It’s still the jobs, stupid

In what I hope is not some symbolic hype, Alan Krueger–an actual economist and a labor one at that–was nominated by President Obama today to head the Council of Economic Advisors.  He will replace Austin Goolsbee.

As the Wall Street Journal noted, Krueger’s scholarship suggests he will “likely provide a voice inside the administration for more-aggressive government action to bring down unemployment and, particularly, to address long-term joblessness.”

If his name sounds familiar, it’s because Krueger’s academic work has frequently played a valuable role in the political discourse. When congressional Republicans blatantly lied about the costs of a cap-and-trade plan, it was Krueger who set the record straight. When conservatives said in 2009 that slashing the minimum wage would boost the economy, Krueger explained why the opposite is true.

The economist also brings relevant experience to the table.

I’m hoping this finally brings the correct policy priorities and prescriptions to the table. We’ve had nearly three years of confused messages and results and the economy is clearly the worse for it.  There’s an article up at The Guardian by economist Dean Baker that pretty much sums up all of my economic posts for the past few years.  Obama never seemed to understand that high unemployment is a problem and never instituted any kind of policy to target the problem directly.  He says he gets it now, but I’d just like to remind every one that he said he got it after the election that delivered the House of Representatives to the Tea Party terrorists and still has shown no sign that he understands that people expect bold fiscal policy in the face of low economic growth.  All we keep getting is tax breaks for rich people and opposites day fiscal policy.

President Obama has discovered how serious the recession is. That’s what he told an audience in Chicago last week. To be fair, he was referring to revised data from the commerce department showing that the falloff in GDP was larger than originally reported.

But ridicule is appropriate. He and we knew all along how many people were out of work. The employment numbers told us the size of the hole and the desperate need for government action.

This sort of ridiculous comment, and President Obama’s weak response to the recession over the first two and a half years of his presidency, explains the tidal wave of scepticism facing his widely hyped upcoming speech on jobs after the Labor Day weekend. The list of remedies leaked ahead of time does little to inspire hope.

At the top of the list of job-creating measures is extending the 2 percentage-point reduction in the social security payroll tax. This provides no boost to the economy, since it just keeps in place a tax cut that was already there, but if the cut is allowed to end at the start of 2012, it will be a drag on growth.

As it stands, the social security programme is being fully reimbursed for the lost tax revenue, but there is always the possibility that Republicans will use this as a basis for attacking the programme. Given President Obama’s willingness to support cuts to social security, it is understandable that this part of his jobs agenda doesn’t generate much enthusiasm.

Baker goes on to call for a new CCC and explains why trade agreements, tax cuts to business yet again that undermine social security, and all the rest of the “jobs” agenda touted by the President aren’t going to do much of anything.  Economist Nancy Folbre has a great piece of analysis up at the NYT explaining why letting this high level of unemployment go on for a period of time has an increasingly negative impact on the entire economy because things multiply over time.  However, a new study covered by Folber shows that the unemployed  just don’t sit around and act like they are on vacation.  They create value by doing unpaid work.  The same folks that think that the unemployed just lie around are the same ones that push the meme that homemakers spend their days eating bon bons and watching soap operas.

The overall increase in non-market work implies that household consumption among the unemployed fell less than market income, but it’s hard to put a dollar value on the unpaid work. When people make a voluntary decision to substitute time for money, we can infer something about the relative value they place on it.

But most unemployment is involuntary, and some unpaid work probably represents an effort to stay busy more than a significant contribution to household living standards.

The authors emphasize the relatively large impact of unemployment on unpaid work, in part because this is a new finding, and in part because it counters the wrong impression that, as Professor Hurst put it, the Great Recession was a Great Vacation.

But it is also important to note that most of the unemployed can’t allocate more of the free time they gain to productive uses, even if they want to. They lack the capital, land, tools and skills needed to flexibly shift from wage employment to production for their own use. Even when they can make a partial shift, their productivity is likely to be lower in unpaid work than paid work.

That’s why involuntary unemployment represents such a waste of human capabilities and loss of productive output for the economy as a whole.

So, what can Alan Krueger bring to the White House if the President will listen to this economist?  This is economist Mark Thoma’s take on the appointee.

His most well known research is on the minimum wage and immigration, The work is somewhat controversial in that the results show small negative effects from raising the minimum wage and from increasing immigration. In my view that is a sign of an economist who is willing to let the evidence do the talking, and that is a good trait to have in this job.

He has also worked in many other areas, including occupational licensing, the economics of terrorism, and more recently on job search in periods when unemployment is high, including how job search is affected by things such as unemployment insurance. But that is just a small taste of the large amount of research he has done.

Krueger’s been working at the Treasury so maybe that will give him access that many of the other Obama economic advisers seemed without.  Time is running out for policy to help the unemployed in any meaningful way.  I say this because as we get closer to the election, it will make the Republicans more surly and less likely to do anything to help a Democratic administration. They’ve already been rewarded for hostage-taking behavior.  Then, there’s the policy lags.  Things like infrastructure banks take a lot of time to set up. Ideas like  patent reform are laughable as job creation tools. I have no idea why the Obama administration won’t embrace things that worked in the past, but that doesn’t appear to be their MO.  They seemed to get their jobs mojo from reheating failed Republican canards and presenting them as the higher, middle ground. I continue to be discouraged.

