White House economist says recovery should continue despite oil prices, European crisis
Wednesday, February 23, 2011; 11:00 PM
A new financial crisis in Europe or a protracted increase in fuel prices as a result of oil disruptions in the Middle East are among the most serious threats to the burgeoning economic recovery, a senior White House economic policymaker said Wednesday.
Austan D. Goolsbee, chairman of the Council of Economic Advisers, said that overall he expects the economy to continue to recover after the worst recession since the 1930s.
But he added that his "greatest area of concern" is what happened last year, when the economy appeared to be improving but faded after "we ran into financial problems in Europe."
He added that the White House is also monitoring the potential economic impact of the upheaval in the Middle East, which is driving up the cost of oil and could lead to much higher fuel costs domestically. Oil touched $100 a barrel Wednesday before closing at $98.10.
Finally, Goolsbee acknowledged that the depth of states' massive funding gaps - the subject of fiery debates in Wisconsin, Ohio and elsewhere - "has been a negative for overall employment," as strapped governors are unable to hire new workers and in some cases must fire them.
Goolsbee spoke in conjunction with the release of the annual Economic Report of the President, which found that the economy was recovering and that the government's role has shifted from rescue to stimulating growth and hiring.
But the prospects are dim for using federal dollars to stimulate the economy, given the Republican victories in the fall congressional elections and popular concern about the federal deficit.
Obama has been touting a competitiveness agenda, emphasizing investments in education, infrastructure and innovation to boost employment. In particular, he is focusing on U.S. companies' more aggressively competing with foreign counterparts, hoping to accelerate economic growth by exporting more products abroad.
This week, Obama brought his entire economic team to Cleveland to discuss efforts to revitalize small businesses, which have struggled to obtain capital from banks to hire and spend more after the recession.
In his remarks, Goolsbee said the government is trying to lay the foundation of steady economic growth for years to come.
He said his research showed that the "the boom of the 2000s was an outlier . . . and an unsustainable outlier" not to be repeated, as it was driven by excessive consumer spending and residential real estate.
In other news, Obama nominated a new member of the Council of Economic Advisers, Carl Shapiro, currently the top economist in the antitrust division of the Department of Justice. He is slated to replace Cecilia Rouse, who is leaving the council to return to Princeton University as a professor.