Economic Adviser Defends Stimulus Plan

By Courtney Ann Jackson-Talk Radio News Service

The economy is far from healthy according to Christina Romer Council of Economic Advisers Chair, but the adviser is still optimistic over the effectiveness of the American Recovery and Reinvestment Act.

“We are urging serious medicine for serious economic problems. If we can accomplish these important changes we will not only come through the current crisis, we will emerge even stronger and healthier than before.” said Romer Thursday at an Economic Club of Washington event.

The Recovery Act provided $787 billion of tax cuts and government spending. Romer said that makes it “the boldest counter cyclical fiscal stimulus in American history.” She noted that the economy was deteriorating rapidly when President Obama announced his economic team just before Thanksgiving.

While the plan has garnered a substantial amount of controversy, Romer pointed to the use of fiscal stimulus to help weak economies by past presidents including Dwight Eisenhower, Gerald Ford, and George W. Bush.

“In the past few months, some have tried to portray fiscal stimulus as an exotic tool with a questionable pedigree,” said Romer. “To use a medical analogy, fiscal stimulus is a well-tested antibiotic, not some new-fangled gene therapy.”

She said the effects of the Recovery will increase over time and they expect the fiscal stimulus to be “roughly $100 billion in each of the next five quarters.” Initially the stimulus was focused more heavily toward tax changes and state fiscal relief, but there will be more direct government investments as it continues.

“The President aimed for a package that was large and got good employment bang for the fiscal buck,” said Romer.

New Study On Healthcare Reform Shows Economic Advantages

A new White House study shows that the economic advantages of reforming healthcare could be beneficial for the majority of Americans. According to Dr. Christina Romer, the chair of the Council for Economic Advisors, expanding coverage for all Americans would not only help with controlling healthcare costs but it would have an enormous effect on lowering the deficit.

“Doing healthcare reform well, is incredibly important for the economy...this is a realistic goal, albeit a challenging one,” said Romer.

By having reform more Americans will be able to see their physician on a regular basis, Romer said. This would improve life expectancy and keep people working which will presumably have a strong impact on the economy.

The fifty-one page report focuses on slowing the growth rate of costs, primarily due to changing provider incentives, health information technology and providing the incentives for consumers so that they can make better choices. There were no short term effects of healthcare reform discussed.

The report can be found at the White House website.

Official: The Great Depression is history

Bank runs and soup lines that once stretched around the neighborhood during the Great Depression of the 1930s remain atypical today, even during the worst economic crisis of the last 70 years. “The current economic recession is unquestionably severe, it pales in comparison with what our parents and grandparents experienced in the 1930s,” said Christina D. Romer, the Chair of the President’s Council of Economic Advisors. Even at the worst point in the current recession, unemployment has only reached 8.1 percent, which stands in stark contrast to the nearly 25 percent seen during the 1930s. Therefore, Romer believes, that no matter how severe the economic recession is presently, America is no where close to entering another depression.


Romer attributed the cause of the current recession to modern innovations such as derivatives, which led to a direct relationship between asset prices and severe stress in financial institutions. “A reliance on such insecure and volatile assets caused the failure of financial institutions, which led a drying up of credit, which America so desperately needs,” said Romer.


Additionally, Romer complimented the Obama administration for passing the American Recovery and Reinvestment Act, and called it the “biggest and boldest countercyclical fiscal action in history.” Also, Romer noted the lack of bank runs and attributed this to the Federal Deposit Insurance Company, which was created as part of the New Deal.


Remaining optimistic, Romer stated that due to the quick and well-conceived response of the Obama Administration, “there is every reason to believe that we will weather this trial and come through stronger than before.” Senator Sherrod Brown (D-Ohio) echoed such beliefs, when he exclaimed that “the United States recovered from the Great Depression and we will recover from today’s recession.”