Romer: We had no clue … and still don’t

posted at 10:12 am on September 2, 2010 by Ed Morrissey

Christina Romer exits the administration this month, and perhaps she felt compelled to engage in a little truth telling.  If so, that may have been a little more truth than the people at the National Press Club, who had gathered to hear her valediction as chair of the White House Council of Economic Advisers, had prepared themselves to handle.  Dana Milbank describes how depressing it was to the gathered media to have someone on the inside of the Obama administration tell them that the emperor and his staff have no clothes when it comes to the economy:

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.”

Anybody want dessert?

Just how bad was it?  Romer admitted that no one at the White House understood the fundamentals of this recession, and how they just assumed it would behave like previous recessions.  And it might have done so, had the Obama administration applied the policies that alleviated previous recessions, especially those that Ronald Reagan used to pull the US out of a decade-long stagnation slump where high inflation eroded the buying power of Americans.  Instead of cutting taxes (especially capital gains taxes) and reducing regulation to entice new investment, Barack Obama and Congressional Democrats chose to chase a government takeover of health care, a massive tax on energy production that would penalize expansion and growth, and expanding the jurisdiction on Wall Street of the same agencies that had watched the collapse come and did nothing about it.

Romer, however, still hasn’t got a clue why a one-time expenditure of government funds didn’t make things hunky-dory:

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.”

“Almost all analysts”?  Only those who work in the White House.  No one doubts the magnitude of the recession, but that’s only part of the story today, and a rapidly diminishing part at that.  The wealth that got destroyed in the bubble collapse has already gone, but there is still plenty of capital left to get the engine of wealth creation primed and pumping again.  The “violent reaction” came to the radical Democratic agenda of government expansion and massive deficits, which is why the normal post-World War II pattern of recovery hasn’t appeared in this instance, and most likely won’t until a new Congress arrives to force the administration into a different, pro-growth direction.

Romer bristles at the perception that she and Obama miscalculated the response, but as Milbank notes, her defense is rather pathetic.  Why, she performed quantitative estimates!

No wonder most Americans think the effort failed. But Romer argued, a bit too defensively, against the majority perception. “As the Council of Economic Advisers has documented in a series of reports to Congress, there is widespread agreement that the act is broadly on track,” she declared. Further, she argued, “I will never regret trying to put analysis and quantitative estimates behind our policy recommendations.”

But the problem is not that Romer did a quantitative analysis; the problem is that the quantitative analysis was wrong. Inevitably, this meant that, as she acknowledged, “the turnaround has been insufficient.”

And it’s not just that, either; it’s also that the White House ignored a long track record of the successful and unsuccessful strategies in dealing with recessions over the last several decades.  When Keynesianism has been tried, it has failed and instead ushered in stagnation and economic drift.  When tax cuts and streamlining have been implemented, expansion and job growth followed.   This administration somehow believed it could reinvent economics so that it performed just like it does in the laboratories of the Ivory Tower, where their top-down, command-economy projects always succeed.  As Romer admits, to the consternation of the media that failed to vet Barack Obama and his policies as a candidate, is that no one in the White House has a Plan B.


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She had no idea how bad the economic collapse would be. She still doesn’t understand exactly why it was so bad.

Please, nobody is buying the whitewash.

Obama campaigned on his solution to the economy woes bcause (no ony he is the smartest of them all) he has the best and the smartest evah people working / endorsing him, and voters gave him a chance.

No we get the ‘Romer didn’t have any clue’ get-out-of-jail card. When and where is Obama finally come clean with ‘the buck stops with me’?

Sir Napsalot on September 2, 2010 at 11:31 AM

Romer admitted that no one at the White House understood the fundamentals of this recession, and how they just assumed it would behave like previous recessions.

I knew it!
I knew it!
I knew it!

I knew that what was being said in the White House was ….”We can give money to the UAW, take control of banking and health care. Then when the business cycle turns the economy around, we can tell everyone that federal spending works.”

