(Page 2 of 3)
It’s also a telling reflection of how the president himself views our current budget problems. Lew is often reported to be almost entirely in sync with the president on budget policy values. Both men sometimes talk up the need to get the nation’s fiscal house in order. But both would rather protect federal spending than find ways to cut it.
The Minimum Wage Enthusiast
Obama often seems to view economic policy in symbolic terms, so it’s fitting that the choice of Alan Krueger to head the Council of Economic Advisers (CEA) was in some sense a symbolic choice, designed to send a message that the administration would prioritize job creation over deficit reduction. Krueger, a Princeton economist who was installed in the CEA job in August 2011, is a well-known and well-regarded labor economist with a reputation for both empirical rigor and clever thinking. He’s also one of the most important minimum-wage enthusiasts in the country.
Before taking over at CEA, Krueger worked for two years at the Treasury during Obama’s first term. Before that, he was chief economist for Clinton’s Department of Labor from 1994 to 1995. His academic work is unusually varied, covering everything from the economic factors associated with terrorism to the follies of occupational licensing, the toll of long commutes, and the market fluctuations of scalped concert tickets. But as a labor economist, Krueger is first and foremost a jobs wonk.
Krueger is most famous for his work on a policy that numerous economists left and right have historically agreed results in higher, not lower, unemployment: the minimum wage. In 1995, he coauthored Myth and Measurement: The New Economics of the Minimum Wage with his Princeton colleague David Card. The book offered an extended, empirical argument against the prevailing wisdom that hikes in the minimum wage reduce employment. Instead, the pair surveyed a variety of studies as well as their own research to argue that the available research provides “fairly compelling evidence that minimum wage increases have no systematic effect on employment.” Not only that, but in some circumstances, they contended, a hike in the minimum wage could actually increase employment.
Other liberal economists soon followed Card and Krueger’s lead with more studies purporting to show no negative employment effects arising from increases in the minimum wage. Those studies were called into question by, among others, a January 2013 National Bureau of Economics Research paper from the University of California, Irvine economists David Neumark and J.M. Ian Salas and the Federal Reserve economist William Wascher, who jointly argued that the pro–minimum wage research designs all suffered from “serious problems,” and that the best evidence “still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others.”
Krueger has maintained his confident support for a higher wage floor over the years, pushing the policy from his perch in the administration. In a February interview with National Public Radio, he went so far as to suggest that a higher minimum wage would actually benefit employers by reducing employee turnover. His advocacy paid off in a public way when Obama proposed in his 2013 State of the Union address an increase in the federal minimum wage to $9 a hour, indexed to inflation.
Yet the payoff, like Krueger’s nomination, was mostly symbolic. Two months after the speech, the administration had all but dropped the issue, and there were no signs that the measure had anything close to the legislative support needed to get through the Republican-controlled House of Representatives.
That left Krueger with the unenviable task of defending the president’s ongoing failure to boost the nation’s employment numbers. The April 2013 jobs report published by the Department of Labor was hailed as evidence of recovery, yet it found that the economy had created only 165,000 new jobs—barely enough to keep up with new workforce entrants. The report also showed an increase in “involuntary part-time workers,” and a sizable reduction in the number of hours worked. The labor force participation rate, meanwhile, was the lowest since 1979. Overall, the economy was still missing two million of the jobs lost in the recession.
Those are tough numbers for an administration economist to defend. But for as long as he sticks it out in the administration, that’s what Krueger will likely be: the erudite jobs wonk tasked with explaining an administration that has consistently failed to make good on its promises to create jobs.
Looking only at his credentials, Gene Sperling might appear to be the administration’s internal check on economic policy: its conscience and critic, the killjoy whose job it is to deliver hard truths when no one else will.
On paper, Sperling, the new director of Obama’s National Economic Council, comes across as a sort of third-way Clintonian, growth-focused and disinclined toward the scrum of partisan rhetoric. His White House bio touts eight years of experience as an economic adviser in the Clinton administration, including work on the Deficit Reduction Acts of 1993 and 1997. Between administrations, Sperling spent time at the center-left Brookings Institution and the liberal Center for American Progress, where he wrote a book titled The Pro-Growth Progressive, which hails dynamism, globalism, and economic acceleration while taking to task fellow Democrats who lack “a deeper appreciation of the inevitability of change, the benefits of open markets, and the upward aspirations and entrepreneurial nature of Americans.”
As the head of the National Economic Council, a role he also held for four years under Clinton, Sperling is responsible for coordinating the administration’s economic policy process, which includes playing the role of “honest broker.” The ultimate goal is to ensure that Obama hears all of the relevant viewpoints on any given issue. It’s a job that makes him an adviser, a manager, a filter, and a firewall on economic policy.
Yet somewhat curiously for a man who has now twice run the White House’s economic policy apparatus, Sperling is not an economist. He holds a B.A. in political science from the University of Minnesota and a law degree from Yale, so it’s perhaps not surprising that he often acts more as the administration’s public advocate—an economic salesman who has become known for his vigorous defenses of administration policy.