Christina Romer, chair of President Obama's Council of Economic Advisers until last month, is back at her post in the University of California-Berkeley's economics department.  And she will be writing a column for the New York Times (in the Sunday Business section).  Her first column hit newsstands (wherever there are still newsstands) yesterday.  In it, Romer argues that, while cutting the federal deficit is important, "now is not the time."

Some advocates of austerity argue that, contrary to the conventional view, fiscal tightening now would lower long-term interest rates and improve confidence so much that the impact could be positive. But an ambitious new study in the World Economic Outlook of the International Monetary Fund confirms that fiscal consolidations — that is, deliberate deficit reductions — typically reduce growth substantially.

The study considers a wide range of advanced economies over the last three decades, so it doesn’t put too much weight on unusual episodes or focus on examples supporting particular conclusions. It also breaks new ground by looking specifically at times when governments changed taxes or spending with the aim of reducing deficits. Previous studies looked at summary measures of the budget situation, and likely included cases when strong economic performance caused lower deficits, not the other way around.

The recent experience of countries already carrying out austerity measures is consistent with the central finding of the I.M.F. study. Ireland, Greece and Spain have all had rising unemployment after moving to cut deficits.

Taking budget actions now that would further increase unemployment would be not only cruel, but also short-sighted. The longer unemployment remains high, the more likely it is to become permanent as workers’ skills deteriorate and they gradually drop out of the labor force.

Such a situation would be terrible for both the affected workers and the long-run budget situation. Imagine a patient with a slow-growing tumor who is also recovering from pneumonia. The outcome is likely to be worse if the patient is not given time to recover before undergoing surgery. 

Read Now Isn’t the Time to Cut the Deficit here.