First at the Treasury Department and now the White House, ILR grad Alan Krueger ’83 has been at the center of the Obama Administration’s response to the biggest financial crisis since the Great Depression. CAM sat down with the head of the Council of Economic Advisers to talk about such issues as job growth, “rockonomics,” the fallacy of comparing governmental borrowing to household debt, and why President Obama may have it worse than FDR did.
ILR Grad Alan Krueger ’83 heads the Council of Economic Advisers
By Bill Sternberg
First at the Treasury Department and now the White House, Alan Krueger ’83 has been at the center of the Obama Administration’s response to the biggest financial crisis since the Great Depression. In 2009 and 2010, as the administration scrambled to avert a meltdown and engineer a recovery, Krueger served as Treasury’s chief economist and assistant secretary for economic policy. Since last November, he has been chairman of the president’s Council of Economic Advisers.
Though Krueger is best known for his work on labor markets, his eclectic research interests range from the roots of terrorism to the economics of rock-and-roll. His résumé features an Ivy League trifecta: a bachelor’s degree from Cornell’s School of Industrial and Labor Relations, a doctorate from Harvard, and a professorship in economics and public affairs at Princeton.
A native of Livingston, New Jersey, Krueger is married to Lisa Simon Krueger ’83; they met at Willard Straight Hall and have two children. He sat down recently with Cornell Alumni Magazine in his high-ceilinged office on the third floor of the Eisenhower Executive Office Building, next door to the White House.
Cornell Alumni Magazine: In early 2010 and 2011, the economy seemed to be improving, only to lose steam later in the year. Is the recovery for real this time?
Alan Krueger: I’m cautiously optimistic. I think that the improvement, particularly in the labor market, is a little bit different this time than when we had some upturns in the past. And I think that the nature of financial crises is that they lead to recoveries that have more fits and starts.
CAM: You’re President Obama’s chief economic adviser. How often do you meet or talk with him?
AK: Often. I have to say I’ve been very pleased with the way the president relies on the Council of Economic Advisers.
CAM: Once a week? Twice a week?
AK: It varies, and it depends upon the issues that are on his plate. But I would describe it as more frequent than I had expected coming in. I would say hardly a week goes by when I’m not involved in a meeting with him one, two, three times.
CAM: The president’s re-election could well be riding on the state of the economy this year. Are you feeling the pressure?
AK: I try to keep politics out of my job. The president hired me to give him, as he said when he announced my nomination, “unvarnished” advice about how the economy is doing and how to make the recovery stronger and faster. There are plenty of people around here who handle the politics. I’m much more comfortable in the role of being the policy guy. I try not to focus on the implications for the election.
CAM: Maybe not, but no modern president has been re-elected with an unemployment rate above 7.2 percent. Where do you think the rate will be on Friday, November 2, when the last jobs report before the election comes out?
AK: I have to give you the answer I always give to questions like that, which is: We do forecasts twice a year. And we’re smart enough not to forecast more than we’re required to. Private forecasters are expecting a gradual reduction in the unemployment rate, but there’s a lot of uncertainty around that. I also think it’s important that people focus on job numbers in addition to the unemployment rate.
CAM: Job creation numbers?
AK: Job creation. Focusing on job growth, I think, is really key because we have a lot of jobs to make up that were lost from the recession. And even before the recession, the U.S. economy was not producing enough jobs.
CAM: Have technology and globalization permanently changed the nature of the labor force?
AK: We have a lot of challenges in the job market. One of the problems is that we had not invested enough in educating our workforce for the jobs of the future. Countries that have expanded education met these challenges more forcefully and were more successful in terms of providing jobs. I do think there’s an encouraging trend starting of “in-shoring”—of bringing jobs from overseas back to the U.S. because we have a productive workforce and because it’s cost-effective to do that.
CAM: Do presidents typically get more credit than they deserve when the economy is doing well, and more blame than they deserve when the economy is doing badly?
AK: I think the American public recognizes that when President Obama walked into the Oval Office in January 2009, he was facing more problems than any president since Franklin D. Roosevelt. And I would argue that he was facing even more economic problems than Roosevelt faced, because the American economy is much, much more complex now than it was then. Our financial system is a much larger share of the economy, and the financial system was melting down.
CAM: What was it like working at the Treasury Department during that time?
AK: It was all hands on deck. So I moved beyond my comfort area, which is mostly in the job market, and worked on issues about banking, housing, and state and local finance. It was a fascinating time. The issues that we were confronted with were a tremendous challenge. There were times when things felt very dark. There were times when it felt as if large segments of the American economy were dependent on the U.S. Treasury for support. And all throughout, it felt as if we were being confronted with a lot of difficult choices that one would never choose to make unless it was an emergency. But when I look back over that period, I think that a lot of courageous choices were made, and that the economy is a lot stronger as a result.
CAM: Many Republicans would argue that the stimulus program [the Recovery Act] and TARP [the Troubled Asset Relief Program] did more harm than good.
AK: The Recovery Act was absolutely essential in terms of putting the brakes on the recession. In the bigger scheme of things, it is a very small part of the federal debt. And I think the management of the TARP program was done about as well as the government could do it.
CAM: Including the rescues of General Motors and Chrysler?
AK: Including the auto rescues, which I would also say have worked out better than I expected at the time. I’m pleased to be proved wrong. And one of the prescient decisions that I don’t think has gotten enough attention is the rescue of the auto suppliers. We were facing a situation in the spring of 2009 when the whole supply network could have collapsed. Had that happened, I think it would have taken much, much longer to rebuild that critical supply chain when conditions improved.
CAM: Your critics also point out that in a household you can’t keep borrowing forty cents for every dollar you spend. How long can the government run trillion-dollar deficits without going off a financial cliff?
AK: Well, I learned at Cornell that households and governments are different. If one wants to say that the government is like a household, then the government is like a household that lives forever, that has the power to tax, and that can print its own money. So the government is different from a household. The analogy is helpful at times, but it only goes so far. I think what the markets are telling us is that investors have a lot of confidence in the U.S. and that confidence is likely to continue for a time. But I think they would also like to see us make credible commitments that we’re moving to a sustainable fiscal path.