Christina Romer: Working to Improve the Economy

Christina Romer, the chairwoman of the president's Council of Economic Advisers, has a special credential for her job. As a college professor, she developed an expertise in the causes of and recovery from the Great Depression in the 1930s, especially the role played by the federal government's fiscal and monetary policy. This has become invaluable as she helps President Obama formulate policies to lift today's economy out of crisis. Romer, 50, is a soft-spoken former economics professor at the University of California-Berkeley. Before that, she taught economics and public affairs at Princeton University. Romer talked recently with U.S. News about what has gone wrong, when a recovery might occur, and what it's like to work with President Obama. Excerpts:

How do you assess the economy today? When will it get better?

People's biggest concern is the overall state of the economy, in particular what's happening to the unemployment rate, which we know has gone up dramatically. We share that concern, and that's why we've taken all the actions that we have—the Recovery Act, all of our work on financial markets, and our housing program. All of these actions were aimed at dealing with the economic crisis and getting the economy going again.

When is real gross domestic product going to bottom out and start to grow again? Most of the forecasts say probably the third quarter is when we'll turn the corner, and then we'll start to grow again toward the end of this year and throughout next year.

How long will Americans be patient that the government will eventually get the job done in improving the economy?

What people realize is this is an incredibly severe recession. It's now more severe on many dimensions than, say, the 1980-82 recession when Ronald Reagan was president. The American people realize that policymakers are doing just a tremendous amount to try to turn this around and that we are as concerned and committed as they are.

What if nothing had been done?

Based on my work as an economic historian, I think the shocks hitting the economy this time are at least as big as those in the 1930s. What our economy was up against was just enormous. The only reason we have not gone off a cliff is the policy response. Here I give a lot of credit to [Federal Reserve Chairman] Ben Bernanke and the Fed back in the fall and a lot of credit to the president and the Congress for what we've been able to get done in the last five months.

Polling indicates Americans are concerned about the deficit and the debt. Is it overdone as an issue, and how do we get to the point where it's not as big and scary as it is now?

It is important to draw a distinction between the short-run deficit and the long-run deficit. Of course the deficit is large now because, one, we inherited a huge deficit; two, the economy is very weak and that inherently creates a large deficit; and, three, we've had to take aggressive action to try to get the economy going again. It would have been nice if we hadn't started with a big deficit, but given where we were, it's absolutely appropriate that it grew because we needed to do that to get the economy going again.

But the bigger issue is the longer-term deficit projections, and that is something the president is concerned about, I'm concerned about, everybody is concerned about, and it needs to be dealt with. My own take on this is that we are in the middle of healthcare reform, and a big part of our long-run fiscal problem involves the rising cost of healthcare. And so I have certainly been pushing very hard that at the time we're doing reform, it's just absolutely crucial that we make those changes that will slow the growth rate in healthcare costs. And if we can keep the will to do that, it will be very good for our budget deficit and will reassure the American people.

The Congressional Budget Office has estimated the costs of two leading healthcare bills in the Senate at, respectively, $1 trillion and $1.6 trillion. How damaging are those numbers to efforts to overhaul the system?

There are so many bills being discussed right now, I think everyone understands that we are early in this process and the numbers are likely to change. What the CBO estimates may have done is focus our attention on how important it is to do reform well.

What are the biggest misunderstandings that you would like to correct about the president's healthcare plans?

One of the things that I keep coming back to—the president has been very clear when he says if you like your doctor, if you like your plan, you can keep them. And I think that is an important message for the American people because one of the things that went wrong the last time [when the Clinton administration pushed for healthcare reform 16 years ago] is people got scared. And if you listen to the president, he is very compelling and convincing that we are going to keep what works and we're going to fix what doesn't.