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