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President Obama has nominated a Princeton economics professor to head up his White House Council Of Economic Advisors, in a continuing shakeup of his economic team.
The good news is, it's not Paul Krugman, thank god:
President Barack Obama has chosen labor economist Alan Krueger for a top administration post as the White House scrambles for solutions to boost a fragile economy with the 2012 election looming...If confirmed by the Senate, he would replace Austan Goolsbee, who left the administration earlier this month.
Goolsbee follows Larry Summers and Christina Romer out the door. The only top dog remaining from Obama's original economic team is Treasury Secretary Timothy Geithner.
Being an industrious little blogger, I read over the material I could find on the internet about Obama's new man, Krueger.
That's where the bad news starts. From the articles I read, Krueger seems to hold a number of illogical positions that go against the economic mainstream, positions that seem to be ideologically driven. For example...
Krueger published a book concluding that increases in the minimum wage have no correlation to job losses. This is equivalent to saying increased business costs have no effect on a business. His proposition is so easy to shoot down that I shouldn't even have to mention it. Here's the experiment - let's raise the minimum wage to $20 per hour and see what happens to unemployment. I guarantee you it would go way up, as jobs were lost by the bushel. The alternate effect is for prices to go way up. Either way, the effect is negative for consumers and demand. I cannot believe an economist, of all people, would try to pass off such a transparently false proposition. Not one whose name isn't Krugman, anyway.
Krueger published a study saying school vouchers have no effect on academic achievement, despite massive evidence to the contrary. Krueger accomplished that bit of sophistry by skewing the sample base. This one is just sad and pathetic. Others studied the same data as Krueger and came up with the OPPOSITE conclusion about vouchers. The mainstream conclusions say vouchers help black and poor kids the most.
Krueger wrote an article in January 2009 proposing the implementation of a 5% consumption tax in 2011. He actually thought this would help the economy. Imagine the negative economic effects we'd be having now had his proposal become law. His tax on all consumer goods, which he claimed would bring in $500 billion in tax revenue per year, would further depress demand in an economy most everyone agrees is lacking in demand. Just flipping brilliant. Is something wrong with the drinking water at Princeton, or what ? How can Princeton have TWO economists who are out to lunch ? Maybe we should study the phenomenon.
So far, the picture we have of Krueger is one of a guy who seems to believe taxes and business costs are irrelevant to the functioning of the economy. He also seems to be carrying water for the public education system. No wonder Obama picked him.
In another article from July of this year, Krueger opined that we should NOT have a debt limit ceiling. Here's the interesting part of that piece:
The debt ceiling is a funny animal. Congress tells Treasury to spend money on various programs, and it authorizes the collection of a certain amount of tax revenue, expecting Treasury to borrow to make up for any shortfall of revenues over spending. Yet, it also sets a limit on how much debt the government can accumulate. The Treasury isn't borrowing money because it wants to; it is borrowing because Congress chose to spend more money than it chose to collect. If Congress wants to limit the debt, it should vote to cut spending and/or raise revenues -- and it can do that independently of voting to raise the debt ceiling. So, in my view, the debt ceiling is an unnecessary constraint that can cause severe damage to the financial reputation of the United States and health of the world economy if it is not raised in an orderly way that is congruent with past spending and taxing decisions.
There's some logic behind Krueger's argument here, but in the end, he ignores realities and is putting forth partisan rhetoric. Imagine for a moment that we didn't have a debt ceiling. Would there have been ANY Congressional negotations to reduce the debt without one ??? Of course not. We'd still be happily spending away unrestrained on the credit card like the ship of fools we are. Even the minor debt deal that was achieved would not have been achieved. Heck, Congress couldn't even bother itself to come up with a budget in over two years. Do you think Congress will do much of anything about the debt/deficit without it's feet being held to the fire first ??? No, me neither. That's why we need a debt ceiling statute. It would be extremely irresponsible for Congress and the President to pass the largest debt ceiling increase in American history, as we just did, without some kind of provisions to reign in the debt in the future. That's the very minimum we should expect from them, and Krueger wants to abolish the mechanism that made it possible.
Obama's new chief economist dude isn't exactly filling me with hope, but he sounds about par for the course for this President. Yet another ivory tower academic who has no idea how the real world functions, just like Obama himself.