President Obama’s leading economist will leave her post Friday, the same day the U.S. Bureau of Labor Statistics releases the latest national unemployment numbers.
The unemployment rate is expected to remain at 9.5 percent, or possibly creep a tenth of a percentage point or two higher. The numbers will cap what has been a tumultuous 19 months for the president’s economic team: from the bad press about the stimulus to the growing ranks of people out of work for more than six months.
Romer acknowledged these hardships in a farewell speech Wednesday at the National Press Club titled “Not My Father’s Recession.” She spoke about her family’s brush with economic hardship following the 1981-1982 recession, when her father lost his job at a chemical plant. Her parents rebounded financially within a few months, but the millions of jobless Americans in this recession have not had the same luck. “Precisely what has made it so terrifying and so difficult to cure is that we have been in largely uncharted territory,” Romer said in her speech.
Whoever inherits her position may feel the same sense of helplessness—along with having to deal with the hard fact that there will no additional money thrown at this crisis, unless it comes in the form of tax cuts.
Romer spoke about the benefits of the $787 billion stimulus package, while acknowledging that “it has been hard for people to see what the [American Recovery and Reinvestment] Act has done.” But, with the midterm elections fast approaching and with a deadlocked Congress, it will be politically impossible for the president to pass another spending package. Even extending unemployment benefits has proven to be a challenge.
Whoever takes the job as the chair of President Obama’s Council of Economic Advisers (D.C. journalists have compiled possible lists of candidates here and here) instead will have to act more like an operator than a macroeconomist.
The person will need the political smarts to help shape any legislation related to tax cuts for individuals, small businesses, or companies that hire unemployed workers. He or she will also need to closely work with colleagues at the Federal Reserve to tweak monetary policy and interest rates when need be. I would also argue that the person will need to work closely with the SEC, FDIC, and other regulators as they nail down the specifics of the financial-reform bill. Although this does not affect the broad macroeconomic policies, whatever regulations put in place could go a long way toward staving off another financial collapse.
Finally, the new economist will need a certain level of toughness—the ability to laugh off the barbs of academia and political operatives as the 2012 election approaches and as everyone thinks in hindsight about what could have been done better.