Press Releases

Remarks by Secretary of the Treasury Janet L. Yellen on Innovation in Virginia

As prepared for delivery

It’s great to be here at the Virginia Innovation Partnership Corporation. I’m appreciative of Bob and his team for hosting us today. Thank you to Senator Kaine and Congressman Connolly for joining us here, and for their leadership and tireless work to pass the Inflation Reduction Act, the CHIPS Act, and the Bipartisan Infrastructure Law. And I am grateful that leaders from Virginia’s higher-education, business, and innovation communities are here as well. I look forward to our discussion on our Administration’s economic plan and American leadership in science and technology.

Earlier this year, I laid out the case for a “modern supply-side” expansion of our economy. I described how a country’s long-term growth potential depends, among other things, on its labor supply and the productivity of its workers. Yet for decades, our potential had been weighed down by declining labor force participation and sluggish productivity growth. With an economy at full employment, I argued that now is the right time for a supply-side expansion that increases our productive capacity and reduces inequality. Our agenda includes concerted investments in our physical capital, our human capital, and science and technology.

Less than a year later, I’m happy to report that our Administration has enacted key elements of the modern supply-side agenda. Today, I’m thrilled to speak about one of the major drivers of our supply expansion: our Administration’s investments in innovation and technology.

The United States is the global leader in innovation. But over the past few decades, our leadership has increasingly come under threat from competitors like China. Frankly, much of this was of our own making. We had failed to make adequate investments in science and technology. Federal R&D as a percent of GDP had dropped to a third of 1960s levels. Our patchwork of clean-energy incentives fell far short of what was needed to meet our climate goals. And the global share of semiconductors manufactured in the United States had fallen from 37 percent to just 12 percent over the past three decades.

Our government’s failure to invest in innovation has had wide-ranging impacts on our long-term economic wellbeing. At the most fundamental level, it impacted our productive capacity. That’s the ceiling for what our economy can produce.

Over the past year, the Biden Administration has begun to reverse that trend. We have advanced an economic plan that finally puts innovation and technology at the forefront of our national agenda. And we are making sure that the benefits are broadly felt in communities across the country. Our Administration is investing in digital infrastructure. We are boosting R&D funding in key areas. We are mobilizing capital toward two foundational 21st-century sectors: semiconductors and clean energy. Together, our efforts are raising our economy’s aggregate production capacity. And in turn, we are raising America’s long-term economic outlook.

Let me be more specific. I’ll speak about the three major laws that are powering our economic plan.

First, let’s start with the Bipartisan Infrastructure Law. The law is a historic effort to modernize our physical infrastructure: roads, bridges, trains, and ports. But it’s also the largest-ever investment in our digital infrastructure. In today’s economy, high-speed Internet is no longer just a luxury. It’s a necessity. Our plan invests $65 billion to expand access to broadband and reduce Internet bills for millions of Americans — including up to a million households in Virginia. We expect this investment to have a meaningful impact on productivity.

The law also deploys technology to modernize America’s transportation system. As an example, the Department of Transportation’s SMART grants are funding pilot programs of smart city technologies by state and local governments. If successful, these projects could be replicated by other communities across the country. The goal is not to simply repair infrastructure. It’s to upgrade it with innovations that can reap significant efficiencies.

Second, we are building a semiconductor ecosystem here at home. Semiconductors are essential inputs to virtually all modern digital technologies — from washing machines to military equipment. The CHIPS Act will nurture the growth of the full microelectronics supply chain in the United States: from R&D to design to fabrication. Our grant and tax incentives are already inducing waves of private investment from companies like IBM and Micron.

Critically, we are also investing in the human capital needed to fill the coming demand for trained workers in the semiconductor industry. The Commerce Department is establishing a center to convene industry, universities, and governments to build the semiconductor talent pipeline that is so critical to boosting our productive capacity. Our efforts will bolster the work of existing training programs, including those in Virginia’s colleges and universities.

And third, we’re making our nation’s largest investment in clean energy. For years, our government had provided incentives for the development of the clean energy sector. But the existing system was insufficient, with little support for new technologies that could help transition harder-to-abate sectors. The Inflation Reduction Act changes that. Our expanded business tax credits are expected to jumpstart innovation and growth in emerging sectors like clean hydrogen and carbon capture. They are also expected to accelerate progress on more established clean technologies like solar.

We’ve already mobilized significant private investment. Since the start of our Administration, companies have announced more than $100 billion in EV and battery manufacturing investments here at home. And there’s been a surge in the two months since the passage of the Inflation Reduction Act.

The benefits of these investments aren’t simply limited to their effect on the economy’s aggregate production potential. We expect our supply-side agenda to broaden economic opportunity across America as well.

For years now, many cities and towns in our country have experienced a painful industrial decline. Our plan delivers on our commitment to focus on areas that have long been overlooked. Battery and chip plants, like the ones here in Virginia, are being announced all across the country, including in regions like the Midwest. We expect that this plan will also deliver good jobs across socio-economic backgrounds. One analysis shows that nearly half of the jobs in the semiconductor industry do not require a bachelor’s or graduate degree.

Building domestic manufacturing capacity in critical sectors also strengthens our economic resilience and our national security. Take semiconductors. Everyday consumer goods, advanced technologies, and defense systems rely on its steady supply. Yet we produce only a small fraction of all semiconductors manufactured globally. And we have no meaningful manufacturing capacity for the most advanced ones. Building a semiconductor ecosystem at home will help mitigate the risks of a severe chip shortage. We know the importance of doing so: according to one estimate, the shortage in 2021 shaved off about one full percentage point in U.S. GDP.

I am proud that our Administration has put science and technology back in its rightful place, even as more work needs to be done. We expect to see some of the impacts of our plan immediately. Other impacts, particularly in research and development, will take years to pass through to topline economic numbers. But together, I believe that these laws constitute among the most meaningful investments we’ve ever made in our economic strength. And they position America to lead the global economy in the decades to come.

Our economic plan invests in the future. But in a way, we are finding our roots again. For all that economists try to do to assess a country’s economic strength, it remains difficult to quantify the intangible effect of a country’s culture and dynamism. America is a country of builders and pioneers. This spirit has driven much of our success as a country. I am proud that we are renewing that tradition with the economic plan that we’ve enacted this year.

Thank you.