 I would like to quickly introduce our guest of honor, my friend, and the person who hired me to join EPI in 2007, Jared Bernstein. So Jared is the chair of the U.S. Council of Economic Advisors. Before joining the CEA, he was senior fellow at the Center on Budget and Policy Priorities. Before that, he was chief economist and economic advisor to then Vice President Joe Biden. And now we get to the good stuff. Before that, he was an economist and the director of the Living Standards Program at EPI. And I have to, unfortunately, end this bio here. I had a whole bunch more nice things to say about Jared, and I sent it to him ahead of time to approve it, and he just said, this is too long and boring, end it here. So end it here, I shall, Jared, I will now hand it over to you. You're just delighted that you're here. Thank you, Heidi, for that highly efficient introduction. As you'll hear in a moment and a lot more detail, I'm very glad to be back here at EPI. I'd like to thank the CEA international team, and especially Amy Gantz, Sandila Lashwayo, Fariha Kamal for their help with this talk. Over the past year, my colleagues in the Biden administration have presented compelling explanations of our approach to international trade. It is an approach that is unsurprisingly rooted in Bidenomics, specifically by recognizing two simple realities that EPI saw decades before most others. The first is that globalization generates both meaningful benefits and meaningful costs. From today's perspective, this may seem obvious, especially as the political consequences of ignoring the costs of globalization have been laid bare. But back in the early 1990s, that was not the case, despite the trade-offs apparent in conventional trade theory. The second is that people are not only consumers, they are also workers, and these workers live in communities that in too many cases were hollowed out by the loss of factory jobs. Policy-wise, such losses were justified by the thinking that as long as expanded trade created enough income for the, quote, winners to compensate the, quote, losers, it's worth pursuing. Now, Pareto optimality is a powerful analytic tool, but in the real world, it's insufficient to show that society can compensate workers hurt by trade competition. The dispositive question is, will we do so? Is there a politics to facilitate such actions? In fact, the past political climate enabled the winners from trade to rig the game even further on their behalf, for example, through high-end tax cuts or cutting what little trade adjustment assistance existed. Trade policy at the time also assumed largely frictionless transitions. The idea that a displaced worker can seamlessly move into a different job, often in another locality, with similar compensation. In fact, this episode taught me to cringe whenever a policymaker invokes a, quote, transition. Too often, that word means that somebody, and it's usually someone who's economically vulnerable, is in for a world of hurt with lasting damages to their communities. Filling in places that were hollowed out by, filling out places that were hollowed out is a Bidenomics goal that we are pursuing with signs of early progress, as seen in the geographical diversity of new domestic manufacturing facilities. My colleagues in the Biden administration have espoused these points. As Trade Ambassador Tai, a longtime supporter of elevated labor standards and trade deals, has explained our worker-centered approach to trade. Secretary Yellen has upheld deepening economic integration with trusted partners, where benefits from the ensuing efficiencies work better for American workers. Reflecting on how pandemic snarl ups in supply chains failed both workers and consumers, National Security Advisor Jake Sullivan has stressed the importance of, quote, diversified and resilient global supply chains, could currently setting, quote, high standards from everything from labor and the environment to trusted technology and good governance. My CEA colleague, Heather Boucher, has touted the, quote, positive sum economics of collaborating with our allies and trade partners. I recommend their talks, fleshing out our framework, but as they've covered that ground, I'd like to do something different today. First, because I'm an EPI, I want to provide a brief history of the U.S. trade debate that took off in the early 90s, which is when I came to work here. Why go there? For one, it's an instructive example of something that matters a lot to the president's economics team, much as it does here at EPI. Too often, economic theories and assumptions interact with powerful ideologies lodged deep within the political economy in ways that diminish a key insight from classical trade models. Trade generates winners and losers. When I came up in this field, prominent economists including Nobel laureates like Robert Lucas argued that distributional concerns were not under the purview of economics. It is worth revisiting that EPI ultimately prevailed in that debate. Second, I want to draw something out of this debate that is perhaps not as well understood as it should be despite the fact that it is well embedded in the speeches of my colleagues. And that is we in the Biden administration highly value robust trade flows. We believe we can continue to aggressively pursue the benefits of U.S. worker-centered trade policy without giving up the many and deep benefits of trade. Such benefits include greater supplies of goods and services, lower inflation, more innovation, good jobs for American workers in exporting sectors, forward direct investment on U.S. soil, and a better chance of reaching our climate goals. I suspect this audience is familiar with the empirical literature supporting these assertions, but it is perhaps less obvious how trade can support decarbonization. Through the trade channel, we can complement our own increasing supply of intermediate and final goods along with the green technologies necessary to hit our climate targets while bending the relevant cost curves. In my experience, it is insufficiently understood by many in this debate that worker-centered trade implies neither less trade nor more trade. We consider the fact that aggregate trade flows have remained robust as a necessary condition for ample, resilient supply chains, even as the country origins for U.S. imports are diversifying with less reliance on China. In a moment, I'll share with you some CEA work wherein we tout the unsnarling of global supply chains and track the contribution of better supply conditions to disinflation, delivering, as the President puts it, increased breathing room for families. I'll also highlight the increased foreign direct investment in new manufacturing plants here in the U.S. in sectors of domestic production consistent with chips and IRA. These FDI flows are themselves consistent with our agenda to boost domestic production of strategically important sectors, most notably semiconductors and clean energy products. To be clear, we expect