I would like to say that they are stupid but I know that isn’t the case. They are so ideologically driven that they can’t admit that what worked in 1921, 1961, 1981 and 2001 will work today.

Harpoon on September 2, 2010 at 11:32 AM

“To this day, economists don’t understand why firms cut production as much as they did, or why they cut labor so much more than they normally would,” said Romer.

Really?

After Obama campaigned on The Next Great Depression and the Greatest Economic Downturn Since The Great Depression over and over and over. Cramming it down everyone’s throat with the media happily playing along and she doesn’t understand why businesses cut production and labor?

Mindboggling.

Can we say self-fulfilling prophecy? Maybe that will give her a clue?

ButterflyDragon on September 2, 2010 at 11:42 AM

So all that time they were saying that it was “the worst economic downturn since the Great Depression” they really thought that it was “just another recession?”

Either they were lying then or lying now. Or both.

29Victor on September 2, 2010 at 11:43 AM

In other words…they were just hoping that the economy was in a typical cycle, and that we would come out of that cycle and they would claim victory over a down economy.
They didn’t pay attention, they didn’t care, they didn’t have the knowledge…incompetent is the word best describing Obama and his team.

right2bright on September 2, 2010 at 11:44 AM

But the problem is not that Romer did a quantitative analysis; the problem is that the quantitative analysis was wrong. Inevitably, this meant that, as she acknowledged, “the turnaround has been insufficient.”

she should be flogged for trying to sell this excuse

they knew exactly what they did

they pumped newly printed dough by the truckloads while signing the IOU with the
private sector signature

even recently they are talking about the huge chunk of “stimulus” that will be at the education mobs disposal

they don’t even know what exactly they were going to buy before amassing the money but since the mostI
portant factor is stripping wealth from the private sector

Sonosam on September 2, 2010 at 11:44 AM

Those who fail to learn from history….

Even Bernanke, the supposed scholar of the Great Depression, has not taken away from that experience the vital lessons that history taught.

The administration has never properly identified the source and triggers of the economic collapse like Fannie and Freddie and other unfunded mandates. Thus, its “solutions” were merely bandages and political payback.

The administration and the party that put it into power have FAIL written into their essential DNA. Command economies and nanny statism have wreaked havoc wherever they have been tried. Mere observation of current governments such as Venezuela’s should have provided a clue.

onlineanalyst on September 2, 2010 at 11:46 AM

they don’t even know what exactly they were going to buy before amassing the money but since the mostI
portant factor is stripping wealth from the private sector,
their plan was not to aid the economy but strip independance

they are reallyare wannabe slavemasters

Sonosam on September 2, 2010 at 11:48 AM

Neither Obama or his merry band of Marxist fools have any idea how to fix the economy. The little Dutch boy plugging the dike with his finger was an engineering genius compared to these bumbling idiots.

rplat on September 2, 2010 at 11:52 AM

Romer also said this:

The current recession has been fundamentally different from other postwar recessions. This is not my father’s recession. Rather than being caused by deliberate monetary policy actions, it began with interest rates at low levels.

So, she’s saying that other recessions were caused by deliberate monetary policy actions? In other words, the government WANTED those recessions?

hawksruleva on September 2, 2010 at 11:53 AM

Please. If she had a clue, she wouldn’t have passed the screening interview. Her ignorance is sincere.
She was hired because Obama thot she would be loyal.

seven on September 2, 2010 at 11:59 AM

“It’s quarter to three…,” and the fat lady is singing at the piano bar.

onlineanalyst on September 2, 2010 at 12:02 PM

This Romer guy should grow a goatee or something. He looks rather effeminate for a guy.

fossten on September 2, 2010 at 12:20 PM

I believe this illustrates nicely that Economics is not science. In Chemistry or Physics, if your theory is proven wrong upon experiment, you go back to the drawing board and come up with a new theory.
Lily on September 2, 2010 at 11:00 AM

Economics is like a science, but with one major difference: The “lab rats” are smarter than the researchers.

logis on September 2, 2010 at 12:26 PM

What a pile of garbage. They did exactly the things they needed to do to make the recession worse and last longer.

