[Senate Hearing 113-466]
[From the U.S. Government Publishing Office]






                                                        S. Hrg. 113-466


                        DRIVERS OF JOB CREATION

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                            ECONOMIC POLICY

                                 of the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                                   ON

  EXAMINING THE CURRENT STATE OF JOB CREATION FOCUSING ON KEY SECTORS 
 SPURRING JOB GROWTH AS WELL AS THE IMPORTANT ROLE OF THE MIDDLE CLASS

                               __________

                              MAY 7, 2014

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         RICHARD C. SHELBY, Alabama
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia             PATRICK J. TOOMEY, Pennsylvania
JEFF MERKLEY, Oregon                 MARK KIRK, Illinois
KAY HAGAN, North Carolina            JERRY MORAN, Kansas
JOE MANCHIN III, West Virginia       TOM COBURN, Oklahoma
ELIZABETH WARREN, Massachusetts      DEAN HELLER, Nevada
HEIDI HEITKAMP, North Dakota

                       Charles Yi, Staff Director

                Gregg Richard, Republican Staff Director

                       Dawn Ratliff, Chief Clerk

                       Taylor Reed, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                 ______

                    Subcommittee on Economic Policy

                     JEFF MERKLEY, Oregon, Chairman

             DEAN HELLER, Nevada, Ranking Republican Member

JOHN TESTER, Montana                 TOM COBURN, Oklahoma
MARK R. WARNER, Virginia             DAVID VITTER, Louisiana
KAY HAGAN, North Carolina            MIKE JOHANNS, Nebraska
JOE MANCHIN III, West Virginia       MIKE CRAPO, Idaho
HEIDI HEITKAMP, North Dakota

               Andrew Green, Subcommittee Staff Director

        Scott Riplinger, Republican Subcommittee Staff Director

                                  (ii)















                            C O N T E N T S

                              ----------                              

                         WEDNESDAY, MAY 7, 2014

                                                                   Page

Opening statement of Chairman Merkley............................     1

Opening statements, comments, or prepared statements of:
    Senator Heller...............................................     2

                               WITNESSES

Jennifer Erickson, Director of Competitiveness and Economic 
  Growth, Center for American Progress...........................     3
    Prepared statement...........................................    27
Derek Smith, Chief Executive Officer, Clean Energy Works Oregon..     5
    Prepared statement...........................................    33
Emil H. Frankel, Visiting Scholar, Bipartisan Policy Center......     7
    Prepared statement...........................................    35
Robert Dietz, Vice President for Tax and Market Analysis, 
  National Association of Home Builders..........................     8
    Prepared statement...........................................    38
R. Thomas Buffenbarger, International President, International 
  Association of Machinists and Aerospace Workers................    10
    Prepared statement...........................................    51

                                 (iii)

 
                        DRIVERS OF JOB CREATION

                              ----------                              


                         WEDNESDAY, MAY 7, 2013

                                       U.S. Senate,
                   Subcommittee on Economic Policy,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Subcommittee met at 2:32 p.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Jeff Merkley, Chairman of the 
Subcommittee, presiding.

           OPENING STATEMENT OF CHAIRMAN JEFF MERKLEY

    Chairman Merkley. I call this hearing of the Economic 
Policy Subcommittee of the Committee on Banking, Housing, and 
Urban Affairs to order.
    Five and a half years ago, this country faced the largest 
financial crisis since the Great Depression. This crisis and 
the following recession shook the American job market to its 
core. We have made progress over the last several years in 
recovering jobs and growth, with employment recently surpassing 
pre-recession levels for the first time.
    At the same time, though, there is no doubt that much more 
needs to be done and should be done to drive job creation, 
particularly middle-income, good-paying jobs with benefits--a 
foundation for America's economic success.
    We still have much more to do to make an improving but 
still tough economy work for all Americans. Unemployment rates 
remain high and punishingly long for too many. The recent lapse 
in emergency unemployment insurance has led many long-term job 
seekers to exit the workforce. And while payroll employment 
gains have recently been rising at a pace of about 200,000 per 
month and almost 300,000 last month, we need more jobs for new 
entrants and more jobs for those seeking full-time employment.
    Among the hardest-hit sectors have been construction and 
manufacturing. As policy makers, we should above all keep in 
mind that not all jobs are created equal. One of the most 
troubling trends of the Great Recession has been that middle-
income jobs lost in the recession have been replaced in the 
recovery by low-wage jobs. An updated study released last week 
by the National Employment Law Project shows that this trend 
continues. We should focus most on the creation of good middle-
class jobs with living wages which will serve as a multiplier 
driving the economy forward.
    I know that these types of jobs are good for working 
families and good for the economy, because I grew up in a blue-
collar family that was able to live the middle-class American 
dream. As I have said before, America does well when the middle 
class does well.
    We have with us today a panel of experts who will discuss 
the state of the labor market as a whole and describe the roles 
of some key sectors in creating living-wage jobs. So I thank 
all of you. We will have an opening statement from our Ranking 
Member, Senator Heller, and then we will turn to your 
testimony. It is great to have you here.

                STATEMENT OF SENATOR DEAN HELLER

    Senator Heller. Mr. Chairman, thank you for holding this 
hearing, and it is always timely to talk about jobs. I want to 
thank our witnesses also for taking time and being here with us 
today.
    Creating jobs and fixing this broken economy has always 
been my highest priority, as I know it has been for the 
Chairman. And there is not a day that goes by that I do not 
think about what can be done to create jobs and improve our 
economy.
    It has almost been a year since we had our first 
Subcommittee hearing on how to help the middle class in this 
recession. Unfortunately, after a year, it is clear that
    Washington, DC, is still failing to create an environment 
where private businesses are able to create robust job growth. 
Some would argue that Washington, DC, has been forcing a job 
destroying agenda on the American public.
    I believe that the policies of the last couple years are 
not working in Nevada. Nevadans suffered through 4\1/2\ years 
of double-digit unemployment and is still one of the worst 
rates in our country. We have to end the fear and uncertainty 
that most Nevadans are facing.
    Now is the time when we should develop policies that would 
create new growth and opportunities and finally free ourselves 
from this mediocre and stagnant economy.
    Well, there is a lot of talk about how to create jobs. 
There has been a lack of action to help create jobs. There are 
concrete measures that Congress could be doing right now that 
would create jobs. Let us reform the Tax Code. Let us rein in 
wasteful Federal spending. Let us support comprehensive energy 
policies. And let us stop Washington's overregulation.
    As I mentioned in our hearing last year, Nevadans are 
fighting every day for a decent paycheck, a safe home, and a 
strong community. Their driving goals for a better life is what 
motivates me every day to fight for them here in Washington so 
their voices can be heard.
    I want to thank again all of our witnesses for taking the 
time to be here today. I look forward to your testimony, and 
thank you, Mr. Chairman, again for this hearing.
    Chairman Merkley. You are welcome, and I will go ahead and 
introduce all of our witnesses, and then we will enter directly 
into the testimony.
    Jennifer Erickson is the Director of Competitiveness and 
Economic Growth at the Center for American Progress. She holds 
a B.A. from the University of Virginia, a master's in public 
policy from the University of Edinburgh. Her work focuses on a 
range of issues affecting America's ability to compete 
successfully at home and internationally. Prior to joining the 
Center for American Progress, Ms. Erickson served as special 
advisor to the First Minister of Scotland, with portfolios 
including economic growth, innovation, and U.S. relations.
    Mr. Derek Smith comes from Portland. I am so glad that you 
traveled so far to join us. He has been a leader in the role in 
triple bottom line ventures for more than a decade with 
experiences in the public, private, and nonprofit sectors. 
Prior to heading Clean Energy Works Oregon, he was policy 
advisor for the city of Portland's Bureau of Planning and 
Sustainability. In the late 1990s, Derek developed one of the 
first sustainability programs in the retail world at Norm 
Thompson Outfitters. As Director of Operations at YOLO 
Colorhouse, Derek was a member of the management team that 
achieved 500 percent annual growth. He has a B.S. in Mass 
Communications from San Jose State University and an M.B.A. 
from the University of Oregon.
    Emil Frankel is a visiting scholar at the Bipartisan Policy 
Center and an independent consultant on transportation policy 
and public management issues. Previously, he served as BPC's 
Director of Transportation Policy. He received his bachelor's 
degree from Wesleyan University and his law degree from Harvard 
Law School. Mr. Frankel has a varied and distinguished career 
in both the public and private sector, including serving as 
Assistant Secretary of Transportation, Commissioner of the 
Connecticut Department of Transportation, and principal 
consultant at an international engineering consulting firm.
    Dr. Robert Dietz is Vice President for Tax and Market 
Analysis for the National Association of Home Builders. His 
responsibilities include economic and legal analysis of tax and 
policy issues. Prior to joining the National Association of 
Home Builders in 2005, Dr. Dietz worked as an economist for the 
Congressional Joint Committee on Taxation, specializing in 
revenue estimation of legislative proposals involving housing, 
urban development, and other business tax issues. He earned his 
Ph.D. in economics from Ohio State University.
    Mr. Tom Buffenbarger is the president of the International 
Association of Machinists and Aerospace Workers. He assumed his 
first IAM leadership post at age 20 in 1970 when he was elected 
shop steward of his apprenticeship group at General Electric 
Jet Engines. He has served in a number of key leadership roles 
over these years before becoming international president in 
1997. And I might add that my father was a member of the 
Machinists, and so I certainly grew up so much appreciating the 
union. Thank you.
    And to kick us off, Ms. Jennifer Erickson.

STATEMENT OF JENNIFER ERICKSON, DIRECTOR OF COMPETITIVENESS AND 
         ECONOMIC GROWTH, CENTER FOR AMERICAN PROGRESS

    Ms. Erickson. Thank you, Chairman Merkley and Ranking 
Member Heller, for inviting me here to testify. My name is 
Jennifer Erickson, and I am the director of competitiveness and 
economic growth at the Center for American Progress.
    My testimony today will focus on three things: the current 
jobs picture in the United States, policies that can promote 
jobs over the short term, and what we have to do over the 
longer term to have a dynamic economy. And what is central to 
all of this analysis is the understanding that if we are going 
to have a strong and growing economy, we need a strong and 
growing middle class--a middle class which provides a stable 
source of demand and also a pipeline of entrepreneurs and 
skilled workers.
    Between 2007 and 2009, the United States underwent its 
longest, most severe economic contraction since the Great 
Depression, with unemployment rising to 10 percent. In the 
nearly 5 years since the official end of the recession, the 
economy has continued to recover. As of last week's latest jobs 
numbers, we have seen 50 straight months of private sector job 
growth and added a total of 9.2 million private sector jobs.
    And while that is encouraging, there can still be no doubt 
unemployment is stubbornly high unemployment and labor force 
participation is far too low.
    Much of this problem has to do with a lack of aggregate 
demand, an output gap which can be attributed in part to 
stagnant family incomes as well as fiscal austerity. So with 10 
million workers still unemployed, the message could not be 
clearer. We need to take immediate steps for job creation.
    Now, if we are going to grow the largest, most dynamic, 
complex economy the world has ever seen, we have to do a lot of 
things right. But there are two things we can do right away: 
invest in infrastructure and dramatically expand 
apprenticeships.
    At a time when almost 800,000 construction workers are out 
looking for work and when so much of America's infrastructure 
is in disrepair, this is the perfect time to invest. And we can 
do so knowing that for every $1 billion invested in 
infrastructure, between 9,000 and 15,000 direct and indirect 
jobs are supported.
    When it comes to our younger workers, we should remember 
that right now in the United States we have as many unemployed 
and underemployed workers as the entire population of New York 
City. And expanding apprenticeships is one way to address a 
part of that problem. Apprenticeships are a form of on-the-job 
training where workers are still earning a wage, and that 
training and those jobs will lead to good middle-class jobs.
    And when it comes to the longer term, we know that 
investments in our middle class and in our competitiveness 
helped build our economy in the 20th century. So the question 
is: Are we prepared to invest in ourselves once again?
    When it comes to building human capital, will we make sure 
that every child in America has the opportunity to attend high-
quality preschool education where we know there is an enormous 
return on investment? And when it comes to our economic 
environment, since we know that about half of all economic 
growth following World War II came from advances in science and 
technology, then are we prepared to boost investments in 
general science, space, and technology funding, a category 
where we saw a cut in real terms of 12 percent from 2010 to 
2013?
    In fact, if we look at those 3 years, 2010 to 2013, we saw 
the largest 3-year reduction in Federal spending since 
demobilization following the Korean War. And cutting 
investments in our economic competitiveness at a time when the 
world is getting increasingly global is incredibly shortsighted 
and it risks the very innovation economy that our workers and 
businesses have so diligently built.
    Finally, I would note that we have to take great care to 
avoid the mistakes of the past. Americans lost millions of jobs 
and trillions of dollars from the financial crisis that led to 
the Great Recession. So as a start, we must see through the 
landmark reforms from Dodd-Frank to ensure that the era of 
``too big to fail'' has truly passed, enabling regulators with 
the tools they need to protect American jobs.
    We know how the economy works: Securing America's middle 
class is the key to America's economic growth in both the short 
and long term. So the sooner that we acknowledge that smart 
investments in growing that middle class are key to our 
economic success, the sooner we will see more Americans in 
good-paying jobs.
    Thank you.
    Chairman Merkley. Thank you.
    Senator, I know that you have to go. Do you want to ask any 
question before you go, just slip one in before you take off?
    Senator Heller. I just want to apologize. Ms. Erickson 
talked about infrastructure and creation of jobs. I have got a 
Commerce hearing right now, and the Department of 
Transportation is going to be in front of that Committee, and 
we need some infrastructure work in Nevada. So I do apologize 
to all the witnesses. I really need to get to this Committee. 
But thank you very much for being here.
    Again, Mr. Chairman, thanks for holding this hearing.
    Chairman Merkley. You are off to apply the very insights 
that are being presented. Thank you so much.
    Mr. Smith.

STATEMENT OF DEREK SMITH, CHIEF EXECUTIVE OFFICER, CLEAN ENERGY 
                          WORKS OREGON

    Mr. Smith. Mr. Chair, my name is Derek Smith. I am CEO of 
Clean Energy Works, based in Portland, Oregon. Thank you for 
the opportunity to speak with you this afternoon, and thank you 
for your leadership on clean energy and economic development.
    Clean Energy Works is a nonprofit, public-private 
partnership. Our mission is to create jobs and reduce energy 
waste through the facilitation of home energy retrofits. We 
coordinate and deploy public, private, and utility dollars to 
scale up the residential energy efficiency sector.
    We were founded 4 years ago as a city of Portland pilot 
project seeded with Recovery Act dollars, and I am here to 
report that this smart Federal investment is proving that 
residential energy efficiency can create quality jobs and 
unlock private capital to grow a vibrant marketplace.
    To date, our statistics include:
    12,000 Oregonians signing up, 3,700 homes upgraded in 
rural, suburban, and urban communities; 30 percent average 
energy savings per home; and more than $1.5 million put back 
into the pocketbooks of Americans instead of being spent on 
energy waste.
    As for jobs, we know through our work that, for every 10 
homes upgraded, one job gets created. To date, we have enabled 
1,300 workers to receive paychecks; 400 new hires in the hard-
hit construction industry; $21-an-hour average wages across 
multiple trades, from weatherization to HVAC to plumbing to 
electrical; 56 percent of work hours performed by women and 
people of color; 36 veterans working on projects; $65 million 
in economic development; and counting.
    Before we began our work a few years ago, this market was 
small. About 200 homes were upgraded per year, and workers were 
paid piece-rate wages averaging around $9 an hour, no benefits. 
We are now lifting people out of poverty and into career 
pathway professions.
    How do we generate these numbers? It all comes down to 
making it easy for citizens to upgrade their homes for energy 
efficiency. The way it works for a homeowner is they sign up at 
our website; we arrange an energy assessment of their home and 
pair them with a vetted contractor; a scope of work is drafted 
and agreed upon by the contractor and the homeowner; we arrange 
financing from a local lender; and we provide quality control 
and customer service throughout the project.
    Currently, more than 100 small- to medium-sized contracting 
firms are growing their businesses in the program, and multiple 
private lenders are providing unsubsidized financing. These 
lenders include several credit unions, a regional bank, and a 
community development financial institution. Loan products 
include secured, unsecured, home equity and ``on-bill,'' 
meaning that customers can pay back their loans through the 
utility bill. So private investment is happening in energy 
efficiency, initially spurred on by public investment.
    As you know, a coordinated effort to retrofit America's 
inefficient housing stock would create hundreds of thousands of 
U.S. jobs in some of the hardest-hit industries, as you 
mentioned, including construction and manufacturing. These are 
primarily small business jobs that cannot be outsourced, using 
materials that are on average 90 percent made in the U.S.A. In 
Oregon alone, we estimate there are 600,000 homes in need of 
weatherization, an $8 billion economic opportunity that could 
create 60,000 jobs.
    So I would like to conclude by highlighting a few policy 
issues for your consideration.
    First, on real estate valuation, a key component to the 
future, the Sensible Accounting to Value Energy, or SAVE, Act, 
Senate bill 1106, was introduced by Senators Bennet and Isakson 
in June of last year. This legislation would improve the 
accuracy of mortgage underwriting used by Federal mortgage 
agencies by including energy efficiency as a factor in 
determining the value and affordability of a home.
    And on financing, Senators Cardin, Feinstein, and Schatz 
introduced Senate bill 2189, the Energy Efficiency Tax 
Incentives Act, last month. This legislation includes the first 
performance-based energy efficiency tax incentive--25E in the 
Tax Code. This tax incentive would provide between $2,000 to 
$5,000 to homeowners based on their energy savings. This 
approach would let the market determine the technology put in 
the home. Tax dollars would essentially be investing in savings 
from what you could consider miniature power plants represented 
by bundles of home energy retrofits, and those tax dollars 
would also be investing in the multiple public benefits those 
savings provide, notably job creation.
    Thank you very much for your support and consideration.
    Chairman Merkley. Thank you, Mr. Smith.
    Mr. Emil Frankel.

