Romer: "We Are Staging A Wonderful Battle"
White House Chief Economist Christina Romer said the Obama administration is staging a "wonderful battle" in an economic war that hasn't been won.
Speaking on "Meet the Press" with David Gregory, she described the current situation as a temporary mess, and said that the Obama economic team has prescribed "incredible medicine" and comprehensive programs to "put us back in a good place."
Romer stated, "We have put in place the biggest, boldest recovery package in history....incredible medicine for economy, and we fully expect it to work." She maintained that the fundamentals of the U.S. economy are sound and continues to expect a turnaround in the second half of the year. "We have our eyes on the fundamentals....the day-to-day ups and downs of the stock market are a bad way to judge policy," she said, voicing one of the Obama administration's mantras.
However, some economists, such as New York Times columnist Paul Krugman, don't think the government stimulus plan is big enough to turn things around. When asked about a second stimulus package, Romer said, "It's premature to talk about a second stimulus package....we have to give this one a chance to work."
She added that the stimulus package (also known as the American Recovery and Reinvestment Act of 2009) doesn't have to carry the whole weight of curing the nation's economic problems. The key is getting banks lending and people spending again, she said, noting that the banks weren't cleaned up in the Great Depression until 1935, after the "real economy" has started to revive.
The Obama administration is expected to announce a proposal tomorrow to help small businesses, which will involve the government buying up distressed assets as a way to get banks lending again.
Gregory asked Romer about the lack of Treasury top deputies confirmed and at work at this point. (None of the top 17 deputies has been named or confirmed.) "If this is an economic war, isn't this akin to going to war without an army?" he asked.
Romer countered that a "huge professional career staff" is in place. Gregory then asked who in the Treasury Department beside Secretary Timothy Geithner is communicating with the banks. Romer answered that the Treasury Secretary is working to get people in place, and that the Obama administration is doing business in a different way. Strict rules and vetting requirements have tied their hands on some of the kinds of people they can hire, she said.
Romer said Treasury is already doing a "tremendous amount," such as increasing consumer business loan initiation and stress-testing the banks, but there is still no detailed blueprint for going forward. "The blueprint is at the top of our agenda, and we expect it to come out soon," Romer said.
Romer summed up how she thinks the recovery will take place, beginning in the second half of the year. People have lost a lot of wealth, and have been saving more than in past years, but they will go out and buy a car after 14 months of thinking about it, and do some spending and come back to a higher savings rate than before the bubble was burst by the recession, she explained.
"When we get through this, we will have a healthier economy," she said, citing investments in healthcare, energy and education, and work on cutting down the deficit.
