Meet Obama's New Council of Economic Advisers Chair, Labor Economist Alan Krueger

Who is Alan Krueger?  More importantly, is anyone in this administration going to propose solid legislation and policies, well thought out in detail, that will actually work to get America back to work?  Bottom line, it looks like the same ole party line and finding anywhere Krueger has crossed it comes up empty.
line in sand
Alan Krueger is a Labor Economist at Princeton and the first bad sign is he was the chief economist at Treasury during 2009-2010, under Tim Geithner. He is tennis buddies with Larry Summers.

The Wall Street Journal says the choice is all about who is willing and who looks real good on TV. Even worse, the Wall Street Journal claims Presidents don't consult Economists since economic policy is a political decision. Awesome, economic policy is a political decision and explains why there is so much wrong with America these days. If you cannot base policy on theory and what is actually happening, how can one expect to do much to turn anything around? Below is the Wall Street Journal video on Alan Krueger, the position and his background:

 

 

Krueger was also the Clinton administration's chief labor economist. This too is horrific in a way for it was Clinton who signed NAFTA, the China PNTR and enabled foreign guest worker Visas as well as offshore outsourcing.

One of the more hopeful signs is Krueger's call out of the Bush administration for privatizing job exchanges for the unemployed:

You would think that if the government spent over a million dollars on research and discovered that a new way of helping the unemployed find jobs was less effective and more costly than the old way, it would continue with the old way. Yet the Bush administration has done the opposite.

Yes, believe this or not, government offshore outsourced and privatized a host of jobs related to the poor and unemployed support programs,. Does it make any sense to ship a U.S. job to India which answers an unemployed American's food stamp questions?

From his Princeton website is a list of working papers, and unfortunately he won an award with an author of one of the biggest economic fudge papers I've ever read, David Card. Card, trying to claim that a sudden influx of immigrants does not negatively impact labor markets, used a localized time limited event: the Mariel boat lift, Miami in the 1980's. Card conveniently ignored the massive amount of drug money pouring into the city as a variable in the Miami 1980s anomaly. Billions in drug money was being laundered through local Miami banks, construction and other activities which generated jobs and created economic growth. That's right, literally the Cocaine trade of the 1980's not only made Miami the murder capital of the U.S. but also fueled a localized economic boom. No surprise then with a massive increase in demand for workers, sudden influxes of immigrants would have no negative impact. Work like this is a fine example of someone touting the political party line instead of objective scientific research in my opinion.

Also the above is fairly shocking since Krueger is involved with statistical integrity, or the data improvement program. When one sets a few labor economics equation variables to zero, (worker displacement magically doesn't happen? O Rly?), in order to make the desired conclusion look right in the dusty obscure corner of economics equations, what does that say about overall raw data integrity as an agenda?

Krueger's Congressional Testimony during the 2001 recession makes no mention, at all, of the massive exodus of jobs to China and India. Labor woes are attributed to technological advances and blaming Americans, claiming they are unskilled. This again is the official party line, to never mention the O word, offshore outsourcing, ignoring raw data from corporate overseas headcount, profits, and especially the trade deficits and lackluster economic growth. Here's another one, again, ignoring the massive amount of jobs offshore outsourced during 2002-2003 and instead implying it's all about education as the cause of jobless recoveries.

On foreign guest worker Visas, well documented to displace U.S. workers, especially the H-1B Visas, there is also denial from Krueger. In this piece, Krueger discounts George Borjas findings on wage repression and displacement as well as the loopholes in these Visas where foreign workers are imported and used to replace American workers. H-1B is called the offshore outsourcing Visa by the India BPO industry for a reason. Technology transfer in advanced technology often must be done through people. Borjas may think wage repression is great for businesses, but at least he doesn't deny wage repression and worker displacement is happening.

Some better signs, Krueger wrote a paper on how the Jobs Corps of the 1960s was actually successful. Considering the horrific unemployment rates for teens and the shocking unemployment rates for black teens, Krueger's promotion of a youth jobs corp is a positive sign we might just get something for a direct jobs program.

