ladies and gentlemen, please welcome the council a and ceo of national competitiveness the honorable deborah. >> good morning. welcome to the u.s. national competitiveness form and its 309 anniversary. last night many of you were with us at the smithsonian's national museum of american history. we were so pleased and delighted to welcome those from around the

world and to honor two great leaders of american competitiveness, the secretary of energy and the president's long-standing science advisor. today we have a very full and engaging day of conversations, presentations and recommendations, and we hope you all will participate in the conversation. allow me to share a few thoughts about today's anniversary forum. in some ways when you think of 30 years back and where we are today, it is a little bit of a back to the future story, but not really. when you look at the threats and challenges they were very different from today. many americans had tremendous anxiety about their future, and it was really the vision and creativity of our founder john young who felt we needed to create a nonpartisan group of ceos from all sectors who would

join with our university presidents, labor leaders and now national lab leaders, to develop a road map for american's prosperity, and to work very closely with our government policy makers to implement that agenda. our anniversary of course is a time of celebration, but very importantly today, we are going to focus on the future. we have some outstanding, exciting innovators who are going to be with us, and we're going to look at what will be the path forward to enhance growth, productivity and prosperity. we will shortly release the council's flagship clarion call for competitiveness with our recommendation, which constitutes. our strategy to the new president-elect of america and the new congress that will take office in january. we are going to hear, as i said from some top line innovators,

but we are also going to have some very important discussions on new thought leadership from the council on competitiveness. we are going to hear from jim clifton about the new report that gallup and the council released this week, new recovery and analysis of the long-term decline in u.s. productivity. we will have a fabulous luncheon talk from a very dynamic innovator, the founder and ceo of the fabulous applied minds center in los angeles. if any of you have been there, it is really a journey into the future. then later in the day we will talk about entrepreneurship and have a great discussion with steve case, who i believe you all have the book, the third wave, that he's given all of us today. i want to thank all the members of the council for their tremendous support and participation with us on our journey. i want to specifically again thank and recognize our very generous sponsors who made last

night and today possible. lockheed martin, pepsico, united association, deere and company, rockwell automation, deloitte, fed ex, snap-on, arizona state university, the bank of america, ucla, uc san diego, whirlpool, white cap investments. and i want to thank sara eisen who will join us shortly and her great team at cnbc for being our media partner today for this forum and then finally thank the board and the executive committee of the council on competitiveness for all their time and stewardship and being the host of this forum. so welcome and we look forward to a fabulous day. thank you. >> ladies and gentlemen, joining miss smith onstage to release the council's clarion call, competitiveness to the 45th

president of the united states of america, please welcome the chairman and ceo of deere and company, chairman of the u.s. council on competitiveness, mr. samuel allen. the vice chairman and chief scientific officer for global research and development of pepsico and u.s. council on competitiveness vice chairman for industry, dr. mehmoud khan, the president on u.s. council of competitiveness vice chairman dr. michael m. crow and co-anchor of "squawk on the street" on cnbc, miss sara eisen. >> hi, welcome, everyone. thank you to our distinguished panel. i'm very pleased and honored to be here to kick off this exciting day and to introduce the council's clarion call which is really a great way to frame the day and the conversation and is going to be their mission

that will be sent directly to president-elect donald trump so here to discuss what's going to go inside, sam, if you would, as the chairman, please kick it off as far as the key priorities that you would like to mention in this clarion call. >> i would start it off by saying the president-elect probably won't like his report card so there's a lot of fs and ds, not too many as on there. i think the important thing that we are trying to highlight in the clarion call, that there is a way forward, that when you look at where the economy has been and this is really about accelerating gdp growth and that really gets down into two components and that is how many workers are participating and what's the productivity that we're deriving out of that. a number of the areas we're looking at in the clarion call, whether it be education, which gets into really developing the

work force of the future, whether it gets into assuring that we do start handling the debt which makes us sustainable, whether it's continuing to invest in basic r & d which is important to the innovation set of this which also drives the productivity piece. there are a number of areas there that we think are very very important that we set a direction going forward. you can prioritize which ones you work on first, but all these areas are important to assure that the country is growing at a sustainable rate over a long period of time. >> what i love about the council in general and this panel is we have so many different backgrounds and industries and academia represented. mehmoud, from your perspective, what are you looking to accomplish on behalf of the council and the clarion call?

>> you know, as i'm sure you have seen it in the clarion call, when we think about opportunity for growth, there is still a lot of exciting opportunity out there. let me just take a sort of technology perspective for a second. let's start with the productivity we have had, when you think about what everybody talks about as the moore's law where the computational power of microprocessors has gone to be doubling every two years or so, it's been an amazing few decades. that slowed down and one way of looking at it is growth has been done and yet, there's exciting technologies coming just around the corner that can jump-start again and give us another s curve. that's exciting because it's another wave of growth and it's not just exciting from an economic point of view but also it's important from a defense point of view. as many people in this room know, our military needs secure state of the art

microelectronics. in fact, the last defense bill required the secretary of defense to make that available by 2020. so the whole cluster capability is there. if we look beyond there in the more consumer industry engineering in general, we have got the internet of things. everybody is talking about it, everybody is starting to experience it. if you think of the capability of sensors, big data analytics and the ability of communication between devices, we are living that only on the surface right now. it will change the way businesses operate, businesses use their labor force, the way companies like mine, pepsico, engage with the consumer. we have an exciting wave of this coming, this link between individuals, machines and machines with other machines. now, another area that has generated from this is we now take internet of things, artificial intelligence and link

that to robotics. look what's happening in manufacturing. we have seen a wave of that in manufacturing but driverless vehicles, just another example. not only cars and automotives that everybody is talking about, but even the potential around the corner of airplanes. having said that, i will touch on it at the end, we have to also be conscious that that means a change in our work force. we have a very large work force that is part of transportation. what are we going to do with that as that technology and that growth comes. the last piece i left to the end because that's my background and i have a lot of passion for it, is the opportunities coming in biotechnology. if you really think about what biotechnology's done, it took, what, 13 years and $3 billion to sequence the first human genome. now you can do it in 24 hours, literally for about $1,000. and it's going to get faster and cheaper. what's the implications of this?

well, take a technology like crisper where scientists can go in very precisely edit a gene sequence in an organism it has profound implications when used for good. let's take an example. somebody born with an inherited disorder because of a genetic mutation. the ability to go into their bone marrow and change stem cells or the ability to go in and identify a plant variant that is more drought resistant, has a higher yield, is pest resistant because we can select certain genes, that is revolutionary. we have to feed 2.5 billion more people in this planet in the next 25 years. closing on that part, i would say lots of things, these are just examples, but one thing we have to do when we talk about technology, we cannot leave large parts of the population behind. technology has to lift everybody.

as multiple stake holders we have to engage people, talk, discuss, agree on what's good for society, then invest behind it. i'm very excited what the potential is for technology. >> it will be on you to train the generation on all of these technological advances. from your perspective, what are you hoping to accomplish this year? >> first thing to point out, this is a tremendous country. we have been tremendously competitive for decade after decade. we have done things that are unbelievable when you look at the annals of human history. but what we have come to as a point where we are having difficulty right now managing the forces that are required to be as competitive as possible. there's really three things at work. one is the overwhelming force of creative destruction where every new idea replaces a previous idea. every new configuration, new

system, replaces a previous configuration or system. in that, if the citizenry is not capable of making those adjustments, more and more of them will fall back. while we will have fantastic achievements in some sectors we will have generally a weakening competitive position in our overall economy which is the case now versus the previous decades and we will have a very negative set of impacts in terms of people being left behind. what's happening now is that we haven't matured enough, our eye is not on the ball and what's happened is changes are so fast that rather than taking three generations for a change to be implemented there's five major changes in a single person's life. five transformative things that would affect a single individual. what that means then is that we need to dramatically enhance our focus on the ball, the focus for

competitiveness needs to be on the continued development of ideas. we are underfunding fundamental research, underfunding the basis from which these ideas can emerge. lots of other people are stepping up, other nation states, other parts of the world. we have sort of been stagnant and not moving at the speed we should be moving. i actually now place that as a secondary issue to the really principal issue of people and people development. we have a poorly articulated, poorly developed and very weak immigration policy on every front. the country's been built on the notion of driving ideas forward, driving the forces of creative destruction forward through immigration and the education and training of both new immigrants and citizens and so that's something that needs to be worked on and our report gives a very poor grade for our policy in all of that. i think the thing that we are not doing that we haven't figured out is that we are arguing about super silly things right now. we are arguing about what's the role of the government in this or that.

the government has always played a role in the preparation of the work force by investing in the next generation through schools and through universities and so forth. we literally, literally were so far off the mark right now, so far off having our eye on the ball not through the resources that are being allocated but through the mindset. we don't realize that everyone has to graduate from high school and if you're not graduating everyone, the entire system is a failure. because those people will not be employable. they will become wards of the state. they will be concentrated in nothing but income tax transfers to those individuals and so we need new schools, new high schools, new ways of thinking, new ways of moving forward, new ways of organizing the universities, et cetera so that we can find a way to actually produce individuals who have the capability of being competitive themselves, competitiveness is

not only a function of the national net competitive outcome. it is a function of the algorithm of the individual's competitiveness. we have far too little focus on the individual and preparing the individual to be competitive. i passed an uber test vehicle in phoenix the other day. there was no one in the front seat. it was driving. there were people in the car. no one was in the front seat. i was at a meeting in morocco a couple weeks ago where a guy stood up from a major technology company in the united states and said what we are going to need to do is replace between three and 12 million jobs in the next 15 years of people that will be displaced by the latest changes of the integration of computational technology, artificial intelligence and decision making systems. are we prepared to do that. he said no. we just need a tax system to give them money so they have something to eat. well, that's nuts. we need competitive individuals

clustered together and advanced through life-long education who can continue to be competitive at higher and higher and faster and faster rates of change and that's the algorithm we need to figure out and we haven't figured it out. >> how do you tackle some of those challenges and goals and turn them into reality? >> i think one of the most important things about the council's clarion call, we have been issuing this for a number of years, is that we recognize it's not -- there's not one silver bullet. this is an integrative system and if we can really make progress in partnership with our public policy leaders, with congress, but really, with the leaders in this room from all these sectors, we can begin to tackle some of these. we really have to look at this going forward on all fronts. yes, we can get our corporate tax rate down to a level comparable with our competitors. i think finally a recommendation that we have been calling for for many, many years is to move

to a territorial tax and get the 2.6 trillion that's overseas back into the u.s. with an appropriate tax level. we can make progress also on some of the issues around our regulatory burdens. but the things my colleagues have been talking about, these are our competitive advantages so i think the message i really want to convey is let's get our house in order on the things we can do that put us right now at a disadvantage to our global competitors around tax and the debt and regulation, and just turbo charge on these competitive advantages around the technology transformation and the people in america. >> i understand the improved growth outlook that was referred to and some of the pro-growth policies that are set to come in action, the stock market at a record high, helps tackle some of these more structural issues. in other words, if the growth is

the medicine that's been missing over the last few years which has made it so hard to prioritize some of the issues you are talking about. >> i think it will certainly be an enabler of bringing people together. some of the stimulus that is being talked about, that does not create long term sustainable growth but what it certainly does is it turbo charges in the short term and when growth is stimulated in the short term, that makes it a little easier for everybody to come together and say okay, how did we work together on this long term problem, one of the ones we have been talking about. i think the important thing for people to recognize, though, is you can change the tax rates, you can do all those things. that will drive a spurt in the economy. but you got to change the productivity equation over the long term if you want long term sustainable growth and so it will be very important and that's where the council can help, i think, in making sure that everyone then is focused okay, how do we tackle the big

problems, things like what michael has talked about, while we are experiencing this near term stimulus that's brought about by the changes that are sure to come with the next administration. >> i was just going to emphasize, look, i touched and talked about the exciting opportunities of technology. i want to come back to what i ended with. if we don't deploy all of this exciting opportunity in a manner that lifts everybody, then we are going to have a worsening of where we are today. looking from a food industry perspective, there are about 50 to 60 million of americans who live on food stamps, one way or the other. that's about one in five americans today. if that part of the population is not given not just financial means and subsidies but meaningful work, people don't want to just be given a handout. i don't care if it's from government or the private sector, they want to be engaged in society, participating in society, having a voice but also contributing.

