This article first appeared in the St. Louis Beacon, April 13, 2011 - The economic debate in Washington today concentrates too much on possible long-term harm at the expense of dollars that could have a real impact now in supporting the recovering economy, according to Christina Romer, former head of President Barack Obama's Council of Economic Advisers.
At a panel discussion at Washington University Tuesday, Romer and four faculty members discussed the causes, cures and questions surrounding the nation's stubborn unemployment situation.
Calling herself an empiricist who says the administration's stimulus program deserves more credit than it gets for preventing a bad situation from becoming much worse, Romer said discussions about a fiscal shot in the arm versus the possible long-term harm from deficits are missing the point about what the economy needs right now.
"Congress is on exactly the wrong trajectory," Romer said, "concentrating on cutting current spending, which is supporting the current recovery, and doing nothing about long-range spending."
Later in her talk, she added:
"Some say that in our desperate long-term fiscal situation, we can't afford to spend any more on anything. I think this is desperately wrong."
Elaborating on a column she had in Sunday's New York Times, Romer said there is "simply no issue that matters more to people's day-to-day lives or to the long-run health of the economy" than unemployment.
After "a wretched 2 1/2 years," she added, the job picture is beginning to brighten, but not quickly enough for everyone -- certainly not for the 13.5 million Americans who are still looking for work and especially not for the 6.1 million who have been without a job for more than six months.
But she disagrees with those who say the high level of unemployment is a new normal that the United States is going to have to get used to. Instead, she said, it is the drawn-out version of "the old cyclical," with the housing bust and the financial crisis contributing to long-lasting declines that are being extended by a general lack of confidence in the economy.
Because of that prolonged gloom, Romer noted, plus the recent added shock of rising gasoline prices, people won't spend. If people won't buy, companies won't expand, and if companies won't expand, they won't hire.
The problem, she said, "is that this is not a jobless recovery but a growthless one."
Later, she added, "Unemployment is a tragedy that should not be tolerated a minute longer."
Even the good numbers from last month have to be tempered with a harsh dose of reality, Romer said.
"I don't rejoice at the news that we added 216,000 jobs in March," Romer said. "About 100,000 of that is needed every month just to keep up with the growth in the labor force."
And when some companies are beginning to advertise that the only people who should apply for their job openings are those who are currently working, the stigma attached to prolonged unemployment gets worse.
How can the economy break the cycle and raise the demand for goods that will lead to more hiring? The private sector isn't likely to do it alone, Romer said, and she does not agree with those who say fiscal austerity will lead to economic expansion.
When the economy began to deterioriate rapidly at the end of 2008 and the beginning of the Obama administration, she said she was "fiscal expansion's strongest proponent. It was our best shot at stopping the freefall." Whether the $787 billion package was big enough is an open question, she added, but she was pretty sure nothing any larger would have won approval in Congress.
After her talk, she said in an interview that the government can definitely play a role to help bolster confidence.
"What people call a lack of confidence is a predictable response to what we've just been through, the worst economic conditions in 70 years," Romer said.
"By taking action, the government can be helpful. By doing things more aggressively to put people back to work, that will increase confidence."
The ultimate answer, she told her audience, is spending on things like infrastructure, innovation and education, to make sure that we have the well-trained workforce needed to help turn ideas into productive businesses. Noting that most jobs today need more education than the manufacturing jobs of the past, she said that training can go a long way toward getting people back to work.
"It's probably unrealistic to turn a carpenter into a nurse," Romer said, but a well-targeted program could turn a construction worker into a solar panel installer."
Calling a healthy economy a key ingredient to innovation, she added:
"Innovation is the best way to ensure growth. We need to make sure that innovation doesn't falter."