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Romer: Stimulus Was Effective; Economy Could Have Used More Help

September 3, 2010 at 5:56 PM EDT
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The outgoing head of the president's Council of Economic Advisers, Christina Romer, speaks with Judy Woodruff on her last day at the White House about the administration's efforts to revive the economy, why she said the stimulus was a good idea and why the government could have done more earlier in the economic crisis.
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JUDY WOODRUFF: We have more on the jobs report coming up in an interview with White House economic adviser Christina Romer.

Today’s jobs report was the latest evidence just how slowly the U.S. economy is recovering. The chair of the president’s Council of Economic Advisers, Christina Romer, who has helped shape the administration’s approach to the recession and the financial crisis, announced recently she was stepping down.I spoke with her a short time ago on this, her last day at the White House.

Dr. Romer, thank you for talking with us.

CHRISTINA ROMER, chairwoman, Council of Economic Advisers: It’s great to be with you.

JUDY WOODRUFF: Today’s jobs report, there was some good news, more jobs created in the private sector, but not enough to make a real dent in the overall unemployment picture.

What is it going to take to get more jobs created?

CHRISTINA ROMER: So, I think your characterization is exactly right, that we did see the eighth consecutive month of private sector job growth.

And 67,000 is certainly better than most analysts had been anticipating. But it certainly is not the kind of robust job growth that I know the president wants. He talked in the Rose Garden today about how we need to get that number higher, so that the unemployment rate comes down.

You know, what the president has been talking about, and certainly looking at, is a range of targeted measures. No one is talking about a second stimulus. They’re talking about actions that can address some of the particular headwinds that we face. So, we know, for example, that small businesses often tell us they would like to create jobs, if only they could get the credit they need to do some investments and get their business growing.

And so he made a plea today for Congress to pass the small business jobs and tax cut and lending bill. And that is certainly going to be something that’s important, but there are a range of other actions that we think could help to make those numbers — those numbers stronger.

JUDY WOODRUFF: And, in fact, it was reported today the president is considering a temporary payroll tax holiday. He’s looking at other business tax, research and development measures. Do you think those would make a real dent in — in employment?

CHRISTINA ROMER: You know, what we do know is that the — the main source of demand and the main source of job growth is going to have to be the private sector. It’s going to have to be consumers getting their confidence back and buying goods.

It’s going have to be firms doing investment. It’s going have to be exports. But, certainly, the kind of actions that are being discussed — and I should emphasize that no decisions have been made — that those kind of actions can make a material difference. And especially by addressing particularly weak areas, I think they can be very important.

JUDY WOODRUFF: Federal Reserve Board Chairman Ben Bernanke said recently that he thinks the unemployment rate is going to stay well above 7 percent through the end of 2012. Do you share that view?

CHRISTINA ROMER: Well, I — certainly, my — my advice is, I — I think the important thing is to do everything possible to make sure that that doesn’t happen.

That — certainly, what I was talking about in a speech that I gave a couple of days ago is that we do have tools for bringing down the unemployment rate. We can do them in a fiscally responsible way. And I think we should, rather — we certainly shouldn’t be lowering our sights. We should be saying, what are the actions that we could take to make sure that the unemployment rate comes down quickly and returns to normal levels?

JUDY WOODRUFF: In that speech that you gave this week, Dr. Romer, you said, among other things, that you failed to anticipate just how violent this recession would be.

It was a pretty searing self-indictment that you delivered. Are you taking full responsibility for what went wrong with this administration’s forecasts?

CHRISTINA ROMER: You know, I — really, what I was talking about is both my own failures, but, of course, I think one of the things I emphasized is that analysts across the ideological spectrum failed to anticipate how severe the crisis would be.

You know, I think one of the things I tried to describe is, we were in unchartered territory. This is not a typical postwar recession. It was caused by a financial crisis in the biggest economy, the center of the world economy, something we haven’t seen since the Great Depression.

