Romer Says U.S. Must Tax Less, Spend More to Aid Employment
By Diana I. Gregg
Publication Date: 09/02/2010
The government should cut taxes and increase spending to stimulate the economy to reduce unemployment quickly, Christina Romer, the outgoing chair of the president's Council of Economic Advisers, said Sept. 1.
Romer, who steps down Sept. 3 to return to academia, said at the National Press Club the odds of a “double dip” are “very small” but the U.S. economy “is going through a rough spot.” She said that “concern about the deficit cannot be an excuse for leaving unemployed workers to suffer.”
She said the gross domestic product “by most estimates is still about 6 percent below trend” due to a demand shortfall, and that the only surefire ways policymakers can substantially increase aggregate demand in the short run are to ensure the government “spend more and tax less.”
“In my view, we should be moving forward on both fronts,” she added.
President Obama said Aug. 30 he will shortly make new proposals to spur growth revolving around tax cuts and investments in infrastructure and clean energy.
Romer said there is “incredibly strong evidence” the American Recovery and Reinvestment Act (Pub. L. No. 111-5) has worked, that fiscal policy and monetary policy are both useful, and that she is confident “additional actions would be useful.”
In her speech, Romer said the $787 billion stimulus package “has played a large role in the turnaround in GDP and employment.”
Small Business Legislation
Romer said there is a risk that high unemployment will become permanent if workers' skills are allowed to deteriorate and they drop out.
Romer did not identify any new proposals but spoke of those passed and still pending, and urged adoption of the small business legislation (H.R. 5297)—which is stalled in the Senate over Republican objections—that would provide tax cuts as well as a boost to lending.
“As the president said … there are a range of other sensible measures that deserve consideration, such as tax cuts for struggling middle-class families and businesses willing to invest in the United States, and much needed investments in infrastructure,” Romer said.
Extending Top Tax Cut Seen as Waste
Responding to audience questions, Romer said extending the Bush tax cuts for the upper-income earners, rather than only for those earning no more than $200,000 ($250,000 for couples) as Obama wants, would be “fiscally irresponsible.” She put the cost at $24 billion next year, adding that she could “guarantee” there are more effective ways to spend that amount.
Romer said that even though in the short run it would help if consumers were spending more, she warned against a return to “unbalanced growth,” so eventually consumers will need to boost savings while companies invest more.
The complete text of this article can be found in the BNA Daily Tax Report, September 2, 2010. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2010, The Bureau of National Affairs, Inc.
