Christina Romer

As we head into a new decade, it is time to take a frank historical look at the financial crisis of 2008 and the ensuing Great Recession. How did the severity of the initial shocks that hit the economy—the bursting of the housing bubble, the financial meltdown—compare to its terrible precursor, the Great Depression of the 1930s? How successful were the monetary and fiscal policy responses? Were there policy actions that should have been taken but weren’t? And perhaps most important, have we made strategic reforms and learned lessons that will help us mitigate these risks in the future?

In this talk Christina Romer discusses the effects and variations of financial crises across time and various countries. Following the 2008 financial crisis, a somewhat pessimistic narrative took hold in the United States—the aftermath of crises is always terrible. In truth, research shows that the aftermath of crises is highly variable. Some aftermaths are truly awful, but some are remarkably benign. It shows that the willingness and ability of governments to use economic policy is a crucial determinant of just how much damage a financial crisis does to the overall economy.

How do tax cuts affect the macroeconomy? Do they cause a temporary boom, increase long-run growth, or mainly increase the deficit? In this talk Romer describes the consensus of the empirical evidence on this important topic, and discusses historical case studies such as the Reagan tax cuts of the early 1980s and the dramatic changes in marginal tax rates in the 1920s and 1930s. Based on this evidence, she probes the likely effects of recent tax changes.