some degree of import substitution in the areas, including of inputs that we have long imported. Such investments can help firms meet the domestic content provisions of the IRA and chip's bill. We've also clearly elevated both security and resiliency risks with regard to some of our trade with China and are acting on those concerns. But here, too, we've been clear to emphasize the narrow, though crucial national security dimensions to which these restrictions apply, what National Security Advisor Sullivan describes as a, quote, small yard with a, quote, high fence. After all, quantum computers and military-grade robots are not sold at your local Walmart, but thousands of imported goods are. Or consider that nature in her wisdom did not put all the inputs under our soil that are required to hasten the clean energy transition underpinning the climate target set by President Biden. We're actively working with our allies to avoid unreliable dependencies and accelerate the achievement of our mutual goals, including global supply chain early warning systems, anti-corruption initiatives, more frictionless trade and investment, all while promoting strong labor environmental standards as seen in our pursuit of new measures like the Indo-Pacific Economic Framework and the U.S.-Japan Critical Minerals Agreement. Given the current labor landscape in the U.S., it's worth noting that this minerals agreement includes an employer neutrality clause when it comes to union organizing. On this president's watch, every deal we make must uphold our labor standards and support our unions. In other words, our policy in this space is best understood as, quote, both and. Both increase domestic sourcing from upstream extraction to final production and robust trade and investment flows alongside heightened cooperation with our friends and allies with clear standards guiding those efforts. Now, let me turn to a brief history of the trade debate with a focus on EPI's role in that debate and how we at the White House continue to build the trade policy that reflects those lessons. I arrived at EPI in 1992 to work with Larry Michelle on that year's version of State of Working America. I came here from New York City, and if it's not too late, I'd like to apologize to my co-workers for being such a New York snob whining about the lack of decent pizza bagels and jazz clubs. I remember after I'd been here for about a year, someone asked me, where's a good jazz club in D.C., and I said, you know Union Station? And they said, sure, is there a good club there? I said, no, that's where you can get the train to Manhattan. I planned to go back to New York after a year, but I fell in love, had kids move to Alexandria and stopped hanging out in jazz clubs. At any rate, back then the Institute under Jeff Foe's leadership was buzzing about something called NAFTA. Like any good grad student, I was well versed in trade theory, comparative advantage, Pareto optimality, but I knew zip about trade deals or FTAs, as they were called. What I quickly learned was that free trade agreements had far less to do with free trade than I'd realized. Instead, they partly represented the rules of the road, and as any D.C. policy analyst knows, she who writes the rules decides who benefits from them. To be clear, this is no blanket rant against this aspect of trade deals. Roads need rules, though if you're one of the tiny minority who both holds forth on FTAs and actually reads them, you know these are often mind-numbing, but necessary discussions about what constitutes a rubber tire grade four, or to quote the NAFTA, quote, filament yards must be composed of filaments that are formed or extruded in NAFTA country, but petrochemical or cellulosic feedstock that is used to make the filaments maybe sourced outside NAFTA, close quote. Of course, if that's all that was in these trade agreements, EPI would have had less to worry about. But as Dean Baker, who also got his start at EPI back then, has long documented, these deals often contain protectionist measures of the type most economists would consider anathema in any other setting, added at the behest of powerful lobbies like Big Pharma. There's a reason why doctors without borders vehemently opposed the TPP FTA. In fact, Dean has long called for a global trading system that's both freer and fairer through reducing protectionist rents, especially in the areas of patents and occupational restrictions on immigrants who would otherwise compete in high wage sectors like medicine and law. Back then, Thea Lee, now at the Labor Department, was a leader on EPI's trade work and she hammered the status quo with common sense arguments for which they had no credible retort. Why she asked a Nobel Laureate economist in one debate, did it make sense for the NAFTA to have a chapter protecting intellectual property rights, but not labor rights? Because he honestly responded, the property rights protect my textbook royalties. Larry Michelle warned about deindustrialization in 1988, followed by Rob Scott's advance warnings about China's accession to the WTO, leading to what is now recognized as the China shock. EPI economists were accused of not understanding Econ 101 or basic trade theory, yet this was while Scott and Lee were explaining that the Stolper Samuelson theory was fully consistent with their view and that jobs displaced by imports were just as important as those created by exports. I remember a conference where I was the usual EPI skunk at the garden party, where an honest economic modeler pulled me aside saying, I couldn't say this out loud, but everybody knows we tweak the models to overwhelm Stolper Samuelson effects. Economist Danny Rodrick, writing in 2018, underscored this point. This corner of trade theory, quote, predicts that low skilled workers are unambiguously worse off as a result of trade liberalization. And he stressed that this result, that increased trade creates losers, is not a special case of one particular model, quote. It is the implication of a very large variety of models. Redistribution is the flip side of the gains from trade. No pain, no gain. This is standard economic fare, familiar to all trade economists, even if not voiced too loudly in the public, close, quote. And because EPI never rests on its laurels, Josh Bibbins and Adam Hirsch continue this trade work that began over four decades ago. Moving from the theoretical to the real world, predictably, the FTA process got captured by investors in corporate interest. The Washington Post documented that 85% of the members of outside committees advising the government on the TPP were from private business and trade associations. Such corporate capture was also relevant in other FTA dispute settlement procedures with the potential to challenge the very type of environmental and industrial strategy actions our administration is pursuing. More mainstream economists like Larry Summers have echoed their own version of these insights. In 2016 he wrote that the, quote, revolt against