James S. Brady Press Briefing Room
2:31 P.M. EST
MS. JEAN-PIERRE: All right. Good afternoon, everybody.
Q Good afternoon.
MS. JEAN-PIERRE: Foggy day. Foggy day.
So, this afternoon, President Biden delivered a major address on his economic legacy. After decades of trickle-down econ- — economics, President Biden has written a new playbook that's growing the economy from the middle out and the bottom up. His administration has delivered the strongest recovery in the world and laid a strong foundation for years to come by investing in America, empowering workers and u- — unions, lowering costs, and supporting small businesses.
Over the last four years, we have made remarkable progress, and the results speak for themselves: over 60 million jobs created, the lowest average unemployment rate of any administration in 50 years, inflation down faster than almost any other advanced economy, and incomes up almost $4,000. The list goes on.
As you heard the president say, we face an inflection point. Do we continue to grow the economy from the middle out and bottom up, or do we backslide to trickle-down economics?
With that, I will turn it over to Jared Bernstein, chair of the Council of Economic Advisers, to further discuss the economic progress that we have made.
Jared.
CHAIR BERNSTEIN: Thank you. Great to be here with you again. I want to thank my team, as always, for helping me to prepare to speak to you today.
The president, as you just heard, gave a legacby — legacy speech today wherein he spoke about the strong economy that his administration is leaving to the incoming team and how we got here, given what we faced when we took office.
He then lays out a set — a set of — he laid out a set of benchmarks, which I will go through with you in a minute, against which the incoming administration's economic stewardship should be judged.
The speech makes clear that while the pandemic was the acute source of economic stress four years ago, the damage done by decades of Republican fealty to trickle-down economic policy was a long-term underlying source of economic pain for millions of America — Americans.
The speech goes through the policy implications of that agenda — offshoring jobs with no concern for workers and their communities, anti-unionism, and disinvesting in American infrastructure workers' industries — and contrasts that with the Biden-Harris agenda of middle-out, bottom-up growth, which implies a very different agenda: investing in workers in key industries of future growth and productivity, union power, full employment, labor markets, fair taxation, and taking on corporations and lobbies like Big Pharma on behalf of the American middle class.
The timing is not accidental. As Karine said, a quote from the speech, "With the outcome of this election, we face an inflection point. Do we continue to grow from middle out and bottom up by investing in all of America and in all of Americans, supporting unions and working families, or do we backslide to an economic theory that benefited those at the top while working people in the middle class struggled for a fair share of the growth?"
The president, as his speech — at the end of his speech, the president ticked through a set of benchmarks, indicators by which the — the conditions of the current economy that the incoming team has inherited can be assessed and judged.
Sixteen million jobs with the manufacturing and a construction boom. In four years, we'll know if the — that job growth and booms will continue or not.
Historic lows in unemployment. Record new businesses. Significantly closing the racial wealth gap. More people covered by health insurance than at any time in history. Our tax code is fairer. We've gone after concentrated corporate power, and in four years we'll know if this power goes back to big corporations or not.
Let me end my introductory comments today with a little bit of a reflection on the economics, speaking as the chair of the CEA, of the economic theory behind what the president talked about in his speech today. I should say the economic theory and the economic outcome. This is far from just a theoretical or an academic exercise.
The president talked about achieving a soft landing, and this is the idea of considerably lower inflation without giving up much on the economy's demand side — that is, lower inflation without higher employment. As you know, many economists told us we couldn't get there. We'd have to have a recession to have as much disinflation as we've seen.
In fact, that did not occur, and one of the reasons it didn't is because the job market. You know, I heard the president mention full employment a couple times in his speech today. The job market has stayed uniquely strong for uniquely long, and that's given workers bargaining clout along with his union agenda.
And so, as prices have come down — as inflation, I should say — as inflation has come down and wages have gone up, we've had real wage gains now for about a year and a half on a — on a yearly basis. Last seen: 1.5 percent real year-over-year. That's — that's real — tha- — that's a considerable pace of real wage gains.
