The economy is getting better quickly, but Americans won't believe it until we feel the extra cash in our wallet or hear an end to our friends' stories about the job market resembling a giant bottomless pit for cover letters. What's keeping GDP growth from trickling down into employment growth? Christina Romer, chair of the Council of Economic Advisers, told the Wall Street Journal's economics editor David Wessel that there are four things holding back the US economy:
1. Credit availability remains tight. 2. State and local governments face continuing budget shortfalls.
3. No one expects consumers, after the searing events of the past few years, to go back to their free-spending ways.4. Foreign demand for U.S. goods remains subdued because the recovery has not taken hold as firmly in Europe as in the U.S., limiting European demand.
She has solutions.
More private demand is essential, she said, but government can do more than it is - and Congress should embrace everything the president has proposed and then some. "One targeted measure that is likely to be very effective is additional fiscal relief to the states," she said. Another is putting money into smaller banks, as the president has proposed, to get them to lend more to small and medium sized firms. A third is more aggressive actions to open foreign markets to U.S. goods and services.
Romer is on the right track, but it's baffling that Treasury officials would leak rumors of a lower-than-expected deficit last week if the administration is indeed planning on additional stimulus measures that would raise the 2010 deficit. Stan Collender, a DC vet on budget battles, interpreted the leak as clear evidence that the White House was signaling that an end to stimulus, or any discussion thereof. Now the chair of the CEA is not only talking about the idea of more stimulus, but calling for Congress to pass an additional relief.
This is part of a broader, bizarre trend of deficit doublespeak. White House officials sing alleluias when deficit projections inch down, compare red ink to monopoly money and say the government should tighten its belt because families are tightening theirs. At the same time, White House officials propose more stimulus spending, enumerate the virtues of more red ink, and explain that when states tighten their belts, the federal government should loosen its fiscal policy. Those are totally opposite and incoherent positions! How can you possibly expect Americans to understand the argument for more spending when each day brings only a 50% change that you'll actually make the argument for more spending?