  STATEMENT OF EMIL H. FRANKEL, VISITING SCHOLAR, BIPARTISAN 
                         POLICY CENTER

    Mr. Frankel. Thank you, Mr. Chairman. I appreciate this 
opportunity to address this important issue. Before proceeding, 
I would like to request that my full written statement be made 
part of this Committee's hearing record.
    Chairman Merkley. Without objection.
    Mr. Frankel. I would like to say that this issue of the 
interrelationship between transportation and infrastructure 
investment has dominated our work on the National 
Transportation Policy Project at the Bipartisan Policy Center, 
which work I directed. Most relevant, in January of 2011, we 
issued a white paper entitled, ``Strengthening Connections 
Between Transportation Investments and Economic Growth'', which 
was co-authored by two members of our project: Douglas Holtz-
Eakin, former CBO Director, and Martin Wachs, of the University 
of California.
    Increasingly, over the past 25 years, as a State and 
Federal transportation official, a consultant, teacher, and 
policy contributor on transportation and infrastructure issues, 
I have come to appreciate the role that these investments play 
in building economic growth and prosperity. This has been true 
throughout American history, from the days of roads and canals 
and Henry Clay's and Abraham Lincoln's internal improvements, 
through highways and airports, and it has been recognized going 
back to Secretary Albert Gallatin, Thomas Jefferson's Treasury 
Secretary, to Dwight Eisenhower.
    In my own teaching, I have made extensive use of a book by 
a distinguished economist, Peter Bernstein, called ``Wedding of 
the Waters'' about the building of the Erie Canal at the 
beginning of the 19th century. It was, of course, an 
engineering and construction miracle, but most importantly, 
from Bernstein's point of view, was how this investment in 
infrastructure in a transportation facility changed the economy 
of the State, the region, and the Nation. The Erie Canal 
connected newly settled areas of the Midwest and the Great 
Lakes to the original States and allowed agricultural products 
to flow from west to east and industrial products from east to 
est. New cities were born, and old cities got a new economic 
function. For example, New York City, because of the Erie 
Canal, reinforced its pre-eminent position as America's center 
of finance, commerce, and international trade, a position that 
it has held for 200 years.
    Similarly, as William Cronan wrote in his monumental 
``Nature's Metropolis'', the coming of the railroads to Chicago 
not only changed that city but fundamentally altered the 
economies and the natural and built environments of both 
Chicago and of the Plains and western regions of the United 
States.
    A March 2012 report by President Obama's Treasury 
Department with CEA noted that the United States has a rich 
history of investing in infrastructure and reaping long-term 
benefits. Those benefits include both the long-term economic 
growth and the short-term effects of stimulating maintenance 
and creation of construction and construction-related jobs.
    While infrastructure investments play an important role in 
stimulating construction jobs, quantifying the multiplier 
effect, the jobs multiplier effect, is difficult. But I think 
as was noted in the BPC white paper, to which I have referred, 
and I am quoting from it, ``Short-term job creation, while 
vitally important, must be viewed within the context provided 
by a long-term view. Over the long-term, higher productivity . 
. . is the key to higher labor earnings and improved standards 
of living.'' It is the long-term economic benefits, in terms of 
productivity, efficiency, access to markets, and labor force 
flexibility, which should be the goals and purposes of public 
investment in transportation and other infrastructure 
investment.
    But selecting the appropriate infrastructure investments, 
those that promise the greatest short- and long-term economic 
benefits in a time of persistent budget deficits and stagnant 
public spending, is a difficult challenge to public policy 
leaders. Public investment capital is constrained, and the 
reality is that Federal transportation spending is likely to be 
under economic pressure for some time to come, despite 
compelling evidence that we have been falling consistently 
short of making the infrastructure investments we need to 
sustain an efficient, safe, environmentally sustainable, and 
well-functioning transportation network.
    The priority, then, needs to be on making ``wise'' 
infrastructure investments, that is, those that promise the 
greatest economic benefits in terms of increased productivity, 
efficiency, and job creation. Unfortunately, for the most 
part--there are exceptions, but for the most part, the United 
States' framework for planning, analyzing, and making decisions 
about infrastructure investments is really not up to the job of 
making these tough, wise investment decisions. I think that is 
an important challenge to the Congress as it considers 
transportation reauthorization legislation.
    I think also the funding limitations puts a greater burden 
on financing and a greater burden on States and localities.
    None of these policy initiatives, whether it is 
infrastructure banks or public-private partnerships or 
expanding TIFIA, remove the need to make better and wiser 
choices. Smart, wise infrastructure investments are critical to 
economic growth and long-term job creation.
    Thank you very much.
    Chairman Merkley. Thank you.
    And we will proceed with Dr. Dietz.

 STATEMENT OF ROBERT DIETZ, VICE PRESIDENT FOR TAX AND MARKET 
        ANALYSIS, NATIONAL ASSOCIATION OF HOME BUILDERS

    Mr. Dietz. Thank you for the opportunity to testify today. 
My name is Robert Dietz, and I am an economist with the 
National Association of Home Builders. NAHB represents all 
sectors of residential real estate development--single-family, 
multifamily, remodeling, and businesses connected with 
supplying and financing those activities. Home building is also 
an industry dominated by small businesses.
    The residential construction industry was hard-hit by the 
Great Recession. Home construction fell 75 percent from 2005 to 
2009, and the industry lost almost a million and a half jobs. 
But since 2011, the home building and remodeling sectors are 
growing again. Over the last 2\1/2\ years, 274,000 jobs have 
been created.
    This job creation has occurred because of significant 
improvement in housing starts. From 2009 to 2013, total starts 
grew by 67 percent, reaching an annual total of 925,000. This 
expansion has had direct economic benefits. NAHB estimates 
that, on average, the construction of 1,000 single-family homes 
provides enough work to create 2,970 jobs--roughly 3 jobs per 
single-family home.
    Additionally, construction of 1,000 rental apartments, 
including units developed under the Low-Income Housing Tax 
Credit Program, generates 1,130 jobs, roughly 1 job per 
multifamily home. And $100 million in remodeling expenditures 
creates 890 jobs.
    This job impact is broad-based across sectors and across 
the Nation. For example, somewhat more than half of these jobs 
are created in the construction sector, with the rest in other 
sectors in the economy.
    The health of housing is key for the overall state of the 
U.S. economy. Currently, housing represents about 15.5 percent 
of GDP through a combination of housing services and the 
investment produced by builders, by adding or improving homes.
    Nonetheless, housing has room to grow. Typically, housing 
represents 17 to 18 percent of GDP. With a growing population 
and an aging housing stock, NAHB forecasts that single-family 
construction will increase 22 percent in 2014, with 6 percent 
additional growth for multifamily. 2014 should, in fact, be the 
first year since the recession in which the total number of 
housing starts exceeds 1 million homes. And this expansion will 
produce jobs. In April alone, builders and remodelers added 
13,100 jobs.
    The Great Recession was an important if painful reminder of 
the key role that housing plays as a source of household 
savings. According to Federal Reserve data, primary residences 
accounted for 42 percent of a typical homeowner's wealth. And 
savings in a home are also widely held. Roughly 65 percent of 
households own a home while only 50 percent possess a 
retirement account and only 16 percent own stocks and bonds 
outside of such an account.
    Housing, of course, also plays a key role in the health of 
our society. Access to safe and decent and affordable rental 
housing is needed for those households for whom renting is the 
best choice. And for those able to assume the financial 
responsibility of owning a home, home ownership has been shown 
across an array of academic studies to produce a rich set of 
social and individual benefits, including increased 
neighborhood participation and improved education and health 
outcomes.
    While home construction is poised to continue to expand and 
add jobs, certain industry head winds exist. These include 
access to building lots, rising building material prices, 
access to builder loans, and worker shortages in some markets. 
And an additional head wind is the lack of policy certainty in 
areas connected to housing. Providing certainty in these areas, 
including enacting a tax extenders bill and passing 
comprehensive housing finance reform, would be a net positive 
for job creation. And fostering job training for those 
interested in becoming home builders and remodelers will pay 
dividends. In particular, support for job centers and the 
community college system will ensure that the next generation 
of construction professionals will fill the jobs of the future, 
including building new homes and making the existing stock of 
homes more energy efficient.
    In conclusion, housing provides the momentum behind an 
economic recovery because home building and associated 
businesses employ such a wide range of workers. Housing can be 
a key engine of job growth that this country needs.
    Thank you, and I look forward to your questions.
    Chairman Merkley. Thank you very much.
    And now we will turn to our fifth presenter. President 
Buffenbarger, thank you so much for coming.