global integration is that it is a project being carried out by elites for elites with little concerns, with little consideration for the interests of ordinary people. Those people, quote, see the globalization agenda as being set by large companies that successfully play one country against another and conclude that globalization offers opportunities to a fortunate few to avoid taxes and regulations that are not available to everyone else. And they see the kind of disintegration that accompanies global integration as local communities suffer when major employers lose out to foreign competitors. Now that was EPI's message when I got here in 1992, long before Larry wrote those words. These local dynamics, as researchers of a series of, quote, China shock papers found, had profound political consequences. Its contribution to inequality and political polarization catalyzed support for an extremism that still confronts and threatens us today. I know that is a harsh message, but it also contains a strong kernel of hope. Much as we are still living with unenlightened choices made back in those days, the choices we make today, the worker-centered trade policy path we pursue, has the potential for positive impacts for decades to come. While it's easy to say both end, is it possible to realize that goal? Some early evidence of IRA-induced shifts in the trade data offer glimpses in this spirit. An important new paper by Alfaro and Chor provides a preliminary view of a, quote, looming great reallocation. Consistent with my theme today, they note that reallocation is not equal to retrenchment. They find that, quote, the aggregate value of key trade flows, such as U.S. goods import, rebounded strongly after the COVID-19 pandemic to all-time highs in 2022. The relocation they identify is largely away from China and more toward Vietnam, and in a case of the near-shoring you've heard us discuss, Mexico. An important dynamic of this shift to Mexico is that it has allowed us to apply the USMCA's rapid response mechanism, enabling expedited enforcement actions when workers are denied free association and collective bargaining rights. I view this as another important dimension of both end. We can both maintain open markets and disallow a race to the bottom. Alfaro and Chor also find the, quote, more finishing stages of production and global value chains are now being performed within the U.S. Consistent with the resurgence of manufacturing, this is me, consistent with the resurgence of manufacturing jobs under President Biden, which the authors suggest, quote, likely reflect recent efforts to promote domestic manufacturing capability in areas such as semiconductors. The authors raise two noteworthy caveats. First, the, quote, great reallocation narrative misses indirect linkages arising from other trading partners' imports from China. They document increased trade with an FDI from China and Mexico, Vietnam and Europe. Other trade economists, including Lovely and Freund, find similar results. Second, import diversification may be associated with higher import prices. This comports with recent evidence of higher wages and production costs in these non-China source countries that might be expected given stronger demand for their manufacturing output. We'll be carefully watching these price dynamics, but because wages were already rising in China, it is possible that some reallocation independent of any U.S. policy changes would have occurred in any case. Also, as Secretary Yellen has stressed, higher costs associated with reallocation must be weighed against the resiliency and security gains from friend and near shoring. Supply chain resiliency has been a focal point for our administration since we took office. As is now well understood, when COVID hit, the savings of American households were significantly boosted through both the lockdown and the inability to interact with in-person services. This led to sharp increases in the relative demand for goods at the very same time that supply chains were snarled due to lockdowns and worker absences. I think it's fair to say that at least in my days at EPI, we tended to focus a lot more on the economy's demand side than its supply side. But with 2020 hindsight, this was short-sighted. Consider but one example, between January and September 2021, motor vehicle assemblies fell nearly 30% primarily due to the chip shortage. As a result, CEA analysis shows that the average auto worker worked more than two fewer hours per week, most of which were over time tantamount to a 6% weekly pay cut. So in June of 2021, we formalized our supply side disruption task force, which quickly partnered with the private sector to unsnarl supply chains. This included facilitation of moving higher levels of cargo in 21 and 22 through ports while concurrently lowering costs of shipping and rail. CEA graphics on our CA blog, which I hope you all subscribe to, told this story in a recent blog post, measures of supply chain pressures, that is delivery times, are positively correlated with PCE core goods inflation in the post pandemic period. As pressures have decreased, we've seen welcome disinflation in that component. We've also documented recent increases in some types of FDI, specifically in areas associated with the investment priorities of bidenomics. Recent FDI data for new manufacturing establishments and expansions show sharp increases, while domestic investment in manufacturing facilities have grown even faster, largely in the EV space. In other words, we have some early, suggestive evidence of crowd chain investments from IRA and chips, both from foreign and domestic investors. In covering this history, recent trade flows, supply chain improvements, and their contribution to disinflation, I've tried to capture the nuances of our trade policy and how we got here. We will continue to wield the powerful tools of recent legislation to advance domestic production in strategic areas. We will continue to reverse decades of disinvestment in our public goods and ways we believe will encourage both private, domestic, and foreign direct investment in facilities and production here on our shores. As I've shown, even in these early days, this isn't wishful thinking. We're seeing some encouraging results. But as I've also stressed, and as secretaries Yellen and Romando did well before me, we will continue to pursue, promote and benefit from the supply and price benefits of robust trade flows. The difference, and it is a portentious difference, one that is at the core of EPI's work is that we will never abandon the American worker and her community wherever those communities are located. Unlike that trade economist who whispered to me on the sidelines, we will never quote, tweak the model in ways that leave workers, labor, and environmental standards or unions behind. Our trade policy will, at the behest of President Biden, always be American worker centered while elevating the importance of supply chain resilience and national security. But