As she prepares to leave The White House, outgoing economic advisor Christina Romer has delivered something of a valedictory speech to the National Press Club. The title: Not My Father’s Recession.
For Romer, her Father’s recession was the one in the early 80s, when unemployment surged above 10%, and Romer’s own father got laid off.
BI then quotes from Romer’s speech. Don’t bother reading it, unless you feel you must, because it’s a lot of “it’s all somebody else’s fault because we didn’t know how bad things were” blame-shifting and excuse-making.
In a report that Jared Bernstein and I issued during the transition, we estimated that by the end of 2010, a stimulus package like the Recovery Act would raise real GDP by about 3 1⁄2 percent and employment by about 31⁄2 million jobs, relative to what otherwise would have occurred. 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 to meet these milestones….
What the Act hasn’t done is prevent unemployment from going above 8 percent, something else that Jared and I projected it would do. The reason that prediction was so far off is implicit in much of what I have been saying this afternoon. An estimate of what the economy will look like if a policy is adopted contains two components: a forecast of what would happen in the absence of the policy, and an estimate of the effect of the policy. As I’ve described, our estimates of the impact of the Recovery Act have proven quite accurate. But 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 GDP and unemployment would break down.
Every other forecaster failed to anticipate how violent the recession would be? Are you kidding me? Is she really that dim? First off, her claims that the Act raised real GDP by about 3 1⁄2 percent and employment by about 31⁄2 million jobs, relative to what otherwise would have occurred, is unknowable, immeasurable and just as accurate as me claiming that my all powerful mind can create stars from nothing at the edge of the universe. The proof of my claim will arrive when light from that star gets to Earth … in about 13 billion years! The proof of her claims are just as illusory.
- Bear Stearns gone, Lehman gone, Wachovia gone, Merrill gone, WaMu gone. Goldman, MS and the Hartford and other brokers and insurance companies converting to banks to get under the FDIC umbrella. Yet Romer thought this was like the 1980s.
- The implosion of the Reserve Primary fund and the half a trillion dollar “run” on the money market system. The collapse of the commercial paper market, and money market funds on life support, surviving only because of federal guarantees, and she thought this was just your typical, garden variety economic slowdown.
- With foreign financial firms like RBC, SoGen, ING and banks across the planet in the toilet, Christina Romer thought this was just like the inflation-busting recession “Tall Paul” gave us.
I’ll never stop believing this one fact. Economists in general, and especially the economists in the Obama administration think they are smarter than everybody else. But they’re not. They may be better educated. But good grades do not equate to intelligence.