 STATEMENT OF R. THOMAS BUFFENBARGER, INTERNATIONAL PRESIDENT, 
 INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS

    Mr. Buffenbarger. Thank you, Chairman Merkley, Ranking 
Member Heller, and Members of this Committee for the 
opportunity to testify before you today on the vital importance 
of manufacturing to the creation and preservation of American 
jobs. My name is Tom Buffenbarger, and I serve as International 
President of the International Association of Machinists and 
Aerospace Workers, also known as the IAM. Our members work in a 
variety of manufacturing industries including aerospace, 
electronics, defense, shipbuilding, transportation, and forest 
products. The IAM is a broadly diversified manufacturing union 
and the largest aerospace union in North America. We strongly 
believe that manufacturing is critical to our national economic 
recovery. Manufacturing is responsible for the good jobs that 
our Nation needs. It also generates the innovation and new 
technology which our Nation depends upon to ensure a healthy, 
robust, and sustainable economy in the future.
    According to the U.S. Bureau of Labor Statistics, the 
manufacturing sector contributes $1.6 trillion in value to our 
economy, or about 9 percent of GDP. A recent study by the 
Congressional Research Service notes that manufacturers have 
been responsible for approximately 70 percent of all research 
and development conducted by businesses in the United States.
    Manufacturing jobs are good jobs. Workers in the 
manufacturing sector enjoy an 8.9-percent compensation premium 
over other working Americans and are more likely to have 
employer-paid health care and other benefits. Since the start 
of the 21st century, education levels for manufacturing workers 
have improved; nearly 30 percent have at least a college 
degree, and the percentage with less than a high school diploma 
has shrunk to 10 percent. However, what has made manufacturing 
a source of middle-class jobs has been the traditionally high 
rate of unionization within the sector. The Center for American 
Progress notes the disturbing correlation between the decline 
of union density and the share of the Nation's income going to 
the middle 60 percent of households, which has fallen from 52.3 
percent to 45.7 percent since peaking in the late 1960s. If 
this trend continues, then manufacturing work will not be the 
ladder to the middle class as it historically has been.
    The effect of the manufacturing sector and the jobs that it 
produces can be found in the sector's multiplier effect. This 
can be seen in two ways. The Manufacturing Institute has found 
that every dollar of manufactured products supports $1.33 in 
output from other sectors, a larger multiplier than any other 
economic sector. In other words, manufacturing creates the 
wealth that drives much of our economy.
    Moreover, manufacturing jobs support additional jobs, both 
direct and indirectly related to manufacturing, throughout the 
economy, and the multiplier ratios from manufacturing vary from 
a low of 1:3 to high of 1:16. The difficulty in coming up with 
a precise ratio derives from the changing nature of 
manufacturing jobs and what is counted as a manufacturing job. 
In the past, many manufacturing enterprises were vertically 
integrated operations that included a variety of support 
functions, such as shipping and transportation, as well as 
professional and business services like accounting, legal, and 
consulting. If any of these functions are directly employed by 
a manufacturer, then they are counted as manufacturing jobs; 
otherwise, the jobs are considered indirectly related to 
manufacturing. Other examples of indirect employment impacted 
by manufacturing activity include jobs in restaurants, retail, 
as well as local and State government.
    According to last week's employment report, manufacturing 
employment currently stands at 12.1 million jobs, nearly 9 
percent of U.S. payrolls. Significantly, even with the addition 
of 650,000 manufacturing jobs since the bottom of the Great 
Recession, the U.S. has still lost over 5 million manufacturing 
jobs since the start of this century. While a variety of 
factors, including technological changes and lean manufacturing 
practices, have reduced overall manufacturing employment, the 
lack of a comprehensive manufacturing policy that is directly 
related to jobs, our flawed trade policies, and a ballooning 
trade imbalance--$475 billion in 2013--have also contributed to 
this decline.
    This year marks the 20th anniversary of NAFTA, which 
increased our trade deficit with Canada and Mexico by $150 
billion resulting in a loss of an estimated 1 million U.S. 
jobs. For our members at companies like Maytag and Freightliner 
who saw their work and their jobs move to Mexico, the harsh 
reality of this model of trade is not a theoretical discussion.
    An even bigger killer of U.S. manufacturing jobs has been 
the implementation of the PNTR with China. When China PNTR was 
passed in 2000, the U.S. exported three times as many 
manufactured goods as China, but within a decade China 
surpassed the U.S. in exports and became the world's leading 
manufacturer and exporter. By 2012 our share of global 
manufacturing activity had declined to 17 percent from 30 
percent just a decade earlier even as the value of our exports 
had more than doubled. Now, two-thirds of our global trade 
deficit is with China, a rapidly growing country that engages 
in a variety of unfair trade practices--illegal subsidies, 
forced technology transfer, currency manipulation, and an 
appalling lack of labor rights.
    The Economic Policy Institute estimates that over the last 
decade our trade imbalance just with China has cost the U.S. 
nearly 3 million jobs and put downward pressure on U.S. wages. 
And now, just 2 years after the passage of the U.S.-Korea FTA, 
we have seen our exports to Korea drop and our trade deficit 
with that country grow with a loss of an estimated 60,000 
American jobs, mostly in manufacturing.
    Successful countries recognize the importance of a strong 
manufacturing sector and the true nature of global competition. 
These countries know that there is no such thing as a ``free 
market'' and provide strong support for critical wealth and 
job-creating sectors like manufacturing.
    The IAM has long called for the development of a national 
manufacturing strategy as our global competitors have done. 
This is not about picking winners and losers but, rather, 
creating the foundation for future prosperity. We applaud the 
President for taking steps to make this happen. The creation of 
the Office of Manufacturing Policy reporting to the National 
Economic Council, as well as the Advanced Manufacturing 
Partnership. which includes representatives from labor, 
industry, academia, and the Federal Government, has put a new 
focus on manufacturing at the highest levels of Government.
    We look for the Advanced Manufacturing Partnership to 
develop a national manufacturing strategy that links Government 
policies and investment to actual job creation. This could be 
accomplished by requiring employment impact statements as part 
of the decisionmaking process for Government procurement 
contracts, grants, and awards. Simply stated, contracting 
agencies and policy makers should know how many good domestic 
jobs will be created and maintained by a contractor or grantee.
    Our trade policies must be reformed to include enforceable 
labor rights and environmental protections, and this is 
particularly important as the U.S. negotiates the Trans-Pacific 
Partnership, or the TPP, with countries like Vietnam and Brunei 
that lack free and independent labor unions. Also, enforcement 
action must be taken to end currency manipulation by our global 
competitors.
    There are many other steps that also will include 
strengthening the measure and standardizing the measure of Made 
in the U.S.A. and Buy American requirements for Government 
procurement contracts. In some cases, the domestic content 
requirement is as low as 51 percent, and it is not always clear 
that agencies limit their calculation of domestic content.
    One Government initiative, the Export-Import Bank, stands 
out as a success. The Export-Import Bank provides critical 
financing for the export of American-made goods and services. 
Last year, the Bank provided over $37 billion worth of export 
financing that supported over 200,000 American jobs, mostly in 
manufacturing, and returned $1 billion to the U.S. Treasury.
    Manufacturing plays a critical role in our economy. The 
sector is an engine of innovation and a source of middle-class 
jobs. We must not, however, take the sector for granted. 
America needs to think strategically about how we prepare our 
workforce, what investments we make to remain globally 
competitive, and how we trade with other Nations. For too long 
our focus has been on meeting the needs of U.S.-based 
multinational corporations at the expense of working Americans. 
This culture must change. Only then will we see a rebirth of 
American manufacturing--a rebirth that is essential for our 
national and economic security, and the future of America's 
hard-working men and women and their families and their 
communities.
    I would be happy to answer any questions that the Committee 
may have. Thank you, Mr. Chairman.
    Chairman Merkley. Thank you, all of you, very much. I have 
been so struck by the fact that in the last recession 60 
percent of the jobs we lost were good-paying or living-wage 
jobs, yet only 40 percent of the jobs we are getting back fall 
into that category. The difference of that 20 percent means 
that millions of families across America who had the American 
dream in their hand--a good, solid job, one with benefits, the 
ability to save a little to assist their children and launch 
them into the world--are now seeing that dream crumble and slip 
through their fingers. And these are very concrete areas, these 
areas of infrastructure and rebuilding the building 
infrastructure with energy-saving retrofits and home 
construction and manufacturing that can make a difference.
    I am going to ask some questions of each of you. I will 
follow the general pattern, but since there is only one of me 
and my panel members are not here, please feel free to indicate 
you would like to jump in on some of these questions so we 
create a little bit more of a conversation. And Senator 
Elizabeth Warren has indicated she is trying to wrap up her 
other Committee and is on the way. So we may have 
reinforcements soon.
    Jennifer, I thought I would start with your point about 
aggregate demand, and if I understand right, this is the point 
that people do not make something if you do not have someone to 
sell it to. But there are others who have said, you know, the 
real key is not aggregate demand; it is concentrating wealth 
among the very few at the top because they will devise and 
build new factories, create new jobs, new job employment 
strategies.
    So as you think about those two different theories, 
essentially aggregate demand and, if you will, a concentration 
of wealth at the top, what is the case that favors one theory 
over the other?
    Ms. Erickson. Thank you so much, Mr. Chairman. I think the 
case that favors the argument for aggregate demand and the 
importance of the middle class is that we tried the other way. 
Supply side economic policies were de facto what was in place 
for a lot of America's last 15 years, and what we saw was 
exactly this concentration of wealth that you mentioned at the 
top.
    In fact, if we look at all income gains since 2009 when we 
entered recovery, 95 percent of those income gains have gone to 
the top 1 percent. And so the reality is that the top 1 percent 
does not have the ability to drive the demand that is needed to 
employ more American workers and for businesses to feel the 
need to invest. It is no mystery that U.S. businesses are 
currently sitting on about $2 trillion in cash. That is because 
they do not think that there are enough customers on the other 
side if they make those investments. In fact, it was the former 
adviser to Presidents Ronald Reagan and George H.W. Bush, Bruce 
Bartlett, who wrote back in 2011, ``It is the demand.'' That 
was the headline of a major national piece.
    And so I think that the reality is that the sooner we 
realize that businesses need customers, the sooner we will 
realize that we need a strong and growing middle class and 
policies that will support that.
    Chairman Merkley. So, in short, if concentration of wealth 
at the top was the key, we would have more jobs now than ever 
before since we have more concentration of wealth; and, 
therefore, the model has been tested, it has failed, and it 
shows that people are not going to keep creating more factories 
and employing more people if there is no one to buy the 
product.
    Ms. Erickson. Absolutely. In fact, venture capitalist Nick 
Hanauer, who is from Washington State--he was one of the 
original investors in Amazon. He wrote a piece in Bloomberg a 
couple of years ago where he said, ``A typical middle-class 
consumer is more of a job creator than I can ever be.'' And his 
point was that while he makes about 1,000 times a year as much 
as a typical American worker, he is not going to buy 1,000 
times as many pairs of pants or pillows or dinners. And so he 
was addressing this not just from the reality of the type of 
character of country he wants to live in where there is more 
opportunity in the middle class, although we would certainly 
believe that is important; but also a matter of hard economics, 
that even if you are looking at it from a purely business 
perspective, you need customers.
    Chairman Merkley. So in this sense, what turns out to be 
very good for the middle class is very good for the entire 
economy.
    Ms. Erickson. Absolutely. Absolutely, and for the private 
sector, too. Again, I think if you look at what is happening 
both in small businesses and large businesses, the single 
biggest thing that comes up when they are asked what is their 
impediment to growth and hiring more workers is demand. They 
need to know there are customers there if they are going to 
open a new set of doors.
    Chairman Merkley. So I want to turn next to the issue of 
infrastructure, and, Mr. Frankel, you addressed this as well as 
Ms. Erickson in the beginning. One of the statistics I was 
struck by is that China is spending roughly 10 percent of its 
GDP on infrastructure. And I went to China a decade apart. On 
my first trip, I saw largely bicycles in Beijing, and on my 
second trip, not only were the roads clogged with cars, but I 
also got on a train that went 200 miles per hour. And that was 
a phenomenal change in infrastructure, and I saw that all over 
China.
    I understand Europe is spending 5 percent of its GDP on 
infrastructure and America just 2 percent. If these numbers are 
not right, please correct me. But what does it mean for a major 
developed country if we are investing far less of our economy 
in infrastructure than, if you will, our European competitors 
and upcoming countries like China? I do not know if either of 
you would like to jump into that.
    Mr. Frankel. Well, respectfully, Mr. Chairman, I am not one 
who really looks to what other countries are doing. I think it 
has some relevance, but China is certainly at a very different 
place in its development from the United States. And it is to 
be expected that it would be spending a much higher percentage 
of its GDP on infrastructure. We spent a much higher percentage 
when we were building the Interstate Highway System.
    The question I think is more are we spending enough or not 
in terms of our own needs, in terms of our own capacity to 
remain competitive, and that is without regard to, you know, 
what China is spending or some other country is spending.
    Similarly, in terms of the high-speed rail system, we need 
to provide the kind of infrastructure which meets the needs and 
can bring the greatest benefits in a time of fiscal constraint. 
You are dealing with that much more directly than I am. You are 
dealing with scarce resources, the issue about how to divide a, 
if not shrinking, not adequately growing Federal pie, Federal 
funding. Congress has kind of established a policy as much by 
inaction as by action and thought over the last 10 years and, 
that is, Federal funding in terms of transportation 
infrastructure, as I noted in my statement, is actually in real 
terms declining. That is inappropriate in terms of providing 
for a productive economy.
    I was struck--I make reference to this in my written 
statement, as you probably noted. I was more recently in the 
United Kingdom. They have a conservative-led Government, which 
has a commitment to a policy of austerity, and they are still 
spending what they think they need to spend on wise 
investments. Particularly, I spent a good deal of time in 
London and got some briefings on a project called 
``Crossrail'', which is a brand-new subway line across Greater 
London. It is a $15 billion or almost $20 billion investment at 
a time of austerity. It was a decision to go forward by a 
Labour Chancellor of the Exchequer, pursued by a conservative 
Chancellor of the Exchequer, because of a perception of an 
analysis which showed that in their case the London region was 
an engine of economic growth for the United Kingdom and that an 
investment in improved access, improved labor mobility, and 
enhancing the agglomeration economics of the financial industry 
and financial sector in the London region was absolutely 
critical to ongoing growth of the United Kingdom and was based 
on a very careful business case and benefit-cost analysis.
    We need to be able to do that in order--those are the kinds 
of decisions, rather than looking to what percentage China is 
spending or some other Nation is spending and what they are 
spending it on, what do we need to spend, what are wise 
investments for us which benefit long-term economic growth?
    Chairman Merkley. I take your point that we should be in 
the context of are we spending enough for our infrastructure. 
What I see in kind of an anecdotal way--and I do a town hall in 
every county each year of our Oregon 36 counties--and I meet 
beforehand with the city commissioners and the county 
commissioners and ask them what is going on, what are they 
challenged by. And they are always raising infrastructure 
issues. And one of the things that is very common for them to 
raise is water infrastructure, and what they tend to say is, 
``We built this water system that we love decades ago,'' often 
post-World War II, that it now has three problems: first, it is 
wearing out; second, it does not meet the modern standards for 
either clean water supply or wastewater treatment; and, third, 
we need to plan for an expanded water supply or wastewater 
treatment for additional growth to be able to occur.
    And given those three things and kind of the common sense 
that those were a major--in terms of the feedback of local 
officials, feedback in terms of what is constricting their 
economy, I have sponsored a bill called ``WIFIA'', or the Water 
Infrastructure Financing Innovation Act, modeled on TIFIA, 
which you mentioned in your testimony, the goal being to 
provide more low-cost funding for this type of infrastructure 
to be built.
    Any insights or thought about--often we talk about roads 
and bridges, but any thoughts about how important water 
infrastructure is to our future?
    Mr. Frankel. Well, it is obviously critical, and we are 
going to have to invest in water resources. Our inland 
waterways may be less relevant in your State, but certainly in 
the middle part of the United States, we have systems of locks 
and dams that are 100 years old. We talk about the 
transportation system, and it does not compare to elements of 
the inland waterways in terms of the need for upgrading and 
restoration.
    Certainly in metropolitan regions, New York to its credit 
has made major efforts to prevent leakages from an old water 
system, and we lose tremendous amounts of water, when water is 
becoming a more and more valuable resource, from leaks and 
breakdowns in major water systems for major metropolitan 
regions. So I think this is critically important.
    In terms of the particular--and I commend you for the 
initiative in terms of the financing initiative, as I 
mentioned, if funding is going to be flat or decline at the 
Federal level, if the burden is going to be greater on States 
and localities, the Federal Government should expand its 
financing capabilities, that is, offering greater credit to 
State and local governments, allowing them to leverage Federal 
resources by putting their own resources in, as well as raising 
private resources. All of that is critically important, 
although it does require the establishment of adequate revenue 
streams, whether it is for transportation or water projects, in 
order to service the debt of provide returns if there are 
private investors involved.
    But as I think I mentioned in my written statement, my 
colleague, Aaron Klein, who is an alumnus of the staff of this 
Committee, and I wrote an op-ed about 8 or 9 months ago about 
the need--that what was happening really was a shift from 
Federal funding to Federal financing, and drawing that 
distinction is important, and taking advantage of and trying to 
ride that and maximize the opportunities.
    I might mention one other thing, actually your comments, 
Senator, reminded--I do not know if this is still the case. I 
suspect it is. When I was at the Department of Transportation 
now 10 years ago, I know a huge issue in Oregon was the state 
of the bridges on the interstate system, particularly on the I-
5. And it is an example of, with limited, scarce Federal 
funding available, what should we be putting it into. And I 
would make the strong argument, for example, in the case of 
Oregon, where they would like to, they need to restore and 
rebuild and in some cases replace those bridges; otherwise, the 
whole system of mobility, including freight and goods 
movements, to, from, and through the State of Oregon will come 
to a stop. Think about the economic impacts of that, as I know 
you have. Think about the economic benefits, huge economic 
benefits in terms of cost and investing in our existing 
infrastructure maximizing its effectiveness and allowing it to 
contribute to a growing economy.
    Chairman Merkley. I think as you may know, Senator Murray 
has for a very long time, long before I ever came to this body, 
worked very hard to line up the particular project, the last 
drawbridge on I-5 on the North-South Freeway, and it had rather 
a rough course over the last 2 years. But because the need 
still remains as a key part of our freight and passenger 
transportation, I am sure we going to be revisiting that piece 
of infrastructure. Point taken.
    I wanted to particularly emphasize a point, if I caught it 
right, that 90 percent of the jobs from infrastructure would be 
middle-class jobs. Did I catch that right in your analysis?
    Mr. Frankel. I made reference to the Treasury-CEA report in 
2012, and it identified--I think the figure was 80 percent of 
the jobs, as I remember--it is in my written statement--of the 
jobs that would benefit from investment in infrastructure would 
fall into the percentiles between the 25th and 75th percentile, 
the construction and construction-related, because most of the 
jobs are in construction and manufacturing, and most of those 
jobs fall into those middle-class percentiles in the economy.
    Chairman Merkley. Yes, that 80 percent of the jobs created 
by investing in infrastructure would be in construction, 
manufacturing, and retail, and that 90 percent of these would 
be middle class. That is a powerful recognition of how much 
connection there is between building this needed infrastructure 
for the general economy but also at the same time creating 
those living-wage jobs.
    While we are still on the infrastructure, did you have 
anything you wanted to add to that?
    Ms. Erickson. The only thing I would say is that U.S. 
public construction spending as a percentage of GDP has dropped 
to its lowest point in 20 years, and while we can all agree 
that the question is are we meeting the needs of our workers 
and our businesses, I also think the answer to that has been a 
resounding no, we are not. So that is why you are seeing 
different bedfellows from the AFL to the Chamber of Commerce 
standing up together and saying that this is really a time when 
we need to act.
    So it is my sincere hope that we will see some bipartisan 
movement on this in Congress. I think that staying too focused 
on every dollar of Government spending as if it is exactly the 
same as part of an overlong and, in my view, sometimes 
misguided deficit fight really risks our fiscal future in the 
long term as well as our jobs picture today.
    Chairman Merkley. Thank you very much.
    I am going to turn now to Mr. Smith, and a different sort 
of infrastructure is our building infrastructure and rebuilding 
our buildings to make them more energy efficient, as you know, 
to create a lot of jobs. There was a statistic that you 
utilized, which I believe was Oregon could create 60,000 jobs. 
Can you repeat the conditions that would be necessary to create 
those jobs just in the energy retrofit field?
    Mr. Smith. Yes. So the data that we have gathered to date 
has been that for every 10 homes that get upgraded for energy 
efficiency, one job gets created, and that is proven data that 
we have, working on this for many years, and is actually 
consistent with what the home builders--as we discussed before, 
the testimony.
    And so the analysis we have done in the State is that there 
are 600,000 homes. These are prequalified homes that are owner-
occupied, that are in need of weatherization, that we can go 
after now, but we have to raise demand to get to them. Again, 
it comes back to demand. And so, therefore, that results in 
60,000 jobs.
    Chairman Merkley. OK. I realize that Oregon is 1 percent 
basically of the Nation, and that would mean a potential for 6 
million under a roughly similar ball-park, back-of-the-envelope 
calculation, so a key piece.
    Mr. Smith. That is right.
    Chairman Merkley. And in terms of customers actually saying 
it is convenient and easy and financially possible to do these 
retrofits, how important is low-cost financing and how 
important is on-bill financing?
    Mr. Smith. Financing is a critical tool in the toolbox, and 
on-bill is a very important piece of financing. I would 
underscore that capital is not the only issue. I appreciate the 
focus on demand in this testimony because from you standpoint, 
we need to get energy efficiency retrofits to be valued by 
citizens, like a kitchen remodel or a bath remodel. Again, this 
is remodeling that should be considered not only for the 
benefits that it provides in terms of better comfort in the 
home, but also that there is better health in the home, the 
homes are safer, and that there will be a return in the result 
of a sale transaction, so a financial return. And the way we 
can really get all those demand drivers moving, not only by 
providing more capital, is to promote policies that support 
real estate valuation. And then in the meantime, as demand 
continues to grow and we result in all these benefits of health 
and safety and job creation, investments in rebates like the 
ones I mentioned and the policy site I mentioned are really 
important and they are smart investments that the public sector 
can make because of all these benefits of job creation, health, 
safety, et cetera.
    And I just want to add, just also to link infrastructure 
and demand, that we recently started adding services of seismic 
strengthening, radon mitigation. We will go into storm water, 
electric vehicle infrastructure. So any services that help make 
the home ready for the future and help the homeowner and 
occupants be safer, healthier, spend less on those resources, 
that is where we want to go. It creates more jobs, creates more 
business development opportunities for these small contracting 
firms, creates more private investment. And it is just great 
all the way around. We are achieving multiple public policy 
objectives in one fell swoop.
    Chairman Merkley. And if I can go back to your estimate on 
the 60,000 jobs, that is homes only. So there is a huge 
potential also in the commercial side in addition.
    Mr. Smith. Absolutely, yes.
    Chairman Merkley. I would like to welcome Senator Elizabeth 
Warren, who has been able to join us. We have been talking 
quite a bit about infrastructure and now also on energy-saving 
retrofits and their role in creating jobs and how many of these 
jobs in these two areas are also good-paying middle-income 
jobs. So I have had the privilege of carrying on the 
conversation for a while, and so would you like to take 5 
minutes and jump in?
    Senator Warren. I would. Thank you very much. I appreciate 
