Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We're joined on Bloomberg TV and radio by the chairman,
Speaker 2: Jared Bernstein, chair of the White House Council of Economic Advisors.
Speaker 1: It's great to see you. Welcome back. Great to be
Speaker 1: back here with the two.
Speaker 2: This is framed as an exit interview. I don't know
Speaker 2: how that makes you feel, but we'd love to talk
Speaker 2: about a couple of different things. And if that's the case,
Speaker 2: as you pack up your office, I want to start
Speaker 2: with the fight of your life, which I believe is
Speaker 2: the fight you waged against inflation for the last time.
Speaker 1: Oh, I thought you were at my confirmation here.
Speaker 2: I thought maybe picked something else. But I think we
Speaker 2: can agree that's what you've spent the most of your
Speaker 2: time on, and it's what we've spent the most time
Speaker 2: probably asking you about. When you look at a chart
Speaker 2: over the last four years of CPI data, it.
Speaker 1: Looks like a mountain.
Speaker 2: Yeah, you crest at the top of that mountain a
Speaker 2: couple of years ago. And as we look at that
Speaker 2: chart now we'll share it with our viewers on Bloomberg
Speaker 2: TV and on YouTube. I wonder on how that makes
Speaker 2: you feel if it brings back some PTSD traumas and
Speaker 2: some of those.
Speaker 1: Yeah, I believe.
Speaker 2: But also when you look at that, do you think,
Speaker 2: look how much progress we made or how much left
Speaker 2: we had to do both.
Speaker 3: Certainly progress we've made, I mean coming down the other
Speaker 3: side of that mountain was critically important. But you know,
Speaker 3: Kayley and Joe, for us, the fight was never just
Speaker 3: about getting inflation back down. That was absolutely key, and
Speaker 3: we're proud of the work we did to help that. Specifically,
Speaker 3: by the way, the Supply Side Disruption Task Force.
Speaker 1: That's not something you hear a lot about that, but
Speaker 1: we were.
Speaker 3: Probably talking about it back in twenty one. The President
Speaker 3: realized quickly that it was snarled supply chains that helped
Speaker 3: cause that inflationary spike in part along with strong demand
Speaker 3: and unstarling those changs was going to be really important.
Speaker 3: But the thing that the President recognized was that we
Speaker 3: also have to worry about costs the price level, not
Speaker 3: just inflation. And that's why, starting you know, shortly after
Speaker 3: that peak, we started talking about what we were doing
Speaker 3: at lower costs. Because it's one thing to get grocery
Speaker 3: inflation from thirteen percent down to around one one and
Speaker 3: a half percent. That was a huge and important accomplishment,
Speaker 3: But that just means your grocery prices are growing more slowly,
Speaker 3: it doesn't mean they're coming down. And a lot of
Speaker 3: people really wanted more deflation, not just disinflation, So our
Speaker 3: cost cutting agenda was also a critical piece of the
Speaker 3: fight well.
Speaker 4: And your point is well taken on how supply side
Speaker 4: factors did ultimately contribute to the higher price pressures, But
Speaker 4: you mentioned demand there as well, and certainly you're familiar
Speaker 4: with the Republican argument that it was too much fiscal
Speaker 4: stimulus that fuel demand and fueled inflation as a result.
Speaker 4: When you look back on it now, do you think
Speaker 4: the ultimate trade off was worth it keep the economy
Speaker 4: and the labor market in better shape through some of
Speaker 4: those stimulated efforts in exchange for what could have been
Speaker 4: that additional marginal pressure upward on prices.
Speaker 3: I do with the following asterisk or caveat, which is
Speaker 3: that if you look at the trajectory of inflation or
Speaker 3: the cumulative out which the price level grew across every
Speaker 3: g SEM and economy, it's pretty much the same in
Speaker 3: every one of them, and they all had different fiscal
Speaker 3: and monetary policies. So I think it's a mistake to
Speaker 3: assign too much of that increase to fiscal policy, and
Speaker 3: I think the Republican argument is fundamentally undermined by that
Speaker 3: international comparison.
Speaker 1: You know. That said, the other.
Speaker 3: Part of your the way you teed up the question
Speaker 3: is really important, which.
Speaker 1: Is what did we get?
Speaker 3: So we are now handing off one of the strongest
Speaker 3: economies on record, and by some really important measures, whether
Speaker 3: it's the number of jobs, you know, a four percent
Speaker 3: average unemployment over this administration, that's an historical achievement, and
Speaker 3: of course the stock market doing great in the past
Speaker 3: couple of years. All of those indicators do take you
Speaker 3: back to punching back as hard as we could against
Speaker 3: the pandemic induced recession. So I want to be very
Speaker 3: careful about not suffering from any of the amnesia about
Speaker 3: what was going on in January twenty one when we
Speaker 3: got there, and how our policies helped get this economy
Speaker 3: back to full employment where it's been ever since.