And I certainly was very frank that there were things that I got wrong, that none of us really knew or anticipated. You know, what I do feel good about is, one, that we have learned, that we certainly — you know, we gave it our best shot. We very much told the president that this was a serious crisis, we should do all that we could.

And I think we did get as big a Recovery Act as we could have gotten through Congress. But, you know, what we have done ever since then — we didn’t just stop there. It’s been a constant process of thinking about, what more do we do for the financial system? What are the evolving steps? And I think that is really the test of policy.

JUDY WOODRUFF: Well, knowing what you know now, what would you have done differently?

CHRISTINA ROMER: Well, you know, knowing what you know now is, you say, the unemployment rate is 9.6 now, two years almost into the crisis, that, of course, what you would do is be more aggressive probably on every front, that you would — you would be working even harder on the financial system, on the Recovery Act, on the housing program, on, you know, the whole range of actions that we have taken.

You know, we obviously, just judging from where we are now, of course, none of us wanted to be here. So, we certainly would, I think, have been more aggressive along all dimensions.

JUDY WOODRUFF: Bigger stimulus? It was reported that you favored a much bigger stimulus than what the White House ultimately pushed.

CHRISTINA ROMER: No, I think the — the White House ultimately pushed as big a stimulus as we could get through Congress.

And, you know, I think it’s important to keep in mind just how big the American Recovery and Reinvestment Act was. It was the biggest fiscal stimulus we have ever done in this country. It has made a tremendous difference. And I am very proud that that action was taken.

I think it’s a big part of why we didn’t sink into a second Great Depression. Where we are is not good, but it would have been so much worse without the policies that were taken.

JUDY WOODRUFF: The White House does seem to be caught in the middle of this debate. On the one hand, you have critics saying too much was done for Wall Street. On the other hand, you have the critics saying too big a hand — government hand in the economy.

What does it say about the administration policy, the way you have sold that policy, that you have these two raging sets of criticisms coming at you?

CHRISTINA ROMER: I mean, maybe what it says is, we ended up in the sweet spot, right? If people — if there is a group that says did you too much and a group that says you did too little, maybe we ended up with what was possible. And I think that is important.

I think, you know, what — what all of us need to think about is, where are we now? Where do we go from here? And I think, with the unemployment rate where it is, with job growth — again, it is incredibly important that we are now growing again. The change from where we are when we came into office is dramatic.

But we have to say, how do we get the kind of job growth that will really bring that unemployment rate down quickly? That has to be our focus. And we can’t let the American people down.

JUDY WOODRUFF: When you said a moment ago that you would have been — knowing with what you know today, you would have been more aggressive, in what way?

CHRISTINA ROMER: Well, I think, you know, what I was trying to give is a sense, you know, we took a wide range of policy actions, everything from the stress tests and trying to recapitalize the banking system, to the Recovery Act, to a housing program to prevent foreclosures, to, you know, the cash for clunkers program eventually.

You know, so, I think what you would say is, you would think about each one of those. And in what way could it have been more aggressive? What more could one have done to try to, you know, get even more aid to the economy?

What we now, I think, understand is just the shocks that hit us in the fall of 2008 were enormous. And I think they have affected the economy in a way that, again, very few analysts at the time anticipated.

And we all have to learn and — and think for the next time of — of — hopefully, we will never have a next time, but to learn from this of what you could have done better.

JUDY WOODRUFF: And, finally, words of advice for your successor?

CHRISTINA ROMER: I think it’s — it’s probably to keep learning, that — not assume that — that we know everything, and to, actually, you look at all the information, you be as aggressive as you can in processing that information, but to keep a certain humility as we analyze it, and to make sure that we’re evaluating all the new information and doing the best that we can for the American people.

JUDY WOODRUFF: Christina Romer, the chairman of the president’s Council of Economic Advisers, on your last day at the White House, thank you very much for talking with us.

CHRISTINA ROMER: It’s wonderful to be with you one last time.