The Economist Who Now Has Obama’s Ear
Policy + Politics

The Economist Who Now Has Obama’s Ear

AP Photo/Carolyn Kaster

By nominating Alan B. Krueger as the new chairman of the Council of Economic Advisors, President Obama turned to a consummate expert on unemployment and income distribution just as he prepares to unveil his latest plan to resuscitate the flailing economy.

Krueger, a prominent Princeton University professor of economics and public affairs and a former Obama administration Treasury official, offers a strong combination of academic rigor and practical government experience. Those skills will be highly useful when the administration attempts to push through another major economic stimulus and unemployment insurance extension package this fall.

Krueger has written widely on employment and economic issues – often times with conclusions that squared with liberal views. In 1992, for example, he co-authored a paper concluding that an increase in the minimum wage doesn’t always increase unemployment, as many conservatives and businessmen contended. He also told Congress in 2009 that scrapping tax breaks for Big Oil would only decrease domestic production of oil and gas by less than 0.5 percent.

But a survey of 6,025 unemployed workers that he completed in January found that the amount of time devoted to searching for work declined while workers received unemployment insurance and that out-of-work job seekers tend to be picky about the wages they will accept.  Conservatives have long argued that unemployment insurance extensions discourage people from looking for work, and that argument is certain to be renewed when the administration and congressional Republican leaders negotiate economic and budget policy this fall.

“Krueger has more experience than most economists at the intersection of professional analysis and public policy in the real political world,” William Galston, a former adviser to President Bill Clinton and a senior fellow at the Brookings Institution, told The Fiscal Times. “I think that the President will get very professionally solid advice, but not politically innocent advice.”

Jared Bernstein, a former economics adviser to Vice President Biden now with the Center on Budget and Policy Priorities, said: “I don’t remember a labor economist who was the chair of the CEA, and I can’t think of a better time for it than now. We’ve been stuck at this high unemployment rate and having a CEA chairman who knows how to move the needle is an inspired choice.”

The president next week will outline his proposals for new or extended tax incentives, public works and infrastructure projects, and other measures to attempt to jump-start the economy and reduce the 9.1 percent unemployment rate. Obama said today that Krueger will offer advice that is heavily grounded in academic research and government experience, and not driven by partisan politics. “We need folks in Washington to make decisions based on what’s best for the country, not what’s best for any political party or special interest,” he said.

The choice of a new CEO chairman to succeed Austan Goolsbee comes at a pivotal time for Obama, who is facing near-record low approval ratings and a critical public frustrated by his economic policies, a weak labor market, and a stubborn unemployment rate.  The Administration is hoping the President’s post Labor Day speech will rally both parties as well as the American public behind him. 

If confirmed by the Senate, Krueger, 50, would be Obama’s third CEA chairman, following Christina Romer and Goolsbee, who left the White House this summer to return to his professorship at the University of Chicago. The telegenic Goolsbee provided a positive face for the Administration’s much troubled economic policies, but Krueger may bring more economic gravitas and firepower to the Obama economic team, which is headed by Treasury Secretary Tim Geithner and National Economic Council Director Gene Sperling.

Cecilia Rouse, a former member of Obama’s Council of Economic Advisors and now a professor at Princeton said she is certain Krueger will focus his efforts on promoting jobs tax credits and further government investments in infrastructure and public works projects. “I think we will see him advocating for further investments in infrastructure….” She said. “I think he will be looking for ways for the government to subsidize employment in areas where we have a lot of unemployment.”

Michael Tanner of the libertarian Cato Institute said that while he strongly disagrees with the economic policies of Krueger, he is a respected, left-of-center economist, with strong academic credentials. “Primarily, he’s going to be an advocate for a stimulus package,” Tanner said. “He’s a Keynesian . . . he certainly will be an advocate for the so-called balanced approach, with some kind of tax increase as a part of a deficit-reduction package.”

Marty Regalia, chief economist for the U.S. Chamber of Commerce, complained that Obama continues to turn to economic elites for advice on the economy. “It’s kind of interesting when you see all the Ivy-Leaguers,” Regalia told The Fiscal Times. “You kind of think of this Administration as selling itself as an Administration for the people, and yet the appointments in the economic area are all from one school of thought and primarily from your more elite universities…. It’s very upper-crust, especially in the economics department.”

Krueger arrived at Princeton in 1987, after finishing his Ph.D. at Harvard. Jointly appointed in the economics department and the Woodrow Wilson School of Public and International Affairs, Krueger has examined job growth, the effects of increases in the minimum wage and the long-term unemployed. He has published widely on the economics of education, unemployment, labor demand, income distribution, social insurance, labor market regulation, terrorism and environmental economics.  

He is the founding Director of the Princeton University Survey Research Center. He is the author of What Makes a Terrorist: Economics and the Roots of Terrorism and Education Matters: A Selection of Essays on Education, and co-author of Myth and Measurement: The New Economics of the Minimum Wage, and co-author of Inequality in America: What Role for Human Capital Policies?

Krueger served as chief economist at the Department of Labor during the Clinton Administration, and signed on as Assistant Treasury Secretary for Economic Policy at the start of Obama’s presidency. He knows his way around government and has developed strong ties to many members of the President’s current economics team. That should enable him to get quickly up to speed when he comes on board, experts say.

“Alan is a tremendously gifted economist,” said William G. Gale, a senior fellow in economic studies at the Brookings Institution. “He is able to identify interesting questions and then identify credible ways of answering those questions in a manner that is I think remarkable, even among top economists.”