position -- arthur burns, walter heller, marty feldstein, and obviously, ben bernanke was there, as well, and allen greep -- greenspan. dr. romer is one of the best known macro-economists in the country. she served 20 years in the faculty at the university of california at berkeley. she became an expert at that time in the depression. she also became a leading expert on fiscal policy and what kinds of effects this has had on the policy by changes in tax policy. she did a lot of this work with her husband, who is also an economist at the university of california, berkeley, and i would say that shows a lot of interpersonal skills.

being married to someone is hard enough, but being married to someone in the same department, also writing articles with your spouse and raising three children is very difficult. she has three children, none of whom are likely to be economists she's told me, but there is a chance her eighth grader may go to economics. her others are in natural sciences. she actually has a unique role in this respect. historically president -- people who have been on the chair of economic advisors have often fought for time with the president of the united states because there are many people who want to see the president, and so the chair of the council doesn't get to see the president as often as the chair would like or as often as other economists think should be the case. but in this case, i think dr. rm omer has actually had more face time with the president than any of her predecessors over the years, and that's in part because she participates in a daily briefing of the president on economic matters, and as a

result she sees the president almost every day if not several times a day. she's also a member of the economic council, and she plays a leading policy role in helping formulate the economic policies of this administration. this morning she'd like to talk a little about the fiscal stimulus program that we've had in the country so far and the consequences of it. i think after she has done her remarks, we will have time for questions from the audience. thank you very much. it is my honor to introduce the council of economic advisors chair, dr. christina romer. plus [applause] >> thank you, it's lovely to be here. it is an honor to speak in front of such a distinguished group. a couple weeks ago we hit the

five-month anniversary of the american recovery and re-investment act. the recovery act provided $787 billion of tax cuts in government spending or roughly 5% of g.d.p., making it the boldest counter-cyclical move in america's history. it was a central piece to rescuing the economy from the worst recession since the great depression and to build a foundation for a stronger more durable prosperity. over the spring and the summer there has been a lot of chatter about how the recovery act was doing, and i would like to spend some time this morning providing an assessment of what it has accomplished and what we can expect going forward. this is a natural time for the assessment coming on the heels of last friday's g.d.p. report. this gave us a look at overall

performance in the second quarter of this year and a clearer sense of the depth of the recession over the past five quarters. in a whimsical moment, i sent in as a title of the talk, "so, is it working?" and given the provocative title, i should probably get right to the answer. absolutely. the recovery act taken by the treasury and to stabilize the market and housing sector is it working to change the trajectory of the economy. it is providing a crucial list of aggregate demand at a time when the country needs it most. we feel the effects will build through the end of this year and the beginning of the next. 3 let me begin by discussing the motivation for the fiscal stimulus and the logic behind its design. the u.s. economy slipped into a recession in december of 2007.

the initial downturn was relatively mild. real g.d.p. declined at a rate of just .7% in the first quarter of 2008 and job loss was about 100,000 per month. in deed, a well-timed temporary tax e rebate that began going out in late april 2008 contributed to positive g.d.p. growth in the second quarter of last year. unfortunately, worsening declines in house and stock prices late last summer led to a fall in consumer spending and sent shock waves through our financial system. the collapse of lehman brothers last september set off a genuine financial panic and led to a devastating freezing up of our financial system. by the time president obama announced his economic team just before thanksgiving, it was clear the economy was rapidly deteriorating.

now, how sick the economy would prove to be and how fast it would fall? we're still unclear. knew data was coming in each day. but there was no question in our minds that the economy was in its most precarious position since the great depression. at a meeting in september, we urged the president to hit the economy as hard as he could with a bold stimulus package. the federal reserve had done a great deal to stimulate zphand following lehman's collapse -- stimulate demand following lehman's collapse, but the fed had -- but there was a dramatic fall in household wealth. there was no realistic prospect that the private sector would generate a turn-around in demand

anytime soon. thus helping distressed home owners was essential, but it would not be enough. we would need to bring in the other main tool the fed has, fiscal stimulus. in the past few months some have tried to describe fiscal stimulus as a questionable solution. to use a medical analogy, fiscal stimulus is a well-tested antibiotic not some new-fanninged gene therapy. this is almost as widely accepted as any in economics. practically up there with supply and demand and the quantity theory of money. fiscal smus stimulus has been used by both parties. roosevelt increased public works spending greatly, dwight

eisenhower expanded the highway program and accelerated other types of spending to counter-act the 1958 recession, and george bush used tax cuts to help end recessions. there is also ample evidence that fiscal stimulus works. many studies have been done to try to measure the effects of fiscal stimulus. these studies thow show strong impacts in fiscal spending. this is the obvious step to take when the economy is in decline and conventional policy has not worked is born out by the actions of other countries. virtually -- what you see from this is that virtually every country has enacted fiscal expansion during the current crisis. they have done so because it works.

