Sunday, May 19, 2024

White House economic adviser struggles with question on monetary policy

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A viral video of President Joe Biden’s chief economic adviser, Jared Bernstein, appearing to struggle to explain how monetary policy works has raised new questions about the administration’s handling of the economy.

Bernstein, who chairs the White House Council of Economic Advisers, was interviewed for a new film called, “Finding the Money,” a documentary made by advocates of Modern Monetary Theory (MMT) – a controversial line of economic thought. One of MMT’s central tenets is that government budget deficits don’t matter for countries like the U.S. that borrow money in their own currencies. Proponents argue this means the government should use tax and spending policies to manage the economy and address inflation instead of the central bank’s monetary policies.

“The U.S. government can’t go bankrupt, because we can print our own money,” Bernstein says in the video. He was then asked by the interviewer, “Like you said, they print the dollar, so why does the government even borrow?”

Bernstein’s reply seems to indicate uncertainty – at best – about monetary policy.

“Again, some of this stuff gets – some of the language and concepts are just confusing. The government definitely prints money, and it definitely lends that money by selling bonds. Is that what they do? They sell bonds, yeah, they sell bonds. Right? Since they sell bonds, and people buy the bonds, and lend them the money,” Bernstein replied.

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White House Council of Economic Advisers Chair Jared Bernstein struggled with a monetary policy question in a clip posted by the team behind a documentary touting the controversial Modern Monetary Theory. (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images / Getty Images)

“A lot of times, at least to my ear with MMT, the language and the concepts can be kind of unnecessarily confusing but there is no question that the government prints money and then it uses that money to um, uh … I guess I’m just, I can’t really, I don’t get it, I don’t know what they’re talking about. . . . It’s like, the government clearly prints money, it does it all the time, and it clearly borrows, otherwise you wouldn’t be having this debt and deficit conversation. So I don’t think there’s anything confusing there.”

Bernstein’s jumbled response about monetary policy sparked criticism of the Biden administration’s economic policies on social media. FOX Business spoke to federal budget and economic specialists who weighed in on the exchange.

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Bernstein was asked about why the U.S. borrows when it prints money. (Photo by Mark Wilson/Getty Images / Getty Images)

Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), told FOX Business, “What you have there is a serious, credible, economist – Jared Bernstein – trying to be polite about a nonsensical economic fairytale that can’t even be called a theory. MMT is forever being reinvented by its defenders who use made-up excuses for why you don’t have to pay for anything.”

“First, both Jared and the MMT crowd are great reminders of why limited government is so important,” Norbert Michel, VP and director of the Cato Institute’s Center for Monetary and Financial Alternatives, told FOX Business. “Fortunately, the people in the administration (and Congress) do not actually ‘run the economy,’ they only enact policies that affect people, and the people have a chance to elect new politicians every couple of years.”

“Second, the MMT crowd, no matter what they say, pretends that the government can just print and distribute money without consequence, but history has already proven that kind of policy leads to inflation, and, depending on how the money is distributed, massive cronyism,” Michel added. “In the real world, there are always rent seekers and resource constraints.”

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Federal Reserve Chair Jerome Powell speaks at a press conference in Washington

Modern Monetary Theory (MMT) lies outside the mainstream of economic thought. Federal Reserve Chairman Jerome Powell has said that MMT is “just wrong.” (Photo by Mandel Ngan/ AFP via Getty Images / Getty Images)

The White House Council of Economic Advisers did not immediately respond to a request for comment.

Bernstein is a longtime economic aide to President Biden, although he lacks an academic background in economics. He earned a bachelor’s degree in music from the Manhattan School of Music, as well as a master of social work from Hunter College and a doctorate of social work from Columbia University. 

He has taught at several colleges, including Columbia and New York University, and worked as an economist for the Department of Labor during the Clinton administration. Bernstein has also worked at liberal think tanks, including the Economic Policy Institute and the Center on Budget and Policy Priorities.

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Bernstein worked as the chief economist and economic adviser to then-Vice President Biden from 2009 to 2011 during the Obama administration. He was an advisor to the Biden-Harris Transition Team, and after President Biden’s inauguration, Bernstein was appointed to the CEA.

He was confirmed as the chair of the CEA on a 50-49 vote by the Senate in June 2023. The confirmation vote was largely along party lines, with all Democrats voting in favor except for Sen. Joe Manchin, D-W.V., who joined Republican senators in opposing Bernstein’s confirmation to the role.

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