Alan Krueger and President Obama at the White House (Photo from Reuters)
President Obama’s ”pivot” to jobs took center stage on Monday, as a major move was announced in the president’s economic team that could have far-reaching consequences for the economy.
Princeton economist Alan Krueger was selected by the president to lead the White House Council of Economic Advisers and become Obama’s chief aide on the economy in place of the outgoing Austin Goolsbee. The president praised Krueger for his academic background and past history in the Clinton and Obama administrations, saying that he is focused on the “challenge” of “how to get this economy growing faster.”
President Barack Obama said he’s nominating Alan Krueger, a labor economist who has advocated for a hiring tax credit for businesses and increased infrastructure spending, to lead the White House Council of Economic Advisers.
Obama said Krueger will play a central role in developing policies to spur faster economic growth. The president said he’ll announce a package of proposals next week to boost hiring.
“Our great ongoing challenge as a nation remains how to get this economy growing faster,” Obama said at the White House. “Our challenge is to create a climate where more businesses can post job listings, where folks can find good work that relieves the financial burden they’re feeling, where families can regain a sense of economic security.”
The nomination is subject to Senate confirmation. Krueger, 50, would replace Austan Goolsbee, who left the administration earlier this month to return to teaching at the University of Chicago. Krueger, who received his Ph.D from Harvard in 1987, has been at Princeton University since last November after serving as the Treasury Department’s chief economist for two years.
Though best known for his extensive work as an academic, Krueger is also a man of Washington. He was the Clinton administration’s chief economist at the Labor Department in the mid-1990′s, and was also the chief economist for Obama’s Treasury Department from 2009-2010. He has also worked in a minimal role with Goldman Sachs, receiving speaking fees from the Wall Street giant.
Liberal economic figures like Robert Reich, with whom he served when Reich was Labor secretary under President Clinton, have high praise for Krueger and are confident he will bring a new attitude to the president’s economic team, calling his appointment “fitting and appropriate.”
The truth, however, paints a more disturbing picture. Is Alan Krueger simply another “yes man” for Wall Street and Corporate America? Here’s a hint: Greg Mankiw, who once held the position of head of the White House Council of Economic Advisors under President George W. Bush, says that Krueger is an “excellent choice” for the job.
While refraining from criticism of the appointment, the Washington Post’s Ezra Klein asserts that Krueger is simply more of the same, another nod to the status quo from a president that delights in populating his closest staff and most important administration positions with insiders, men and women that have previously served in Washington and are deeply familiar with how government works — but also stained with the policies of a government that has repeatedly failed Americans.
Among other biographical focal points, Alan Krueger worked closely with Tim Geithner through the bank bailouts and other questionable policies of Obama’s Treasury secretary, and is also a close “tennis buddy” of Larry Summers and Geithner. As mentioned previously, Krueger was a top advisor in the Clinton administration for two years. He is by no means “fresh blood” in an administration that would seem to desperately need it.
Krueger merely fits a pattern. As Klein writes of Krueger’s selection, “Why would anyone have ever thought they would have chosen anyone else?”
There are two ways to look at the White House’s decision to name Alan Krueger to lead the Council of Economic Advisers. One is that Krueger is arguably the leading labor economist in the country. He’s known for bringing a near-superhuman rigor to a subject that, oddly enough to non-economists, had fallen into a bit of disrepute in the profession (for more on that, stay tuned to the blog today, as Brad Plumer will have a longer look at Krueger’s academic work). He’s served in both the Clinton and the Obama White Houses, so he knows the players and has proven his ability to move within the bureaucracy. He’s more than qualified for this position.The other way, however, is that of course the Obama administration chose Alan Krueger. Why would anyone have ever thought they would have chosen anyone else? The White House has hewed to a very specific personnel-replacement strategy, and Krueger fits it perfectly.
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Krueger fits this pattern. He was the top economist on the Labor Department under Clinton and the top economist for the Treasury Department from 2009-2010. He’s a close tennis buddy of Summers and Geithner. He knows these guys, and they know him. If you had tried to predict this choice by asking yourself, “who is the former Clinton-administration economist who has an extremely good relationship with the current set of economic-team principals,” Krueger is among the first names you would have come up with.
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If everything was going great and the administration had been perfectly surefooted in its response to this crisis, that wouldn’t be particularly worrisome. But that’s not the world we live in, and on at least a couple of different issues — housing, monetary policy, the likely speed of the recovery, etc — the administration has run into some real trouble. So if you think that this might be a good time for the administration to step back and rethink where the economy is and what we need to do going forward, then the question is which of their recent hires is in a position to help them do that?