it, Mr. Chairman. I apologize for not being here earlier. I am 
caught in two committees at the same moment. We have another 
committee that is about NIH funding and cancer research, so I 
apologize for not being here. But I had some questions I wanted 
to ask about that I thought were important here.
    I was looking through some data, and according to the 
National Institute of Standards and Technology, manufacturing 
is responsible for about 12 percent of our GDP. Every dollar 
spent in manufacturing generates about $1.48 in economic 
productivity in other sectors of the economy. So we have got a 
powerful multiplier out of investments in manufacturing.
    The growth in manufacturing is very important to the 
economy, but if manufacturers cannot get adequate funding, then 
growth is obviously held back, and that means that they cannot 
take on more orders, hire more people, make more shipments, 
that sort of thing.
    Now, a recent study from NIST which analyzed the results of 
a national survey for manufacturing companies found that a lack 
of access to capital was one of main obstacles to 
manufacturers' ability to remain profitable, to expand their 
operations, and to compete with larger companies--cannot get 
the money, cannot make the investments, cannot have a business 
that prospers and then grows.
    So the question I would like to ask--and I will ask it to 
anyone on the panel--is: How do we think about sustaining, 
expanding, capital--making capital available to manufacturers, 
particularly to smaller manufacturers? Does anyone have 
thoughts on this or had any experience with this? Mr. Dietz, 
you had the misfortune of moving first.
    Mr. Dietz. I represent the National Association of Home 
Builders. I would say that is beyond just manufacturing. It is 
construction as well.
    Senator Warren. Fair enough.
    Mr. Dietz. Absolutely a very large issue for home builders. 
Something like two-thirds of the construction in this country 
is done by small firms, firms that are family owned, that have 
10 or fewer employees, and that access to credit, what is 
called ``acquisition, development, and construction loans,'' is 
a big deal. And a lot of that lending comes through smaller 
banks, so we need to make sure that the community banking 
system is available so you get the kind of benefits that come 
from regional growth. And it is also--we have talked a lot 
about demand. It is also a matter of credit for home buyers. 
And so, you know, people go through a life cycle. They rent, 
they buy. But credit is key to turning that kind of 
macroeconomic concept of demand into kind of a real economic 
benefit at the microeconomic level.
    Senator Warren. Yes. You know, it is a very powerful point 
you make about the importance of community banks, that 
community banks disproportionately relative to big banks spend 
more of their lending portfolio in small business lending. And 
I worry about our community banks because we all know the 
number of community banks out there is shrinking. They are 
under a lot of pressure. They are under regulatory pressure. 
They are under other economic pressures. They get swept up in 
purchases by other larger financial institutions. And every 
time that happens, it is not only an impact on that community 
bank and on the banking system, it is also an impact on every 
small business that counted on that community bank for its 
financing.
    Anybody else want to speak to this? Any other thoughts 
about it? Yes, sir.
    Mr. Buffenbarger. Well, from the machinists' perspective, 
this is an interesting conversation, and we are talking from 
our own parochial points of view. But what the Government needs 
to do is start thinking big again. The first thing to the 
safety of community banks and support is reinstate Glass-
Steagall, handle a few----
    Senator Warren. I did not set you up with that answer.
    Mr. Buffenbarger. No, no.
    Senator Warren. Would you please clarify?
    Mr. Buffenbarger. But you certainly gave me the opportunity 
to put my 2 cents' worth in.
    Senator Warren. Good.
    Mr. Buffenbarger. But, Senator Merkley, you pointed out, as 
did others on the panel, the crisis in, for instance, water 
resources in this country. Being an old union, 126 years old 
this past Monday, we were around at the creation of the 
Tennessee Valley Authority, and we were designated by President 
Roosevelt--the machinists and the electrical workers--to build 
TVA. And if you take that concept and expand that nationwide, 
you address the issues of water resources. With that inherently 
are the other side--sewer, waste--but it also has an element of 
power with it where we generate low-cost electricity. That in 
turn, when power is cheap, to entice manufacturing to start, 
and the consumers of that on both ends, the manufacturing side, 
the using end, and those then who will benefit from it on the 
purchasing side, seems to be a self-perpetuating idea.
    And that is something that merits deep thought and a 
review--I mean, all the lessons of the past were not bad 
lessons. TVA happens to be, I think, one of the--that and 
Social Security are the two great hallmarks of Franklin 
Roosevelt's domestic agenda.
    Instead, today we fight because the Government wants to 
privatize TVA, much as we did the banking community, and our 
experience as a union with the deregulation, privatization of 
transportation, of power, of pharmaceuticals, of banks, of just 
about everything in our lives has been the code word for 
``destroy.'' Why do we want to do this?
    So I would recommend the creation on a big thinking level 
of a development bank, a bank that spurs innovation, low-cost 
loans to those who wish to get into the manufacturing business, 
that we give an oversight to assure it does provide jobs, the 
middle-class jobs we are looking for to sustain this country. 
And if we have got the stomach for big-ticket items again and a 
challenge to America, I think this country is looking for that 
kind of challenge again.
    Senator Warren. I really appreciate your making that point, 
Mr. Buffenbarger, because you are exactly right, that when we 
make the investments in infrastructure, we not only create good 
jobs right now; we create the right conditions for businesses 
to be able to grow and flourish. Every investment that we make 
in the power grid is an investment in bringing down the cost of 
production for every business out there. You are right. Every 
investment we make in roads and bridges is an investment in 
being able to get your goods to market. And when we make those 
investments, we have another particular to build a future--a 
future in manufacturing and a future in all other business 
areas. That is a very good point.
    Anyone else want to add? Mr. Smith.
    Mr. Smith. Yes, Senator, I would like to add a point to 
your great point about community banks, and credit unions, 
actually, and how close they are to their communities, and a 
point related to the work I am in, which is energy efficiency 
retrofits of homes. And before I do that, I just want to credit 
Senator Merkley for your--I meant to mention in my previous 
statement your efforts to get capital to rural communities 
through working with rural utilities, which is a huge help for 
those communities.
    What we have experienced is we took U.S. Department of 
Energy stimulus dollars to provide credit enhancements early in 
the downturn of the economy to motivate private lenders to lend 
into the residential energy efficiency sector. In 2008, there 
was no lending anywhere, but certainly not in this new 
burgeoning field. And what we have been able to do in the past 
few years is actually unlock that private capital, pull the 
credit enhancements, and have multiple lenders competing for 
this sector because we created competition among them, and we 
have found that it has been community banks like Umpqua Bank 
and credit unions like Advantis and Selco and others in our 
State that are closer to the ground, they are closer to the 
communities, they want to support their members, they want 
their capital to go locally. And I find--a little editorial 
here--a little too much attention on the big banks and interest 
from those banks in reaching out their hand for a subsidy, when 
actually it is these small banks that are taking the risk. 
There is enough data in this sector that it is worthy of 
investment, and I believe that if we turn our attention to 
supporting these community banks, as you pointed out, that the 
big banks will follow at some later point as demand--again, we 
need more demand before they are going to enter the market. We 
do not need to subsidize them. We need to focus on the small 
guys who are close to the communities. Thank you.
    Senator Warren. Very powerful point.
    Ms. Erickson.
    Ms. Erickson. I think everyone has had really important 
suggestions. One thing that I would like to mention in addition 
to support for community banks is that, again, the single most 
important thing we need to do for access to capital from my 
perspective is avoid repeating the next financial disaster that 
will seize all credit. The Chairman mentioned that, before I 
came to the Center for American Progress, I was the economic 
adviser to Scotland's First Minister, which is a tiny country 
with huge banks. And so I had, unfortunately, far too close a 
ringside seat to what happens when credit pretty much dries up 
overnight, when institutions that are hundreds of years old and 
operate in many countries pretty much go away or have to be 
taken over by the Government.
    And I think that, as important as Dodd-Frank is--and I 
certainly appreciate the leadership of this Committee in 
getting it through--if we were to go ask men and women on the 
street, ``Do you think that the financial sector is safe? Do 
you feel like your 401(k) is all right? Do you trust your 
banks?'' I do not think that most people in America think that 
the job is done. I do not think that most people in this room 
would think that the job is done. And so I think one of the 
most important things now to protect credit and access to 
capital is making sure that the regulations that were so 
strongly fought for in this chamber are actually put into 
place.
    Senator Warren. I think that is a very, very good point, 
Ms. Erickson. I think Americans get this. I think people all 
around the country get this. They understand that we have some 
very large financial institutions that are continuing to load 
up on risks and that it poses a danger to the entire economy.
    You know, the five largest financial institutions which we 
were told back in 2008 were too big to fail, had to be bailed 
out, are now 38 percent larger than they were when they were 
bailed out in 2008 and 2009. This is not a sustainable path for 
the United States. So I thank you very much because I think you 
have made powerful points around this.
    Going back to Mr. Dietz's point, finance is important for 
being able to develop manufacturing, to develop markets, to 
develop all of our business activities, and getting it right so 
that our community banks, our credit unions, the people who are 
on the ground and working with small businesses can make an 
important difference. But we have got to make sure we do not 
crash this economy, let the largest financial institutions 
crash this economy again.
    I thank you all very much on this, and I appreciate this, 
Mr. Chairman.
    Chairman Merkley. Thank you. Thank you, Senator.
    I am going to jump back in, following up with Mr. Dietz, in 
regard to two issues related to home construction, and that is, 
one concern I have is that with fewer families earning middle-
class incomes, fewer families will believe they have the power 
and, in fact, de facto will not have the financial power to 
become homeowners. So I would just like you to comment a little 
bit on that, but also--and, by the way, we will have to keep 
our comments very short because we have votes now scheduled for 
3:45, which means we can go until 3:50, but then we have to 
dash over to the Capitol.
    And, second, I read recently that young adults between 25 
and 30 in a short number of years have become half as likely to 
get a home mortgage, in other words, to start become 
homeowners, which obviously affects the long-term number of 
houses that will be sought and purchased.
    Any comment on those two challenges?
    Mr. Dietz. Yes, I think they are actually connected. One of 
the kind of areas of my research has been to look at 
demographic challenges. We talk about income distribution. We 
have talked about it here. But we really need to look at age 
analysis, too.
    One of the things you have seen recently is even though 
there is job creation going on, there has actually been some 
wage declines, but it has been for people under age 35. When 
you layer on student loans and all the other typical challenges 
that come about those kind of key years of forming households, 
getting married, you really do have a problem for both renter 
demand and owner-occupied demand.
    So, you know, the Congress needs to look carefully, pass 
comprehensive housing finance reform to make sure the credit is 
available for those home buyers, but also make sure credit is 
available for developers of multifamily housing. And a key way 
that we can support the rental housing sector is to protect the 
Low-Income Housing Tax Credit Program, which has obviously been 
a topic of debate in tax reform.
    Chairman Merkley. I think one of the things we are hoping--
and I have signed on to Senator Warren's bill--is that by 
reducing the interest rates on student loans, enabling folks--
in Oregon we have 500,000 folks who have student loans--to 
refinance those at 4 percent, a lot of those people may be much 
more likely to become customers of the home construction, home 
ownership world.
    Mr. Dietz. Eventually.
    Chairman Merkley. Yes. And, President Buffenbarger, I want 
to--you made many big points about how we are structuring our 
economy from talking about financing banks for infrastructure, 
industrial banks, manufacturing, certainly how manufacturing 
drives R&D. Did I catch you right, 70 percent of R&D driven by 
manufacturing?
    Mr. Buffenbarger. Yes.
    Chairman Merkley. Yes, substantial, and kind of the whole 
multiplier. But here is an issue that I have seen in 
manufacturing, that we have--we did lose a lot of 
manufacturers, as you pointed out, 50,000 factories, 5 million 
jobs, due to an unlevel playing field. But we also have a 
challenge that we have to figure out in terms of automation. I 
have been doing a Made in Oregon manufacturing tour, and the 
modern robotics and modern software to drive that robotics are 
phenomenal and are changing what can be done with human hands 
at a cost that can replace workers. This means much higher 
productivity, on the one hand, but it means a lot fewer 
workers, a lot more money going to capital and less to labor. 
And I have always felt if we do not make things in America, we 
are not going to have a middle class in America. But in this 
case, if we do not make things in America with people, we have 
a challenge. And yet, to be competitive with the world, we are 
certainly going to continue adopting these new technologies.
    So any insights on the challenge of sustaining 
substantial--not just a successful manufacturing sector but 
ways in which we can make sure it thrives so much that it 
continues to provide living-wage jobs.
    Mr. Buffenbarger. Thank you, Senator. As you pointed out, 
Oregon, which is a great State--and recently I toured the 
Boeing facility in Portland, a prime example of high 
technology, yet we are hiring there. We are going to be putting 
the employer there. It is going to be adding about 500 new 
jobs, because the technology enables us to handle the higher 
volume to meet the demand of the marketplace.
    What would help in this realm, if the Government were to 
insist on those Made in America principles we spoke about 
earlier and Made in the U.S.A., maybe we could make the robots 
here for a change. After all, the concept of them was invented 
here, and we offshored it with Government incentives to Nations 
such as Japan and Germany. Maybe we should have kept the 
technology that was devised from defense-related R&D. That was 
a taxpayers' investment into the thought process, and then we 
turn it over to the private corporations who send it overseas 
and make a big profit off of it.
    Where was the taxpayers' return on the investment? It was 
in the loss of jobs.
    I say that if we are going to use our incentives, tax 
policies, whatever, to promote this type of innovation, this 
type of R&D, the quid pro quo would be it has to be built in 
the United States. That would bring and keep those good, high-
tech--high-wage manufacturing jobs here, or at least go a long 
way toward that end.
    Chairman Merkley. And can you comment on the Export-Import 
Bank and the fact that its authorization is expiring this year 
and the role it plays in being able to sell our products to the 
world?
    Mr. Buffenbarger. The IAM is very much in support of 
renewal of the Export-Import Bank. For the aerospace industry, 
it is the best example I can draw on right now. It helps us, 
the U.S., sell our products overseas, to export products. And 
the fact of the matter is it is the one bank that returns its 
profit to the United States Treasury each year. Last year, it 
was $1 billion. That is $1 billion more than a few other banks 
I could think of that we used the taxpayer dollar to bail out 
not too long ago.
    Chairman Merkley. Let us give the final question to Senator 
Warren, and then we are going to have to dash. Normally after 
we conclude a hearing, I would be able to stay and chat with 
folks. My team will be staying, but I am going to have to run 
for the vote.
    Senator Warren. So we have time for me to just ask a little 
bit more? OK.
    So I have a question about worker training and whether or 
not worker training is good enough to meet the real-time needs 
of manufacturers. A recent National Association of 
Manufacturers survey indicates that more than 80 percent of 
manufacturers reported a significant shortage in skilled 
workers and about 75 percent of manufacturers said that the 
skills gap was harming their ability to expand their 
businesses.
    Community colleges can play a valuable role in closing the 
skills gap. In fact, in Massachusetts, we have put something 
together called the ``Rapid Response Grants Program'', which 
provides money to community colleges so they can respond to 
workforce training needs within 90 days of a company's request. 
Last year, for example, the State provided funding to MassBay 
Community College so that students could receive training to 
work at Web Industries, which is an employee-owned advanced 
manufacturing company in Holliston.
    Also, in February of this year, Greenfield Community 
College announced the expansion of its advanced manufacturing 
training programs.
    These programs make sense if we are helping workers learn 
skills that will help them over the course of their careers and 
not just subsidizing in-house training for specialized 
manufacturers that they ordinarily would provide. And I just am 
interested in anyone on the panel's comments about whether this 
is an approach that works or not. We hear a lot about it, but I 
would just like the views of some of the people who are on the 
front lines on this.
    Why don't we start with you, President Buffenbarger?
    Mr. Buffenbarger. I am the product of a tool-and-die 
apprenticeship with General Electric jet engines, a very high-
tech apprenticeship. It also includes that time with the 
university. In my case, it was Miami University of Oxford, 
Ohio. All the apprentices with General Electric attend 
university classes. The concept is not so much the community 
college or the university providing the skills. They cannot 
alone. With an apprenticeship, it is hands-on, augmented by 
that classroom, that instruction, at whatever level it is.
    And so whatever we are going to do in the future, there has 
to be that emphasis placed by this Government with great 
strength and great force behind it to take a serious look at 
that original 4-year degree program called an 
``apprenticeship.''
    Senator Warren. I hear you. Thank you.
    Mr. Dietz? And we are going to have to run in just a minute 
here. Thank you.
    Mr. Dietz. Yes, very quickly, again, that is a very large 
issue in construction right now. You can look at Bureau of 
Labor Statistics data. The number of open, unfilled 
construction sector positions is 127,000, which, given the high 
rates of unemployment, is a bit of a paradox, but it has a lot 
to do with skills. It is also where the construction is taking 
place. But community colleges, job centers, NAHB has a 
subsidiary called Home Builders Institute that helps train 
workers. That is a necessary part of filling these jobs, which 
are available, they are out there, and they are middle class 
jobs that pay about $40,000 a year.
    Senator Warren. Anyone else want to add to that? Ms. 
Erickson, you get the last word, it looks like here.
    Ms. Erickson. I just wanted to say I am so grateful that 
you brought up apprenticeships, because it is something that we 
are very much pushing at the Center for American Progress. We 
have about 375,000 apprentices registered right now in the 
United States. That is a tiny fraction of the apprenticeships 
that we see in countries such as England and Germany, not just 
in manufacturing, although that is really important, but we can 
expand them into things like IT and health care. And I just 
want to note there is a bipartisan bill before the Senate, the 
LEAP Act, and so hopefully we will see some progress soon.
    Senator Warren. Thank you.
    Thank you, Mr. Chairman.
    Chairman Merkley. You are welcome, and thank you for your 
participation. And I appreciate so much all the perspectives 
that you have brought on keeping and expanding living-wage jobs 
in America. This is a huge, huge issue for the success of our 
Nation. We should not be judging the success of our economy by 
the Dow Jones or S&P 500. We should not be judging in by the 
GDP. We should be judging it by how many living-wage jobs are 
we creating that provide a strong foundation for families to 
thrive.
    And so each of you have brought insights related to that 
central question in our economy. I so much appreciate it. I 
apologize I cannot stay and talk, but it is a dialog that we 
are continuing to carry on with all of you.
    With that, I will note that the record will remain open for 
7 days for any questions that Members wish to be submitted, and 
with that, I formally adjourn the Banking Committee Economic 
Policy Subcommittee hearing on job creation.
    Mr. Smith. Thank you both for your leadership.
    [Whereupon, at 3:56 p.m., the hearing was adjourned.]
    [Prepared statements supplied for the record follow:]
                PREPARED STATEMENT OF JENNIFER ERICKSON
 Director of Competitiveness and Economic Growth, Center for American 
                                Progress
                              May 7, 2014
    Thank you Chairman Merkley and Ranking Member Heller for inviting 
me here to testify. My name is Jennifer Erickson, and I am the Director 
of Competitiveness and Economic Growth at the Center for American 
Progress.
    It is difficult to imagine a more important issue for the security 
of both American families and the American economy than creating and 
maintaining good, middle-class jobs. With that in mind, my testimony 
today will focus on three things: an overview of the current jobs 
picture in the United States, policies that can promote job creation in 
the short to medium term, and also what we need to do to ensure a 
vibrant economic ecosystem in the future.
    Central to all of this analysis is the understanding that if we are 
going to have a strong and growing economy, we need a strong and 
growing middle class. President Barack Obama rightly identified 
reigniting the engine of growth of the middle class as the defining 
issue of our time. \1\ That is because we know that with a strong and 
growing middle class, we have a more stable source of demand, a bigger 
pipeline of both entrepreneurs and skilled workers, and the critical 
support needed for public institutions that a vibrant middle class 
provides. \2\
---------------------------------------------------------------------------
     \1\ The White House, ``Remarks by the President on Economic 
Mobility'', Press release, December 4, 2013, available at http://
www.whitehouse.gov/the-press-office/2013/12/04/remarks-president-
economic-mobility.
     \2\ Heather Boushey and Adam Hersh, ``Middle Class Series: The 
American Middle Class, Income Inequality, and the Strength of Our 
Economy, New Evidence in Economics'', (Washington: Center for American 
Progress, 2013), available at http://www.americanprogress.org/issues/
economy/report/2012/05/17/11628/the-american-middle-class-income-
inequality-and-the-strength-of-our-economy/; David Madland, ``Growth 
and the Middle Class, First Principles: Arguing the Economy'', 
Democracy Journal (20) (2011), available at http://
www.democracyjournal.org/20/growth-and-the-middle-class.php.
---------------------------------------------------------------------------
Overview of the Current Jobs Picture
    Between late 2007 and June 2009, the United States underwent its 
longest and most severe economic contraction since the Great 
Depression, the result of a real estate bubble and the ensuing crash 
that had its roots in lax regulations, opaque financial products, and 
unsustainable household debt. \3\
---------------------------------------------------------------------------
     \3\ Council of Economic Advisers, ``2010 Economic Report of the 
President'' (Executive Office of the President, 2010), available at 
http://www.whitehouse.gov/sites/default/files/microsites/economic-
report-president-chapter-2r2.pdf; Bob Willis, ``U.S. Recession Worst 
Since Great Depression, Revised Data Show'', Bloomberg News, August 1, 
2009, available at http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=aNivTjr852TI.
---------------------------------------------------------------------------
    The economy saw a rapid increase in unemployment, from 5 percent in 
December 2007 to a peak of 10 percent as of October 2009. \4\ This 
decline in employment exceeded that of any recession over the past few 
decades \5\ and was the first on record to wipe away all of the 
previous job gains of the most recent economic expansion. \6\
---------------------------------------------------------------------------
     \4\ U.S. Bureau of Labor Statistics, ``Data, Tables and 
Calculators by Subject: Labor Force Statistics From the Current 
Population Survey'', available at http://data.bls.gov/timeseries/
LNS14000000 (last accessed May 2014).
     \5\ Bureau of Labor Statistics, ``The Recession of 2007-2009'' 
(U.S. Department of Labor, 2012), available at http://www.bls.gov/
spotlight/2012/recession/pdf/recession_bls_spotlight.pdf.
     \6\ Christopher J. Goodman and Steven M. Mance, ``Employment Loss 
and the 2007-2009 Recession: An Overview'', Monthly Labor Review 
(2011): 3-12, available at http://www.bls.gov/opub/mlr/2011/04/
art1full.pdf.
---------------------------------------------------------------------------
    It has been nearly 5 years since the official end of the recession, 
\7\ and the economy continues to recover. 2013 was the third straight 
year in which private-sector employment rose by more than 2 million 
jobs. \8\ And as of last week's jobs numbers, the U.S. economy has seen 
50 straight months of private-sector job growth, adding a total of 9.2 
million private-sector jobs. \9\
---------------------------------------------------------------------------
     \7\ Bureau of Labor Statistics, ``The Recession of 2007-2009''.
     \8\ Council of Economic Advisers, ``2014 Economic Report of the 
President'' (Executive Office of the President, 2014), available at 
http://www.whitehouse.gov/sites/default/files/docs/
full_2014_economic_report_of_the_president.pdf.
     \9\ Jason Furman, ``The Employment Situation in April'', The White 
House Blog, May 2, 2014, available at http://www.whitehouse.gov/blog/
2014/05/02/employment-situation-april; Center for Budget and Policy 
Priorities, ``Chart Book: The Legacy of the Great Recession'', 
available at http://www.cbpp.org/cms/index.cfm?fa=view&id=3252 (last 
accessed May 2014).
---------------------------------------------------------------------------
    While the signs of improvement are encouraging, there is no doubt 
that the pace of the recovery in terms of growth and jobs has been 
modest and underwhelming when we consider the potential labor-force 
growth during this time. Stubbornly high unemployment and low labor-
force participation continue to define today's workforce. As of April 
2014, the United States had an unemployment rate of 6.3 percent, down 
nearly 4 percentage points from the labor market's recession peak. \10\ 