Speaker 2: You've been very disciplined about staying independent from the FED
Speaker 2: and not answering our questions about the FED for the
Speaker 2: last four years. I salute you for your consistency every
Speaker 2: now and then we got a little bit of a crackout.
Speaker 2: I just wonder, I don't know if you feel more
Speaker 2: or less shackled now than you did in the throes
Speaker 2: of the administration, But did you feel in sync with
Speaker 2: the FED from transitory to the first cuts.
Speaker 3: Well, first of all, people ask me, right now, you know,
Speaker 3: what are you going to do after this job.
Speaker 1: One of the things I say is I'm going to
Speaker 1: talk about the.
Speaker 3: FED, So hopefully here for certainly going to remain pretty
Speaker 3: quiet about the FED as long as I'm a still chair.
Speaker 1: Of the CEA. I mean, look, I think one.
Speaker 3: Place I take your question is is just how much
Speaker 3: we valued FED independence.
Speaker 1: And that wasn't just some weird kind of idea we had.
Speaker 3: We're just acutely aware that economies have been brought to
Speaker 3: their neees by compromising the independentive essential bank. And that's
Speaker 3: largely because of unforced errors on inflation. Now in some cases,
Speaker 3: I think, I think there are many critics who worry
Speaker 3: about the incoming Trump administration's policies in the context of
Speaker 3: being inflationary, whether it's deportation or tariffs or lots of
Speaker 3: tax cuts. And you know, I'm not going to go
Speaker 3: there myself. I want to give these guys a chance.
Speaker 3: Let's see what they do.
Speaker 1: They don't want.
Speaker 3: Higher inflation or interest rates. I think we can be
Speaker 3: pretty clear on that. But once you start messing around
Speaker 3: with FED independence, I think you're making a pretty fatal
Speaker 3: mistake in terms of controlling inflation.
Speaker 4: Well, you just said they don't want higher inflation. But
Speaker 4: do you think ultimately when you look at the layout
Speaker 4: of the policies at least that they've outlined, if not
Speaker 4: into the granular details that we may have yet to
Speaker 4: get once Trump takes office, that that is what is
Speaker 4: going to result, is that it's going to lead to
Speaker 4: a new spike upward in prices.
Speaker 3: Kayley, again, I want to give this incoming team the
Speaker 3: benefit of the DOABTA. I know some of these folks,
Speaker 3: they're good economists. They don't want to generate higher inflation
Speaker 3: and higher interest rates. But if you do look at
Speaker 3: the impact of say sweeping tariffs or deportations, or fiscal
Speaker 3: stimulus through unnecessary high end tax cuts really also hurting
Speaker 3: the economy's fiscal outlook, all of those, of course are inflationary.
Speaker 3: And then if you add in compromising FED independence, you've
Speaker 3: got a real problem on your hands. I don't think
Speaker 3: they want to go there.
Speaker 1: I will say the following.
Speaker 3: If there are those who think that, hey, we did
Speaker 3: tariffs in our first administration and it didn't hurt us.
Speaker 3: On the inflationary side, twenty twenty five is a lot
Speaker 3: different than twenty seventeen. Right there, you're looking at an
Speaker 3: economy where you were missing inflation from the downside for
Speaker 3: something like five or ten years. There, you're looking at
Speaker 3: an economy where interest rate yields were very low. Now
Speaker 3: you're talking about an economy where inflation is making its
Speaker 3: bumpy way path back to target and yields are of
Speaker 3: anything going the other way. This is a very different
Speaker 3: climate to be considering those kinds of ideas. And I
Speaker 3: would say in that regard, they have fewer degrees of freedom.
Speaker 1: And again I think they know.
Speaker 2: That independence, though as a as a principle is something
Speaker 2: that some would argue is being challenged right now by
Speaker 2: this incoming administration. The man who was just experiencing his
Speaker 2: confirmation hearing earlier today, Scott Besson, the potential future Treasury secretary,
Speaker 2: floated the idea of a shadow fed share is that
Speaker 2: our next reality?
Speaker 1: I don't think so.
Speaker 3: Again, I think there are things one says in sort
Speaker 3: of the think tank world. Yeah, you know, the Bible
Speaker 3: says when as a child, I spake as a child.
