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In what the White House is calling a jobs summit, President Obama is sitting down with economists, business leaders, labor leaders, and small business owners tomorrow to discuss ways to battle unemployment. And Christina Romer , chair of the President's Council of Economics Advisers , shares one of her goals--to generate ideas that encourage the private sector to work with government to generate more jobs: Many ideas under discussion build on partnerships with the private sector. Given the budget deficits this administration inherited, it is critical to leverage scarce public funds. More fundamentally, when businesses seem hesitant to hire and productivity is surging, we need to harness the private sector, bringing large and small firms in off the sidelines to boost job creation. One idea is to give direct incentives for homeowners to retrofit their homes to improve energy efficiency. This approach would be convenient and certain, and it could encourage millions of homeowners to make cost-effective investments they might not have done for years, if ever. It could help both stimulate the manufacture of retrofit products and increase construction employment. Others have suggested incentives to help small businesses invest, grow and create jobs. This could include measures to restore the flow of credit for small businesses and targeted tax cuts. In these types of ways, a moderate and targeted investment by the government might be leveraged into significant employment gains and purchasing power by small businesses. Direct government investments can also play an important role. We've already seen from the Recovery Act that spending on infrastructure—everything from roads and bridges to schools and municipal buildings—is an effective way to put people back to work while creating lasting investments that raise future productivity. All these ideas are just that—ideas to be discussed, refined and evaluated. Action on any measures to spur job creation will be worked out with Congress after careful study, and will be done in a fiscally responsible way. But it is important to use Thursday's Jobs Forum at the White House as a chance to confront the challenges our workers and firms face, and explore creative, cost-effective solutions. Read Romer's full op-ed here .

Christina Romer , chair of the President's Council of Economic Advisers, has a guest article in the latest Economist. Romer, who has been bullish on the Obama Administration's economic recovery plan, writes that we need to look back to 1937 to understand why, in her view, the stimulus spending is the right antidote for this recession. During FDR's first four years in office, the economy rebounded from the Depression in "rapid" fashion--"annual GDP growth averaged 9%." Unemployment dropped significantly in that period. But come 1937, unemployment surged (see chart at right from the Economist), as the country went into a deeper downturn. Romer: ...The fundamental cause of this second recession was an unfortunate, and largely inadvertent, switch to contractionary fiscal and monetary policy. One source of the growth in 1936 was that Congress had overridden Mr Roosevelt’s veto and passed a large bonus for veterans of the first world war. In 1937, this fiscal stimulus disappeared. In addition, social-security taxes were collected for the first time. These factors reduced the deficit by roughly 2.5% of GDP, exerting significant contractionary pressure. Also important was an accidental switch to contractionary monetary policy. In 1936 the Federal Reserve began to worry about its “exit strategy”. After several years of relatively loose monetary policy, American banks were holding large quantities of reserves in excess of their legislated requirements. Monetary policymakers feared these excess reserves would make it difficult to tighten if inflation developed or if “speculative excess” began again on Wall Street. In July 1936 the Fed’s board of governors stated that existing excess reserves could “create an injurious credit expansion” and that it had “decided to lock up” those excess reserves “as a measure of prevention”. The Fed then doubled reserve requirements in a series of steps. Unfortunately it turned out that banks, still nervous after the financial panics of the early 1930s, wanted to hold excess reserves as a cushion. When that excess was legislated away, they scrambled to replace it by reducing lending. According to a classic study of the Depression by Milton Friedman and Anna Schwartz, the resulting monetary contraction was a central cause of the 1937-38 recession. Red the full article here .