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 Remember that Porkalus Bill? Almost $800 billion dollars went to “Shovel Ready” projects with the purpose of getting America Back to work. Yesterday Christina Romer of the Council of Economic Advisers, was interviewed on C-Span where she said the economy will begin to turn around in fourth quarter of his year and job losses will continue through the end of the year. Her comments echoed Federal Reserve chairman Ben Bernanke’s similar prediction last week.

Gee, what happened to “shovel ready?” The stimulus bill was designed to put people to work right away. With their admission that unemployment will continue to grow for the rest of the year, Romer and Bernanke were telling America that the Stimulus isn’t working. Then again, spending your way out of a recession never has:

Obama Adviser Sees Unemployment Rising Until 2010
Doug Mills/The New York Times


Speaking on C-SPAN, Christina Romer, chairwoman of the White House Council of Economic Advisers, said that she expected the economy to begin growing in the fourth quarter of this year. Ben S. Bernanke, the Federal Reserve chairman, made a similar prediction last week.


But Ms. Romer also said that she expected unemployment to rise even after the economy turns, saying that gross domestic product has to grow at a rate of about 2.5 percent before unemployment will fall. Before that happens, she said, it is “unfortunately pretty realistic” that the unemployment rate could reach 9.5 percent. It was reasonable to estimate that the G.D.P.’s growth rate in 2010 would be 3 percent, she said.


Robert Reich, who served as labor secretary under President Bill Clinton and advised the Obama campaign, said on Sunday that the rate of growth would have to be higher — 4.5 percent — to reverse rising unemployment.


“I think that when we talk about — or anybody talks about — hitting bottom, what we really have to understand is that the bottom is a kind of an undefined concept here,” he said on ABC’s “This Week.”


According to figures released on Friday, the unemployment rate in April was 8.9 percent, its highest level in 25 years. The so-called underemployment rate, which counts people who are working part time because their hours have been cut and those who have given up looking for jobs, reached 15.8 percent.


Still, the administration seized on the report as an early sign that the economy’s free fall was coming to a halt, because the pace of deterioration had slowed.


The economic recovery, Ms. Romer said, will be driven by business investment in sectors like renewable energy rather than consumer spending. She echoed the views of other economists who expect a long-term economic shift.


“The chance that consumers are ever going to go back to their high-spending ways is not very plausible, nor do I think they should,” she said. “We were a country that needed to start saving more.”


Several major retailers, including Wal-Mart, Macy’s and Nordstrom, are scheduled to post quarterly earnings reports this week, which will give further indication of consumer spending.


Ms. Romer also defended the Obama administration’s budget, which has been criticized by Republicans and some independent analysts for not cutting spending deeply enough. In details released Thursday, the White House budget director, Peter Orszag, announced cuts to 121 programs that would save $17 billion. The savings total is about one-half of 1 percent of the $3.5 trillion budget. The White House is expected to provide additional information on its budget on Monday.


Ms. Romer said that the reductions announced Thursday were only one part of the Obama administration’s larger plan to cut the deficit in half by the end of his first term, a goal that she said was still reasonable. She pointed to the president’s announcement last week of his intent to close tax loopholes for offshore tax havens as another example. But the “big dollars,” she said, would come from fundamental changes in the health care system.


“When you actually look at that budget going out in time, the thing that is going to bankrupt us is government expenditures on health care,” she said.

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