expectations when we talk about it in the way we are talking about it we're down

sizing people's expectations, and that prevents change. >> i really don't need to downsize people's expectations. to be fair to those who are viewing regulatory uncertainty plays a role here. if you look -- go back to where we started. dodd-frank, you ask five people in the industry where they think this is going to turn out, how do they think the volcker rule ends, you will get five different opinions. that is uncertainty, isn't it? in your industry, peter, in yours, this is lack of low visibility in terms of the regulatory environment. and that's just the states we're talking about. we haven't even mentioned the regulatory changes internationally. >> no question that uncertainty -- regulatory uncertainty and capital requirements, which i agree fully that's critical to stability in the system down the road. there is an adjustment period that's going to be one not friendly to credit creation or

the cost of credit. and there are elements within the volcker rule that one can debate. certainly the prop trading and the extent to which you affect market makers which are necessary and, for example, the corporate bond market. there are 25,000 issues of corporate bonds that, as paul knows well, that day in and day out there isn't always a market there. you have to have firms of a scale that are willing to buy whole for a while, and sell when a buyer comes along to make the market work. if you don't have that the cost of doing business goes up substantially. >> business surveys show that regulatory uncertainty is contributing to the cautionary approach that businesses are taking. and there is a cost to -- >> ranks surprisingly lowdown, doesn't it? i've seen surveys that -- >> that's actually where i was headed. that the regulatory uncertainty shows up in surveys and is

having an impact, but there are other things going on in the world that right now make it basically an extraordinarily high risk environment from businesses point of view. it's like, you know, businesses are not confident that the recovery is going to be sustainable. only about four, six months ago the market pundits were predicting a 40% or 50% chance the economy was going to go back into contraction. you have europe which, if they completely lost control of their fiscal crisis would create a financial environment far worse than in late 2008. in that environment businesses are being very cautious. one thing, you know, you can see the caution when you did below the surface and the economic numbers. look at the payroll numbers we're getting the reason why the payrolls are rising is because decline in layoffs. that's a signal that basically businesses are saying, okay, we can see our orders and we need these people to fill those orders. if you actually saw them hiring additional new people as opposed to reducing the layoffs, it would be a signal of, hey, i am more confident of what i need

down the road in terms of more people to produce. i think there's a lot of signal in the market. not just from a regulatory point of view, but a high degree of uncertainty about what's going to happen. the message i always have in businesses when i try to talk to them is it's like when i get up in the morning to do an event like this and it's pea soup fog outside. you know, i don't want to make the drive, but i don't have a choice. you have to build your business even with the uncertainty that's out there. >> what's wrong with pea soup fog? we're going to go to the audience for about 15, 20 minutes of questions. but before we do, does anybody have some cheering observations to make? this has been a fairly down -- rigorous economic dose of pessimism most of you have been giving us. paul, where's the silver lining here? >> i'm inherently an optimist. in fact, i used to be teased at

pemco. i'm the house optimist and i'm still the house optimist. i think our economy is a growing concern. we have americans get up every morning and go to work, you know, support their families, have aspirations for their children, enjoy romance. life is okay. it's not what we would like it to be. but our economy is growing, our population is growing. we're benefiting from continual technology. three months ago i bought an iphone. i find it fascinating. i'm learning how to use it without making typos. life is okay. life is okay. >> can anybody cheer us up out without mentioning apple? yves? >> i'm not the person to go to for optimism. >> okay. we'll have to go to the audience for that, i think. >> we should -- antonio grampsee, optimism of the spirit and pessimism of the intellect. that's the only way out of this. we have a problem and we can't

dig our heads in the sand. there's certainly a way out of this. there is a map out of this. it's not on the table right now. but that's the optimistic message. let people know there is a map and they will demand that map. if we don't offer to it them i get politically pessimist tick as well as economically pessimistic. >> those that are on this side and the far side of the room if you would like to cue up, please, share your name and organization. >> if you'd like to cue up, please, and share your name and organization. >> you had a comment while they're lining up. >> i was just going to -- >> sorry, peter. >> i was going to maybe go out on a him and say that the euro will likely survive. >> growing concern. >> certainly the developments there had been, i think, promising in the sense that you have both at the fundamental level, policy developments and in spain, italy, and a recognition among the political leadership of what needs to be done.

you also have the ecb that has obviously taken for the time being the risk of bank failure off the table. certainly being very supportive. these two factors continuing, i think you've -- >> you can see a sustainable -- >> you've taken away a major downside risk, at least for the time being. >> okay. so we have -- we have questioners lined up. sir, could you start? >> my name is eric lowe. i'm with the federal observer. my question is for yves. the point is that because i used to work in finance i understand you to appoint about like wall street and everything. and i share the pessimism because one of the things i got from people who work -- who used to work there saying that, you know, that talk about the regulations that are not in place, it's not going to be in place, because you don't have recorders of know inside how wall street works. so it continues, basically. always to come back again.