that's part of what we are as human beings in any society. i don't care where you are. that needs to be focused on. it can't be done by any one sector alone. what the council is doing is actually pointing out these gaps and proposing real pathways forward of how multiple stake holders, everybody in this room working together to change that. i think that's an important point michael was raising and technology is an enabler. it's not a destination. >> so where do you find that countries are out front on this, globally, looking around the world, as we look to a loss of competitiveness as you described it? who do you think are our chief competitors or rivals? >> there's lots of competitors. i think the nature of competition is good. competition produces better ideas, better products, better outcomes, economic growth, economic enhancement. we have got the rise of the asian tigers, we have fantastic

competition coming from some of the countries in europe, stabilization going on in some of the markets in south america, a whole new conceptualization, i'm just back from a trip to africa and the middle east, things happening there, going on there that are just unbelievable. all positive, positive, positive. the problem we have got is that we are the rich family in the big house down at the end of the street everybody looks at and says what's going on in there. there's a lot of arguing going on in that house, a lot of stuff going on, so the thing we have lost i think perhaps compared to others is that we have been coasting. we have been coasting on the investments of the past. we have been coasting on the systems of the past. we were unbelievably competitive launching missions to the moon and doing the things that were going on in the 1960s and the moon shot mentality and projects and achievements and all kinds of things. we can do all of that. but what we haven't done, we haven't figured out yet how to

help every individual to be competitive. if you live in the united states today, and you have only a high school education or less, there are nearly 25% fewer jobs for you than existed just prior to the recession. if you live in the united states today and you are of european descent and are a woman and have only a high school education, your life span is going down. if you are in the bottom third of the american economy from an income perspective, 110 million people, something on that order in that bottom third, you have no positive indicators. life span is going down, educational attainment is going down, incomes are going down, family stability is going down. there are no positive indicators. if we don't fix that, i'm not talking about fixing it from a social engineering perspective. i'm talking about fixing it from a competitiveness perspective, there won't be any competitiveness enhancements in the united states. you can't have a third of your population that's non-competitive and hope that your country will be competitive

and that bottom third will at one point either destroy or kill everyone else. so it's something take needs to be fixed. it's not something that will lead to competitiveness. >> how do you do that and are you more hopeful as you describe a public-private partnership that at least we are coming out of some years of grid lock in washington, d.c. and theoretically shouldn't see it as intensely as it has been over the past few years? >> i think we are very optimistic at the council on competitiveness because of the people we have that are in our organization and our extended partners to really begin to tackle these very deep structural problems but also the opportunity. i think we have to always be looking at the opportunity before us and certainly now, when i look back at the beginning of the council and during my time, we have just seen a plethora of very new innovative public/private partnerships.

when you think of the energy and manufacturing sectors and what we are doing there, to bring together the power of universities and national labs with our large scale investments on the federal side, no country in the world is doing that on the scale we are. mehmood mentioned the potential with the next generation of electronics. i don't know if we will call it semi-tech 2.0 but this is an area where we really need to bring together everyone that has a role in this to ensure that we are developing and deploying the electronics and sensors that are going to drive all of this new change in industry. i think in terms of our engagement with policy makers, this council is very proud that we are nonpartisan. we have worked across administrations. we are one of the founders of the senate competitiveness caucus and we are prepared to be very aggressive to work across the aisle to really move forward in implementing the clarion call for competitiveness.

it will take everybody in this room and really, you know, the tremendous leadership we have in the council on competitiveness to do that. >> it sounds like the common theme is it all comes down to people, our people, training, education, preparing them for technology. as ceo of deere, what would be on your wish list as you try to hire the next generation of folks to work at john deere hopefully as long as you have, right? more than 40 years. >> when we look at it, our wish list, there's two sets of skill sets we are looking at. we are looking at the technical skill sets that we need to have. that gets to a lot of what michael was talking about in terms of developing those individuals, but then we are looking at the human skill set that we want, the ability for people to relate to other

people, to work because we are in a very global environment. we are looking for people that can be very inclusive, work across cultural lines. very effective in that environment. both of those are very challenging and there's what we would say right now, both areas we need to do a lot of work on. both in preparing people to work in this diverse environment as well as getting the right set of technical skill sets that we need to continue to move our company forward. >> if you, we are just about out of time but i wanted to hear from you on this as well. >> just quickly to build on that, we all have heard and talked about s.t.e.m. s.t.e.m. isn't just people with ph.d.s and degrees in engineering or medicine. it's about quantitative skills. if we are going to fill this gap we have to create a system where young people who may not have the opportunity or aspire to doing very advanced technical training can get those skills

through our educational system. there's a gap, a huge gap, yet we on the industry side have difficulty recruiting and filling jobs that require quantitative skills. >> can you leave us with a hopeful note? >> the hopeful note is that all of these things are solvable. they are all understandable and all doable. we deployed a math class last semester with 40,000 students in it from around the country and the world called college algebra. it's not about algebra. it's a fantastic class with intelligent tutors, personalized learning platforms, move at your own pace. if you stay with the class you will master college algebra. if you master college algebra, there is little else on a technical or quantitative side you can't comprehend and can't then actually master. so what we are doing is figuring out how to teach everyone how to move not some people forward, not just great athletes forward, but all athletes forward. >> i will take that class.

i just decided. >> i'm sorry we have gone over. i know deborah and the team here at the council, and sam, work their hardest. it sounds like there's a long to do list. thank you very much for our distinguished panel. thanks to all of you for being here. i know it will be a great day. thank you.

>> ladies and gentlemen, releasing key findings from the new u.s. council on competitiveness gallup report no recovery, please welcome the ceo of gallup, mr. jim clifton. >> well, deborah, congratulations and thank you for having gallup be a part of this important 30th anniversary

and congratulations on the great contribution that you have made not only to business and industry but also to our country. so we were asked to make a report. the mic works, doesn't it? to make a report to talk a little bit about productivity and more specifically about growth. and we are going to hand the report out in just a minute. i don't want to go through the report because you can read it yourself. as a matter of fact, we have a slide deck with one slide. i have never done a slide presentation before but i got one slide so i do refer to it as my deck. but i want to take a little bit of a different angle on it, kind of a leadership angle on what we have done. the guy that founded our company was a guy named dr. george gallup, who was an academic more than he was i'm going to say an entrepreneur.

he usually makes that list of 100 most influential, the real good list, not the "time" magazine list that has chefs but the one with washington and franklin and that kind of thing. but he had a thing where he loved democracy so much, he said if democracy is about the will of the people somebody should go find out what that will is. he would always report that to washington not unlike what deborah and the council and to make a clarion call because what he said was if you are wrong, this is what he worried about, if you're wrong about the will of the people, when you make policies and you lead and you're wrong about that premise, the more you lead the worse you make things. but what a wonderful mission. i was thinking about how that applied to right now and about growth. because let me just ask you, are we in a recovery? because it's a debate.

i don't think i should say this in front of this group but i didn't actually know what productivity was. i know what gdp is. i have some opinions about that some opinions about that. i know that 2.5% is a lot better than where we are now at 1.5 or 1.7. i know that we need to 2.5% to break even with the costs we have. when you're at 177, you're slowly going broke. i also looked into if you said what's the right amount of gdp to have, i don't think this board is a group like -- i don't know what the right number is. can you go up to 8? can you have 9%? what do we need to? the biggest moment in the history of human development over the last couple thousand years is between 1850 and 1950 in the united states of america. we kind of overwhelmed the world and now we're 25% of all the --

all the money. here's a good question. what was gdp during that time series? of you know what the answer is? 3 3/4. think how small those differences are. so 3 3/4, if you said how do we boom and dominate the world again economically, the answer is 3 much 75 over a type series of ten years or something like that. how do you go broke? you have a time series like we do now of 1.5 or 1.7. but you have to be somewhere above 2.50%. i didn't know that. but the next thing i learned was that gdp is not the best method. if you take a population of economists both right leaning, moderate, left leaning, whatever it is, they say the best measure is actually gdp per capita. i didn't know that. i started thinking maybe it would be gdp per worker would be good. you can't do that because you

have fewer people in the workforce and so if you get too many drop out, you have it inflate. you have to do gdp for the whole population because people at home, good for them, there's a lot of people that should be at home, but they use the economy, too. so do babies. so the best number you can use and so that's the number that gallup and the council and then my team of economists chose to -- chose to use. then we went back 50 years. and we determined that that was the single best metric to determine if we here in a recovery, but now remember if we're in a recovery, i looked the word up. i was on a flight back from frankfurt, deb borera, i was thinking about this. you know the way they bring you the newspapers, i had the "financial times," i had the "wall street journal" and the international "new york times." i found an article in every single paper on the front page

that referred to america's recovery. that seems like a very important article to me so i looked up recovery. it means that you've been sick and you're getting better. you're recovering. that's what it means. you wouldn't think i'd have to look that up but i did. but going back to dr. gallup's point, if we are in a recovery, that suggests totally different activities than if we are not in a recovery. if we're in a recovery it suggests everything's going well and you kind of get your hands off the wheel and tweak it a little bit and keep nudging in that right direction. if we're in decline, that means that you got to shake everything up. that means you need a turnaround. you need turnaround -- you see the difference? but it harkens back to you better get your premises right

because if we're wrong about that one, the more we lead, and the more we ruin the country. so here's my deck, my one slide deck, this is 50 years of gdp per capita in the united states. can you look at that and see a recovery? i wrote down three quotes. you can find them anywhere you want. this one is from the "wall street journal," the guy's name is eric. i won't say the rest of his name, but i read him before. here's what he said. "the u.s. economy appears to be growing at its fastest pace in two years." i don't know what he sees. but i guess you can say it.

i think you can go through like the radio salesman. you probably can find one little blip somewhere. maybe between one quarter and another, i don't know. here's one from i won't say his name but from raymond jones, the investment banking company in new york. "growth is a lot stronger than it looks." i don't know what that means. but where do you find growth that's stronger than it looks on there? this one is interesting. okay? this is my last one. have you ever heard of confirmation bias? a guy got a noble prize for this. but when you make a decision, you come to a conclusion, he figured out 30% is based on fact and 70% is based on emotion. he's actually a psychologist. a psychologist to get a nobel prize in economy, about six or seven years ago, but

confirmation bias is that you look for facts that confirm what you want to believe. but you wonder how often we get into that, whether it's -- mario, you and i were talking about most of the media tried to find facts, not picking on the media, all of us did it, i did it too, but why hillary can win, why brexit will never work, why the electorate in colombia will never vote for a farc treaty. nobody saw arab spring coming because we keep -- that 70% dominates all of our thinking and dominates our thinking. we're always in a fight with that 70%. this one is an important one. this one -- we're seeing definite evidence -- i don't know if my senior editor is here in the room but i don't think there is anything called definite evidence. you either have evidence or don't have evidence. but anyway, we are seeing definite evidence like convince me this time i really mean that

it's evidence. the economy is expanding more strongly. who do you think said that one. do you know? that's janet yellen. she's working on my 70%, too. we're not in a recovery. it helps me when i can reduce things to kind of their simplest form, but if we were a company and this was a shareholder's meeting, i would be reporting to you that our sales are $18 trillion, we have 100 million full-time employees, we have 50 million part-time employees and we have debt of $20 trillion going to $30 trillion and we have revenue that's increasing at a decreasing rate and our revenue is down to about 1.7 and

i can finish the line to where it's zero. do you want some of that stock? the next thing i'd tell you is that i got some good news for you. that is that food's cheaper than it's ever been before. so when i was a kid, it was almost twice as much. that's some good news. transportation and gas. but we have three expenses that are totally out of control -- $18 trillion in sales, $20 tarily union in in debt, but we've got three line items that are booming out of control. you know what they are? we need to know. education, we all know health care, we all know housing and i see in the clarion call there that i think we know those pretty well. remember, there are some real basics that you need to know as shareholders, too. one of them is with health care we spend twice what other

comparable countries spend on health care per person. we spend twice as much as england, canada, france, germany. two times as much. next thing you need to know is that they all live longer than we do. you don't like to hear that. that doesn't work well in the confirmation bias. that one doesn't fit neatly in there. the great american health care system. it makes you wonder a little bit. so canadians live three years longer than us, french live three years longer than us, we spend twice as much. it makes me wonder if the more they spend on us the faster they kill us. [ laughter ] did you read this? you can hardly believe it. you got to google it to believe it. i did but i was wondering how many people were killed in hospitals. i was thinking about soldiers. i know the admiral is here. i don't know, i think the single

