Back in March, when he still enjoyed remove from the policy fray as an academic at Princeton, Alan Krueger used unusually blunt language to sound the alarm that the American economy was staring at the sort of crisis that seemed unlikely to be fixed absent sustained and aggressive action.
At the end of a largely wonky, data-driven piece of analysis written for Bloomberg News, Krueger discounted the incessant focus on the unemployment rate -- which does not count jobless people who have grown so discouraged that they have given up looking for work -- arguing that the real action is found in the so-called employment-to-population ratio, which measures what slice of working age Americans are employed. The ratio then sat at a dismal 58.4 percent, just off the low reached the previous December, meaning that the supposed resumption of economic growth was not putting large numbers of jobless people back to work.
Even back when the economy was still technically expanding between 2002 and 2007, Krueger noted, the percentage of working age people then employed never got back to where it had been before the previous recession in 2001, at a peak of 64.7 percent.
"What this indicator tells me is that we weren't creating enough jobs long before the recession that began in December 2007," Krueger declared. "If this pattern holds, even in recovery, it points to a much deeper and disturbing problem for the U.S. economy."
Curiously, Krueger ended his piece right there, without suggesting what we might do to fix this "deeper and disturbing problem," one that is now beyond argument, given that the pattern has indeed held. (Maybe Bloomberg was parsimonious with its space? Maybe Krueger had to go teach a class?) In any event, for Krueger, the answer to that question his observation provoked has just been elevated to something greater than academic interest: It has become his problem to solve, along with the central problem of these times.
President Obama on Monday named Krueger to head the White House Council of Economic Advisers, a development that analysts construed as a sign that the administration finally grasps the public's priorities: Enough with the bickering over the debt ceiling and arguing about what government spending to cut; time for a serious and sustained focus on putting Americans back to work.
The political and policy calculus of his nomination was unimpeachable. Krueger is a highly respected labor economist who has written voluminously about the economic imperatives of the nation. His research has fairly well annihilated the nonetheless enduring red herring that raising the minimum wage exacerbates unemployment. He has studied the extent to which American workers are vulnerable to having their jobs shipped off to lower-wage countries. He has probed at length the benefits that accrue to the economy through greater education of the workforce, and he has advocated for an expansion of programs to train workers for higher-wage careers in faster-growing areas of the economy.
Krueger is in short someone who has, over an academic and public service career spanning decades, thought deeply about the state of play for American workers and what might be done to arrest the steady decline of working opportunities. From the standpoint of messaging -- the only standpoint that generally gains bandwidth in Washington -- he seems like the right guy for the job.
But the real question for the rest of the country is whether Krueger's appointment will in fact alter the policies coming out of Washington, delivering initiatives that can address the crisis he highlighted in his opinion piece early this year, laying the ground for aggressive hiring. On that score, unfortunately, there is limited reason for optimism, for the simple reason that he is walking into an administration that has so far proven unwilling or unable to marshal a fight to generate paychecks.
The Obama White House has been alternately fearful of running up short-term budget deficits with spending aimed at stimulating the economy (and never mind the research showing that austerity only increases deficits over the longer haul by putting the brakes on growth) or naively pursuing the dream of forging peace with a Republican party that has clearly bet on an extension of economic misery as the pathway to electoral gain.
President Obama cast Krueger's appointment as part of his "urgent mission" to boost "economic security", but it is hard to hear such words without retreating to the false comfort of sarcasm: How's that mission been going, and with how much urgency, really?
Obama's supposed "pivot" to jobs has been telegraphed so many times that it has become a joke -- and not a particularly funny one. What else has merited a higher priority all these months? The president has never managed to make this clear.
Krueger is replacing Austan Goolsbee, another highly respected academic economist whose nomination in September 2010 was widely portrayed as a signal that the administration was finally getting serious about jobs. But when the news broke in June that Goolsbee had decided to head back to the University of Chicago to resume teaching this fall, the message seemed clear: His efforts to spur the economy and encourage job growth had run headlong into the partisan sniping and fatal compromising that defines most of the proceedings in the capital.
The president began his administration by leaning on the counsel of Larry Summers, who as treasury secretary in the Clinton administration did as much as anyone to bring us to the crisis at hand: He rolled back regulations on the financial system despite prescient warnings of disaster from people he ridiculed and pounded.
Obama put his own Treasury under the authority of a Summers protege, Timothy Geithner, who has rarely paused when confronted with a choice between catering to mega-banks or to the interests of ordinary people: He is Wall Street's tool. At the New York Fed, he helped engineer the bailouts of big banks in 2008 without safeguarding taxpayer interests. At the Treasury, he has repeatedly shot down proposals to relieve homeowners of untenable mortgages -- a substantial drag on economic growth -- in order to protect banks from having to absorb losses.
Krueger is no stranger to the idea-killing world into which he is now walking: Until late last year, he served as assistant secretary for economic policy in Geithner's Treasury. There, he toed the party line.
In February 2010, Krueger told the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association that the Obama administration's policies seemed to be working out great.