Still, there are estimated to be 8 million or so illegal workers in the United States and Obama just granted de facto amnesty by refusing to deport them, loosening up those jobs for unemployed Americans. Once again labor economic laws of supply and demand in a depressed economy are not even acknowledged.  It's pretty clear globalized labor arbitrage won't be recognized by this guy either, even if a few mathematical variables need to be set to zero and a few data sets need to be redefined as orthogonal in order to deny it.

The last 2011 piece from Krueger's working papers is simply a survey of what kind of correlations exist between the job hunt and unemployment insurance. Not exactly bold research tackling the new problems in a globalization, labor arbitrage era. Take another example, Krueger, fortunately knows about depressed employment to population ratios, yet presents no policy recommendations on what to do about the millions of people who have dropped out of the unemployment count.

From that bastion of corporate agendas as news, Fortune Magazine comes some more clues on Krueger. Now to be fair, Krueger just lists a few merits of a consumption tax, but the real question is why Krueger didn't mention a VAT, a tax that can actually assist with the trade deficit, instead?

What's the bottom line?  It's looking real bad Obama is going to actually enact the kind of policies needed to generate jobs, with an it's coming really new economic policy. Krueger is going to be pleasant to watch on TV, but so was Alan Goolsbee. Still doesn't mean objective analysis reigns and thus correct policy advice is given. But since when does Washington care about accurate analysis and right application of economic theory?

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Expert on tweaking stats?

Seems like maybe this Kruger has a real expertise in tweaking employment stats. Whatever it takes, the White House wants to see published unemployment rate below 9%, preferably 8% or less by September/October 2012. It's like when a corporate CEO gives the CFO orders to find a way to show certain profit or earnings numbers for the annual report. "Do it! Whatever it takes!" Just like any other literary genre, somebody has to be paid to write economic fiction.

Krueger, fortunately knows about depressed employment to population ratios, yet presents no policy recommendations on what to do about the millions of people who have dropped out of the unemployment count.

 

Interesting speculation about Job Corps enlargement. Not only stats, but also underlying reality for employment among inner-city youth, may be crucial to voter turnout. Could enough of the GOP in the House go for that to get it though? ... maybe, but hardly seems likely ... unless there is a political patronage twist to it.

Would youth enlisted in the Job Corps be counted as employed ... or would they be 'institutionalzed' and so out of the workforce population? Kruger presumably will pay attention to details like that.

BTW: It's inane that anyone would favor a national consumption tax and yet be categorically opposed to a VAT.
 

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don't put words into their mouths

I don't know if he is against a VAT, just he doesn't mention it at all, which is very odd for a VAT is superior to a national sales tax due to it's "at the border adjustment".

I do not know what Krueger thinks of a VAT. I would not imply someone is manipulating statistics, more I happen to have read the Card papers a long time ago. But Krueger did not co-author that particular "paper", but I clearly see the same agenda and the two teaming up to basically claim their philosophy on migration and labor markets is actual fact. Not So and from everything I've read, the bottom line is all other variables held constant, the laws of supply and demand are still as rock solid as they always have been, i.e. increase labor supply dramatically and suddenly and one will have repressed wages and worker displacement. I personally am not happy with anyone, any group, any individual who manipulates equations, data sets to conclude what they "want" as a political agenda or "philosophy" and that goes from the Heritage Foundation to AEI, McKinsey Institution to the SEIU to the Halls of Academia.

I have a background in hard sciences and this kind of fudging is just unreal, not cool, and on top of it, I don't think few even find the fudges for it's buried into false, invalid assumptions or equation manipulation. It truly is obscene and I think hurts the field generally.

Kind of like CDSes for policy wonks. Anywho, the fact team Obama didn't release a plan plus we're already hearing "bi-partisan" which means more completely ineffective "tax cuts" as an agenda (and sure helps that deficit doesn't it?) I doubt we're going to see anything.