on those both and terms, and on behalf of working Americans and the communities in which they reside, we will continue to participate in globalization, never ignoring the costs of trade, but at the same time reaping its benefits. Thank you. Thank you, Jared. That was fantastic. And I'm going to ask you a few questions. And then I will turn things, will try to leave some time for some audience Q&A. I'm just going to ask you one question on trade, and then we'll move some questions on a wide variety of other topics. OK, so this is the one on trade. So lots of people see trade as competition between nations, like China versus the US. EPI, as you stress, has always recognized that the sort of core distributional conflict isn't between countries, it's within countries. It's between high wage workers and typical working people. And you talked about this, but can you say more about how that insight impacts the way the Biden administration looks at these issues? Sure. I mean, first of all, thanks so much for inviting me. And thank you. I'm just reminded, listen, God, Haiti, how you're always so clear. And whenever I tune in and see you, I turn up the volume. And it's a breath of fresh air. So I really appreciate all that. I mean, this is a somewhat of a horny old tale that I've told many times before, but it happens to be true. And I think it's appropriate at EPI. And it gets right to the heart of your question. So when I went to interview with Joe Biden in December of 2008 to be his chief economist when he was vice president, he pulls from his jacket pocket when we sit down at his Delaware house a graph that Larry Michelle and I made, and that is carried on to this day at EPI, which shows productivity against median compensation. That's an, I think people have t-shirts with that on it around here. And he pulled it out, and I didn't pull it out. He said, and he pointed to the gap between the two. And he said, if you come to work for me, this is our target, that gap, closing that gap. And it's exactly what you just said. And I think, I hope I captured in my speech, that whatever policy we under, in whatever policy space we're working in, whether it's climate, trade, full employment labor markets, which, by the way, he touted. I suspect we'll get to this, because it's another big EPI topic he touted in one of his first speeches as president, the importance of getting back to full employment quickly, which I think we did. All of that is in the interest of empowering workers, which now is cited as, obviously, a foundational EPI view, but that's now one of the three pillars of Bidenomics. So I think that the connections there are very clear. That makes a lot of sense. And I feel like we could talk about this forever, but I am going to move on, because there is so much going on in the broader economy right now. So I'm going to switch to some of those other topics. Tell me about it. I know. I know. There's a lot going on. We'll try to touch on as many of these things as we possibly can. OK, so with the backdrop of the president having gone to the UAW picket line yesterday, something that no sitting president has ever done before. Could you just talk a little bit more about how this administration is supporting striking workers or just sort of workers' rights? Well, as I said, I mean, we like to talk about things in Bidenomics term these days, but it's something that I think I've had a PhD in Bidenomics for a long time. And it's something we've been, that's a rubric that's very familiar to people who've been working in this. I should say that the policies under that rubric are very familiar to all of us. And look, if you're talking about empowering workers, I think there are two powerful channels. One is not just getting to full employment, but staying at full employment. Persistence really matters. So the fact that the unemployment rate's been below 4% for over a year and a half is very important in terms of that empowerment goal. And of course, the other side is unions. And as you well know, there are a lot of people in this country who have quite favorable feelings about unions. And they will tell pollsters that they understand and like that idea because I think they recognize that having some leverage, having some bargaining power is a way for them to get a fair slice of a pie that they're helping to bake. So if a lot of people want unions, but we don't really see that curve turning up very much, union density, there's got to be some factors that are blocking that. And I think many people in here know what they are. Probably many people here are better than I do. The playing field has long been tilted against workers who want to form a union and collectively bargain. The NLRB hasn't always been working towards that goal under different, particularly Republican administrations. We now have an NLRB that's making some really important decisions that look to me like they're going to help. We have a blog coming out on that soon. And the president being there yesterday and proudly calling himself the most pro union president on record is all about this realization that really goes back to the graph that he pulled out of his pocket that day. He pointed to the gap between productivity and meeting conversation. He knows in his bones that that gap gets closed by empowering workers. And what are we doing? We're pursuing full employment and a pro union agenda. It's not complicated. Got it. Yes. OK. Can I dig in a little bit more on full employment? I know when you were at EPI, you worked a lot on the importance of full employment, including the importance of full employment to racial equity. And you talk more broadly about the importance of full employment. Yeah. And I think the racial equity point is really critical there. I mean, the numbers kind of speak for themselves because the elasticies are just larger. If the black unemployment rate tends to be twice that of the white, that can be a disadvantage as unemployment goes up, but a disproportionate advantage multiplier as the unemployment rate comes down. I did a paper while I was at the center on budget where I looked not just, I worked with a guy named Keith Bentley, we looked not just at the broad aggregate unemployment measures. We looked at annual hours worked, and we were able to look at the extensive and the intensive margins. So people coming into the labor market, that's the extensive margin, and the intensive margin, how many annual hours they work per year. And the results for black men and women were off the charts. Not only did workers add a lot to their annual hours in periods of full employment, but you were pulling a lot of people in from the sidelines. And we're starting to see that now, by the way. We've seen prime age labor force participation grow. So look, I don't want to say that the only solution in our quiver for racial inequities is full employment. It's one of many. I think the housing piece of that is really big for us and something that we want to do a lot more work