Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, he served as chief economist and economic adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.
In his last State of the Union speech before the November election, President Obama defended his record addressing the financial crisis and called for greater economic fairness. He warned that Wall Street would no longer be allowed to play by its own set of rules. But the bulk of the speech dealt with the economy. We get reaction from Jared Bernstein, former chief economist and economic adviser to Vice President Joe Biden and past member of President Obama’s economic team. Bernstein says that Occupy Wall Street "had a lot to do with" Obama’s message of economic fairness: "These issues, I mean, they’re called populist now. Frankly, I think they’re just basic fairness. I don’t know why it’s populist to argue that middle-class people should pay a fair tax rate and one that’s certainly no higher than that paid by millionaires and billionaires, or for that matter, that economic growth should not be a spectator sport for people in the middle class. [These ideas] haven’t broken through in the way that Occupy Wall Street did in a matter of months. So I give them a ton of credit." [includes rush transcript]
This is a rush transcript. Copy may not be in its final form.
NERMEEN SHAIKH: In his last State of the Union speech before the November election, President Obama defended his record addressing the financial crisis and called for greater economic fairness. He warned that Wall Street would no longer be allowed to play by its own set of rules.
On other issues, Obama called for Congress to pass comprehensive immigration reform and the DREAM Act. Obama also endorsed expanded offshore oil production and domestic natural gas drilling, while proposing to produce more clean energy on public land. But the bulk of the speech dealt with the economy.
PRESIDENT BARACK OBAMA: The state of our union is getting stronger. And we’ve come too far to turn back now. As long as I’m president, I will work with anyone in this chamber to build on this momentum, but I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place. No, we will not go back to an economy weakened by outsourcing, bad debt and phony financial profits. Let’s never forget, millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same. It’s time to apply the same rules from top to bottom. No bailouts, no handouts and no cop outs. An America built to last insists on responsibility from everybody.
AMY GOODMAN: President Obama also said he would form a task force aimed at investigating shoddy mortgage lending practices in addition to forming a special financial crimes unit. Obama also called for a revamp of the nation’s tax code.
PRESIDENT BARACK OBAMA: We need to change our tax code so that people like me and an awful lot of members of Congress pay our fair share of taxes. Tax reform should follow the Buffett rule: if you make more than a million dollars a year, you should not pay less than 30 percent in taxes. And my Republican friend Tom Coburn is right: Washington should stop subsidizing millionaires. In fact, if you’re earning a million dollars a year, you shouldn’t get special tax subsidies or deductions. On the other hand, if you make under $250,000 a year, like 98 percent of American families, your taxes shouldn’t go up. You are the ones struggling with rising costs and stagnant wages. You are the ones who need relief. Now, you can call this class warfare all you want. But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.
AMY GOODMAN: To respond President Obama’s State of the Union address, we’ll hear from two people. Later in the show, we’ll speak to longtime consumer advocate, presidential candidate, Ralph Nader. But first we turn to Jared Bernstein. From 2009 to 2011, he served as chief economist and economic adviser to Vice President Joe Biden, also served as executive director of the White House Task Force on the Middle Class and was a member of President Obama’s economic team. He’s now a senior fellow at the Center on Budget and Policy Priorities.
Welcome to Democracy Now!, Jared Bernstein. Your response to President Obama’s address?
JARED BERNSTEIN: Well, thank you for inviting me on.
I thought it was a strong address. It was very much targeted at kind of building on the momentum we have. If you think back to the President’s last State of the Union address, there was a lot of talk about winning the future and an ambitious, long-term investment agenda. I heard last night’s speech as, I guess you could call it "smaller-bore," in a sense, but I don’t see that as problematic in this case. We have an economy that’s beginning to recover. I think that’s unquestionably in the numbers. But it’s still far too weak. We need to build on the momentum we have. And if we don’t bring the middle class along with it, as has been the case, by the way—the middle class has been left behind in the last few economic recoveries—then it’s not going to be at all the kind of blueprint the President envisioned. So I think it was important on those—on both of those issues.
NERMEEN SHAIKH: Jared Bernstein, I want to turn to one of the comments that Obama made about outsourcing. Early in his State of the Union address, he said businesses who want to outsource jobs shouldn’t get tax breaks.
PRESIDENT BARACK OBAMA: So, we have a huge opportunity, at this moment, to bring manufacturing back. But we have to seize it. Tonight my message to business leaders is simple: ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed. We should start with our tax code. Right now, companies get tax breaks for moving jobs and profits overseas. Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense. And everyone knows it.
NERMEEN SHAIKH: Jared Bernstein, your response?
