During an interview with Bloomberg aired on Thursday’s “Balance of Power,” White House Council of Economic Advisers Chair Jared Bernstein stated that “strong demand” did help cause inflation and he accepts that the upward pressure on prices from COVID stimulus was worth it, but inflation was about the same in every G7 country, “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.”
Bernstein said, “The president realized, quickly, that it was snarled supply chains that helped cause that inflationary spike, in part, along with strong demand. And unsnarling those chains 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 shortly after that peak, we started talking about what we were doing to lower costs.”
Co-host Kailey Leinz then asked, “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 fueled 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 labor market in better shape through some of those stimulative efforts in exchange for what could have been that additional marginal pressure upward on prices?”
Bernstein answered, “I do with the following asterisk or caveat: Which is that if you look at the trajectory of inflation or the cumulative amount of which price level grew across every G7 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. That said, the other part of 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, a 4% average unemployment over this administration, that’s [a] 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 ’21 when we got there and how our policies helped get this economy back to full employment, where it’s been ever since.”
Follow Ian Hanchett on Twitter @IanHanchett
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