The outgoing chair of President Obama’s Council of Economic Advisers acknowledged yesterday that the Democrats’ recovery efforts have been insufficient, and that part of the reason was that the administration underestimated the severity of the economic recession.
“[C]ompared with the problems we face, the turnaround has been insufficient,” said Christina Romer at the National Press Club in a farewell address of sorts. “Though the unemployment rate has come down six-tenths of a percentage point, it is still nine-and-a-half percent — an unacceptable level by any metric.”
“[W]e, like virtually every other forecaster, failed to anticipate just how violent the recession would be in the absence of policy, and the degree to which the usual relationship between GDP and unemployment would break down,” she added.As she leaves the White House, Romer says that the country really needs (but is not likely to get) more fiscal stimulus from Congress.
“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,” Romer insisted. “I desperately hope that policymakers on both sides of the aisle will find a way to finish the job of economic recovery.”
As bad as things are, Romer suggested they could have been worse — that senior members of the Obama administration would have been content with an even smaller stimulus. In the days before Obama took office, she and other members of the economic team “sent a memo to Rahm Emanuel… laying the groundwork for a larger stimulus package.”
“Whereas most analysts and Congressional policymakers had been contemplating a stimulus of $500 billion or less, we urged that it grow substantially because of the severity of the downturn,” she said.