This helps support strong consumer spending, and that's been a core factor keeping this economy moving forward a- — above trend growth rates and leading to a situation that you heard the president talk about today, where the U.S. economy really is the envy of the world. And I say that as someone who recently came back from Europe, where I was frequently accosted by people who wanted to just talk about how we've achieved the innovation, the productivity, the persistent full employment that — that we have.
That's the consumer side of the story — the consumer spending side of the story. It's 70 percent of our nominal GDP, so it's extremely important to keep the economy moving forward.
But I often think of consumption as today's story and investment as tomorrow's story. I think what the president talked about today that was so important and so compelling — especially given the fact that many of these benefits are going to unfold 2, 4, 5, 10 years from now, if the incoming folks nurture the seeds we've planted versus take them out — this investment agenda i- — has the potential and is already transforming economic growth, production, innovation, building up new domestic sectors in this economy in the area of clean energy, battery production, chips. And — and that kind of investment agenda, that speaks to future growth rates. That speaks to future opportunities. That speaks to future productivity growth.
Now, we've already — as the president said in his speech today, there's been a trillion dollars of private investment that has flooded into those sectors — into clean energy, into semiconductors, into providing infrastructure for this country. All of that, again, is a complement to the consumer spending side of the agenda, the soft-landing agenda that sets us up for a future based on the kinds of investments the president talked about today.
With that, I'll turn to your questions.
MS. JEAN-PIERRE: Go ahead, Josh.
Q Good to see you, Jared. Thanks for doing this and subjecting yourself to all of us. (Laughter.)
One of the benchmarks that President Biden didn't mention in his speech was the U.S. budget deficit, which is closing out the fiscal year last year, like, above 6 percent of GDP. How sustainable is that as an inheritance of the incoming administration?
CHAIR BERNSTEIN: The president spoke about this a bit in the speech in the context of doubling on the TCJA tax cuts, of course, most of which expire at the end of next year. And he talked about over fi- — I think he mentioned 5 trillion in deficit-financed tax cuts if Republicans fail to offset that.
I think that stands in stark contrast to the budgets that — that we've passed that have three — the most recent one with $3 trillion of deficit reduction.
So, the first point is that if you look at the fiscal outlook that we've tried to craft in our budgets — now, obviously, we were — were not able to get those through Congress, but we certainly — that's what we've been fighting for — they're characterized by significant deficit reduction and a great deal more fairness in the tax code, which is something he talked about today.
So, I think he correctly took a stance that the extens- — the full extension of the — of the Trump tax cuts would be both significantly damaging our fiscal outlook and, even worse, creating more unfairness in the tax code and increasing after-tax inequality.
In terms of whether 6 percent deficits are sustainable, I think that when we — what — what you really want to see, it's very h- — I think it's hard and probably not that advisable to say, "This number is okay and that number isn't. Once you get to this level of debt to GDP, you're in trouble. Once you go over it" — you know, the — the markets don't really work that way.
Given the extent of the debt that we face so far, we still have very successful auctions to — you know, to — to explain, you know, what I'm talking about.
But I do think that what you want to see is, when you get to a full-employment economy with above-trend growth, you'd like to see that number coming down. So, I think it's much more of a delta story. You'd like to see that number coming down, and one of the reasons you don't is because decades of trickle-down economics and Republican tax cuts have broken, have severed the linkage between strong economic growth and revenue flows to the Treasury. We tried to correct that in our budgets, but the politics have blocked us from getting it there.
Q But basically, you believe the current situation is not sustainable based off your budget proposals?
CHAIR BERNSTEIN: I think that when you get to an economy — I think that when you're an economy like ours — no, I wouldn't say it that way. I would say, when you're an economy like ours, with all the kinds of indicators the president discussed today — full employment, above-trend GDP growth, historically low unemployment — yes, your budget deficit should be going down because the revenues that come into — the revenues that come into your coffers are outpacing your — your outlays.
And that's the budgets that we've written. That's something we've tried to embed in our budgets, and, you know, we haven't been able to get them passed.
What's worrisome — and the president talked about this today — is that the incoming administration is making sounds of going in the other direction, which I would consider fics- — fiscally reckless.
MS. JEAN-PIERRE: Go ahead, Andrea.
