Romer: A Plan on Jobs Deserves a Hearing

Christina Romer takes on several arguments against Obama's job creation proposal, e.g. that worry about the deficit is standing in the way:

A Plan on Jobs Deserves a Hearing, by Christina Romer, Commentary, NY Times: ... People are concerned about the deficit, and this concern is holding back the recovery. Fiscal austerity, not more stimulus, is the answer.

This argument makes me crazy. There’s simply no evidence that concern about the current deficit is a significant factor limiting consumer spending or business investment. And government borrowing rates are at record lows, suggesting that financial markets are not worried about the deficit, either.

Moreover, as I discussed in a previous column, the best evidence shows that fiscal austerity depresses growth and raises unemployment in the near term. That’s the experience of countries like Greece, Portugal and Britain... Cut the current deficit and you will raise unemployment, not lower it.

Like many other countries, the United States has two terrible problems: a devastating lack of jobs right now and an unsustainable budget deficit over the longer run. The right question is not whether we can reduce unemployment by lowering the deficit (we can’t), but whether we can make progress on both problems.

With 14 million Americans unemployed and no prospect of rapid recovery on the horizon, we really have no choice: we must take additional measures to create jobs. ... Just as important, policy makers should be discussing how to make meaningful progress on the long-run deficit at the same time. We need a credible plan that phases in aggressive deficit reduction as the economy recovers.

The president has started a discussion about job creation. His proposal deserves a full debate based on facts, evidence and careful analysis.

One thing -- I wouldn't say that long-run deficit reduction is "Just as important" as job creation. Job creation is the more important concern right now.