Obama Adviser Considers Stimulus Spending Successful
“The program is working,” said Christina Romer, chairwoman of the White House Council of Economic Advisers. “Millions of unemployed workers have seen an extra $25 a week in their unemployment insurance checks [and] 95 percent of American households saw a tax cut in their paychecks starting April 1.”
Romer made her comments at the Economic Club of Washington, D.C., on Thursday as skepticism continued to mount over the effectiveness of the stimulus plan and the president’s approval rating continued to drop in most polls. A Quinnipiac University poll released Thursday showed Obama at 50 percent.
“A key indicator of just how brutal this recession has been is the fact that in the first quarter of this year, we lost nearly 700,000 jobs per month,” said Romer. “In the second quarter, we lost an average of 436,000 jobs per month. This rate of job loss is horrendous, but the change does suggest that we are on the right trajectory.”
President Barack Obama and Democrats warned in February that unemployment could surpass eight percent if the stimulus bill was not passed. In early July, the unemployment rate reached 9.5 percent (now at 9.4 percent). President Obama thinks it will surpass 10 percent, White House Press Secretary Robert Gibbs said on Thursday.
“After we administered the medicine, an economy that was in free fall has stabilized substantially, and now looks as though it could begin to recover in the second half of the year,” Romer said. “The timing and strength of this change is highly suggestive that the stimulus has been important.”
Still, Romer said, “It is important to realize that job growth will almost certainly lag the turnaround in real GDP growth. The consensus forecast is for the employment statistics we get tomorrow to show that the U.S. economy continued to lose hundreds of thousands of jobs in July.”
Romer scoffed at criticism that because the economy is not improving, it means the stimulus is not working.
“Throughout the spring, I frequently heard people say, ‘The unemployment rate is even higher than you all predicted without the stimulus. That means the policy isn’t working and may actually be making things worse,’” Romer said.
“Even leaving aside the fact that we were always very clear that there was tremendous uncertainty about what would happen to the economy, that argument is – to quote a recent New York Times editorial – just plain silly,” she added.
“Suppose you go to your doctor for a strep throat and he or she prescribes an antibiotic. Sometime after you get the prescription, and maybe even after you take the first pill, your fever spikes,” Romer said, trying to offer an analogy.
“Do you decide that the medicine is useless? Do you conclude the antibiotic caused the infection to get worse? Surely not. You probably conclude that the illness was more serious than you and the doctor thought and are very glad you saw the doctor and started taking the medicine when you did.”
Romer said the money from the stimulus is being spent, about one-third on public projects. She said this has produced significant increased spending by state and local governments with 2,500 road projects underway.
However, since the passage of the bill in February, critics have pointed out that the bulk of the spending does not take place until next year.
“The first thing to say is that the money is absolutely going out the door quickly,” Romer said. “As of the end of June, more than $100 billion had been spent. Those numbers are rising each week, and we are on track to have spent 70 percent of the total by the end of the next fiscal year.”