Sadly, Krueger’s time at Geithner’s Treasury Department offers little in the way of promise that the president’s new economic right-hand man will break from the administration’s current policies.
As Treasury’s chief economist, Krueger “toed the party line” in backing up Tim Geithner’s policies and peddling ebullient praise for the Obama administration’s economic agenda, predicting in early 2010 (wrongly, of course) that in the coming months ” labor market conditions should improve with sustained and solid economic growth.” Never happened.
Krueger is no stranger to the idea-killing world into which he is now walking: Until late last year, he served as assistant secretary for economic policy in Geithner’s Treasury. There, he toed the party line.
In February 2010, Krueger told the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association that the Obama administration’s policies seemed to be working out great.
“In sum, the economy is continuing to recover from the most severe recession of the post-war period,” Krueger declared. “It will take time for the pickup in economic activity to translate into renewed hiring, but labor market conditions should improve with sustained and solid economic growth.” He added: “Administration policies have played an important role in jumpstarting economic activity and restoring stability to markets and will continue to provide support in the months ahead.”
In the months since that pronouncement, the employment-to-population ratio toward which Krueger is inclined has dipped from 58.5 percent to 58.1 percent, its lowest level since 1983.
Also of concern is Krueger’s aggressive endorsement of tax cuts as a means to jumpstart the economy, as well as his belief that the long-term unemployed are partly to blame for their predicament and may not be worthy of extended government benefits. These are sentiments generally shared by the president and ones that clearly influenced his decision to select the Princeton professor for his economic team.
Krueger is on record as supporting a payroll tax cut originally proposed by President Obama and passed by Congress, now up for renewal and facing some opposition in Congress. Krueger has said he “favor(s) the idea of having a new jobs tax credit,” promising that it would lead to more hiring in the private sector to offset government job cuts stemming from spending austerity.
More nuanced is his extensive academic record, which includes numerous studies on the importance of having a strong minimum wage but also research on unemployment trends that appear to place much of the blame for the sharp rise in long-term unemployment on the jobless themselves. One of Krueger’s projects complained that “…the amount of time devoted to job search declines sharply over the spell of unemployment,” and decried how “picky” the unemployed can be in trying to find a new job.
In 2011, Krueger and Andreas Muller conducted a survey of 6,025 unemployed workers and found a couple of interesting things. One, “the amount of time devoted to job search declines sharply over the spell of unemployment.” Second, out-of-work job-seekers tend to be picky: The minimum wage a worker will accept tends to be pretty close to the wage of his previous job, and it doesn’t drop very much over time, even if he stays unemployed.
The selection of Alan Krueger does raise the specter of an alternate universe. This is one where President Obama names a Princeton professor and noted economist with a last name beginning with “Kru-” as his top economist, but a figure without the Goldman/Geithner/Clinton/blame-the-jobless baggage. Of course, that would be Paul Krugman.
he is a good hire – IF he gets confirmed and IF his ideas (and the spend on jobs theme is not radical, just good economics) are not thwarted by the Wall Street sycophants in charge … a lot of ifs, but you gotta start somewhere
Sounds like Obama: Nibble around the edges. Tax breaks to companies to hire is a joke. Like companies are going to spend 10s of thousands to hire someone because they save $5k. Sound like a republican or, as I said, like Obama. And another Clintonite to boot, showing once again that Obama lacks guts and creativity. I’ll be interested to see what Krugman’s take is.
This is ridiculous. If the whole “new job tax credit” is the best idea he has (i admit I haven’t bothered to do any other research yet), then it is all just window dressing.
Why would a company hire new empoyees they don’t need just to get a tax credit? We live in a corporate world and therefore, no CEO is going to agree to hiring more workers whose pay is going to cost more than the tax credit. Corporations are all about cutting costs and maximizing profits? So how in the hell would a small tax cut encourage anyone to hire workers when this is a big recession and they don’t need the workers.
And if companies DID need workers, then they would hire them regardless.
Krueger Has Great Credentials And Has Some Good ideas – which means the RepubliCONS will stonewall his appointment. I like the jobs credit – the employer has to actually HIRE someone BEFORE they get a tax break. As opposed to the GOP, who wants to shower tax breaks with no strings attached on companies, and HOPE that they hire someone. Also. Obama can’t do a recess appointment, because Boehner has used some technical trick to say that Congress is really NOT in recess (even though it is). Obama should use some trick of his own – since they aren’t technically in recess, Obama should call Congress back into session every few days to take up something. Make Boehner pay for using dirty tricks.