Transcripts For CSPAN Council 20240704

Heather hello and welcome to Washington Post live. Im heather long, an economic columnist and member of the post editorial board. Today we have a very special guest, President Bidens long time economic advisor, jared bernstein. He was also recently confirmed as the new chair of the president s council of economic advisors. Welcome to post live, chair bernstein. Jared its great to be with you. You and i have known each other for a while. Just call me jared. Heather chair, jared. We saw great numbers last week on inflation. Very encouraging story with inflation cooling off. Tell us, are you ready to declare victory on inflation . Jared so i dont know if you can hear me. This isnt worky. Sorry to say. I cant hear you which is very discouraging. Heather sorry. Can you hear us now . Jared i can bah you were going but you were going in and out. Try again. If you like, i can jump on a car and get over there. Heather i know. We probably should have done it in person. Jared two blocks away from me. We can try again. Yes, i definitely looking forward to talking to you. But seems like we have a bit of a shaky connection. So why dont you try again. Heather all right. Let me try one more time. Im wondering if we can declare victory yet on inflation after the good numbers last week . Jared no victory laps, no mission accomplished, no declarations of that sort. It would be appropriate. We are definitely making real substantive progress in terms of providing households with more breathing room. Inflation is down not just in a monthly blip sense but on a yearly basis, 12 months in a row down 2 3. So if we were talking a year ago, we would have been talking about 9 inflation. Now were talking about 3 . Weve seen some real easing of pricing in terms of goods, things you buy in retail outlets. Weve seen prices actually come down, not just slower inflation, but lower prices in some parts of groceries. Obviously, gas is about a buck 50 less than it was a year ago. So real progress, real breathing room, but more work to do. And i think one of the important attributes of bidenomics is that we have a lot more savings in the pipeline in this regard. Heather yeah. Can you say a little bit more about that . Im wondering. I know your team has great models to try to figure out how all of this dynamics play together. Youve been tweeting some really Interesting Data around housing and rent, for instance. Can we get to 2 , to this magic 2 inflation target by the end of the year, early next year . How optimistic are you . Jared well, i think its actually pretty tricky to forecast. To state the obvious, forecasting inflation has been a very tough ordeal. We are still in a postpandemic economy. Lots of uncertainties out there. One thing you and i have been talking economics a long time. I dont think either of us have seen macroeconomic dynamics of the following type. Six Percentage Points lower inflation, thats the 2 3 decline in inflation, with unemployment staying below 4 for 17 months in a row. As you know, go back to the last time inflation went up this high and fell eventually fell down which was probably about 40 years ago. So around the 1980s or so, early 1980s. The Unemployment Rate had just about doubled. I think it went from about 6 to about 11 when inflation came down as much. So weve gotten a lot of inflation reduction without much sacrifice on the job market. Particularly on the Unemployment Rate. But even in terms of job numbers. As your intro suggested, the pace of job growth is slowing but its solid. So that is unusual or unchartered areas. Im hesitant to forecast. What i can tell you is that we have real momentum. This is not a monthly change. This is 12 months in a row of slower inflation. And second part of your question, there are significant cost savings in the pipeline when it comes to bidenomics. On prescription drugs, on clean energy, and on broad expanding the economys capacity when it comes to microchips as well as infrastructure. Heather yeah, thats really interesting. Ive certainly heard a lot of praise in this inflation cooling environment for the federal reserve. Obviously, they took very bold actions. But whats the case here, how much credit does President Biden deserve for bringing inflation down from 9. 1 to 3 in the past year . Jared well, it kind of relates to the comments i made a minute ago. When you have inflation coming down as far as it has and you really havent seen too much sacrifice on the demand side, that is unemployment has stayed very low, historically low, extremely important to bidenomics. Its empowering workers. One of the ways we do that is maintaining a very tight labor market. So thats important to us. When you see that happening, you can pretty fairly conclude that theres a lot of positive action taking place on the economys supply side. Now, and actions weve taken there have included, of course, releasing the historically the largest number of barrels of oil from the strategic reserves. Im going back to over a year ago. Im saying that was something that helped back then. But starting in mid2021, President Biden stood up the supply Chain Disruption task force. We worked very closely with private sector allies in the ports in long beach and los angeles. We had an envoy out there working on this, and we helped helped. This is not all of our credit by a long shot. We worked very closely with the private sector. We helped supply chains. If you actually look at some of the independent sees indicies. The c. E. A. Website. You can see in our blogs. You will see two things. You will see that supply chains are largely back to where they were in terms of their functionality prepandemic and you will also see that core goods prices have moved along with those supply chains and have improved as the chains have unsnarled. So i would say our fingerprints are on some of the supply side actions. The president said the fed is first and foremost the inflation i want to be clear we are not taking that credit away from them. They obviously worked a theyve done a bunch in this space. But that tends to be more on the demand side of the economy. Thus far, i think what weve seen from inflation has been some real supply side improvements and some demand acceleration. Thats in the mix as well. Heather yeah. Thing about demand, deceleration. Im wondering if you can be a little reflective. We often hear from critics of the white house is that the American Rescue plan, the 1. 