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17 Comments on “It’s still the jobs, stupid”

  1. dakinikat says:

    Here’s Krugman’s take:

    Alan is a fine choice as chief economic adviser. He’s done excellent work, he’s a really good guy, whom I know pretty well, since we keep getting each others’ mail.

    • Minkoff Minx says:

      Oh, that is good to know that you approve of Alan Krueger…

      I saw this, and I know it is the Washington Examiner…Three minutes, two teleprompters | Campaign 2012

      President Obama required two heavy-duty teleprompters on Monday during a three-minute speech in which he nominated Alan Krueger to serve as chairman of his Council of Economic Advisers.

      “I am very pleased to appoint Alan and I look forward to working with him,” Obama said, staring at the large, flat-screen monitor to his right, then shifting his eyes to the teleprompter on his left. “I have nothing but confidence in Alan as he takes on this important role as one of the leaders of my economic team.”

      The picture shows a big daddy teleprompter.

      I tell you, Obama would need a teleprompter just to repeat one of his favorite phrases: Let me be clear.

  2. The Rock says:

    This is an interesting move by Obumbles. He is now in a position to say that he has appointed a ‘jobs czar’ of sorts. But he can still fall back on Congress to not approve of any initiatives that he comes up with. It is very possible that this is purely a campaign move, and a dangerous one at that. I’m curious to hear what the CBC thinks about this on the heels of their nationwide ‘jobs tour’ and the leadership debacle that was Hurricane, I mean bad Tropical Storm, Irene.

    The $60,000 question is “..Dak, what do you think about this guy? Are his positions consistent with someone that understands the problem and can come up with policy ideas that will solve it?..”

    Hillary 2012

    • dakinikat says:

      He knows what he’s doing. To me, the question is will the President listen?

      • The Rock says:

        Then maybe this was the ‘pivot’ that Obumbles was talking about (not that that means a hot load of monkey poo at this point). I do have another general question for you. How come the DOW is climbing, but gas prices aren’t? Oil can’t be coming out of Libya yet, and I can’t believe that energy speculators aren’t using this to make a ton of money. And the volume that is being traded has decreased since the last two weeks sell offs, yet the Dow is still rising. Why?

        Hillary 2012

      • dakinikat says:

        Demand for oil is down. That usually happens with slow growth in the economy. The stock market is anticipating a response by the Fed, I think.

      • The Rock says:

        Gracias!! Lets hope the Fed response will at least maintain current levels of trading in advance of the ‘urgent major speech’ post labor day. When Obumbles talks, the market drops. (That might be another bumper sticker!)

        Hillary 2012

      • foxyladi14 says:

        well now we know he always listens. :lol:

  3. bostonboomer says:

    I heard about this hire while I was out in the car and couldn’t wait to see what you thought of the guy. But whether the President will listen to him–highly unlikely, since he wouldn’t even listen too Goolsbee, apparently.

  4. bostonboomer says:

    Thanks for the great analysis. I agree that being willing to report the results of the research despite fear of criticism is a great trait for someone adivising the President. Krueger sounds like he’ll do a good job–I hope Obama finds some brains and humility and decided to listen to some advice from an expert for a change.

  5. madamab says:

    I have found the super-secret source code that will allow me to channel into the future! I hereby present the “jobs plans” of the top three candidates for Preznit 2012:

    Obama: “Eat your peas. Trade Agreements. Patent regulations. Shared sacrifice. You are the ones you’ve been waiting for, which means I don’t have to do anything! Hey, where else you gonna go?”

    Perry: “The worst thing you can do in a recession is spend money creating jobs. Texas miracle, bad air, minimum wages, no regulations! Yee-haw!”

    Romney: “What day is it? Oh yeah, it’s Populist Day. Uh, raise my taxes! Wait, did I just say that? DAMMIT!”

  6. Minkoff Minx says:

    Dak, did you see this?
    FDIC Objects to $8.5 Billion BofA Settlement (Updated) « naked capitalism

    Ooh, this is getting to be fun. Now the FDIC has weighed in too.

    Can’t wait to get my hands on the filing (any readers who can get it are encouraged to provide a link or send a pdf so I can upload it).

    Needless to say, the FDIC objection is further validation of the questions raised by attorneys general Eric Schneiderman and Beau Biden.

    No details yet, merely a notice of the existence of the objection at Bloomberg.

    Update. Here is the filing. The general logic is similar to the Biden objection (although he also took a major shot at the Bank of New York role), but this is as skeletal as it gets. This is literally a placeholder, to weigh in prior to the deadline for objections, which is August 30.

    • dakinikat says:

      Nope. Will go check. Trying to breathe today is taking up all my energy. It feels like being in a smoker and smells like it too around these parts.