Q Jared, it's been a — a little while since I've seen you, so I want to ask you a question about the speech and — and the context for it. I mean, so many voters cited inflation and just their pessimism about the economy in their — in exit interviews as — as we were watching the election.
So, what is the — what is the purpose of sort of going out and saying, "Well, we did all this right"? Against that backdrop, it's kind of like water under the bridge, right? You know, sort of, your account of the economic progress is against the backdrop of people having said, "No, that's not what we want to do."
CHAIR BERNSTEIN: Well, as I tried to express in my topper here, in my introductory remarks, the purpose was really twofold. One was to lay out a set of benchmarks. I mean, I think the president quoted Reagan in the speech, saying, "Sometimes facts can be stubborn things," but they are facts.
So, lay out a set of facts that are unequivocally correct about above-trend growth trending at 3 percent on real GDP, lowest average unemployment in 50 years, 16 million jobs, and so on — real gains in average income of $4,000 since we got here. Lay down a set of facts, benchma- — 20 million new businesses — small businesses created. Lay down a set of benchmarks against which the progress of the incoming administration should be judged.
I mean, this is — the — the incoming team, in no small part, ran hard against this economy. And so, it's entirely possible that, in some short amount of time, that they start making very different sounds about how — how they own these great results. And we wanted to be sure that we set down the benchmarks that the Biden economic agenda delivered.
Secondly, how did we get there? So, those are the benchmarks, but how did we get there. We certainly didn't get there with trickle-down economics. We got there with the new playbook that Karine and I referenced, and that's a playbook that invests in American workers. It invests in American bargaining power. It believes in union strength. It believes in fair competition. It believes in fair taxation and a more reasonable fiscal outlook. It believes in pushing back on concentrated corporate power.
All of those parts of the Biden economic agenda got us to where we are in terms of the positive indicators that we had in this — that I — we outlined today.
Now, at the same time, nobody is denying the inflation that you — you asked about, and, in fact, the president hit that head on in two ways.
One, first, he talked about our efforts to get inflation down. So, remember, in mid-June, you saw inflation peak, and after that, it turned around and came down pretty quickly to now it's within target — it's — it's close to the Federal Reserve's target rate, and that's why you see them cutting rates.
And so, how did we get there? Well, we did a great deal of work on trying to unsnarl supply chains; the president talked about his release of oil from the strategic reserves; and, of course, a full set of cost-cutting measures going after junk fees, health care, and so on.
The incoming administration has talked about repealing measures that would directly raise costs, not to mention adding a set of sweeping tariffs that would act like a national sales tax, pushing the wrong way on inflation.
So, it seems to us entirely important to reference all of those developments in this — in this case.
Q Can I just follow up? So, you know, given that there's this lag in the economy — like something happens, and then there's a lag when you see the effect — you know, how long will it be before, say, Trump's tariffs sort of make themselves felt? Because, you know, I think your — you know, the White House itself looked at the possibility of repealing or removing the U.S.-China tariffs to sort of address inflation and realized there would be only a very modest impact, so —
CHAIR BERNSTEIN: Okay. So, first of all —
Q Like, what — what's your prediction —
CHAIR BERNSTEIN: Sure. I can give you some economics on that —
Q — for the lag? Yeah.
CHAIR BERNSTEIN: — the lag structure.
First of all, it's really important in this conversation dis- — to distinguish between targeted tariffs that are designed to protect American industry and American taxpayers' investment against unfair overcapacity trade practices of the type that China has engaged in with sweeping tariffs of multi-digit percent tariffs on everything coming in from Europe and China. Totally different worlds.
The first prodec- — protects produ- — American producers. The second hurts American consumers.
How quickly does that happen? Quite quickly.
So, let's talk about how a tariff works. And, again, I think we've gotten some misguided explanations in this regard from the other side. The other country doesn't — the — the exporting country doesn't pay the tariff. Technically, the tariff is paid by the importing company. It's paid upon customs receipt by the importer. Now, that business then typically pushes that tax or tariff forward to their consumers.
