A speech by Christina Romer (chair of the Council of Economic Advisors and until recently an economic historian at Berkeley) in defense of the stimulus package is making the rounds in the econblog world. I highly recommend it – it’s an excellent (if brief) description of why she thinks the stimulus will work and what’s wrong with the critiques of her estimates of the multipliers on taxes and spending (that is, how much stimulus per dollar of government spending we will get).
A couple notes/thoughts: Her research involved a significant amount of qualitative analysis of government documents and the congressional record. How refreshing, from an economist! Second, Romer (like many economists) uses the financial sector/real economy distinction, arguing that aiding recovery in the real economy will help the financial sector out. I still wonder when that distinction starts and when it takes on its current vocabulary?
Last, here’s Romer’s defense of “non-traditional” stimulus spending:
Second, there’s a tendency in some circles to criticize specific spending proposals, like funding for preventative care or Pell Grants for college, that involve spending that looks very different from our traditional view of stimulus projects where brawny men build things out of steel. But, those types of spending provide just as much stimulus as road-building and school-weatherizing. Spending on preventative care leads to the increased employment of nurses and clinic staff. Pell Grants lead to job creation in education, and by relaxing the budget constraint for households, lead to jobs in industries that produce consumer goods.
I love the writing, and the ease of justifying massive new government spending on education and health care. As Rahm says, we can’t let a crisis go to waste. Hooray for the Obama administration! Let’s just hope we get a single-payer system by the end of this (though that seems unlikely still).
Oh, and I’m sure you all caught Obama’s education rhetoric in his big speech last week, right? Did you notice the bit about it being unAmerican not to attend college?
But whatever the training may be, every American will need to get more than a high school diploma. And dropping out of high school is no longer an option. It’s not just quitting on yourself, it’s quitting on your country — and this country needs and values the talents of every American.
I’m calling this the “full employment for professors” act.