Christina Romer, of UC Berkeley, has been appointed to Chair President Elect Obama's Council of Economic Advisers. Romer wrote, if not the book, at least the chapter for Encyclopedia Britannica, The Great Depression. News of her appointment should make liberals and women who opposed the appointment of Lawrence Summers, who many predicted (including today's Wall Street Journal) would get this job, somewhat happy, though it looks like Summers will be named White House economic director. Professor Romer and her husband David were both advisers to the Obama campaign and they hold two seats on the committee which decides when the U.S is officially in a recession.
The Romers are macroeconomists, who study the big picture in economics. They've also studied the way tax cuts affect the economy and government spending. A UC Berkeley article reported,
What they found about both issues surprised them. Tax cuts provide powerful short-run stimulus to the economy, but there is little evidence that tax cuts restrain government spending.
"It turns out," Christina explains, "that tax cuts have led, eventually, to tax increases. Basically, something has to give. What we thought gave when you cut taxes was spending, but we seem to find that in postwar U.S. history what actually gives is the tax cut itself. A substantial fraction of a tax cut is typically undone in the subsequent five years."
The appointment may telegraph Obama's intentions regarding Fed Reserve Chair Ben Bernanke. Romers wrote a paper, Choosing the Federal Reserve Chair: Lessons from History. Like Bernanke, she has a history of a connection to Princeton University, where she was an assistant professor from 1985-1988. Romer graduated from College of William and Mary in 1981 and from M.I.T., with a Ph.D., in 1985. In 1994, she co-authored, with her husband, a paper, "What Ends Recessions?" It's clear, Obama is appointing someone smart, with strong academic credentials. Unlike Treasury Secretary appointee Geither, who is overflowing with experience, Romer is an academic who's specialized in "getting" the big picture.