And that's why studies have shown that fairly quickly — I don't want to cite a number, but I think it's months ra- — versus — I don't want to cite a time period, but I think it's more months than — than quarters. So, pretty quickly, I think, we've seen in the past.
Oh, you know what's a good example is the washing machine tariffs. That — they hit very quickly. I think it was a matter of weeks or months before we saw the price effects on washing machines and on dryers — American dryers, even though they weren't tariffed. So, the price effects worked pretty quickly.
MS. JEAN-PIERRE: Go ahead, M.J.
Q Thank you. Thanks, Chair.
CHAIR BERNSTEIN: Hi, M.J.
Q Hi. Nice to see you.
You know, over the last year or so, I think we've all seen you field a lot of questions about this disconnect between what you describe as a strong economy versus the people's generally pessimistic economic outlook. I just wondered — and it's related to the last question — what would you say is the reason that there wasn't enough of an improvement in people's economic outlook by Election Day? I assume you've had some time to reflect on the results of the election.
CHAIR BERNSTEIN: It seems clear, if you look not just at our election but at elections and approval ratings across the globe, that not just inflation — because by the time the e- — election came along, inflation was back down within distance of 2 percent, so it was back down close to the Fed's target — so, not inflation, but the price level, the cumulative impact of inflation — so the fact that people could still remember what things used to cost, that was a force that really whacked incumbents in every elect- — I think, virtually every election we've seen across the globe. So, that was a very powerful force.
Now, look, from our perspective, we needed to do two things. We needed to get inflation down, because you'll never get — people will never be able to acclimate to the higher price level unless inflation comes back down to around 2 percent. And that was behind our work on unsnarling supply chains, which became very important in this space. One of the graphics that, you know, I — I like to tout from our CEA team is, if you look at supply chain measures of stress, which go way up and way down, pandemic and post-pandemic, and you plot them against commodities, goods inflation, they — they track each other very closely with a bit of a lag.
And so, getting inflation back down to target was very much an important part of agenda. But that just means prices are rising more slowly. It doesn't mean they're falling. And, in fact, to have a broad decline in the price level, you would need a deep recession that nobody wants.
So, what you need to happen is for incomes to catch up.
Now, that — those dynamics were happening. They were occurring. And I've spoken about this from the podium before. I theorized, you know, probably a couple of years ago — and one of my colleagues and I are trying to write an academic paper about this — I theorized a couple of years ago that if inflation came down and people had enough time to acclimate to the new price level — an acclimation that would be very much aided and, in fact, was essentially — it had — had to be aided by rising real wages or incomes — eventually they'd start to get — you know, to get acclimated and to feel better.
And, you know, pa- — one — one tr- — you know, sort of, ape- — what's the word I want? Sort of a trivial example of that is, you know, when I started driving, gas was 60 cents a gallon, but I don't walk around annoyed that gas isn't 60 cents a gallon because, while prices have gone up, incomes have gone up more.
That's where we are. Inflation is back down. Prices — the price level remains too high from the perspective of consumers and voters, and that's partly — you know, a big part of the answer to your question.
I sense you want to say something else.
Q Well, just this — this long memory that people have on —
CHAIR BERNSTEIN: Yeah.
Q — price levels. I mean, do you feel like you, the president's economic team, the president himself, could have done anything differently over the last few years to better address that, better, you know, sort of meet people where they are? I mean, you've known that that is where people's heads —
CHAIR BERNSTEIN: Yeah.
Q — have been at for a while.
CHAIR BERNSTEIN: You know, the question of "could you have done something different and better," I always feel like, "Sure." You know, you could always im- — nobody's perfect, and you can always improve on what you did.
But on the issues I'm talking to you about, we were one of the first folks to be — to be talking about this, to be understanding the difference between inflation and price levels from people's perspective.
I mean, I don't know if you remember, but I brought this to our senior staff one day. You know, I brought this — well, I think it might have been the only time I did this — I brought a handout to our senior staff and said, "Let me talk to you about the difference between inflation and the price level and how people feel about that." And, you know, economics doesn't think that much about the price level. It thinks a lot about inflation. And, you know, not at all a critique of the mandate of the Fed, that — that's the cr- — congressional mandate and the one they follow, but it's full employment and stable inflation.
