Questions For Christina Romer
Tomorrow, Christina D. Romer, the chair of the President's Council of Economic Advisers (CEA), will appear before the Joint Economic Committee of Congress. Professor Romer is a distinguished macro-economist (with widely cited work on US economic history, including the Great Depression; start with this speech), on leave from the University of California, Berkeley (for more, see her Web page), and represents an important part of the analytical thinking that underpins the administration's recovery strategy.
In particular, her team provides a good deal of the economic input into the administration's most important decisions, for example on autos. She is also responsible for much of the work behind the administration's overall economic growth forecast, although obviously this involves a great deal of back-and-forth with the White House and other agencies.
It does appear, however, that the Council of Economic Advisers has been less involved with the financial sector bailout than you might think. That task seems to have been run more by U.S. Treasury, with substantial input from the National Economic Council at the White House.
The Council of Economic Advisers chief appears before the Joint Economic Committee every year, usually to defend the annual Economic Report of the President. However, the latest report was prepared by President Bush's team, and we have all moved on a great deal since that was put together at the end of 2008, so this is not likely to be an important topic for discussion.
Romer will surely stick closely to the official White House line on most points. But she has in the past provided subtle hints regarding internal administration dissonance on banks, for example, recognizing that this is a deeper issuer than just banks having enough liquidity (i.e., the ability to turn their assets into cash readily). Hopefully, she will expand on her full diagnosis of the banking situation.
She has consistently supported "legacy asset purchases" as part of the solution, and it will be interesting to see if the committee pushes her on this point. Is there any evidence that the latest Treasury plans (known as the PPIP; fact sheet; an analytical review) are making progress? What is the exact analytical case for this approach? When and how will we know if it is working?
With her husband, David Romer, Christina Romer authored an academic paper that argues against the idea that cutting taxes "starves the beast," in the sense that it leads to future spending cuts -- a favorite idea of Ronald Reagan and subsequent conservatives.
The abstract of their paper argues: "The results provide no support for the hypothesis that tax cuts restrain government spending; indeed, they suggest that tax cuts may actually increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases. Examination of four episodes of major tax cuts reinforces these conclusions."
I expect some members of the committee would like to talk about this further.
What are your questions for Romer? Post them below.
April 29, 2009; 12:29 PM ET
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