digits or 0 more in the last ten years. you read the "new england journal of medicine," how many people were killed in hospitals last year? put a number in your mind. google it. their answer is 100,000. it's dangerous to be in baghdad, afghanistan. you want to go places where you're really in danger? go to a hospital. they maimed a million. just saying. johns hopkins put their numbers out and they said 250,000. out and they said 250,000. but you wonder when you have an expense item that's that out of control and has that little success, do you really need lead or do you need total disruption? another one that our analysts found was education. i don't need to go on and on about that, but you know it's booming. . it has also many other

implications to the amount of debt that boomers have. you know, boomers are going to be wonderful workers. they are really different. i saw a conversation on squawk box this morning and they were talking about our mill lennians different than any other generations. they all -- they said no, they're no different at all, they're just younger. they came it a conclusion. but that fits -- again, there's your confirmation bias, it fits the line they needed. i'm going to tell you and you tell me if this makes them different. one thing is they don't have babies. that seems to make them quite a bit different. you know, this is the first year where the white man is going to be smaller. they're causing the white man to be extinct. that seems like a real big one to me. they also have the lowest marriage rate since the history of our company. when i was a kid, the great american dream was owning a house. not so much with them. homeownership is the lowest it's ever been. we've just been wrong about that american dream. but it changes almost

everything. they don't buy diapers anymore, they all have pets so they buy expensive dog food. i'm not making a joke. if any of you have stock in pet food, it's going absolutely through the roof. the changes are extraordinary, but yet we're wrong about them. i even -- it kind of bothered me, i was watching squawk box i said, i thought this morning, i wonder if everybody goes away with that confirmation bias and they all go out and do their jobs wrong because they concluded the wrong things there. because they did. i looked up their ratings this morning. they have 100,000 people watching. i don't know if that's a big number or small number but i know it's about the same of a michigan home game, so a crowd about that big. bingo, i can tell that but they're very important people, that's the point. so i don't care if there's a million. so they all go out, they've got the wrong thing, they're going to -- but there's one real important thing in there that has to do with education. baby boomers are going to be very good workers.

here's one big difference between my generation antigen ration before. the generation before baby boomers produced millions of babies, the other thing is they started a whole bunch of new companies. the other thing millennials don't do besides not having babies is they don't start companies. and that needs to be fixed somehow. but education is probably not doing that because what we've done is when we ask them where they are right now, they're in a whole different state of mind than my group because, what? saddled with debt. the other thing is when you ask me about, do you think there will be money for your retirement, i say yeah. i say how about your kids? i think there will be some for my kids, how about your grand kids? i know there won't be. now those kids will become aware of that so if you take if you take education, if you take housing, if you take health care, it may not be as simple. it's more complicated in how they fit into the decisions we make, the clarion call we make because all of them seem to be tied somehow to growth.

i've been trying to stretch my thinking, deb borera, since we started this project because i keep getting surprised so much . but if you said what did you figure out and the report will be -- maybe it's coming out now. that's why i'm not doing the report. you can read yourself. i'm trying to make some reckless remarks here. so we know we need to more growth and i can say this to this group because my business is selling innovation but we say how do you fix our gdp and this problem? we know we need to get the pie growing. you know what our answer is? we've concluded the same thing, we did it with our own confirmation bias and we're wrong. we think it's just innovation. so we just keep building up

innovation, we spend hundreds of billions of dollars on innovation. read the "wall street journal" either yesterday or the day before and we have a record number of patents. i mean, since 2000, it's just boomed. i mean, innovation is, is, we're blowing it through the roof. so how are we doing with new companies? this is the lowest it's ever been. so we keep booming because somebody told us innovation creates companies. and we don't consider it. we don't consider the other side of it. maybe 2 it doesn't. of course it's a big part of it but i'll throw this out to you. what if innovation has no value whatsoever unless it's in the presence of a customer? we don't think of that. what about innovation has no value at all until it has a business model that works? it's the story that's kind of unbelievable but you all

know who vince serf is? what a great guy. he and bob kahn got the packets to fly through fiber optics and that became the internet. they were the wright brothers or something. he told me this story at dinner. it's got to be true because it's not complimentary to vin and he's one of the most important americans ever. he was doing his job. remember, had he already built that thing at darpa so we could send signal s around and a guy came over from the u.s. senate who loved technology and said to him "let me see that thing." he showed it to him and he went "that's the greatest thing i've ever seen in my entire life, can i go back to the senate and pass a bill and throw it out to commerce and see what they can do with it?" what a conversation. you know what wins said back to him? "fine with me, but i don't see what value it will have to business." that's a lot bigger conversation than "watson, come here, i need you." or whatever. but you know who the senator was?

huh? yeah, it was -- i'm the only guy in the world that tells a nice story about al gore, i think. but think if al gore hadn't come over. maybe he knew that that innovation had no value at all. what about another $100 billion for that dar pa piece. but until you have customers, boom, we got an explosion out of it. but maybe when we build institutions of innovations somebody better raise their hand and say it's not making the pie any bigger. it's not fixing that right there. what fixes it is when somebody actually starts a business. there's been about -- you read there's 26 million companies but only six million only four million of them have only 1.4 employees. there's only two million businesses, that's getting smaller. we keep working on innovation while the part that the fires it and creates customers and creates gdp per capita, that's getting smaller but we keep working on this because that fits our confirmation bias.

i think i'm going to end it with this point. but i think i can -- i think this make sense. here's where you have hope. if you're an engineer, you look for solutions where you find variation. so these terrible numbers aren't consistent across the country. so you have some states that are doing -- that are probably never turn themselves around. i don't know what you do with illinois. i don't know what you do with california. they're so underwater. but then have you other states that make a profit. you know florida's killing it. i was just out in wyoming. they're printing money out there. i don't know what's going on, but see the variation? i get a kick out of tennessee

because that's a good one for researchers. obviously, the same country. they got all the same laws, same state so you go the same governor. all the legislation and all that. but you got two cities in there with very different outcomes. one's memphis and one's nashville. memphis is really struggling. nashville's killing it. what it does is gives you hope. but leaders of these communicates, especially by cities, i think even more by states can change the outcome of america. i notice, deborah, that somebody turned our story into obama's failure. or something like that. if you look at that line, you know a conclusion you could have that's way outside of confirmation bias? you could ask yourself how much does the president really change the country. because obama's line is bad, so is bush's. you go clear back to where there was really a big lift, reagan had a big lift.

went down a little bit, get the recession and then clinton came back a little bit. i just throw this out to you. you know, when we say things aren't going well, we say, well, we need to a president. that one's no good. bush is no good. that were one didn't work. let's clear out and try this one. i'm just wondering, there might be more solutions from the leadership of america. maybe 10,000 of us. maybe 100,000 of us than there is with the president. but thank you, again, deborah for all that you do. congratulations on the 30 years and thank you very much. [ applause ] presenting his views on u.s. leadership in the global economy and the ways open trade and an improved tax policy will help keep the u.s. committeetive while creating opportunity at home and abroad, please welcome our morning keynote speaker, the chairman and ceo of fedex,

mr. fred smith. [ applause ] >> good morning, everyone. thank you for having me here today. that was an important presentation by jim clifton a minute ago with a lot of very sobering information. before i get started on my remarks, let me first congratulate president-elect trump and vice president-elect pence. i think the caliber of the cabinet nominees to date is quite reassuring given the many economic challenges that the united states faces today. our economy has been growing too slowly, as the presentation just before us certainly underscored. our national debt has increased from 63% to 105% of gdp just

since 2007. the u.s. now owes, again, as jim mentioned a moment ago, almost $20 trillion, and this is projected to grow. federal investment is at the lowest level since the late 1940s as a percentage of gdp. net business investment is subdued. infrastructure is deteriorating. protectionist tendencies are increasing here and abroad. and the election results certainly show that too many people feel they are being left behind. some blame these problems on trade, but the facts indicate otherwise. history shows clearly people have always wanted to travel in trade. today that desire is stronger than ever. with our constantly growing

digital economy, anyone with a mobile phone can reach new markets in nanoseconds, funneling tremendous digital connectivity into more buying power, more economic growth, and a higher standard of living. fedex is at the nexus of globally trade. we move 12 million shipments a day, serving 220 countries and territories. so we see the value of trade every day. in fact, although as jim said, we're not up to par with our friends in nashville, the largest clearance point of entry in the united states of america is the memphis airport where our fedex super hub is located. so we at fedex are passionate about supporting trade. we consider all fedex jobs to be trade jobs. we have over 450,000 team members around the world who help enable the supply chains of

companies from the united states to uganda, from singapore to south africa. we know trade means more markets and greater opportunities for u.s. companies, especially small and medium businesses which comprise about 97% of u.s. exports. based on what we've seen over the past 40 years at fedex and beyond that from 20th century history, we know several things to be true. centrally planned, government directed economies simply don't work. they can't sustain growth, they can't respond quickly to change in market conditions. they innovate more slowly and they don't attract much foreign investment. look what's happened in socialist venezuela. when the price of oil, venezuela's main export was at that all-time high, the government used its revenues to fund massive social programs

without investing to diversify its economy. when oil prices dropped, the country had to discontinue most of those social programs and could not even afford to import basics such as milk and eggs. grocery store shelves stood empty and citizens stand in lines to get basic food rations. protectionism doesn't work either. a november 25th "wall street journal" article examined the impact of brazil and argentina's protectionist policies based on high tariffs and promotion of domestic production over imports. such policies have, indeed, created factory jobs. but they've come at great cost to consumers who pay higher prices for goods and to taxpayers who foot the bill for the subsidies. the article notes taken together these measures essentially transfer wealth from society at large to a smaller group of workers.

a december 2nd article in the "new york times" did an excellent job describing global supply chains and u.s. manufacturing's dependence on imported content. the article discussed the reduced competitiveness u.s. manufacturing firms would experience if the prices of their inputs were to rise because of new tariffs. we have the best example of protectionism from our own history. the devastating smoot/hawley act of 1930 raised tariffs on more than 20,000 items. this contributed to a 66% decline in world trade from 1929 to 1934. this misguided act of congress ignited the great depression. in 1934 with the leadership of secretary of state kordell hull, good tennessean, franklin roosevelt overturned the

smoot/hawley act and established the trade policy the united states has pursued ever since, one of competitive, open markets. history has shown repeatedly that free market economies create human opportunity. the post-war general agreement on trade and tariffs or gatt, which sought to reduce trade tariffs and other trade barriers was a decisive factor in the post-war growth of the united states, which became the richest country in the world. u.s. trade policy was also a major factor in the recovery of japan, germany, and other devastated countries. now, trade certainly got its fair share of attention in the recent presidential campaign. but much of what was said was inaccurate and i'd like to set the record straight. first, trade is good for and absolutely essential to prosperity. -- to american prosperity.

trade is a two-way street in which both imports and exports are vital. keep in mind the u.s. exports goods and services. in 2015, the united states exported more than 750 billion in services. we also import products for other countries, import secure materials needed to create american products and imports give our families more choices and lower prices. from 1960 to 2015, trade rose as a percentage of u.s. economic activity according to the world bank, from 9% to 28%. even though we're the world's largest economy, 80% of the world's purchasing power and 95% of its consumers lie outside the united states. our farmers rely on foreign markets to remain financially strong. in fact, one-third of all

american farmland is planted for exports. american manufacturers depend on foreign markets with about 25% of all manufacturing jobs in this country being supported by exports. overall, trade supports over 40 million u.s. jobs or more than one in five in our nations. tens of thousands of those jobs are at fedex. trade-related jobs pay an average of about 18% more than nontrade-related jobs. in general, trade has added more than $13,000 a year in purchasing power for the average american household. the second fact about trade. market access and ecommerce are changing the nature of trade. thanks to the internet and global logistic services offered by fedex and others, e-commerce is booming.