on. But I think that speaks to your question. That certainly does. OK, I want to get more in on the broader economic situation that we're in right now. What some people have said that the UAW strike is going to slow the economy. And I will say that one thing that I always note when I get this question is it may slow some measures of growth in the short run, which, by the way, means that UAW workers are producing something that is in high demand and should get cut in a fair share of the income that they're producing. And also, the labor market is really, really strong right now, so should pretty easily be able to absorb the impact of the shock and then of the strike. This is where she answers the question. I'm going to get to the question. I'm going to get to the question. OK. I like what you're saying. OK, then I'll finish this part of it. But then the other thing is that once the workers get to contract and are back on the job, they're going to pretty quickly fill in the production shortfall so that the long run impact is just not going to be that great. But that is just one factor in our overall economy. So I did answer that one. But can you talk more broadly about where you see the broader economy going, headwinds, tailwinds, like what's in your crystal ball about all of this? You know, back when I was working here, I could gum flap about my crystal ball and nobody gave a crap. I need to be careful about forecasting or trying to look around corners because it's really hard and because we are subjected to a level of scrutiny. But you're, first of all, thank you for your answer to your question, which is very, very fulsome. And I'll steal some of those points if somebody actually asked me that question. I think about this the same way I think you do, which is tailwinds and headwinds. So you can tally up your, you know, without getting quantitative and trying to forecast, you know, you've got headwinds from a higher price of oil. You've got the UAW strike, potential shutdown, student debt restart. Those are the ones that are, if you read the Wall Street Journal article on this the other day, that's what they went through. I mean, another one is, you know, higher interest rates, but of course that's pretty baked in. I don't think there's any surprise there given that the Fed's hiking campaign. So all of those are known headwinds. I would say on the rates side, you know, you really, you know, when you get a mortgage, a 30 year fixed rate mortgage of seven and a half percent, you're talking about, you know, a really interesting headwind. I say interesting because typically that would make housing prices come down. And we have seen some of that, especially on the rental side, which by the way is most important for the deflaters. One of the things we've done are, okay, we actually have done that. I say, we, I mean, Ernie Tedeschi, our chief economist, has done a really good job of forecasting the contribution of housing to the CPI and the PCE. And he's looking at rents, which have come in more than housing prices. Housing prices, you would say if a mortgage rate is seven and a half percent, you'd think, boy, that must be a headwind to housing prices. Well, there's a lot of lock-in right now. People staying in homes and housing supply is very constrained. So basically, higher interest rates pulled in on the housing demand curve. And while the housing supply curve went in even further. So that's been a challenge. And we have, as I've mentioned, we have a very deep housing supply agenda that we will continue to work on. It means it's gonna call on Congress. I think getting to, sorry, I mean, I can talk, I think about, this is really what I think about a lot of the day. I think the following, let's make it really simple. We have a, almost 70% consumer spending economy. Nominal consumer spending is a share of the economy, 68%. If you go to Europe, that's 55%, if you go to China, maybe it's 40, 45, used to be 25, we're way higher than any other advanced economy on that metric. If you have a 70%, consumer spending economy and you are persistently at full employment or near full employment, generating worker bargaining power, pushing on the union question, as we've discussed, there's a bit of a perpetual motion machine going on there. You're generating now real wage gains, because we've worked very hard to help get prices down. So we got prices down, we have wages now beating prices, nominal wages growing faster than prices. That dynamic in our economy creates a pretty persistent flywheel. In the absence of a policy mistake or an exogenous shock, we think that that sort of keeps things going in a pretty good way. So let me just, I know I jumped around there, but let me just stop there. That makes good sense to me. And it leads into another question that I wanna ask, which is something of a mystery to me right now. I have been a labor market economist for a very long time. I have never seen the gap that we see right now between what's really going on in the labor market, which is one of the fastest jobs recovery we've seen in history, and then what people say they think is going on in the economy when they're polled about it. And so I was just wondering if you could actually, do you have any insight on that from where you sit? Yeah, I do, I think. For some reason, when you were starting to ask that question, I thought you were gonna go in a different direction. So let me go there first. Okay, fair. Because that's a happier thing than you asked about. And I will speak to it. I think about that a lot too. And we've actually done a lot of really good research on that question at CEA. What I thought you were gonna say is, I've never seen, in our buzzwords, a lower sacrifice ratio. That is a bigger gap between how much inflation has come down in percentage points, at least headline. Although core has come down less, but it's also come down. And the fact that we haven't really given up anything on the unemployment rate, right? There are a lot of economists who said, look, if you wanna get inflation now, you're gonna need a lot more unemployment. President Biden said to us, you know, that's not the way I want this to happen. I want us to keep employment where it is. I wanna keep maintaining full employment. It's so important to workers' leverage, the bragging cloud, but we have to get prices down. And I would say that some on the team were like, well, yeah, we'd love that happen, sir, but this and that, and it was right. And so that's a gap that I think can also be explained. I don't think there's an immaculate disinflation. I think that that has to do with supply side normalization. The fact that the supply side of the economy, whether it's on labor supply, or what I referenced in terms of global supply chains in my talk, I think there's a lot of normalization there. And again, I think that's one of the benefits from trade when you normalize your trade flows, your supplies are more robust. In terms of the sentiment question, the gap between a lot