5 trillion that was passed shortly after the president took office was too big and that that really fueled demand and really fueled a lot of the inflation problems. In hindsight, was it a little too big . Jared i dont think so. I mean, i think if you consider the things weve been talking about thus far, we cant divorce them or separate them from the rescue plan. I think the rescue plan set up the historic job Market Recovery were talking about. So i think its wrong to say, look at this great job market and forget one of the things the president explicitly talked about it was one of his first economic speeches was getting back to full employment as quickly as possible. Because he knows that that helps give workers the Bargaining Power they would otherwise lack, especially middle and lowwage workers to get ahead, to get their fair slice of the pie. Bottom up, middle out growth, key goal of bidenomics, very much relates to this issue of workers having the bargaining clout to get a fair shake. We have a very prounion president and that helps. We have a tight job market. Its hard pressed to find an economist that wouldnt honestly connect an honest sort of even critics of our program who wouldnt agree that the growth that weve enjoyed, the really quick return to the full Employment Labor market was very much helped by the rescue plan. Now, when you talk about the inflation part of the equation, i think its fair to say that the inflation that took off in spring of 2021 was a function of Strong Demand plus constrained supply. Now, some people will add expectations to that calculation, but theyve been pretty accurate so we dont have to go there so much. If you think of Strong Demand and constrained supply helping to really set off the inflation that took off back then and you look at where we are now, 12 months of improvements, you can pretty much unwind that calculation and think weve benefited from, as i mentioned, the unsnarling of supply chains but also some dampening on the demand side as well. Part of it is fiscal retraction. Part of it is the work of the fed. And some of it is burning through excess savings. It is where we are and where we are. Heather i know you get this question a good bit. Why dont americans give this economy a better grade . Youve seen the polling. You know its like only one in three approve of the president s handling of the economy. Why do you think its so gloomy . Jared well, i think there are a few things. Were starting to see some improvement in the sentiment. The index really popped up in its last report. One month. I dont want to overtorque on one month. I understand what youre asking about, heather, and its something i looked at pretty closely. I think americans have been through a whole lot over the past couple of years. I mean, a 100year pandemic. The horrible illegal invasion of the sovereign nation of ukraine. The supply chain snarlups we talked about. Of course, inflation a year ago at a 40year high. 2 3 of that has come off, which obviously is very positive. But having gone through all of that, i think people have been definitely somewhat shaken up by what theyve been through. I think what the president did when he got here was to say, we have to get back to normal as quickly as possible. It may take a while for that kind of renormalization to work into peoples consciousness, but were starting to see some of it now. I happen to think a key part of that ingredient is real wage gains. That is wages rising faster than inflation. And were now seeing that. Thats a relatively new trend. Last few months weve seen wages start to beat inflation. And as thats occurred, weve started to see some improvements in these indexes. Thats one. People have been through a lot. It takes a while to normalize. As it continues to do so people will hopefully peel better. Feel better. Heres another thing. Part of the problem are what folks are asking people about. If you understand what people think about bidenomics, they should ask about the granular components therein. Something like the inflation reduction act, the infrastructure law, the chips act, they poll way north of 50 . I think some of them poll north of 70 . It kind of comes down to this. I mean, if you go to flint, michigan, and you ask, what do you think about replacing lead pipes with pipes that dont poison your kids, you are going to get a very high approval rating. That at a granular level is what were doing. When you ask people about the broad macroeconomy, sometimes they divorce that from their own financial situation, which has actually improved in some ways in recent months, especially as inflation has come down. I think there are a lot of moving parts there, but i think one answer is to really drill down and ask people about the more granular impacts of what were trying to do. Heather yeah. The specific policies. I got a bunch of questions on bidenomics specific for you, but i want to make sure i get some in here. You and i always talked about workers. Its one of the reasons you worked with President Biden because of that concern you both share about workers and about unions. Tell me how you assess the Current Situation . How much power do workers have in the current economy . Is it enough, is it too much . What would you say . Jared i would say that workers in the current economy have significant bargaining cloud they would not if the Unemployment Rate were higher than it is. The fact that its been weve been at something sort of approaching full employment. I think people can quibble about some of those numbers. Weve been in an area where essentially employers had to bid up wage offers to get and keep