the fiscal stimulus that the administration worked with congress to create was not only bold but well conceived. they got good employment bang for the fiscal buck. it was designed to provide lift for at least two years because we knew the economy was likely to face an extended period of weakness, and the president insisted that the period be genuinely useful. at a time when the budget was already large we could not afford to build the budget by digging ditches and filling them in. government had to supply realistic needs. now, the critics seemed to have missed the fact that roughly a third of the $787 billion took the form of tax cuts for american families and businesses. another third was aid to state government and aid to people directly hurt by the recession

through programs such as extended unemployment insurance. as unemployment rates have risen sharply, these look more crucial than they did in january. roughly 1/3 of the stimulus investment was for conventional infrastructure -- roads, bridges, water projects -- but some was more uniquely 21st century -- investments in r & d and a smarter electrical grid. i've reminded you why we took the actions we did, why we worked so hard to pass the recovery act. let me turn to the question i started with -- so, is it working? well, the money is absolutely going out the door quickly. as of the end of june, more than $100 million has been spent. those numbers are rising each

week. we are on track to have spent 70% of the total by the end of next year. i know some believe that the government can never doo do things well, but the program really is a model of efficiency and transparency. the recovery.gov web site announces a thorough understanding of what's happening. a blogger misinterpreted and said we spent $1 million for two pounds of ham. it turns out it was for 760,000 pounds of ham that went to food banks and soup kitchens. i can tell you that the vice president is a man on a mission and is determined to get -- every dollar will go out quickly to the high-value projects it was designed for. and the program is working. millions of unemployed workers have seen an extra $25 a week in

their unemployment insurance checks. 95% of american households saw a tax cut in their paychecks starting on september 1. my father and a lot of veterans got their stimulus checks in may. state and local government employees like teachers, firefighters, and police officers who were scheduled to be laid off are still working because of the increase in federal spending for the state. 252,500 road construction projects are underway. i believe the recovery act signs we see popping up everywhere will be as ubiquitous as the n n.r.a. blue eagle was. all right. there is still the question of whether we can see it in the overall performance of the economy. here i can't resist pointing out a falsey in a common critique.

throughout the spring i frequently heard people say, "the unemployment rate is even higher than you-all predicted. that means the policy isn't working and may actually be making things worse." that argument is, to quote a "new york times" editoral, just plain stilly. -- silly. let me give you an analogy. suppose you go to your doctor for strep throat and he or she provides an antibiotic. maybe after you take the first pill, your fever spikes. do you assume the pill caused your illness to get worse? no, you probably conclude that the illness is worse than you thought and you are glad you started to taking the medicine when you did. that is the situation with the economy. it is true that the u.s. and world economy went down much faster last fall and winter than we and almost all forecasters expected. the revised g.d.p. statistic

shows the actual decline in g.d.p. growth in the third and fourth quarters of last year was about twice as large as the preliminary estimates we had at a time indicated. and the rise in the unfloiment rate has been exceptionally large, even given the large fall in g.d.p. that we now know occurred. the fact that the economy deteriorated between january, when we were doing our forecast, and the end of march, simply reinforces how crucial it was that we took acks when we did. well, now having gotten that off my chest, let me return to the question. a little more than five months after the recovery act was passed, can we see the effects on the macro-economy? again, the answer is almost surely "yes." the reason i say, "almost churely" is because the recovery act has only been effect for about five months. that means we only have one quarter of data on economic outcome. if there is one thing i have

learned in the past six months it's not to read too much into any one number. with that disclaimer in mind, let me show you a graph of the growth rate of real g.d.p. what you see is, after falling considerably, and indeed, progressively more deeply in each of the three quarters before the more recent one, the falling g.d.p. moderated substantially. after falling at an annual rate of 6.4% in the first quarter of 2009, it fell at a rate of 1% in the second quarter. now, to be sure, the economy is far from healthy. we obviously have a tremendous difference to go. real g.d.t. is, after all, declining. but economies don't switch from rapid decline to robust growth all at once. given what we now know about the frightening momentum of economic decline in the first quarter, it