of the indicators, I think it all comes down to inflation. I really do. I think it's about prices. I think we're trying to talk to people about disinflation when what they really want is deflation. They want their old prices back, damn it. And I think if you were able to explain to people, here's what would have to happen for you to really get deflation, a lot of very bad things. Maybe that wouldn't sound so desirable, but for people who are, for non-economists who don't necessarily walk around thinking about the ills of deflation and how bad an economy you have to have to get deflation, people are not saying, wow, we want prices. We're really glad that prices were growing at 9% and now they're growing at 3.5%. We want, we remember that eggs cost 220, and you're telling me I should be happy now that they cost three because they used to cost four and a half. So you see what I'm saying? So they want their old prices back. Now, in some cases we've had deflation, eggs is a good example, that's an avian flu story, and as that has passed through the system, egg prices, we've seen a lot of deflation there, we've seen actually groceries have been an area of considerable deflation in various commodities, beef, chicken, I could say more. But here's the thing, and this is getting more to the EPI kind of labor mentality. If people really would never be happy until they get their old prices back, then people would be perennially unhappy, right? They just always would be unhappy because deflation is a disease and you really don't want that. So how is it that people don't necessarily, don't usually feel bad when inflation is creeping along between one and 2%. And the answer is their wages, is their pay. And though nobody does this calculation, so I'm not claiming that they do, the implicit calculation is, it used to take me an hour and a half to work, it used to take me an hour and a half of work to buy a bag of groceries. Then it took me three hours to buy a bag of groceries. That made me really unhappy. Well, the average time it takes, the average work for production, the average time it takes for a middle income worker, for a middle wage worker, the average time it takes to buy an average bag of groceries is back to what it was pre-pandemic. So in other words, your buying power's coming back. So why do people still feel bad because they haven't reset their price expectations yet? You have to have two things happen. Enough time has to pass so you can reset your price expectations so you don't bemoan that you don't have your old egg prices back and you're used to the new prices because your buying power is back up that you can get the same bag of groceries for the same amount of work that you had before or even do better. So that has to happen and that is happening but then enough time has to pass for your, we call it your PPV, your personal price vector to reset. That is, that makes a lot of sense to me. I also think another component is misinformation about what's going on in the economy, like the stories that people are getting as well. But I think the thing that you're talking about is far more fundamental. Okay, I wanna do just one more question before we turn it over to the audience to ask some questions. And I just, I wanna go a little bit more into inflation right now. Can you, you talked about some of the, what's going on with inflation, but can you talk about how much of our recent inflation was due to higher, to stronger wage growth at that time? Like sort of how that is all shaking out now. Well, I mean, again, I don't think wages are particularly implicated and I'll tell you one area where I do think there's some interesting wage stuff going on. But for the most part, this question is I think fairly easily answered by that zero sacrifice ratio. So if you're taking percentage points off of inflation and you really haven't given up much of anything on the unemployment rate and wage growth, I mean, it has come down in nominal terms, but it's still pretty strong, speeding inflation, then it doesn't really look like a demand side story, which is where the wage piece comes in. It looks more like a supply side normalization story. And we've seen that, by the way, in the beverage curve debate, that's really kind of a looks to me like you're cutting into vacancies, but without giving up much on unemployment. And that's also a zero sacrifice ratio story and another story of supply side normalization. In this case in the labor market with the beverage curve kind of coming back to where it was without higher employment, but just the dots every month come in the vacancy on employment space, those dots just coming down underneath each other one after another. So I think that the wage piece isn't typically there, but here's where I think there is a bit of a wage story and this is work that, again, Ernie and I have done. We have a new blog post coming out on this. I keep advertising the CEA blog because raise your hand if you've ever clicked on the CEA blog. Oh, that's C-MOM at EPI. That's a good showing. Great to see. It's a great blog. Thank you, it's a great blog. Katie, Megan, you're hearing this, I hope. So we have a new blog coming out about this. You'll find it interesting, but it's very weedy. But we like that, and you like that, and this is EPI. So the Federal Reserve talks about non-housing services inflation. That's the part of inflation that they say, we're watching very closely, because that's the part that they don't really see coming in. While housing, as I've mentioned, especially if you look at rents, housing is easing up. Certainly goods part of inflation is easing up. This is core, so we're putting aside food and gas. The one part of inflation that the Fed says they're watching is non-housing services, and I mean, they're watching it all, but the one part I think they're kind of concerned about is NHS non-housing services. That's core services, not including housing. And Ernie and I have looked at that, and we think we can decompose it. It's about half the core by weight. It's about half the core, and we think we can compose it to a wage-sensitive part and a wage-insensitive part, and that's about half and half again. So a quarter of the core is wage-sensitive inflation. That's half the core is NHS, and half of that is wage-sensitive. And by wage-sensitive, we mean it looks like if you regress those components on a bunch of wages, the joint coefficients on the wages are significant if you joint the price on wage. And so as what we've seen is that non-housing services' wages, which we've measured, we figured out how to figure out what are the wages in these sectors, in the NHS sectors, those wages have been coming in pretty strongly. They're still obviously growing, but their nominal growth data slowed along. They were up at eight, now there's something like four or five. With a 10-month lag that's showing up in NHS wage-sensitive inflation, and that's coming in too, quite nicely marching along with this 10-month lag. So you'll