While there has been steady private-sector job growth over the past 50 
months, the pace has been too slow to restore us to full employment. 
\11\ The current share of workers either working or looking for work 
falls below the rate at the beginning of the recession--66 percent--and 
is equal to the lowest participation rate since around 1978. \12\
---------------------------------------------------------------------------
     \10\ U.S. Bureau of Labor Statistics, ``Economic Situation 
Summary'', Press release, May 2, 2009, available at http://www.bls.gov/
news.release/empsit.nr0.htm; U.S. Bureau of Labor Statistics, ``Data, 
Tables and Calculators by Subject: Labor Force Statistics From the 
Current Population Survey'', available at http://data.bls.gov/
timeseries/LNS14000000 (last accessed May 2014).
     \11\ Furman, ``The Employment Situation in April''; Center for 
Budget and Policy Priorities, ``Chart Book: The Legacy of the Great 
Recession''.
     \12\ U.S. Bureau of Labor Statistics, ``Data, Tables and 
Calculators by Subject: Labor Force Statistics From the Current 
Population Survey, LNS11300000'', available at http://data.bls.gov/
timeseries/LNS11300000 (last accessed May 2014).
---------------------------------------------------------------------------
    The long-term unemployed have suffered tremendously as we continue 
to see an abnormally high number of Americans who want to work but are 
unable to find employment. As of April 2014, there were 3.5 million 
Americans who have been actively searching for a job for 27 weeks or 
more. \13\ At 35.3 percent, the current rate of long-term unemployment 
as a share of the unemployed falls below the peak during the recession 
but is far and away the highest level on record. \14\ Among those ages 
20 to 24, there is an unemployment rate of 10.6 percent, more than 4 
percentage points higher than the national average. \15\
---------------------------------------------------------------------------
     \13\ U.S. Bureau of Labor Statistics, ``Economic Situation 
Summary''.
     \14\ The State of Working America, ``The Share of the Unemployed 
Who Have Been Jobless for Six Months or More, 1948-2014'', available at 
http://www.stateofworkingamerica.org/charts/long-term-unemployment/ 
(last accessed April 2014).
     \15\ U.S. Bureau of Labor Statistics, ``Economic Situation 
Summary''.
---------------------------------------------------------------------------
    According to Adam Hersh of the Center for American Progress, the 
economy is currently growing at around 60 percent of the pace set by 
the prior three U.S. expansions from as far back as 1982. \16\ Since 
the June 2009 trough, ``the economy has grown just 11 percent 
overall.'' \17\ Of the last six recoveries, the most recent recovery 
ranks behind all but December 2001, with the smallest share of months 
with job growth above 200,000, or 33 percent. \18\ Moreover, at the 
current average rate of job growth, analysis done by CAP's Michael 
Madowitz using The Hamilton Project's estimates demonstrates that the 
U.S. economy will not reach its former level of employment until 2019. 
\19\
---------------------------------------------------------------------------
     \16\ Adam Hersh, ``Private Debt, Public Penny-Pinching Holding GDP 
Back'', Market Watch, April 30, 2014, available at http://
www.marketwatch.com/story/private-debt-public-penny-pinching-holding-
gdp-back-2014-04-30?link=MW_story_latest_news.
     \17\ Ibid.
     \18\ CAP analysis of Bureau of Labor Statistics and National 
Bureau of Economic Research data. See U.S. Bureau of Labor Statistics, 
``Labor Force Statistics From the Current Population Survey'', 
available at http://www.bls.gov/cps (last accessed May 2014); National 
Bureau of Economic Research, ``U.S. Business Cycle Expansion and 
Contractions'', available at http://www.nber.org/cycles/cyclesmain.html 
(last accessed May 2014).
     \19\ Michael Madowitz and Matt Markezich, ``The State of the U.S. 
Labor Market: Pre-May 2014 Jobs Release'', Center for American 
Progress, May 1, 2014, available at http://www.americanprogress.org/
issues/economy/news/2014/05/01/88688/the-state-of-the-u-s-labor-market-
2/; The Hamilton Project, ``Closing the Jobs Gap'', available at http:/
/www.hamiltonproject.org/jobs_gap/ (last accessed April 2014).
---------------------------------------------------------------------------
    Much of the problem has to do with the fact that our economy is 
suffering from a large output gap. Through the first quarter of 2014, 
demand for goods and services has been more than 4 percent less than 
what the economy can supply. \20\ This restrained growth can be largely 
attributed to both fiscal austerity and stagnant incomes for families 
across the United States. \21\ While businesses continue to see strong 
earnings and capture a major share of the income gains throughout the 
recovery, this has not translated into more jobs. \22\ This is largely 
because businesses have less of an incentive to invest when consumer 
demand is weak. \23\
---------------------------------------------------------------------------
     \20\ Center for Budget and Policy Priorities, ``Chart Book: The 
Legacy of the Great Recession''.
     \21\ Hersh, ``Private Debt, Public Penny-Pinching Holding GDP 
Back''.
     \22\ Matthew Phillips, ``Goldman: Corporate Profits Grew Five 
Times Faster Than Wages in 2013'', Bloomberg BusinessWeek, January 24, 
2014, available at http://www.businessweek.com/articles/2014-01-24/
goldman-2013-corporate-profits-grew-five-times-faster-than-wages; 
Nelson D. Schwartz, ``Recovery in U.S. Is Lifting Profits, but Not 
Adding Jobs'', The New York Times, March 3, 2014, available at http://
www.nytimes.com/2013/03/04/business/economy/corporate-profits-soar-as-
worker-income-limps.html?pagewanted=all.
     \23\ Bruce Bartlett, ``It's the Aggregate Demand, Stupid'', 
Economix, August 16, 2011, available at http://
economix.blogs.nytimes.com/2011/08/16/its-the-aggregate-demand-stupid/
?pagewanted=all.
---------------------------------------------------------------------------
    This need to improve our economic prospects has not been helped by 
sequestration, debt ceiling debates, and spending cuts on both the 
Federal and State levels. In particular, according to the Council of 
Economic Advisers, the most recent Government shutdown and debt limit 
brinkmanship had a ``substantial negative impact'' on the economy, 
resulting in a ``0.25 percentage point reduction in the GDP growth rate 
in the fourth quarter and a reduction of about 120,000 private-sector 
jobs in the first 2 weeks of October.'' \24\ Additionally, not only 
have these austerity policies resulted in cuts to investments and 
services critical to economic growth, but they have also led to cutting 
jobs--including the loss of hundreds of thousands of public-sector jobs 
since the end of the recession. \25\
---------------------------------------------------------------------------
     \24\ Council of Economic Advisers, ``Economic Activity During the 
Government Shutdown and Debt Limit Brinksmanship'', (Executive Office 
of the President, 2013), available at http://www.whitehouse.gov/sites/
default/files/docs/weekly_indicators_report_final_0.pdf.
     \25\ Michael Linden, ``It's Time To Hit the Reset Button on the 
Fiscal Debate'', (Washington: Center for American Progress, 2013), 
available at http://www.americanprogress.org/wp-content/uploads/2013/
06/FiscalReset.pdf; U.S. Bureau of Labor Statistics, ``Top Picks'', 
available at http://data.bls.gov/cgi-bin/surveymost?ce (last accessed 
May 2014).
---------------------------------------------------------------------------
    In short, while we are slowly recovering from the worst economic 
crisis since the Great Depression, in February 2014, the Congressional 
Budget Office estimated that economic growth from the end of 2017 
onward will be ``well below the average seen over the past several 
decades'' and that the unemployment rate will remain above 6 percent 
until the end of 2016. \26\ Nearly half a decade following the 
recession, with 10 million workers unemployed and 3.5 million who have 
been looking for work for 6 months or more, \27\ the message could not 
be clearer. We need to take steps to accelerate job creation, and we 
also need to take care that we are creating an economic environment 
that is producing good, middle-class jobs.
---------------------------------------------------------------------------
     \26\ Congressional Budget Office, ``The Budget and Economic 
Outlook: 2014 to 2024'' (2014), available at http://www.cbo.gov/
publication/45010.
     \27\ Hersh, ``Private Debt, Public Penny-Pinching Holding GDP 
Back''; U.S. Bureau of Labor Statistics, ``Economic Situation 
Summary''.
---------------------------------------------------------------------------
Policies That Can Promote Job Creation in the Short to Medium Term
    In 2013, the Center for American Progress published an economic 
growth strategy, ``300 Million Engines of Growth'', that was centered 
on the premise that our economy will do better when all Americans are 
able to participate in it at the top of their talents. In ``300 Million 
Engines of Growth'', we acknowledge the reality that if we are going to 
grow the largest, most dynamic, complex economy the world has ever 
seen, we have to do a lot of things right--with the Government both 
investing in human capital and setting a competitive environment in 
which our workers and businesses can compete at home and abroad.
    Today, I would like to highlight a few policies that would have the 
benefit of spurring job creation in the shorter term, while at the same 
contributing to our longer-term competitiveness.
Infrastructure
    At a time when approximately 800,000 construction workers are out 
looking for work, \28\ and when the American Society of Civil Engineers 
ranks America's infrastructure with a troubling D+ grade, \29\ this is 
the perfect time for bipartisan consensus on the importance of 
investing in a new generation of infrastructure--from our roads and 
bridges, to our railways and ports, to our electric grids and 
wastewater systems.
---------------------------------------------------------------------------
     \28\ U.S. Bureau of Labor Statistics, ``Table A-14. Unemployed 
Persons by Industry and Class of Worker, not Seasonally Adjusted'', 
Press release, May 2, 2014, available at http://www.bls.gov/
news.release/empsit.t14.htm.
     \29\ American Society of Civil Engineers, ``2013 Report Card for 
America's Infrastructure'', available at http://
www.infrastructurereportcard.org/a/#e/welcome (last accessed May 2014).
---------------------------------------------------------------------------
    Infrastructure investment is a well-known ``two-fer,'' meaning it 
results in job creation in the short term and greater economic 
competitiveness over the long term. \30\ As of 2008, for every $1 
billion in infrastructure spending in a given state, around 9,000 to 
15,000 direct and indirect jobs are supported--making infrastructure 
one of the single best investments the Government can make. \31\
---------------------------------------------------------------------------
     \30\ ``President's Council on Jobs and Competitiveness, Taking 
Action, Building Confidence: Five Common-Sense Initiatives To Boost 
Jobs and Competitiveness'', Interim Report (Executive Office of the 
President, 2011), available at http://files.jobs-council.com/
jobscouncil/files/2011/10/JobsCouncil_InterimReport_Oct11.pdf.
     \31\ Claudia Copeland, Linda Levine, and William J. Mallett, ``The 
Role of Public Works Infrastructure in Economic Recovery'', 
(Washington: Congressional Research Service, 2011), available at http:/
/www.fas.org/sgp/crs/misc/R42018.pdf.
---------------------------------------------------------------------------
    The President's recently released surface transportation 
reauthorization proposal calls for $302 billion in expenditures, which 
would have a powerful effect on both jobs and competitiveness. \32\ As 
valuable as this contribution to the jobs picture would be, the 
contribution to our Nation's productivity for years to come would be 
enormous as well. After all, the interstate highway system was a 
massive investment in our Nation's infrastructure and boosted U.S. 
annual productivity growth by double digits for decades. \33\ Yet many 
of these critical assets are rapidly approaching the ends of their 
useful lives. America's workers stand at the ready to lay the 
foundation for the next five decades of prosperity.
---------------------------------------------------------------------------
     \32\ The White House, ``Fact Sheet: President Obama Lays Out 
Vision for 21st Century Transportation Infrastructure'', Press release, 
February 26, 2014, available at http://www.whitehouse.gov/the-press-
office/2014/02/26/fact-sheet-president-obama-lays-out-vision-21st-
century-transportation-i.
     \33\ Federal Highway Administration, ``Productivity and the 
Highway Network: A Look at the Economic Benefits to Industry From 
Investment in the Highway Network'', (U.S. Department of 
Transportation, 2012), available at http://www.fhwa.dot.gov/policy/
otps/060320b/index.htm.
---------------------------------------------------------------------------
Apprenticeships
    The latest unemployment statistics highlight that too many of 
America's young people are either unemployed or underemployed. \34\ 
Unemployment does not just hurt these would-be workers now; it can also 
depress their earnings for years into the future due to forgone work 
experience and missed opportunities to develop skills. \35\ The fact 
that the number of unemployed and underemployed young Americans is 
greater than the entire population of New York City has extremely 
damaging implications for our economic prospects as a Nation. \36\
---------------------------------------------------------------------------
     \34\ U.S. Bureau of Labor Statistics, ``Economic Situation 
Summary''; Sarah Ayres, ``The High Cost of Youth Unemployment'' 
(Washington: Center for American Progress, 2013), available at http://
www.americanprogress.org/wp-content/uploads/2013/04/
AyresYouthUnemployment1.pdf; U.S. Bureau of Labor Statistics, 
``Employment and Unemployment Among Youth Summary'', Press release, 
August 20, 2013, available at http://www.bls.gov/news.release/
youth.nr0.htm.
     \35\ Ayres, ``The High Cost of Youth Unemployment''.
     \36\ Sarah Ayres, ``America's Ten Million Unemployed Youth Spell 
Danger for Future Economic Growth'' (Washington: Center for American 
Progress, 2013), available at http://www.americanprogress.org/issues/
economy/report/2013/06/05/65373/americas-10-million-unemployed-youth-
spell-danger-for-future-economic-growth/.
---------------------------------------------------------------------------
    One immediate opportunity to address part of this problem is 
through dramatically expanding apprenticeships, a structured form of 
paid worker training that combines on-the-job learning and classroom 
instruction. Apprenticeships have been shown to boost workers' earnings 
and raise sponsoring companies' productivity levels, which is why many 
other countries rely on them as a central tool to develop a highly 
skilled, competitive workforce. \37\ But even though, according to the 
U.S. Department of Labor's Employment and Training Administration, 
there are currently more than 375,000 registered apprentices in the 
United States, the training model is largely unfamiliar to Americans 
and considerably less widely used than in countries such as Germany and 
the United Kingdom. \38\
---------------------------------------------------------------------------
     \37\ Ben Olinsky and Sarah Ayres, ``Training for Success: A Policy 
To Expand Apprenticeships in the United States'' (Washington: Center 
for American Progress, 2013), available at http://
www.americanprogress.org/wp-content/uploads/2013/11/
apprenticeship_report.pdf; London School of Economics and Political 
Science and Centre for Economic Performance, ``The State of 
Apprenticeship in 2010'' (2010), available at http://cep.lse.ac.uk/
pubs/download/special/cepsp22.pdf.
     \38\ U.S. Employment and Training Administration, ``Registered 
Apprenticeship Data and Statistics'', available at http://
www.doleta.gov/OA/data_statistics.cfm (last accessed May 2014); Olinsky 
and Ayres, ``Training for Success: A Policy To Expand Apprenticeships 
in the United States''.
---------------------------------------------------------------------------
    Expanding the U.S. apprenticeship system both in number of 
participants and available occupations would strengthen employment 
outcomes for young Americans by creating pathways for young workers to 
good-paying, middle-class jobs. Apprentices get a job today and higher 
wages for a lifetime. Researchers have found that, including nonwage 
benefits, workers who complete an apprenticeship make an average of 
$300,000 more than comparable job seekers in their lifetimes. \39\ 
Importantly, the wage premium in many cases comes with little or no 
educational debt. \40\
---------------------------------------------------------------------------
     \39\ Debbie Reed and others, ``An Effectiveness Assessment and 
Cost-Benefit Analysis of Registered Apprenticeship in 10 States'' 
(Oakland, CA: Mathematica Policy Research, 2012), available at http://
wdr.doleta.gov/research/FullText_Documents/ETAOP_2012_10.pdf; Sarah 
Ayres, ``5 Reasons Expanding Apprenticeships Will Benefit 
Millennials'', Center for American Progress, December 2, 2013, 
available at http://www.americanprogress.org/issues/economy/news/2013/
12/02/79872/5-reasons-expanding-apprenticeships-will-benefit-
millennials/.
     \40\ Ayres, ``5 Reasons Expanding Apprenticeships Will Benefit 
Millennials''.
---------------------------------------------------------------------------
    Given these benefits, we should welcome the President's recent 
announcement of $100 million in grants to support new apprenticeships, 
and Congress should pass the bipartisan Leveraging and Energizing 
America's Apprenticeship Programs, or LEAP, Act, which would provide 
businesses with a tax credit for each apprentice they hire, expanding 
these highly successful private-sector-led training programs. \41\
---------------------------------------------------------------------------
     \41\ The White House, ``Fact Sheet: American Job Training 
Investments: Skills and Jobs To Build a Stronger Middle Class'', Press 
release, April 16, 2014, available at http://www.whitehouse.gov/the-
press-office/2014/04/16/fact-sheet-american-job-training-investments-
skills-and-jobs-build-stron; Nia Hamm, ``Bill Aims To Spur Job Growth 
for the Unemployed'', CNBC, April 15, 2014, available at http://
www.cnbc.com/id/101581979.
---------------------------------------------------------------------------
Policies That Can Promote Job Creation in the Longer Term
    While investing in infrastructure and apprentices can help create 
jobs in the near term, there is much more to be done to drive job 
creation in the longer term.
    Investments in the middle class following World War II helped build 
the most prosperous economy in the world. Congress made those 
investments in core areas of U.S. competitiveness--our people, our 
infrastructure, and our innovation.
    The G.I. Bill helped almost 8 million American veterans go to 
college or get training and was seen as so successful that it was 
repeated for Korean and Vietnam veterans and further expanded after 
September 11, 2001. \42\ From 1944 to 1956, we invested the equivalent 
of more than $100 billion in 2011 dollars, and our return on that 
investment was the engine of middle-class growth that powered the 
American economy following the Great Depression and World War II. \43\
---------------------------------------------------------------------------
     \42\ Jennifer Erickson, ``Top 10 U.S. Government Investments in 
20th Century American Competitiveness: Why Federal Funding in the 21st 
Century Is Equally Critical to U.S. Science and Economic 
Competitiveness'' (Washington: Center for American Progress, 2012), 
available at http://www.americanprogress.org/issues/economy/report/
2012/01/06/10930/top-10-u-s-government-investments-in-20th-century-
american-competitiveness/.
     \43\ Ibid.
---------------------------------------------------------------------------
    President Dwight D. Eisenhower embarked on one of the most 
ambitious Government spending programs America has ever seen in the 
form of the interstate highway system. In 2011 dollars, we invested 
$468 billion--across multiple administrations headed by both 
Republicans and Democrats--to connect the country with more than 42,000 
center-line miles of road, in what President Eisenhower referred to as 
a ``mighty network'' critical to U.S. competitiveness, safety, and 
defense. \44\
---------------------------------------------------------------------------
     \44\ Ibid.
---------------------------------------------------------------------------
    Taking one example of our research and development investment 
following World War II, in 2011 dollars, we invested $150 billion in 
the Apollo space program. At the height of its efforts, it employed 
400,000 Americans and worked with 20,000 partnering institutions. This 
investment led to massive technological advancement and technology 
transfer in the private sector, leading to more than 1,500 successful 
spinoffs in areas from heart monitors to solar panels. \45\
---------------------------------------------------------------------------
     \45\ Ibid.
---------------------------------------------------------------------------
    The point of these three examples is that we know what works and 
leads to big returns on public investment: investments in our people 
and our innovative environment.
    The question now is this: Are we prepared to invest in ourselves 
once again?
    When it comes to human capital, will we invest in our future 
workers by ensuring all our children have access to high-quality 
preschool education, where economist James Heckman has shown we can 
earn a high return on our educational investment? \46\ Or--in a clear-
eyed realization of the economic and entrepreneurial value of giving 
legal status to aspiring Americans--will we ensure there is a pathway 
to citizenship for the 11 million undocumented immigrants currently 
living in the United States, knowing that the extra jobs and money that 
their status would create would lead to an average annual increase of 
121,000 jobs and a cumulative 10-year boost to GDP of $832 billion? 
\47\ The Senate has already spoken on this, passing a bipartisan bill 
that is still waiting for a vote in the House.
---------------------------------------------------------------------------
     \46\ James J. Heckman and Dimitriy V. Masterov, ``The Productivity 
Argument for Investing in Young Children''. Working Paper 5 (Committee 
on Economic Development, 2004); James J. Heckman, ``Schools, Skills, 
And Synapses'', Economic Inquiry 46(3) (2008): 289-324; James Heckman, 
Seong H. Moon, Rodrigo Pinto, Peter A. Savelyev, and Adam Yavitz, ``The 
Rate of the Return to the High Scope Perry Preschool Program'', Journal 
of Public Economics 94 (2010): p. 114-128.
     \47\ Robert Lynch and Patrick Oakford, ``The Economic Effects of 
Granting Legal Status and Citizenship to Undocumented Immigrants'' 
(Washington: Center for American Progress, 2013), available at http://
www.americanprogress.org/wp-content/uploads/2013/03/
EconomicEffectsCitizenship-6.pdf; Jennifer Erickson and Michael 
Ettlinger, ``300 Million Engines of Growth: A Middle-Out Plan for Jobs, 
Business, and a Growing Economy'' (Washington: Center for American 
Progress, 2013), available at http://www.americanprogress.org/issues/
economy/report/2013/06/13/66204/300-million-engines-of-growth/.
---------------------------------------------------------------------------
    And when it comes to improving our economic environment, since we 
know that advances in science and technology account for roughly half 
of the growth in the U.S. economy since World War II, \48\ are we 
prepared to boost investment in general science, space, and technology 
funding, which was reduced in real terms by about 12 percent from 2010 
to 2013? \49\
---------------------------------------------------------------------------
     \48\ Michael J. Boskin and Lawrence J. Lau, ``Generalized Solow-
Neutral Technical Progress and Postwar Economic Growth'', Working Paper 
8023 (National Bureau of Economic Research, 2000), available at http://
www.nber.org/papers/w8023; Robert M. Solow, ``Technical Change and the 
Aggregate Production Function'', Review of Economics and Statistics 
39(3) (1957):312-320, available at http://www9.georgetown.edu/faculty/
mh5/class/econ489/Solow-Growth-Accounting.pdf.
     \49\ Office of Management and Budget, ``Historical Tables'', 
available at http://www.whitehouse.gov/omb/budget/Historicals (last 
accessed May 2014).
---------------------------------------------------------------------------
    In fact, according to Michael Linden, the period from 2010 to 2013 
saw ``the largest three-year reduction in Federal spending since the 
demobilization at the end of the Korean War.'' \50\ Since we all have 
an interest in responsible public finance, we must recognize that 
responsible public finance includes responsible public investment. 
Cutting investments at a time when the global economy is getting ever 
more competitive is short sighted in the extreme and risks the very 
innovation economy that our workers and our businesses--aided by smart 
Government investment--have worked so diligently to build.
---------------------------------------------------------------------------
     \50\ Linden, ``It's Time To Hit the Reset Button on the Fiscal 
Debate''.
---------------------------------------------------------------------------
    Additionally, while we need to invest in our human capital and our 
economic environment, we also must take great care not to repeat the 
mistakes of the past that will decimate employment. Millions of 
Americans are still reeling from the after-effects of the financial 
crisis and Great Recession, including long-term unemployment and lost 
household wealth. In fact, the Council of Economic Advisers calculated 
that during this period, Americans lost more than $13 trillion in 
wealth. \51\ So as a start, we must see through the landmark reforms 
from the Dodd-Frank Wall Street Reform and Consumer Protection Act to 
ensure that the era of ``too big to fail'' has truly passed and empower 
regulators with the tools they need to do the job required for the 
American people.
---------------------------------------------------------------------------
     \51\ Council of Economic Advisers, The Economic Impact of the 
American Recovery and Reinvestment Act Five Years Later (Executive 
Office of the President, 2014), available at http://www.whitehouse.gov/
sites/default/files/docs/cea_arra_report.pdf.
---------------------------------------------------------------------------
Conclusion
    We know how the economy works: Securing America's middle class is 
the path to strengthening U.S. economic growth now and for the long 
term. If we are going to have a vibrant economy producing good-paying 
jobs, we need that economy to be fueled by a strong and growing middle 
class that can supply the human capital, entrepreneurship, and stable 
demand to drive our economy.
    Some of the policies discussed today can have an immediate effect 
in driving job creation, such as investing in infrastructure and 
expanding apprenticeships. Others, such as investing in our next 
generation of workers who are just starting their educational journeys 
and funding research and development, will take decades to bear fruit. 
But the sooner we acknowledge that smart Government policies that 
support a strong and growing middle class are key to our economic 
success, the sooner we will see more Americans in good-paying, middle-
class jobs.
                   PREPARED STATEMENT OF DEREK SMITH
           Chief Executive Officer, Clean Energy Works Oregon
                              May 7, 2014
    Mr. Chair, Members of the Committee, my name is Derek Smith. I am 
CEO of Clean Energy Works, based in Portland, Oregon. Thank you for the 
opportunity to speak with you this afternoon; and thank you, Senator 
Merkley, for your leadership on clean energy and economic development.
    Clean Energy Works is a nonprofit, public-private partnership. Our 
mission is to create jobs and reduce energy waste through the 
facilitation of home energy retrofits. We coordinate and deploy public, 
private, and utility dollars to scale up the residential energy 
efficiency sector.
    We were founded four years ago as a City of Portland pilot project 
seeded with Recovery Act dollars. I am here to report that this smart 
Federal investment is proving that residential energy efficiency can 
create quality jobs and unlock private capital to grow a vibrant 
marketplace.
    To date, our statistics include:

    12,000 sign-ups

    3,700 homes upgraded in rural, suburban and urban 
        communities

    30 percent average energy savings per home

    More than $1.5 million put back into the pocketbooks of 
        Americans instead of being spent on energy waste

    As for jobs, we know through our work that, for every 10 homes 
upgraded, one job gets created. To date, we've enabled:

    1,300 workers receiving paychecks

    400 new-hires in the hard-hit construction industry

    $21/hour average wages across multiple trades, from 
        weatherization to plumbing to electrical to HVAC

    56 percent of work hours performed by women and people of 
        color

    36 veterans working on projects

    $65 million in economic development

    And counting . . .

    Before we began our work, this market was 200 homes per year and 
workers were paid piece-rate wages averaging around $9/hour. We are now 
lifting people out of poverty and into career pathway professions.
    How do we generate these numbers? It all comes down to making it 
easy for citizens to upgrade their homes for energy efficiency. The way 
it works for a homeowner is:

  1.  They sign up at our Web site

  2.  We arrange for an assessment of their home and pair them with a 
        vetted contractor

  3.  A scope of work is drafted and agreed upon by the contractor and 
        homeowner

  4.  We arrange financing from a local lender

  5.  We provide quality control and customer service throughout the 
        project

    Currently, more than 100 small- to medium-sized contracting firms 
are growing their businesses in the program. And multiple private 
lenders are providing unsubsidized financing. These lenders include 
several credit unions, a regional bank and a community development 
financial institution. Loan products include secured, unsecured, home 
equity and ``on-bill,'' meaning customers can pay back their loans on 
their utility bills. So private investment is happening, initially 
spurred on by public investment.
    As you know, retrofitting inefficient homes puts energy savings 
back into the wallets of American families and communities. A 
coordinated effort to retrofit America's housing stock would create 
hundreds of thousands of U.S. jobs in some of the hardest hit 
industries, including construction and manufacturing. These are 
primarily small business jobs that cannot be outsourced, using 
materials that are on average 90 percent made in the U.S.A. \1\ In 
Oregon alone, we estimate there are 600,000 homes in need of 
weatherization, an $8 billion opportunity that could create 60,000 
jobs.
---------------------------------------------------------------------------
     \1\ Home Performance Resource Center: Manufacturing Shares of 
Common Energy Remodeling Products.
---------------------------------------------------------------------------
    Plus, energy efficiency is unique in that it creates its own cash 
flow--less money spent on energy means more money to purchase groceries 
and save for college. Simply put, saving energy pays for itself.
    So I'd like to conclude by highlighting a few policy issues for 
your consideration.
National Policy Challenge--Utility Coordination
    Utility dollars are regulated at a State level and are exclusively 
focused on energy savings, blind to economic opportunity, driven by 
lowest cost, and so they inadvertently foster cheap wages and minimal 
career advancement. Even though there may not be direct Federal 
jurisdiction, I point this out as a national policy issue because, when 
you send public dollars into the energy efficiency sector--a proven 
smart investment that creates jobs and unlocks private capital--public 
utility commission oversight formulas consider this leverage an 
unwelcome challenge. The result is the potential pullback of utility 
investment. It is our experience that continued growth in energy 
efficiency can be optimized when public, private and ratepayer dollars 
are effectively coordinated.
National Policy Opportunities--Real Estate Valuation
    The Sensible Accounting to Value Energy (SAVE) Act, S. 1106, was 
introduced by Senators Bennet (D-Colo.) and Isakson (R-Ga.) in June of 
last year. This legislation would improve the accuracy of mortgage 
underwriting used by Federal mortgage agencies by including energy 
efficiency as a factor in determining the value and affordability of a 
home.
    The SAVE Act is a prudent addition to Federal underwriting 
guidelines as it incorporates the second largest cost of home 
ownership--energy costs, which exceed both taxes and insurance as a 
monthly expense. It is not a mandatory addition to such policies, but 
only comes into play if the consumer is buying a new energy efficient 
home or seeking to improve the efficiency of an older home. In fact, 
consumers in older homes have been significantly allocated a larger 
part of their remodeling expenditures to energy efficiency according to 
the Harvard Joint Center. \2\
---------------------------------------------------------------------------
     \2\ http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/
harvard_jchs_remodeling_report_2013.pdf
---------------------------------------------------------------------------
    The inclusion of net energy savings in the debt-to-income 
calculation is not a liberalization, but a long overdue prudent 
addition to correct a ``blindspot'' in underwriting. A car loan or 
credit card debt is included in the debt burden, but not the energy 
cost, which may be higher. Although the SAVE Act does not call for a 
mandatory inclusion, it allows for the recognition of cost-effective 
savings from rated properties to be included. For example, if the 
monthly additional mortgage cost to obtain a new or improved home is 
$50 a month, but the monthly savings are $95, the residual $45 only can 
be recognized as a net energy savings. I would argue that it is not a 
coincidence that the Veterans Administration, the only federally 
insured entity that includes a proxy for energy costs, had the best 
mortgage performance over the recent housing crisis cycle. Although 
anecdotal, many housing counselors have reported that, in performing 
troubled homeowner counseling, energy costs were a large and relatively 
fixed component of monthly expenses that were harder to adjust relative 
to other expenses such as cutting down discretionary spending or 
selling a second car.
    The appraisal feature of the bill has been supported by the 
Appraisal Institute and the Congressionally chartered Appraisal 
Foundation as consistent with generally recognized valuation methods 
and techniques.
    It is also important to note how mortgages for such homes actually 
have actually performed over time. The University of North Carolina 
studied the performance of energy efficient homes versus a matched 
sample for the period from 2001 to 2012. \3\ It found that the energy 
efficient homes foreclosed on average 32 percent less than their 
similar neighbors. Furthermore, they stayed in their homes on average 
25 percent greater period of time possibly indicating greater 
satisfaction due to comfort and lower operating costs.
---------------------------------------------------------------------------
     \3\ http://www.imt.org/uploads/resources/files/
IMT_UNC_HomeEEMortgageRisksfinal.pdf
---------------------------------------------------------------------------
    Over 50 national organizations have signed on as supporters of the 
SAVE Act. What is of interest is the diversity of the group, including 
leading organizations representing business (NAM and the Chamber), 
housing (NAHB, NAR, and LBA), industry (Dow, Johns-Manville, and BASF), 
as well as energy efficiency-focused NGOs (ACEEE, NRDC, and ASE) and 
Efficiency First, a home performance business trade association of 
which Clean Energy Works is proud to be a member. They all recognize 
the changes happening in the housing industry and agree on the benefits 
of prudent underwriting support as well as savings to consumers and 
strengthening of the economy and job formation in our communities.
National Policy Opportunities--Financing
    While I have noted here today how valuable home energy efficiency 
may be, despite its value, it is severely under-utilized. There remain 
significant market barriers that prevent this vital resource--energy 
efficiency--from being tapped more effectively. Homeowners are being 
asked to make these investments not only because we want them to save 
money on their utility bills, but because this reduces costs across the 
energy system as a whole, and also to achieve broader goals such as 
energy independence, pollution reduction, job creation. However, we are 
not properly valuing these very real public and resource benefits 
energy efficiency provides. Instead, we are asking homeowners to pay 
for the full cost of these improvements, often up front and out of 
pocket.
    One of the key shifts to begin accounting for the multiple benefits 
of energy efficiency is to move towards accounting for energy 
efficiency as a resource, the demand reduction equivalent of supply-
side energy production. Reducing demand on the grid through energy 
efficiency is akin to building power plants, only cheaper, 100 percent 
domestic and completely clean.
    We know how to finance power plants. Due to the structure, 
protections and oversight in place, power plants supply a stable and 
predictable amount of energy to an established and reliable market. 
Utilities can raise capital to make investments in projects to 
increasing the Nation's energy supply, however, we lack the same mature 
capital sources and markets for energy efficiency, even though it is 
widely understood to be the most cost effective resource for meeting 
our energy needs.
    We need to begin to treat residential energy savings as distributed 
demand-side power plants that will ultimately, at least in part, be 
paid for based on their ability to deliver an energy saving resource to 
the grid. To accomplish this, we must more rigorously measure and 
account for the performance of energy efficiency improvements.
    Historically, energy efficiency incentives have largely been 
targeted at specific technologies and individual improvements. 
Transitioning these incentives to a performance-based paradigm that 
links incentives to actual savings allows for technology and business 
model neutrality. Rather than attempting to maintain an up-to-date list 
of equipment specification or picking winning technologies or special 
interests, offering incentives based on savings at the meter can free 
up the tax code from keeping pace with an ever-changing industry. Most 
importantly, it creates a system that is flexible and rewards 
innovation.
    Senators Cardin, Feinstein, and Schatz introduced S. 2189, the 
Energy Efficiency Tax Incentives Act last month. This legislation 
includes the first performance based energy efficiency tax incentive--
25E in the tax code. This tax incentive would provide between $2,000-
$5,000 to homeowners based on their energy savings. And, public dollars 
would be targeted toward public goods, energy savings. This approach 
would let the market determine the technology put in the home. Tax 
dollars would be investing in those minipower plant savings and the 
multipublic benefits those savings provide.
    Thank you very much for your support and consideration.
                                 ______
                                 
                 PREPARED STATEMENT OF EMIL H. FRANKEL
               Visiting Scholar, Bipartisan Policy Center
                              May 7, 2014
    Thank you, Chairman Merkley, Ranking Member Heller, and Members of 
this Senate Banking, Housing, and Urban Affairs Subcommittee on 
Economic Policy for the opportunity to address on the important issue 
of the economic returns and job growth benefits of investment in 
infrastructure. This has been a matter that has dominated our work on 
transportation and infrastructure policy at the Bipartisan Policy 
Center (BPC), where I am currently a Visiting Scholar. I directed BPC's 
National Transportation Policy Project (NTPP) that issued a series of 
reports and white papers between 2009 and 2012, which, among other 
matters, addressed the inter-relationship between transportation and 
infrastructure investment and benefits to the broader economy.
    Most relevant, in January, 2011, NTPP issued a white paper, 
entitled ``Strengthening Connections Between Transportation Investments 
and Economic Growth'', coauthored by two members of NTPP, Douglas 
Holtz-Eakin, a distinguished economist and former Director of the 
Congressional Budget Office (CBO), and Martin Wachs, one of America's 
leading scholars of transportation and urban planning during a long 
career at the University of California, Berkeley, UCLA, and RAND 
Corporation. I will refer to this white paper during my testimony this 
morning.
    Increasingly, over the past 25 years, as a State and Federal 
transportation official, a consultant, teacher, and policy contributor 
on transportation and infrastructure issues, I have come to appreciate 
the role that these investments play in building economic growth and 
prosperity. Throughout American history, even before the birth of the 
Republic, investments in roads and canals (the so-called ``internal 
improvements'' that Henry Clay and Abraham Lincoln and their Whig 
colleagues espoused), railroads and ports, highways and aviation have 
characterized public policy and have influenced--perhaps, more than any 
other single thing--where cities are located and whether they grow or 
decline. From Albert Gallatin, Thomas Jefferson's Treasury Secretary, 
to Dwight Eisenhower, America's leaders have spoken of the economic and 
political significance of wise infrastructure investments. In the words 
of Gallatin, ``Good roads and canals will shorten distances, facilitate 
commercial and personal intercourse, and unite, by a still more 
intimate community of interests, the most remote quarters of the United 
States. No other single operation, within the power of Government, can 
more effectually tend to strengthen and perpetuate that Union which 
secures external independence, domestic peace, and internal liberty.''
    In my own teaching I have made extensive use of a book by a 
distinguished economist, Peter Bernstein, Wedding of the Waters. It's 
about the construction of the Erie Canal in the early years of the 19th 
Century. Its development was, of course, a marvel of surveying, 
engineering, and construction at the time, but what Bernstein is most 
interested in is the extraordinary impact that this infrastructure 
investment had on the economy of the State, the region, and the Nation. 
The Erie Canal connected the newly settled areas of the Mid-West and 
Great Lakes regions to the original States, and allowed the 
agricultural products and natural resources to reach Eastern and world 
markets, and for industrial products to reach what was then America's 
frontier. New cities were born, like Buffalo and Syracuse, and older 
cities took on new and prosperous economic functions, like Albany and, 
of course, New York City. The Erie Canal reinforced New York City's 
preeminent position, as America's center of finance, commerce, and 
international trade, a position that it has held for over 200 years. In 
a word, the Erie Canal created what we have known as the American 
economy.
    Similarly, as William Cronan, distinguished University of Wisconsin 
historian, demonstrated in his monumental Nature's Metropolis, the 
coming of the railroads to Chicago fundamentally changed the economies 
and the natural and built environments of that great city and of the 
Plains and other western regions of America, by making it possible for 
the products of America's ``Great West'' to reach national and regional 
markets.
    In a March 2012 report of President Obama's Treasury Department 
with the Council of Economic Advisors (CEA), it was noted that the 
United States has a rich history of investing in infrastructure and 
reaping the long-term benefits. Those benefits include both the short-
term effects of stimulating the maintenance and creation of 
construction and construction-related jobs and long-term economic 
growth. It seems that every surface transportation authorization bill, 
at least since ISTEA in 1991 (and probably before), has been justified 
on the basis of stimulating construction employment, the so-called 
``jobs' multiplier'' effect. Elected and appointed officials are fond 
of talking about 20,000 or 30,000 or 50,000 new jobs' being created for 
every $1 billion of investment, as justification for legislation. I 
have done so, myself.
    While infrastructure investments play an important role, in 
stimulating construction jobs, quantifying the so-called multiplier 
effect is, perhaps, more difficult than it sometime appears. Certainly, 
infrastructure projects can be important, in stimulating new 
construction and construction-related positions, particularly, in times 
of severe unemployment in construction, as was the case during the 
``Great Recession,'' which America has recently endured. However, there 
are substantial uncertainties, in predicting such job growth, and 
therefore it should not be the sole basis for justifying public 
investment in infrastructure.
    As Holtz-Eakin and Wachs noted in the BPC white paper, to which I 
have referred, ``Spending on transportation is often justified on the 
basis of jobs impacts, but estimated multiplier effects carry 
substantial uncertainty. Generally, they are not purely data-driven; 
rather they rely on judgments and assumptions, may not take into 
account aspects of the structure or timing of an investment that would 
have an impact on its actual multiplier effects, and may miss qualities 
of the specific economic environment in which an investment is being 
made. These uncertain estimates about how many jobs will be created by 
a given increment of transportation spending too often obscure 
meaningful comparative assessment of different investment 
opportunities.''
    As the BPC white paper further noted, ``Short-term job creation, 
while vitally important, must be viewed within the context provided by 
a long-term view. Over the long-term, higher productivity . . . is the 
key to higher labor earnings and improved standards of living.'' It is 
the long-term economic benefits, in terms of productivity, efficiency, 
access to markets, and labor force flexibility, which should be the 
goals and purposes of public investment in transportation and other 
infrastructure projects and programs. The March 2012 Treasury-CEA 
report noted that investments in infrastructure allow goods and 
services to be transported more quickly and at lower costs, resulting 
in both lower prices for consumers and increased profitability for 
firms. This report also concluded that infrastructure investment 
created middle-class jobs. It reached this conclusion, based on an 
analysis that 80 percent of the jobs created by investing in 
infrastructure would be in the construction, manufacturing, and retail 
sectors and that, by distribution of wages in these three sectors, 90 
percent of these jobs would be defined as middle-class jobs, that is, 
between the 25th and 75th percentiles in the national distribution of 
wages.
    However, selecting and supporting those infrastructure investments 
that promise the greatest short- and long-term economic benefits in a 
time of persistent budget deficits and stagnant public spending is a 
difficult challenge to public policy leaders. Public investment capital 
is constrained, not least by a political environment that often views 
``investment,'' as just another category of spending, and by a 
political process that seems incapable of establishing sustainable 
revenue streams for such investments.
    Surface transportation funding at the Federal level has been 
stagnant for several years, and the motor fuels taxes, on which such 
funding depends, have not been increased in over 20 years. As BPC's 
transportation policy project noted in its June 2011 report, ``The 
reality is that Federal transportation spending is likely to be under 
enormous pressure for some time to come, despite compelling evidence 
that we have been falling consistently short of making the 
infrastructure investments needed to sustain an efficient, safe, 
environmentally sustainable, and well-functioning transportation 
network.'' The same may be said about all other areas and categories of 
infrastructure.
    The priority, then, needs to be on making ``wise'' infrastructure 
investments, that is, those that promise the greatest economic 
benefits, in terms of increased productivity, efficiency, and job 
creation. Unfortunately, although there are exceptions, America does 
not have in place an analytical, planning, and capital programming 
framework that allows such investment decision-making to occur. We need 
to be able to develop comprehensive strategic capital programs, in 
which investments are synergistic and prioritized, and, pursuant to 
which, scarce resources are directed to the most promising projects.
    For many years, Edward Gramlich, a distinguished economist and 
former Federal Reserve Governor, argued that the greatest returns could 
be found with investments in existing assets. This view was consistent 
with the analytical approach of a report several years ago to the 
United Kingdom's Treasury and Department for Transport (DfT) by Sir Rod 
Eddington, former CEO of British Airways (the Eddington Report). The 
Eddington Report concluded that, generally, the most positive benefits, 
in relation to costs occurred with incremental improvements to existing 
facilities and networks, rather than from large ``build-it-and-they-
will-come'' projects.
    Most important, and relevant, about the Eddington Report, however, 
was its application of benefit-cost analyses to competing projects and 
its reliance on economic factors, in making choices about the 
investment of constrained public resources. For example, it found that, 
given the tremendously important role of the London metropolitan region 
to the national economy and of the movement of goods and services to, 
from, and through a national system deeply dependent upon global trade 
and finance, investments in the assets and networks critical to these 
elements of the British economy were, by far, the most beneficial.
    Similarly, the decision about an enormous public infrastructure 
investment--about $20 billion (U.S.) for the development and 
construction of an entirely new subway line across metropolitan 
London--in a time of severe austerity was justified on the basis of a 
strong business case that completion of the new Crossrail line would 
serve to enhance mobility and access in London and benefit the 
agglomeration of financial and related services, on which the British 
economy has come to depend for economic growth and prosperity.
    Of course, neither the Eddington Report nor the business case for 
Crossrail has perfect application to the decisions that America's 
public leaders have to make about infrastructure investments, but the 
analytical and decision-making processes that have been used in those 
cases do seem relevant to the United States. We need to be able to make 
better and ``wiser'' infrastructure decisions in the context of scarce 
public investment resources, stagnant Federal infrastructure funding, 
and the unwillingness of Congress to provide for sustainable revenue 
sources to support such investments.
    Of course, these circumstances stimulate other significant Federal 
policy changes, in order to respond to the need for greater 
infrastructure investment. For one thing, as Federal infrastructure 
funding stagnates, the investment burden is falling more heavily on 
States and localities. Limited Federal funds have to be used more 
effectively to leverage greater public and private investment at those 
levels. My BPC colleague, Aaron Klein (a distinguished alumnus of this 
Committee staff) and I argued in an OP/ED a few months ago that the 
Federal role in infrastructure was, increasingly, moving from funding 
to financing. This calls for the expansion of existing Federal loan and 
credit enhancement vehicles, like TIFIA, as well as consideration of 
new ones, such as infrastructure banks and financing authorities. But 
expanded Federal financing requires the establishment of appropriate 
revenue streams at the State and local level to support Federal credit 
and provide returns to private investors. To that end, Federal barriers 
to State and local innovations to establish such sustainable revenue 
sources should be eliminated, and such State and local innovations 
should be incentivized by Federal policy.
    None of these policy initiatives, however, remove the need to make 
better and wiser choices. Public capital resources at all levels will 
remain scarce for the indefinite future, so investments must be made in 
those infrastructure projects and programs that promise the greatest 
economic returns, both in the short-term and the long-term. Analytical 
and decision-making tools are available to us, in order to select the 
right infrastructure investments. It is critical that America's public 
officials use those tools on a consistent basis.
                                 ______
                                 
