Obama's jobs dilemma

Our view: Reaction to the president's nominee for a top economic post shows the difficulty he faces in trying to get Congress to act on the nation's top problem — unemployment

August 30, 2011

President Barack Obama plans to issue a series of proposals next week to address what public opinion polls say is far and away the biggest issue on the minds of Americans: how to create jobs and spur economic growth. But the reaction to his nomination of a well-respected, mainstream economist and expert on labor markets to the post as head of the Council of Economic Advisers shows just how seriously politics has warped the debate about the economy in Washington.

Here's a sampling of what is being said by the nation's top economists about Alan Krueger, the Princeton professor Mr. Obama wants as his top economic adviser: He is a "smart guy" and an "excellent choice"; he is "an expert in labor-market problems, taxation and the economics of terrorism. I hope the president listens to him"; and he is "an absolutely first-rate economist" who was "exactly the characteristics you'd want in a CEA chairman." Those quotes were from, respectively, N. Gregory Mankiw, who lead President George W. Bush's Council of Economic Advisers; Martin Feldstein, the top economic adviser to President Ronald Reagan; and Douglas Holtz-Eakin, a former top economic adviser toSen.John McCain.

If the public becomes disappointed in him, it would probably be because he isn't likely to champion a sufficiently aggressive response to the nation's economic woes. In a previous stint in the Obama administration, he helped craft the "cash for clunkers" program, a credit program for small business and the Build America Bonds, which helped state and local governments invest in infrastructure. Those programs were, doubtless, helpful in stopping our slide off the economic cliff two years ago, but given the precarious state of the job market today, they were obviously insufficient.

The liberal Center for American Progress was so unimpressed by the scale of thinking that Mr. Krueger represents that one of its senior fellows, Matthew Yglesias, used a picture of horror movie monster Freddy Krueger to illustrate a blog post entitled, "Alan Krueger Is The Guy You Call When You've Given Up On Reducing Unemployment By Increasing Demand." He wrote of Mr. Krueger that "the kind of action he's an aggressive and creative thinker about is relatively small bore, supply side changes rather than big picture efforts to fill the gap."

To listen to the Republican National Committee, however, you'd think Mr. Krueger studied economics at the Kremlin, not Harvard. They call him an "advocate for higher taxes" who is "wrong on stimulus and jobs." Republicans blast him for suggesting that we should end tax breaks on oil companies and for supporting the idea of using a cap-and-trade system to help reduce greenhouse gases. They scold him for advocating higher minimum wages (while ignoring the actual results of his research on the subject, which found that when New Jersey raised its minimum wage, employment at fast food restaurants near the Pennsylvania border actually increased).

But it should not be surprising at this point that there is a massive disconnect between Republican political orthodoxy and the thinking of mainstream economists. Among the latter, there is widespread support for the notion that the federal government needs to take action now to stimulate employment and economic growth, while simultaneously crafting long-term plans for deficit reduction. That idea was most recently voiced by Federal Reserve Chairman Benjamin Bernanke, himself an appointee of President George W. Bush. After all, the one thing that will do the most to make the federal debt problem worse is another recession, or years of high joblessness and weak economic growth.

But in a Republican Party where the leading presidential contender all but accused Mr. Bernanke of treason for using monetary policy to try to stimulate the economy, there is no room for talk of anything but cutting spending and doing it now. Republican leaders in Congress, if the recent debate over the federal debt ceiling is any indication, are likely to toe the ultraconservative line, the opinion of most Americans notwithstanding.

That leaves Mr. Obama with a political and practical dilemma. He has been cagey about what his jobs proposal will entail, not just in its specifics but also in its scope. The Washington Post reported Tuesday that the vagueness is in part a reflection of a debate within the administration about whether the president should lay out a bold proposal and force the Republicans to defend their opposition to it or whether he should champion smaller-scale ideas that have some chance of passing the Republican-controlled House of Representatives and avoiding a Republican-led filibuster in the Senate.

This shouldn't be a debate. He should do both. Neither economic reality nor the mood of the electorate calls for any limit on the scope and breadth of ideas we should consider for putting Americans back to work. Certainly, voters deserve to see a real contrast between the president's approach and the Republicans' rigid orthodoxy, but what they really deserve is for the government to do everything it can to address the nation's biggest problem. If the president doesn't push for big ideas, nobody else will. But if all he can get through Congress is a renewal of a cut in the payroll tax or small incentives for companies to hire the unemployed — two ideas being floated in Washington — he should take it. We need every new job we can get.

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