Posted on 06/28/2009 11:57:48 PM PDT by bruinbirdman
The US economy will feel a substantial boost from the Obama administration’s emergency spending package over the next few months, says Christina Romer, a senior White House official, who has warned against tightening monetary and fiscal policy before recovery is well established.
Ms Romer, chairman of the US president’s council of economic advisers, told the Financial Times in an interview she was “more optimistic” that the economy was close to stabilisation.
But while hopeful that America could yet experience a V-shaped recovery, she said it was much too soon to begin tightening policy: “We do not want to repeat the mistake Japan made in the 1990s, when the moment things started to improve they tightened policy.”
Meanwhile, David Axelrod, a senior White House adviser, told NBC Television on Sunday the administration would be open to further stimulus if needed. “Let’s see in the fall where we are, but right now we believe what we have done is adequate to the task. If more is needed, we’ll have that discussion.”
Ms Romer’s comments come as opposition Republicans step up their attacks on the $787bn fiscal stimulus, pointing out that it has not prevented unemployment from hitting a quarter-century high of 9.4 per cent.
Ms Romer said stimulus spending was “going to ramp up strongly through the summer and the fall”.
“We always knew we were not going to get all that much fiscal impact during the first five to six months. The big impact starts to hit from about now onwards,” she said.
Ms Romer said that stimulus money was being disbursed at almost exactly the rate forecast by the Office of Management and Budget. “It should make a material contribution to growth in the third quarter.”
But she acknowledged that cutbacks by states facing budget crises would push in the opposite direction.
Ms Romer said the latest economic data were encouraging, following a weaker patch a month ago. “I am more optimistic that we are getting close to the bottom,” she said.
The CEA chairman, who has forecast a sharper rebound in 2010 than most economists, said she had lowered her estimates for growth this year “and also for next year, a bit” since the start of the year. She said the consensus forecast that unemployment would continue to rise for the rest of this year and peak early next year was probably accurate.
But she added: “I still hold out hope it will be a V-shaped recovery. It might not be the most likely scenario but it is not as unlikely as many people think.
“We are going to get some serious oomph from the stimulus, there is the inventory cycle and I believe there is some pent-up demand by consumers.”
Even so, Ms Romer warned against tightening monetary and fiscal stimulus prematurely. She said the authorities should continue to work on their exit plans but not implement them until the economy came back strongly.
“It is important to think about it now but policymakers should not start acting until we are really recovering well and are approaching full employment.”
Ms Romer, an expert on monetary policy, said she thought the risk of inflation was “very low”.
“With unemployment and unused capacity high, it is not as if inflation is going to creep up on us. We will have a long period of time to figure out what to do.”
Romer, University of California, Berkeley, promoted to full professor in 1993.
FROM WIKIPEDIA:
[In 2008 (Christina)Romer was set to join the Harvard faculty of economics . . . However, the Romers remained at Berkeley after Drew Gilpin Faust, Harvard's president, vetoed her appointment. Her decision resulted in substantial discussion within the discipline and in the mass media. The motivations for Faust's decision to block Romer’s appointment remain unclear, though speculation has focused on an opposition among “New Classical” economists to her “New Keynesian” tendencies, or a reluctance to appoint MIT-trained faculty at Harvard.]
Government spending is a component of GDP and Hussein plans to ramp up stimulus payments especially in the Q3.
If he adds $200B of the $700+ stimulous left to the economy, that would be about 1.4%. That's for one quarter. Projected annually (4X), say on an otherwise flat GDP, he could claim the economy is up 5.6% annually.
yitbos
Japan has done how many stimulus packages which haven’t worked?
DR.ROMER: “It might not be the most likely scenario but it is not as unlikely as many people think.”
During the Khrushchev era of the Soviet Union, when housewives stood in lines to buy a bag of flour, the propaganda airwaves were full of “achievements” in collective farm production. There was a wry Russian joke that went: “If you want milk, just take your pail to the radio.”
she is a ****ing idiot.
LLS
Very funny. Under this regime we can take our retirement accounts to a teeveee tuned to ABC..
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