Christina Romer

Economics Professor, University of California Berkeley (since September 2010)

(Bill O'Leary/TWP)

Why She Matters

Professor Romer headed the White House Council of Economic Advisers during one of the worst economic crises ever to hit the United States. After the country weathered the worst of the storm, she returned to teaching at the University of California-Berkeley.

Romer is considered one of the premiere Great Depression academics. She and her husband, David Romer, form a powerful economic duo. The two California-Berkeley professors have published a variety of papers together, which at times run counter on tax policy to President Obama's own opinions. The pair have also questioned the Federal Reserve's ability to soothe recessions in the post-World War II economy by controlling monetary policy through such actions as lowering interest rates.

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Background

At a Glance

Career History: Chair of the Council of Economic Advisers (January 2009-September 2010); Professor, University of California Berkeley (since 1988); Asst. Professor, Princeton University (1985 to 1988)
Birthday: Dec. 25, 1958
Hometown: Alton, Ill.
Alma Mater: College of William and Mary, BA, 1981; Massachusetts Institute of Technology, Ph.D. (economics), 1985

Spouse: David Romer
Office: 549 Evans Hall #3880 Berkeley, Calif. 94720-3880; 510-642-4317
Web site

Path to Power

Romer made a quick splash on the academic scene as an assistant professor at Princeton University in 1985. Shortly after earning a Ph.D. in economics at the Massachusetts Institute of Technology, the 26-year-old Romer challenged well-established pre-World War II gross national product (GNP) figures.

Simon Kuznets, who won a Nobel Prize for his work, had calculated GNP figures from the late 1800s to the 1930s. His findings were considered golden in economic circles and helped support the belief that government economic policy had shortened U.S. recessions while lengthening expansions. But Romer asked whether the numbers accurately depicted the length of the pre-World War II recessionary periods and questioned whether public policy actually impacts economic forces.

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''The Keynesians and macro-economists point to stability as evidence that government policy matters,'' Romer said. ''But if that's true, we have to ask why the post-war economy hasn't been more stable. Maybe policy was poorly applied, or we've had greater shocks, or maybe there's been a change in price flexibility."

Despite skepticism, Romer would continue to argue the notion that pre-World War II recessions were longer than post-war downturns. She wrote in the American Economic Review in 1986, "indeed, it does appear that the relative stabilization of the postwar economy is a figment of the data. . . . [This work suggests] that the severity of economic fluctuations on both sides of the Great Depression are roughly equal."

University of California-Berkeley

Romer's challenges to economic canon intensified after she moved to the University of California-Berkeley in 1988. There, she studied the length of recessions and boom periods from 1887 to 1917. She recalculated economic data based on updated criteria and developed new lengths of contraction and expansion periods during that 30-year period. She found that post-World War II recessions and expansions lasted longer than those that occurred before World War I and that economic cycles occurred less frequently after World War I.

"'There is evidence of some stabilization over time,' Romer concludes, 'but much less than the traditional numbers show.'"

That doesn't mean Romer believes the government should take a laissez-faire approach to markets. Her studies show that downturns are exacerbated when something in fiscal or monetary policy goes wrong. The misstep could occur from the president or Congress failing to take action at the right time, or the Federal Reserve receiving incorrect data before deciding to leave interest rates unchanged. In her 1992 paper, Romer quoted Milton Friedman's famous line: "policy itself is often destabilizing," to explain why economic policy often fails to steady a weak economy.

In 1994, the husband-and-wife team released a study concluding that the economy responds when the Federal Reserve acts, for example, by lowering interest rates. They also noted, however, that fiscal policy -- stimulus packages for example -- had not helped lift the U.S. economy out of past recessions.

In 1997, Christina Romer was mentioned as a possible nominee for the Federal Reserve Board of Governors. She took herself out of the running for personal reasons, according to a source close to the Clinton administration.

The Issues

The CEA is responsible for studying economic indicators and the economic impact of public policy before issuing recommendations tothe president. The council's significance depends on the persuasiveness of its head.

Romer is "a very highly regarded economist and a first-rate academic," said Gerald P. O'Driscoll Jr., a senior fellow at the Cato Institute and former vice president at the Federal Reserve Bank of Dallas. ""With big guns and players like Summers and GeithnerShe'll have to learn to get sharp elbows."

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Some have suggested that Summers and Romer might clash in the White House. "On nine out of ten issues they would independently come to the same conclusion," said Gregory Mankiw, former CEA chairman under President George W. Bush and best man at the Romers' wedding. "And on the other, after they talked it out, they would come to same conclusion." The two have known each other since Summers taught a class in which Romer enrolled as a student at M.I.T.

