- The Washington Times - Thursday, August 6, 2009

A top economic adviser for President Obama acknowledged Thursday the administration underestimated how fast and deep the economy was sinking last fall and winter.

“By the time President Obama announced his economic team just before Thanksgiving, it was clear the economy was deteriorating rapidly,” said Christina D. Romer, chairwoman of the Council of Economic Advisers. “Just how sick the economy would prove to be and how fast it would fall were still unclear. It is true that the U.S. and world economies went down much faster … than we and almost all other forecasters expected.”

Mrs. Romer — who meets with Mr. Obama most every morning during his daily economic briefing — made her comments before the Economic Club of Washington D.C. as part of her five-month analysis of the administration’s $787 billion American Recovery and Reinvestment Act.

In the roughly 20-minute speech titled “So, Is It Working?” Mrs. Romer vowed to give a “clear-eyed assessment” of the plan.

“I should probably get straight to the answer. Absolutely,” she said. “The Recovery Act, together with the actions taken by the Treasury and the Federal Reserve to stabilize financial markets and the housing sector, is helping to slow the decline and change the trajectory of the economy.”

As evidence, Mrs. Romer pointed to second-quarter reports showing the country’s gross domestic product is shrinking less and the economy is losing jobs at a slower rate — from roughly 700,000 a month in the first quarter to roughly 436,000 in the second quarter.

“This rate of job loss is horrendous,” she said. “But the change does suggest that we are on the right trajectory.”

Despite her optimism, Mrs. Romer acknowledged near the end of the speech that “evidence from the path of the economy over time cannot settle the issue of what the effects of the Recovery Act have been.”

Though upbeat about the future — including plans to spend 70 percent of the Recovery Act money before October 2011 — her assessment of the economy in the early days of the administration included such words as: “panic, devastating, cataclysmic, brutal, shock waves, mind-boggling — and horrendous.”

This was not the first time the administration acknowledged that it miscalculated the economic free fall from late 2008 to early 2009.

Just last week, Mr. Obama said after the release of the GDP report the recession was worse than he knew upon taking office in January.

“It told us how close we are to the edge,” he said.

Mrs. Romer deflected questions about whether the White House team could have taken a better approach or if it was blind-sided by the Congressional Budget Office’s assessment that its health care reform would increase, not reduce, the federal deficit.

However, she said forecasts show the economy will continue to lose jobs, and she agrees with economists that the GDP will grow by the end of 2009.

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