"When households and businesses are liquidity-constrained by reduced lending, any money put in their pockets is more likely to be spent," she said.
Romer's academic research into the effects of stimulus is widely cited, and her work has shown that a permanent tax cut of 1 percent of gross domestic product raises output by between 2 and 3 percent over the next three years.
But many economists have expressed concern that the current stimulus package would have only a modest impact on 2009 growth, and consumers would be inclined to pocket tax cuts as they try to rebuild savings wiped out by falling real estate and stock markets.
In the meantime, British Prime Minister Gordon Brown will press President Barack Obama for details on his plans to fix the ailing U.S. financial sector in talks Tuesdaythat will focus on the global economic crisis.
The two leaders will also discuss ways to tighten lax financial regulations, a major topic for the summit of the Group of 20 developed and emerging economies that Brown will host in London on April 2.
Invoking former U.S. President Franklin Roosevelt's New Deal policies aimed at lifting the United States out of the Great Depression in the 1930s, Brown has called for a "global New Deal" involving cooperation from major economies to stimulate growth and improve financial regulation.
"This is a global problem. It needs global solutions. There is a global banking collapse that we're dealing with the consequences of in every country," Brown told National Public Radio in an interview.
Keep track of what Obama has been doing since taking office:
Day 42: Health Reform Positions Nominated (Mar. 2)
- Obama named Kansas Governor Kathleen Sebelius to lead his ambitious health reform effort. He also named former Clinton administration health official Nancy-Ann DeParle to serve as head of the newly created White House Office for Health Reform, which will help coordinate Obama's health reform agenda with Congress. (Full Story)
- British Prime Minister Gordon Brown hopes to forge an alliance this week with Obama to combat the global financial crisis and reinforce what London calls its special relationship with Washington. Brown will be the first European leader to meet Obama since he was inaugurated. (Full Story)