Three Reasons Christina Romer Should Be Fed Chair
By Matthew Yglesias
Posted Monday, Sept. 16, 2013, at 9:06 AM
Christina Romer, chairman of the Council of Economic Advisers, testifies before the House Appropriations Full Committee Hearing on Fiscal Year 2011 Budget and Economic Outlook on March 16, 2010 on Capitol Hill in Washington.
Photo by TIM SLOAN/AFP/Getty Images
Former White House Council of Economic Advisors chair Christina Romer isn't under consideration to run the Federal Reserve and never has been. There are reasons for this, and they're not all terrible reasons. But there are three very good reasons that she ought to be a—if not the—leading contender for the job.
1. She believes in the power of the Fed
: The extent to which the Federal Reserve has the power to fill an aggregate demand gap and boost a depressed labor market is hotly disputed among economists. And the dispute is healthy. But it's very important to have a Federal Reserve chair who does believe in the power of the Fed, rather than a Federal Reserve chair who'll start off by lowering expectations and shifting blame onto other institutions. Romer wrote a great paper with her husband David Romer on how historically the worst periods of monetary policy in the United States have come when Fed officials lost faith in their own powers
. We need a chair who believes monetary policy can dramatically improve the economy and that his or her job is to make that improvement happen, not to complain that congress is making the job harder.
2. She represents regime change 3. She's an expert on recovering from disaster:
: With short-term nominal interest rates at zero, far and away the most important tool in monetary policy is expectations. That means ideally you'd want the new chair to represent a clear shock to the system's expectations. As Romer has put it in her scholarly work, you want a change of regime
. All the many reasons she's not under consideration—too vocal, too controversial, too outside the mainstream, not enough of a team player—are reasons why her accession would represent a useful and important change of regime.
This one has all the masculine qualities Obama likes in a woman.
I don't know if I would call her an expert on recovering from disaster, FEMA should send in a make-up team.