UPDATE 2-High US unemployment not the "new normal"-Romer

* Economy starting to recover but still far to go

* High unemployment is “old cyclical”
(Adds McConnell response)

By Matt Spetalnick

WASHINGTON, April 17 (BestGrowthStock) – The fragile U.S. economy
is on the path to recovery but is still far from back to
normal, White House economist Christina Romer said on
Saturday.

Romer, chairwoman of President Barack Obama’s Council of
Economic Advisers, said the signs were improving but the
economy is still suffering from a shortfall of aggregate demand
as it emerges from what has been termed the Great Recession.

“By almost every indicator, the U.S. economy is finally on
the road to recovery,” Romer said at Princeton University in
New Jersey. But citing a March jobless rate of 9.7 percent, she
cautioned: “When it comes to the economy we are very far from
normal.”

Obama has made job creation a top priority, mindful that
persistently high unemployment could mean heavy losses for his
Democrats in November’s congressional elections.

While acknowledging serious concern that some Americans
face long-term unemployment, Romer pushed back against
economists who have asserted that high joblessness is now built
into the economy and has become the “new normal.”

“The overwhelming weight of the evidence is that current
very high and very disturbing levels of overall and long-term
unemployment are not a separate structural problem but largely
a cyclical one,” Romer said in her speech. “That is far from
being the ‘new normal,’ it is the ‘old cyclical,'” Romer said.

She also made the case for congressional approval of
financial regulatory reform, saying it was needed to “help curb
destructive bubbles” that spurred the financial crisis.

Obama, in his weekly radio and Internet address on
Saturday, accused Republicans of spreading misinformation about
the Democratic financial reform bill, which is expected to come
to a vote in the Senate within weeks. [ID:nN17143503]

Obama said Senate Republican Leader Mitch McConnell’s
insistence the bill would lead to more taxpayer-funded bailouts
of financial firms was a “cynical and deceptive assertion.”

In response, McConnell’s spokesman, Don Stewart, said:
“It’s especially disappointing for the president to attack
Senator McConnell for raising concerns about the bailout
loopholes in the bill when just last night the White House
agreed with Senator McConnell and its own treasury secretary
and asked Senate Democrats to remove the $50 billion fund.”

The bill proposes setting up a $50 billion fund to pay for
liquidating distressed financial firms, a measure not favored
by the White House. Republicans have said the fund presents the
possibility of continued bailouts.

With debate heating up, regulators charged Wall Street
giant Goldman Sachs (GS.N: ) with fraud on Friday.
[ID:nN16131161]

JOBLESS BENEFITS AND HELPING STATES

Romer said the shortfall in demand reflects lingering
effects of the crisis and headwinds the economy still faces.
She outlined steps for boosting recovery, including more fiscal
relief for states and further extending jobless benefits.

“There are fiscally responsible measures we can take that
can make an important difference between so-so recovery and
strong recovery,” she said.

Romer said reducing the federal budget deficit and getting
the government’s “fiscal house in order” would be crucial.

“It would be penny-wise but pound-foolish to try to deal
with our long-run problem by tightening fiscal policy
immediately or foregoing additional emergency spending to
reduce unemployment, she said.

“But a credible, comprehensive plan for deficit reduction
would create a favorable climate for investment and ensure that
the economy remains strong.”

Though Obama inherited record deficits, Republican critics
have charged that heavy government spending since he took
office is digging an even bigger fiscal hole.

Penny Stocks

(Reporting by Matt Spetalnick; Editing by Doina Chiacu and
Eric Beech)

UPDATE 2-High US unemployment not the “new normal”-Romer