so i totally agree with the one beside you talking about like the thing -- >> get to your question. >> yes, it's not on the table. so how can we get the agenda on the table, would be a very good point. >> i'm afraid -- i wish there was a simpler answer. one is -- and i don't give it very high percentage odds of success, but there are peculiarly, some of the groups around occupy wall street. for example, the occupy the s.e.c. group submitted a 325-page volcker rouletter. you're actually seen people -- and that was done by a very small group of people, four or five people. you're actually having citizens groups making input in the rag regulatory process and the media has taken over, "the financial times" and other outlets have taken that up quite seriously. you're getting push back from unexpected areas. the second as i hate to say it is if we had, you know, we've obviously very aggressive

efforts by the obama administration, the fed, to keep the banking system healthy. if we see more problems, you know, for example, if -- for example, a major european bank were to fail, i can't not see the problems not ricocheting over here and there would be a human cry for, why didn't we fix this? we thought we fixed it. >> next question. madam? >> i'm mitsy wortheim with the naval postgraduate school. i want to build on that. seems like one of the problems we have is nobody understands how this system works and where do we find a collection like you that can sort of draw it out? what's the process? who are the players in a way that the general public can understand how screwed up the system is. and maybe there's nobody that understands it well enough that can explain it to us voters who are also the victims of this process. >> good question, and who would like to take it?

>> yes, the answer. >> no more. >> that was a shameless plug. >> i'll really interested in this stuff at a sixth grade level. looking at the american voter, it has to be at that level. >> the public and so-called experts has never been wider. it certainly isn't sectorially wider than the sector we've been talking about for most of this morning which is the financial sector. can anyone explain to the public? it's a reasonable question. who would like to take it? >> i would simply recommend to make as part of your daily reading three journalists, one who has also got another job. paul quigman, "new york times," martin wolfe, "financial times," and david of the "wall street journal." you read all three and you will get a nice flavoring in easy terms of what's going on in our economy.

and they're not all cut from the same political cloth. >> okay. >> i like the second answer better. >> paul amberdean. the capital trust group. as i listen to the panel -- >> can you speak up a little bit? >> i said, as i listen to the panel there was no mention of the word oil. if you go back to what happened in 2008, they increase of price of oil, undoubtedly, had a role in the meltdown that we had. and now the price of oil could impact the recovery. i think we should -- >> that's a good question. clearly already saying some impact on the economic confidence with gas prices. how big is threat is this? how big a threat is that? >> that's the issue when you're trying to do an economic forecast. the start of this year,

the number one risk was europe. the number two risk was around fiscal policy, you know, and sustainability of the u.s. economic recovery. oil wasn't actually on the list of what the top three, top three to five risks were. but all of a sudden because of increased tensions in the middle east, oil is now on the plate as a major risk to the economic forecast. and what we saw last year is when gasoline prices got over $4 a gallon, we could see empirically the impact that had on retail spending. when it got through the $4 market, really started to tamper economic growth. so higher oil prices acts as drag on the economy. at this point if oil prices stay about where they are it only knocks down growth by about a 0.10 of a point. so, you know, relative to last year. so as a result, you know, the real risk is what happens in politics which you cannot

guarantee with any degree of certainty. although that doesn't stop financial markets from betting. i think right now the financial markets are betting a 38% chance of a strike by israel against iran. i mean, but it's made up numbers. right? it's just pure betting for financial market speculation basis. if we did actually see a disruption in oil we would go up to $180 a barrel if you had a major problem in the straits of hormuz, and it would be a major risk to the global economic recovery, but that's probably not the most likely scenario. >> sorry, madam. i accidentally ignored you. you've been there from the beginning. please. >> i'm marianne stein with the fund for global human rights. i am curious, at least one of you mentioned that the, a sustainable recovery isn't a big enough goal, and that, in fact, we should be aiming for shared prosperity. which is -- >> fair commercial. >> which i happen to like. and i'm just curious whether any

of you would address what you think some of the steps would be that would be different in terms of going toward shared prosperity? >> thomas? >> wow. did someone pull out that question there? thank you. look. i like to -- how i characterize the policy configuration we had the last 30 years, i call it a liberal box. we put workers inside the box and fenced them in and pounded them with a particular form of globalization, pounded them with a labor market agenda. we abandoned full employment at the fed and made inflation and our goal, and pushed a small government agenda, night watchmen state agenda. we have to repack that box. we take workers out we put financial markets in and we put rules around them so they actually work for the social purpose for which they're legislated.

