Economic Adviser Defends Stimulus Plan

By Courtney Ann Jackson-Talk Radio News Service

The economy is far from healthy according to Christina Romer Council of Economic Advisers Chair, but the adviser is still optimistic over the effectiveness of the American Recovery and Reinvestment Act.

“We are urging serious medicine for serious economic problems. If we can accomplish these important changes we will not only come through the current crisis, we will emerge even stronger and healthier than before.” said Romer Thursday at an Economic Club of Washington event.

The Recovery Act provided $787 billion of tax cuts and government spending. Romer said that makes it “the boldest counter cyclical fiscal stimulus in American history.” She noted that the economy was deteriorating rapidly when President Obama announced his economic team just before Thanksgiving.

While the plan has garnered a substantial amount of controversy, Romer pointed to the use of fiscal stimulus to help weak economies by past presidents including Dwight Eisenhower, Gerald Ford, and George W. Bush.

“In the past few months, some have tried to portray fiscal stimulus as an exotic tool with a questionable pedigree,” said Romer. “To use a medical analogy, fiscal stimulus is a well-tested antibiotic, not some new-fangled gene therapy.”

She said the effects of the Recovery will increase over time and they expect the fiscal stimulus to be “roughly $100 billion in each of the next five quarters.” Initially the stimulus was focused more heavily toward tax changes and state fiscal relief, but there will be more direct government investments as it continues.

“The President aimed for a package that was large and got good employment bang for the fiscal buck,” said Romer.