This guy though, sure isn't going to suggest something like "confront China on currency manipulation" even though that is hugely bipartisan as something people want to see happen, economists of many flavors and stripes, or say reform NAFTA or enact a real Hire America Buy American program and so on.

I don't have the latest stats on black youth unemployment but I could swear it was above 50% nationwide. Don't quote me for I"m not bothering to get that stat, but it's beyond belief high!

Of course, deport all of the illegal workers doing those restaurant, dock, construction jobs and that might have something to do with it. 20 years ago all of these jobs were traditionally high school student part time jobs. Of course never mentioned again because it goes against someone's political agenda and philosophy.

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Ooops, overcome by cynicism

Robert Oak:

You're right. I was overcome by cynicism. I should have at least inserted a question mark, as I usually do, to indicate that I'm not stating a fact. Or, I could have used one of those all-purpose qualifiers like 'possibly', 'perhaps', 'arguably', or, (when there's a source to blame it on) 'allegedly'. Or, I should have used one of those funny little faces to indicate "Don't read this literally wink

Anyway, he's a public figure now, so he has to take all the abuse we can throw at him devil

At least my sword was two-edged and cut into both political parties, meeting the gold standard for unbiased reporting these days. After all, I did hint that the votes of GOP members of the House might be influenced by considerations of political patronage blush

But I don't think that it's a stretch to suggest that the President is concerned that the BLS unemployment rate published in September/October/November 2012 may be 10% or more. And I don't think it's a stretch to suppose that the President may have suggested to Mr. Krueger that a number less than the current 9% -- even a solid 8% -- would be nice to see a year from now ???

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HuffPo today - youth unemployment

It happens that HuffPo today (Lila Shapiro) published a review of the government reports and informed commentary on the "youth unemployment crisis" aspect of current and downward-trending record lows in the labor force participation rate.

"Youth Unemployment Crisis Has Longterm Implications For Teens, The Economy"

Shapiro's article begins by preparing readers for bad news to come: "As we look forward to this Friday's [3 September 2011] August unemployment snapshot from the Department of Labor ... "

Skipping over the endemic unemployment situation for school dropouts and the matter of incarceration rates, Shapiro does make the crucial connection between:

(1) the lowest-ever 48.8% July youth employment rate (for ages 16 to 24), and,

(2) the percentage point decline form 2010 to a record low of 59.5% for the labor force participation rate.

(I use "lowest-ever" and "record low" as short for "lowest since the BLS began collecting such data, in 1948." That is, lower than in 1948 or any time since.)

Sources cited by Shapiro, other than BLS:

  • Carl E. Van Horn, a labor economist at Rutgers University and one of the authors of the recent report "Unfulfilled Expectations: Recent College Graduates Struggle in a Troubled Economy"
  • Algernon Austin, director of the Race, Ethnicity and the Economy Program at the Economic Policy Institute
  • Andrew Sum in a report on teen summer employment for the Center for Labor Market Studies at Northeastern University

The crisis ranges from college graduates coming from the suburbs to high school dropouts in inner-cities. Two age groups are most impacted: the young and the old. But "the pain is not evenly spread. According to Algernon Austin's research, compiled from the Bureau of Labor Statistics and additional sources of data, black teens are the least likely to find summer work, while rich white teens are most likely" (Shapiro).

"The labor force participation rate is at a record low for American workers of all ages [but] a growing group of young Americans, so frustrated by their fruitless search for employment that they give up looking entirely, could have its own unique and troubling consequences -- not just in the immediate future but for decades to come ... " (Shapiro).

