Alex Witt   |  June 23, 2013

The good and bad news about US economy

Jared Bernstein, former Chief Economist to Vice President Biden, joins Mara Schiavocampo to analyze the latest economic headlines. Jared  explains how becoming a net exporter in fuel production has and will help the American economy, however, he does not think it is the game changer that business writer Charles Morris predicted. Bernstein comments on the extent of income inequality in the U.S.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> when the opening bell rings tomorrow morning, wall street traders will be hoping for a much better performance than last week. when comments from the federal reserve sent stocks tumbling, but could boom time be on the horizon thanks to good old-fashioned industry? joining me is jared bernstein, former chief economist to vice president biden and a senior fellow on the center for budget and policy. thank you for being here.

>> my pleasure, mara.

>> jared morris has a column for pbs in which he argues that the u.s. is on the brink of an economic boom thanks to fuel production and heavy manufacturing . are you seeing any signs of that?

>> certainly in terms of energy production , and that's a good thing. for example, for decades we've been a net importer of petroleum products , things like jet fuel and other types of petroleum. well, lately over the past couple of years we've actually become a net exporter and that, of course, helps our economy. i think the question is, and to some extent the article may be slightly overoptimistic in the following sense, this is just one sector. energy is one sector. it also mentions manufacturing. and it's not as large a sector as some other important aspects of the economy. it's good. it will help. i don't know if it's a game changer as much as he thinks it is.

>> you could categorize the last few booms we've had as soft or speculative. there was the dotcom boom and housing speculations.

>> that's a correct point that mr. morris emphasizes. if you have a boom based on, say, a housing bubble , artfully inflated asset prices, home in the -- homes in the case of 2000 , stocks in the case of the dotcom bubble , that's a very different and i agree with your adjective of softer kind of underlying recovery than something based on energy and manufacturing where we're building things. in the manufacturing story, however, there's an interesting dynamic there. it's a very highly productive sector and it's getting more productive in part due to robot particulars. there might not be as many jobs as there were in past manufacturing boom times.

>> so that was the good news. so now let's talk a little bit about the bad news. the economic policy institute just released a study that found some shocking figures about the extent of income inequality in the u.s. top 1% of earners saw their income grow by over 240% between 1979 and 2007 . during the same period the middle fifth saw their income grow by just 19% and the bottom fifth had only 10.8% gain. how does something like that happen?

>> well, look, i'm really glad you're bringing that into the discussion because the first part of our discussion, while i think there is some optimism there, is about what we think of aggregate growth, the growth of things in the economy, gdp growth or the economy. what this is reminding us, you can have all the growth you want but if it's not equitably distributed, then a lot of families end up falling behind even as the economy improves. it's sort of like the economy is doing well except for the people in it. how does that happen? it has a lot to do with who has bargaining power , low levels of unionization, it has to do with the fact that some of the jobs out there are return high levels of wages and incomes to people with the highest levels of skills. so some folks are getting less behind. it has to do with the trade deficit . so really many different kind of perpetrators on the inequality story.

>> what do you do about that? how do you make sure that people who are on the lower end of the economic spectrum get some prosperity as well?

>> the solution is a lot simpler than i think a lot of people think. if the unemployment rate is very, very low, something we haven't seen for a while, what you find is that employers have to bid up the wages and the compensation, kind of the benefit packages that they pay to even the lowest wage workers. we actually saw this in the second half of the 1990s . the economy wasn't all that different in terms of, say, employers' skill demands. but because the unemployment rate was so low employers were forced to in a sense share the benefits of growth with their work forces in ways they don't where. our key goal in terms of offsetting inequality should be to bring down that unemployment rate .

>> all right. jared , thank you so much for your time this afternoon. we appreciate it.

>> my pleasure, mara.