Transcripts For CSPAN2 Council 20240704 : vimarsana.com

Lower unemployment and inflation reduction were two data points mr. Bernstein cite as indicators of President Bidens efforts on the economying with impactful being impactful. This conversation was hosted by the Washington Post. Hello and welcome to Washington Post live. Im heather long, an economic columnist and member of the posts editorial board. Ed today we have a very special guest, President Bidens longtime Economic Advisor jared bernstein. He was also recently confirmed as the new chair of the president s council of economic advisers. Welcome to post live, chair bernstein. [laughter] its great to be with you. You and i know each other well, so youre welcome to call me jared, and ill call you heather if thats okay. All right, that works for me. I was going to say the chair, chairman, just jared. So we all saw really great numbers last week on the inflation, very encouraging story with inflation cooling off. Tell us, are you ready to declare victory on inflation . [no audio] so i dont know if you can hear me, but this isnt working, im sorry to say. Im not hearing you, which is very discouraging. Oh, no. Let me try it again. Can you hear us now i can, but you were going in and9 out. But try again. All right. One more time. If you like, i could jump in a car and get over there i know. We probably should have done it in person. We can try again but, yes, im definitely i looking forward to talking to you, but it seems like we have a bit of a shaky connection. Why dont you try again. All right. Let me try one more time. Im wondering, can we declare victory yet on inflation after those good numbers last week . 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 yearlyye basis 12 months in a r, down twothirds. 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 prices in terms of goods, things that you buy and Retail Outlet es, weve seen prices actually come down. Not just slower inflation, but lower prices in some parts of groceries. Obviously, gas is about 1. 50 less than it was a year ago. So real w progress, real breathg room but more work to do. I think one of the important attributes of bidenomics is that we have a lot more savings in the m pipeline in this regard. Yeah. Can you say a little bit more about that . Im wondering, i i know your team has great models to try to figure out how the dynamics play together. Youve been tweeting some really interesting dataun around housig and rent, for instance. Can we get to 2 , to this magic 2 inflation target by thet em of the year, early next year . How optimistic are you . Well, i think its actually pretty tricky [laughter] to state the obvious, forecasting inflation has been a very tough ordeal. We still are in a postpandemic economy, lots of uncertainties out there. I mean, one thing that you and i have been talking economics for a long time, i dont think either of us had ever seen macroeconomic dynamics of the following type 6 Percentage Points lower inflation thats the twothirds 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, you know, probably abouts 40 years ago, so around the 1980s or so, early 80s. The Unemployment Rate had to just about double. I think it went from about 6 to about 11 when inflation came down this fast. So weve gotten a lot of inflation reduction without much sacrifice in the job market, particularly in the Unemployment Rate but even in terms of job numbers. I mean, as your intro suggested, the pace of job growth has been slowing, its still very solid. So g that tells you youre into some unusual or or uncharted areas. So im hesitant to forecast. What i can tell you is that we have real momentum. This is not a monthly change, this isng 12 months in a row of slower inflation, and the 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 expanding the economys capacity when it comes to microchips as well as infrastructure. Yeah, thats really interesting. Ive certainly heard a lot of praise in this inflationcooling 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 91 to 3 9. 1 to 3 in the past year . 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 from the perspective of bidenomics. Pillar two of bidenomics is empowering workers, and one of the ways we to that is maintaining a very tight labor market. Thats really important to us. When you see that happening, you can pretty fairly conclude that theres a lot of positive action taking mace on the economys place on the economys supply side. Now, and actions that weve taken there include, of course, releasing the historically, the largest number of barrels of oil from the streibleic reserves. Im going strategic reserves. Im going back to over a year ago, so im saying that was something that helped back then. But starting in mid 2021, President Biden stood the 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 our credit by a long shot, we worked closely by the private sector we helped unsnarl supply chains. And if you look at some of the indices, the new York Federal Reserve has one, there are others that weve written about on the cea web site you can see on 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 wouldha say our fingerprins are on some of those supplyside actions. Now, look, the president has consistently said the fed is the first and foremost inflation fighter, so i want to be clear were not taking any of that credit away from them. Theyve obviouslyre worked, theyve doneey a bunch in this space. But thats, that tends to be more on the demand side of the economy and thus far i think what weve seen from inflation has been some real supplyside improvement and some demand deceleration. Thats been in the mix as well. Yeah. Seeing the demand deceleration, im wondering if you could be a little reflective of what 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 . I dont think so. I mean, i think if you consider the things that weve been talking aboutut thus far, we cat divorce them or separate them from the rescue plan. Of 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 that 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 that they would otherwise lack, especially end 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. Now, we have a very prounion president and that helps, but weve also had a very tight job market. And i think youd be somewhat hard pressed to find an economist who wouldnt honestly connect, you know, who, you know, an honest even critics of you are our program who wouldnt agree that the growth that weve enjoyed, that 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 a part of the equatio, i think its fair to say that the inflation that took off in springok