In His Post-Fed Life, Bernanke Talks Taxes, Trump And Partisan Perceptions

May 1, 2017
Originally published on May 1, 2017 10:58 am

Ben Bernanke had to guard his public comments closely in his eight years as the world's most powerful central banker. His words could move global markets.

He hasn't had to be quite as circumspect since leaving the Federal Reserve chairmanship three years ago — and he's kind of enjoying that.

"It's been good! It's nice not to have those responsibilities anymore, and to have more flexibility, more time," he tells NPR.

Bernanke has been writing and speaking — about the economy, but also about how political partisans view it, and who is left behind by economic change.


Interview Highlights

On Trump administration claims that the recently outlined tax cut plan will pay for itself in increased growth

In terms of paying for itself I don't think any outside arbiter, including those from the conservative side, would argue that it's realistic. So I think we have to accept that if you do cut rates the way the proposal suggests, there would be a big increase in the deficit.

On the disconnect between the overall healthy economy and partisan perceptions

There's kind of two broad reasons. One is that while the economy in the near term has done pretty well in terms of its improvement/recovery from the recession, there are some long-term trends, which have been difficult for a lot of people including reduced social mobility, inequality's increased, wages have not improved for many people for a long time. ... I think in addition to these legitimate, serious problems, there's a lot of partisanship in the United States today, so that people tend to look at the economy through a very partisan lens. It's quite striking that the day of the election, when Mr. Trump won the election, that Republicans' views of the current economy greatly improved, and Democrats' views of the current economy greatly worsened. ...

To give candidate Trump credit, he tapped into some real unhappiness about how the economy's performed over the long term.

On the impact of some of Donald Trump's economic claims that Bernanke calls, in a new afterword to his book, The Courage to Act, "seriously inaccurate, or at least distorted"

I think it's important that we can disagree on policies, but we have to get the facts right. By the way, one of the things that I am concerned about, as an economist, is that Congress may cut the budgets of organizations like the Bureau of Labor Statistics, which calculates the unemployment rate. It's really important that we have good numbers so we understand what's actually going on in the economy. Otherwise our policies are not going to be very effective.

Morning Edition editor Steve Tripoli contributed to this story.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

RACHEL MARTIN, HOST:

Ben Bernanke had to guard his public comments closely during the eight years he served as the world's most powerful central banker. His words could move global markets. He hasn't had to be quite as circumspect since leaving the Federal Reserve chairmanship three years ago, and it suits him.

BEN BERNANKE: It's been good. It's nice not to have those responsibilities anymore and to have more flexibility, more time. I blog, and I give speeches.

MARTIN: Bernanke has been writing and speaking about the economy of course but also about how political partisans view it and who is left behind by economic change. Bernanke came into our studios late last week.

So you're three years out from working as the chair of the Fed. How are we doing when you look at the economy big-picture right now?

BERNANKE: Well, from the Fed's perspective, things are going pretty well. On the employment side - unemployment, you know, is down to 4.5 percent, which is quite low. On the inflation side, the Fed is pretty close to its 2 percent target. And so in many dimensions, the economy has recovered pretty well from the Great Recession. And indeed now, relative to Europe, Japan, other advanced industrial economies - the U.S. is looking pretty good.

MARTIN: So why were there so many people who thought otherwise? I mean, when we consider the campaign and the part of the country that saw in Donald Trump someone who recognized how hard their lives were, how the economy wasn't working for them - how do you account for that disconnect?

BERNANKE: Well, it's an absolutely fair question. I think there's kind of two broad reasons. One is that while the economy in the near term has done pretty well in terms of its improvement, recovery from the recession, there are some long-term trends which have been difficult for a lot of people, including reduced social mobility. Inequality's increased. Wages have not improved for many people for a long time. They're just not the kinds of things that the Fed, in its short-term focus, pays a lot of attention to, at least in terms of its policymaking. But they are nevertheless real, and they've caused a lot of pain and disruption.

I think in addition to these legitimate, serious problems, there's an awful lot of partisanship in the United States today so that people tend to look at the economy through a very partisan lens. It's quite striking that the day of the election - when Mr. Trump won the election, that Republicans' views of the current economy greatly improved. And Democrats' views of the current economy greatly worsened. And so to some extent, it's kind of like a...

