Money Well Spent? by Michael Grabell

Author:Michael Grabell
Language: eng
Format: epub
Publisher: PublicAffairs
Published: 2012-01-03T05:00:00+00:00

By now, Christina Romer, the head of the Council of Economic Advisers, had come to terms with the fact that the stimulus was smaller than her models suggested was necessary. At $800 billion, they had gone as high as was politically practical. She had accepted that her initial projections of a stimulus keeping unemployment under 8 percent were optimistic. After clashing heatedly with Larry Summers, she had demanded and earned her place at the table and had gained confidence in asserting her viewpoints.

“I had to throw an elbow or two to make sure I wasn’t going to be marginalized,” she said. “Anyone who knows Larry knows that he can be frustrating, cocky, and incredibly opinionated. He is also brilliant and you can persuade him with good evidence.”

None of her early missteps left Romer with any serious regrets. But the period when the trajectory of the economy clearly showed that more needed to be done, yet the White House failed to act, has troubled her most since leaving Washington.

“My biggest regret was that we didn’t do more,” she said. “As good as the Recovery Act was, we were going to need more. My regret is that in that fall of 2009, we didn’t get a second chunk of some important stimulus actions. The economy needed it and I think that would have made a difference.”

The economic team was now meeting roughly twice a week to come up with a plan. Yes, unemployment was 10 percent. But the deficit was expected to be $1.4 trillion this year and $9 trillion over the next decade. How could they stimulate the job market while tackling the deficit? Should they do a jobs tax credit? More aid to struggling states? A discretionary spending freeze? Infrastructure was popular and bipartisan, but the Recovery Act showed that even in the best of possible circumstances, it was painstakingly slow. If they pushed more jobs measures, should they do them incrementally? Or all at once, which could lead to assertions that the administration was trying to ram through a second stimulus, which by now had become Republican shorthand for “tax and spend”?

Watching the economy continue to deteriorate, Romer started agitating for more action. A scholar of the Depression, she was worried about repeating the errors of 1937, when Roosevelt pulled back, sending a recovery back into a recession. To simplify her argument, she used the metaphor of a patient who despite beginning to take medicine saw his symptoms get worse. “Do you decide that the medicine is useless? Do you conclude the antibiotic caused the infection to get worse?” she asked in one speech. “Surely not. You probably conclude that the illness was more serious than you and the doctor thought and are very glad you saw the doctor and started taking the medicine when you did.”

“It is as if,” she continued, “when you went to the doctor for that strep throat, he discovered you had high blood pressure as well. The antibiotic was great for the infection, but he prescribed other medicine, a better diet, and a good dose of exercise for the blood pressure.

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