                   PREPARED STATEMENT OF ROBERT DIETZ
  Vice President for Tax and Market Analysis, National Association of 
                             Home Builders
                              May 7, 2014
    On behalf of the 140,000 members of the National Association of 
Home Builders (NAHB), I appreciate the opportunity to testify today. My 
name is Robert Dietz, and I am an economist and Vice President for Tax 
and Market Analysis at NAHB. My area of focus includes housing market 
and home building industry analysis, as well as tax and other policy 
issues. I received a Ph.D. in economics from The Ohio State University 
in 2003.
    NAHB is a Washington, DC-based trade association whose broad 
mission is to enhance the climate for housing, home ownership and the 
residential building industry. We represent builders and developers who 
construct housing ranging from single-family for-sale homes to 
affordable rental apartments and remodelers. About one-third of NAHB's 
members are home builders and/or remodelers. The others are associates 
working in closely related specialties such as sales and marketing, 
housing finance, and manufacturing and supplying building materials.
The State of Employment in the Residential Construction Sector
    After experiencing significant job losses during the Great 
Recession, the residential construction sector is adding jobs to the 
national economy as housing construction recovers. According to Census 
Bureau data, in 2005 total housing starts reached an historic high of 
2.068 million: 1.716 million single-family and 352,000 multifamily 
homes. Leading into the housing crisis and the Great Recession, the 
pace of home construction declined significantly. Construction activity 
declined from 2006 to 2009, reaching an annual total of only 554,000 
total housing starts in that year: 445,000 single-family and 109,000 
multifamily.
    Since that time, and particularly over the course of 2012 and 2013, 
home construction recovered as housing demand strengthened due to 
overall job growth and household balance sheet repair. For 2013, 
housing starts totaled 925,000: 618,000 single-family and 307,000 
multifamily units.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Driven by declines in home equity and the volume of existing home 
sales, remodeling activity also declined during the recession--although 
not as much--and has also begun to expand. In 2006, home improvement 
related spending peaked at $144.9 billion. As the pace of existing home 
sales declined during the recession, remodeling felt the impact, 
falling to $111.6 billion in 2010. For 2013, the sector expanded off 
cycle lows, reaching $134 billion for the year.
    With activity declines in all three subsectors of the residential 
construction industry (single-family, multifamily, and remodeling), 
significant jobs losses were incurred. Data from the Bureau of Labor 
Statistics reveals that at peak employment in April 2006, the 
residential construction sector employed 3.45 million people (1.022 
million builders and 2.428 specialty contractors). \1\ From April 2006 
until January 2011, the industry lost 1.466 million jobs.
---------------------------------------------------------------------------
     \1\ ``Construction Job Openings Cool at the Start of 2014''. NAHB 
Economics and Housing Policy blog post: http://eyeonhousing.org/2014/
04/08/construction-job-openings-cool-at-the-start-of-2014/
---------------------------------------------------------------------------
    Since that time, the expansion in home building and remodeling has 
added jobs back to the sector. Over the last two and half years, 
274,000 jobs have been added by home builders and remodelers. Over the 
course of the last year alone, 108,000 jobs were added. \2\ More are 
expected with continued gains in construction activity. Currently the 
industry employs 659,000 individuals in the builder category and 1.598 
million as residential specialty contractors, for an industry total of 
2.257 million.
---------------------------------------------------------------------------
     \2\ ABLS Data and NAHB Calculations''. April BLS Employment 
Report. May 2, 2014.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    NAHB is forecasting that single-family construction activity will 
expand by 22 percent in 2014 to a total of 760,000 starts. The 
multifamily sector should see modest growth of 6 percent to a total of 
326,000 starts. This represents a slightly cooling from the substantial 
growth witnessed during the 2011-2013 period. Finally, NAHB is 
forecasting that remodeling related activity will grow 3.1 percent 
during 2014, which represents a slowing of growth as existing home 
sales subside.
    The industry still has room to grow. At its most fundamental level, 
the demand for new homes is determined by the growth of population and 
households, as well as the need to replace older housing stock or to 
accommodate changes in the location of regional economic activity. 
Thus, while the forecasted 2014 numbers for home construction represent 
substantial improvements over the lows set after the recession, these 
totals are still off from the potential or normal levels of activity.
    As the following chart illustrates, the Nation can expect 
population growth and rising household formation in the years ahead. 
The yellow bar in the graph highlights key ages for household formation 
(25-35). We are currently entering a period in which the size of the 
population entering these key years is on the rise, with roughly 4 
million currently aged 35 but 4.6 million aged 22. These ``echo 
boomers'' will increase demand for both rental and owner-occupied 
housing in the years ahead.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    NAHB estimates that total housing construction should over the next 
few years return to a level just under 1.7 million combined single-
family and multifamily starts per year. The forecasted first quarter 
2014 level of single-family construction represents only 45 percent of 
this normal or expected level of activity. By the end of 2015, NAHB is 
forecasting that single-family activity will have improved to 
approximately 93 percent of this benchmark.
Virtuous Circle of Housing and Jobs
    Housing and jobs form a virtuous circle in which employment growth 
for a local economy increases the demand for home construction, which 
in turn creates additional jobs. NAHB has developed a model that uses 
Government data to estimate the complete interactive economic benefits 
that arise with residential construction. \3\ The model employs the 
input-output accounts from the Bureau of Economic Analysis to track the 
impacts from home construction on other sectors of the economy. These 
additional impacts are traced and summed to estimate the aggregate 
impacts on wages, business income, jobs, and taxes.
---------------------------------------------------------------------------
     \3\ ``Impact of Home Building and Remodeling on the U.S. 
Economy''. NAHB Economics and Housing Policy. http://www.nahb.org/
generic.aspx?sectionID=734&genericContentID=227858&channelID=311
---------------------------------------------------------------------------
    The 2014 estimates for this model find the following:

    Building an average single-family home produces 2.97 jobs 
        (full-time equivalents) o $110,957 in Federal, State, and local 
        taxes

      $162,080 in wages and salaries

      $118,354 in business income

    Of the 2.97 jobs per home, 1.76 are in construction, with the 
remainder in other sectors including manufacturing, wholesale and 
retail trades and other industries.

    Building an average rental apartment produces 1.13 jobs 
        (full-time equivalents)

      $42,383 in Federal, State, and local taxes

      $60,877 in wages and salaries

      $46,838 in business income

    Of the 1.13 jobs per multifamily unit, 0.68 are in construction, 
with the remainder in other sectors including manufacturing, wholesale 
and retail trades and other industries.

    $100,000 in remodeling expenditures produces 0.89 jobs 
        (full-time equivalents)

      $29,779 in Federal, State, and local taxes

      $48,212 in wages and salaries

      $35,190 in business income

    Of the 0.89 jobs per multifamily unit, 0.55 are in construction, 
with the remainder in other sectors including manufacturing, wholesale 
and retail trades and other industries.
    Additional data from the Bureau of Labor Statistics Occupational 
Employment Statistics (OES) provide details concerning the types of 
jobs created by home builders. \4\ The OES survey defines employment as 
the number of workers who are classified as full- or part-time 
employees. The following profile examines the Residential Building 
Construction industry group, which includes builders of for-sale and 
owner/contractor built single-family and multifamily housing, as well 
as residential remodelers.
---------------------------------------------------------------------------
     \4\ ``Jobs in Home Building and Remodeling''. NAHB Economics and 
Housing Policy. http://eyeonhousing.org/2014/02/11/jobs-in-home-
building-and-remodeling/ 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    According to the 2012 OES, management jobs constituted 
approximately 9 percent of jobs in the residential construction 
industry, for a total of more than 48,000 positions. Office and 
administrative support made up the second largest category, which at 
just under 80,000 jobs represented 14 percent of sector employment. 
Sales staff and business/finance roles each made up about 4 percent of 
home building business jobs, each contributing approximately 24,000 
jobs.
    Other jobs in home building, generally representing about 6 percent 
in combination, include architects, lawyers, designers, building/
grounds maintenance staff, security guards, drivers, and IT staff.
    Not surprisingly, the largest share of home building/remodeling 
employment is concentrated in construction and extraction jobs. For 
2012, more than 363,000 jobs were in such fields. The following chart 
provides a breakdown of these jobs.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Carpenters make up almost half of construction/extraction jobs (47 
percent), for a total of more than 171,000 jobs. The OES defines 
carpenters as workers who construct, erect, install, or repair 
structures made of wood. It also includes workers who install cabinets, 
drywall, siding, and insulation. Approximately 30 percent of carpenters 
nationwide are employed by the residential building construction 
sector.
    Rounding out the construction segment of industry employment are 
construction laborers, worksite supervisors, brickmasons, stonemasons, 
carpet/tile installers, cement masons, equipment operators, drywall 
installers, electricians, glaziers, insulation workers, painters, 
plumbers, plasters, rebar workers, roofers, and sheet metal workers.
    Besides involving a variety of occupations, this base of employment 
has wide geographic scope. The following map uses 2011 data from the 
U.S. Census to chart by county builder and remodeler employment across 
the Nation. \5\
---------------------------------------------------------------------------
     \5\ ``A Nation of Builders''. NAHB Economics and Housing Policy. 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Additional data from the 2012 OES provides details concerning the 
wages paid by these occupations. \6\ The following charts present 
median wages by occupations for workers in home building and 
remodeling. Annual wages are calculated, by the BLS, as the hourly wage 
paid on a 2,800 hour annual basis. Wages are measured on a gross pay 
basis, but certain bonuses and employer paid benefits are excluded. 
Occupations with median wages in excess of the U.S. median represent 
approximately 80 percent of total employees.
---------------------------------------------------------------------------
     \6\ ``Wages in Home Building and Remodeling''. NAHB Economics and 
Housing Policy. http://eyeonhousing.org/2014/02/12/wages-in-home-
building-and-remodeling/

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The second chart breaks out shares of the large element of the 
industry--construction and extraction occupations, which constitute 64 
percent of industry employment. The percentages on this second chart 
are percentages of this 64 percent only.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Taken together, these data demonstrate that as the residential 
construction sector continues its post-Great Recession recovery, 
hundreds of thousands of jobs will be created within the construction 
sector and within other sectors of the economy. These jobs will, among 
other economic impacts, also boost demand for rental and owner-occupied 
housing. For example, given NAHB's forecast for significant single-
family construction growth, approximately 420,000 jobs will be created 
for 2014 in the construction and related business sectors due to 
residential construction growth.
Housing's Contribution to GDP and National Wealth
    From a macroeconomic perspective, housing plays a key role in our 
Nation's economy. As of the first quarter of 2014, housing's share of 
gross domestic product (GDP) was 15.5 percent, with home building 
yielding 3 percentage points of that total. \7\
---------------------------------------------------------------------------
     \7\ ``First Quarter 2014L Housing Share of the Economy at 15.5 
percent''. NAHB Economics and Housing Policy. http://eyeonhousing.org/
2014/04/30/first-quarter-2014-housing-share-of-the-economy-at-15-5/ 


