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On Alan Krueger, Obama's Nominee to Chair the Council of Economic Advisers

Today August 29, 2011, Obama announced the nomination of Alan Krueger as chair of the Council of Economic Advisers. Krueger is a labor economist at Princeton since 1992. He was chief economist at the Department of Labor for a year from August 1994 to August 1995 under Clinton. He wrote one study which found that a higher minimum was associated with higher employment and a lower minimum wage with lower employment.

But who is Alan Krueger? Have any of us in the hoi polloi ever heard of him before today? What does he really think about employment and economic policy?

Perhaps most importantly, he was Assistant Secretary for Economic Policy at the Treasury Department from May 2009 to November 2010 and its chief economist from February 2009 to November 2010. This put him at ground zero of Obama policymaking during the first two years of Team Obama's efforts to bail out the banks on the backs of ordinary Americans, with no help for jobs and cruel jokes, like HAMP, for struggling homeowners.

We should all know by now that Obama would not let a progressive within a million miles of his White House. We should also take it as a given that no real progressive would associate him-or herself with this Administration. Now this might seem unfair and too blanket a condemnation, even though empirically it works just fine.

So I tried via the google to find out what I could about him. I started with his home page at Princeton and his CV. The first thing I would like to note is that his tenure at Princeton overlapped with that of Ben Bernanke. At the time of Krueger's hiring in 1992, Bernanke was not yet chair of the economics department but he could have had a hand in Krueger's hiring. I really don't know. But I do know that Krueger entered into a department where Bernanke was the rising star, the heir to the throne as it were.

At any rate, I scanned through the titles of Krueger's papers, books, and posts. For a labor economist, he has spent remarkably little time studying the massive unemployment that came with the December 2007 recession. There are a couple of papers to be published that might touch on this but nothing direct and nothing already in print. The housing market blew up 4 years ago. The meltdown hit 3 years ago. It's not like Krueger didn't have the time or the material to work with.

The closest he came was a paper entitled "Did Active Labour Market Policies Help Sweden
Rebound from the Depression of the Early 1990s?" In this paper, Krueger argued that keeping unemployment benefits high or extending them meant that the unemployed could afford to stay unemployed longer.

From an American perspective it would, perhaps, seem natural to lower the levels of the social safety nets and in this way make the unemployed persons seek, find and accept new job offers more rapidly.

He conceded that for Sweden this approach would meet with resistance so he stressed the importance of job search and counseling services. He opined

While it is unclear why job search assistance is such a cost-effective strategy, one possibility is that such programs provide the unemployed with a more reasonable expectation for the type of jobs that they might be able to obtain (which has the economic effect of lowering reservation wages [that is the lowest wage at which someone will accept a job]).

So there you have Krueger's "jobs" strategy either cut the safety nets until the unemployed are forced to accept low paying shit jobs or provide counseling to direct them into such jobs.

Krueger's approach meshes well with Obama's corporatist entitlement cutting agenda. It does not begin to address what happens when there are no jobs or the effects of his race to the bottom wage policies would be on wages generally. And of course not a whiff of an acknowledgement that our economic system is a kleptocracy which has resulted in extreme wealth inequality. But again we know that Krueger would never have been selected if Obama thought for a moment he would raise these issues.

I also found one article from April 28, 2005 on bubbles. It revisits the precedent of the South Sea bubble of 1720 and relates it to the dot com bubble of the late 1990s. Krueger's prescription is greater disclosure. What is interesting about this is that in 2005, Krueger was sitting on top of the biggest bubble in world history, the $8 trillion bubble in US housing. Not one word about it. Apparently Krueger thought that bubbles could only occur in stocks.

Given Krueger's pedigree in an elite system based on credentialism, he is definitely Establishment and so will not challenge or disturb his kleptocratic masters. From what I have seen of his writings, both what he writes and does not write on, I would say that he is considerably to the right of Establishment liberals like Paul Krugman and Robert Reich. I would not expect much from him on the jobs front, maybe some subsidies to employers, and some training or counseling for the unemployed to match skills to employers, but nothing very big or effective, and likely at the cost of cutting unemployment insurance or entitlements.

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Submitted by jawbone on

on today's All Things Considered.

Sounds like a good Republican idea.

Labeling him a "labor economist" would indicate to most people that he gives a fig about laboring people and their welfare, when, instead, he could simply see labor from the Corporatist point of view as something to be used at the lowest possible cost.

That seems to be the case. Hence, Obama wanting him on his econ team. Fits with Michael Hudson's statement that Obama wants to see a 30% reduction in the rate of pay for American workers.

Submitted by Hugh on

I updated my post adding a new third paragraph. He is in lockstep with Team Obama because he was literally a member of Team Obama. That he would suggest a regressive tax, like a national sales tax, just underlines how anti-progressive he really is and how at home he was and is with this most corporatist of Administrations.

