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

Caging the Inflation Hawks

As was widely expected, the high priests at the Temple of the Fed announced yesterday that they would hold the Fed Funds Rate (FFR) steady at 5.25 percent. There are inflation hawks out there who will criticize the decision, but it's a good thing these hawks are keeping their claws off the pause. Neither the economy nor workers' wages need higher interest rates and slower growth right now. Technically, the FFR is the interest rate the Fed charges to lend money to banks, but practically, it is the main lever by which they set the cost of borrowing throughout the economy. It's also a deeply scrutinized signal of where the Fed thinks the economy is, or should be, going. When they raise the rate, they're signaling their concern that the economy is overheating, and needs the weight of higher borrowing costs to slow it down. And visa versa -- lower rates are intended to boost economic activity. By continuing to pause -- the FFR has been at 5.25 since June 29th -- the Fed is diagnosing the...

Honey, I Raised the Fed Rate Again

For the 16th time in a row, the Federal Reserve has raised its benchmark interest rate, bringing the federal funds rate to 5 percent. The rate hike was widely expected. The question among soothsayers who parse the entrails of the Fed's statements was not whether this hike would occur, but whether the committee would signal an end to the long climb that began back in June of 2004 when the rate was 1 percent. When the Fed funds rate was at a 40-year low and the economy was beginning an expansion, rate hikes were as close to no-brainers as such things get. Now, Federal Reserve Chairman Ben Bernanke and the rest of the Open Market Committee are deep into a 3-D chess game, with many crosswinds blowing in all directions. The language in last week's announcement suggests that Bernanke and Co. will be doing some serious data mining to determine their next move. First and foremost, they'll be evaluating conditions in the macro-economy, specifically growth and inflation. GDP grew smartly in the...

Short Changed

When the economy is doing well, presidents tend to spout growth rates and historical comparisons in their State of the Union speeches, while leaders of the other party suffer through the speech. If a president is presiding over a downturn, he feels their (and everybody's) pain, tortures a few numbers to suggest things are not that bad, and describes a way forward. But -- despite the serious economic challenges the country faces -- we heard little about it last night. The economy and economic policy got short shrift, with one or two statistics (4.6 million jobs and four-plus years of uninterrupted growth), a few sentences on health care, a few lines on tax cuts, and a smattering of education. Sometimes what presidents don't say speaks volumes. It's worth pondering why the economics section of the speech was light. First, many things are not going Bush's way right now. A few days ago, we learned the real GDP rose 1.1 percent in the last quarter of 2005, the worst growth rate in three...

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...

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