of 21 was a function f 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. So 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 that weve benefited from, as ive mentioned, the unsnarling of supply chains but also some dampening on the demand side as well. Part of a that is fiscal retraction, part of that is the work of the fed, part of that is consumers kind of burning through some of their excess savings, but i think thats the right way to think of where we were and where we are. So riddle me this, i know you get this question a good bit, why dont americans give this economy a better grade . If 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 . Well, i think there are a few things. Were starting to see some improvement in the sentiment indexes, you know, the umich index really pond up. One month popped up. One month, i dont want to i understand what youre talking about, heather, and its something ive looked at pretty closely. I think americans have been lu 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 weve talked about. Of course, you know, inflation a year ago at a 40year high. Twothirds of that has come off whiching obviously which, obviously, is very positive. But having gone through all of that, i think people have been definitely somewhat shake h isen up 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 that a key part of that ingredient is real wage gains; that is, wages rising faster than inflation. And were now seeing that, but thats a relatively new trend. The last few months weve seen wages starting to beat inflation. And as thats occurred, weve started to see some improvements in these indexes. So thats answer one, people have been through a lot, it takes a while to normalize, and i think as they continue to do so, people will hopefully feel better. But heres another thing. Part of the problem is what folks b are asking people about. If you want to understand how people feel about bidenomics, you should probably can ask them about the granular components therein. And if you to do so, you get quite different answers. You are going to get a very high Approval Rating at that at a granular level is what were doing here when you ask people about the broad macroeconomy sometimes the divorce that from the old financial situation which is improved in some ways in recent months especially as inflation has come down. I think there are a lot of moving parts but one answer is to really drill down and ask people about the more granular impact of what were trying to dof expert i got a bunch of questions on bidenomics specific for me but i want to make sure to get some in here. You and i have always talked about workers its one of the reasons you have long worked with President Biden because of that concern you both share about workers and about union. Tell me how you assess the current situation, how much power do workers have in the current economy . Is it enough, too much, what would you say . I would say that workers in the current economy have significant that they would not have if the Unemployment Rate were higher than it is. The fact that its been we have been at something sort of approaching full employment i think people can quibble about some of those numbers but weve been in an area, essentially a place thates i do up wage offers to get and keep the workers they need workers canth upgrade their job and say this job is that the quality im looking for, im going to get a better one. That doesnt happen in an economy with a lot of slack. To go back to early speeches by President Biden and winn Vice President work together. This is an insight has long had. I think the tight job market is helping a lot. Byd. The way Cheryl Powell has said similar, say this is a well understood phenomenon. I think one way your beginning to see that is that as inflation has come down real wages they have slowed somewhat as the job market has softened i heard a clip you played earlier labor demands supply becoming better i might. Another benefit by the way of tight labor markets as you pull people in from the sidelines and we hadre working age Labor Participation rates that are hitting historical highs especiallyly for women and a 20 year high overall. Put all that together and you have the situation where workers are getting a larger slice of the pie. Another way to talk about that almost very straightforward in terms of point out real wage gains over the past year wages are up 1. 2 for private workers they are up 1. 6 for middle wage workers they are not more for people in the middle and bottom in the offer people at the top. That is a good sign, yes, workers particularly middle and lower wage workers havee more borrowing clout. Talk to me about the strike, President Biden came out friday endorsing the hollywood actors and writers strikes but a big one on many peoples minds is what happens if the ups workers, over 300,000 would go on strike at the end of the month . Is that something the white house would be supportive of . One of the best things we could do at the white house when youre in a w position like that and the companys unions are starting to talk to each other and stay the heck out of their way. Thats what i came to do. I will say of course when you have a president as understanding of the importance of unions and the role and bargaining clout, building economy from the outcome bottom up worker Bargaining Power is an essential ingredient at a course unions played a key role which is why joe biden has been supportive of it. Thats very much in our consciousness. It would not be at all helpful for me to comment on negotiations that in some cases are not even underway yet. Where all hoping for good resolution. So bidenomics you insert a lot about the present has that a lot about in recent weeks but tell me this in ten years what are people going to remember about bidenomics . 