"In sum, the economy is continuing to recover from the most severe recession of the post-war period," Krueger declared. "It will take time for the pickup in economic activity to translate into renewed hiring, but labor market conditions should improve with sustained and solid economic growth." He added: "Administration policies have played an important role in jumpstarting economic activity and restoring stability to markets and will continue to provide support in the months ahead."
In the months since that pronouncement, the employment-to-population ratio toward which Krueger is inclined has dipped from 58.5 percent to 58.1 percent, its lowest level since 1983.
That is not Obama's fault, it must be noted. He is correct in repeatedly emphasizing that it took a lot of years and a lot of hands to turn the American economy from a prodigious job creation machine into a contraption of arbitrage that rewards the wealthiest and best-connected while condemning the rest of the population to stagnant wages and high unemployment. This came about through the financial deregulation of the Clinton years, then more of that plus tax cuts for the rich and expensive wars from the Bush administration.
The trouble is how little Obama has done to change this bleak economy. A man of clearly enormous intellect and analytical command, he shows no will to fight, seemingly reluctant to sully himself with the bloody sport known as politics.
Perhaps his naming of Krueger to his new post is a sign of change, and let us all hope so.
But until we see the initiatives and the follow through, until this administration gets deadly serious about replacing decrepit infrastructure and embracing clean energy, Krueger's dead-on assessment of the problem penned earlier this year will remain a problem diagnosed and left untreated. And that will leave tens of millions of people mired in debt, decline and dismay.
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This refers to the seriously flawed 1993 study based on a phone survey of PA and NJ fast food establishments. One result of the fact that many politicians believe this nonsense can be seen in the 50% unemployment rate among Washington D.C. youth.
"A subsequent analysis published by the National Bureau of Economic Research based on payroll records of fast-food restaurants during the same period revealed that Garden State workers experienced a 4.6 percent decrease in employment after the minimum wage hike compared to the Pennsylvania control group. In other words, they confirmed the commonsense economic principle that when something costs more, people can afford less of it. Or in the case of a minimum-wage hike, when workers cost more to employ, businesses can afford to hire fewer workers."
http://www.nationalreview.com/corner/275846/krueger-s-faulty-minimum-wage-study-carrie-l-lukas
http://ideas.repec.org/p/nbr/nberwo/5224.html
drastcally reduce the giving away of billion of dollars in such Aid. We also need to give incentives for Companies to bring their jobs back to America by an emergency modification of the tax code. For those Companies that stay abroad they need to pay some type of penalty to remain abroad. What I do not know.
"Curiously, Krueger ended his piece right there, without suggesting what we might do to fix this 'deeper and disturbing problem.' "
I frankly don't see anything curious about it. He ended the piece right there, because the "deeper and disturbing problem" is that our economy is no longer the "prodigious job creation machine" we all fantasize it to be. There is nowhere to invest in America that will create enough jobs to increase the ratio of workers to citizens. He didn't suggest ways to fix the problem, because there IS no fix to the problem, without a fundamental restructuring of our economy.
The vibrant industrial- and manufacturing-based economy that came out of post-WWII full-employment, when everyone was a consumer, a demand for goods spurred an explosion in production, is GONE. The jobs have been outsourced, in the name of corporate profits.
We can't stimulate ourselves back in time, when "Made in America" was a patriotic mantra. And so we must find ways to stimulate job creation in other sectors of the economy. For service sectors all have one important thing in common... they're all labor intensive. Growth in any of them will create millions of jobs.
I have seen this starting in 2005 as trends marked a decline in employment as jobs went overseas and manufacturing, housing and real estate became affected by many factors.
Extrapolating from that, we saw more credit cards being used, more vacancies in houses we mailed to (previous customers) and lower requests for services or reduced services which we saw as the bubble getting ready to burst.
In 2008, it did at that first quarter and slumped rapidly after that.
Unemployment is a hard factor to gauge, but in the sense of what Krueger did, he nailed it and made it more understandable.
Remember the old saying:
Keep doing the same thing and expect a different result.
Psych 101.
If the DOJ did their job
If ICE did their job
maybe, just maybe, the job prospects for legal American workers would improve
And who does he have as a real business adviser? The CEO of GE who has sent more jobs overseas than most companies. They just got through decimated the manufacture of light bulbs in the US so that GE could see overprices bulbs that are toxic when broken and manufactured overseas just to save a few watts of electric that people without jobs can afford to buy or use.
This is just another bad choice in a string of bad choices.
And now we could see the International Space Station abandoned or destroyed because of the lack of foresight (or defense understanding) of this Administration in not keeping one shuttle active for emergencies.
The light bulbs is not a conspiracy.
I am certain the decision about the space station was not made just before they closed it out. It had to be during Bush's administration.
Thank for, however, the demonstration that America is the least educated of the industrial nations.
The government, and the clueless dependent class that has been evolving the last 20 years, is the problem. A government that spends 20 million dollars to create 14 "green" jobs in Seattle, will continue to ruin any hope of recovery as long as people are so entrenched in their ideological bunker they cling to their political leanings over any resemblance of common sense or self determination.
Good post.
The "green" lightbulbs - for energy efficency - have been exploding and burning people.
Everyone I know is going back to the other light bulbs.