"The economy continues to be very weak. This point cannot be over-emphasized ... So we have, even in this group, at this young age, individuals who may have tried several summers, or for a year or more since completing high school or completing college, and have not been able to to find work."  -- Algernon Austin

"People who are the economic victims of recessions bear a burden that goes on beyond the duration of the recession ... These two groups really are going to pay the heaviest price. The older workers can't get back into the labor market and the younger workers can't get in to begin with."  -- Carl Van Horn

"The substantial drop in teen employment prospects has had a devastating effect on the nation’s youngest teens (16-17), males, blacks, low income youth, and inner city, minority males ... "Those youth who need work experience the most get it the least ... "  -- Andrew Sum

 

Looks like we'll get more numbers on Friday.

Meanwhile, all I can think is that "if it looks like a duck, walks like a duck and squawks like a duck, it probably is a duck!"

What it is: the Second Great Depression.
 

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on Saturday some labor demographics

I usually overview up two articles on the unemployment report but this month I'll try to do 3 or 4 and break down by what's available, i.e. age, occupations, "foreign born" (which is ridiculous because it only means who was not born in the U.S.) and so on.

This is what I mean, there is so much evidence that labor arbitrage has been going on for some time, offshore outsourcing and it's clearly at critical mass, yet you cannot get a word, not a word out of politicians and even these "so called" mainstream economists. There actually are some heavy weight economists who point to all of these issues creating workforce malaise but they of course are almost "kicked out of the club" in terms of political positions and so on. Although they do testify before Congress where all of their expertise and research is promptly ignored.

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Appreciated

I suppose it isn't much, but after the hurricane and the tornado, after the earthquake and after the fire, there persisted the "still small voice" of truth.

"And it was so, when Elijah heard it, that he wrapped his face in his mantle, and went out, and stood in the entering in of the cave. And, behold, there came a voice unto him, and said, What doest thou here, Elijah?" 1 Kings 19:13 (KJV)

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Recession or Depression?

The case is like that of the Dragon-Slayer, who approaches the dragon and then politely asks, "What be your name?"

 

St. George and the Dragon (c. 1470), wikimedia commons

Altar piece by artist known as 'Master of the St. George Altarpiede', tempera, linded wood covered with canvas. Image scanned from Bohemian art of the gothic and early renaissance periods, Press Foto, Praha (copyright expired). Wikimedia Commons (2007)

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Three-part (3 PDFs) mini-book linked at ZeroHedge webpage, humorously titled 'Compare and Contrast to the Great Depression: in Three Parts'.

The booklet (in three parts, totaling about 35 pages), Comparisons to the 1930s, is by Scott Minard, (Chief Investment Officer, Geggenheim Partners, LLC), August-September 2010.

ZeroHedge has resurrected Minard's work from a year ago because there still doesn't seem to be anything better on the subject.

IMO, Minard's insistence on this being the "Great Recession" rather than the "Second Great Depression" bears reexamination in 2011.

It's becoming a lot like 'First World War' and 'Second World War'.

World War II began as a little old European war, like usual ... something to do with implosion of the British Empire, oil, gold, the Great Depression and the Bolsheviks. The First Great Depression began as a little old 'panic', like usual ... something to do with implosion of the British Empire, oil, gold, World War I and the Bolsheviks.

After all, World War I was the war to end all war. And the Great Depression was the economic depression to end all economic depressions, wasn't it?

What I always wonder about is the heavy focus on mistakes of the Fed in the 1930s with so little focus, comparatively, on mistakes of the Fed in the 1920s ... or the possibility that the Fed (as instituted) was itself a mistake since its creation in 1913!

American Monetary Institute

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BTW: Who needs to form up focus groups and hire professional shrinks to figure them out, when all you really need is a good exchange of views, non-monitored and unvetted, by people posting at ZeroHedge? They psychoanalyze each other!

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Great Depression vs. Great Recession

One of the things that bothers me is the differences in way unemployment statistics were taken in the 30's, then again the change in 1996 to compare apples to apples. I believe there were also other changes, such as to CPI, GDP and so on.

I also have issue with NBER being the great cycle dater and iff and only iff GDP is negative that constitutes a recession (technical definition).

Regardless, technically the U.S. is more like the lost decade in Japan or the great economic stagnation with a beyond belief jobs crisis.

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