would have been lard for the economy to stabilize much faster than it has. now, this graph shows you the growth rate -- shows you the change in the growth rate of real g.d.p. for the last 25 years. the rise in g.d.p. growth from the first quarter to the second was the largest in almost a decade and the second largest in the past quarter century. now, this picture shows the change in payroll employment over the recession. a key indicator of just how brutal this recession has been is the fact that in the first quarter of this year, we lost nearly 700,000 jobs per month. in the second quarter, we lost on average 436,000 per month. this rate of job loss is horrendous. but the change does suggest that we are on the right trajectory. this figure again shows the change in the change in employment. and a movement in job loss from

the first quarter to the second was the largest in almost 30 years. in other words, after we administered the medicine, the economy was that was in free fall stabilized. stabilized substantially, and it now looks as though it could begin to recovery in the second half of the year. of course, identifying the effects of the recovery pact of just a few data points is inherently important, we don't observe what would have happened in the absence of fiscal analysis. one way to provide rigors to the analysis to do a more formal ecomomet rhythm cs forecast. let me discuss the results of a typical one. we forecast the usual behaviors of g.d.p. jointly using data from 1990 through 2007. then what we're going to do is forecast g.d.p. growth and average job loss in the second

quarter of 2009 using actual data up through the fourth quarter of the year. what this picture shows is the forecast of employment change, that's the light blue bar moving this procedure. with a baseline forecast implies is further substantial job loss. indeed, based on just the past history, the implied monthly decline that we would have predicted for the second quarter is about 600,000 jobs. what you see, that's the dark blue line, is what actual job loss was in the second quarter. it came in substantially lower. these calculations impry that employment is about 485,000 jobs above what it otherwise would have been in the second quarter of 2009. this number is very similar to the estimate that stimulus added

roughly half a million jobs relative to what otherwise would have occurred. i do, however, want to be very cautious. the approach we used is one of a number of p.m. ways of predict whag would have happened in the absence of stimulus. other -- but the clear impliment reply indication is the program is working. . the results of this forecasting for real g.d.p. are shown here. again, the dark blue lines are actual data. the light-blue line is our forecast. what past history says, based on a usual behavior of employment and g.d.p., past history indicates that real g.d.p. would decline. the projected decline is 3.3%. again, substantially worse than the actual decline, which was 1%. this way of speffing the

baseline con -- specifying the base line confirms g.d.p. growth was 2.3 percentage points higher than the usual time period of g.d.p. would lead one to expect. private sectors attribute much of the behavior in the g.d.p. to the recovery act. this table shows you analysts estimate this added anywhere from 2% to 3% g.d.b. growth. if you look at the different pieces of g.d.p., you can see telltale signs of the recovery. this figure shows you the contribution of each of the major changes in g.d.p. i think the role of the recovery act is clearest in state and local spending.

sharp falls in revenues and balanced budget requirements are have been forcing state and local governments to tighten their belts significantly, but state and local governments actually rose at an annual 2.4 percentage rate in the second quarter of twine. no one can doubt the $33 billion in state fiscal relief has already gone out thanks to the recovery act is a key source of this increase. another area where the role of the recovery act seems clear is in business investment. firms purchases of everything from machines to software to structures. a key source of the more modest decline in g.d.t. in the second quarter is that this type of investment, which had fallen a mind boggling 39% al annual rate, fell at a much more moderate 9 perforate in the second quarter. one important componeyebt -- component of the recovery act

was incentive. businesses received about $14 billion of tax relief in the second quarter, and this may have contributed to the slower investment decline. for the personal consumption component, the pictures are more nuanced. it has largely stabilized despite rising unemployment and g.d.p. the making work pay tax cuts and improvement in confidence and the administration's other actions almost surely contributed to this stabilization. at the same time that consumption fell slightly after rising slightly in the first quarter could be a sign that households are using the tax cut mainly to increase their savings and pay off debt. obviously we will be monitoring the behavior of consumers closely as we move forward. because the evidence from the

