It would be a mistake for the U.S. to rapidly wind down fiscal stimulus measures to bring down the deficit, one of President Barack Obama's top advisers said Thursday.
Christina Romer, head of the White House Council of Economic Advisers, advocated further measures such as fiscal relief for state and local governments and extension of emergency benefits for the long-term unemployed.
"It would be wrong to tighten fiscal policy immediately, as that would nip the nascent economic recovery in the bud," Romer said at the annual meeting of the Organization for Economic Cooperation and Development, a 31-nation watchdog that includes the world's richest economies.
Romer said that "nothing would be more damaging than a protracted recession that brought about permanent high unemployment."
She said that "The American economy is clearly improving, but unemployment is still painfully high."
As the U.S. fiscal stimulus plan winds down next year, "further targeted fiscal actions'" are needed for the U.S. to add oxygen to the "nascent economic recovery," Romer said.
Romer said there is a risk that current high cyclical unemployment in the U.S. could become permanent structural unemployment unless measures are taken to increase the pace of the U.S. economy's recovery.
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