They Don't Have a Clue?

During the first few minutes of lunch today I took the time to read the testimony of Dr. Christina D. Romer, Chair of the White House Council of Economic Advisors, before the Joint Economic Committee. The title of her talk is The Economic Crisis: Causes, Policies, and Outlook. It can be found here -

http://jec.senate.gov/index.cfm?FuseAction=Files.View&FileStore_id=9ae99fef-abc7-42f9-b748-a60afc589d7a

Under the heading Causes of the Crises she tells us exactly what, in her opinion, led us to where we are today:

1. "In thinking about the causes, one needs to begin with the extreme fall in house and stock prices over the last eighteen months."

2. "...a decline in wealth as large as the one we have experienced has led to a large decline in the aggregate demand for goods and services."

3. "Another factor to consider is the uncertainty created by the gyrations in asset prices."

4. "...the drying up of credit."

5. "Fear, uncertainty, and a desire to contract lending spread to other markets."

6. "The reduction of credit had two devastating consequences. One was a further lowering of consumption and business investment... The other consequence of credit rationing is a reduction in efficiency."

7. "Finally, falling income in the United States means we are buying less from abroad."

With all due respect to Dr. Romer and the other members of the committee, when the Chair of the committee that is advising the President doesn't know the difference between the causes of the problem and the symptoms of the problem how could they possibly provide sound advice in part two of the testimony, Policies for Recovery. She has offered a laughably inadequate explanation of the causes of our current crisis that would receive a failing grade in a first year economics class at the local community college.

Dr. Romer received her PhD in economics from M.I.T. so it would be difficult to chalk this embarassment up to ignorance, which implies that it was deliberate. Why? Her testimony was not designed to address the stated goals and provide economic guidance because it was not a statement on economics. It was, rather, a political statement - a statement designed and written to protect the prime movers in this depression - the government itself - and to provide support for a political agenda that coincides with a school of economic thought that insists that the solution to every problem, even those caused by the government, is more government.