remember, these are creatures of legislation and law. we need the federal reserve to take full employment really seriously. when times are good. not when times are, sort of like now. the rhetoric is easy now, but what happens went the tough questions are to be made? we need to have a managed globalization. we need what i call a solid juristic agenda that ties wages back to productivity growth and we need a social democratic agenda. that solves the problem. >> i'm going to have to finish it now. we have run over. really good job from all of you. thank you so much. [ applause ] house republicans rejected the president's budget plan last week and passed their own. all this week here on c-span3 we're taking a look at what's in

the president's 2013 budget request. this afternoon as 5:25 eastern, veterans administration secretary eric shinseki house republicans want an increase for that department. and at 8:00 eastern, american history tv prime time. and a look at who time magazine might pick for person of the year in 1862. james mcferson is among the historians who nominate candidates for the most influential person on the national stage 150 years ago. this weekend marks the anniversary of the bloodiest battle to be fought during the civil war. up to that point. the battle of shiloh, with almost 24,000 casualties. we'll tour saturday at 6:00 p.m. eastern and sunday night at 7:00, the angel of the battlefield and founder of the red cross, clara barton, operated the missing soldiers

operation until 1868. join us as we rediscover the third floor office as it's prepared for renovations. this is c-span 3. with politics and public affair ls programming. get our schedules and see past programs at our websites. you can join in on social media sites. the house republican passed last week would change job straining programs america's promise alliance hosted an education conference called rad nation summit to address the high school dropout rate. arkans this is about two hours and 30 minutes.

[ applause ] good morning. it is such a pleasure to see you all here. on behalf of the entire board of the alliance and 400 national partners. welcome to the nation summit. we are so happy that you have come here from all around the country. there are attendees here from nearly all 50 states. and you've all come together to work to help solve the most urgent problems of our times.

you are the reason we're here. and you are a big part of the solution. we cannot do it without you. i would like to thank our sponsor who is made this possible. our premier sponsors of the grant nation summit, at&t, target, and the bill gates foundation. the signature sponsors, apollo group, family programs, corporation for public broadcasting, board foundations, ford motor company.

i would also like to thank our media partner. we are so pleased to work closely with them as we make people aware of the education crisis in america and what can be done about it. this is a reflection of the way that the grant nation campaign has become a large and growing movement. this is a spark that is igniting americans from every walk of life to join us. as many of you know, peter passed away last year. he was truly a visionary who played a founding and guiding role in our lives.

was no greater champion for the power of the five promises to change lives. he once said, "to dream what is possible and put one's self in service of that dream is the formula for a life well-lived." i know that if he were here today, he would be so excited to see so many people who have stepped up as leaders to bring more of the promises to the young people who need them. because that's the heart of our grad nation work. we all know that it's an election year. how can you escape it? everybody's mind is on the economy. and jobs is our top priorities. but we need to help all americans recognize that there is a direct link between quality education and thriving economically strong communities. that's the theme of this summit. and you'll be hearing more and more about it over this next

day-and-a-half. when children are not thriving, when too many find themselves in low-performing schools that don't prepare them for college in the work force, communities can't thrive. and that means our nation can't thrive. as education secretary arne duncan, who you'll be hearing from later this morning says, we have to educate our way to a better economy. our young people are the secret of that success. most of you know that we launched this campaign two years ago with president obama and secretary duncan. and since this campaign began, we have made real and sustainable progress. you'll be hearing more from that today from bob ball fanz and john bridgeland who will talk about the building of grad nation report that we are releasing today.

you'll also hear what's working. it seems to me that these days we don't often hear about what's working. but we also know we have to do more. and we must do it faster if we are to reach our goal of a 90% national graduation rate by 2020 with no school below 80%. and we must especially remember that these figures are not mere statistics. they represent our children. our children. who want nothing more to claim than -- claim for themselves the promise of america. the opportunity to live independent, secure and happy lives. when we talk about graduation rates and readiness for college

and work, that's what's at stake. our children. and their future. so let us resolve these days while we are here and carry it forth with us that we will rededicate ourselves, not just for the next two days, but in the days to come. that we will not stop until we have kept the promise that others work to keep for us. that we will bring others to this work and bring our communities together to build a grad nation so that we can remain a great nation and hold our place in the world. and now it is my privilege to introduce to you somebody who i can truly say i've known him all his life. please welcome the co chair of the grad nation campaign, michael powell. >> good morning. you know, we know a lot about what it takes to successfully raise a child. but i don't think there's any greater blessing or advantage than to have a committed and caring mother.

and mine happens to be spectacular. you know, by the time i finish my remarks, seven more kids will have dropped out of high school. by the time you finish your work two days from now, another 6,646 will be gone. that's crisis. that's a ticking time bomb. that is a sure way to erode the foundation of any hope of the american dream. we're here to change that. and to change that with some urgency. we launched the grad nation campaign to mobilize america to end this dropout crisis. now, this campaign has become a large and growing movement of dedicated individuals, organizations and communities. working together toward this goal. we are grateful you are here this week, as leaders of the