see the picture in our next blog post. I think there is a wage connection there. It's a quarter of the core, so that ain't nothing, but it's actually coming in pretty nicely. Got it. Okay, that's something that I'm sure all of us, well, me for sure, will wanna dig in on. But I am going to now turn this over to audience questions. And we are not using microphones because of the way that we are videotaping this. So people, you can raise your hands if you have a question, and I'm gonna call on you, and you just need to really project your voice. And Jared, if when you talk, you could also kind of restate the question before you answer. This requires you to actually ask a question. You have to ask a question. Yes, all right, everyone have their marching orders. Okay, we'll take it right here, and then we'll go to the parts behind here. So I'm Andrea Shalal with orders. I wanted to ask you about the kind of, convergence of all of these factors that are happening right now, whether it's the UAA strikes, the threat of a shutdown, the child care cliff, the lack of the child tax credit. And to what extent do you think that poor people and people of color are being particularly hit and will be particularly hit by this? You're just looking at some statistics today that say that, for instance, African-Americans, black Americans are disproportionately represented, for instance, in the federal workforce, something like 18% versus 13% of the population. So to what extent is all of this barreling down on poor people and people of color in particular? So to what extent, I'll try to repeat the question, to what extent are the various headwinds that we've talked about, and you listed a few we hadn't, and I'll try to speak to those, are disproportionately hurting people of color? Well, there's a lot to unpack there, and I wanna get to a lot of questions, so let me be briefer than I'd like to. I was asked to come to the podium, the press room a couple of weeks ago to talk about binomics, and this was right after the census numbers came out, and I was asked about the expiration of the CTC expansion and its impact on child poverty, and what I said then, and has been, I think very much a message of our administration, is that that episode shows how the poverty rate, particularly the child poverty rate, is a policy choice, and President Biden made a very important, I think a very progressive and a very racially important choice to support that expansion and to work with Democrats to get that there, and it is an important part of our budget to reinstate that and we'll continue to fight for it. When it comes to the headwinds, it's really kind of a variation on what we were just talking about a minute ago. So the tailwinds actually disproportionately help people in communities of color, as I said, because full employment labor markets disproportionately deliver to folks who are more likely to be left behind at a higher unemployment rate, so that part is helpful, and it's a headwind pushing against the tailwind. We've seen some actually quite positive results, and sorry, now I'm sounding silly, we have a blog on this. No. We, it was a quarter or so back, and so if you update these things, you have to really stick, but we looked at how black wages were doing, and in fact, black wages were going faster than any other group of workers, median black wages. So that was an important finding when we got, we have immigration back on trend, immigration in the labor market, immigration, immigrants participation in the labor market, back on trend. We've had some great employment rate results for workers of color, so the strong labor market is a huge tailwind, and we shouldn't lose sight of that, but the policy framework is as I've just discussed in terms of implementing policies that we know disproportionately help vulnerable communities, and we're gonna keep pushing to get there. Sometimes there's a lot of pushback, but I think President Biden's shown himself to pull a lot of legislative rabbits out of hats when people thought he couldn't do so. I'm gonna turn, yes, I got you, yeah. Can you speak up? Yeah, housing is one of the, if you have two, yeah, so first of all, thank you for, oh, now I have to repeat the damn question. Housing market and what are we doing in the Biden administration to help with the insufficient supply of housing, particularly affordable housing, given a set of dynamics that speaker very thoroughly and very smartly, you took us through the dynamics in a way that was very resonant with me, so I agree with your analysis. I think it's a little weird that you walk around thinking about housing in your spare time, but I think it's great, because I do the same thing, and that makes you a houser, and housers are really important people. I've got a couple on my staff, and I love them, because once you start thinking about that, you get exactly to where you got. I think the racial dimension is particularly important, and obviously, you know, I think I'm here at the EPI where Richard Rothstein's long been associated, his book on the color of law is the Bible on that issue, and so what are we gonna do about it? So first of all, we're very, very focused on the supply side. Now, you know, there are demand side policies, vouchers that are important, section eight. I'm not gonna, we're not gonna dismiss those, we're not gonna say we, you know, we're all supply, we're not, we don't care about that, but the pressure point is on the supply side. We've had an insufficient supply of housing that met us when we got here, as I'm sure you know, it's a 10 year old problem at least, and the shortfall is, you know, according to Mark Zandy, between one and a half and two million. Let me talk about two things, although there are more than two things, but two broad things. One is the problem that you're identifying is that building affordable housing doesn't pencil out in the current economic environment. It just doesn't pencil out. By which I mean that the, it's a market failure. Part of it is the investor's story you said, you know, swapping up, sweeping up a lot of communities, but it's bigger than that. It's the fact that given the incomes of people and the costs of the access to capital, the costs of building, low income people can't afford housing in places where they want and need to live, okay? So that's a role for government to intervene, and there are two ways to do that. One is, this gets to Rustin's work, is we have to push back on exclusionary zoning. Now that tends to be pretty local, and it's not easy for the federal government to do that, but we have a lot of ideas to do it. And what do we do in the federal government? You know, we make rules, we write checks, a few other things. If our support for things that communities want to do is contingent on pushing back on exclusionary zoning, if you can get extra points in your bid to build a transportation hub under the bipartisan infrastructure law because you are putting affordable housing in that area, well, that