Vice President's Chief Economist Defends Stimulus

This is a rush transcript from "Your World With Neil Cavuto," February 13, 2009. This copy may not be in its final form and may be updated.

ALEXIS GLICK, GUEST HOST: All right, joining me now is Jared Bernstein, Vice President Biden's chief economist.

Good to see you.

JARED BERNSTEIN, CHIEF ECONOMIST TO VICE PRESIDENT JOE BIDEN: Thank you. Nice to be here.

GLICK: All right.

So, I assume that you are feeling pretty good. The House voted. It's done. The Senate is expected to vote within the next hour. But, wow, did things got testy. Where do we head from here?

BERNSTEIN: Well, I think I — we feel good as helping to craft and devise the plan with the Congress, often with partisans from both sides of the aisle.

• Video: Watch Alexis Glick's interview

But, you know, what, really, I am thinking about today are the American people and the kinds of economic challenges and difficulties they are facing right now, the three million to four million jobs that we believe this plan will create or save over the next couple of years.

And the other number that is rolling around our heads is the number of jobs we have lost over the past three months alone, 1.8 million jobs. This plan, coming as quickly as it has, given that we only got here a few weeks ago, is exactly the medicine that we need to be getting into the system. And we are very, very excited about getting to work on implementing this recovery package.

GLICK: OK. So, tell me, you know, instant gratification, how quickly can we create those jobs, if we're able to start spending immediately?

BERNSTEIN: You know, I am reminded of a story that happened with Vice President Biden the other day.

He was out in Pennsylvania. And the vice president and the president were getting out, actually talking to people who have been really feeling the brunt of this economic downturn. He was out there looking at a bridge that was very much in need of repair.

And he started talking to one of the engineers about the bridge, and asked that question. How quickly could this happen? And the guy said, I have got the plans in his car.

(LAUGHTER)

BERNSTEIN: Now, that does not mean — that does not mean, you know, concrete is going to start, you know, getting into the ground tomorrow.

But what it does mean is that, as we crafted this plan, and the folks at the NEC, the OMB worked very hard on this issue. It has actually been under-reported. As we crafted this plan, we really did focus on shovel-ready infrastructure. We really did focus on getting the tax cuts out the door quickly to the 95 percent of working families to the unemployed people.

So — so — so, quickly is the key word. I can't tell you a day in which checks roll out the door, but a lot sooner than later, thanks to this kind of planning.

GLICK: All right.

Let me ask you a question that a lot of people are very worried about. The vast majority of jobs that are created in this country come out of small businesses. My husband happens to be a small-business owner. He told me the other day — he said: "Alexis, I have spoken to multiple insurance providers to see what the insurance premiums would be for this year. I got quotes from three or four people. The prices were up 20 percent, 30 percent. Lines of credit are nearly impossible to come by."

What are we doing right now to address small businesses, which are the biggest creator of jobs in this country?

BERNSTEIN: I think that's a great point.

And I have got a couple of leverage points I would like to point out here. First of all, remember, some of the significant share — I think it's ended up being around a third of this package — is tax cuts that get into the system awfully quickly.

And one of the things that drives business hiring and business production are people coming in the front door. And once we start boosting paychecks through the "Making Work Pay" tax credits, for example, once we start helping folks offset some of their budget constraints with helps on unemployment insurance and food stamps, those folks are going to spend more.

And we actually looked at this and found considerable job growth in the retail sector because of this. Now, the other piece there, of course, is the financial stability package. And that is critical to getting credit markets unclogged.

GLICK: OK.

BERNSTEIN: That's the other piece of the puzzle, of course.

GLICK: One last point here, though.

In the two longest recessions post-World War II, the savings rate in this country went to double digits. Are you not concerned that, at a period like this, where the savings rate is still maybe only about 3.5 percent in the last reading, that Americans will save the money or pay down debt? And might that not be a good thing for us?

BERNSTEIN: You know, it is this interesting thing.

Keynes called it the paradox of thrift. There are lots of times when you absolutely want households to save. But, in an economy that is 70 percent consumption, this is a time when we need them to spend as well.

But the fact is that people are so strapped, and especially folks in the middle- and low-income parts of the scale, who, by the way, are the ones we targeted with these tax cuts, it is very likely that they're going to go out and spend that money on things that are what we call inelastically demanded. That is stuff that they have got to have regardless.

And, so, we are quite confident that a good share of this money will be spent out in that manner.

GLICK: All right, Jared Bernstein, with the White House, Vice President Joe Biden's chief economist, thank you very much for taking the time to join us this afternoon.

BERNSTEIN: My pleasure.

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