More Stimulus

http://online.wsj.com/article_email/SB10001424052748704107104574570331372941594-lMyQjAxMDA5MDAwMjEwNDIyWj.html

We have chronicled in prior posts (note the "plural") how Paul Krugman and Warren Buffet have concluded separately that more money needs to be pumped in to the economy, that the "stimulus program" was not enough. Others joined them in that position. One needs to look no further than an unemployment rate of 10.2% (or an "underemployment rate of 17.5%) to see that the potential for a "double-dip" recession is there.

When the Federal Government begins to conclude this, we see articles like the one attached authored by Christina Romer who is Chair of the President's Council of Economic Advisers. Dr. Romer's article was written to "position" the President's White House meeting yesterday on employment. As opposed to Lawrence (don't call me "Larry") Summers, for whom many (including this author, the entire female faculty at Harvard, and others) have little use, Christina Romer has the respect of most people even though she practices the dismal and imprecise science of economics.

Dr. Romer suggests in her remarks that the the stimulus did, indeed, turn around the economy as evidenced by the majority of "professional forecasters" agreeing with her position (these would be the same people who did NOT predict the financial collapse). More importantly, she quotes the Congressional Budget Office (no friend to the White House or either political party) as concluding that 3rd quarter GDP was up 1.2% to 3.2% over what it would have been had there been no stimulus. In addition, she quotes the CBO as in agreement that between 600,000 and 1.6 million jobs were created by stimulus money (directly or indirectly). While there is some dispute about the jobs numbers, there is little dispute about the GDP numbers.

However; Dr. Romer goes on to point out that, despite these successes, the job market remains weak. She sees American businesses as hesitant to hire while producing more with fewer workers. She is, as she says, looking for large and small businesses to come in off the sidelines to "boost job creation." She mentions that the government could provide "incentives" to help small businesses invest, grow and create jobs. This would include measures to restore the flow of credit for small businesses and targeted tax cuts. Her whole position, with these and other suggestions that she has, is that moderate and targeted investment by the government might be leveraged into significant employment gains and purchasing power by small businesses.

She should be applauded for her position and, hopefully, something will come of it. As we said in our prior post, small businesses and new businesses are where most job creation takes place.

The original stimulus program (inclusive of all the money that was spent beyond the $787 B) was
not enough. The original stimulus program was supposed to keep unemployment at 8% or less. It did not. Dr. Romer's suggestions provide a way to supplement that stimulus without appearing to go back to Congress and admitting to failure. Most importantly, her ideas do something for employment.