President Obama’s chief economist, Christina Romer, says her boss plans to provide a large, sustained economic stimulus in order to avoid mistakes made by the Roosevelt administration during the recession of 1937-1938.
“A small fiscal expansion has only small effects” Romer told a Senate Banking subcommittee, Bloomberg reports.
“The total fiscal expansion in the 1930s was very small indeed,” Romer told senators.
“As a result, it could only have a modest direct impact on the state of the economy.”
“This is a lesson the Obama Administration has taken to heart.”
Romer characterized the $787 billion stimulus package Obama signed in February as “the biggest and boldest countercyclical fiscal action in history.”
Romer stressed the importance of stabilizing the banking industry in tandem with the economy and instituting measures to prevent another crisis.
However, the administration should be asked to provide assurances it won't compromise the integrity of the dollar as it strives to implement its $3.9 trillion budget and simultaneously reduce the deficit, economist Judy Shelton writes in The Wall Street Journal.
“Fiscal accountability is imperative because when government spends more than its citizens can afford, it hollows out the productive capabilities of the nation,” Shelton says.
“It very much matters how much of the projected growth touted in the Obama budget will turn out to be real, and how much is apt to be achieved through money illusion.”
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