On yet another day of mixed economic news, Cecilia Rouse, President Biden’s top economic adviser, spoke to the SIEPR community about the state of the U.S. economy — and of the uncertainty to come.
Rouse, the 30th chair of the White House Council of Economic Advisers (CEA) and a professor at Princeton, explained how Biden’s economic policies are responding to the COVID-19 pandemic and other short-term shocks while also ensuring long-term stability.
“These are challenging times,” said Rouse, who singled out ongoing fallout from the pandemic, rising inflation, the war in Ukraine, threats from climate change and other risks facing the U.S. and global economies.
Rouse spoke at a virtual event hosted by the Stanford Institute for Economic Policy Research (SIEPR), which frequently convenes scholars and top policymakers to discuss pressing economic issues. Mark Duggan, the Trione Director of SIEPR and the Wayne and Jodi Cooperman Professor of Economics, kicked off the wide-ranging conversation by noting that Rouse’s participation marked “a perfect example of the bridge that we have built and are constantly maintaining between academia and the policy world.”
The event came just hours after the Commerce Department reported that GDP growth in the first quarter of the year fell an estimated 0.4 percent, or 1.4 percent on an annualized basis. The report came after GDP grew 5.5 percent in 2021 and marked the weakest quarter since the start of the pandemic.
In an hour-long discussion, Rouse talked about the decline and a host of other economic issues that she said the public and private sectors must work together to address. These include declining rates of participation in the labor force by men and women, growing income inequality, deep-seated problems with unemployment insurance programs in California and other states, planning for future COVID variants and pandemics, and lagging clean energy use relative to peer countries.
“The lack of respect and understanding of the way in which the public sector and private sector can work in partnership — in my view — came into stark relief during the pandemic,” Rouse said.
The need, she said, to address the array of deeply rooted economic problems brought her back to Washington, D.C., in March 2021 as the first Black leader of the 85-year-old CEA. Rouse had previously served in the Clinton administration and then the Obama administration — where she sat on the CEA alongside Duggan, then the council’s senior economist for health care policy.
In prepared remarks and in response to questions from the SIEPR community, Rouse argued that U.S. fiscal policy over the last two years, though imperfect, worked — a view that is shared by both sides of the political aisle. Rouse specifically pointed to the $1.9 trillion stimulus package that passed Congress after Biden took office. Included in that relief aid was an expansion of the Child Tax Credit, which data show sharply reduced poverty levels in the United States.
“There’s a lot of uncertainty that lies ahead,” Rouse said. “I’m optimistic we’re going to get through it. You don’t go through what we’ve been through over the last two years — where we power down a $22 trillion, $23 trillion economy — and turn it back on without it having some bumps along the way.”