By Silla Brush - 09/01/10 05:03 PM EDT
Christina Romer, in her final speech as chairwoman of the Council of Economic Advisers, called on Wednesday for new tax cuts and government spending to boost the economy.
Romer defended the Obama administration's 2009 stimulus bill, initially estimated at $787 billion and later revised to $814 billion, as contributing to a "dramatic" turnaround in the economy from the depths of the crisis. The stimulus, she said, "made the difference between a second Great Depression and a slow but genuine recovery."
But Romer urged congressional lawmakers to find the "will and the wisdom" to approve additional tax cuts and spending measures to help an economy that is witnessing flagging growth rates and near double-digit unemployment.
"The only surefire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less," Romer said. "The key is that we need to take action and we need to do it quickly."
Romer mentioned additional tax cuts for the middle class, spending on infrastructure and a pending bill to boost small-business lending. She also supported additional efforts to promote exports and finalize new trade agreements. Romer defended the administration's regulatory approach as "prudent" for the economy.
Obama said this week his advisers are looking for additional tax cuts and spending measures as ways to boost the economy. Any large package will struggle to win passage in Congress, with lawmakers reluctant to approve additional spending before the November elections.
Romer's speech comes amid signs that the recovery is slowing, with the housing and labor markets struggling. The economy grew at 1.6 percent in the second quarter, lower than the initial 2.4 percent estimate. And economists are privately expressing rising concern about a possible double-dip recession.
Republicans have sharply criticized Obama and Democrats for the stimulus bill and their broader economic policies. According to numerous polls, the economy is the top concern for voters in November, and the public has soured on Democrats' efforts at recovery.
The White House has not announced a replacement for Romer.
Romer also defended the estimate she and Jared Bernstein, an administration economist, made in the fall of 2008 for the pace of economic growth. The administration came under heavy criticism for arguing the stimulus would prevent unemployment from exceeding 8 percent. Unemployment now rests at 9.5 percent.
"We, like virtually every other forecaster, failed to anticipate just how violent the recession would be in the absence of policy, and the degree to which the usual relationship between [Gross Domestic Product] and unemployment would break down," Romer said.