Policy Conference Puts Spotlight on Options, Reforms

Even as keynote speakers told 25th Annual Washington Policy Conference attendees about options for the Obama administration and Congress, Federal Reserve and Treasury officials were crafting initiatives to counter the economic crisis. Turnout for the conference was strong as members sought details of rescue and bailout plans, as well as expert assessments of policy options and the prospects for an end to the recession.

Since the conference was held March 1-3, key economic data reports have confirmed the recession has deepened and policymakers are implementing stimulus plans and other new programs to try to bolster economic growth.

More than 300 persons attended the policy conference, a significant turnout reflecting what members told NABE was their keen interest in finding out what new policies were likely to be put in place and how the economy will fare in the months ahead. Economists from different sectors sought the latest details on stimulus plans and rescue programs, as well as opinions from private sector analysts as to the likely success of the approaches to shore up the financial system and boost consumer spending.

Obama Officials Outline Their Approach

Top Obama administration economists, having just sent their first budget proposal to Congress, talked of the need for patience as the new president and his cabinet worked to stop the economy’s freefall and start the long process of restructuring the financial sector.

Attendees also heard from a Federal Reserve policymaker and private sector economists, including analysts from the “loyal opposition” on White House initiatives and likely Congressional actions to address the recession and financial issues.

NABE’s policy survey, released during the conference, found members giving a mixed scorecard for the economic stimulus packages and financial system remedies that had been either enacted or proposed as of mid-February, when the survey was done. See the summary at: http://nabe.com/publib/pol/09/pol0903.pdf

In its most recent survey, released April 20, NABE forecasters said the latest data and their own projections indicate that “the breadth of decline is narrowing. Declines still outnumber gains, but fewer firms are reporting declines and more are reporting gains. This suggests that the economy is at an inflection point but has not yet reached a turning point.” See the summary at: http://nabe.com/publib/indsum.html

NABE President Chris Varvares, president of Macroeconomic Advisers in St. Louis, thanked conference organizers, led by William Strauss, board member and an economist at the Chicago Federal Reserve Bank of Chicago. Other NABE members who served on the policy conference program committee include Richard Wobbekind, Richard Brown, Stuart Mackintosh, Nayantara Hensel, Diane Swonk, Sviatlana Francis, and Nicole Firment.

The evening of March 2, NABE members and guests were treated to a reception at the Federal Reserve in the Foggy Bottom area of Washington, D.C. Hosted by Fed Governor Donald Kohn, the reception was held in the marble halls of the reception area of the Eccles building’s atrium. Take a virtual tour of the Eccles building and the art exhibits currently featured there.

Get Connected, NABE’s program for early and mid-career professionals, hosted a well-attended networking event the first evening of the conference. And Get Connected team leaders organized poster sessions and a popular presentation on data visualization.

Romer Describes Stimulus Package

Christina Romer, chair of the president’s Council of Economic Advisers, told conference attendees the morning of March 2 that the American Recovery and Reinvestment Act, signed by President Obama on Feb. 17, is “almost all genuine stimulus” that will help turn around the economy by the end of this year.

She noted that before her appointment to the CEA, she spent much of her academic career, most recently as an economics professor at the University of California-Berkeley, “trying to estimate the effects of both monetary and fiscal policy.” She compared the turnaround to the challenge of steering an aircraft carrier in new directions, a metaphor that has since been used often by administration officials.

In the question-and-answer period following her talk, Romer was asked which economic indicators she would watch most closely for signs of a turnaround. In a general sense, she said, the administration expects the economy to shows positive signs by the fourth quarter of this year. “I’ll be watching initial unemployment claims, and employment is the gold standard. Consumer sentiment is also an important indicator,” she said.

Overall, the economy still faces strong headwinds, Romer said. “Households are less wealthy. This loss of wealth and sentiment” continues to weaken the economy, she said. “I feel strongly that the actions that we’re taking will be helpful.”