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 we are 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,or microprocessors and for clean energy products, electric vehicles, electric batteries, solar, wind, those industries are standing up as we speak to these early days so the question about ten years is a good one and an interesting one. I think historians will look back and reflect on really what is again i keep talking about these pillars are one of bidenomics which is that Public Investment component private investment. This stands in direct contrast to trickle down to i think historians will look back and recognize that the rejection of topdown, trickledown economics, based on just decades of empirical evidence that it doesnt work is replaced by a very different set of ideas. The idea on trickledown is if the Public Sector stops investing, if it just disinvest in our Public Infrastructure of the the private sector will commit to make up the difference. Joe biden knows thats always been wrong, and i that, in fact, its backwards. That the way to kraut in private investment is to make the Public Investment in areas that are under invested, where the market itself will underinvest it underinvest certainly in the Semiconductor Production for it underinvest in clean energy it even underinvest in empowering and educating workers left to its own devices we can see the evolution of anticompetitiveness that bidenomics also strikes out against beer so i think what you would see looking ten years, if you went and looked back k what you see is an economic model that tapped the power of private production by paving the way through Public Investment, through public, the worker environment and the worker education and through promoting competition so Small Businesses can entrepreneurs can have a real fair chance to get into the mix. So help me think through this appear this is where i struggle a bit with bidenomics is what you are painting is a big transformation for the country on the energy front and on the Industrial Base front. It probably createoo a good bit number of jobs could you start the question again because i didnt hear you when you started. Sure. Apologize for these connection problems that weor clearly need some investments in this infrastructure. Were focusing on Rural Broadband overheats of urban broadband in this case. All of the above. Okay, so bidenomics youre here to run struggling a bit. Is obvious a lot of investment going on inst energy sector, in the manufacturing sector, but a lot of this seems like incentives for companies. It investments that helps spur private sector growth. How does that really feed through to the middle class . How are individuals and households really going to see that . Well, its businesses that create employment, and its middleclass households that create Economic Activity for businesses. So it is a Virtuous Cycle. When we say middle outgrowth, we are talkingg about consumers who have healthy economic conditions, making the kinds of purchases and investments that stimulate the private sector to keep this a virtuous flywheel going. 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, the middleclass consumer, doesnt have the buyin clout, doesnt have the labor market, doesnt have the jobs to get that growth cycle going. So its really a very kind of some level sort of simple but another level pretty profound Virtuous Cycle. When we say middle outgrowth, thats not just a tax catchphrase but its actually an architecture for ongoing, not, is going to stay stimulating, stimulus kind of implies a specific intervention against an economic shop. A healthy middleclass isor a recipe for consistent demand triggering Economic Activity, triggeringmi investment, and the cycle, the more Virtuous Cycle is off and running. I think what, we made this very kind of fundamental mistake in basic economics, which is a think thats about the top 1 , so much of the wealth is disproportionately going to the top them to think that the top 1 can do it. Thats trickledown. Thatwn the failure of trickle dn 50 i did that as long as rich people have all the tax cuts and the wealth that they need, that will trickle down and lift the middleclass. Thats topdown growth that is decades of evidence against its effectiveness. Middle outgrowth, bottom out document by upgrade, that is muchch more i think a much more lasting proposition in the sense that it just try to communicate. All right. Let me run a couple by you, i know you have heard some of these before. Criticism comes on, theres so much investment happening at home and i would really the best place to do all of this manufacturing . Let me ask this wicked does President Biden believe in free trade . Certainly President Biden believes in robust trade flows but im not sure what the word freetrade means to tell you the honest truth ive seen freetrade agreement that are 2000 pages long, and they involve aot lot of things that e not freetrade like protecting pharmaceuticals pics i think we need to be careful what we mean when we throw those words around. I knowrd that the president is very much remains very favorably disposed towards trade flows. Now it is true that weve taken precautions to ensure that those flows as two very important test for us. One, is that they dont threaten our national security. So yes, we have taken actions to ensure that some of our enemies or potential enemies are not able to recognize some components of craigslist against the spirit and two, resilience. So we have seen real knowledge resilience and supply chains and that very much caught the president s attention. So when you say, when one says we are for a more secure trade relationships, and when we are for more resilient trade float, we are not saying that we are for some kind of zero trade or shutting off trade at the borders. Instead were talking about much more nuanced differences were we continue to benefit from increased supply for global trade brings to the table. But we take out some of the knowledge resilience these in the supply chains that really hurt us during the pandemic. I think frankly if, for any economist or trade economist who did learn that lesson worth paying attention expert all right. Lets get one oror two more befe we let you go desperate were not paying attention. I need to get this with a lot. We are not in a recession now speeders are notry here to give. Let me try one more time. We are obviously not in a recession now, far from it. What do you think how are you going to avoid it for the next year . Well, the way you started is exactly thehi right place, which is to look at where we are right now. As you well know, i recession is not a matter of your vibes or what kind of mood you entered theres actually a set of very distinct indicators that explain where the economy is in in that regard and have to do with personal income, with payroll employment, retail sales and so on, industrial production. So if you look where we are, as you said, these indicators are certainly not flashing anything close to recession. Where we are going is a much tougher proposition. I said i said earlier when you asked me to forecast inflation, i think its not, its a tough business to be in these days given the uncertainty kind of embedded in this economy and some of the unusual forces that we are seeing the resort have been abe to bring down inflation by a great deal by twothirds in fact, here on cspan2, break k away from live coverage now of the u. S