Despite historically high projected US budget deficits, there are no lessons for the United States in the Greek debt crisis, says Christina Romer, chair of President Obama's Council of Economic Advisors.
European Union leaders have been scrambling to find a way to prevent a default on Greek government bonds. Greece has consistently violated EU rules holding government budget deficits to 3 percent of gross domestic product. Late last year, the Greek government said its current deficit was 12.7 percent of GDP, which led to a financial market run on Greek government debt.
In its budget for 2011, the Obama administration predicts the federal deficit will be 8.3 percent of GDP and then fall to 5.1 percent the following year. The deficit is expected to hit 10.6 percent in the current budget year.
US is completely different case
In response to a question about possible lessons for the US from the Greek experience, Ms. Romer pushed back strongly at a Monitor-sponsored breakfast with reporters. “At a most fundamental level, the United States is clearly completely different.... I think the important thing is the United States is the most credit-worthy country in the world,” she said.
Romer added, “No, I don’t think there is actually a lesson for the United States. I think, for all of us, what we always knew is countries have to get their budget deficits under control, and the United States and the president certainly have a plan to do that. “
Disaster in 'walking the walk' on deficit reduction now
The CEA chair also defended the Obama administration from critics who say the administration talks a good game on controlling deficits but is not walking the walk. “In the very short run … walking the walk would be a disaster for the economy,” she said. With unemployment high, “right now is not the time to be getting the budget deficit down to 3 percent of GDP,” the CEA chair said. “But we need to put in place a plan … going forward that makes people understand we are going to get [the deficit] under control.”
Only 6 percent of Americans think stimulus act created jobs
A New York Times/CBS news poll out today showed only 6 percent of Americans think the $787 billion stimulus act has created jobs. When asked about that widespread skepticism, Romer replied, “That is a hard one…. We are inherently in the world of the counterfactual.”
With jobs losses continuing, “I think in that world, if you ask people: Are things working? They say, 'God, no – things are not working, the unemployment rate is still going up,' ” Romer said. “Having to say, 'Do you understand how much worse it would have been?' ... The trouble is, that is not an easy sound bite.” And, she admitted, “for someone who is unemployed or just seeing their children not being able to get a job, that doesn’t feel like progress.”
Romer said she strongly supported tax credits for firms that hire new workers, a concept she described as “kind of putting the workers on sale this year.” It is a proposal which has significant support in Congress.
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