Interview with Jared Bernstein (Chair of the Council of Economic Advisers under Joe Biden)
Jared Bernstein served as the Chair of the Council of Economic Advisers between 2023-2025 under President Biden. Previously, he served as a member of the Biden CEA and was chief economist to then- Vice President Biden in the Obama Administration between 2009-11 before joining the Center on Budget and Policy Priorities, where he served as a senior fellow from 2011 to 2021. He was deputy chief economist in the US Labor Department from 1995 to 1996.
Interview conducted 14th March, 2025
Q: How do you characterise “Bidenomics”? What do you think its objectives were and how do you think it performed?
That might take the hour. I have an elevator-pitch definition of Bidenomics: if you’re helping bake the pie, you ought to get a fair slice. That is very motivating for Joe Biden. It references the gap that’s grown since the late 1970s, a gap you’ve also seen in the UK. Productivity or GDP growth proceeded apace while median or lower earnings and incomes didn’t keep up. There were occasional periods when that gap shrank, when the bakers got fairer slices. Those periods tended to coincide with tighter labour markets. So you could say that full employment is an important part of the recipe and Biden would agree with that. But he would also say that unions and greater worker bargaining power make a difference. Our union density here is small, about 10%, and in the private sector it’s closer to 6%. But a keyway for “the bakers” to get a fair slice of the pie is through stronger bargaining clout.
That addresses part one of your question. Part two, on how I’d assess our performance, is trickier. On a broad set of macro indicators, we did very well. We stood out among advanced economies in GDP growth and low unemployment. Some others had decent labour-market records, but we had particularly low unemployment, strong job gains and even some acceleration of productivity growth. That is the holy grail of economies, and something I know the UK and Europe has struggled with, though you need five years or so of data to confirm a real acceleration. Still, on the macro indicators we did well
On some of the measures that really matter to folks—particularly real incomes—we did less well, though the last few years were a lot better than the first few years. But of course looming over all of this was the inflation record, which led to a sharp, negative spike in American economic “vibes”. I suspect that is a word you have heard before. As early as the second half of 2021, we noticed a measurable gap opening up between the aggregate economic indicators and how the public were feeling about the economy. I thought a lot about that gap. Certainly it relates partly to inflation, but even more to the price level itself. In my view, it relates more to where prices ended up than to the actual rate of change.
I think the first part of your question is pretty easy to answer, as I hope was clear. I think the second part is more complicated, around a set of indicators that mean a lot to me as someone who thinks a lot about the overall macroeconomy where we did very well. But people were very unhappy with the economy and that matters tremendously when you’re in the White House. A major reason for that was the price level. It wasn’t the only reason: immigration was really problematic for us in the first few years—there was a real surge, and that wasn’t something people felt particularly good about. And there were other factors like the President’s decision about running again, which I won’t say much about.
Q: How much of your thinking on the macro economy was about avoiding a downturn, versus how much was about various policies—tax credits, union power, industrial policy—that require a tight labour market for those policies to be effective?
That loomed larger for many of us, particularly at the Council of Economic Advisers (CEA) than almost anything else. The industrial policies and other elements were important to us, but a function of the CEA is to help the President and senior staff understand what is going on in the overall economy—macroeconomics, global trends, and so on. So we paid a lot of attention to the job market. Obviously, I’m not saying our actions alone were responsible for the unemployment rate; there’s a little institution called the central bank that would want to have a say in that. Success has many fathers.
But when we were sitting there in early 2021, the unemployment rate was still above 6%, coming down from a peak of almost 15%. The question was whether the economy would keep improving on its own, or if we needed substantial stimulus to return quickly to full employment, avoid scarring effects and punch back against some of the problems that were still very much in play around the pandemic. With hindsight, some of our critics argue the economy would have gotten better anyway and that we did too much. But believe me: nobody knew that back then and there is lots of evidence to support that view.
Q: How much of your thinking was shaped by the view that the stimulus coming out of the financial crisis of 07/08 fell short, and you weren’t going to make that mistake again?
Very much so. Biden said that explicitly in our Zoom meetings when he was President-elect, as we were putting together the American Rescue Plan. But, I also want to be clear that the magnitude of the Rescue Plan shouldn’t be described as some carefully calculated number to perfectly and concisely fill the output gap as we understood it. Yes, we wanted to go big, and yes, in the past we had often gone too small, leading to initially very weak recoveries. Scarring is something we were very worried about. We were worried that if families and businesses weren’t able to get to the other side of the pandemic intact, we thought we would be left with hysteresis that would have a negative, lasting impact on the economy.
We wanted to avoid the mistake, as you said, but there was also some legislative piling on because of the politics of the moment. Remember, we had Democrats controlling all three branches. One of the reasons that happened was because of the election of the two senators in Georgia. That involved some fiscal promises that were including in the Rescue Plan. So it was a combination of wanting to go big, avoid scarring and the political moment where there was a lot of untapped demand among Democrats for things they wanted to do.