path of the economy overtime can't settle the issue of what the effects of the recovery act have been, it is helpful to also look at other types of data. in particular, i want to mention two kinds of comparative evidence. the first involves comparisons across countries. countries responses to the scricis have varied substantially. one can therefore ask the question whether countries sha that have responded more aggressively seem to be recovering more quickly. to get a forecast of this, we looked at forecasts -- to quet an understanding of this we look at forecasts after the crisis hit but before countries formulated their response. we then did a best guess for what second-quarter growth would be. what this figure shows is the relationship between how consumer trizz' second quarter growth pron prospects have changed from what was expected back in last november and the

country's discretionary fiscal stimulus in 2009. the fact that those points lie along an upward sloping line shows that on average things have improved more in countries that adopted bigger stimulus packages. and the re relationship is sizeable. on average, a country with a stimulus that's larger 1% of g.d.p. has expected real g.d.p. growth in the second quarter that is two percentage points higher relative to the november forecast. a second comparison involves individual states in the u.s. the lath largest portion of aid to the states under the recovery act is it has taken the shape of matching funds for state medicaid. what this figure shows you is the correlation between employment growth from february to june and the size of those extra matching funds ber capita. what you are supposed to see is that on average, states that received more funds lost fewer

jobs. now, there is an obvious element of reverse cause asian that's pushing the relationship in the other way. states whose economies are weaker tend to get more of these funds. but preliminary analysis by several members of my staff addresses this issue by focusing on a sub set of the spending that isn't a response to states' economic conditions. they find that the results hold up well. more spending is associated with less job loss. well, obviously, this is a very preliminary analysis of the data across countries and states, and it doesn't account for all the factors that may be at work, but our first look at these numbers provides further evidence that stimulus spurs recovery. all right. well, so much of what i have discussed so far focuses on the role of the recovery act in moderating the g.d.p. decline and in saving jobs in the second

quarter of 2009. the obvious next question is, what can we expect going forward? we expect the stimulus to increase over time because the multsplire effect tends to rise for a substantial period before it begins to wane. 4r also, the composition of the stimulus will be changing toward components with larger short-run effects. the early stimulus was weighted more heave wli toward tax changes and state fiscal relief whereas going forward, there will be more direct vements. these direct investments have a short-run effect, roughly 60% larger than the tax cuts. second thing we can expect going forward, because of the recovery act, other rescue measures that we've taken and the economy's nal natural resilience, most

forecasters are now predicting that g.d.p. growth is likely to turn positive by the end of the year. federal reserve chairman ben bern did i seconded this opinion in recent congressional testimony. however, if as is always the case, especially around a turning point, there is substantial uncertainly to this forecast, and there is even greater uncertainty about how strong the recovery is likely to be. third, it is important to realize that job growth will almost surely lag the turn-around in real g.d.p. growth. the consensus forecast is -- for the employment and unemployment statistics that we get tomorrow to show that the u.s. economy continued to sluseu lose hundreds of thousands of jobs in july. given that g.d.p. growth was still negative in the second quarter, this is all but inevitible, and it is unacceptable. unfortunately, even once g.d.p. begins to grow, it will likely take still longer for

unemployment to stop rising -- or for employment to stop falling and begin to rise. fourth and crucially, given how far the economy has declined, the recovery will be a long, hard process. even if g.d.p. is relevant lively robust going -- is relatively robust going forward, it will take time to bring up employment back to usual levels. but the president is committed to job creation and this has been the focal part of our efforts. the bottom line is we are no doubt in for more turbulent times. the actions we've take yn, particularly the american recovery and re-investment act have clearly changed the trajectory we're on. they are doing what the president always said needed to be our top priority -- rescuing an economy on the edge of the second great depression. and i firmly believe that when the history of this period is

written, the recovery act will be seen as the beginning of the end of this terrible economic crisis. it is a central part of our strategy to rescue the economy. complimenting our efforts to stabilize the financial system, re-start the economy, and help homing owners -- home owners in kiss tress. -- in distress. the administration is work wg congress to help rebuild the economy better. it is as if when you went to the doctor for that strep throat he discovered you had high blood pressure as well. the antibiotic was great for the infection but he prescribed other medicine, a better diet and exercise for the blood pressure. that's what the president is trying to do for the economy. he's urging health care reform to slow the growth rate of

spending and provide all americans with secure health insurance coverage. we're working with congress to pass financial regulatory reform so we never again walk as close to the edge of a cliff as we did last september. and we're committed to comprehensive education to combat climate change. in short, we are urging serious medicine for serious economic problems. if we can accomplish these important changes, we will not only come through the current crisis, we will emerge even stronger and healthier than before. thank you. [applause] >> we have questions. the first question we have is, in light of your commints on the economic stimulus bill s. there