Obama's idea was a dud. However, his business interests w GE is a Major success.
A more important symptom to track in our current economy is median wage rates. The Fed regularly releases average wages but these are skewed more every day. The top 25 hedge fund managers made $25,000,000,000 last year. The current Federal minimum wage is $7.25. That will give the average fulltime retail or food service employee a little more than $15k a year. If they have an older child or a spouse working part time with them, that household makes $25k a year. That is above the poverty line for a family of 4.
25 hedge fund managers made the same as 1 million low income American households combined. Over 30 million American households don't make even that much.
Many of these are working Americans and don't show in any unemployment estimates. Who are these people? Here is a quote from a Boston newspaper story.
"Mark hired 115 workers for the 13 McDonald’s restaurants he owns in Eastern Massachusetts. He interviewed 2,055 people and turned down many qualified applicants. He said:
“We had a lot of professional people who were looking to change careers and a lot of kids, a lot of mothers, a lot of senior citizens — it was an amazing mixture.""
Unemployment is bad. Employment isn't much better.
The world's economic experts met this weekend in Jackson "Round-Aperture-in-the-Earth", Wyoming, coming to the common conclusion that the Fed has pretty much "exhausted its endogenous supply of mobile-zygote-suspension".
The financial services sector has been stimulated enough to invest in US companies with sufficient impact to dramatically decrease our 23% national unemployment. Yet it seems the financial services sector is having a problem meeting that mandate... which has nothing to do with concerns about the federal deficit, or an uncertainty about future public policy, tax structure or regulatory environment.
The problem they're having is not whether or not to invest in US companies in order to create new jobs, but more WHERE to invest to create new jobs.
What got us out of the Depression was an industrial- and manufacturing-based economy... steel mills, smelting plants, a growing auto industry, companies making everything sold in America IN America... able to absorb all those unemployed workers, once programs like the WPA even marginally increased demand for those products.
Today, we have no industrial base... Rust Belt towns are ghosts of their previous selves. And manufacturing has been outsourced to the Pacific Rim. Investment in most companies will create jobs in China, Korea, Japan, and India.
So the problem they're having is... Where are they supposed to invest, to create manufacturing or industrial jobs here in the US?
and to build the energy grid and transport systems of tomorrow.
that is what obama claimed the $787 BILLION Stimulus package was all about......and was revealed to be everything but what he claimed.
I'm very much interested in an "energy grid" plan, that happens to provide a mag-lev rail system as a by-product...
I'm frankly more interested in your Health Care is a Right microbio, however. I'd very much like to point you to what I consider my flagship agenda item, coming from the perspective of 35 years as a health care financial consultant. I would love to hear your comments, if you would be so kind. http://americanprogressive.org/2011/08/28/a-progressive-health-care-agenda/
I'll fill you in on the grid plan, as well as my patent on steam-turbine power generation, driven by hydrogen fuel, if you ask :)
Nonetheless, both the GOP and the Obama Administration are doubling down on Supply Side with their Austerity programs. No businessman invests when he anticipates fewer customers.
Wait until Austerity meets the Xmas 2011 shopping season. On Erev Turkey Day we announce on whose necks the Special Committee's financial axe will fall and then we will fight like the craven lunatics until Xmas eve when Congress announces who will really feel the guillotine's blade.
"The wages and salaries of households purchase about two-thirds of all the production in the United States. Consumers vote with their dollars, thereby directing production toward the goods and services they want businesses to provide. This is called consumer sovereignty." http://dallasfed.org/educate/everyday/ev5.html
I think it was a knee-jerk response to rising unemployment, and a major mistake to pump so much money into investment banking, when the basic "employment infrastructure" is no longer in place to make Keynesian supply-side economics functional.
But then I think it was a mistake to interpret the success of the Reagan tax-cuts as testament to the veracity of supply-side economics, also. The Reagan tax-cuts were successful because they put money into the budgets of households, who spent it right back into the general economy, stimulating production.
I'm convinced that the secret to economic recovery is jobs. Putting stimulus money into households will drive growth in GDP, and John Maynard's precious supply-side will follow.
Paychecks in peoples pockets mean spending on consumer products and enriching the revenue flow. Think the republicans in congress will go for it? Maybe if money only flows to districts that request it through their offices. Put them on the spot.
Jared Bernstein(?) made an observation, dealing with the first attempt at getting construction projects going. They thought in terms of fifty hard hats per ten machines, when it was just the opposite ratio. Well la te da! The invention of the wheel should have signaled that.
Arguments about "kids - grand kids" is stale. Take care of the now and our posterity will be fine.
It's easy to be simplistic and sophomoric as my above post illustrates. But it's time for arm twisting and calling out obstructionist. Austerity. Hell. If money doesn't circulate the economy stagnates. Spend Damn it spend.
Oh I did say "either" congress has a change of heart or we wait for the 2012';s and give this president a full blown uncrackable majority. And while we're at that get rid of the filibuster rules and the 60 threshold in the Senate.
Rant over.
Let's just throw out all the laws and procedures - so that it becomes more than just pandemonium.
More words: Senate rules: Single senator filibuster; 60 vote threshold.