MARTIN: Which was a flip.

BERNANKE: It was a flip. But the economy, of course, is what it is. And to give candidate Trump credit, he tapped into some real unhappiness about the way the economy's performed over the long term.

MARTIN: The president unveiled the broad outlines of a tax policy recently, slashing corporate tax rates to about 15 percent. His treasury secretary says they'll pay for themselves in economic growth. What do you make of this plan, the broad outlines of this?

BERNANKE: Well, it should first be said that we don't really know that much about the plan. There's only been a few numbers. There's not really any details at all. In terms of paying for itself, I don't think any outside arbiter, including those from the conservative side, would argue that's realistic. So I think we have to accept that if you do cut rates the way that the proposal suggests, there would be a big increase in the deficit.

Today, my own personal priority would be two things. One would be to invest in public infrastructure to make our economy more productive.

MARTIN: Which is something President Trump has said he wants to do.

BERNANKE: Which he said he's done - but it appears to be not the top priority at this point. And the other thing is that there has been discussion about tax reform, as opposed to tax cuts, to improve, simplify, clean up the tax code to make it more supportive of growth.

MARTIN: You have written a new afterword to a book that you published a few months ago about the economic crisis. And in this, you've pointed to some criticisms of Donald Trump's campaign promises about the economy, his statements about the unemployment rate or tax rates which you call, quote, "seriously inaccurate or at least distorted." What do you think has been the effect of those misstatements on the economy?

BERNANKE: Well, I think it's important that we can disagree on policies, but we have to get the facts right. By the way, I mean, one of the things that I am concerned about as an economist is that Congress may cut the budgets of organizations like the Bureau of Labor Statistics, which calculates the unemployment rate. It's really important that we have good numbers so that we understand what's actually going on in the economy. Otherwise, our policies are not going to be very effective.

MARTIN: You were quoted in the Times that when you think about the economy and global markets that people have been left out and that doing well - and I'm quoting here - "doing well on the whole doesn't mean doing well for everybody." Is that just a reality of living in a globalized world, that some people will be left out? And if it is, what is the collective responsibility to those people?

BERNANKE: I think that economists bear some blame here. And for a long time, economists have focused on the benefits of trade and globalization, the benefits of technological change and progress, how that does increase the overall income and level of output in the economy. All that is true. But change can be very disruptive. It can be very costly, at least to some people. And I think if we want to promote change and allow change, we've got to bring everybody along as much as possible, which means we need to pay serious attention to those communities and those individuals who are disrupted by change. So I...

MARTIN: Attention or money? Do you have to put money in that - retraining programs...

BERNANKE: Well, often, money is involved. I mean - for example, if you want to have a job training program, that costs something. I don't think that we just want to rely on welfare or even tax refunds, things of that sort. I think instead it's important for us to use our creativity. And a lot of this is going to happen not at the federal level; a lot of this is going to happen at the state and local level.

MARTIN: You were thrust into the worst economic recession this country has seen in generations and were forced to make very difficult decisions in dramatic fashion to prop up the economy during the recession. When you look back now and when you look forward, are you confident that we won't see the likes of that in the near term or medium term?

BERNANKE: Well, we had to stabilize that situation. And then we had to take strong action to help the economy recover. We - and I say - now, I'm talking about policymakers in general and the whole economy - have been successful in recovering and bringing the economy back to a more normal situation. Now, I do have some concern about this in that we did a lot of work following the crisis to improve our oversight of the financial system to make sure that banks have more capital. And I'm a bit concerned that some of the proposals in Congress today would roll back a lot of those important regulations.

I don't mean to say that all regulations are effective. I'm not saying that you can't make changes. But the key elements of the Dodd-Frank financial regulatory reforms that were done, including higher capital levels, tougher oversight and in particular the tools we needed to unwind a failing financial giant so it didn't bring down the whole economy. Those things were put in place, and I'd be very, very concerned about the future if those things were taken away.

MARTIN: Former Federal Reserve Board Chairman Ben Bernanke. He's now a distinguished fellow at the Brookings Institution here in Washington. His updated book, "The Courage To Act," is out this week in paperback.

Mr. Bernanke, thanks so much for your time.

BERNANKE: Thank you. Transcript provided by NPR, Copyright NPR.