Economic recovery not yet reaching Americans, Middle Class Task Force chief says

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By Michael A. Fletcher
Washington Post Staff Writer
Friday, July 2, 2010

A poster-size replica of the cover of "The State of Working America" hangs behind Jared Bernstein's desk in the Eisenhower Executive Office Building, next to the White House.

The memento is from Bernstein's former life at the pro-labor Economic Policy Institute, where he co-wrote a series of reports about the increasingly uncertain terrain confronting the nation's workers. It is also a reminder of the Main Street sensibility he brings to a White House economic team that's top-heavy with Wall Street experience.

In the administration's first year and a half, the team has helped pull the U.S. economy from the precipice. The federal government passed a massive stimulus plan, and President Obama pushed through far-reaching health-care legislation that proponents say will expand coverage and control costs. The administration is also close to a financial regulatory overhaul.

Economic growth, however shaky, has returned. The nation is again creating jobs, and the stock market has regained much of the value it lost in the dark days after the financial collapse of late 2008. Yet the unemployment rate hovers at the highest level in 28 years, and wages remain flat.

"Is the economic recovery really reaching the American people?" said Bernstein, Vice President Biden's top economic adviser. "And the answer to that is: Not yet."

It is a sentiment Obama himself has expressed, even as he credits his economic policies for averting disaster. But now the administration faces an even more daunting task: translating growth into shared prosperity.

Bernstein, 54, has pondered that challenge for nearly two decades, and as executive director of the administration's Middle Class Task Force, his job is to address it.

He said the reasons the middle class has not fared well in the modern economy are complicated. Increased globalization, technology, diminishing bargaining power for many workers, reduced unionization and slack in the labor market all share responsibility, he said.

While Bernstein thinks he understands the problem, he acknowledged that forging a solution is difficult, given the unrelenting political opposition and the suspicions some Americans harbor about an activist government. Complicating the picture is that the economy often moves in ways that challenge old assumptions.

Just before Obama took office, Bernstein co-wrote a report projecting the likely impact of the administration's $787 billion stimulus bill. The report accurately projected the legislation's effect in cushioning the economic contraction. But employers cut many more jobs than the administration or forecasters anticipated. The unemployment rate crested at above 10 percent, not at the report's predicted 8 percent.

"It tells you that employers were going to squeeze as much as possible from workers," Bernstein said.

'Different orientation'

Bernstein followed an unusual path to a job where he helps brief the president and vice president several times a week. A graduate of the Manhattan School of Music, he worked first as a bass player, sometimes gigging with famous musicians in Greenwich Village nightclubs. He gave that up for social work in hopes of addressing the chilling depravation that seemed to be everywhere. "I remember walking over homeless people to get to work," he said. "That was a symptom that something was very sick in society."

He went on to earn a doctorate in social welfare at Columbia University before going to the Economic Policy Institute. There he helped document the plight of working Americans who found themselves with fewer guaranteed pensions, increased job volatility, skimpier raises and more inequality. Bernstein found that his economic ideas meshed with those of Obama. After the election, Biden summoned him to his Delaware home for an interview to be his top economist.

"Jared has a history of seeing economic policy through the lens of low-income and middle-class Americans," said Lawrence Mishel, president of the institute. "That is a different orientation than some others" in the administration.

'Economic recipe'

Although some of Obama's economic advisers -- particularly National Economic Council Director Lawrence H. Summers and Treasury Secretary Timothy F. Geithner -- are often viewed with suspicion because of their past Wall Street connections, Bernstein says he has not had an ideological conflict with them. "This notion that there are deep Wall Street sympathies somewhere on the economic team is just completely absent, and I am involved in the high-level discussions," he said.

The test the team now faces is how to nurture the fledgling recovery and channel it into the lives of everyday Americans. Recently, Obama has called for more stimulus, money aimed at saving hundreds of thousands jobs in cash-strapped states. But Congress has balked, saying the nation cannot afford the debt. That frustrates the administration.

In the short term, Bernstein said, the economy needs stimulus, followed by budget discipline and then efforts to subdue health-care costs in the long run.

"That's the economic recipe," he said. "But the political recipe is much more challenging."

© 2010 The Washington Post Company

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