JARED BERNSTEIN: Well, he’s absolutely right. It’s actually more advantageous in the tax code to build a factory in a province in China than it is in Cleveland, Illinois—I mean, Cleveland, Ohio, sorry, or Illinois. And the reason is because we have all this favorable treatment in the tax code for multinationals that engage in overseas investment. And as the President said, that doesn’t make any sense. Now, he’s been trying to close these tax loopholes since I was a member of the economic team back in—starting in the beginning of his term. It’s been in every one of his budgets. What he introduced last night that was a little bit new was something called a kind of a minimum tax that you would have to pay on your overseas earnings so that you couldn’t defer them, basically, hold them overseas, and keep them out of the American tax system.
The other point we should emphasize here is that he’s trying to tap something that’s happening anyway in the marketplace. Many producers will tell you that we have overshot in terms of outsourcing, kind of overdone that outsourcing trend. Given the cost differentials between production abroad and production here, given the rising costs of transportation to bring the production back here, there is a bit of a nascent insourcing movement going on anyway, so he’s trying to tap that trend and amplify it.
AMY GOODMAN: Jared Bernstein, Bob Kuttner, the editor of American Prospect, said to solve the housing problem "would require a New Deal-scale break-up and recapitalization of several large banks. But the people making economic policy for this administration will not touch that idea with a rake." No matter how President Obama sounded like last night, very much as a populist, the issue is his record. What do you make of what Robert Kuttner said?
JARED BERNSTEIN: Well, it’s true that the President doesn’t have anything that ambitious in terms of, say, taking over any banks, in terms of housing policy. I don’t know—I guess I would say that I don’t know that that is what it’s going to take to resolve this. I do think more aggressive action is obviously needed. The President talked last night about a large refinancing program. You know, we have very low interest rates, but millions of homeowners can’t refinance into those lower home loans, having a lot to do with the nature of the credit system right now. Without legislation, that’s not going to happen, and Congress isn’t going to give him legislation. So, while Bob has a solid point, we have to think about ways to try to crack this nut probably without Congress, at least for the time being. There are ways to do that. The FHFA—that’s the regulator of Fannie Mae and Freddie Mac—has things it can do. And the administration, what they really ought to be doing, is pushing very hard on FHFA to get them to do principal reductions on the millions of mortgages they hold or insure. I think Bob would probably agree with that.
NERMEEN SHAIKH: Jared Bernstein, how much do you think, if at all, the Occupy Wall Street movement had to do with the tone that the President struck last night?
JARED BERNSTEIN: Well, it’s a great question. I think they had a lot to do with it. I mean, I’ve been talking about these issues—I mean, they’re called populist now. Frankly, I think they’re just basic fairness. I don’t know why it’s populist to argue that middle-class people should pay a fair tax rate and one that’s certainly no higher than that paid by millionaires and billionaires, or for that matter, that economic growth should not be a spectator sport for people in the middle class. So, you know, nowadays, that’s populism or even class warfare. No, I’ve been talking about these issues for three decades and haven’t broken through in the way that Occupy Wall Street did in a matter of months. So I give them a ton of credit for doing what it is, by the way, that they will tell you they set out to do, which is to engage the nation in a conversation about these issues.
AMY GOODMAN: Finally, on the issue of you having been an insider, and now you’re outside—you were the top economic adviser to Vice President Biden—how much are they listening to what’s going on outside and the frustration that people feel that this is the way President Obama sounded when he was running for president—
JARED BERNSTEIN: Right.
AMY GOODMAN: —but that when he became president, he surrounded himself by Wall Street, I mean, epitomized by Tim Geithner, a former Republican who changed so he could, you know, be the top economic czar for the Obama administration?
JARED BERNSTEIN: I think they’re listening more closely to these kinds of issues than they’ve ever been, much like I emphasized in my last response. And I credit Occupy Wall Street, but it’s not just OWS, it’s also the overreach by conservatives. I mean, I think the idea that somehow the solution to all the problems we’ve been talking about for the last few minutes are lower taxes for the wealthiest among us, are less regulation for financial markets, are, you know, tearing down what we’ve built up in terms of financial reform, getting rid of the healthcare measures that the President has managed to legislate, that—the idea—the kind of the intersection of economic trends that have left the middle behind, the rise of Occupy Wall Street, and the overreach among conservatives, I think, are creating an extremely important and unique moment for precisely that kind of policy agenda that the President presented last night.
AMY GOODMAN: Jared Bernstein, we thank you so much for being with us, senior fellow at the Center on Budget and Policy Priorities.
JARED BERNSTEIN: My pleasure.
AMY GOODMAN: From 2009 to '11, he served as chief economist and economic adviser to Vice President Joe Biden. This is Democracy Now! When we come back, we'll hear from former presidential candidate, well-known consumer activist, Ralph Nader. Stay with us.
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