CMike's picture
Submitted by CMike on

I would guess he's to the immediate left of Krugman.

Just curious, Hugh. What wage rate do you think the long-term unemployed should be holding out for?

Submitted by Hugh on

Krugman is such a ditz. Like everyone else in our elites, it's the connections that count, not the ideas. So Krugman won't say anything bad about Krueger because A) he's another economist, B) he's from Princeton like Krugman, and C) they are both part of the Establishment. It's amazing how quickly Krugman is able to ditch his intellectual integrity for another member of the club. But note Krugman's comment. It's pretty general in nature. I don't think Krugman knows Krueger or Krueger's work particularly well. Still he tries some ass covering for Krueger anyway. He would be way more activist if they only let him. Yeah, right, like I've never heard that line before.

Submitted by Hugh on

I think American workers should be paid a living wage, protected by strong unions, and be covered by universal single payer healthcare.

Depressing the reservation wage, the wage at which workers will take jobs, is, as I said in the post, part of a race to the bottom. The effect isn't felt just on the lowest wage earners but acts as an anchor pulling all workers' wages down. We saw something similar with the evisceration of unionism in this country. Unions tended to pull up wages not just of their members but of everyone in their industries. Their emasculation put this process in reverse where poorly paid non-union members tended to pull wages and benefits down, even those of union members in the give backs we have seen.

We tend to focus on the number of jobs and forget their quality is just as important. Serfs are employed, but who wants to be a serf?

Submitted by Hugh on

That's because I view the economy in terms of its macroeconomics. I don't have the data to answer your question. I don't see wages or employment improving any time soon. There are two dynamics, downward pressure on wages and the absence of jobs at any wages. Many people won't even have the option of bad jobs at poor wages. I see these as the expected result of the great wealth inequality that our kleptocratic elites have created.

I don't think much of the country ever experienced even a weak recovery and that they are and have been in depression. The employment figures for August will be out this Friday. They should be able to tell us more about underlying disemployment.

So I guess if you are unemployed, I would say that it will be hard getting any job and that this will be truer the longer you are unemployed. And if you do get a job it will likely be for substantially less than what you were making, with fewer benefits or prospects.

twig's picture
Submitted by twig on

here. Modeled on Georgia Works, corporations get free labor by unemployed who can earn "up to" an additional $240 on top of unemployment benefits (only those getting benefits are eligible). Not sure if the $240 is per week or for the entire 8-week program.

Sounds like an internship, except more disgusting.

Submitted by lambert on

But maybe I never pressed the submit button.

Sounds like an internship. And at the end of it? "See ya later." It's going to be HAMP, except for the DISemployed.

beowulf's picture
Submitted by beowulf on

As I've mentioned before, the best way to sell progressive, enlightened economic policy in this country is to frame it in the most regressive, divisive way possible (precisely on point-- Nixon describing is guaranteed income program as "workfare"). Since a federally funded jobs guarantee run by state agencies would inevitably see Republican governors use federally subsidized workers to displace state and local employees anyway, I'm in agreement with Ralph Musgrave's proposallthat the unemployed be placed in short-term temp jobs with private employers. At the end of the assignment, if the worker still can't find a full-time job, place him another temp job. Conservative writer Peter Ferrera proposed something along in this lines that would would be so progressive (guaranteed job, health insurance, day care, housing subsidy, it should best be described (for political reasons) as "corporate slavery". :o)
Suppose all aid to the able bodied was in the form of an offer to work. Report to your local welfare office before 9 am and you are guaranteed a work assignment somewhere paying the minimum wage for a day’s work. A private job assignment would be the top priority. If you need more money come back tomorrow. If you have children with no one to care for them, bring them with you and they will receive free day care… If you work a minimum number of hours you get a Medicaid voucher that will purchase basic private health insurance. If you work for a continued period establishing a regular work history, you would be eligible for new housing assistance focused on help in purchasing your own home… These workers would continue to receive the EITC and child tax credits…

The government could even reduce administrative costs to a minimum under this system. There would be no need to maintain and investigate eligibility requirements. If Warren Buffett wants to show up for a work assignment before 9 am, no big deal. Most importantly, this new system would effectively eliminate real poverty in America. Everyone would have a place to go where they could get an assured job and an assured income of $25,000 to $30,000 per year.
(p. 9)

cripes's picture
Submitted by cripes on

I like the general thrust of your idea, although some details are not well thought through.

Showing up for "day labor" doesn't exactly sound like a career ladder to me.
And you don't make 30,000 a year on minimum wage anywhere in this country.
More like 15,000 IF you work 40 hrs x 52 weeks a year with no vacation or holiday.

The problem with guaranteed low-wage labor is that it doesn't keep people out of homelessness, it puts them in it.

beowulf's picture
Submitted by beowulf on

I like the general thrust of your idea, although some details are not well thought through.