worldwide retail ecommerce sales are approaching $2 trillion and are projected to exceed $4 trillion by 2020. while much of this is domestic trade, cross-border ecommerce will unlock even more growth potential for companies of all sizes, especially small and medium-sized companies. let me just give you one great example of this just up the road. fedex customer ora gene technologies in rockville, maryland. they develop rna, dna clones, antibodies and plasmas used for research. starting with eight employees in 1996, aura jean now employs 80 in the united states and approximately 500 worldwide. their network of international distributors reaches more than 35 countries. fact number three, the u.s. wins when we enter free trade

agreements. the u.s. has free trade agreements in place with only 20 of our trading partners. contrary to public perception, the united states enjoys a surplus with those trading partners in manufacturing and has global surpluses in services and agriculture. according to the department of commerce, our 20 free trade partners buy nearly half of all u.s. exports. on a per capita basis, these 20 countries buy 13 times as many goods and services as other countries. that's because free trade agreements remove barriers to our goods and services and make our exports more competitive. these free trade agreements are the solution to trade deficits, not the problem. american workers and businesses need agreements like the transpacific partnership. it's an important step toward achieving free trade agreements between the u.s. and 11 other

countries in the pacific realm. we're 100% behind tpp. this recently negotiated agreement will unlock more trade opportunities with these other fast growing tpp countries. tpp represents more than 480 million potential customers for u.s. businesses. the agreement would eliminate 18,000 tariffs on u.s.-made products, thus increasing global demand for american made goods. it will spur greater investment in the united states, which correlates directly to new jobs here. our strong recommendation to the incoming trump administration is not to abandon tpp but to improve it towards full free trade, which president-elect trump supports, with these countries. there was also a great deal of negative talk about nafta during the election campaign.

but in fact, nafta is the link pin of our comurnt economic competitiveness. here is what nafta does. it eases trade among 450 million people in the united states and our trading partners canada and mexico. nafta trade more than quadrupled in 20 years, which boosted the economies of all three mexico. nafta has made the united states the centerpiece of a huge north american production platform. nearly 14 million u.s. jobs depend on trade with canada and mexico. economist gary hoffbauer estimates it nafta makes the tunts about $127 billion richer every year. u.s. private sector jobs have increased by more than 29 myon, a 32% rise since nafta began. of course nafta was written in the 1990s and the nature of

trade has changed substantially, mostly due to the internet and the digital economy. modern trade agreements like tpp address 21st century trade issues such as e-commerce, cross board data flows, state-owned enterprises, small businesses and global supply chains. all these improvements, plus others, in areas of labor and environment are included in tpp. if president-elect trump wants to improve nafta, we recommend he start with these types of provisions, many of which have already been agreed to by mexico and canada as part of tpp. the new administration may also want to address the advantage that mexican exporters receive through the rebate of value-added taxes or vat on all their exports to the united states. we don't have similar rebates on corporate taxes paid on u.s.-made goods, and this puts

our exports at a serious disadvantage. while nafta could be updated and strengthened as noted, withdrawal is another matter entirely. there are myriad reasons why that would be catastrophic for the u.s. economy, but the main one is the nature of american supply chains. few people understand how nafta has woven the productivity capacity of north america into one integrated platform. the united states, canada, mexico makes many things together. 40% of the value of mexico's exports to the united states is u.s. content. the auto industry is a great example. it's been said that the average american car crosses the u.s./canadian border seven times during its production. a november 10th "wall street journal" article cited an example of which a seat had parts from four u.s. states and four mexican locations.

nafta makes the u.s. one of the most attractive manufacturing locations in the world because of value added productivity of both canada and mexico in one integrated north american supply chain. if we could complete free trade agreements with asia and europe, the u.s. could, in fact, become the undisputed champion in manufacturing once again. withdrawal from nafta would have massive repercussions. thousands of u.s. companies would have to ship their supply chains at great cost and disruption to their businesses. americans should understand that pulling out of nafta does not ensure that production in mexico would come back to the united states. in fact, it's possible that many u.s. manufacturers would either find suppliers in other countries or use mexican production to export to other markets because mexico has 40

plus free trade agreements, double our level. we've talked about tpp and nafta but we haven't mentioned the huge economy that's part of neither of those agreements, china. u.s./china relationship is most consequential relationship of the 21st century. it comprises the two largest economies in the world. two economies that are highly interdependent. we have numerous common interests and challenges and many of the toughest global issues cannot be solved without sino-u.s. cooperation. for years the bedrock of our relationship has been based on three principles. first, that china's rise is good for the united states. second, that both countries must work together where we have common objectives. third, we must manage our differences carefully so they don't spiral out of control. those three principles are still

valid and should continue to govern our relationship going forward. both sides, however, have to acknowledge that attitudes in the united states are changing towards globalization. international trade and china itself. let's look at these changing attitudes crystallizing in the minds of american business leaders, policymakers and the public who elect them. no one can reasonably deny that china's joining the w.t.o. has brought about the enormous benefits for china and overall the rest of the world. having china inside the global rules-based system will always be preferable to having them outside it. china's wto membership has brought great benefits and opportunities for consumers and companies around the world including fedex. it's also propelled dramatic change in china.

it was the right call then and it still is today. but it's important to note there are tradeoffs and many people here have been hurt by china's economic rise especially in the manufacturing sector. when we talk about the manufacturing issue, it's important to note that not all our problems can be blamed on china. much of the u.s. decline in u.s. manufacturing employment is due to automation and productivity improvements. even so, u.s. manufacturing output was more than $2 trillion in 2015. we make things today with fewer people and that will continue into the future. in addition, it's important to note our trade deficit with china is really a trade deficit with asia and the vast network of asian supply chains into china. even if we imposed massive tariffs on china, much of their production would simply shift to other asian marks such as

vietnam. tariffsen china will not bring back large numbers of low value added manufacturing jobs. training our workforce for the future and reforming our tax code will grow high-paying manufacturing jobs here in a truly open trade regime. protectionism will reduce them. but let me be clear. there are legitimate concerns about chinese mercantilist policies that promote domestic companies there and their industries while restricting foreign competition. the list of troubling chinese economic and trade policies includes the indigenous innovation initiative, support of national champions, massive investment in state-owned companies, intellectual property violations including cyber espionage and forced technology transfer. fedex has experienced protectionist policies in asia

firsthand. so i know of what i speak. both japan and then china tried to deny fedex our commercial rights. japan and china did this trying to protect potential domestic competitors. many other western companies have faced similar forms of protectionism. prime minister abe in japan and president she in china are well aware of their own economic challenges due to protectionism in their country. this is why prime minister abe has taken a strong stance in favor of tpp against significant domestic opposition in japan. in the same vein, press xi has strongly supported a more open and dynamic chinese economy with a more consumer driven gdp. unfortunately, progress to those in china has been slow as evidenced by recent increased support of debt for state-owned

enterprises. while its growth in the last 20 years has been remarkable, china is now approaching the outer limit of investment and export-led mercantilist growth. history shows that china will not be able to take the next more difficult step of transitioning to an innovative higher income country while still a state-run economy. china need only look at what's happened in japan. its mercantilist approach for so many years gradually slowed its economic growth almost to a halt. that's why japan now avidly embraces tpp. a sustainable culture of innovation does not grow through government fiat nor does it grow through state supported acquisition of foreign technologies, brands and businesses while keeping one's own economy closed. instead, china needs to pull back from state ownership, reduce regulations, and move

towards becoming a true free market system. here are three recommendations regarding china for the incoming trump administration. one, make the u.s./china relationship a top priority to avoid a downward spiral in economic and commercial relations that would harm millions of people this is critical. the peterson institute has modeled the impact on the u.s. economy from a full-blown trade war with china and mexico. the results are not pretty. it would throw the u.s. into a recession and cost us close to 5 million jobs. the president of both countries must commit to maintaining the relationship as we work through our differences. second, we need to focus on increasing u.s. exports to china than restricting chinese imports. we need to more trade, not less. this requires the trump administration to address both chinese and u.s. policies that

inhibit u.s. exports. of course, we must be prepared to address situations where china or other countries export to the u.s. in violation of trade rules. the trump administration has an extensive array of tools to apply in those situations. equally important, the u.s. should not ignore the services sector. export services, jobs pay wages that average 20% higher than the united states average. the u.s. enjoys a huge comparative advantage with the services trade surplus of over $250 billion. private services account for about 68% of our gdp but only about 50% in china since so many important service sectors are closed. opening these service markets will help china achieve its own economic objective of moving from an export-based economy to

a more consumption based gdp. the bilateral investment treaty that the u.s. is negotiating with china could give the trump administration its first opportunity to get a better bilateral agreement and help china achieve its internal market reform goals. and third, we need to enforce our trade agreements and address policies that penalize the u.s. economy and our workers. but of course, we must always act consistently within u.s. law and wto rules, after all, as the u.s. has been the primarily architect of a rules-based system since franklin roosevelt's administration. it's important to recognize blanket tariffs imposed across the board are not the right response. such tariffs will erode support for the global rules-based system and undoubtedly unleash a wave of protectionist retaliation around the world. china should understand that

under a trump administration, there will be stronger and more rapid consequences for closed door commercial practices. how china reacts will be critically important. all the while, we support president xi's stated commitment to a more open chinese economy. to these ends, we hope the trump administration will take another look at tpp and realize not only its benefits to the united states but also the consequences if an improved rergs is not approved. tpp is the bulwark against current chinese practices and china is aggressively moving forward with its own trade agreement in the region. the rcep regional comprehensive economic partnership. many tpp countries have said that without tpp, they'll have no choice but to move closer to rcep. we urge the trump administration to put his stamp on a revised

tpp by addressing any concerns it sees and making any additional improvements to promote trade rather than restrict it. we also hope that other existing trade negotiations can be picked up and strengthened under the trump administration. the two most important of these are the trade in services agreement or tsa and the translack trade and investment partnership or ttip with the eu. trade facilitation should be another priority. we've been promoting this for years. the wto trade facilitation agreement has now been ratified by 102 countries and needs only eight more to come into effect, and this reduce customs and administrative costs by up to 14% which is significantly more than the average global tariff. and finally, i would note that the trade promotion authority or tpa that congress recently passed has a detailed list of

all the areas where the u.s. has a comparative trade advantage. we need to lean into those opportunities rather than to walk away from them. finally, it's important to recognize that u.s. success in the world economy depends on three other changes. first, we very simply got to overhaul our corporate tax code. our 35% corporate tax rate is one of the highest in the world and is inconsistently applied across industries. in addition, the united states and chile are the only two, the only two major economies with a worldwide tax system. this means we tax earnings of u.s. companies anywhere in the world making our goods more expensive overseas and our companies less competitive. we need to a territorial system like every other advanced economy. this combined with a lower corporate rate will resolve many of the disadvantages i've talked

about today and that were so central to the recent presidential election. a lower corporate tax rate in a territorial system will equal more investment and higher investment means more better paying u.s. jobs for american workers. second, we must train our workers for the innovative jobs of tomorrow. a mckenzie study noted in a few years, employers worldwide could face a shortage of 85 million high and medium skilled workers. so we should strengthen our trade adjustment and assisted programs to provide for retraining of workers impacted by global trade and automation. a large number of those jobs will stay in the united states if we adopt the policies i've mentioned today. and third, we must modernize our infrastructure. unless we make major improvement to our roads, ports, airports and other facilities, we'll lack

the capacity to handle a growing economy and the global supply chains that support it. our federal and state governments must urgently work towards modernizing our infrastructure for maximum competitiveness. trade has made america great. and expanding trade has been a bipartisan pursuit for over 80 years. the failure to continue to do so would be a severe mistake with enormous consequences for america and for the world. thank you. [ applause ] >> ladies and gentlemen, please join us in the foyer for coffee and refreshments. programming will resume promptly at 10:20 a.m. >> while congress is on break this week, we're taking the

opportunity to show you "american history tv" programs normally seen only on weekends. we continue tonight with a look at what happened after the end of world war ii. starting at 8:00 eastern with the fate of nazi and japanese war criminals after the war. that's followed by how the war changed the u.s. and the rest of the world. "american history tv" primetime all this week at 8:00 p.m. eastern. sunday in depth will feature a live discussion on the presidency of barack obama obama. we're taking your phone calls, tweets, e-mails and facebook questions. our panel includes white house correspondent for radio networks and author of the presidency in black and white, up close view of three presidents and race in america. princeton university professor eddie glout, author of "democracy in black." and pulitzer price winning journalist and associate editor

