Jared Bernstein

Jared Bernstein is an economist and senior fellow at the Center on Budget and Policy Priorities. He was formerly chief economist to Vice President Joe Biden and a member of President Barack Obama’s economics team.

 

Recent Articles

Not Another Tax Cut

The consensus was that they'd do it, and they did it. The Federal Reserve raised short-term interest rates again, the 11th consecutive rate increase, from a measly 1 percent in June of 2004 to 3.75 percent on September 20. Technically, the rate in question is the interest rate that banks charge one another on overnight loans, but its impact is much more widely felt (see this graphic for how it works). In general, this rate-increasing campaign by the Fed represents an effort to be “less accommodative,” that is, to raise the cost of borrowing as the economy picks up speed. In Fed economists' own words, they're trying to “maintain price stability” by heading off any inflationary pressures that they fear may be building. Given that this so-called removal of monetary stimulus has been going on for more than a year now, what's so interesting about the recent decision to proceed with business as usual? The answer is that this is the first Fed interest-rate move in the post-Hurricane Katrina...

Skills Setback

“The economists don't know what they're talking about.” Granted, this may seem like an odd opening for a piece by two economists, but the guy who said this -- a member of a focus group probing Americans' experiences in the current economy -- has a point. Policy-makers are waxing ever more enthusiastic about how great things are. In response to the most recent report on the gross domestic product, the research director at the Federal Reserve Bank of Minneapolis quipped, "It's kind of boring around here because the economy looks so good.” That all depends on who's doing the looking. Virtually every poll on the subject shows much more dissatisfaction with the economy than you'd guess either by looking at the “top-line statistics” (GDP, productivity, factory orders, and so on) or by listening to the cheerleading emanating from the White House. A recent Wall Street Journal /NBC News poll reported, for example, that public approval of President Bush's handling of the economy fell from 47...

Fresh Air

This may seem like a weird time for progressives to feel optimistic, but a confluence of recent events suggests the faintest breeze of hope in the air. Granted, the winds of corruption and shortsightedness still dominate. More so than at any time in recent memory, high-level officials are indistinguishable from right-wing lobbyists, gutting government's ability to regulate corporate power. The Justice Department is throwing the fight against the tobacco companies; the White House is busy editing the science out of regulations that might restrain polluters. Meanwhile, the administration and its congressional allies continue the fiscal recklessness that has been their hallmark since they got here. If they continue to have their way -- and they recently added a new slew of regressive tax cuts to their 2006 budget -- it will eventually be impossible for government to fulfill essential functions, from safety nets to investment in future technologies. (I know, that's the point: Starve the...

Sunny Forecast

An economist's view of the world generally boils down to “every silver lining has a cloud.” Our reputation as dismal scientists, fair or not, makes us especially grateful when we find something to be optimistic about. In that vein, there's one development over the past decade that makes even us feel brighter about the future: the acceleration in productivity growth. Productivity measures economic output per hour of work, and thus offers a basic measure of how fast living standards can rise. Since the mid-1990s, productivity has been growing at least 1 percentage point faster per year than it was over the prior few decades. This genuinely happy news is particularly relevant to one of today's most pressing political issues, as faster productivity growth will help to fill the Social Security financing gap. Now that even the president seems to understand that private accounts won't restore solvency to the system, talk has turned to tax increases, benefit cuts, and raising the retirement...

Tax and Interdepend

It's tax day, and the mind drifts to interdependent utility functions. Back in grad school at Columbia, we slogged through microeconomics, learning how individuals sought to “maximize utility,” which roughly translates into becoming as fulfilled as possible, given various constraints. The optimal economy, we learned, was one in which economic agents, or “people,” sought to promote their own well-being. We didn't just take this at face value, though; we constructed pristine mathematical models that proved it. Government, in these models, was generally something of a villain. Taxes inevitably created distortions in behavior that stayed the invisible hand. They created “deadweight losses” and led people to work less, or work more, or some combination thereof. Later, our textbook allowed that some amount of taxation was justified in the sense that there are a few “public goods” that we desire but that the market can't or won't provide. But I think it's fair to say that their training...

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