Christine Romer resigned last month from the Obama administration and went back to UC Berkeley to teach. Dr. Romer was President Obama’s first Chair of the Council of Economic Advisors. In her tenure, she co-authored a paper with Jared Bernstein, Vice-President Biden’s chief economic advisor, in which they predicted that the effects of the recent stimulus package would contribute a 1.6% growth rate to the expansion of the economy. Further, the growth rate would be stable for the next several years. Combined with the economy’s own natural cyclical capabilities to grow we should have a GDP growth rate much higher than the current 1.6%. Growth doesn’t all come from stimulus.
In a paper by Cogan, Cwik, Taylor, and Weiland titled “New Keynesian versus Old Keynesian Government Spending Multipliers”, Romer’s and Bernstein’s conclusions are challenged with predictions that the stimulus package would contribute only .8% growth to the economy in 2010, .5% in 2011, .3% in 2012, and .2% in 2013. To me, it was unusual in how it directly and strongly challenged the Rome-Bernstein conclusions.
Dr. Romer has one thing for which I give her credit and that is the good sense to choose this time to quit. It should be clear that she did not create the stimulus legislation. That was Congress. She did estimate its effects. She has been replaced by Austan Goolsbie, an economist who was, at least one time in his life, a stand-up comedian.