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Christina Romer on Why We Don't Need a New WPA

5 years ago
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Christina Romer, head of President Obama's Council of Economic Advisers, braved the capital's icy, snowy streets to answer questions about her report on the administration's first-year economic record. But one of the first questions she got was about a Senate jobs bill that shrank from $85 billion to $15 billion within hours of its unveiling.

Romer adeptly avoided commenting on whether she was happy about the sudden shift by Senate Majority Leader Harry Reid, which surprised Republicans and could cost the measure bipartisan support. Instead, she told reporters at a Christian Science Monitor breakfast that she is encouraged that "there's movement" on jobs bills in the House and Senate. "This is the start of the process," she said. "I very much hope there are going to be a number of measures" addressing jobs.

Other highlights of the free-wheeling session:

*Does anybody really know how to create jobs? Romer said she's a fan of proposed tax breaks for employers who, by the end of 2010, hire people who have been out of work. She called it "putting workers on sale this year" and says "that little bit of incentive" can have a big impact.

*What part of the $787 billion stimulus package did she like the best? Romer said fiscal relief to states has been "one of the triumphs" and has had "more bite than we would have thought."

*Given her forecast of unemployment above 9 percent for years, does she regret that the stimulus package was not bigger? "We got as big a fiscal stimulus as we could get at the time. It was as aggressive, as good as we could manage to get through Congress," she said, adding it was a hodgepodge "by design" and "a very smart package."

*Why is Obama having such a hard time convincing people the stimulus is working? Romer said high unemployment and continuing job losses don't "feel like progress" to people. She predicted scholars will eventually conclude that the recession "would have been dramatically worse" without the stimulus package.

*Why is her forecast so modest compared to big bounce-backs in recoveries of the past? Romer said after most recessions, authorities can bring down interest rates and unleash spending. This one was caused by a financial crisis and rates are already at rock bottom, plus there's a headwind of consumer and bank psychology to fight.

*Why hasn't the administration proposed a public jobs program like the Works Progress Administration? Romer said officials have considered it but it's hard to come up with a program that would put lots of people to work quickly. She also said the administration is funding WPA-like infrastructure projects, but now they are done through "the normal highway building process" and other avenues that did not exist in the 1930s.

*Is she predicting continued high unemployment through 2011 out of political caution, after the administration got hit for saying its stimulus package would keep unemployment at 8 percent? "We were completely off" on the earlier prediction, Romer admitted, because there was a breakdown in the usual relationship between GDP growth and unemployment. She said the latest forecast is the best possible based on available information and there was "no attempt to shade one way or another."

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