President Obama nominated Princeton labor economist Dr. Alan Krueger to become the chairman of the White House Council of Economic Advisers on Monday. Readers who follow this sort of thing will recall that Krueger is something of a star among liberal economists for his stances on a number of major economic issues, including his support for a cap and trade regime, and value added tax, and the infamous “Cash for Clunkers” program.
Kentucky’s junior senator, Republican Rand Paul, fired off a stinging response to the Krueger nomination, late Monday afternoon:
“Alan Krueger is nothing more than an extreme government interventionist, cut from the same cloth as those who have failed to correctly predict, diagnose, and manage our economic problem. During his tenure at the Treasury Department, Alan Krueger helped design the ‘Cash for Clunkers’ program and even supported a European style value-added tax that would raise prices on American families.
“This repetition of bad economic decisions by the President and his advisers could be described as the epitome of insanity – doing the same thing over and over and expecting a different result each time. Hasn’t the President realized we don’t need more big-government Keynesians in Washington saddling the American taxpayer with trillions in debt? The President’s economic policies have been an abysmal failure. His economic advisers have helped lead to these failures.
“I have called for Treasury Secretary Tim Geithner to resign, and I am now calling on Alan Krueger to step down before he even begins his new role, before any more damage can be done to the American economy by this Administration.”
President Obama announcing the nomination of Dr. Alan Krueger as chairman of the White House Council of Economic Advisers
Krueger really became the darling of the left back in 1993, when he and David Card published an incredibly flawed study which purported to show that a higher minimum wage does not necessarily lead to greater unemployment, as the overwhelming majority of economists suggest. The study examined the effects of New Jersey’s 1992 minimum wage hike on employment in the fast food industry, using neighboring Pennsylvania as a control group.
Krueger and Card claimed to find that employment at the New Jersey fast food restaurants actually increased at a greater rate than those in Pennsylvania after the former increased its minimum wage. Liberal politicians, such as the late Sen. Ted Kennedy (Dem., Mass.) and President Clinton’s Labor Secretary Robert Reich, repeatedly referred to the “study” as evidence of the positive economic effects of a higher minimum wage.
But peer reviews of the study showed fatal flaws disproving its findings. In 1996, a review of the study by the Employment Policies Institute found that the data sets Krueger and Card used were so badly flawed that “no credible conclusions can be drawn from the report.” Specifically, the study found, “the data set used in the New Jersey study bears no relation to numbers drawn from payroll records of the restaurants the New Jersey study claims to cover.”
When Economists David Neumark and William Wascher re-evaluated the study, they found that data collected using those records “lead to the opposite conclusion from that reached by” Krueger and Card. “[E]stimates based on the payroll data,” wrote Neumark and Wascher, “suggest that the New Jersey minimum wage increase led to a 4.6 percent decrease in employment in New Jersey relative to the Pennsylvania control group.” In other words, the New Jersey/Pennsylvania case study supports the basic economic notion that increasing the cost of hiring a worker will generally lead to fewer workers hired.
Krueger will doubtless be confirmed by the Senate, and will then become Obama’s third chief economic adviser in as many years. Accordingly, Americans can look forward to at least one more year of inept fiscal management and failed economic policy. There will be no change, and precious little hope.
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