Matt Yglesias

14 Responses to “Christina Romer on ARRA”

1. ron Says:
   February 28th, 2009 at 12:27 pm

   That piece was better than I expected, but unconvincing as to the package being big enough.
   I would love to see a similar explanation from Geithner as to the financial package.

2. ron Says:
   February 28th, 2009 at 1:03 pm

   Since the mid 1980s, the economy has expanded on the back of a series of bubbles (S&L,dot.com,housing) and increase of consumer debt.
   Going forward, I see the financial sector decreasing by half and a substantial draw-down of consumer debt.
   That will have to be replaced by government expenditures for GDP to grow.
   Therefore, I foresee massive stimulus being required.

3. MattYoung Says:
   February 28th, 2009 at 1:32 pm

   “In these models, a tax cut has a multiplier of
   roughly 1.0 after about a year and a half, and spending has a multiplier of about 1.6.”

   Estimates based on the last growth cycle. This growth cycle has not yet started, so to the extent that we have re-configured production it is mjore likely that her estimates are in error.

   She has no idea what the future production system looks like because no one can see it clearly as long as Ms. Romer keeps pushing us back to the system we just left.

   Look at what heppened to the yield curve since the crash. The total yield curve shrunk, then began to grow again. Then when Romer and Obama started pushing us backward, the yield curve collapsed once again, it is now inverted predicting the collapse of another economic sector.

   The economy wanted something specific that addresses the constraints consumers see. Just sort of “stimulus spending” is not an accurate answer. Stimulus spending is about covering the losses of the losers before the winners can get hold of the reigns.

   Obama mis-judged the depth of the depression, and he an Rahm thought they could sneak in some goodies before getting caught. We are smarter than that.

4. JonF Says:
   February 28th, 2009 at 1:43 pm

   Re: Since the mid 1980s, the economy has expanded on the back of a series of bubbles (S&L,dot.com,housing) and increase of consumer debt.

   The dot-com bubble was certainly a bubble but it was secondary phenonomemon. The 90s IT revolution was a bona fide technological revolution that transformed the world’s economies, ushered in a major productivity upsurge, and led to a broad-based (albeit temporary) prosperity that rested on solid foundations, not wishful thinking. It was no more “smoke and mirrors” than the electric power and automobile revolution of the early 20th century (which ended in the speculative bubble crash of 1929 after all).

5. SavageView Says:
   February 28th, 2009 at 2:19 pm

   Estimates based on the last growth cycle. This growth cycle has not yet started, so to the extent that we have re-configured production it is mjore likely that her estimates are in error.

   She has no idea what the future production system looks like because no one can see it clearly as long as Ms. Romer keeps pushing us back to the system we just left.

   Look at what heppened to the yield curve since the crash. The total yield curve shrunk, then began to grow again. Then when Romer and Obama started pushing us backward, the yield curve collapsed once again, it is now inverted predicting the collapse of another economic sector.

   The economy wanted something specific that addresses the constraints consumers see. Just sort of “stimulus spending” is not an accurate answer. Stimulus spending is about covering the losses of the losers before the winners can get hold of the reigns.

   Obama mis-judged the depth of the depression, and he an Rahm thought they could sneak in some goodies before getting caught. We are smarter than that.

   As an economist might say, this is a post devoid of economic content.

6. bob mcmanus Says:
   February 28th, 2009 at 2:32 pm

   Here is SSRN Page Romer’s SSRN page. Abstracts only without subscription, but worth a glance.

   Look, I guess there are several arguments about Christy Romer. To me, she is one of the leading figures of “Great Moderation” New Keynesianism, with its overwhelming preference and bias toward relying on Fed rates & monetary mechanisms to stabilize the economy. I believe this reliance on monetary policy, and the use of Fed rates to hold real wages down, and a distaste or distrust of messy fiscal policies as automatic stabilizers, are among the majors sources of our present crisis. As far as I can tell, Romer & DeLong and even Krugman have not abandoned their preference for monetary stabilzation over fiscal, and are mostly “foul weather” Keynesians, ready to return to their underlying neo-classical models the minute GDP turns positive or when Fed market rates start to rise.

   There is plenty of reason to expect Romer & her allies to become deficit-hawks and over-enthusiastic inflation-fighters at too early a time, possibly generating a double dip repeating FDR’s mistakes in 1936-37. The fiscal “restraint & responsibility” is an open theme of Obama’s rhetoric and program, and it is not “lying” to be concerned about Romer * Summers histories and previous positions.

   Romer is no Post-Keynesian social spender, and to claim she was always already a fiscal enthusiast is the lie,

7. bob mcmanus Says:
   February 28th, 2009 at 3:00 pm

   I also have sopme questions or difficulties with the Romer’s work on the macroeconomic effects of tax policy, especially the NBER paper. She goes into the subject again in the linked speech.

   Here is Kash and here is James Hamilton

   Ya know, as I told DeLong, Christina Romer sure seems to get misunderstood and misinterpreted a lot, by some people I respect and some I don’t.

8. bob mcmanus Says:
   February 28th, 2009 at 3:19 pm

   This is the line, repeated I think a little inexplicably in her speech, certainly taken out of context, without the Romer’s data and details and caveats, that Mankiw and Tabarrok & the right-wingers have been running away with.

   A tax cut of 1% of GDP raises GDP by between 2 and 3% over the next three years.

   In the policy environment from Kemp-Roth to the latest tax-cut madness out of the minority party in Congress, for a liberal to toss this sentence out there is irresponsible and counter-productive at best.

9. ron Says:
   February 28th, 2009 at 3:34 pm

   So for economic advisors Obama has Summers (who has screwed-up every thing he has touched), Geithner (a dumkopf and protege of Rubin (the evil one)), Romers (who seems to often confuse the trees and the forest) and Volcker(a genuine public servant).
   Here’s hoping Volcker prevails.

10. Thomas Says:
    February 28th, 2009 at 3:36 pm

    But Bob, that’s what her research actually shows. Contrary to Matt’s suggestion, her research hasn’t addressed fiscal stimulus along the lines we’ve just seen. She says that she thinks there are reasons to believe there are parallels, but that’s a hypothesis which should lead to investigation, not an actual result.

    And contrary to DTM’s statement above, she doesn’t say she believes spending has a higher multiple than tax cuts. She just says that they used conventional models that assumed that. So basically she suggests a parallel between spending and tax cuts, and then uses models that disagree with her own research findings to support spending. There’s not much to be said for this speech.

    Someone should ask Romer what she thinks of tax increases in 2011, given that she thinks some stimulus will still be needed. Here’s my guess: she’ll say that her research says that tax increases for deficit reduction don’t harm growth. But don’t ask her to square that with her criticism of Barro.

    There’s no there there–this is just b.s. dressed up as analysis.

11. SavageView Says:
    February 28th, 2009 at 10:10 pm

    So for economic advisors Obama has Summers (who has screwed-up every thing he has touched), Geithner (a dumkopf and protege of Rubin (the evil one)), Romers (who seems to often confuse the trees and the forest) and Volcker(a genuine public servant).
    Here’s hoping Volcker prevails.

    Ron, on the other hand, is a blog poster.