White House Council of Economic Advisers breaks down a busy week in D.C.

Jared Bernstein White House Council of Economic Advisers joins Yahoo Finance to discuss the debt ceiling, the budget resolution and other debates ongoing on Capitol Hill.

Video transcript

ADAM SHAPIRO: I want to point everyone's attention to the fact that on the White House webpage right now, there's a new OMB CEO Council of Economic Advisors report that shows billionaires-- I think it's the 400 wealthiest families in the country-- pay on average a federal individual income tax rate of just 8.2%. Jared, we're going to talk about this in the context of what's about to happen on Capitol Hill. But I want to get right to the big headline about the debt ceiling. Who's going to blink first, Mitch McConnell or the Democrats? Will they do it through reconciliation and raise it?

JARED BERNSTEIN: Look, I think the thing that viewers need to understand most is that as we speak, literally, I think something like 45 minutes, an hour from now, Democrats have a bill heading to the floor of the Senate that would avoid default, would keep the government open, and get disaster relief to Americans who are feeling the brunt of Hurricane Ida and other people who need disaster aid.

Now, Republicans in Congress have consistently claimed that they support each one of them. They don't want the country to default. They don't want the government to shut down. They want the aid to get to folks. They're now going to have a chance in mere minutes to make good on that word.

But not only are they claiming that they're going to vote-- that they're not going to support that vote, they're not even going to allow Democrats to pass it. At least, that's what they're saying, that they will filibuster it. If that's true, they are fooling around with fire. And it is an immensely irresponsible position if that turns out to be the case.

SEANA SMITH: If we do see ourselves in that position, I guess, are you very concerned about what this could potentially mean for the economy, or you're confident that the Democrats are going to be able to handle this and this won't be a larger worry at this point?

JARED BERNSTEIN: There's always concern when you're talking about one side kind of using the debt ceiling to their political advantage. I believe that Mitch McConnell even used the term holding hostage in the context of the debt ceiling. Now, look, if Republicans and McConnell and anybody else wants to have a fulsome, robust debate with us about economic policy, about fiscal policy, about tax policy, about building back better on behalf of American families, as you know, because we've done it on your station, we will have that debate all day long.

But when it comes with playing this incredibly high stakes, reckless game of chicken in order to boost your political fortunes, or at least, perceive that that's what you're going to do, that's not something we should be messing around with at all. That's something we should all agree on getting behind us and getting back to doing the work of the American people.

ADAM SHAPIRO: Jared, one of-- we had a guest on last week, Buddy Carter, the representative from Georgia. And he made the case that raising the debt ceiling will allow this incredible spending. We challenged him and pointed out, no, raising the debt ceiling covers the bills you've already spent money on.

JARED BERNSTEIN: Thank you.

ADAM SHAPIRO: So let's move forward, though. Because we're talking about taking on new spending, which most likely will raise the debt. And then in this paper I referenced, as I was bringing you into the stream, the tax rate of just 8.2% is the argument that you and the White House are making. Raise the taxes on the wealthy so that their average income rate that they actually pay is more in line with the rest of us. And what is in line with the rest of us?

JARED BERNSTEIN: Yeah, a couple of things on that. First of all, look, I know you raised this point yourself as well. You should have. And thank you. That's responsible reporting in this context. But I just want to underscore it. There is nothing in raising the debt ceiling that has anything to do with forward-looking spending. Raising the debt ceiling simply allows you to pay bills that you have already incurred. Not raising the debt ceiling is perfectly analogous to sitting there at the restaurant, having your meal, and when the check comes, saying no thanks.

So this is a mechanism by which we pay for measures, which Congress, Democrats and Republicans, have already endorsed. Yes, to get to your other question, the number that you're talking about, the fact that the wealthiest 400 billionaire families in America paid an average of about 8% on their income, including not just their regular income from wage and salary, but what-- so much more important to those very top wealthy families is their capital gains, either what they realized through selling their capital assets or unrealized gains that appreciated as markets go up over time.

If you actually look at what those folks pay, it's about 8%, which is multiples below what the average American family pays. So what Joe Biden is trying to do here is reward work over wealth. Flip a code that rewards wealth over work and use those revenues to help lower costs to the middle class of America so that they can get their fair share of the economy's benefits as GDP expands.

SEANA SMITH: Mr. Bernstein when we talk about GDP expanding, I guess, recent data that we've gotten out has been relatively mixed. Yes, we certainly have seen a strong recovery. But now, certainly, that recovery is slowing. Not a surprise by anyone because the pace of the recovery that we were looking at simply is not sustainable. But from your perspective, because I think some-- there is a notion out there that maybe growth has peaked. What's your consensus, just in terms of where we stand in this recovery?

JARED BERNSTEIN: Sure. Well, we have a forecast that you can check out in the mid session review. It's fairly recent. And we have growth continuing to come in above trend. And I think even if you look at forecasts that have been dialed back, in part because of Delta and in part because of some constrained supply chains, you still see forecasts for growth, at least GDP in the third quarter, that's north of 3%. 3 and 1/2% was some of the most recent numbers I've seen. And if you think of trend growth at about 2%, that's still solid growth, fast enough to keep bringing the unemployment rate down and generating job gains.

And what I want to emphasize here is that GDP, which is, obviously, very important to talk about from the perspective that we just mentioned, how the economy is doing, how it's responding to these macroeconomic threats that are out there, we're in a situation where the economy has been coming back with some strength. 750,000 jobs per month over the past three months, but we still know that there's a pandemic out there. We still know that there's more people to get vaccinated. And we know that we have these supply chain constraints that I mentioned.

This is-- it's never a good time to fool around with a government shutdown. It's never even conceivably thoughtful to think about defaulting. So this is a uniquely horrible time to be playing politics with government shutdowns and debt ceilings when we have Americans who need the aid that's coming their way from Hurricane Ida. We have Americans who are trying to get back to work. We have Americans who are trying to get their kids back in school and have their childcare situation improve.

All of that is part of the president's investment in this reconciliation plan. So what Congress really needs to do here is heads down, pass the president's agenda, and stop trying to throw up, in the Republican case, roadblocks that lead to government-- that have the potential to shut down the government and threaten the debt ceiling. That is completely counterproductive in the economy that we're talking about right now.

ADAM SHAPIRO: Jared, you just brought up part of what's in the $3.5 trillion outline for reconciliation and the money being spent to give people daycare, so they can get back to work, those kinds of things. If that got through, though, how do you get the voting public to understand this was done by a certain group of people when the people who vote you into office are paying $6.99 for a half gallon of milk? I mean, inflation right now is high. And the low income workers, the average wage increases are falling below the increase in inflation. How do you get those people to understand what's being done on their behalf?

JARED BERNSTEIN: Well, interestingly enough, they understand it much better than a lot of people might think. I was just looking at some polling results for some of the measures that directly cut costs to working families. Prescription drugs, healthcare, childcare, elder care, the cost of education-- these are all in the reconciliation package. And they all cut costs faced by middle Americans. And that's why their approval ratings among people of both parties ranged from about 2/3 to about 80%.

So people understand that they need these kinds of assistance. They particularly need them. And this gets to your question in areas where over the long term-- now I'm not just talking about recently constrained supply chains. Over the long-term, we know that certain services, healthcare, education, housing, have increased faster than average inflation.

That's where the pressure has been for working families. And that's precisely what the president attacks with this plan. There are literally millions of housing units that will get built in this plan. There are lower prescription drug costs, much lower costs to people seeking childcare, universal pre-K, community college. That's precisely targeting those parts of the family budget that have been most strained for working families in recent decades.