anything the administration would have done differently if they realized how deep the problems would have bnch in drafting the legislation? is there anying you would have changed in how that bill was formulated? >> i think one of the things i tried to describe, and i think we tried to hit this thing with as much force as we could. we did know it was a very serious economic downturn. we also re were aiming at what could we get out the door very quickly. that's why things like the tax cut, the fiscal relief were so terrific precisely because they did get out the door quickly. i think the other thing i would like to say in answer to that is, i very much want to give the sense, the recovery is a piece of a much bigger plan. so all of the work that secretary geithner and the rest of the administration did to help rescue the financial system, all of those were things that we did precisely because as we saw the economy getting thicker we knew it needed everything we could give it.

>> the next question is you didn't exactly predict or give your own views on what we would be in positive g.d.p. territory. would you be willing to say we'd be in positive g.d.p. territory the first quarter, the second quarter, or you're not going to say? >> i will tell you that i think the consensus forecast is doing very well. they are predicting we will see it before the end of this year, and i think that is a reasonable prediction. >> was the administration blind-sided by the c.b.o. analysis on the cost of the health care legislation, and what is an acceptable 10-year cost for the health care legislation? >> again, wide-ranging questions. the c.b.o. is doing its job, which is trying to give congress stimmingts of what -- estimates of what they think bills will do. it is important to recognize the c.b.o.'s job is really to think about the 10-year budget window.

here we are in complete agreement with them. we have said from the beginning that anything we do on health care, any investments we make, any expansion of coverage absolutely has to be paid for in that 10-year budget window with hard scoreable savings that c.b.o. says are there with revenue changes that are there. so that is a -- that is completely a place where we are in complete agreement. and i think their numbers on things like the kind of reforms we've been talking about for medicare absolutely line up with ours. i think where we might have a difference is much more on the longer run. because if you look at sort of the long-run budget projections, is sky rocketing health care costs. that's why so much of what the president is trying to do with the health care reform act or the legislation as it's going forward is to make sure that there are all the things that health economists say need to be there to slow the growth rate of costs. that's why we proposed an

independent advisory council, a structural change too give us an advantage at slowing the growth rate. i think c.b.o. doesn't inherently tend to do long-range projections, so we're going to have to go with what the experts and economists tell us in things like investments in health investment technology, the institutional changes we've talked about, delivery reforms, all of those things, they tell us will absolutely slow the growth rate of costs that we feel will need to be in any legislation. >> can you give us a hint about whether the unemployment rate is likely to hit double digits and whether it will recede to the prerecession level of 4%? >> the first thing to stay, i have not seen any numbers. they do come out tomorrow. i'm not going to make any predictions other than to say certainly what the forecast -- what market experts are telling us that we will lose hundreds of thousands of jobs.

i know they are anticipating that the unemployment rate will go up. it does emphasize the economy is still in a recession. we do think we are improving the trajectory. but there is just no denying the fact that we are still in tough times for the american people. how quickly it comes back down. i mention in my talk, even once g.d.p. begins to grow, there is jushly a lag between when we see g.d.p. growth and unemployment start to go in the better directions. it also depends crucially on how fast you grow. it is not enough to turn the corner. g.d.p. needs to grow at 2.5% just to keep the unemployment rate where it is. so we have to keep growth above 2.5% to finally make progress in the right direction. obviously what we're going to be looking for is not just g.d.p. growth, but strong g.d.p. growth. that's what would bring it back

quickly. >> are you more worried about inflation or deflation? >> the truth is i am thrilled at the fact that inflationary expectations seem dob pretty darn flat. i think that's attributeable to the federal reserve. we've had 25 years of steady inflation is the reason we haven't seen movement in either directs. -- directions. that said, given how bad the recession has been, given the fact we have unemployment over -- at 9.5%, i think the greater risk is on the down side than on the up side. i, for one, i don't feel that inflation comes -- we know the fed's balance sheets have gotten bigger. but i know they tell us inflation doesn't come out of nowhere. it doesn't just come from a lot of stuff on the fed's balance sheet, it comes from an economy overheating. i think we have a long time before we have to worry about

inflation. >> next question is, you have a view on the direction of the dollar, is it going up or down or staying the same? >> i have only been in washington for six months, but i know more than to speculate on what the dollar is going to do. especially in front of five tv cameras. >> well, i thought you would say that. but had to ask it anyway. >> is there any wiggle room that no one in the middle class will see any type of tax increase during his presidency? >> can i go now? you know, the president has made it very clear through the campaign that middle class families have really gotten a bum deal not just in this recession but probably for at least the last 10 years, and that's why he does not want to do anything that burdenens middle class families. and obviously no one is talking about raising taxes.