So — and you'll hear Chair Powell talk about that — that, "I recognize the price level is a stress to people, but my job is to get inflation down."
So, it's something we've been on for a long time, and it's behind the cost-cutting work that we tried to do here. We cut costs in health care. The president talked tobay [today] about junk fees. You saw the energy results from the SPR release and so on.
We tried to get a lot more competition going in the grocery sector, where there's definitely not enough competition, leading to pretty high markups and profit levels that we've talked about and used the bully pulpit to convey our — our concern about, but, you know, we live in a capitalist economy, and so prices are generally determ- — determined by private markets.
But where we could — and health care is a great example, because the government is in 9 percent of the health care market. So, health care is about 18 percent of GDP; about half of that is the government. So, there's an area where we could and did make a huge difference: insulin; capping prescription drugs, which kicks in, by the way, in a couple of weeks — the $2,000 cap on prescription drugs. We're very proud of that agenda.
You know, could we have done more or talked about it differently? You know, I — I think we did what we could.
MS. JEAN-PIERRE: Go ahead, Annie.
Q Hey, Jared.
CHAIR BERNSTEIN: Hey.
Q Good to see you.
One of the things the president mentioned today at Brookings was some — he — he had a note of regret about not signing the COVID checks the way that Donald Trump did. And I just was wondering if that's something you ever talked about or if, you know, following up on M.J.'s question about what could have been done differently, was that a debate that happened at all? Would you have recommended anything to the president in that regard?
CHAIR BERNSTEIN: It's not something I recall talking or debating about.
I mean, I will say two things about that. One is — just to bring it back to the economic space in which I'm — I'm more comfortable — certainly, those checks were instrumental in what I described earlier, which was getting businesses and consumers to the other side of the crisis.
You know, we gave people more buying power than they had at a time — and there's been a lot of second-guessing on this, so I'd love to set the record kind of straight — in 20- — in January of 2021, it was peak COVID deaths. Okay? The unemployment was stuck at 6.7 percent. And I just looked back the other day; the last jobs report when we came in was a negative. It had been revi- — it's been revised differently. I think it's actually been revised to be a bigger negative, but it was a negative. In other words, we'd lost, I think, 140,000 jobs, according to the print that was in December of '20.
So, this was a very challenging economy. You know, people who say, "It was fine, and you shouldn't have done anything," are forgetting. You know, that's — that's amnesia.
So — so, we're very proud of the fact that this income got into people's hands quickly. Who was asking about the lag a second ago? Boy, there's a really tight lag there. You know, this — this money got out quickly. It got into the economy quickly, and it very quickly set up an economic expansion that is today the envy of the world. The president isn't hyperbolic when he says that, and I say that having recently come back from Europe. Is the en- — that set up that full employment expansion that we've enjoyed since then.
And two — so, I said there'd be two points. Two, he was kidding.
Q Oh, wait, he was kidding about signing the checks?
CHAIR BERNSTEIN: He was — he was kidding.
Q Oh.
MS. JEAN-PIERRE: Go ahead, Danny.
Q Thanks. Thanks, Jared. I just wondered if you have had the chance yet to speak to your successor in the Trump administration, and if you've got any advice for him.
CHAIR BERNSTEIN: I have not. I don't know who will be sitting in my chair yet, so I haven't spoken to that person.
And then, advice?
Q Yeah.
CHAIR BERNSTEIN: That's a good question — one I haven't thought of. I would say, read the president's speech today. (Laughs.) Really, I'm not — I'm not being facetious.
The president's speech today is the best advice I could give to any member of the incoming economic team, because what it says is we have planted some very important seeds in growing domestic industry, which I think both the outgoing and the incoming administration share the strong desire to see American industry stand up independently, more resilient supply chains.
Yes, we still believe in very robust trade flows. So, obviously, part of my advice would be not to do sweeping tariffs. Certainly, small tariffs — you know, targeted tariffs that protect against unfair dumping, sure. But I would be — it would be to nurture — you know, I mean, I guess this — this may not be the most mellifluous advice that they want to hear, but nurture the seeds that we've planted.