of the washington post, author of bam obama, the story. watch in-depth live from noon to 3:00 p.m. eastern on sunday on book tv on c-span two. ♪ >> the presidential inauguration of donald trump is friday, january 20th. c-span will have live coverage of all the day's events and ceremonies. watch live on c-span and c-span.org and listen live on the free c-span radio app. >> the u.s. council on competitiveness continues its look at new innovations in the economy and workforce. this portion includes a series of panel discussions on such issues as artificial

intelligence, partnerships among universities and technology companies, and encouraging future innovations. this is just under an hour and a half. >> ladies and gentlemen, please welcome back to the stage council president and ceo, the honorable deborah wins-smith. joining her to help set the agenda for future insights will be the former chairman and ceo of intel corporation, dr. craig barrett. president emeritus of georgia tech and secretary emeritus of the smithsonian institution, the noornable wayne clough and drkter of the lawrence livermore national laboratory, dr. william goldstein. >> thank you. i hope you all liked our quick panoply of the last year of the council. we couldn't highlight everything but it gives you a snapshot of

what we've been doing for the country. we have a wonderful guest who's arrived today and is he going to make a fewra. it's senator jerry moran, republican senator from kansas who is the co-chair with senator chris kunz from delaware on the democratic side of the bipartisan senate competitiveness caucus. senator moran. >> thank you. >> thank you very much. i just came from a squawkbox" interview in which i decided i must not be saying the right things about competitiveness because a minute and a half into my interview, breaking news. there's a new ceo at coca-cola and so i listened to the news and think surely they're bringing me back. so having failed to have my full time in front of the squawkbox audience i decided to come visit you this morning and tell you something that i would have said had i had more air time this morning. senator kunz and i are honored

to serve in a capacity in trying to bring congress and our staffs together for the purpose of promoting an agenda that is about competitiveness. as i was explaining this morning in that interview in my view, competitiveness is really a nice word for jobs, for better jobs, for higher paying jobs, for job stability and an opportunity to find the positions that create the chance that more americans can achieve the american dream. and so while competitiveness may sound like something technical or policy oriented, it's really something very basic to our country and its economy. let's make the opportunity for every american real and let them have the chance to pursue it. so thank you for your efforts. we will continue to try to find ways to work together. i am hopeful, i look the an elections as similar to new year's day in which we create our resolutions and it's a sense of opportunity and hope that good things can happen in the

future and senator kunz and i are committed to making certain that our colleagues whether they're republican or democrat find that sweet spot in an agenda that increases the chances that the united states of america and its economy remain competitive in a global economy and that certainly means things that are front and center for the congress and the administration in the future. the tax code, repatriation, the regulatory environment, trade, access to world markets, technology advancements, education and training, a workforce that is highly motivated and innovative, and those things matter greatly as we try to make certain that good things happen in america today and in the future. one of my agendas since i came 0 congress mostly related to work of the kaufman foundation in kansas city, the kaufman foundation on entrepreneurship is how do we restart the opportunities for someone who has an idea developed in their backyard or garage or barn that they can take it to market and we become the country again of startup businesses that our

country historically has been. my pleasure to be with you today and thank you for your efforts to make certain that congress has an agenda that will achieve the things that are important for our country. again, thank you for the efforts and we look forward to working with you in 2017. deborah, thank you. >> thank you so much, senator. thank you. [ applause ] >> well, i think many of you know that innovation and technological leadership and the nation's position in research and development has really been in the dna in the council on competitiveness since our inception 30 years ago. we did some of the first critical technology lists, we had a great report that our first distinguished fellow eric block who just sadly passed away did on reinventing r & d and the list continues. and i wanted to start this conversation out with three tremendous leaders at the forefront of technology throughout their careers about what really was the genesis for

some of the work that you all did with the council and i might start with you, wayne, because as our vice chair for industry and even before, when you were president of georgia tech, you were really doing some very innovative things on the regional front and then ended up you know, leading one of our major projects on regional innovation clusters. tell us a little bit about that story and the impact of it for the country. >> again, congratulations on the 30th. i think when i was president of georgia tech, i knew i had a lot of things to do, but one of the things i felt that was lacking was a connection between what we were doing in a context, a national context and so i talked to some people who i felt were friends and mentors, chuck vest and eric block. they all said the council on competitiveness was the place where things really happen and where you brought together industry, government, labor and prust industry to do things together. and so i had to explore that

myself. and it was a real positive experience for me. and so a lot of time invested into the council and every bit of that came back to me more than i invested in it. and then had the wonderful opportunity to work with deborah and to be vice chair of the council, dwayne ackerman at that time was the chair. but it's been a continuum of these great leader who's continue to add to our national fabric on competitiveness. we, you know, i had the great honor to co-chair the national innovation initiative in the early towels with sam. but i think people forget about what led up to that and the lead up to that i think was a very important part of the work of the council. michael porter who we saw last night on the video worked on the cluster study and we did a cluster study in atlanta and mike kessler is here with the georgia research alliance. it was a seminal study. it helped atlanta for the first time understand its economy and

how to redirect it so you would get the desired result and so the council has been important to me personally. it's been important to my institution which is obviously actively involved in these issues and also very important to and to all of georgia and that region about, you know, making it successful and anticipating what's coming down the road. >> and i think in that study also you really presaged a lot of the current leadership that atlanta has across bio neck and health and nano and so many others. did you think at the time if we had a vision into the future that your city was going to be the dynamic global city it is today in these critical sectors of the economy that were just beginning then? >> not really. i don't think anybody can anticipate these changes, but atlanta had the good fortunate to have good political

leadership as well and good civic leadership. i think, you know, we describe those, the council works on national policy and national policy is the framework that allows you to succeed and that's where the federal government's role is, but innovation is local. innovation is regional. we were very fortunate at the time to be building something called technology square which we thought would be a great way to get corporations and government and industry working closely with the institution and with the city and with the help of a lot of people it worked. my successor, bud peterson has done a terrific job with that. today that area is full of start up companies and major companies with research components relocating their healthcare, retail, it doesn't matter, logistics, they are all there and it really has been the core of the development of atlanta and the technology, innovation sector as it's called. so the council was -- you were there many times and, you know,

i think this idea that everyone could work together was just not really understood until the council got involved. >> and of course we were so fortunate to have great leadership with duane ackerman as the chairman of the council when he was the chairman and ceo of bell south who was your partner in all of that. craig, of course, you've been in technology through your whole life, having come out of stanford and then going on to lead one of our greatest high tech companies in the world, intel, but you've also been passionate about the investments in basic research and people and stem and everything. we were so honored when you and bill brody when he was at johns hopkins took on the leadership to really move our national agenda on innovation forward. just share with us a little bit about the history and why do you think back in 2004 or 2006 we had a moment where we could really jump start and lead to the american competes legislation on innovation capacity. >> i think two things came

together in that time frame, deborah -- and, again, congratulations on 30 years. i mean, the beauty of the council is it's a continuing entity. a lot of these programs and national reports like rising above the gathering storm we talk about, they appear but then there's not a whole lot of follow-up. the council gives follow-up. innovation in my mind has always been driven by a couple of key things and some of them are in your report card, but, i mean, it's really driving basic l & d budget, the federal r & d budget, you know, just i will paraphrase kind of my assessment of where we are on each of these as we go along but federal r & d

budget we've been trying to double that forever and it doesn't score very highly on your report card. put that in perspective the company i used to work for, intel, has a way bigger r & d budget than the national science foundation and probably the department of energy combined, one company. so it's critically important. we've been pushing that. the other one is education and you've heard people talk earlier today, michael crow very eloquently about education. i have a very simple model there which is the earning power per capita gdp in the u.s. is going to depend on the average level of education of the workforce. the results of our k-12 education came out this week, we're mediocre to bad in all three categories and even though we have the best research universities in the world, the fraction of our folks with postgraduate or post secondary schooling we are now something like 15th in the world, we used

to be number one. and then the government environment set up to promote innovation. you heard today talking about tax rates and things. sometimes i think it's important to look at the big picture on all of these which is what we try to do on the council and that is, you know, don't get excited about little line items where you have success, but if you're failing at the overall mission you have to admit that you're failing and maybe we will get a corporate tax simplification and incentive to do things in the united states under this administration. we've had disincentives. i will give you a simple example of a disincentive. intel builds these massive manufacturing plants to make silicon chips and that present value of one of those plants in the united states or in a low tax environment is well in excess of a billion. it doesn't have anything to do

with labor rates, it has everything to do with the u.s. tax code. it's difficult to explain to your shareholders you will take a billion dollars away from them just to put the plant in the united states. we haven't succeeded in that area at all. so i look at those three categories, you know, education we are not succeeding, folks, building a federal r & d we are not succeeding and the current incentive structure to do things in the united states we are not succeeding. it's a good message to give the next president. >> i want to come back a little bit in a minute and talk about the infrastructure and advanced manufacturing, but, you know, on the education front in your post ceo life at intel you've done some amazing things in doing some innovative pilots around the education and the state of arizona. do you think that, you know, some of these new ideas and opportunities that you're incubating can scale up or do we

really need to be thinking more at the local state level to get a handle on some of these education challenges? >> well, i mean, you look at this whole issue of raising standards in common core when the backlash of the federal government associated with that, education has to go on at the local level, has to be driven at the local level, but there's key aspects of that. take washington, d.c., good example, in the middle of it, it's historically had the worst k-12 education system in the united states, maybe in the world. it is now the fastest improving educational system in the united states and the reason is half of the kids are now in alternative education, charter schools, and out of public schools and the charter schools have been competitive, they're innovative, they have raised the level of the public schools up. without that competition d.c. would still be zero in education. i'm a great fan of competition wherever you might be.

it makes the whole system better. we've had some great results with our charter schools and they're absolutely scaleable as long as the local state government invites this alternative competition in and supports it. there are still eight or nine states in the u.s. that don't even allow charter schools. >> we're seeing arizona is an innovative state on many fronts in terms of innovation. >> arizona early adopter of competition of the public school system. roughly, i don't know, 16%, 18% of kids in arizona are now out of standard public schools and in public charter schools. and the public charter schools are kind of like the top 20 schools in the state. competition works in that space. the entrenched bureaucracy doesn't like that concept but it works. >> so, bill, you are a physicist so i knew if we were having a

glass of wine i wouldn't understand three-fourths of what's going on in your mind but i do know you are leading one of our great national laboratories in an unrivaled system of labs in the department of energy but also other federal agencies. innovation and rapid technology development to solve national missions is at the heart of what you're doing but you're also leading the forefront in advanced computation and super commuting. how do you see in your role as lab director the value of your participation with all of us on the council and what are some of your thoughts on the thoughts you want to share as the critical component of the national labs in america's innovation ecosystem. >> thank you, debra. first thing i'll share is that you're doing better than me understanding what's going on in my mind.

