Christina Romer, the departing chairman of the President's Council of Economic Advisors, was at a complete loss of words when it came to explaining the state of the economy when she appeared at her valedictory lunch before her returns to her teaching sinecure at Berkley. Dana Milbank of the Washington Post comments:
She had no idea how bad the economic collapse would be. She still doesn't understand exactly why it was so bad. The response to the collapse was inadequate. And she doesn't have much of an idea about how to fix things.
What she did have was a binder full of scary descriptions and warnings, offered with a perma-smile and singsong delivery: "Terrible recession. . . . Incredibly searing. . . . Dramatically below trend. . . . Suffering terribly. . . . Risk of making high unemployment permanent. . . . Economic nightmare."
Recall, this is the expert chosen by Obama to help oversee the economy. Ms. Romer predicted that the Obama stimulus package would keep the unemployment rate at 8 percent or less; it is now 9.5 percent. We are more in debt than ever before, no matter how that debt is measured -- in absolute terms, as a percent of GDP, or as a percent of the federal budget (assuming the Democrats would be responsible enough to actually pass one before the midterms).
In the spirit of confession, she admitted Obama's team was unprepared.
When she and her colleagues began work, she acknowledged, they did not realize "how quickly and strongly the financial crisis would affect the economy." They "failed to anticipate just how violent the recession would be."
Even now, Romer said, mystery persists. "To this day, economists don't fully understand why firms cut production as much as they did or why they cut labor so much more than they normally would." Her defense was that "almost all analysts were surprised by the violent reaction."
That miscalculation, in turn, led to her miscalculation that the stimulus package would be enough to keep the unemployment rate from exceeding 8 percent. Without the policy, she had predicted, unemployment would soar to 9.5 percent. The plan passed, and unemployment went to 10 percent.
Perhaps I, a humble economics major from Northwestern University and a holder of an MBA from the same, might offer some suggestions to why the economy is failing: anti-business rhetoric from Barack Obama and Democratic leaders; pro-union policies , ObamaCare, and rules and regulations that depress hiring; the prospects for cap and tax and anti-trade policies that put a clamp on the animal spirits that are needed to give a pulse to the economy. And let us not forget about the wide range of steep tax increases that are coming on New Year's Day 2011. Those won't help, Ms. Romer, and those are the responsibility of the administration where she held a powerful position.
Perhaps, the ideas behind Keynesian economics, so beloved by liberals because it encourages spending and sanctions big debt, have to be reconsidered.
Are we shocked that the team Obama assembled to run the economy (heralded as the best and the brightest by the courtier media) are so clueless when it comes to the real world? After all, so few of them-including Barack Obama-have any experience in the real world of business and industry.
Maybe Professor Romer will have time when she returns to her cosseted academic life to consider some of these factors that might account for the economy's troubles. Hopefully, she can teach her students better than she helped run the economy.
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