I don’t but this feigned ignorance nonsense for a second. No one is that stupid.

Get rid of all these academia clowns making any policy decisions based on their dimwitted theories, graphs and models. There are plenty of people in this country who know real world economics.

All of these people have a lot to answer for, and claiming they were ignorant is not a defense.

reaganaut on September 2, 2010 at 12:29 PM

This sorry sack of shite is such a liar..maybe not as much as Turkmanbama, but still, she lied and lied just to go along. I have no respect for this Mrs. Doubtfire doppleganger.

I saw her spew her lies in February of 2009. I was utterly disgusted.

She may have left because her run-over integrity may have started haunting her in her dreams, but I have no use for this tragic creep. Too late, Aunt Bea…we know what you did to be with the so-called “cool crowd”.

Gob on September 2, 2010 at 12:35 PM

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.”

-
This is a joke, right? Everybody knows that Obama’s election and the sudden shift to far left policies which included; ignoring contract law and investor rights, statements intended to intimidate businesses and force them to capitulate to the Marxist in Chief, all but calling for the gallows to be constructed for… bankers, automaker CEOs, and other investors in and employers of the masses were at the heart of the continued decline into this depression.
-
So let me fix her drivel…

“almost all analysts were surprised by the violent hunkerdown reaction to Obama’s power grab.”

RalphyBoy on September 2, 2010 at 12:37 PM

Question is, will the Oppressives in the White realize their mistake and try something different, or will they double down on stupid?

IF they really wanted the economy to recover, they would try something besides this foray into Socialism.

What they do next should indicate to all what their true intentions are.

Chip on September 2, 2010 at 12:48 PM

Let me just say a a blatant truth that many know here already.

IF YOU LISTENED TO RUSH LIMBAUGH STARTING NOV. 5TH, 2008 you would have been totally prepared for this economic free-fall. He is not even an economist (many good ones still trying hard not to admit we are in serious trouble) and he has been so correct on almost every (if not every) prediction of how the Obama regime would destroy this country.

I have always been a fan of Rush’s, but his show only became vital to me a few days before that dark day in November 2008. I used to listen to Dennis Prager during his time slot.

As Gerald Celente says, “this is no recovery, this is a cover-up”. If you have no idea who he is, you should google him NOW.

What Rush does know are Liberals. Don’t doubt him. What he has predicted is very scary if you are taking count.

Gob on September 2, 2010 at 1:01 PM

They didn’t know? Really? Really????

I think they did, and do. My personal belief is they want to continue on this path of destruction. It paves the way to rebuilding America in their image. More government control, and intervention. Power to the king, and slavery for the rest of us.

All part of the plan!!!

capejasmine on September 2, 2010 at 1:01 PM

Romer finally admits that the administration really is stuck on stupid.
I wonder how she figured it out.

DDT on September 2, 2010 at 1:19 PM

Romer should be teaching five-year-olds on Romper Room–but even that’s debatable–not teaching economics at a major university. What a nitwit.

BuckeyeSam on September 2, 2010 at 10:39 AM

And now there will be another generation that just doesn’t understand why pouring gasoline on a fire didn’t extinguish it. After all, isn’t gasoline wet like water?

One phone call to Cavuto, 30 minutes tops, would have helped.

barnone on September 2, 2010 at 1:22 PM

Explaining the reason for the Czech Republic’s economic slump in the mid-90′s, then-President Vaclav Havel postulated that it was a “punishment for pride“:

The government has embraced an arrogant ideology. They claim to know the key to prosperity. It’s analogous to communism. They thought the same thing. The clever ones – themselves – would run everything. That’s the analogy. The key to prosperity is to let things run themselves. We’ll liberalize everything, let everyone look after himself, let business, not the state, run the economy. The state should have no views, no policies of its own. Just open it all up, step back, let it go and you’ll see how well everything will work if we just leave things alone.