[ laughter ] also, you know, just note that looking at the distinguished members of the panel i see i'm the only one without a former or an emeritus associated with their name, so i may have a more historical perspective on this than others, but i would like to add my congratulations on 30 years of exceptional service to the nation of the council on competitiveness. i think from the point of view of the national laboratories it's notable that the council is the only forum that i'm aware of that brings together the system of national labs with industry, with labor and academia. the only organization, period. i can't think of another place where that happens. and in doing so the council has

bent to common cause the system of innovation in this country from knowledge creation to application to scale up to commercialization. again, a remarkable accomplishment. in fact, in some sense the council is the bipartisan policy equivalent of silicon valley in that sense, if you will. national labs, i think, are a critical ingredient for this, in fact, earlier the -- there was talk about capitalizing on the nation's competitive advantages and i think that the system of national labs that exists in this country is without question one of the competitive advantages that exists here and that can be brought to bear. in fact, we find increasingly other nations looking to the national lab system here in the u.s. as an exemplar and looking for ways to reproduce it. i've seen that personally in

places ranging from brazil where there's an initiative under the council that we've been participating in and also including china which came very explicitly at the u.s. on how to develop the national lab system that they see is so successful here. so the mission of the national laboratories and not to mention the 25,000 scientists and engineers is to perform long-term research and development in the national interest, driven by applications, though, in energy and national security and environmental stewardship. it complements and is fed by academia's more curiosity driven approach and can help to bridge a potential -- in fact, often realized gap between basic

research and commercializable innovation. as you, i think, have noted, the national labs being government-owned contractor-operated entities also bring the public sector explicitly into the mix, and open the door to i think a much richer set of public/private partnerships than are possible otherwise. the capabilities that are offered by the laboratories are publicly financed, publicly funded to serve enduring national science and technology needs. so, for example, my laboratory, lawrence livermore, has as its primary mission to provide the technical basis for ensuring that the nation's nuclear stockpile remains safe, secure and reliable in the absence of nuclear testing, however, the facilities not to mention the know-how that's required to do

that, which includes the most powerful lasers in the world, as you noted, deborah, the most powerful computers in the world are available for a range of national leads and national missions and explicitly among them is the mission of transitioning technology and know-how from the national laboratories to the private sector in the service of actually enhancing national well being and increasing national competitiveness. this role, by the way, is explicitly recognized by the department of energy, it's one of the missions of the department. and i'd say that the council has had remarkable success over the years in leveraging the opportunities represented by its recruitment of the national labs into its circle. examples include the initiative

on high performance computing which was so successful and here an example by the way of where i think the council and the laboratories played an important role on moving things forward for the nation but also what that initiative did for the laboratories themselves and for us, and more recently in the area of advanced manufacturing where a very productive explicit partnership has been formed between the council of the department of energy and the national laboratories to make available the most advanced new developments in advanced manufacturing and 3-d manufacturing in particular, to the private sector and in particular to the entrepreneurial sector. so i think those are some examples and in general how the laboratories have enhanced, i believe, and played a role and will continue to do so in the

future. >> thank you. and i would just add that, you know, one of the things i'm committed going forward in the council is to really deepen the relationship between our labs, our companies and our universities and i know there's some congressional barriers to some of those things, how money is appropriated and things. so that's something we want to work on, but you've brought up manufacturing and of course at georgia tech and under your leadership, you were one of the early universities really having major infrastructure and research on manufacturing and nano technology and the frontiers. craig, i mean, intel has been the innovator in the electronics manufacturing and continues to do so. so let's talk a little bit, you know, from your perspective about the future of that because just looking at our time i want to talk a little bit about that advanced manufacturing enterprise and what it means for our competitiveness, given the automation and all the transformation under way, and then have you all be thinking

about what we should be doing for the future, the next 30 years. so, craig, you know, you talked about the cost and the scale and scope of the infrastructure that intel has in, you know, each generation of fab. there is a concern right now that perhaps we don't have enough of the next generation in america. so tell us a little bit about, you know, how critical this manufacturing technology enterprise is to the nation's competitiveness. >> well, it's critical. i mean, ultimately i think if the u.s. wants to have a healthy economy and growing economy and growing jobs you need manufacturing here in the u.s. i mean, the facebooks and the googles are great, but you don't employ that many people in those companies and you don't -- google is making a few things,

but the companies are actually manufacturing and making things and creating jobs are critical. so i think the whole concept of advanced manufacturing -- but i do want to kind of turn the tables on you a little bit. i'd much rather see our national labs spend their moneys on what i believe is the national labs' mandate, which is big science. there's no place other than the livermores and the berkleys and the argonnes that can afford these huge photon light sources and these things and that's a national resource that everybody can come and use and quite frankly i'd like to see it grow dramatically. today if you want to -- i happen to be on the berkley advisory board -- if you want to upgrade their photon light source, which is critical for pharmaceutical development, chemical reactions, all sorts of things, it's a

ten-year plus process to say i want to do this, i want to get the approval of the doe, i want to get my $800 million, $100 million a year to do this. hell, you know, i come from a background where i want to build a $5 billion manufacturing plant it's from greenfield to output in two years and i can't stand to see a $500 million project span ten years. it's not competitive. it's not the lab's fault, this he got hamstrung by the bureaucracy that exists here in washington, d.c. i'd love to see the labs grow. i'd love to see them grow in what i think is their great capability, which is big science, big computing, big science, stuff that georgia tech can't afford, stanford can't afford because you just can't

put those facilities in individual universities. and these guys are a national resource from that standpoint. >> i think you just gave us a great topic for a senate competitiveness caucus session next year to look at that challenge of how to reduce the time to get these large scale big facilities going and implemented in the country. wayne -- >> well, i think one of the examples -- >> you guys just jump in. >> -- as it relates to bill's work and others in this room was a high performance computing initiative that was done in conjunction with the doe and the council, it was a hugely successful endeavor, it created an infrastructure which, in fact, universities can use relatively easily and access the tremendous capability. they really can't afford to operate, they can't afford the cooling systems and all the things that are necessary. it came back to me when i was at the smithsonian. the smithsonian has 500 ph.d. scientists. people forget about that. greg knows because he's active

at the smithsonian. they do a lot of work in genomics. i used to give my friends at the nih a hard time. you've got easy work here, you only worry about one genome. the smithsonian is worried about 2 million genomes, all the other creatures on the earth. we signed an mou with oak ridge and the smithsonian has direct to the computing capability and the talent to help the smithsonian get into and use the facilities it needs to do this. and you think, well, that's pure science. it's not. 70% of the diseases are coming from nature. zika and all of these diseases. so understanding the genomes of all these other species is critical to the health of these human species. it was an example where i think it was very insightful for the council and d.e.o. and the national labs to set up a system that works. i do think there is a

xoentent in all of this and that is come back to the local idea. i grew up in a little town called douglas, georgia, in the very southern part of the state of georgia. they fortunately have a very public school system because they're committed to it. they win science competitions in the state of georgia. and i go back and speak to the students and we try to get as many as we can to come to georgia tech, but there's a gap. there's a gap between all the things that we can do here as these big organizations, and i think universities have lapsed their responsibility to reach out to help youngsters in these small communities get the education that they need. but the great opportunity with the digital capability and the maker systems and digital printing, for all this to happen, back there in those schools. i think that's something -- we're missing a link there, exciting part to reach a part of the population we're not reaching. >> bill, you want to -- >> so maybe i'll disappoint you, but you're not going to get an argument from me, anything that

you gentlemen have brought up. one of the issues that stands in the way of a better utilizing laboratories and making them more of an engine for innovation and for growth frankly is thehas to do with the regulatory environment that we all live in but that the laboratories as an element of the federal system has to deal with. and i would be interested in the possibility of that kind of a dialogue going on. i did want to just pick up on when something you talked about this idea of reaching out more and bringing in schools and education. because i think education was a major theme early this morning. it was one that really struck a chord. it's something i think actually the laboratories could do more of, play more of a role in with the council, with the other components of the council.

we started over the last two years hosting, under a presidential initiative, my brothers keepers events at the laboratory, where the first year we brought in 70 middle school students and i think over 150 middle school students just last year from the surrounding school districts from san joaquin valley reaching all the way to oakland and san francisco. and watching these students, many of whom -- well, almost all of whom had never experience the kind of on big science that we could show them. watching them react to that and i have to say the inspiration that just spending a single day at the laboratory watching that sort of thing and becoming aware of it gave me tremendous feeling of hope and the idea that many of these junior high school students who maybe never would

have thought of becoming quantitatively adept and going into s.t.e.m. fields, just doing that could have a tremendous impact. think about how much more we could do, how much more of anim pact by coordinating amongst the parts of the council is and i think it would work tremendous things for the laboratories and the missions here. >> debra, from a retiree who you know, raises cattle and bison in montana to come to the stage and talk about innovation is kind of interesting, but i would really like you guys to take one thing to heart, and that was michael crowe said this morning, you have to bring everyone in the system along. until the average education system in the u.s. is world class, you've got a hell of a job in front of you.

and we dance around that, you know, pisa results showing mediocre results are in the headline for one day and disappear. nobody picks that up. nobody takes responsibility for it, but it is the achilles heel of this country. we're not going to increase the number of workers with post secondary schooling until we fix the primary and secondary school system of the u.s., k-12. that's physically broken today on average. they're bright examples but it's broken. until you get that one fixed, the job of the council is going to be increasingly difficult. >> thank you, craig. you know, our last few minutes here and of course, we heard this morning from jim clifton at gallup, the drag on productivity from our education system apart from the social issues and economic issues, that is clearly

one where we need a whole new type of innovation and really also i think new relationships between industry, academia, and also labor, very importantly, but a few other issues. john young last night in our video, i had the wonderful honor and pleasure to go out and interview him in august out in silicon valley. one of the things he said, we were sort of laughing. but i said, you know, we created the council on competitiveness. we thought it was just going to be around for a couple years, you know, and now it's 30 years and it's obviously sustainable, and contributing and what's going to be the next 30 years? is it this nexus of innovation, sustainability beyond moore's law? you're moving into 4d printing, genomics, there are lots of things we can do but at the end of the day you three leaders who contributed so much, craig, you've talked about the criticality of our k through 12 education. wayne, and then i want to ask bill and we'll wrap this up.

now remember, you're king for a day here, so you can -- posit into the future. >> i found the discussion about the gdp to be fascinating. it's also in line with an argument, a recent book that argues that the age of innovation was really and i think it was basically the same period that was talked about this morning from 1850 to 1950 in the u.s. over the last 70 years or so, the u.s. gdp is basically, productivity growth has basically been stagnant and that's really because the kinds of revolutionary changes like electrification, the automobile, things that have incredible impact on people's lives. despite the digitize asian revolution, what is going to have the impact. we talked about 3-d printing

beyond moore's law, all of the innovations clearly important to have an impact, what is the next electrification, global electrification. solving world hunger, moving off the earth, colonizing the moon. using the informatics and large scale computing to preserve the biodiversity that we're losing every day. i think these are the kinds of big ideas, really big problems that we should be thinking of over the next 30 years. this is a real futures looking agenda. it seems to me that it's important what the council does in looking at what's evolving today. it would be interesting to take

a 30-year view of what the really huge impactful things could be, doubling the life expectancy of everybody on earth. >> thank you, bill. wayne? >> i think a big challenge certainly for higher education in this discussion is access, and we all appreciate those of us of the white haired set here. when we went to school, tuition was very low. i could go to georgia tech to get my education and be a co-op student and pay my way through school. that's not true anymore. there is this great fear of leaving people behind. georgia tech will get good students because so many are applying but those cadre of students in another corps fundamentally just as good as the students up here but can't financially afford their education today. that accentuates, exacerbates the problem of people getting left behind and frustrated in our society. i teach part time again. i'm stunned by how bright the

students are, how excited they are. they want to be motivated. they want us to provide them with the kind of education that gets them excited. in the technological fields it's the help i think these students broaden their view. i love the concept bill gates has thrown at big history. i love history and i think as you get into history you learn an awful lot about becoming something bigger than yourself and i think that really helps. new approaches to education, georgia tech, to its credit, started the first degree program, masters in computer engineering on line. the whole degree program. not a course, but a whole degree program and it's enormously successful. 4,000 or 5,000 students are taking this course. half the cost of what they would have to pay if they came to georgia tech. i think we really have to look at these models and find the best practices and make sure we

marry them in a way that inspires and reaches way down to the second graders and third graders so they get inspired and want to learn. it's there. but we really have mismatched ourselves in terms of being able to do that. >> well i want to thank you all for coming, and helping us celebrate our 30th anniversary, but very importantly, sharing your story and these three gentlemen have had and bill continues in his current leadership role to have tremendous impact on our country and i'll just close by saying that in the beginning of the council, there used to be a saying that what's good for america is good for all americans, and i think going forward we need to reverse this and really think of what's good for all americans is good for america. and so with that, i want to thank you all for being with us. >> thank you. [ applause ] >> ladies and gentlemen please welcome the assistant secretary for energy efficiency and renewal energy, dr. david friedman.

