Today President Obama announced the nomination of Princeton labor economist Alan Krueger to head the Council of Economic Advisers. Krueger is already a veteran of both the Obama and Clinton administrations.
For information on what the CEA chair does, read Keith Hennessey’s description of the roles of the various economic advisers. As CEA head, Krueger will be giving Obama big-picture advice and explaining economic concepts and research for the president. In that capacity, he shouldn’t represent a significant break from previous Obama CEA chairs Christina Romer and Austan Goolsbee, except perhaps in that his expertise has less to do with macroeconomics than with lower-level subjects relating to labor markets and other microeconomic concepts.
Brad Plumer has a good summary of Krueger’s academic work. Arguably his most famous paper (it was taught in my intro to labor economics course in college, at least) is a study on the impact of minimum wage laws, using differing laws in Pennsylvania and New Jersey as a natural experiment, that found evidence that minimum wage increases do not necessarily increase unemployment. Jim Pethokoukis argues that the results of that study were undermined by later research. Krueger has also been criticized by conservatives for favoring a significant Value-Added Tax, pushing for a cap and trade program, botching an employment projection, and for being an all-round liberal.
The one item in his background that stands out as a cause for concern, though, is his earlier work for Obama in enacting Cash for Clunkers. Cash for Clunkers was a program in which people traded older, less efficient cars for a rebate on purchases of newer, more fuel-efficient cars. The older cars, once traded in, were destroyed. The effect of the program was to shift some demand for fuel-efficient cars from the future into the present, create a windfall for some dealers, and cause the destruction of hundreds of thousands of useful cars that otherwise would have gone into the secondary market. It represents the worst of stimulus thinking: it would have been better simply to cut taxes by an equivalent amount, or probably even just to mail checks to random people.
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