we're in the middle, as i've been describing, the worst recession since the great depression. that's why we gave tax cuts to 95% of american families. it's true, that's why we have a long-term budget problem. the president is concerned about that. there is nothing causing more trouble in those long-term budget projections than the predicted path of health care budget expenditures. so doing all the things we have talked about, about slowing the growth rate of costs is the number one thing you can do to help all americans. >> what is the biggest surprise you have seen in the way economic policy is made compared to what you thought you would see before you came here? >> i would say, the most positive -- and it has been a positive development, and i'm surprised at what a role analysis and you know empeerkal

evidence plays. -- empirical evidence plays. i often said this to larry so maniers. larry -- sommers. larry is a fantastic economist. i learned early on in the transition is that the way to have -- pr is to do analysis. i have the world's best staff. we have a great group of incredibly talented economists, and i have been pleased at the degree to which people will say, tell us what's true, not make up some numbers that support our position. they want to actually know whatted effect of various things are going to be, and that's a positive sign about the policy process. >> can you give us any insight as to what the daily presidential briefings are like on presidential policy and what's the president's comprehension of economics for someone who wasn't trained in

that area? >> i tell you, the scaryest thing is to be in one of these briefings is for one of us to ask a question and the president answers it. i will tell you, he absolutely knows a lot of economics. the briefings are -- one of the things that's been hard to get used to. there's often a scheduled topic. people will take turns -- today we'll brief the president, what can we expect about inflation or deflation. one of the things you learn is, you have to be ready to change on a dime, because you may have a beautiful slide deck to tell the president, and he'll say, you know, i'm worried about the auto companies. suddenly, switch gears. so you do have to be ready to do that. so they are free-wheeling. i think the economics team in the white house is known for be ing sort of free and open with their opinions, so they are often good lively opinions, but it is a great way to spend 40

minutes every day. >> ok. we're going to have some questions from the audience, and then we have a few minutes for that. and then there is a microphone. somebody have a microphone for this speaker? gary schaap row? -- s crmple hpiro. >> this is an economic club, so i want to ask a tougher question, if i may. rising deficit, it is phenomenal, and the ambitious goal is half this phenomenal record, rising protectionism, proposing increases on taxes for those that create jobs. how is this justifiable in the long-term economically for the overall health of the country? i feel like we are fiddling and rome is burning. >> first of all, you describe cutting the budget deficit in half as an ambitious goal. first of all, let's not lose sight of the fact we inherited a budget deficit that was $1.3

trillion. the president said he wants to cut it in half before the end of his first term. but the first thing he wanted to do was call a -- he felt consulting it in half wasn't enough. i couldn't agree with you more. i think the president couldn't agree with you more. it is a problem, and something we have to deal with. i think if you are really concerned about the deficit, i would bring it back to health care reform. you look at any study by the congressional budget office, those long-term budget projections, the thing that will really wreak havoc on our budget deficit is if we don't get the costs of health care under control. they are rising at an astronomical rate. that is why we need to reform our financial regulatory system, we need to deal with energy independence, the president said, this can't wait. the status quo is precisely what is going to cause real problems for the deficit and for the country. that's why we are working as

hard as we can to not only do health care reform, we do good health care reform that genuinely expands coverage and slows the growth rate of costs. it is absolutely crucial. >> one more question from the audience. anybody leer -- here? mr. president while you are getting the mic, is there any frustration about your current job? >> it is very hard. no, i think i will have to say i have my 19-year-old son home from college, and i got home at 11:30 last night, i got home at 11:00 the night before. so i'm frustrated that i don't get to be at home nearly as much, that my husband had to learn to doo do laundry, grocery shopping, all the cooking. it is hard work, but it is an honor. >> husbands do that all the time? >> he's always done half the work. he's now doing all the work. >> there's been some recent news