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Housing-related activities contribute to GDP in two basic ways.
    The first is through residential fixed investment (RFI). RFI is 
effectively the measure of the home building and remodeling 
contribution to GDP. It includes construction of new single-family and 
multifamily structures, residential remodeling, production of 
manufactured homes and brokers' fees. For the fourth quarter, RFI was 3 
percent of the economy.
    While the first quarter of 2014 was the fourth strongest level of 
RFI after the Great Recession ($482 billion annualized pace), the 
slowing of the rate of growth for home building was a drag on quarterly 
GDP growth. This was the second consecutive quarter of drag after 12 
straight quarters of boosting economic growth. Nonetheless, the trend 
in recent quarters indicates that RFI is growing faster than the 
economy as a whole. For example, over the last 2 years, the quarterly 
annualized measure of GDP has grown about 3.7 percent, while RFI is up 
15.5 percent.
    The second impact of housing on GDP is the measure of housing 
services, which includes gross rents (including utilities) paid by 
renters, and owners' imputed rent (an estimate of how much it would 
cost to rent owner-occupied units) and utility payments. The inclusion 
of owners' imputed rent is necessary from a national income accounting 
approach because without this measure increases in home ownership would 
result in declines for GDP. For the fourth quarter, housing services 
was 12.5 percent of the economy.
    Historically, RFI has averaged roughly 5 percent of GDP while 
housing services have averaged between 12 percent and 13 percent, for a 
combined 17 percent to 18 percent of GDP. These data illustrate once 
again the room housing has to grow, increasing national income and 
creating jobs.
    Home ownership also represents the most important investment and 
source of savings that most middle class households will undertake. \8\ 
Nationally, the primary residence represents the largest asset category 
on the balance sheets of households. At $20.7 trillion, the primary 
residence accounted for almost one-third, 30 percent, of all assets 
held by households in 2010. The primary residence represented 62 
percent of the median homeowner's total assets and 42 percent of the 
median home owner's wealth. It is also a widely held asset. A greater 
share of households (67 percent) owned a primary residence than held a 
retirement account (50 percent) or stocks and bonds (16 percent).
---------------------------------------------------------------------------
     \8\ ``Homeownership Remains a Key Component of Household Wealth''. 
NAHB Economics and Housing Policy. http://www.nahb.org/
generic.aspx?sectionID=734&genericContentID=215073&channelID=311
---------------------------------------------------------------------------
    Equity in residential property tends to be a particularly important 
component of wealth for lower income, older households. For age 75+ 
households with incomes under $35,000, the median share of net worth 
held as equity in a primary residence is 60 percent. Higher income 
households over age 75 have higher net worth and more equity in a home 
in absolute terms, but equity in a primary residence accounts for a 
smaller share of total net worth. The median residential equity share 
of net worth for households age 75 or older with total income between 
$35,000 and $60,000 was 47 percent and 36 percent for older households 
with income between $60,000 and $100,000. The median residential equity 
share of net worth for the highest-income, older households was 30 
percent.
Housing's Social and Community Benefits
    The impact of housing is not limited to savings and other economic 
outcomes. Be it rental or owner-occupied housing, the residential 
capital stock provides a basic need for shelter. There is a time to 
rent and a time to own a home, with the right decision determined by 
factors such as age, income, family size, expected length of stay in a 
given area, and other factors.
    Hence, ensuring the availability of safe and decent rental housing 
is an important social policy objective. The Low-Income Housing Tax 
Credit (LIHTC), the Nation's only affordable housing production 
program, serves in a critical role in this regard. Since its inception, 
the LIHTC has produced and financed more than 2 million affordable 
apartments. As LIHTC properties must generally remain affordable for 30 
years, they provide long-term rent stability for low-income households 
around the country. But the demand for affordable housing is acute and 
exceeds the availability of financing through the LIHTC program.
    For those ready to meet the financial obligations of owning a home, 
home ownership offers a wide range of benefits to individuals and 
households. \9\ These include increased wealth accumulation, improved 
labor market outcomes, better mental and physical health, increased 
financial and physical health for seniors, reduced rates of divorce, 
and improved school performance and development of children.
---------------------------------------------------------------------------
     \9\ R.D. Dietz and D.R. Haurin, ``The Social and Private Micro-
Level Consequences of Homeownership'', Journal of Urban Economics 54 
(2003) 401-450.
---------------------------------------------------------------------------
    These beneficial financial and social outcomes are due to the 
stability offered by home ownership, as well as the incentives created 
by the process and responsibilities of becoming and remaining a 
homeowner.
    An important motivating factor in the pursuit of home ownership is 
the investment opportunity it offers for many families. As noted 
earlier, despite recent price declines, equity in a home constitutes a 
substantial proportion of a typical American family's wealth. According 
to the 2010 Federal Reserve Survey of Consumer Finances (SCF), the 
median family net worth of a homeowner is $174,500; for renters, it was 
$5,100.
    Home ownership also provides advantages for seniors. A significant 
proportion of a household's wealth is in the form of equity of owner-
occupied housing, and this wealth provides significant advantages in 
retirement. Mayer and Simons (1994) indicate that equity in the home 
and the use of a reverse mortgage could increase liquidity for senior 
households by as much as 200 percent. \10\
---------------------------------------------------------------------------
     \10\ C.J. Mayer, K.V. Simons, ``Reverse Mortgages and the 
Liquidity of Housing Wealth'', AREUEA Journal 22 (1994) 235-255.
---------------------------------------------------------------------------
    These data illustrate the importance of housing wealth and suggest 
caution with respect to policies that would reduce these wealth 
holdings, based on decisions made over a lifetime, via direct policy 
changes or indirect changes.
    Overall, economists, sociologists and other social scientists have 
found significant, positive home ownership-related impacts on a large 
set of outcomes associated with households and communities. \11\ For 
these and other positive impacts, home ownership has and should 
continue to remain an important national policy objective.
---------------------------------------------------------------------------
     \11\ Two comprehensive literature reviews detailing the impacts of 
home ownership are: W. M. Rohe, G. McCarthy, S. Van Zandt, ``The Social 
Benefits and Costs of Home Ownership: A Critical Assessment of the 
Research'', Research Institute for Housing America, Working Paper No. 
00-01 (2000); R. Dietz and D. Haurin, ``The Social and Private 
Microlevel Consequences of Home Ownership'', Journal of Urban Economics 
54 (2003) 401-450.
---------------------------------------------------------------------------
Industry Headwinds
    While the housing sector has considerable room to grow given 
population and household growth, the ongoing recovery has seen month-
to-month volatility. In fact, recent data (particularly for existing 
home sales, but also for housing starts) indicate that the unseasonably 
cold winter sapped some of the momentum that the housing market carried 
into 2013. Beyond seasonal factors, other headwinds will challenge the 
recovery in home construction. These factors include access to building 
lots, rising building materials, access to builder credit, and labor 
shortages for some tasks in some markets.
    As noted earlier, housing demand is recovering in most markets. 
However, to meet that demand, home builders must have access to 
developed, ready-to-build lots. The supply of lots in many markets is 
low, and for smaller builders this constraint is the primary reason for 
not being able to build homes. Partially, the lack of lots is connected 
to another headwind: lack of credit. Home builders and developers must 
have access to credit or equity to build homes or develop lots. Such 
lending, which typically comes from community bank, \12\ is known as 
acquisition, development and construction (AD&C) financing.
---------------------------------------------------------------------------
     \12\ ``Smaller Banks Are the Largest Source of AD&C Lending''. 
NAHB Economics and Housing Policy. http://eyeonhousing.org/2014/04/21/
smaller-banks-are-the-largest-source-of-adc-lending/
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    AD&C lending was severely curtailed during the housing crisis. \13\ 
At the low point for lending, the stock of loans was down approximately 
80 percent. While lending conditions have begun to ease (according to 
NAHB industry surveys \14\ and FDIC indicates that the stock of 
outstanding loans rose by approximately 7 percent over the course of 
2013, a lending gap persists that is filled, when possible, by 
nontraditional sources of financing. Nonetheless, lending for smaller 
builders and developers represents a significant bottleneck for the 
ongoing recovery in home construction.
---------------------------------------------------------------------------
     \13\ ``Stock of AD&C Loans up More Than 7 Percent During 2013''. 
NAHB Economics and Housing Policy. http://eyeonhousing.org/2014/02/27/
stock-of-adc-loans-up-more-than-7-during-2013/ 
    \14\ ``AD&C Lending Conditions Ease Slightly at the End of 2013''. 
NAHB Economics and Housing Policy. http://eyeonhousing.org/2014/02/24/
adc-lending-conditions-ease-slightly-at-the-end-of-2013/
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    Rising building material prices are both a challenge and a sign of 
the recovery and growth in residential construction. \15\ Gypsum prices 
have risen by 10 percent to 20 percent at the beginning of the last 
three years. And softwood lumber and oriented strandboard prices have 
risen significantly over the last three years, with occasional spikes 
in prices when demand exceeds manufacturing capacity. Some easing in 
building material prices has been seen when new factories and material 
sources come online, but the rising cost of construction is a factor 
that keeps some building projects from proceeding.
---------------------------------------------------------------------------
     \15\ ``Producer Price Index Up for March''. Economics and Housing 
Policy. http://eyeonhousing.org/2014/04/11/producer-price-index-up-for-
march/ 


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Another significant headwind is local labor shortages, particularly 
for some skilled labor positions. \16\ NAHB industry surveys report 
that securing workers for projects for specific time periods has become 
increasingly difficult as the pace of home construction accelerated. 
Data from the Bureau of Labor Statistics Job Openings and Labor 
Turnover Survey (JOLTS) provides an illustration of the degree to which 
the rate of unfilled job openings in the construction sector is rising.
---------------------------------------------------------------------------
     \16\ ``Construction Jobs Openings Cool at the Start of 2014''. 
NAHB Economics and Housing Policy. http://eyeonhousing.org/2014/04/08/
construction-job-openings-cool-at-the-start-of-2014/
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    As of February 2014, the 3-month moving average of the construction 
job openings rate stood at 2 percent, slightly lower than the 2.33 
percent in December but a higher rate of unfilled jobs than any post-
recession period before October 2013. Currently there are 273,000 
unfilled jobs in the construction industry. The rate of open jobs in 
the construction industry has risen significantly since the spring of 
2012.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Finally, while housing demand should improve, given the sources of 
pent up demand and population growth, uncertainties with respect to the 
tax and finance rules that govern homebuying and home building act as 
additional business challenges to builders. These uncertainties include 
the future of housing tax rules in the Internal Revenue Code, including 
the mortgage interest deduction and the Low-Income Housing Tax Credit, 
as well as the future of the housing finance system and the secondary 
mortgage market. At the local level and Federal levels, regulatory 
burdens also increase the cost of building and deter job creation.
Policy Recommendations
    The home building industry can be a key engine of job creation that 
this Nation needs. That said, certain policy decisions will help the 
industry play its traditional role as a job creator as the economy 
moves out of periods of weakness.
    First, mindful of the job destroying potential of onerous 
regulations, ensuring that undue regulatory burdens do not hinder 
economic growth will ensure the sector can continue to create jobs. 
NAHB industry surveys and analysis shows the degree to which these 
regulations increase the cost of a home. \17\ These estimates show 
that, on average, regulations imposed by Government at all levels 
account for 25 percent of the final price of a new single-family home 
built for sale. Nearly two-thirds of this--16.4 percent of the final 
house price--is due to a higher price for a finished lot resulting from 
regulations imposed during the lot's development. A little over one-
third--8.6 percent of the house price--is the result of costs incurred 
by the builder after purchasing the finished lot.
---------------------------------------------------------------------------
     \17\ ``How Government Regulation Affects the Price of a New 
Home''. NAHB Economics and Housing Policy. http://www.nahb.org/
generic.aspx?sectionID=734&genericContentID=161065&channelID=311
---------------------------------------------------------------------------
    Fostering skill training and ensuring young workers are interested 
in the construction trades is another policy that will increase the 
growth of the industry, while raising wages and employment of younger 
workers. Multiple approaches can be taken in this regard, including job 
centers and protecting the role of the community college system in our 
Nation. The BLS JOLTS data cited earlier indicates that there are 
currently many unfilled construction sector jobs waiting to be claimed 
by individuals with the right training.
    At the Federal level, Congress should maintain its important and 
historic support of home ownership and affordable housing. Protecting 
policies like the mortgage interest deduction and the LIHTC are 
critical to ensuring the growth of the middle class and access to 
housing. The future of the housing finance system, including enabling a 
liquid secondary mortgage market that serves the entire country, is 
also key to how people buy homes in the future. Passing comprehensive 
housing finance reform is a part of this process. Providing certainty 
with respect to these housing-related policies is an important goal.
    In the short-run, one element of certainty can be obtained by 
passing a tax extenders bill that would extend tax rules such as the 
minimum 9 percent credit rate for the LIHTC and the continued existence 
of residential energy efficient tax credits (45L for new construction 
and 25C for retrofitting existing homes). \18\
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     \18\ http://eyeonhousing.org/2013/10/23/housing-related-tax-
provisions-expiring-at-the-end-of-2013-2/
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Summary
    Residential construction plays a key role in creating jobs and 
generating economic growth, particularly as the economy emerges from 
recessions. After a multiyear transition period, housing is once again 
playing that role and the industry is ready to get back to work. 
Housing creates jobs, and job growth for builders and other sectors of 
the economy in turn foster demand for rental and owner-occupied 
housing.
    Given the underlying demand for new homes in the county, the 
industry is poised to build on the 274,000 jobs created over the last 
2\1/2\ years with hundreds of thousands more as housing starts return 
to more normal levels of production.
                                 ______
                                 
              PREPARED STATEMENT OF R. THOMAS BUFFENBARGER
 International President, International Association of Machinists and 
                           Aerospace Workers
                              May 7, 2014
    Thank you, Chairman Merkley, Ranking Member Heller, and Members of 
this Committee for the opportunity to testify before you today on the 
vital importance of manufacturing to the creation and preservation of 
American jobs. My name is Tom Buffenbarger and I serve as International 
President of the International Association of Machinists and Aerospace 
Workers, also known as the IAM. Our members work in a variety of 
manufacturing industries including aerospace, electronics, defense, 
shipbuilding, transportation, and woodworking. The IAM is a broadly 
diversified manufacturing union and the largest aerospace union in 
North America. We strongly believe that manufacturing is critical to 
our national economic recovery. Manufacturing is responsible for the 
good jobs that our Nation needs. It also generates the innovation and 
new technology which our Nation depends upon to ensure a healthy, 
robust, and sustainable economy in the future.
    According to the U.S. Bureau of Labor Statistics, the manufacturing 
sector contributes $1.6 trillion in value to our economy, or about 9 
percent of GDP. A recent study by the Congressional Research Service 
notes that manufacturers have been responsible for approximately 70 
percent of all research and development conducted by businesses in the 
United States.
    Manufacturing jobs are good jobs. Workers in the manufacturing 
sector enjoy an 8.9 percent compensation premium over other working 
Americans and are more likely to have employer paid health care and 
other benefits. Since the start of the 21st Century education levels 
for manufacturing workers have improved; nearly 30 percent have at 
least a college degree and the percentage with less than a high school 
diploma as shrunk to 10 percent. However, what has made manufacturing a 
source of middle class jobs has been the traditionally high rate of 
unionization within the sector. The Center for American Progress notes 
the disturbing correlation between the decline of union density and the 
share of the Nation's income going to the middle 60 percent of 
households, which has fallen from 52.3 percent to 45.7 percent since 
peaking in the late 1960s. If this trend continues then manufacturing 
work will not be the ladder to the middle class as it historically has 
been.
    The effect of the manufacturing sector and the jobs that it 
produces can be found in the sector's multiplier effect. This can be 
seen in two ways; the Manufacturing Institute has found that every 
dollar of manufactured products supports $1.33 in output from other 
sectors, a larger multiplier than any other economic sector. In other 
words, manufacturing creates the wealth that drives much of our 
economy.
    Moreover, manufacturing jobs support additional jobs, both direct 
and indirectly related to manufacturing, throughout the economy and the 
multiplier ratios from manufacturing vary from a low of 1:3 to high of 
1:16. The difficulty in coming up with a precise ratio derives from the 
changing nature of manufacturing jobs and what is counted as a 
manufacturing job. In the past, many manufacturing enterprises were 
vertically integrated operations that included a variety of support 
functions, such as, shipping and transportation, as well as 
professional and business services like accounting, legal, and 
consulting. If any of these functions are directly employed by a 
manufacturer, then they are counted as manufacturing jobs, otherwise 
the jobs are considered indirectly related to manufacturing. Other 
examples of indirect employment impacted by manufacturing activity 
include jobs in restaurants, retail, as well as local and State 
government.
    According to last week's employment report, manufacturing 
employment currently stands at 12.1 million jobs, nearly 9 percent of 
U.S. payrolls. Significantly, even with the addition of 650,000 
manufacturing jobs since the bottom of the Great Recession, the U.S. 
has still lost over five million manufacturing jobs since the start of 
this century. While a variety of factors, including technological 
changes and lean manufacturing practices, have reduced overall 
manufacturing employment, the lack of a comprehensive manufacturing 
policy that is directly related to jobs, our flawed trade policies and 
a ballooning trade imbalance, $475 billion in 2013, have also 
contributed to this decline.
    This year marks the 20th anniversary of NAFTA, which increased our 
trade deficit with Canada and Mexico by $150 billion resulting in a 
loss of an estimated one million U.S. jobs. For our members at 
companies like Maytag and Freightliner who saw their work and jobs 
moved to Mexico, the harsh reality of this model of trade is not a 
theoretical discussion.
    An even bigger killer of U.S. manufacturing jobs has been the 
implementation of Permanent Normal Trade Relations (PNTR) with China. 
When China PNTR was passed in 2000, the U.S. exported three times as 
many manufactured goods as China, but within a decade China surpassed 
the U.S. in exports and became the world's leading manufacturer and 
exporter. By 2012 our share of global manufacturing activity had 
declined to 17 percent from 30 percent just a decade earlier even as 
the value of our exports had more than doubled. Now, two-thirds of our 
global trade deficit is with China, a rapidly growing country that 
engages in a variety of unfair trade practices--illegal subsidies, 
forced technology transfer, currency manipulation, and an appalling 
lack of labor rights. The Economic Policy Institute estimates that over 
the last decade our trade imbalance just with China has cost the U.S. 
nearly three million jobs and put downward pressure on U.S. wages. And 
now, just two years after the passage of the U.S.-Korea FTA we have 
seen our exports to Korea drop and our trade deficit with that country 
grow with a loss of an estimated 60,000 American jobs, mostly in 
manufacturing.
    Successful countries recognize the importance of a strong 
manufacturing sector and the true nature of global competition. These 
countries know that there is no such thing as a ``free market,'' and 
provide strong support for critical wealth and job creating sectors 
like manufacturing.
    The IAM has long called for the development of a national 
manufacturing strategy as our global competitors have done. This is not 
about picking winners and losers, but, rather, creating the foundation 
for future prosperity. We applaud the President for taking some 
important first steps to make this happen. The creation of the Office 
of Manufacturing Policy reporting to the National Economic Council, as 
well as the Advanced Manufacturing Partnership (AMP), which includes 
representatives from labor, industry, academia, and the Federal 
Government, has put a new focus on manufacturing at the highest levels 
of our Government.
    We look for the Advanced Manufacturing Partnership to develop a 
national manufacturing strategy that links Government policies and 
investment to actual job creation. This could be accomplished by 
requiring employment impact statements as part of the decision making 
process for Government procurement contracts, grants, and awards. 
Simply stated, contracting agencies and policy makers should know how 
many good domestic jobs will be created and maintained by a contractor 
or grantee.
    Our trade policies must be reformed to include enforceable labor 
rights and environmental protections. This is particularly important as 
the U.S. negotiates the Trans-Pacific Partnership (TPP) with countries 
like Vietnam and Brunei that lack free and independent labor unions. 
Also, enforcement action must be taken to end currency manipulation by 
our global competitors.
    Other important steps to facilitate the growth of manufacturing 
jobs include strengthening and standardizing the measure of ``Made in 
the U.S.'' and Buy American requirements for Government procurement 
contracts. In some cases, the domestic content requirement is as low as 
51 percent and it is not always clear that agencies limit their 
calculation of domestic content to direct factors of production.
    The American Society of Civil Engineers estimates that the U.S. has 
an infrastructure deficit of over $3 trillion. Infrastructure 
investments make our Nation more efficient and are crucial to our 
ability to compete globally. Strong Buy American requirements coupled 
with investments in our crumbling infrastructure would spur 
manufacturing growth. We have already seen this in mass transit as 
foreign rail manufacturers have set up production in the U.S. to meet 
domestic content requirements. This has spurred the creation of a 
domestic supply chain to meet the needs of these transplanted 
manufacturers. Ending the misguided policy of sequestration will enable 
the rebuilding of our infrastructure and protect our defense industrial 
base, a critical component of U.S. manufacturing and an ongoing source 
of innovation.
    One Government initiative, the Export-Import Bank, stands out as a 
success. The Export-Import Bank provides critical financing for the 
export of American made goods and services. Last year, the Bank 
provided over $37 billion worth of export financing that supported over 
200,000 American jobs, mostly in manufacturing, and returned over $1 
billion to the U.S. Treasury. All of our important global competitors 
provide similar financing and Congress must reauthorize this important 
program this year.
    Manufacturing plays a critical role in our economy. The sector is 
an engine of innovation and a source of middle class jobs. We must not, 
however, take the sector for granted. America needs to think 
strategically about how we prepare our workforce, what investments we 
make to remain globally competitive, and how we trade with other 
Nations. For too long our focus has been on meeting the needs of U.S.-
based multinational corporations at the expense of working Americans. 
This culture must change. Only then will we see a rebirth of American 
manufacturing--a rebirth that is essential for our national and 
economic security, and the future of America's hard-working men and 
women and their families and communities.
    I would be happy to answer any questions that the Committee may 
have.
Policies To Promote U.S. Manufacturing Jobs

  1.  Develop a comprehensive manufacturing strategy that reviews all 
        Federal incentives to corporations to outsource manufacturing 
        (tax policy, currency, trade, and investment policies).

  2.  Require that all contracting agencies adopt and implement 
        employment impact statements. Policy makers and Government 
        procurement officers should know how many domestic jobs will be 
        created and maintained by each contractor/grantee who submits a 
        proposal. Contractors should be accountable for making sure 
        that they met their job estimates. If they do, then this should 
        also be a factor in future contracts. If they do not, then they 
        should be barred from future Government contracts.

  3.  All trade and investment deals must undergo a careful analysis to 
        determine the jobs impact they will have on specific U.S. 
        industries and communities before negotiations are commenced. 
        In this vein the IAM continues to demand that all past trade 
        and investment deals be reviewed to determine their specific 
        job/community impact. Include enforceable labor and 
        environmental protections in all trade agreements.

  4.  End currency manipulation by our global competitors.

  5.  Reauthorize the Export-Import Bank for 5 years and increase its 
        lending cap.

  6.  Strengthen Buy American requirements and more limits on Buy 
        American waivers, which are currently too vague and broad. Make 
        certain that Made in the U.S.A. actually means Made in the 
        U.S.A. Review all domestic content requirements to make certain 
        that these requirements are directly related to jobs and do not 
        contain intangibles not directly related to production costs.

  7.  Create a manufacturing development bank with below market loans 
        for establishing manufacturing plants in this country that are 
        directly related to creating American jobs.

  8.  End sequestration and make investments in our crumbling 
        infrastructure.