seems to us like a pretty good deal, and that's exactly what we're doing. And we have, you know, some number of bids, I don't want to say it's a thousand, but we've gotten a number of bids, you know, I don't know the number, but it's not huge, but it's a great idea, and it's a real nose under the tent kind of idea. If you want to get this bid, if you want to get a favorable advantage in getting this bid, tell us what you're going to do to push back on exclusionary zoning. So that's actually in play. That's part of, and then secondly, tax credits, which is the pencil out problem. So the low income housing tax credit, that's for apartments typically, is actually a really important solution to this question. Why? It has three supporters. Low income housing people like it, bankers like it because they buy the credits and use them against their tax liability, and builders like it. And so that's a nice, you know, triumvirate there. So we're trying to look at our budget. You know, we have serious expansions of LiTech. There's other pieces of that puzzle too. We could talk for a long time about them, but thank you for being a Houser and for understanding the question, you know, understanding the dimensions of the question as deeply as you do. Tia, former president of VPI, is going to ask the next question. And I really like the point that you made, Jared, about that there's no inconsistency with bi-nomics about being full of robust trade flows. Like we're not against trade and trade is good. We should take the benefit of trade. One of the other metrics that people talk about is pre-trade agreement. Like the Biden administration doesn't have new pre-trade agreements, therefore they're anti-trade. And I'd like you to speak to that a little bit. I might be on this, but I'm gonna answer my own question. Please do. No, you would be the person I would ask to answer this. So I have my answer and it would be a poor imitation of your answer, so go ahead. It would be an effort because trade, trade when it happens, right, whatever. And so we should go in another direction, but maybe talk a little bit about I past the end of Pacific Economic Forum or how the Biden administration sees accomplishing very important trade goals but without actual pre-trade agreement. Well, yeah, it's exactly, not surprisingly, you know, I agree with, it's exactly as you said. And by the way, in this, in this Danny Rodgers piece that I cite is very good on this point. And it actually takes you through some of the numbers that the address mentioned in terms of if you're sort of tariff rates are down here, there's just not that much to be gained from that part of your trade agreements. And look, I think I tried to express in my speech and this is work I've also done a lot with Lori Wallach who's a real mentor of mine in this area arguing that the F in the FTA was kind of misleading and Dean was also very strong on that. I mean, again, there was a fair bit of protectionism in these FTAs that as you heard that people finally were reading them, standing up to them, looking at ways in which they undermine our environmental policy, our labor policy and so on. We think we can actually do what it is I said in my both and approach in the speech that is achieve worker-centered support and elevate the goals of worker-centered trade while continuing to benefit from robust trade flows if we do a number of things, none of which have to do with FTA. So part of it is we have to be very careful both in terms of national security and supply chain resilience in our dealings with China. That doesn't mean autarky or zero trade with China but it sure means trying to achieve the kind of reallocation that if you listen to Alfaro and Shor is actually being achieved and if you look at the policies that we've implemented around some export controls and sensitive areas around advanced chips and other such things, you'll see that we've been able to do that again without an FTA and that's again, that's critical for national security reasons. In terms of the IPEF and the minerals, I cited the minerals agreement, these are deals for us to get together. I mean, to me, I think they work better than FTAs because it's not pharma sitting around a table or whatever lobbyist who has the best entree card to that table sitting across from USTR and cutting deals. It's people like Thea Lee who are in the government now sitting around the table with her counterpart in other countries saying, how can we raise standards? And that's the way to do it. So I actually think, we'll see how far we can push this but you don't need an FTA to accomplish the goals that I set out in my speech. We will take one more question. I'm gonna grab the woman right here, yes, go for it. Hi, my name is David Fitzgerald. I'm a trade policy officer at the British Embassy. I was wondering if you could fit the labor chapters within trend agreement. I think the economic benefits actually stem largely from the kinds of empowerment that I was talking about in our own context. And again, I cite, and this gets back to Thea's question. I talked about the employer neutrality rule in the minerals agreement. That's not an FTA, that's an agreement that, well of course USMCA was an agreement wherein we had some of those rules improved. And so whether it's a more enlightened FTA or whether it's the kind of agreements that we've been trying to, the kinds of arrangements and frameworks we've been trying to cast, basically you just need to have, your agreements need to do what I said in my talk. They need to elevate the independence of labor movements, of unions, their ability to form true worker representative unions, not Potemkin ones, with the force of the agreement behind them, so that there is recourse if a country that's part of the framework or the agreement doesn't follow through and blocks their unions. I think it's that simple. Workers, it gets back to everything I talked about including my discussion with Heidi about unions and empowerment. If we're going to have a more equitable distribution of growth, if the workers who are helping, baking the pie, want to get a fair slice, one way we know that happens is through tight labor markets, another way we know that happens is through collective bargaining and union formation. And too often our trade deals completely ignored that latter part. There were no teeth by which you could enforce labor rules. Even if we had some sort of a labor chapter, the rules just weren't there. I think we've made real progress on that thanks to work under Thea, Rob, EPI. So that's actually a good place to stop. That is a good place to stop. Thank you so much, Jared. Yes, round of applause. It's been a wonderful discussion. Thank you so much for your time. Jared is willing to stay at the reception for a little, so I was just gonna say feel free to swarm him but I feel like that's gonna happen no matter what I say. So please enjoy the refreshments. Help me stand up. Jared, that was amazing. Thank you. Really well done.