Lacker of Richmond Fed Voices Concerns for Post-Crisis Period

Offering the monetary policy view, Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, told the conference that one of his major concerns is when and how the Fed and Treasury will “scale back” the “scope of the financial safety net” as the economy improves.

“When a financial crisis threatens one or more institutions that appear to pose `systemic’ risks to a broad array of counterparties, it can be hard to contemplate not intervening,” Lacker said. “But it may also be the case that the systemic risks are partly the result of expectations about the likelihood of government intervention. This is a classic example of a so-called time consistency problem.”

A few days later, as a voting member of the Federal Open Market Committee, Lacker agreed with the entire committee to leave the federal funds rate at its target range of “0 to ¼ percent” in anticipation that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” At that March 18 meeting, the FOMC also agreed to “provide greater support to mortgage lending and housing markets” by purchasing an additional $750 billion of agency mortgage-backed securities, bringing the total up to $1.25 trillion this year.

Jeffrey Liebman, executive associate director of the Office of Management and Budget offered another Obama administration view. He told the conference that the Economic Recovery Act, totaling $780 billion, would create or save 3.5 million jobs and should result in growth in real gross domestic product by the fourth quarter of this year.

Commenting on OMB’s role in tracking the distribution of stimulus funds, Liebman said the agency regularly updates its Web postings of timelines and progress reports, plus details from federal agencies charged with monitoring funds, on http://www.recovery.gov.

Holtz-Eakin Call Policies “Risky”

As the luncheon speaker on March 3, Douglas Holtz-Eakin, economic adviser to presidential candidate John McCain and former director of the Congressional Budget Office, offered his assessment of the first few weeks of the Obama administration and the new Congress. Acknowledging there are “unique issues” prompting the unprecedented infusion of federal money into the economy, Holtz-Eakin described the adminstration’s fiscal policies as “risky” and said the U.S. budget is “fundamentally out of whack.”

Because of the agreement between Congress and the administration to support the financial sector and encourage credit and spending, “we have basically placed a large part of the budget on auto pilot,” Holtz-Eakin said. Fashioning a solid reform of the financial sector and oversight will be critical to restoring economic health. Holtz-Eakin is currently president of DHE Consulting and is formerly a fellow at the Peterson Institute of International Economics.

Media Coverage Extensive

Thirty-one reporters from both domestic and foreign media outlets attended the Policy Conference, reported Melissa Golding, NABE press officer.  The outlets represented were: Dow Jones Newswires, Reuters News Agency, ABC News, C-SPAN, Bloomberg News, Bloomberg Television, the Detroit Free Press, The Kiplinger Letter, Carta Economica Regional (Mexico), Voice of America Radio, Daily Labor Report, Market News International, Daily Report for Executives, Nikkei (Japan), Dagens Industri (Sweden), MarketWatch, Reuters TV, Sound of Hope Radio Network, ZDF German Television, and Fox News.

C-SPAN, Bloomberg TV, and ZDF German Television sent camera crews to cover Richmond Fed President Jeffrey Lacker’s speech on Monday, March 2, and Bloomberg TV sent a crew to cover CEA Chair Christina Romer's speech on March 3.

On the evening of March 2, NABE’s Doug Duncan, Sara Johnson, John Silvia, and David Wyss were interviewed in a roundtable discussion about the NABE Policy Conference, NABE Policy Survey, and the economy in general on Washington Business Tonight, a half-hour business news program which airs weeknights at 7:00 p.m.on Washington’s NewsChannel 8. To watch the interview, go to the Business Tonight video page and click on the “Economists Discuss Business Outlook” headline listed under March 2, 2009.

In addition to the outlets listed above, other outlets that produced original coverage of the Policy Conference include Mortgage101.com, Marketplace Radio, the International Herald Tribune, and the Washington Post.

See the Policy Conference Session Pages for speaker presentations, papers, biographies, and links to websites of interest for topics covered in each of the sessions. Also, view video clips of conference sessions.