There’s no telling why Christina D. Romer has become the first administration insider to voluntarily fly the coop-it could be burnout, friction with economic adviser Larry Summers (she has denied this), or my personal favorite: Romer was the top cheerleader in the notion that the stimulus would prevent unemployment numbers from rising.
Romer left fresh on the heels of the latest unemployment numbers, and she told the Washington Post that she regretted her prediction:
As she prepares to step down as President Obama‘s chief economist, Christina Romer said Friday that she wishes she could redo one of her first official acts for the president: last January’s forecast that a big shot of federal spending would save millions of jobs and keep the unemployment rate under 8 percent.
The forecast was wrong. Many economists agree that Obama’s stimulus package probably saved millions of jobs, but the recession was far worse than Romer predicted. Unemployment has soared and is stuck at 9.5 percent.
Republicans campaigning to regain control of Congress have seized upon Romer’s report as exhibit A in their case against the $862 billion stimulus package, arguing that the money was wasted and that Obama’s economic policies have failed. The release of the latest jobs numbers Friday brought a hail of fresh GOP criticism of the measure “that was meant to keep unemployment below 8 percent,” as Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement.
Asked about the report, Romer said in an interview: “One could have presented it differently. If we’d only talked about the effect of the stimulus on the change in unemployment [instead of predicting the unemployment rate itself] . . . it would have been better. The thing I obviously couldn’t control is the baseline forecast, and that’s the thing I’m getting criticized for.”
But, as Reason magazine notes in a harsh critique, Romer is one member of the administration who should have known best that the stimulus for which she put her good name on the line wasn’t going to work:
As an economist, Romer did an excellent job [pdf] of establishing that New Deal stimulus failed to end or seriously mitigate the Great Depression. As an Obama team player (and poignantly, a sunny supporter of the then-senator’s campaign), she made a 180-degree turn toward pro-stimulus hocus pocus. Romer will be remembered as the main advocate of the mythical “multiplier” phenomenon, in which every federal dollar spent producers more than 100 pennies worth of economic activity. This is the kind of economics you’d expect to hear from a fine arts major.