Q: One of the striking things about the US economy is the dynamism in the labour market. Did you expect that, or were you worried about the spike in unemployment and worry about what it might mean?
We were definitely worried about the large unemployment spike. And there was some discussion as to whether we should think about the European model of keeping people in their jobs, or should we do what we always do, which is temporarily ramp up the unemployment insurance program?
There’s a small component of our unemployment insurance program called short-time compensation. It basically means that instead of laying off one person in a firm of five, you cut everybody’s hours by 20% and partially compensate them against the lost hours. But that program is very little used. There was a debate about whether we should keep people more connected to their jobs, but there was simply no way to scale up short-time compensation or do much beyond what we usually do, which was to increase the benefits and durations of our unemployment insurance program—which is kind of creaky over here—and we did that.
Nobody I knew at the time said, “It’s good that we’re doing it this way because there’ll be occupational upgrading and better matches.” But that is what happened.
So some people argue that this wasn’t much to do with Bidenomics, it was the underlying nature of the US economy and labour market and that’s what made the difference on productivity and jobs?
That’s not quite true. Ron Wyden, the Senator from Oregon, championed this significant increase in unemployment benefits, to the point where there were papers and arguments suggesting we were overcompensating people and giving them a great opportunity to stay out of the job market. Subsequent research showed that it didn’t really discourage work, thanks to a natural experiment when those benefits started fading in different states at different times. But, because people had an option to hold out for a higher reservation wage, I think that probably enhanced occupational upgrading—something that might not have happened without strong unemployment insurance extensions, not to mention, of course, very strong labour demand
Q: Some of the same people who say it was the fundamental dynamism of the US labour market also say —while having a hot labour market might be good—you basically overdid it. In the end, inflation and the politics flowing from that are a consequence of thinking it was the macro side that needed to do the work, rather than the micro dynamism of the labour market.
That doesn’t strike me as a particularly compelling critique. There’s no government since Keynes that doesn’t look at a shock and say, “Okay, we have to fill the negative output gap.” At the same time, you do micro things — unemployment insurance, tax credits, anti-eviction, improved health and child care access. But there’s no government that wouldn’t try to fill an output gap of the magnitude we saw.
The very important question is: did we go too far? I’m more sympathetic to that critique. But you have to ask: why, and by how much. It’s not all or nothing. Jason Furman and Larry Summers are very good friends of mine and we’ve talked about this incessantly. Jason, in particular but Larry too, I think agree with me that we would have had a lot of inflation no matter what. My personal view is that inflation would have peaked at 7% instead of 9%. Would that have been less damaging in terms of consumers’ vibes? Maybe a little, but I’m afraid not much. Under any plausible scenario—there was no way we weren’t going to legislate some reaction to the ongoing pandemic shock in 2021—we still would have faced strong demand colliding with constrained supply, which was what drove up our inflation.
Q: What were the intellectual foundations behind the industrial policy push: did you feel it was a genuine break or was it a continuation of standard economic thinking—just at a larger scale? And then to what extent were the final policies a product of politics?
My friend Jason Furman has a lot to say for getting everyone revved up about post-neoliberal vs neoliberal, I think it’s all nonsense. I’ve talked about what we did on industrial policy very much in the perspective of market failures – a good old neoclassical construct. At least in theory and, somewhat remarkably, in practice too. It’s pretty targeted at corners of the market where the private sector is under-investing. Clean energy is the classic market failure where we’re internalising externalities, but I’d argue that building chips domestically also became important, and similarly, we want a resilient supply chain.
Q: Do you see that as a market failure or a comparative advantage that turned out to be strategically significant?
You’re right — “market failure” might be too strong for some areas, though in clean energy it’s a classic case. There are strategic reasons to do this, and the market on its own wouldn’t get us there. That’s actually helpful framing because when I talk to Congress about this and I frame it as a market failure I think they get uncomfortable, because that pushes it too far. It is a fuzzy edge of market failure bleeding over into strategic public investment.
On the question: “How did it work?” Surprisingly well. We tapped an elasticity of desired investment in subsidised areas that was bigger than I thought—crowding in more private capital than I expected or than the Congressional Budget Office scored. It’ll take years to judge fully, but I think it’s off to a really strong running start.
Q: Ex ante, were you sceptical?
I don’t remember being particularly sceptical. I was concerned about inflation, because we were saying every day that we’d do everything we can to tamp down price pressures, but then we had this new fiscal policy in the background. We ran models, looked at the payout pace, and thought we’d be okay, but I worried about fiscal pressure. I thought the policies themselves made a lot of sense—whether you call them strategic investment or addressing market failure – particularly when you see they are addressing untapped demand.