J_Crater on September 2, 2010 at 1:25 PM

This confirms my belief that Obama isn’t very bright and that he surrounds himself with socialists and sycophants.

His economic team is nothing more than a Marxist echo chamber.

molonlabe28 on September 2, 2010 at 1:36 PM

No clothes for the emperor or his court…

But they do wear a fetching line of albatrosses!

ajacksonian on September 2, 2010 at 2:17 PM

Hey. My chance to post my plan again!
+++
The following ideas assume that the Republicans take the House and make inroads in the Senate in November:
(1) Defund the federal government agencies, excepting only the military, across the board by 10% in 2011.
(2) Pass legislation declaring a 2 year payroll tax and 2 year corporate income tax holiday. Inform Obeyme that if he vetoes the legislation, the federal agencies (EPA, DoE, DoA, etc.) will all be defunded another 10% for a total of 20% defunding — and he will have to manage the layoffs and pay cuts. My guess is he will sign. At which point corporations have a reason to start hiring again — without more jobs nothing else will solve it.
(3) Raise the eligibility retirement age for Social Security by 6 months every year until it reaches 75, then stop. However, first raise it to 70 in 2011.
(4) Legislate that no Social Security funds will be available to non-citizens, period, as of 2011.
(5) Defund Obamacare, and legislatively remove it (Obeyme won’t sign, but fine, being unfunded it can’t go into effect and he will be gone in 2012, and the next President can sign it — and it becomes a great campaign message against the Democrats).
(6) Legislate that all long distance (assume this to be defined as 50K miles per year) road freight traffic must convert to run on natural gas by 2017. That’s all 18 wheelers and many of the high usage (FedEx, UPS, local delivery service) vehicles. This will reduce our demand on oil sharply, with two strategic benefits: (a) natural gas is cheap and we produce it domestically and (b) we will reduce oil imports enough that we should be able to get by with only importing from this hemisphere (goodbye House of Saud).
(7) Legislatively overturn EPA mandates on nuclear power and declare that the Federal government will cover all insurance risk for the next 100 nuclear power plants built, and that for every nuclear power plant brought online before 2018 the Federal government will pay the operating company ONE BILLION DOLLARS in gold. Simultaneously inform the EPA that if they obstruct this at all they will be defunded by 50%. Advantage — nuclear power plant construction employs a LOT of people — and a lot of blue collar and union work. Electricians, metal work, pipe fitters, concrete work, roads, building, you name it. Lots of jobs would be created AND due to NERC requirements none of them would be illegals OR foreign contractors. And operating the plants would permit retiring the coal fired plants, thus actually cleaning up the environment. Everyone wins.
+++
The above is the 7 point SunSword plan to getting the debt cut, reducing the size of the federal government, dealing with the Social Security problem, cutting down Obamacare, and cranking employment by cutting corporate taxes and payroll taxes while building nuke plants (and cleaning the environment by retiring coal fired plants), AND cutting our dependence on foreign oil while increasing usage of domestic natural gas (also leading to more jobs).

SunSword on September 2, 2010 at 2:18 PM

Maybe they should try another stimulus and see if that one works.

They oughta go back to the liberals they paid off with the first stimulus and get our money back. I won’t hold my breath.

toongoon on September 2, 2010 at 2:32 PM

I gotta say I’ve gained alot of respect for Dana Milbank. Never thought I’d say that.

Chuck Schick on September 2, 2010 at 2:38 PM

She’s still not accepting any responsibility for the destruction being created by the feds. It’s the fault of firms who cut production too much and fired employees and didn’t hire that is keeping the economy from responding to our magnificent plan. What’s almost as bad is, she’s going back to the classroom to create another generation of economic idiots.

Kissmygrits on September 2, 2010 at 2:39 PM

There may still be a silver lining in this. If the Republicans take the House and if they also get the Senate (or, failing that, persuade enough Democrats to join them), and if the GOP stops acting like a bunch of scaredy cats and actually takes bold steps to heal the economy (roll back exorbitant spending, pare back the latest over-regulation, and cut taxes), and if the Republicans can actually show the courage of their convictions …

Then they can present, through their actions, an undeniable contrast between the liberal approach to a recession and the non-liberal approach.

