Outgoing Council of Economic Advisers head Christina Romer says the US faces a substantial shortfall of aggregate demand and that growth is still about 6 percentage points below the trend level. That is the main cause of unemployment, she says. The US must take quick action to boost demand and bring down unemployment. The best way to do that is in the short run is for the government to spend more and tax less, she says.
It is interesting to hear an unvarnished assessment from the esteemed economist, not the usual happy talk, as she backs her bags to return to academia.