Something that was very important to me at the time was I thought we were being too protectionist. So I was happy to see the foreign direct investment come in and companies wanting to build here. I remember getting flak from some commentators saying, “Wait a minute, you’re subsidising a South Korean company,” but if they build a fabrication plant in Cleveland instead of Shanghai, I like Cleveland.
Q: How much of our discussion focuses on achieving specific micro goals, and how much is about using fiscal policy at the macro level? Was it simply a sensible way to do stimulus at a time when the economy needed it?
In the Biden administration, “micro” often meant jobs—Joe Biden would say this is going to create good jobs for non-college-educated workers. They might pay $100,000 a year, and we had estimates. That’s where a lot of the micro emphasis was.
If you think about things like the child tax credit, those were important too. But in the case of industrial policy, the economic impetus was on strategic or market-failure rationales, jobs, and a bit of industrial-organisation thinking to strengthen key sectors.
Q: How did you feel about your capacity to deliver industrial policy at the beginning, and how has your judgment on the experience changed over time?
I think we did well at that. I very much object to the notion that the US—or any other economy—doesn’t do a lot of industrial policy. We do. In our country, more so than in the UK or Europe, it’s implemented through the tax code in the most inefficient ways, based on who has the most connected lobbyist. That’s how we do industrial policy. Lobbyists with deep pockets invest in members of Congress, who give tax breaks favouring certain sectors. That’s a really shitty way to do industrial policy. I thought we could improve, and I believe we did, with our work being pretty narrowly targeted.
I never worried about the “picking winners” argument—the government picks winners all the time based on who has the best-connected lobbyists—so this struck me as a better way to invest.
The one thing that did worry me, and still does, is that our industrial policy lacked a limiting factor. I wondered where it ends and when the training wheels come off, but you can’t sort out everything when legislating. That was a concern of mine.
It’s the idea that for some set number of years—5 or 10 years —taxpayers subsidise the correction of the market failure or the implementation of the strategy, rather than it going on indefinitely. I prefer the former to the latter.
Q: That depends on your assessment of what’s working and not working – how much evaluation was built into the policy decision?
We were constantly evaluating. In part because the President felt that we really need to tell people at a granular level what we were doing – to the point of what town, how many dollars, on what day and what did they do with it.
So there was extensive evaluation – not always using the economic cost-benefit analysis, although that was of course something we were very interested in, but from the perspective of telling people what we were doing. Now, Joe Biden grew up in a world, and as did I, where if you do good things that help people and tell them about it, they’ll support you. That sort of broke down in a way that was challenging for us.
Q: How did you think about “left behind” places?
When I think of that question, I think about places that were left behind by globalisation in our country. We were explicitly targeting those places, trying to help them. The Trump tariffs also look like they target those places but coming from the other direction. If they continue to pursue this destructive agenda, they will end up hurting the very places that we tried to help – places that have long been left behind.
We put together, somewhat behind the curtain, groups of policymakers to try and target them. For some of the grants, your bid would get bumped up if you were helping a place that met these criteria. I thought we did a good job on targeting. But I understand that evidence isn’t as clear cut as I might like. I know the Economic Innovation Group’s assessment was that it was not as well targeted as it could have been, so I’m not sure.
Q: Some critics like the industrial policy but thought elements of it was protectionist, for example on solar. How did you feel about it?
It’s a very big topic and one of the things I was most engaged in at CEA. There were a couple of strains of thinking in the Administration from thoughtful to less thoughtful and more politically motivated.
We are in an unfortunate place in American politics, where if I wanted to go to Congress and say “I would like to name that bridge in Baltimore the Ed Balls bridge”, everybody would say, “That hippy? Forget about it.” If I said, “I want to name this the Ed Balls bridge and it will be bad for China,” it would pass in an afternoon. China is a bete noire now that is used to muster majority, bipartisan votes.
That was one end. On the other end – at the CEA, I worked very hard to get the approval to go out there and say: this Administration values robust trade flows with our friends. We understand the distortions caused by unfair trade. I’m a long-time reader of Michael Pettis. The notion that trade deficit is a function of domestic savings relative to domestic investment is of course a definitional identity, but the fact is that other countries’ choices also determine your trade balance. I have a long history of worrying about trade imbalances, but I really pushed for a more constructive approach to that in the White House.
Q: Do you think you were successful?
Way more than most people realise, though it wasn’t me. My evidence is that the trade flows remained highly robust. If you look at the magnitude of the flows, yes there was less with China but there was more with Vietnam, Mexico and other substitutes. Trade flows remained robust – I hoped CEA was helpful in pointing out the benefits therein.
Q: Moving to politics, where do you think the mistakes crept in?
