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Departing Obama adviser urges more stimulus

By Lori Montgomery
Washington Post staff writer
Thursday, September 2, 2010; A15

Departing White House chief economist Christina Romer urged Congress on Wednesday to "finish the job of economic recovery" by pumping more cash into the economy through additional tax cuts for businesses and middle-class families, as well as fresh investments in the nation's infrastructure.

Her remarks at the National Press Club came as President Obama's economic team is working on additional measures to combat an unemployment rate stuck at 9.5 percent. Any new package is likely to include more tax breaks for business - possibly including another temporary reduction in payroll taxes for new hires - as well as more spending on roads, bridges and other transportation projects, according to people with knowledge of the talks.

But administration officials said the talks are very preliminary, and they acknowledged that any new proposal is likely to be relatively small.

Romer did not say how much more she thinks Congress should spend. But in a farewell speech before returning to academia, she said election-year anxiety about the deficit that has blocked much of the president's jobs agenda this year "cannot be an excuse for leaving unemployed workers to suffer."

"We have tools that would bring unemployment down without worsening our long-run fiscal outlook if we can only find the will and the wisdom to use them," she said.

An array of economic data indicate that the recovery is rapidly deteriorating despite last year's massive economic stimulus package, now estimated to cost $814 billion. The latest jobs report, due out Friday, is expected to extend that streak by showing the jobless rate inching up to 9.6 percent in August as the private sector created only about 42,000 new jobs.

It is unclear whether any additional stimulus package could win approval from lawmakers locked in a bitter campaign for control of the House and Senate in the November midterm elections. Senior Democratic aides in both chambers said the White House has yet to discuss details with legislative leaders.

Republicans, who are opposed to additional spending, argue that Democrats have run up record budget deficits without improving the economy. Those charges have left even some Democrats reluctant to support new measures. The odds for more spending are particularly long in the Senate, where any proposal would need at least one Republican vote to overcome a GOP filibuster.

"Republicans have tried to block every other economic or jobs initiative we've tried to take to the floor. There's no reason to expect that will change now, despite the obvious need," said Jim Manley, spokesman for Senate Majority Leader Harry M. Reid (D-Nev.).

Manley nonetheless predicted that the Senate will muster the 60 votes needed to advance the president's latest priority - a small-business package that would cut taxes and create a $30 billion loan fund to improve access to credit. The Senate is scheduled to resume debate on that measure when lawmakers return to Washington on Sept. 13.

Romer, a macroeconomist and expert on the Great Depression, has made no secret of her opinion that more federal spending is needed to prevent high unemployment from becoming a permanent condition. Although acknowledging concerns about rising deficits, she has persistently pressed for more spending than most lawmakers - and some administration officials - have been willing to stomach.

Before the Press Club, Romer delivered a full-throated defense of last year's stimulus package - a mix of tax cuts and spending that has been widely praised by economists but inspires deep skepticism among voters - saying it has helped make the difference "between a second Great Depression and a slow but genuine recovery."

Noting that the economy has encountered headwinds from the European debt crisis, among other sources, Romer also blamed Congress for the faltering recovery, suggesting that lawmakers have failed to summon the political courage to take unpopular actions in an election year.

Romer said Congress has approved "substantially less" than the $266 billion in emergency spending Obama requested in his 2011 budget. "As a result," she said, "the economy has not had all the additional support that it needed."

Romer, who announced last month that she was stepping down from her post to return to teaching at the University of California at Berkeley, also offered personal reflections on Obama's election and her role in responding to the worst economic crisis since World War II.

Confronting the crisis, she said, was "scary as hell." And she reflected on the difference between the Great Recession and the downturn of the early 1980s, when her father was "sacked" from his job at a chemical plant. Although that recession was terrible, Romer said, it was at least a downturn that economists could understand, having been driven by central bankers trying to rein in inflation. Her father, laid off in the spring, was back to work by fall, and by Christmas, "our family's economic health was almost fully restored," Romer said.

What America faces now, she said, "is not my father's recession. . . . Precisely what has made it so terrifying and so difficult to cure is that we have been in largely uncharted territory."

The White House has yet to name Romer's replacement to the three-member Council of Economic Advisers. The posts are subject to Senate confirmation.

montgomeryl@washpost.com

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