Why He Matters
One of the few left-leaning scholars on the new administration’s economic team, Bernstein will have the ear of Vice President Biden and is likely to push his agenda of income inequality and worker rights.
But with centrists like former Treasury Secretary Lawrence Summers and Berkley professor Christina Romer predominating in the Obama cabinet, it’s hard to predict how much impact Bernstein’s ideas will have on economic debates in the midst of a crippling recession.
As an economist at the left-leaning Washington think tank Economic Policy Institute (EPI) since 1992, Bernstein is loudly pro-union and skeptical of free-trade. While many of Obama’s economic aides are disciples of Clinton Treasury Secretary Robert Rubin, Bernstein doesn’t believe a large deficit is a bad thing.
But crises make strange bedfellows. In a November 2008 op-ed penned by Bernstein and Rubin, the two argued that spending and more spending was the best remedy to the current downturn.
“Fiscal rectitude versus stimulus and public investment: The Bible got this right a long time ago (paraphrasing slightly): there's a time to spend, a time to save; a time to build deficits up and a time to tear them down,” Rubin and Bernstein wrote. “Though one of us (Mr. Rubin) is often invoked as an advocate of fiscal discipline, we both agree that there are times for fiscal discipline and times for fiscal largess. With the current financial crisis, our joint view is that for the short term, our economy needs a large fiscal stimulus that generates substantial economic demand.”(1)
Path to Power
While not much has been reported about Bernstein’s youth, tragedy hit his family at a young age. When he was just seven, his father died. His loss at a young age, he believes made him more aware of those who live with disadvantages, and led him to support unions and workers.(2)
Bernstein moved to New York, and spent many years playing the bass for a jazz band, before deciding to shift into social work and eventually economics.
In 1992, Bernstein joined the liberal EPI as an economist. In 1995, he left the think tank for a brief period to work at the Labor Department as the deputy chief economist under Clinton Labor Secretary Robert Reich. By 1996 he had returned to EPI, where he wrote two books and co-authored eight editions of the The State of Working America, EPI’s yearly analysis of the U.S. labor market.
Bernstein may have been picked for his job because of his ties to organized labor and his more progressive economic views compared to other Obama economic aides.
According to Bloomberg News, two unnamed sources on Obama’s economic transition team said Biden was contacted by union officials, complaining that no one represented labor’s interests in the new administration. Biden decided to speak for labor, according to these sources.(3)
When seeking advice for whom he should turn to for labor help, Biden asked Austan Goolsbee, Obama’s pick for staff director and chief economist on the newly created Economic Recovery Advisory Board. According to MSNBC.com, Goolsbee suggested Bernstein.(4)
On Dec. 5, 2008, Biden named Bernstein to his economic team, saying through a press release that “he’s an acclaimed economist, and a proven, passionate advocate for raising the incomes of middle-class families.”(5)
Income and Labor
Throughout his career, Bernstein has studied the slowing effects of income growth in America. In 1994, he and economist Lawrence Mishel authored The State of Working America, which outlined problems of income stagnation and wage disparity. The Clinton administration had been on record stating the best way to correct these issues was through better education and improving job skills in order to catch up with changing technologies.
Bernstein and Mishel didn’t agree. While not offering any solutions, the two blamed globalization, a decline in unionism and the fall in the inflation-adjusted minimum wage as the three main factors causing the decline in wages. Adjusting for inflation, they also showed that median income for families stood at $38,248 in 1993, a dip since 1989 and a figure that neared 1979 numbers.(6)
Less than a year later, Bernstein published a report claiming African-Americans had fallen behind whites in wages and unemployment rates, but the gap between whites and blacks with a high-school diploma had actually decreased. He pointed out three reasons for this decline in wages: High-paying manufacturing jobs, occupied by a disproportionate number of blacks, were beginning to disappear; blacks had not caught up with whites in obtaining a college education and enforcement of anti-discrimination laws had decreased.
"These findings suggest that there is a role for government to play in shoring up institutions that have been eroding, including worker-training programs, placement of displaced workers, a livable minimum wage and strengthened labor and anti-discrimination laws," Bernstein said.(7)
In 1996, Bernstein worked on another installment ofThe State of Working America and he found that the typical working man’s wage had decreased 6.3% from 1989 to 1995. Women’s wages had dropped an average of 1.7% in the same time period. He also said the wages of chief executives of “large corporations’” increased to 173 times the pay of the average worker, which was up from 60 times the average worker in 1978.(8)
By 1997, America had experienced six years of economic expansion. This increased corporate profits and stocks, but the wages of average American workers were often declining. Bernstein spoke out for the working class.
“At best we have achieved wage stagnation," Bernstein said. “At worst, there are significant groups of workers whose wages continue to decline as they have over the past 15 years."(9)
Raising the Minimum Wage
Bernstein backs minimum wage increases, and in 1996 the minimum wage rose from $4.25 to $4.75 an hour. By 1998, the jobless rate had fallen to 4.3 percent, its lowest in nearly three decades, seeming to rebuff the argument that companies would shed workers if forced to pay higher wages. Bernstein co-authored a study on minimum wages with economist John Schmitt, and it showed that the increase helped workers in the lowest income bracket, meaning the hike had worked effectively.
