New Obama Economics Chief Should Focus on Barriers to Hiring

By Daily Editorials

August 30, 2011 3 min read

President Barack Obama's latest choice to head his Council of Economic Advisers, Alan Krueger of Princeton, has the labor market as his field of study — a useful specialty with the unemployment rate stuck at more than 9 percent. The question is whether he will give the right advice to the president.

He is well-regarded by his colleagues, and his appointment has been praised by some conservative economists. But he is known, in Harvard economist's Greg Mankiw's phrase Monday in a CNBC interview, as well-qualified but "distinctly left-of-center."

Among Krueger's more controversial projects was his research while at Princeton in the mid-1990s purporting to show that an increase in the minimum wage did not diminish the job prospects of workers. The finding has drawn a great deal of skepticism from other economists. More than a decade after Krueger and a colleague released their findings, University of Chicago economist Gary Becker, a Nobel laureate, was writing of the damaging economic effects of minimum-wage hikes.

Two years ago, Krueger suggested in a New York Times column that the United States ought to consider a value-added tax, which is a tax not only on a particular item at the stage of consumption, but also on the materials that go into the production of the item, though he hedged that it "might not be the way to go."

In an earlier stint in the Obama administration, as assistant Treasury secretary for economic policy, he worked on, among other things, a policy to give employers a tax credit for hiring the unemployed.

Ultimately, however, there is a limit to the tax and monetary gimmicks to affect the unemployment rate at the government's disposal. Right now, there are huge uncertainties hanging over all employers. The fate of Obamacare — which could affect employee health care costs — is unresolved, for example.

While the Obama administration has made some helpful gestures in trimming back some regulation, its officials at the EPA, National Labor Relations Board, National Mediation Board (another labor relations agency) and other agencies have been particularly heavy-handed and anti-business.

Hopefully, Krueger will use his expertise to highlight these impediments to hiring and freeing up the labor market and not to simply affirm his new boss' anti-growth leanings.

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