[ applause ] >> hi, everybody. well thank you very much for that introduction, and first off, thank you very much to the council on competitiveness, and especially to deborah wentz smith in particular. under your leadership, the council has been an incredible collaborator, including through our american energy and manufacturing competitiveness partnership. the regional dialogues that we held across the country were truly a really rich way to directly engage with stakeholders. including, i think, many of the folks here in this room. this was a great way to talk about how we can tackle our challenges and unlock our country's leadership in innovation, science, and technology, because that is

exactly what it takes to ensure competitiveness. leadership in science and technology, leadership in innovation, especially when it comes to manufacturing. now nations around the world have their own ways of working towards competitiveness in manufacturing. of course, given the great nation that we are, we have our own way, which includes using public/private partnerships to drive innovation and expand manufacturing and jobs right here at home. so on behalf of the department of energy, i'm really excited that i have the opportunity today to announce the selection

of the lead for our latest manufacturing institute. in fact, the tenth institute in the manufacturing usa initiative, but i'm not going to tell you quite yet. i'm going to leave you in suspense for just a little while longer, because i want to talk to you about the natural outcome of innovation. and that, that's revolution. innovation is at the heart of everything we do in my office at d.o.e. in fact, when it comes to making america more competitive with nations like china, germany and japan on clean energy, we at the office of energy efficiencies and renewable energy, we are the solutions people. our mission is as simple as it is ambitious, to create and sustain american leadership in the transition to a global clean energy economy. and really, this is a transition that's already under way as we save money and create jobs while changing how we generate and use energy across the country. i mean, just think technologies like solar and wind power, l.e.d.s and electric vehicles are rapidly spreading across the

country as costs drop by 40% to 90% thanks to innovation. and around the world, global investments in world, global investments in clean energy have quadrupled between 2005 and 2015, and i would argue that within the next decade, those investments are going to reach the trillions when it comes to the opportunity before us. so to paraphrase the beatles, you say you want a revolution? well you know, we are changing the world. it's incredible the pace of change. but as these technologies continue to be deployed, we face a fundamental question -- who's going to make them? if you look around the country, we have two options.

we can cede the mantle of manufacturing and innovation leadership to germany, japan, china and others around the world, or we can step up and lead. now, i guess looking around the room you all probably have the exact same answer that president obama has had. step up and lead. and that's exactly what he's done. i think that choice is pretty clear. after all, manufacturing, it plays such a critical role when you look across our economy. you all know this sector supports over 12 million u.s. jobs across the country and contributes to more than $2 trillion when it comes to our gdp. these are well paying jobs with an average manufacturing worker earning over $80,000 a year, and these jobs, they're creating incredible domino effects. the economic policy institute found that for every single person directly employed in manufacturing, another 1.5 jobs is created elsewhere across our economy. that's exactly why we've been

working hard for these many, many years to create a lot more of them, because, as i've gone around the country and talked to leader after leader in industry and government and around communities, i've seen a growing awareness that if we're going to play to win on the global stage, many, many more clean energy technologies need to be made in the usa. and the entire manufacturing process needs to be here. whether it's clean energy or not, all of our manufacturing facilities need to get a lot more efficient so they can become a lot more competitive. now other countries are also making significant investments in the world of clean energy manufacturing innovation. germany, japan, singapore, the uk, these are just a few examples of the folks who are working hard to challenge us and to challenge our leadership

every single day. we need to do the same. in fact, we need to do more and we need to do it better, and that's why president obama launched the manufacturing usa initiative. this effort, it's been a great partnership. it's brought together industry, academia, other federal agencies including commerce and defense in order to create a growing network of advanced manufacturing institutes, each one bringing in different technology focus, different ideas, different innovations to enhance our competitiveness and revolutionize manufacturing. now with the department of energy, we've played a key role by standing up institutes in emerging fields like power electronics and advanced composites. the goal at the department of energy here is to help manufacturers of all sizes,

large and small, to save money, to save energy by adopting new technologies and by providing workers with the skills they need for the manufacturing jobs, not just of today, but of tomorrow. if you look back over the four years since this effort has begun, the administration has already committed over $700 million in investments and we've already gotten so much for that investment. in fact, we've already leveraged more than double that, more than $1.4 billion in private and other nongovernment investment from our partners. because that's what we can do. we can leverage our work into much greater progress around the country. and as a nation, we have grown from just one institute with 65 members to an entire network that now includes ten institutes

and over 1,300 participants. so on that note, i'm going to end the suspense. so today, i'm incredibly pleased to make the announcement of our nation's tenth manufacturing usa institute. it's called r.a.p.i.d. which stands for the rapid advancement of the process intensification deployment. and i'm happy to announce that the new institute will be led by the american institute of chemical engineers. they will be serving as key drivers behind the institute's cutting edge work in modular, chemical, process intensification. common household word everyone's familiar with it. i believe karen fletcher is here in the house. karen, are you out there somewhere? there she is.

all right. so karen now has an incredibly impressive career. she's now moving from industry to tackle this great new challenge to serve as ceo of the institute and leading this coordinated effort. karen i'd love for you and maybe several members of your team here, i'd love for you to stand an everyone to give a loud applause for their great work. [ applause ] that's a lot of folks and that's just the beginning of all the folks who are going to make great things happen because there's over 130 partners across industries that are part of the r.a.p.i.d. manufacturing usa institute so thank you all and congratulations. it was a great proposal and i look forward to the amazing work that you're going to do. when we look at this new manufacturing usa institute, it's going to leverage up to $70 million in federal funding, with another $70 million in commitments from partners

already in hand, and in just five years, in five years the institute will be standing on its own, driven by industry and other stakeholders to be completely self-sustaining. it's going to focus on new technologies that add up to big savings on the manufacturing floor, from improving energy efficiency and cutting operating costs to reducing waste and cutting the amount of equipment that's needed. i mean, in the chemical industry alone, these technologies have the potential to save more than $9 billion in costs every single year, and on top of that, there can be huge benefits for a variety of other industries, too, including oil and gas and the pulp and paper industry. so what's our end goal with all of this? it's to see the growth of more customized factories, more and more local manufacturing across

every corner of our country and to make greater use of u.s. feed stocks, all while training workers in advanced fields and the next generation of manufacturing. now this institute is just the latest example of how the department of energy continues to invest in the manufacturing technologies of tomorrow, like high performance computing and the next generation machines, as well as 3-d printing, just to name a few. now we've also seen exciting steps forward with major new u.s. manufacturing plants in the works supported by the department of energy, including tesla, who's been doing great work in batteries and suniva and solar city and solar modules. 1366 technologies in solar wafers and sora, with high-efficiency l.e.d.s. i love the fact there's no debate anymore over a compact fluorescent or incandescents. l.e.d.s are cheaper over their

life, better quality of life, incredible and we're making them here in the usa. now on top of all that, if you look across our government, if you look across our nation, the u.s. manufacturing sector as a whole has added over 800,000 new jobs since february of 2010. now of course that doesn't change the reality that manufacturing has faced challenges and will continue to do so. the number of our successes aren't comforting to those who are still hurting, to those folks who have been left behind. yes, we've created many more jobs for example in the energy sector than we've lost in recent years, but they aren't the same jobs. they aren't in the same place for employing the same people. so we know that the clean energy revolution, while real and while revving up, still hasn't been

felt in every region, at least not yet. and that's why we at the department of energy must continue to accelerate our efforts to invest in innovation, innovation that will continue to enhance america's manufacturing competitiveness, innovation that will bring more good jobs and innovation that will strengthen our economy as the clean energy revolution expands around the u.s. and around the world. and that's why every single one of us in the room need to help, because this challenge of ensuring the revolution, excuse me, this challenge of ensuring that that revolution is spread across our great nation is way too big for any one person or any one sector to solve alone. so one last quote from the beatles. we all need to come together right now.

i know that if we work together across industries, across sectors, we can create more prosperity and many, many more jobs and a much stronger economy, but to do that, we need to face the reality of the market, where the trends in clean energy are crystal clear, the choice is not whether or not there's going to be a clean energy revolution. it's happening. the choice is whether or not we as a nation are going to continue to lead it. i encourage all of you to take the opportunity you have as leaders to keep focused on progress, because i have no doubt in my mind that we can boost u.s. competitiveness across the board in our manufacturing sector and beyond and we can ensure that the united states leads in the global manufacturing marketplace if, if we continue to innovate and fight to win the clean energy race. thank you.

[ applause ] >> ladies and gentlemen, please welcome the president and ceo of excelon corporation and director of argon national laboratory for moderating conversation with washington correspondent mr. steve levine on the future competitiveness of american advanced energy infrastructure. >> good morning. in a time of great change in the world in the united states, in the world, it's said that the transformation that is going on in electricification in electricity in transportation and in our electric grid is

bigger and more profound than any, and today we're going to try to take that apart. i want to open up right away. when chris, i want to start with you, when we're talking about a transformation of the grid that the grid of the 21st century, which is the mantra that we hear is going to be much different from now, what are we talking about? what is the problem, and what kind of a solution are we looking for? >> sure, let me tell you where we've come from in a very short period. technology is morphing and changing and becoming faster than it ever has in our industry. up to a couple of years ago you didn't know if your power was on unless you called us, monitoring on a distribution system was very limited. it was based off of previous engineering calculations on line size, load, what the demand would be at peaks and so it was

not a very intelligent system. in the last ten years we put in the last couple of years out of our 10 million utility customers, we put over 7.5 million smart meters on. now we're starting to see how the system operates, the demands of the system, what our customers are looking for. there's a lot more intelligence that we can put on fault detection, fault isolation, but the customers now are becoming much more engaged in what they want to, how they want to control their energy consumption, and how they want to manage the cost. so as the technology becomes available, the customer gets more control, how do we integrate that in maintaining the premise that it has to be reliable, it has to be clean, but it has to be affordable. so as we look towards the future, significant amount of

distributed generation, how do you control the grid with that. there's a potential desire that one neighbor will want to sell his solar power to the other neighbor, and how do you manage that? so energy storage systems, energy management systems, intelligent operating systems and trading businesses are going to be a big part of the future as we go forward. >> and we need more electricity, right, 27% more electricity forecast by 2040. >> that's the estimate. >> peter, do you want to unpack that, too? >> yes, so firstly it's very interesting to see this transformation from the outside. i thought i might warm people up actually by putting up a slide if we could have the slide coming up. if you go back a century, we had a discussion earlier about, gee, is the disappearance of productivity growth due to the fact that all of the big things are already invented and all being done? so actually beginning with this, what you're looking at is

telecommunications and the electric grid in 1915. if you look at the two pictures, besides the fact that one is clearly new york and the other is in california, and it's snowing in new york and they have horses and california it looks like they just had a vehicle accident, but you may not be able to tell which of that was electric power and which of that was telephony. if you look forward, click again on the slide, you see where that's gone. so those two things in 1915 were in many ways very similar. what you're doing is pushing electrons out in one direction, and one case producing power and the other case sending information, but by the time we got to 2015, at least for telecommunications, everything has changed. there aren't any wires. the information is going around through photons rather than electrons a lot of the time, and there's been an amazing change

of that. whereas what actually happened on the electric grid, it's got bigger and there have been many changes within that but fundamentally as chris just said, the mechanism of what we're trying to do has been until recently the same. so a bit of my own history, i used to work for the phone company when it was marbell, at&t, when i worked for bell labs in 1980, the model for telephony was the same as it was in 1915. it was universal service at the lowest possible price. and the assumption was that you had a regulated monopoly which had to deliver just that and it was delivered by cost, by price, whereas, everything changed after that. so one of the effects of that is that my phone bill is now about an order of magnitude higher than it would have been under the old model, and the reason i'm happy to do that is i get

more stuff, and the question is, is that going the same way with energy? and i think it is, and chris has already pointed out that you begin by having more smarts on the grid, you know what's going on, we're no longer in this central push out where you're regulated by price. there's real value, and if you ask how much are people prepared to pay for energy? maybe six cents a kilowatt hour but the best price, if you go to a rock concert it's been going for a few days, everybody's phone run down and a business model people charge for ten bucks. you're not paying six cents a kilowatt hour to do that. there's a different model which may emerge with that. >> so chris, just playing directly off of that, you've established what the problem is in the system, and how in some ways it sounds primitive when peter describes it.

you have as a bridge to getting there, you formed a relationship with mit, northwestern, and with argon, deciding that you didn't have internally whatever means of intellectually bridging that gap. can you describe that, what are you lacking and what is this relationship all about? >> sure, as a publicly traded company that provides energy delivery services and energy, there's not a lot of capability or balance sheet space for r&d, so it is the jewel of our competitiveness going forward is the work that's being done at the national labs and the work that's being done at the universities and how we can support the labs and the

universities is a much more efficient model than us being a utility company or a competitive generating company trying to come up with our own bell labs type design. the work that we're trying to do, the partnership that we're trying to do is we know the practical on how the system operates. we have some imsight into what customers want and what customers at this point are willing to pay, so we have a practical knowledge where the theoretical, the deep theoretical knowledge is within the labs and the universities, and how we can help commercialize that in a very affordable way, but a more expeditious way is what we're looking for with partnerships with the labs and the universities. >> but peter, the labs are research facilities. chris seems to be describing a think tank operation, right? how formulating what the future looks like.

