I highly recommend that anyone with interest in economics read the full text of the speech (PDF) Christina Romer, outgoing head of the Council of Economic
I highly recommend that anyone with interest in economics read the full text of the speech (PDF) Christina Romer, outgoing head of the Council of Economic Advisers, gave yesterday. It is personal and hardly academic — very easy to get through — and both the best full-throated defense of Obama’s policymaking and the best argument for why the government should do more I’ve seen.
Romer notes that she believes the country is not where it needs to be, and that more tax relief and stimulus would help businesses and families:
[C]ompared with the problems we face, the turnaround has been insufficient. Though the unemployment rate has come down six-tenths of a percentage point, it is still 9.5 percent — an unacceptable level by any metric. Real GDP is growing, but not fast enough to create the hundreds of thousands of jobs each month needed to return employment to its pre-crisis level.
And she regrets not doing more:
The thing I do regret is that there is still so much unfinished business. I would give anything if unemployment really were down to 8 percent or lower. The American people are suffering terribly. Policymakers need to find the will to take the steps needed to finish the job and return the American economy to full health, and no one should be blocking essential actions for partisan reasons. …
In the long run, the transition to a higher-saving, higher-investment, higher-export economy can restore demand, and hence output and employment to normal. But at the moment, as the recent data emphasize, that process is operating painfully slowly.
The pressing question, then, is what can be done to increase demand and bring unemployment down more quickly. Failing to do so would cause millions of workers to suffer unnecessarily. It also runs the risk of making high unemployment permanent as workers’ skills deteriorate with lack of use and their labor force attachment weakens as hope of another job fades.
She notes that the solutions are not easy, but they do exist:
While we would all love to find the inexpensive magic bullet to our economic troubles, the truth is, it almost surely doesn’t exist. The only surefire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less. In my view, we should be moving forward on both fronts. …
Given our long-run fiscal challenges, any additional support should be done in a responsible way. It makes sense to view some temporary support as emergency measures. Most actions, however, should be paid for over time with future spending cuts or appropriate future revenues. But concern about the deficit cannot be an excuse for leaving unemployed workers to suffer. We have tools that would bring unemployment down without worsening our long-run fiscal outlook, if we can only find the will and the wisdom to use them. …
I desperately hope that policymakers on both sides of the aisle will find a way to finish the job of economic recovery. We have already navigated through miles of difficult, uncharted waters. Surely we can go the rest of the way. The American people deserve nothing less.
And it includes some, well, very sweet passages:
On election night almost two years ago, my husband and I did a most uncharacteristic thing. We’d had friends over to watch the returns and had celebrated the Obama victory with a sedate glass of champagne around 8:00 California time. By 8:30 our friends had gone home and we were left wondering what to do with our joy. I finally declared that I needed to be part of a crowd.
So, we hopped in the car and followed the sounds of honking horns into downtown Oakland. We stopped at the first street corner where people were gathering. There we were, two middle-aged economists, dancing in the street with the Oakland teenagers. Like so many that evening, we were celebrating the promise of a new President who shared our values and our dreams for a better America. What we didn’t realize that November evening was just how large an economic nightmare lay before the new President and the American people. It would require actions few would have contemplated that evening just to keep the unemployment rate from rising beyond low double digits. It has been an honor beyond any I could have imagined to be part of the team.
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