Thursday
Aug062009
Economic Adviser Defends Stimulus Plan
Thursday, August 6, 2009 at 2:30PM
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.
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.
Economist Disappointed With Stimulus Plan
The recession may be coming to a close, but according to Barry Bosworth, the Senior Fellow in the Brooking Institution's Economic Studies Program, the stimulus plan may not be responsible. In Bosworth's judgement, the $787 billion measure to jumpstart the U.S. economy has been a disappointment.
"The problem with the stimulus program has been that it has taken too long to get it going. The crisis hit in mid September [of 2008], Congress never acted until the Spring, and then it takes a couple of months for the government agencies to get it set up," said Bosworth during a panel discussion at the Brookings Institute Thursday.
However, Bosworth added, the stimulus plan can still prove useful.
"Most of the money is going to be spent in the future. It is going to be a big plus in driving us out of the recession," Bosworth said. "Don't give up on it, but what's really disappointing is that recession after recession the same thing happens: we can not get the political process to act fast enough."
Bosworth criticized provisions of the stimulus that were not intended for immediate economic relief, claiming that individual interest groups had capitalized on the crisis to push unrelated agendas.
Arlington County (Va.) Board member Christopher Zimmerman, who joined Bosworth on the panel, disagreed with Bosworth's assertion. Zimmerman responded that while not all of the aspects of the stimulus plan provided an instant boost to the economy, many will provide long term benefits.
"All that stuff that's being done that may not be great for stimulus are things that we actually need in this country to generate the economy that will take care of things like deficits and other expenditures we need to make in the future," Zimmerman said.