Obama Adviser Romer: More Stimulus Needed

Wednesday, 01 Sep 2010 02:57 PM

 

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WASHINGTON – Departing White House economist Christina Romer said on Wednesday the United States must find the political will for more action to boost the economy and not let high deficits obstruct job creation.

"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," Romer said in excerpts from a speech she was to deliver at the National Press Club.

The remarks come as a recent raft of data suggested the U.S. economy has begun to falter after signs from the middle of last year seemed to show it was on the mend. Romer spelled out the scale of the problem facing the country.

"The United States still faces a substantial shortfall of aggregate demand. GDP by most estimates is still about 6 percent below trend," she told the National Press Club.

The reports have put pressure on President Barack Obama's Democrats ahead of November 2 elections that could shift the balance of power in the U.S. Congress.

Obama said this week that he and his advisers were discussing ideas to help boost the recovery but his spokesman said these would likely be targeted measures. Romer said there was no time to waste.

"The key is that we need to take action and we need to do it quickly," she said.

There has been a debate at the White House for several months over whether to focus on further steps to stimulate the economy or deficit reduction. Romer has been among those arguing for more stimulus.

"Given our long-run fiscal challenges, any additional support should be done in a responsible way ... But concern about the deficit cannot be an excuse for leaving unemployed workers to suffer," Romer said in the speech excerpts.

REPUBLICANS CRITICIZE

The $814 billion economic stimulus package that Obama pushed through Congress last year has been heavily criticized by Republicans.

They contend it exacerbated the budget deficit -- which is estimated to hit $1.5 trillion this year -- without bringing down the 9.5 percent unemployment rate.

Romer said there was no "magic bullet" to boost growth and hiring but any solution must put money in people's pockets.

"The only sure-fire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less," she said. "In my view, we should be moving forward on both fronts."

Obama has appointed a fiscal commission to study the challenges facing the country and asked it to report back by the end of the year. Its recommendations are expected to include a mixture of tax increases and spending cuts.

Romer launched a vigorous defense of the stimulus in her speech, saying the recession caused by the 2007-2009 financial crisis was "fundamentally different from other postwar recessions" and required dramatic action.

"Because the final bill was a mixture of hundreds of measures, many of which don't come with Recovery Act signs or easily identifiable links to the act, it (has) been hard for people to see what the act has done," she said.

"But it is precisely because it works through existing programs and spreads funds widely that it could get out quickly and reap large benefits."

Romer announced earlier this month that she would leave her job as chairwoman of the White House Council of Economic Advisers on September 3 to return to her job as a professor at the University of California, Berkeley.

Experts say a Labor Department report due on Friday could show an uptick in the U.S. jobless rate in August to 9.6 percent from 9.5 percent in July, which would add to Obama's dilemma ahead of the November congressional elections.

© 2014 Thomson/Reuters. All rights reserved.

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