about changes in administrative policy regarding fannie mae and freddie mac. we know the importance of creating a secondary market and stablizing housing prices. i'd be interested in knowing what your thoughts are and what the direction of that change might be. >> obviously, it isn't an issue. one of the things that we have -- again, we've been through just a real crisis in our financial markets. that's why in the midst of all the other things we're doing, thinking about how do you reform the system so that we don't ever face this again. one piece of this has been the government-sponsored enterprises and their roles and the extraordinary actions we've had to take. so of course, something that we're going to be thinking about is where do we go from here? how do we, as we move out of the

immediate crisis, how do we think of reforming those just as we're thinking of reforming the financial regulatory system? i don't want to get ahead of the process, because obviously, we are at the very start of anything that we're doing on a whole range of these issues about our financial markets. but it is going to be something we'll be looking at. >> thank you very much, dr. romer. [applause] >> thank you very much. here's our little gift for your speech today. thank you all very much for coming. we hope you had an enjoyable time. thank you very much, dr. romer. >> thank you. >> following her remarks at the economic club of washington, miss romer talked briefly with

reporters. this is about 10 minutes. >> all right. well, you get points for persistence. shoot. >> in your speech you talked about -- you suggested that g.d.p. growth was 2.3% -- percentage points higher than usual. this would lead one to expect -- then you say private forecast goldman, economic advisors. what is your number as far as your estimate of what the stimulus package did, your personal one? you were citing these others, but do you agree with these? is that what's going to show up in your numbers in the next couple weeks? >> it is actually a great question. one of the things i was trying to do in this talk -- so back in the transition, right? when we say what stimulus was going to do, we would use estimates of here's a normal multiplire. we got them from private

forecasters from the fed. we said, this is how much we're going to spend. this is the tax cut. we think this is what it's going to do. very much what i was trying to do this time was get away from that. get away from saying for the amount of money we spend we think it created this many jobs. actually go with a baseline. that's why we did the vector auto reaggression. -- regression. my chief of staff said, you're going to lose people if you start talking about vector auto regression. that said, i think the numbers we see coming out of goldman and macro-advisors and all are pretty much in the range. if anything, i think our estimates probably say it is a little bigger than that. certainly because recovery.gov is so good, they can get the stame data we have. once upon a time, we had an advantage, but yeah, a lot of

money is going out the door. >> just a general question. going forward after the stimulus package, is there a move in the white house and the administration to go for a more sovereign wealth approach? we have talk of a national infrastructure bank? something that could produce an international rate of return, et cetera? >> you know, you probably remember back to the original discussion of the stimulus there was talk of an infrastructure bank. there was, you know, i think -- i think, from my own point of view, and certainly i think from the council of economic advisors, one of the things we've been pushing more than that, is cost-benefit analysis to make sure that infrastructure is being done well, has the highest possible rate of return, because we're putting it in the projects that really need to be done. i think that's kind of where my focus has been these days and in thinking about what i'd would -- as i move forward, i'd like to

see more of that. again, once you give money to the states, instead of saying, are you guys doing some cost-benefit analysis to make sure you are building the road in the right place? that's how i would like to go forward for now. where it goes after that, your guess is as good as mine. >> what are the lessons learned with the cash-for-clunkers situation? what do you see the imbeing? should we see more retoo long of allocations for recovery funds going forward? >> is has been a big success, no doufment we put these incentives in place. we knew people would respond, but boy did they really respond. you know, i think it does say incentives matter. we've seen the same thing with the new hope buyers tax credit. when we talk to people in the tax market, we hear people say, god, there's a lot of home buyers out there. that's a sign that that is working. i think right now we're talking

about making sure the cash for clunkers gets expanded and extended. we are hard congress is working hard on this, and we anticipate good news there. we are always re-evaluating things. one of the things we put in place, the pram program that we thought would do what needed to be done for the financial rescue, for home owners, is kind of an example of we're always monitoring things and thinking is there something that would work better exactly with our foreclosure modification. we are constantly thinking, is it working as well as we could. we are doing, i would expect we would do kind of evaluations of these going forward, and if we think of other good things, we will try to do them. >> what kind of pullback do you anticipate when these incentives that are working so well aren't there anymore? >> i think the big picture is surely the case that savings

rates will end up higher than they were back in the mid 2000's. american consumers have lost so much wealth, they are, i think, never going to go back to their free spending big credit card bill ways. i think that's just something we've got factor into our planning. this is not going to be an combhi driven by as much consumption growth going fomplt i think that's realistic. and just, you know, something to know. i think the important thing is knowing going forward what's going to fill the gap. if consumers aren't going to do the buying, what's going to create aggregate demands. here i talk some in my talk about business investments. i think that is absolutely going to be crucial. that's why we have these good investment incentives in the recovery act. it is again kind of a reason why things like the energy and climate bill are important in

