The Alan Krueger Lesson: Good Advice Is One Thing, Following It Is Another

The appointment of economist Alan Krueger, who President Obama named to head the Council of Economic Advisers today, is getting generally favorable reviews from progressive economic commentators. For the unemployed, that means there would be a high-level voice in the administration calling attention to their concerns about the labor market if the Senate confirms his appointment.

What isn't clear, though, is whether Krueger will be a voice for the kind of robust jobs policy that President Obama has so far been loathe to advocate—and if so, would President Obama follow Krueger's advice?

Krueger is a labor economist who is perhaps best known for his work debunking conservative dogma about the minimum wage, showing that increases in the minimum wage do not lead to increased unemployment as right-wing think tanks and politicians frequently assert.

“I think it's a great appointment,” Lawrence Mishel, president of the Economic Policy Institute, told me today. He describes Krueger as “really smart and pragmatic,” a person who “will bring a great sensitivity to concerns about unemployment and income inequality.”

At New Deal 2.0, economist Rob Johnson writes, “He is a fine economist with government experience at the Treasury and the Labor Department and he should be very familiar with the people and practices of government. There are no issues more important to address than the persistent and devastating high levels of unemployment, and Krueger’s academic strengths are ideally suited to meet the challenge.”

On the other hand—as Roosevelt Institute senior fellow Dorian Warren, a political science professor at Columbia University, points out in the same article—the Obama administration started with Christine Romer in the same position as chief economic adviser, and though Romer has been a strong advocate for bolder action to stimulate the economy (most recently in this PBS interview), actual administration policy has been much more modest—and thus much more prone to attack.

Matthew Yglesias at Think Progress is critical of Obama's decision because Krueger “is a specialist in micro-scale labor market inefficiencies. What’s the difference? Well, nationwide we have a massive plague of idle resources — unemployed workers, and unused facilities — to which the largest contributor is insufficient aggregate demand. This big chunk of inefficiency (“Okun Gap”) is what fiscal and monetary stimulus are all about. You call in Christina Romer if you want to tackle these problems.”

However, an article that Krueger wrote for Bloomberg News earlier this year analyzed ups and downs in the unemployment rate in the last three years, concluding that to get a real feel for the state of joblessness and the economy, look instead at the percentage of the population that is employed. By that measure, he noted, we have been in a jobs slump for more than a decade and face a continuing dire situation.

Yglesias goes on to concede that Wall Street Journal writer David Wessel is reporting today that Krueger “is likely to provide a voice inside the administration for more-aggressive government action to bring down unemployment and, particularly, to address long-term joblessness.”

If that is true, it remains important for that voice to be amplified beyond the walls of the White House. The people on President Obama's political team seem content to have the administration propose a series of patches to the economy. What is really needed, both from an economic and a political perspective, is a sweeping set of economic proposals that will reorder and revive the economy in a way that inspires the majority of voters that put President Obama into office and that will rewrite the economic narrative that is now being dominated by the advocates of a counterproductive austerity agenda.

Krueger certainly has the capacity to give the administration good advice in this regard, but getting good advice is not enough; you have to be willing to follow it. Once again, the job for progressive activists is to alter the political climate so that good economic policy—bold action to reduce unemployment now—is understood to also be good politics.