Speaker 3: But then when he chaired the CEA, I had to
Speaker 3: get a lot more serious.
Speaker 2: And so I think I think of in this team
Speaker 2: the benefit of the death.
Speaker 3: I think that, you know, I want obviously, that's what
Speaker 3: I've said that numerous times, and I want to pursue that.
Speaker 3: But I also think that, uh, the idea of hitting
Speaker 3: this economy with higher in higher inflation, I think any
Speaker 3: economists worth their salt know that that's not where we
Speaker 3: want to go.
Speaker 4: We heard the President in his farewell address last night,
Speaker 4: also say that he wishes the incoming administration's success because
Speaker 4: he wants the country to succeed, and just a few
Speaker 4: minutes later, he went on to warn of what he
Speaker 4: sees as a burgeoning American oligarchy, talking about the concentration
Speaker 4: of wealth and power. And I wonder, from an economic standpoint,
Speaker 4: how you do view that this widening inequality we are
Speaker 4: seeing take place in America.
Speaker 3: Well, that's exactly how I view it. And I'm glad
Speaker 3: you went there, because when I heard the President talking
Speaker 3: about that It brought me back to one of the
Speaker 3: first meetings I had with Joe Biden, or first extended meeting,
Speaker 3: which was in December of two thousand and eight when
Speaker 3: he was the vice president elect, who has at his
Speaker 3: house in Delaware, and he was looking for a chief economist.
Speaker 3: And I rumbled in there and he pulled a graph
Speaker 3: out of his pocket, one that I had made. It
Speaker 3: folded piece of paper. He unfolded it and it showed
Speaker 3: productivity going up, up up. This is a graph that
Speaker 3: I'd made with Larry Michelle, the great labor economist and
Speaker 3: median wages meeting incomes flat. And he pointed the gap
Speaker 3: between the two of those, and that's inequality.
Speaker 1: He said, This is what I want our work to address.
Speaker 3: I want to close that gap and bid nomics to
Speaker 3: this day I describe is that if you're helping to
Speaker 3: bake the pie, you want to get a fair slice.
Speaker 3: So to me, what he said about about this threat
Speaker 3: of excessive wealth concentration is part and parcel of his
Speaker 3: concern about the regular working middle class Americans who build
Speaker 3: this economy every day getting their fair share of the growth.
Speaker 2: Yet it must have frustrated him to not see them
Speaker 2: connect with his vision throughout polling. It was obviously a
Speaker 2: campaign that he dropped out of with the economy as
Speaker 2: the number one issue here. So what was the most
Speaker 2: frequent question? I mean, you would ask you, Jared, what
Speaker 2: was he actually waking up worried about when that was
Speaker 2: the dynamic you were dealing.
Speaker 3: Well, interestingly, you say frustrating, and it's an interesting point
Speaker 3: that makes me think back to conversations we had. He
Speaker 3: was constantly bolstering his staff, including me, saying, look, I
Speaker 3: know it's frustrating, you know, to be seeing this out there,
Speaker 3: but you know I've been through this before, I've been
Speaker 3: to this rodeo, and we just have to keep pressing.
Speaker 3: We have to keep getting the economic job done on
Speaker 3: behalf of the American and middle class. And so he
Speaker 3: was obviously very gratified to see. And this is something
Speaker 3: he and I worked on from the very beginning, going
Speaker 3: all the way back to you know, throughout our relationship
Speaker 3: was the idea that if you run a full employment economy,
Speaker 3: the benefits of the growth that you're helping you generate
Speaker 3: will disproportionately reached bottom half.
Speaker 1: Well, look what's happened to wages.
Speaker 3: I know you've talked about this and documented this at Bloomberg.
Speaker 1: Low wages did the best.
Speaker 3: You know, the low age growth was the strongest that
Speaker 3: comes right out of this running this biden esque full
Speaker 3: employment economy.
Speaker 1: The black unemployment rate over Joe.
Speaker 3: Biden's four years was the lowest on record of any
Speaker 3: four year term.
Speaker 1: All right, that's huge.
Speaker 3: Support for I think the president's theory of the case.
Speaker 3: Now you can ask about the disconnect between that and politics.
Speaker 3: I think that takes us back to the price level
Speaker 3: and that discussion. But the President was well aware of
Speaker 3: this architecture of how the economy works and recognize the progress.
Speaker 1: We made on it.
Speaker 4: And we'll leave it on that note. Jared Bernstein, the
Speaker 4: outgoing chair of the Council of Economic Advisors, thank you
Speaker 4: so much for joining us. Thank you on Bloomberg TV,
Speaker 4: at the radio.