terms of creating investment for a whole new kind of investment, in terms of new technologies, new ways of producing things, that's going to end up having to be an engine of growth going forward. the other thing we have seen adjust, and again i think it is a healthy change is the trade deficit. just as we've seen consumers start to trade, we've seen our trade deficit come down. i think that's again what's going to take up some of the slack i would trict predict going forward, lower trade deficits. >> is there a possible that the u.s. economy could go into a second dip in the latter half of the year? >> again, i think it's not what most private forecasters are anticipating, but we will obviously be watching this as closely as we can. i gave the analogy in my talk

about how fiscal stimulus is an antibiotic and we had other problems. it was actually my chief of staff that said one of the rules of an antibiotic is don't stop it before you finish the full course. it is so important that the fiscal stimulus carries through to the end. it's something we think will be providing lift for over the lift -- through the end of 2010. it is really important that that's there precisely for preventing any kind of a second dip. >> i know you said we have to focus on spending the stimulus we have in place now, but are there any triggers that the administration would look for, start putting in a second stimulus? >> again, you quote me very well. i think we do have a big fiscal stimulus in place, and i think the first order of business is to get that $787 billion out the door, and there is so much we can do with that.

i do want to come back on how much we have been doing with all the other things. if secretary geithner were here, he would rattle off the 900 things that tread treasury have done just as i rattle off what the recovery act has done. all those things are important for getting recovery going again -- economy going again. for home owners, we absolutely need something to get us going again. of course there is not a hard and fast trigger. in my own mind, i know these numbers are ramping up. i know goldman saks just sort of -- sachs just tweaked their numbers. they now think there will be 3.3% growth. do we see that happening? do we anticipate the thing is going to build in terms of impact? i think we ought to give it time to work. that said, if we come to the end of the year and we're not seeing

the kind of results that we yape anticipate, you know, i would certainly -- we'd start thinking about other things that need to be done or if we need to make some of the changes that we're talking about. the president always said, we'll do what it takes to get the economy out of this thing. we think we have the right medicine in place, but a good doctor always monitors. >> there's been a lot of talk about when do we start to unwind some of these actions, and maybe it is more on the central bank side. you know, as inflation gets to be a concern. are you concerned that we could be starting to unwind some of this too soon? for example, the purchases of mortgage-backed securities has really held mortgage rates low, and if they don't continue that, are you concerned that could put

housing off the rails? >> no, i'll come back to my antibiotic analogy. absolutely it is important, we've put in place this whole range of programs because the economy is in v very serious trouble. i absolutely do think it would be, you know -- you don't want to unwind things too quickly. you want to make sure that we're firmly on the road to recovery. i think one of the things that chairman bernanke has said which makes so much sense is that a lot of the fed's programs sort of naturally unwind. so that when they are no longer needed, people don't go to the commercial paper facility if there is a private commercial paper market that's functioning. i think his anticipation is these things, you know, that they unwind as the economy doesn't need them. so i think that's a very good character riftic. you know, right now the focus absolutely has to be on, you know, doing what we're doing and

keeping on this good trajectory because, you know, i've tried to make the case today that this trajectory is still changing, but you have to come back to unemployment rates is surely getting to -- we anticipate we're going to see more job losses tomorrow. we anticipate seeing the unemployment rate going up. we know g.d.p. in the second quarter, it fell less than in the first quarter, but it fell. that is not a time to pull back when the economy is just beginning to stabilize. you want do see serious, good, strong growth before you think about an exit strategy. the other thing besides not talking about the exchange rate that i've learned? i don't talk about the fed, so i'm not going to comment. well, thank you very much. i need to get back to work. >> thank you. >> for more on the economy, check out our economic stimulus web site at c-span.org/stimulus.

it contains hearings and congressional debates as well as links to watchdog groups tracking the spending. that's all at c-span.org/stimulus. [captions copyright national cable satellite corp. 2009] [captioning performed by the national captioning institute] .

>> this morning we will talk with joel simon, about the jailing of journalists abroad and conditions faced by reporters working abroad. in an hour, max pappas of freedomworks discusses that organization's efforts to rally protesters of president obama's health care initiatives at town hall events. ilyse hogue talks about moveon.org. in a couple of hours, dr. anthony fauci, the