Princeton’s Krueger, Jobs-Credit Advocate, Picked as Obama’s Top Economist
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.
Krueger would help remake Obama’s economic team ahead of next year’s re-election campaign as the president seeks to lower the 9.1 percent unemployment rate.
Jobs Tax Credit
“I favor the idea of having a new jobs tax credit,” Krueger said in a July 1 interview with Bloomberg radio. “If companies increase their payroll by an employee, they could get a $5,000 tax cut to offset their additional hiring costs.”
“Eventually, companies reach a point where they are so lean they do need to hire more,” he said. “But they also need to be more confident that demand will be there for their goods and services.”
Cecilia Rouse, a Princeton economist and former member of Obama’s economic advisers’ council, called Krueger “an inspired choice” by the president.
“He is probably best known for his work on the economic benefits of schooling and the impact of school quality on student outcomes, the impact of the minimum wage on employment, and more recently on measures of individual well-being including among the unemployed,” Rouse said in an e-mail.
The Republican National Committee criticized Krueger, saying in a statement that he favored raising taxes and was “wrong” in assessing the stimulus passed in 2009 had helped turn the economy around.
Krueger would be Obama’s third CEA chairman in as many years, joining an economic team that has been almost entirely revamped in Obama’s first term. Treasury Secretary Timothy Geithner is the only member of Obama’s original core economic advisers who remains in the administration.
The president’s first council leader, Christina Romer, returned to teaching at the University of California at Berkeley last September. National Economic Council Director Lawrence Summers and Office of Management and Budget Director Peter Orszag left the administration last year. Summers returned to Harvard University and Orszag is now vice chairman of global banking at Citigroup Inc.
As chairman of the Council of Economic Advisers, Krueger’s salary would be $191,300 a year. In his last full year as a professor at Princeton, Krueger made $369,807, according to his financial disclosure report.
Consulting and Speeches
Krueger supplemented that income with consulting, board memberships and speeches, including $7,000 from Goldman Sachs Group Inc. (GS) for a speech in June 2008. As council chairman, Krueger would again be working with NEC director Gene Sperling, who left Treasury earlier this year to replace Summers and also drew money from Goldman before joining the administration, earning $887,727 for advice on that company’s charitable giving.
At Treasury, Krueger worked on the administration’s first stimulus package, tax credits for businesses and the Build America Bond program. As an academic, his work has focused on the labor market, including studies on long-term unemployment, which will be one of the issues Obama plans to address in his jobs speech next week.
Obama will release his jobs plan shortly after the Sept. 5 Labor Day holiday. The president intends to press Congress for billions of dollars in spending to reduce unemployment as he also pursues a compromise on long-term deficit cuts.
The proposal will be for “a series of steps that Congress can take immediately to put more money in the pockets of working families and middle-class families to make it easier for small businesses to hire people to put construction crews to work rebuilding our nation’s roads and railways and airports and all the other measures that can help to grow this economy,” Obama said today. The measure should draw bipartisan support, he said.
White House press secretary Jay Carney said the time and place for Obama’s address hasn’t been set. It will include proposals that Obama previously has backed, he said. Those include extending that temporary cut in employee payroll taxes and worker retraining programs.
The administration also is set to release its mid-year budget review this week with projections on growth, unemployment and the deficit.
Krueger has “not had any role” in shaping the president’s proposals, Carney said.
The jobless rate and sluggish growth have driven down Obama’s popularity. Disapproval of the way he’s handling the presidency hit a new high of 55 percent in an Aug. 25-27 daily tracking poll by Gallup. His approval rating was 38 percent, tying a low.
Since World War II, no U.S. president has won re-election with a jobless rate above 6 percent, with the exception of Ronald Reagan, who faced 7.2 percent unemployment on Election Day in 1984. The median forecast of economists surveyed by Bloomberg puts the unemployment rate at 8.2 percent in the third quarter of next year.
In March, Krueger predicted the jobless rate wouldn’t increase, as some economists have suggested, as workers feel more confident about employment and seek full time jobs.
“I suspect a large rise in the labor force won’t cause the unemployment rate to jump,” he wrote on March 30, when the jobless rate was 8.8 percent, in a Bloomberg opinion piece. “Instead, I suspect we’re going to see a continuing decline in the unemployment rate, though there surely will be some blips along the way.”
That statement was among those cited by the RNC today in its criticism of Krueger.
During the debate on the debt ceiling this summer, he argued that businesses were looking for certainty from the political process to start hiring. He also called for patience on the economic recovery and made the case for additional infrastructure spending.
“The recovery does just take time,” he said in the July 1 interview. “There are some things the government can do that would also help, like investing in infrastructure.”
“That would help to reduce unemployment among construction workers and could lead to an increase in consumption and possible raise confidence and would raise productivity in the future,” he said.
The three-member Council of Economic Advisers was created by Congress in 1946 to advise the president on preparation of the White House economic report and to analyze the interaction between economic trends and developments and administration policies.
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