This is not a blue-state thing or a red-state thing. And, in fact, the president was very clear on this today, most of the investments under the IRA, under CHIPS, even under Infrastructure, are going to red states, not blue states. Most of them are going to people with relatively lower incomes or lower levels of education, so very much a working-class issue.
So, nurture the seeds. Don't stomp on them.
MS. JEAN-PIERRE: Go ahead.
Q Is there anything that you have seen or heard from the incoming administration's economic plans that you like or that could be in line with what you have done here?
CHAIR BERNSTEIN: You know, I've heard, certainly, commentary about getting on a more fiscally sustainable path. So, I'm thinking about Josh's question a moment ago.
What I can't put together is how you get there from here — well, not from here — how you get there from what I — I believe to be their fiscal agenda.
And, in fact, there have been many scorekeepers across town who have been scoring the cost of not just extending fully the TCJA tax cuts but going further — tax cuts for overtime, tax cuts for Social Security, tax cuts for tips. And so, if you — if you tout that all up, by one study, there was an upper bound of north of $10 trillion in terms of adding to the deficit and the debt.
So, I like some of the sound I'm hearing about getting on a more sustainable fiscal path, but then I'm hearing a po- — a policy agenda that goes the wrong way on that.
Q Just to follow up, you said that most of these projects are in red states. Certainly, the — your administration didn't get a whole lot of political benefit from that. But I'm wondering, why is that? Is it because it's easier, there's less red tape, there's less regulations in red states, you can get projects up and going faster than in blue states?
CHAIR BERNSTEIN: No, it's — it's not so much that. It's more that — that these projects were targeted to communities that had been historically left behind. This president believes — and I think he probably shares this belief with, you know, the incoming president to some extent — this president believes that while there are absolutely positive attributes to globalization, the idea that globalization didn't leave behind American communities and didn't hurt anybody and uplifted everybody is clearly wrong and — and even bereft. I mean, to blithely say, you know, "Here's another trade deal; everybody is going to love it and be fine," is just denying the impact of the China shock and the hollowing out that happened to the very communities we're talking about.
So, these plans were designed in part to disproportionately send their investments to communities that had been hollowed out and left behind: energy communities, communities where factories — where anchor factories were lost. And that's behind where those investments have flowed.
Q But a lot of battleground states are — were deindustrialized and left behind.
CHAIR BERNSTEIN: Well, it — that —
Q I mean, you could of put projects anywhere.
CHAIR BERNSTEIN: — no — so, go to —
Q Why red states, is what I'm asking.
CHAIR BERNSTEIN: No, no. Go to Investment.gov —
Q Well, yeah.
CHAIR BERNSTEIN: — and you'll see that there are lots of projects there too. So, it's not that — it's not that 90 percent were in red and 10 were in blue. It — I don't know what the division is, but I think it's probably fairly close. It's that a lot more — you know, when the president talked about this today, he framed it as, like, "This may not" — you know, "Some may look at this and say this is not my greatest political move." You know, that's not where he's coming from. When he said, "I'm president for all Americans," he meant it, and he over delivered.
MS. JEAN-PIERRE: Go ahead.
Q Yeah. Hi, Jared. Thanks for doing this. I have a question sort of about legacy. Biden billed this — billed the speech this m- — this afternoon as about an economic playbook, something that is successful and should be replicated, but it didn't have a lot of electoral success and it didn't — you know, in the minds of voters, as other folks have said, they don't see it as a — a success for them. I — I just wonder, what gives you or what gives the president confidence that this — this should be or would be —
CHAIR BERNSTEIN: So, here you have to —
Q — replicated in the future?
CHAIR BERNSTEIN: That's a totally fair question. Here you really have to get under the hood, and I've done this. If you ask people what they think about paying $35 for insulin versus $400 a month, it's not going to surprise you that that polls somewhere between 80 and 150 percent. I'm making the second number up, but it polls north of 80 percent.
If you ask people how they feel about an infrastructure project that restored a bridge in their area, again, your — you get poll num- — you'll get approval numbers in — in the high 70s and high 80s.