And when the economy takes off, there will be little doubt (except among the professional left) which way actually works.

Paul_in_NJ on September 2, 2010 at 3:31 PM

Plan B = Boooooosh!

ronsfi on September 2, 2010 at 4:08 PM

Romer is from Academia.
In Academia everything works on paper.

In the real world? Not so much, to many variables.
Academia pretends the variables don’t exist.

Therefore, No one at the White House understood the fundamentals of this recession.

Romer: “

To this day, economists don’t fully understand why firms cut production as much as they did

Ah that’s because “firms” operate in the “real world”, not the “Fantasy world” of Academia.

Romer: “

almost all analysts were surprised by the violent reaction

.”
Only the ones that operate from your echo chamber of Academia.

Considering the “Incompetent One’s” reliance on “Academia” this isn’t going to get any better, we are so $crewed!

DSchoen on September 2, 2010 at 4:09 PM

Academia = some wonderful thinkers + a boat load of losers who couldn’t make it in the real world.

Mojave Mark on September 2, 2010 at 6:44 PM

First, let me take up for “my people” for a moment. Let’s not let Romer get away with a sloppy argument from authority when she says economists don’t understand what’s going on. Believe me, plenty of us are perfectly clear what’s going on.

This is what was particularly galling to me:

The current recession has been fundamentally different from other postwar recessions. This is not my father’s recession. Rather than being caused by deliberate monetary policy actions, it began with interest rates at low levels.

[Emphasis mine]

There’s a perfectly plausible business cycle theory that proceeds from an artificially low interest rate feeding malinvestment and asset bubbles. Romer just never studied it.

DrSteve on September 2, 2010 at 6:54 PM

I’m glad this dingbat is gone but the Democrats have many more like her. The next one to go is Laura Tyson, she was evil during the Clinton administration and is more evil now. Things will not change until all of these clowns are gone.

whbates on September 2, 2010 at 10:28 PM

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.”

After the slashing and burning that the administration did with the Chrysler bondholders, no business wanted to be in the situation that over took Chrysler .. too little demand, too much supply.
Obama instilled fear into the investment community and the corporate staffs, instead of trying to ride it out, took defense measures to reduce inventory by cutting jobs.
Bottomline, the roughshod manner the administration dealt with economic challenges made matters worse.

J_Crater on September 3, 2010 at 12:21 AM

OMG…and this smiling fool is going back to TEACH the NEXT GENERATION at Berkley for likely $250K a year??? Berkley must be the new welfare state for failed economists.

No real remorse for the American families and lives she and her elite crew of chuckle-heads have impacted…these folks have no honor….

PhreeMan on September 3, 2010 at 7:15 AM

Keep in mind that the laboratories of our Ivory Towers are financed with god-like endowments. When their alumni are in power they seem to unconsciously treat the US Treasury as another unspendable endowment.

Amphipolis on September 3, 2010 at 10:33 AM

Arrivederci, Romer

….and good riddance!

Sweet_Thang on September 3, 2010 at 2:46 PM

So how will Romer’s failed economic experiment affect what her new message will be to legions of hapless students?

Next time, bypass socialism and go right to full bore communism. If that means cracking a few skulls, hey, whatever it takes. Lesson learned!

Sweet_Thang on September 3, 2010 at 2:58 PM

Arrivederci, Romer TURKEY!

….and good riddance!

Sweet_Thang on September 3, 2010 at 2:46 PM

FIFY!

Gob on September 3, 2010 at 3:47 PM

At least this Romer seems like a reasonably moderate fellow.

.

She’s a what ?

cableguy615 on September 3, 2010 at 6:33 PM

Romer and Napalitano. Their gift to the world:

The chance to use Frumpy, Feckless and Fool in the same sentence – often and accurately.

sclemens on September 3, 2010 at 8:17 PM

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