>> that's what we're trying to do. so we have to see how this works. so it's certainly not a model whereby chris says i have this problem, i need a widget. would you please design it for me and go back? we do work like that, many of the labs do, universities do. we're really trying to get into a piece of white space and say what actually are the problems? how can you think them through in a different way? of course we could do that from a theoretical perspective but it wouldn't be useful if we didn't have a partner to be able to do that because we don't understand the constraints, how stuff works and indeed we are a research lab, so you know, it's not appropriate of course for us to be doing certain classes of things, but it really is i think appropriate for us as part of a national endeavor to bring out competitiveness in the system to be working with very forward-thinking companies like excelon that want to think through this. it's more of a think tank than it is let's design some better

widgets. >> all right, so let's have a mini think tank here now. of course you only just started and so what the future looks like is vague, to say the least, but you must have already had some brainstorming. can both of you give some possible scenarios of what the world looks like in 2040? >> well that's a risky proposition. the one thing we know is to stay on path is we have to stay educated. we have to stay informed. in relationships like we have with the labs and universities, help inform us, as we're trying to define what is the utility of the future. it's another overused phrase, but as i said earlier, the customer desire, the technology

advancements, the capability of our grid, getting smarter, the data that we're going to get off of the grid, how to figure out the best way to use that, we do have a big picture vision that there's going to be much more distributed generation on the system, so you'll have more solar panels on individual houses, and how we operate the system and what the customers want to do with that is something that we have to be forward-thinking about. we have to ensure that it's an equitable process that we go through. we don't see distributed generation serving the industrial load, and so if we overcompensate an individual at a house with a solar panel at the cost of the grid to the industrial customer, or the commercial customer or the metropolitan area, it would be difficult. so we have to keep a balance on what we think the future can

look like, what the technology evolution is, and how we're able to keep that affordable energy component going so we can continue to drive competitiveness.going. >> well, that's -- it's never a good idea to try to pro detective the future but there's a few odd things that may be out there. you know, there are relatively conservative projections of energy use, but let me offer a non-conservative one, which is to note that while we're getting more efficient at using energy for i.t., it's now running at about 6% of global energy consumption. now if moore's law were continue -- and this is one of the arguments that explains it won't continue -- running with current technology at 10 to the minus 14 joules per bit, you project that expotential growth which is continuing to go on and by 2040 the whole of the world's

energy consumption will be for i.t. that probably won't happen but it means that, for example -- and i think this was referred to in an earlier point. when we think about high-performance computing and the direction that will go and the way computing with permeate everything, there will be a model for computing which will change and one possibility is that they will be much more computing on the edge of things. so rather than the current model we have where data is centralized, you take it here, put in the the cloud somewhere. as i point out, the cloud really is in somewhere, northern finland melting the permafrost, probably. [ laughter ] we won't be able to have that model of just beaming stuff around the planet, we will have much more intelligent agents out there doing computing on the periphery. so what does that mean for us and how does that connect with the kind of stuff that's

happening in this space. in chicago, we're just putting out about 500 sensors called the array of things and these are things which sit out in the environment, they have cameras on them they measure all kinds of things, whether it's raining, whether there's a dog crossing the street or whatever. but they compute and make decisions and call up city hall and say "there's a flood in the street, you need to pump out the drains." that requires power. all of this is sitting on light polls being put up by com ed engineers. so you begin to see how the need to put in power is not just going to be associated with people or factories but autonomous stuff which is all over the place.

that's one piece of the snare you that we're going through along with the other things that chris was thinking about, which is how do you integrate renewables on to the grid? how do you balance having wind and solar and what other technologies do you need in order to get that to happen, including electrical storage, about what you know about. >> so just throwing in exactly where you've left off, let's talk a little bit about politics. so we -- in january we have a very different administration coming in in the united states with a very different idea about energy, about the environment, and i'm wondering until now for the last eight years the themes have been sustainability and green and renewable. your decisions are 30 and 40 years in the making. to what degree we're going to

possibly have over the next four and possibly eight years, does that change what you're going to do? >> the last over decade has been a frustrating period for our industry. we have environmental policies that are set at a desire to have a reduction in greenhouse gases and have a low carbon future. but that's an environmental policy and it incents or targets particular technologies. it doesn't incent or design an outcome. the low carbon future is the dream of the current policies. the energy policy over on the other side does not incorporate the desire or the outcome of the

environmental policy. so the way the markets are designed, it's around reliability and it's around affordability. it's not around low carbon. so we've had an issue with predictability on making investments. if you were to go out and build a new nuclear plan today, it would cost you $16 billion. it would have a 60-year life the dilution period during construction -- it's huge. it's not something even with our large balance sheet we could do and there isn't an energy policy that says go do that. so what we're looking for with whatever administration comes in is a recognition if you're trying to get to a low-carbon future, it can't just be on the back of renewables. you have to come up with some market design that says energy,

transportation, agriculture, all of the industries together have a carbon footprint and what is the most economical way to get to that low carbon future. if the new administration changes their mind or changes the policies and the positions at the federal level and leave it to the state level, we'll work with the states. but our customers in majority of the states that we operate in have a desire for a low-carbon future. the confusion over federal policy and the confusion at state policy has got to be what we work out. >> okay. just trying to bring some clarity to what you've said. are you -- shale gas has been a big driver in the reduction of co-2 and this is this has happened irrespective of anyone's policy. and it's resulted in utilities taking coal-fired plants off and

putting gas fired plants on. that's a piece of the landscape. are you speaking of nuclear then, of policies that encourage nuclear and the other thing i wanted to ask is on low carbon are you saying that irrespective of whether the new administration has an objective of low carbon that's going to go on any way because the states favor it? >> couple bites there. the current economics of the electric -- prices of electricity are really set by the marginal producer which is the natural gas plant. the revolution that has come on to our industry has greatly reduced the prices of energy.

plants that were the eisenhower era, they are less efficient thermal transfer heat rates, they can't compete with these low natural gas prices so there are some environment rules that took coal plants off and economics that took coal plants off. so that's been good for carbon reduction. a gas plant is 60% of the emissions of a coal plant. it's been good for economic growth in industry. so there's a positive portion to that and any plant that is in a competitive market needs to compete against the marginal producer. and if you can't compete against that marginal producer then you need to be shut down or you need to make the prudent business decision. there's a lot said in that. just having everything on one fuel source is probably not the smartest way to go so you have

to design markets and evolve markets that have fuel diversity. this is a -- not environmental policy yet, this is just sound resilient to make sure you have a reliable system. a couple years ago the polar vortex came in very cold. our gas plants, our natural gas plants, couldn't get gas until 10:00 or 11:00 in the morning because the primary priority for natural gas is home heating. if you let the pressures go too low and you allow the pilot lights to go out in the city of new york, it can take a year to get in and relight those things so there's some dynamics around the way the current system works that, yes, natural gas is good, yes, natural gas is competitive but you need fuel diversification for reliability. so that's one thing. on the other side, if you're looking at environmental. we don't know where this

administration is going to come down. we've heard some commentary and then retraction or just stated that they will be looking at it. the supreme court has mandated that the epa is to regulate carbon. now how that manifests itself we don't know, but there is a court mandate to do it. we can invest in our systems. we can work within the business models as long as we know there's predictability. like you said, our investments in our utilities and our investments in our power generation stack are 30 to 60-year investments and understanding you're going to be able to get a return on that investment is very critical. over the next five years, we'll invest $25 billion into our six utilities. that's a significant investment. half of it is dead on the books, and half of it is shareholder equity that you have to pay the debt and give a return on the equity. with the level of uncertainty

that we have, that's a hard investment. the one thing i'll tell you, if we're looking at a low carbon future, we have to balance the technologies and the capability of the technologies. we think the future -- there is a very bright future for energy storage and energy management systems and that's our -- that was the cornerstone of our new partnership with the national labs. that's got to be advanced and we have to help commercialize that technology. but to do that and to maintain a low carbon environment you have got to have an all of the above strategy. when california shut down two nuclear plants, with all the investment that's been made in renewables in california, the carbon output went up 35%. germany has invested significant amounts of money into renewable energy and technology and transportation capability. they determined they were going to shut their nuclear fleet down

and now they're burning lignite. if you look at the reduction of carbon in the country of germany, it started down, it ticked back up and now it's flat. there is some of the highest energy costs in the european union based off of that design. what we're saying is give us an outcome. where do you want to get? and let the market design how to get there in the most economic way. or give us predictability. if that's not what the nation's policy is about, then we know how to make investments in how to support these long lead investments going forward. >> let me jump in there. first thing i should point out from the perspective of the labs, we work for the federal government and therefore the federal government suggests -- sets the agenda and we deliver on that. but, you know, you should understand that the balance between sustainability and manufacturing has actually tilted over the past few years.

i would argue that, you know, what's actually happening in parts of the market now, particularly around electrical storage with electric vehicles is that that's fast moving us into a situation where people choose this because they want one. and because they want one of those, the technology needs to be there. so it isn't just, i think, driven by regulation or by a view of the market. another point to come back in sort of a historical public/private partnership goes all the way back to the founding of argonne. in 1946, argonne was founded to create nuclear power to create the first generation of nuclear reactors, several of which you're now operating. and there was a very clear set of a public agenda which involved the transfission of new technologies into private industry for the benefit of the country. so when you do have that

purposeful policy which sticks for a while, then, in fact, we can -- turns out we can work together very well. we didn't, of course, put in nuclear power there because we thought it was low carbon. it wasn't the reason. >> too cheap to meter. >> too cheap to meter. >> we have one minute left. i wanted to pose the other big thing that's going on, cyber attacks, cyber war, the german intelligence, british intelligence and u.s. all are describing cyber attacks as a threat to democracy, to our systems. to what degree is protection against these attacks one of the aspects of this research? >> so partnership between the industry, the national labs, the department of homeland security and the d.o.e. is very collaborative right now. it's very structured. there's an electric sector

security council that we meet on a regular basis, we have live monitoring on 75% of the consumers -- electric consumers today. we have monitoring on the systems of intrusion, detection devices. it was with a partnership of the national labs we've been able to develop that technology. the labs developed it and we've been able to commercialize it coming out. there's a significant focus on what we can do and what we have to do going forward but it is really one of the best public/private partnerships that we have. >> peter? >> yeah, i think i agree. that's a very important link. it's doable. at the moment there's all kinds of stuff which is connected to the grid and the internet that doesn't have any security on it at all. so that's really vulnerable. there's a real opportunity, i think, as you go to more distributed systems to build in a level of resilience which is very different from being completely fail safe.

but undoubtedly, you know, there are threats out there, there are people who are going to take advantage of our vulnerability and, again, that's traditionally one of the big roles for the labs to do. remember that, you know, we are here for the nation's security , that's our job, that's something we take very seriously and there's a great partnership with the electric power distributors. >> we're going to have to stop right there. thanks very much both of you. >> thank you. [ applause ] while congress is on break this week, we're taking the opportunity to show you american history tv programs normally seen only on weekends. we continue tonight with a look at what happened after the end of wa of world war ii starting with the fate of nazi and japanese war criminals after the war. that's followed by how the war changed the u.s. and the rest of the world. american history tv prime time all this week at 8:00 p.m.

eastern. new year's night on "q&a." >> while people were starving, van buren was having these fancy parties in the white house. it was part of the image-making where harrison was the candidate, poor man for the poor people and here was this rich man in washington here? ing at the poor people. harrison had thousands of acres and estates so he was actually a very wealthy man but he was portrayed as the champion of the poor. women came to the parades and waved handkerchieves. some wrote speeches. and it was very shocking, they were criticized by the democrats who said the women should be home making pudding. >> ronald shaffer, author of the book "the carnival campaign, how the rollicking 1840 campaign changed presidential elections forever." sunday night at 8:00 eastern on