“Although households in the bottom 20 percent (whose average income was $15,728 in 1996) received only 5 percent of total national income, 35 percent of the benefits from the minimum wage increase went to these workers,” the study said. “In this regard, the increase had the intended effect of raising the earnings and incomes of low-wage workers and their households.''(10)
Although hopeful, Bernstein’s view of economic growth changed over time. By 2003, as unemployment rose to nearly six percent, Bernstein demonstrated that wage growth was not keeping pace with inflation. In the first quarter of 2003, wages grew at a 1.3 percent rate while inflation grew by 2.9 percent.
“This is a stark demonstration of what happens when the pressure goes out of the system,” Bernstein said.(11)
And a year later, after President George W. Bush’s first term, Bernstein showed his disgust with income inequality.‘"The middle-income family is definitely worse off than four years ago,’ Bernstein said.(12)
He noted that it would take extraordinary growth — about 400,000 new jobs a month between now and November — for Bush to avoid the dubious distinction of being the first president since Herbert Hoover to see a net decline in jobs during a term of office.
‘We are more than a million jobs below where we were at the employment peak in March 2001,’” Bernstein said.(12)
The Cure for U.S. Economic Ills
While Bernstein’s specialty doesn’t involve credit mortgages, default swaps or toxic assets, he does have a few words to say about the economic environment’s effect on the middle and lower classes. He wrote a book in early 2008 called "Crunch: Why Do I Feel So Squeezed?" that included some damning criticism of American capitalism.
''Economics has been hijacked by the rich and powerful, and it has been forged into a tool that is being used against the rest of us,'' Bernstein wrote. ''Far too often, economists justify things many of us know to be wrong while claiming the things we believe are critically important can't be done.''(13)
In it, he contends that the chief flaw of the American economic system is the lack of equitable income distribution. He blames weaker unions, lack of minimum wage growth, global competition and shortage of quality job creation, for economic problems.
''The name of the problem is economic inequality, and it's been on the rise for decades,'' he said.(13)
Bernstein’s book was published before the the economic crisis that resulted in the fall 2008 $700 billion rescue package approved by Congress. He hesitated to support the package, especially when Treasury Secretary Henry Paulson nearly demanded the money from Congress.
“Hold on a second. The Treasury and the firms they are representing do not, I repeat, do not, have the bargaining clout here,” Bernstein wrote on his blog for the liberal site Talking Points Memo. “We--the taxpayers and their reps--do. They're coming to us saying, ‘we've screwed up and need you to pick up the pieces to the tune of $700 billion.’ And they've got the brass ones to try to muscle us around about it?!? If Pelosi and company can't get the spine to ignore this muscle play and craft a better plan, then they're not doing their jobs.”(14)
Bernstein called for more oversight of the Troubled Asset Relief Program (TARP) and a way for taxpayers to reap benefits, if the plan worked.
As for Obama, he sees an opportunity. Calling for a stimulus package and major investments in health-care reform, Bernstein thinks Obama has a rare chance to create a major reform of the U.S system.
"You don't get to implement major changes in American economic policy absent something going pretty wrong," Bernstein said. "He has a historical opportunity to step into the breach."(15)
While at EPI, Bernstein worked in the same organization as some notable names in politics. David Kusnet, the chief speech writer President Clinton during his first two years in office, has worked at EPI since 1995, and John Irons was on the Federal Reserve Board of Governors from 1992 to 1994.
In 1995, Bernstein joined the Labor Department as its chief economist under Reich.
Bernstein has donated $7,200 since 2004. All of the money went to the Democratic party or directly to candidates within the party, including $1,450 to Obama in 2008. He gave $250 to John Kerry’s (D-Mass.) presidential campaign in 2004.(16)
Rubin, Robert E. and Bernstein, Jared, "No More Economic False Choices," The New York Times, Nov. 3, 2008
Achenbach, Joel, "Liquid Assets; Two Economists Look At America Through Very Different Glasses," The Washington Post, Aug. 23, 2004
Przybyla, Heidi "Biden Shows He Will Be Labor’s Advocate in Obama Administration," Bloomberg, Dec. 6, 2008
Montanaro, Domenico, "Biden Picks Economic Policy Advisor," MSNBC.com, Dec. 5, 2008
Press release “Vice President-elect Biden announces Chief Economist and Economic Policy Advisor,” Change.gov
Neikirk, William, "Clinton Job Strategy Challenged: Global Trade, Union Decline Cited," Chicago Tribune, Sept. 4, 1994
Rich, Spencer, "Wage, Job Gaps Widen Between Blacks, Whites," Posted in the Chicago Sun-Times from The Washington Post, April 30, 1995
Francis, David, "Families Scrape to Pay Bills, Yet Consumers Are Upbeat Family incomes are growing, but have not caught up to 1989 level," The Christian Science Monitor, Aug. 30, 1996
Francis, David, "Despite 1996 Growth, Wages Stayed Stagnant," The Christian Science Monitor, Feb. 7, 1997
Herbert, Bob, "The Sky Didn't Fall," The New York Times, June 4, 1998
Taylor, T. Shawn, "Pay increases outpaced by inflation," Chicago Tribune, June 4, 2003
Lazarus, David, "Economy is Bush's downfall," The San Francisco Chronicle, Aug. 11, 2004
Hurt III, Harry, "A Rock, a Hard Place and an Exit Strategy," The New York Times, May 18, 2008
Bernstein, Jared, "Now Just Hold On, Hank," TPM Cafe, Sept. 22, 2008
Easton, Nina, "CEO in Chief, "Fortune," Nov. 24, 2008
Center for Responsive Politics