Taxes

Tax policy was a contentious issue during the 2008 presidential campaign as Obama's proposals reduced taxes for 95 percent of Americans making less than $250,000 a year. It would have increased taxes for those making more.

But in November 2008, Christine and David Romer published studies that had Republicans smiling. In one paper entitled, "Do Tax Cuts Starve the Beast?" they wrote: "The results provide no support for the hypothesis that tax cuts restrain government spending; indeed, the point estimates suggest that tax cuts may increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases."

House Republican leader John Boehner (R-Ohio) used the Romers' study to publicly urge Obama to fight economic instability by reducing both government spending and taxes.

The Romers released another study in November 2008 that showed a tax increase equal to one percent of gross domestic product reduces output by 3 percent over the next three years. Republicans have used this study to argue against Obama's ambitions to change the tax code.

The Stimulus Plan

Romer has said that fiscal policy, such as government stimulus packages, doesn't help economies recover from recessions. But her views have changed as the Fed has moved the benchmark interest rate closer and closer to zero, leaving it with fewer options to help stimulate the economy. The February 2009 $787 economic stimulus package is a main plank of Obama's economic recovery program.

"She may well agree that's needed in the current setting, but certainly her work on the Great Depression does not reflect that," said Robert Gordon, an economics professor at Northwestern University.

Health-Care Reform

Romer threw her two cents in on health care reform with the June 2009 release of the CEA report, "The Economic Case for Health Care Reform."

Romer told Politico.com that the report was inspired by White House Office of Health Reform head Nancy-Ann DeParle, who said, Romer recalled, "You know, we're about to start something . . . very big, very hard. We ought to know what it's going to do to the economy."

"I am now the most passionate advocate for health-care reform," Romer continued," probably in the entire White House.

The Network

Romer has worked with or studied under many top economists. As a Ph.D. student at M.I.T, she took a class taught by Summers. She also studied under and worked with Nobel Prize winner Daniel McFadden. Romer worked three years at Princeton, where Fed chairman Ben Bernanke taught economics.

Romer is married to David Romer, another well-regarded professor at Berkeley who is currently being wooed by the International Monetary Fund as a top aide to the chief economist, Olivier Blanchard.

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Campaign Contributions

Romer has donated $6,250 since 1999, including $4,250 to President Barack Obama in 2007 to 2008. She also gave $1,000 to Sen. John Kerry (D-Mass.) in 2004 during his presidential campaign.

Additional Resources

Evans, Kelly and Cronin, Brenda, 'Romer Joins a Crowd of Strong Voices as Chair of Council of Economic Advisers,' The Wall Street Journal, Nov. 25, 2008
Marshall, Jonathan, 'Study Shows Experts Ineffective in Stabilizing the Economy,' The San Francisco Chronicle, Nov. 16, 1992
Abate, Tom, 'UC's Romer a popular Obama pick; Woman named to head economic council has wide approval from economists,' The San Francisco Chronicle, Nov. 25, 2008
Francis, David R. 'The Fed Stands Alone As Recession Rescuer,' The Christian Science Monitor, July 15, 1994
"The Economic Case for Health Care Reform," Executive Office of the President, Council of Economic Advisers, June 2, 2009
Lerer, Lisa, 'Who is Christina Romer?,' Politico, Nov. 28, 2008
Center for Responsive Politics
Gordon, Meryl, 'What's New in Economic History; The Myth of the Tamed Business Cycle,' The New York Times, Sept. 29, 1985
Allen, Mike, and Chris Frates and Carrie Budoff Brown, "White House Says health Reform Would Boost family of Four by $10,000 Annually by 2030-Obama tries to get Seante Dems on His Page," PoliticoPulse, June 2, 2009
Davis, Bob, 'IMF Recruiting David Romer To Handle Economic Issues,' Dow Jones News Service via WSJ, Dec. 5, 2008
Evans, Kelly, 'U.S. News: Obama Gets Depression Scholar in Romer,' The Wall Street Journal, Nov. 26, 2008
Feller, Ben, The Washington Post, "Romer Says White House Departure Long Planned," August 6, 2010
Miller, Rich, 'College dean among those mulled for Fed - sources,' Reuters News, March 13, 1997
Romer, Christina and Romer, David, 'Do Tax Cuts Starve the Beast? The Effect of Tax Changes on Government Spending,' July 2008