the workers they need where workers can upgrade their job. They can say, yeah, this job isnt the quality im looking for. Im going to get a better one. That just doesnt happen in an economy with a lot of slack. Again, if you go back to early speeches by President Biden and, of course, when he was Vice President we worked together. This is an insight that he has long had. So i think the tight job market is helping a lot in that regard. By the way, chair powell has said very similar things. This is a well understood phenomenon. I think the one way youre beginning to see that is that as inflation has come down, real wages they slowed somewhat as the job market has softened. I heard in a clip you played earlier for me, labor demand and supply becoming a little better aligned. That has improvement in the supply side of the economy. You pull more people in from the sidelines and we have working age Labor Participation rates that are hitting historical highs. Especially for women and a 20year high overall. Put all that together and you have a situation where workers are getting a larger slice of the pie. Another way to talk about that in almost very straightforward terms, point out real wage gains. Over the past year, wages are up 1. 2 for private workers. Theyre up 1. 6 for middle wage workers. So theyre up more people at the middle and bottom than they are for people at the top. And that is a i think a good sign. The correct answer to your question, workers, particularly lower and middle wage workers have more Bargaining Power and thats helpful. Heather talk to me about the strikes. President biden came out very powerfully on friday endorsing the hollywood actors and writers strikes. But the big one on many peoples minds, what happens if the u. P. S. Workers, over 300,000, would go on strike at the end of the month, is that something the white house would be supportive of . Jared i think one of the best things we can do at the white house when we are in a position like that and the companies and unions are starting to talk to each other is stay the heck out of their way. Thats what i intend to do. I will say that, of course, when you have a president as understanding of the importance of unions and their role and bargaining clout, you know, if youre building the economy from the middle out, bottom up, worker Bargaining Power is essential and unions play a key role there and thats why joe biden has always been supportive of. Thats very much in our consciousness. It would not be at all helpful for me to comment on negotiations that in some cases arent even under way yet. Heather yes. Were all hoping for a good resolution. So bidenomics, you said a lot about it. The president said a lot about it in recent weeks. But tell me this. In 10 years, what are people going to remember about bidenomics . Jared well, if they think back and if things go as planned, they will remember that the transformational shift in Domestic Production of clean energy products, of electric vehicles, of batteries dates back to investments that were talking about today. The magnitude again, you played this in your introduction. The magnitude of investments, if you look at the construction of manufacturing facilities for, again, for microprocessors and for clean energy products, electric vehicles, electric batteries, solar, wind, those industries are standing up as we speak. Now, these are early days so your question about 10 years is a good one and an interesting one. But i think historians will look back and reflect on really what is, again i keep talking about these pillars. Pillar one of bidenomics which is that Public Investment can pull in private investment. This stands in direct contrast to trickle down. I think historians will look back and recognize that the rejection of top down, trickle down economics, based on just decades of empurecal evidence is replaced by a different empirical evidence is replaced by a different set of things. If the Public Sector stops investing, disinvests in our Public Infrastructure, the private sector will come in and make up the difference. Joe biden knows thats always been wrong. And that in fact its backwards. That the way to crowd in private investment is to make the Public Investment in areas that are underinvested. The market itself will underinvest it. They underinvested in Semi Conductor production, clean energy, it underinvests in empowering and educating workers. Left to its own devices, we can see the evolution of anticompetitiveness that bidenomics also strikes out against. So i think what youd see looking 10 years if you look back, i think what youd see is an economic model that tap the power of private production by paving the way through Public Investment, through public through worker empowerment and through worker through worker education and through promoting competition so small businesses, entrepreneurs can have a real fair chance to get into the mix. Heather so help me think through this. This is where i struggle with bidenomics. What youre painting is a big transformation for the country, on the energy front and on the Industrial Base front. You know, probably create a good bit number of jobs. Jared sorry, heather. Could you start that question again because i didnt hear it . Heather sorry for the connection problems. We clearly need investment in this infrastructure. Jared were focusing on rural broadband. We need some urban broadband in this case. Heather all of the case. Bidenomics. Heres where im struggling a little bit. Theres obviously a lot of investment going on in energy sector, in the manufacturing sector. But a lot of this seems like incentives for companies. Its investments to help spur private sector growth. How does that really feed through to the middle class . How are individuals and households really going to see that . Jared well, its its businesses that create employment and its middleclass households that create Economic Activity for businesses. So it is a Virtuous Cycle. When we say middleout growth, were talking about consumers who have healthy