I'm Christina Romer, and I'm the nominee designee for the chair of the Council of Economic Advisors.
One of the ways the President-elect has described his goals for
American Recovery and Reinvestment Act
is he wants to create or save three million jobs.
That's a very concrete way of saying we want to turn the corner and ease as much of the pain as we can.
And so one of the things he wanted was some evidence that as the plan develops
are we going to meet that goal, and then it even went further because there are
certainly questions about well how about the various pieces of the program?
Are all of them helping us meet that goal?
Are some better than others?
Is there reason to have a balanced package?
So that was something we're looking at.
There have been some questions about, well what will the jobs be like that this kind of a plan would create?
What industries will they be in?
What kind of people, what demographic groups would be likely to get them?
And so that was an issue he wanted us to look at.
It's kind of a funny thing.
It's not something that a CEA chair designate would normally do.
This is more like my old life as a university professor.
It's doing research, but that was something I knew how to do.
And it's a joint report with Jerry Bernstein who's an economic advisor to the Vice President-elect
and who's also a very important expert on labor market issues.
So it was a nice chance for the two of us who didn't really know each other
to get together and collaborate and try to answer the President's questions.
We worked with a lot of forecasters both private and public to get a sense of what do you think the effect of government spending is,
what do you think the effect of a tax cut is,
then put them in the computer and simulate what do we think is going to come out of this, what is it likely to do to GDP, what's that likely to do to jobs.
The important finding there is we do think it will create probably somewhere between three and four million jobs.
Something else we that we looked at is the effects of the different pieces of the program.
I think often times people have a sense that well they can understand if we invest in green energy that will make green energy jobs.
But sometimes it's not so clear why do you have a tax cut in there?
Is that really going to create new jobs? I don't see that.
And so a crucial part of, I think, our analysis is to point out that absolutely when you cut people's taxes they spend more.
And when people spend more that means that people have to produce the goods they are making.
And so those kinds of things do have jobs affects, as well
Likewise, when you invest money in infrastructure, that makes jobs directly as you hire people to do the infrastructure.
But it also makes more jobs as they get wages and start spending it, then the things they are buying, those creates jobs.
Another thing we looked at, is what kinds of jobs are going to be made.
For example, what industries would you expect them to be made in?
Well here we had to rely on private forecasters who have a lot more resources than we do right now, and staffs
and things that can be running these studies.
But we found some really interesting things.
We do think, obviously, if we are going to do a lot of investment in roads and bridges, we are probably going to create a lot of jobs in construction.
But we found some really interesting things.
And absolutely, that's in there.
But again it was a useful exercise, I think, for us and for the President-elect to see but ah, think about the investment in health care and education or state fiscal relief.
you might be used to thinking about where is that kind of government spending going to show up.
Likewise if you have a middle class tax cut, one of the places that that shows up is in wholesale and
retail trade because when people start buying things, we need people to run stores again.
So I think that can be important.
But so what we find is though that the jobs effects are somewhat concentrated in some industries
absolutely in construction and manufacturing have more than you would get if if you just had a completely generic kind of recovery package.
But it is pretty broad-based and it is going to show up throughout the economy.
The very first email I got when I was announced as a member of the economics team was from a women's group
saying we don't want the stimulus package to just create jobs for burly men.
And that's been in the back of my mind as I looked at this and thought about this.
And that's where certainly I've been one of the strong proponents of, you know, the balance of the program,
the fact that it does have the investments in education and health care, it does have the state fiscal relief,
it does have the middle class tax cuts – all of those kinds of pieces are creating jobs in some of the sectors like health care
and education and retail trade where women are a larger, sort of a disproportionately large
fraction, so I think that is an important finding.
I think one statistic that I hadn't really been focusing on as much until I got into this
had to do with what's happened to sort of, not so much the number of jobs, but the nature of jobs
because one of the really striking statistics is the number of people who are working part time for economic reasons
- like they are forced to, their full time job turned into a part time job - that number that we just got in this morning's report shows, since this recession started a year ago
3.4 million workers have moved from full time to part time for economic reasons
and so that was something that I found really striking and led us to think that that again is something that is very sensitive to the overall health of the economy
and so as we improve the overall health of the economy, as we get the recovery going, one of the things that we'd expect and
hope to see is those people that have been forced into part time will get to move back to full time.
So it's not just that we are going to create more jobs but we are hoping better jobs that, that will serve our population better.
As bad as things are, what our parents and grandparents went through 75 years ago was certainly much worse.
Right, there we were talking about unemployment rates of maybe 25 %, today's number was 7.2 which is terrible it is just not as bad as 25%.
So I don't want to go too far and to say that things are as bad as they have ever been.
I think where my knowledge of history has mattered is in making me realize the risks.
Right, part of the reason I worry so about how this could spiral out of control and why I've been an advocate for really pushing,
and an advocate, for a sensible and strong recovery plan is precisely because we have seen that happen before.
I mean I think one of things, the, the parallel to the Great Depression right, the initial downturn right,
we had trouble in our financial markets and that set off a process where a recession started and, and its seeing that snowball that as things got worse,
the banks got weaker, things got even worse, made me say we've got to, we've got to stop this thing now,
right, not to let that sort of vicious cycle go all the way to the nightmare scenario.
You know, certainly, part of the, the role I felt I needed to play in this transition is to be talking about how bad things were and how bad they could get.
Right, because I think we did need to make the case for a bold, innovative recovery package.
The flip side of that, though is I think if we take those actions and the kind of actions that are being talked about, I think much good could come of it.
So first of all I think we will turn the corner.
I am a firm believer that government, increases in government spending, that if you cut people's taxes you do get the economy moving again
and I think that's a, a crucial lesson from history, and one I absolutely expect to, to see played out.
I think even more important is thinking about the long run.
Right, this is not just spending for spendings sake.
It's because we are trying to be smart about it.
We are trying to spend on things that we think will make the economy better.
We are trying to, uh, get a start on the smartgrids so we have a better energy economy.
We are tying to, to rebuild our schools so that we educate a whole, we educate our children better.
We're trying to rebuild our infrastructure so that can be a more productive economy and I have great hopes that by spending the money now,
we're, we're helping the economy today but I think we going to be helping it in the future as well and so I think we can look forward to a healthier, faster growing economy in the future.