I'll try not to take that as an insult. I would just point out, if day care would otherwise cost you, say, $200 a week but is provided for free by the govt while you're working (to say nothing of the Medicaid and housing benefits), do you still think the job is only paying minimum wage?
Sure the minimum wage should be hiked, but between doing that or a jobs guarantee, I'd do make the latter the priority.

cripes's picture
Submitted by cripes on

Are what's needed, including medical, dental, housing and child care.

I worked many years in Workforce Development programs, so I have first had experience of what a trap government-run work programs are: Earnfare, TANF, etc.

I say this not as an anti-welfare zealot, but to highlight the punitive nature of actual government programs that punish the poor. Single mothers get the worst of it, and single men are left out almost entirely. Go-nowhere "transitional" jobs that pay too little to house the worker, and lead to no permanent employment, just free labor for "partner" corporations. Talk about a vicious cycle.

Barbara Ehrenreich talks about this in gruesome detail here:

In Denmark, for example, store clerks make about $15 hourly, get medical, university education, child care, real job training (not "job readiness"), and housing subsidies. Unemployment is not allowed to make workers destitute and homeless, and subject to criminal prosecution.

That's a program I could get with. It's in the details. We have a loooong way to go.

PS: I'm not insulting anyone, just making the point that guaranteed minimum (low) wage job is not the solution, and to be wary of the prospect that such programs be turned into slave labor for permanent underclass--with a cute hopey-changey slogan!

Submitted by Hugh on

I'm pretty much in favor of taxing the wealth away from the rich and using it to give people real jobs, real healthcare, real education, real housing, and real retirements. We have the resources. We can afford better than Dickensian solutions.

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Submitted by CMike on

High tax rates for the wealthy should be the policy and "to protect our democracy" should be one of the reasons explicitly given for maintaining them.

Eureka Springs's picture
Submitted by Eureka Springs on

is in order. Neo-labor economist. But Shock Doctor or kleptocrat lumps them all into the same septic tank so well.

beowulf's picture
Submitted by beowulf on

As I've mentioned before, the budget compromise that Gov. Mark Dayton made with GOP legislators in Minnesota is the template. It only looks like a defeat if you make the Obamabot assumption that raising revenue (or cutting the deficit) is the top priority. Since, unlike state govts, Uncle Sam never needs to tax to spend, the opportunity this strategy offers is far larger.
The late Thursday afternoon announcement that Dayton and the Republican Legislative leadership had reached a tentative budget deal was a near capitulation by the governor. He failed to get his tax increases on the wealthy to fund his spending, instead agreeing to the final Republican offer to fund the budget with more accounting shifts and a borrowing off of the future tobacco settlement funds. Dayton gets to say he got more spending and maybe a bonding bill without social legislation that he opposes.

Democrats should push for specific tax hikes to fund new spending in specific programs and the rotten compromise" they reach with GOP (whose donors hate taxes more than they hate spending) is no tax hikes and new spending. Actually, the real compromise (which a non-corrupt Democratic Admin could use to get Medicare for All "paid for" for free) involves arbitraging the defective CBO budget scoring model.
1. CBO is projecting short term interest rates (3 month T-bill rates) will be at 4.5% by middle of decade, highly doubtful since as Warren Mosler likes to say, the natural rate of interest is 0.
2. At the discretion of the Secretary of the Treasury, the IRS can accept Treasury bills for payment of taxes.
3. CBO preliminary scoring for Anthony Weiner's Medicare for All bill said it'd require (from what I've heard second-hand) $1 trillion a year in new revenue.
4. James Bowery's "net asset tax" proposal would tax $60 billion in household wealth-- let's limit it to top 10% of households, we're down to $40 billion tax base. Bowery's tax rate would be whatever the current 3 month T-bill rate is. By CBO's crazy math, it would raise $1.8 trillion a year (40T x 4.5%), more than enough to pay for Medicare, abolishing estate tax and cutting FICA taxes, and yet 3 month T-bill rate is, as of yesterday, 0.02%. On a $40T base that'd be... $8 billion a year.
5. If the wealthy can step into the bond market at any time to "buy down their tax rate" and then turn around and use the T-bills they bought to pay other taxes, the odds that 3 month T-bill rate will ever go up is approximately... 0.02%.
6. By the time the CBO updates its buggy economic model, everyone in the country would already have Medicare at no cost to themselves, their employers, state govts, auto or workers comp insurers and excepting health insurers, anyone else (the Pentagon budget would be cut by 10% simply by moving its healthcare costs to Medicare). Its the biggest free lunch in the world, and that's not even counting the 45,000 people who die prematurely die because of inadequate health coverage (EPA values "statistical life saved" at $9.1 million, x 45k, so a $409.5 billion a yr reduction in the deadweight cost of the real death tax).