economic conditions, making the kinds of purchases and investments that stimulate the private sector to keep this virtuous flywheel going. And one of the things that happens when we fail to sufficiently invest in Public Infrastructure is that we dont crowd in enough private investment so that the consumer, middleclass consumer, doing have the buying cloud, doesnt have the labor market, doesnt have the job to get the growth cycle going. So its really kind of in some levels sort of simple but another level pretty profound Virtuous Cycle. You know, when we say middle out growth, thats not just a catchphrase. Its actually an architecture for ongoing i was going to say stimulate stimulus is an economic intervention. A healthy middle class is a recipe for consistent demand triggering Economic Activity, triggering investment, and you know, the cycle the more Virtuous Cycle is off and running. I think what you know, we made this very kind of fundamental mistake in basic economics. Which is to think that somehow the top 1 so much of the wealth is disproportionately going to the top, to think that the top 1 can do that. Thats trickle down. Thats the failure of trickle down. The idea that as long as rich people have all the tax cuts and the wealth that they need, that will trickle down and lift the middle class. Thats top down growth and that has decades of evidence against its effectiveness. Middle out growth, bottom out growth bottom up growth, thats much more, i think, a much more lasting proposition in the sense that i just tried to communicate. Heather all right. Let me run a couple by you. I know you heard some of these before. Criticism comes on, theres so much investment happening at home. Are we really the best place to do all of this manufacturing . So let me ask it this way. Does President Biden believe in free trade . Jared certainly, President Biden believes in robust trade flows. Im not sure what the word free trade means, to tell you the honest truth. Ive seen free trade agreements that are 2,000 pages long and they involve a lot of things that arent free trade like protecting pharmaceuticals. So i think we need to be careful what we mean when we throw those words around. I know that the president is very much remains very favorably disposed towards trade flows. Now, it is true that we have taken precautions to ensure that those flows pass two very important tests for us. One is that they dont threaten our national security. So yes, weve taken actions to ensure that some of our enemies or potential enemies arent able to weaponize some components of trade flows against us. And two, resilience. So we have seen real nonresiliency of supply chains and that very much caught the president s attention. So when you say when one says were for a a more secure trade relationships and when were for more resilient trade flows, we are not saying that were for some kind of shutting trade at the border. Instead, were talking about much more nuanced differences, where we continue to benefit from the increased supply that global trade brings to the table but we take out some of the nonresiliencies in the supply chains that really hurt us during the pandemic. Frankly, any economist or trade economist who didnt learn that lesson, they werent paying attention. Heather all right. Lets get one or two more before we let you go. I know you get this one a lot, too. Were not in a recession now. Let me try one more time. We are obviously not in a recession now. Far from it. What do you think . Are we going to avoid it for the next year . Jared well, the way you started is exactly the right place which is to look at where we are right now. As you well know, a recession is not, you know, a matter of your vibes or what kind of mood youre in. Theres actually a set of very distinct indicators that explain where the economy is in that regard and they have to do with personal income, with employment, retail sales, so on, industrial production. So if you look where you are, as you said, these indicators are certainly not flashing anything close to recession, where were going is a much tougher proposition i said earlier when you asked me to forecast inflation. I think its not a very tough business to be in these days given the uncertainty kind of embedded in this economy and the unusual forces that were seeing. Weve certainly been able to bring down inflation by a great deal, by 2 3, in fact, to be precise, while not sacrificing much at all on the employment said. So that suggests momentum. And thats sort of the best answer i can give to your question. Where we are right now looks i think very good in regards to any of these recession indicators. It looks very nonrecessionary. Where were going is partly a function of the momentum that we have. When inflation is falling 12 months in a row, thats a trend. Its not a monthly blip. When you have an economy thats 70 Consumer Spending and you have a labor market thats been characterized by unemployment below 4 for over a year and a half, that means you have a strong, robust consumer and sure enough, month in, month out, quarter in, quarter out, you know, we had good consumption, Consumer Spending results. Im now seeing estimates, not our estimates but estimates from the atlanta fed, from various market shops that look at that are estimating the growth in the Second Quarter may be somewhere between 1. 5 and 2 . Thats not a white house estimate. Thats a market estimate. That was around 2 in the first quarter. Maybe you reported on it. A lot of people were talking recession in those quarters and those growth rates im citing, theyre clearly nonrecessionary. I think where we are is, you know, certainly clearly nonrecessionary and theres some momentum to keep us in that space. Heather the word of the day really seems to be momentum. As you say, lets hope it keeps going. Great to have you with us, chair bernstein. Welcome any time. Jared thanks so much. Heather thank you for joining us for a wideranging discussion on the economy today. There are more great discussions coming up. Cheng it out