I think you have to put immigration in there. The border surges in 2021 and ’22 were not something most Americans were comfortable with
Next, the messaging was problematic for sure but it wasn’t because we didn’t explain to people what we did, we did that all the time. Every single week, I guarantee you we published something saying “here are all the good things we’re doing”. The thing that was wrong with the messaging was that we talked past how people felt about the economy. We talked about this great GDP report that came out. With hindsight, I played a less-than-helpful role in this myself and one I’ve thought a lot about.
But I think we completely talked past people on the economy. They felt the economy – meaning the price level – was highly problematic and all they heard from us was “no, everything’s great”. Now, that’s not what we said. Every time we talked about the economy, we had this paragraph – and I memorised it – explaining that we knew that costs were too high and we were doing everything we could do to lower costs. What we didn’t say was that there was not all that much we can actually do. If I was to do it all over again, I would have flipped the script. I’m not faulting us for talking up good economic reports on our watch – what administration wouldn’t do that? It would be malpractice not to. But I would have said instead: costs are too high, I know you’re struggling, and I get that this GDP report isn’t going to solve that problem, but it is a move in the right direction, it’s necessary but not sufficient. So I would have really flipped the messaging in that regard. That’s where we lost people, not because we didn’t explain to them what we did.
All that said, I doubt either the vibes or electoral outcomes would have been any different if we’d had more sympatico messaging. No one should overestimate its impact, especially in a world with pervasive social media.
Q: In the last six months, it didn’t seem as if Kamala Harris talked up the economic record much.
Let me briefly tell you why I think Kamala Harris lost, in my view. The three ‘I’s: inflation, immigration, incumbency. Also she’s a black woman so sexism and racism also played a role. Incumbency by itself was a headwind that would have stopped anybody. Then you add in inflation and immigration surge, which people didn’t like. It was largely cured by 2024 but by that point it was too late. She actually ran a solid campaign, but I’m not sure anyone could have overcome those headwinds.
Q: What lessons should policy lessons should the US, and then the UK/Europe draw from this experience?
Watch your supply side very carefully. Many progressive American economists came up – righteously, I’m not apologising – with the view that u* was set too high, y* was set too low, the NAIRU was lower than people thought it was and we were consistently struggling with output gaps. When I was coming up as an economist, u was much more likely to be higher than u* in any given quarter than vice versa, so it’s completely reasonable that people like me came up in a world where we thought our economic policy needed to be focussed on closing output gaps.
We didn’t ignore the supply side, and leaned into the need to for better infrastructure and access to education. We didn’t think enough about the implications of supply disruptions. To put it in technical terms, we pretty much envisioned a flat Phillips curve because that’s what we grew up with. What we didn’t envision was a Phillips curve that went non-linear and practically vertical when you hit a supply shock. The explanation of inflation is strong demand plus constrained supply. Anyone who doesn’t include the second half of that equation has their thumb on the scale.
Q: And if you have a demand and supply shock at the same time, it’s hard to offset that with macro?
That’s exactly right. But don’t overlearn the lesson of hitting back hard against an economic shock. That’s the right thing to do, but be mindful of your supply side when you do so.
Q: What lesson do you draw from labour dynamism?
I don’t know how well the following observation would translate into UK and Europe’s economies but yes, I think it probably would. I think there is a sclerosis that Mario Draghi has talked about that might be improved upon if there was an allowance of more dynamism, which is a nice word for saying what we went through.
At the beginning of this, I was thinking somewhat positively about keeping people connected to their jobs like the European model. With hindsight, if you want a more dynamic labour market, that might not be the way to go. That might be a lesson as well, but I’m not sure how it maps onto other economies. And to be very clear, that only works if you have very strong labour demand relative to labour supply.
Disruption is one of those words that economists use that sounds benign but it can obviously be very painful. On the other hand, we have done very well with business creation: it’s not just the big getting bigger, so yes, those dynamics has been helpful to us.
Q: There might be a challenge which is: the dynamism may have been productivity and wage enhancing, but the politics of disruption can be difficult to deal with. Could it be that Biden’s political hit was the counterpart to economic success?
That’s probably right. If it’s true that to get on a higher productivity growth path you have to experience some economic disruption and pain, and I think it might be, the solution is to make sure you have a healthy social safety net. I don’t think the Biden problem was so much the disruption, that actually that worked pretty well for people because the job market was so strong that people could upgrade. The thing people felt consistently good about in the polling was the labour market and the jobs, what killed us was the price level.
Q: What is the one thing that really worked and one thing in retrospect was the problem?
The problems were inflation and immigration. It’s hard to choose between those two. Perhaps immigration more, because there we really could have made a difference. Some of our early actions, particularly reversing terrible Trump 1 era immigration policies, contributed to a surge of undocumented immigration and that was an own goal kick. Inflation was less of an own goal. That would have happened anyway. I hope you appreciate the football reference.
On what went well: the two words that summarise my career, over these many decades, are full employment. Being the Chair of the CEA during a period we have persistent full employment was a source of great pride.
ENDS