Cross-posted from New Deal 2.0.
The chair of the White House Council of Economic Advisers has decided to bail on the administration. Romer, an economics prof at the University of California (Berkeley) prior to taking her post, was one of the key players in crafting the original stimulus bill. What does her exit say about who gets access to the President? Is this a sign that the iron grip of Summers will loosen? Just what did Romer mean to the administration's economics vision? I asked Roosevelt Institute fellows and New Deal 2.0 contributors to share their views.
Christina Romer wrote the one recent speech that really contained focus on concern about unemployment. Otherwise one would think the Administration had gone to sleep and accepted 9.5 percent. An administration that justified the bank bailouts on the grounds that "it would take the real economy down with the banks so we had no choice" seems to now be complacent when the banks are coming back and the real economy is still sputtering.
The stimulus program was too small from the get go. It was also not focused on durable programs that would create a lasting benefit for our society. More is needed and the key voice in the Administration that expressed these concerns is leaving. That is cause for concern as we spiral downward with dams busting and roads and bridges breaking and trains and airports operating so slowly that foreign visitors are dismayed.
Dr. Romer also led at team at the CEA that wrote a very clear blueprint of what our longer term budget concerns are. She focused on the role of wars, tax cuts, bailouts and medical costs contributing to the rise of the deficit and its future trajectory. Hers was sensible thinking that will be missed in this hysteric age of the Austerians.
It is not clear how strongly Christina Romer could stand up to Larry Summers and Obama's political advisers. Or even quite where she stood on matters. Her academic record is mixed. But this is an opportunity for Obama to remake policy boldly in favor of a serious jobs strategy, an infrastructure-oriented industrial policy and a new stimulus. Given the recent record, it seems too much to hope for, however.
Now there's nobody in the White House familiar with the economics of the Great Depression. And Romer was very, very clear that the financial crisis and the Great Recession had not somehow magically combined to make 8.5% a valid benchmark for "full" employment. Let's see what her successor thinks on that one; it will tell plenty. Unemployment policy is the central economic problem for the United States and the person most interested in it in the White House just left.
Compared to the usual Rubinite retreads who currently dominate economic policy in the Obama Administration, Christina Romer was a decided improvement -- although clearly not a terribly influential voice if the current policy trajectory is anything to go by. In keeping with the President's alleged Lincolnesque "Team of Rivals" approach, it would be nice to see Obama use her resignation to bring in an alternative voice, such as James K. Galbraith. More likely, unfortunately, is that Professor Romer will be replaced by another Clintonista who will make all of the usual noises about the need to "get the deficit under control" in order to "retain the confidence of the markets," as well as virtually ignoring the issues of employment, stagnant economic growth and growing income inequality. In other words, there will be no team of rivals, but an echo chamber of Wall Street Democrats.
It is a shame but no surprise that, with midterm elections coming and likely to result in a political bloodbath, the White House made a symbolic gesture in sacrificing the senior economic official least responsible for their failed policies.
Rather than assigning blame squarely on the static thinking of the "let them eat cake" crowd still calling the economic shots, they are hoping the symbolic gesture will placate a public that voted for change.
Rather than deep self-reflection at this watershed moment in history, they have fallen flat. Rather than assigning blame to a Treasury that continues to pervert markets and distort financial reality -- causing ever more financial contractions as intermediation is further impaired -- they offer symbols.
Romer was the most likely of the current team to think big or embrace and understanding of the critical need for the bold initiatives that could address a hollowed-out economy. Increasing the educational attainment of our population in an ever more competitive world, perhaps by supporting our public through our state and community colleges. As the only out of the box thinker in a lead position, she was also most likely of this crowd to recognize that buying votes with unemployment benefit extensions may buy fewer votes than programs that genuinely focus on the reeducation and re-employment of our unemployed, into growth industries, and require some service from them in return - perhaps rebuilding failing infrastructure.
To the degree anyone is watching, without further and higher profile resignations, the symbolism of her departure will lead to greater voter cynicism.