Pat Dollard

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Associated Press:

WASHINGTON (AP) — President Barack Obama tapped labor economist Alan Krueger for a top administration post Monday, rounding out his White House economic team ahead of a highly-anticipated announcement next week on a new jobs initiative.

Obama announced Krueger’s nomination to chair the White House Council of Economic Advisers in a Rose Garden ceremony Monday morning. The president said he expected Krueger, a former Treasury Department official and Princeton economist, to provide him with unvarnished economic guidance, not partisan political advice.

“That’s more important than ever right now,” Obama said. “We need folks in Washington to make decisions based on what’s best for the country, not what’s best for any political party or special interest.”

With the nation’s unemployment rate stubbornly stuck above 9 percent and much of the public deeply dissatisfied with Obama’s handling of the economy, the president has promised a new set of jobs proposals. He said Monday that he would make those announcements next week.

“Our great challenge as a nation remains how to get this economy growing faster,” Obama said. “That’s our urgent mission.”

Obama has already called for an extension of a payroll tax cut that expires at the end of the year and he wants to continue jobless benefits. Aides are considering other measures, including tax incentives for businesses to hire and direct infusions of government money into construction projects. The president has said he intends to call for additional long-term deficit reduction to help pay for the short-term spending his proposals would require.

In Krueger, Obama will gain an economist with expertise in unemployment and the labor market. If confirmed by the Senate, Krueger would replace previous CEA chair Austan Goolsbee, who left the administration earlier this month to return to the University of Chicago.

Goolsbee was the latest in a string of top White House economists to leave over the past year, forcing Obama to do a wholesale makeover of the economic team that came to the White House with him three years ago. Treasury Secretary Timothy Geithner is the only remaining top official left l from Obama’s original economics team. Last month, the Treasury Department announced that Geithner would stay on, ending speculation he would leave the administration.

Krueger spent the first two years of the Obama administration as an assistant Treasury secretary for economic policy. In 2010, he returned to Princeton University, where he has served on the faculty for more than 20 years.

While at Treasury, Krueger worked on the popular “Cash for Clunkers” program that gave people rebates for buying new, more fuel-efficient vehicles and the HIRE Act, which gave businesses tax incentives to give jobs to the unemployed.

Krueger is likely to become an important public face for the administration on the economy. Both Goolsbee and Christina Romer, Obama’s two previous CEA chairs, were frequent spokesmen for the president, appearing on television and at White House events to promote the president’s policies.

That role could be even more important in the coming months, as a host of would-be Republican successors travel around the country, campaigning hard for the GOP presidential nomination by focusing, in no small part, on Obama’s handling of the economy.

The national unemployment rate remains at 9.1 percent and has shown little improvement over the past year, despite the more than $800 billion stimulus program that Obama got Congress to pass not long after he took office. The economy also has been on a dual track of slow growth and ballooning deficits, and Obama saw the nation’s credit rating downgraded by Standard & Poor’s earlier this year as he fought congressional Republicans for weeks for a program to slow the flow of red ink.

The White House and Republican congressional leaders ultimately agreed to a compromise deal to increase the government’s borrowing authority in early August, on the cusp of default, but the S&P credit rating was lowered from AAA to AA+, nevertheless.

Obama took to the road for a series of town-hall style meetings just before he went on vacation, seeking to explain his efforts to promote economic growth and attack the stubborn high joblessness.

Appearing earlier Monday on MSNBC, Goolsbee said that “we’re still in a pretty tough spot” on the economy.

“When you come out of a recession, especially one as deep as we were in, you can’t just go back to do what you were doing before,” he said. He said growth had picked up in 2010 but “this year we’ve taken some heavy blows.”

Goolsbee, who is expected to play an informal role in Obama’s re-election bid, said investing and focusing on the “industries of the future” are the kinds of policy directions the country needs to pursue. He also said he doesn’t think that bringing another stimulus program forward is necessarily a good idea, and instead suggested tax incentives for companies to hire.

More from the New York Times:

A Future Consumption Tax to Fix Today’s Economy
By ALAN B. KRUEGER

Any casual observer knows the United States faces enormous economic challenges in both the short and long run. These challenges — and the respective solutions that are being discussed — are somewhat in conflict, though.

On the one hand, the economy is contracting, people are cutting back on their spending and the economy faces a possible downward spiral with fear of job loss, causing consumers to spend even less, which in turn would cause more job loss — the so-called paradox of thrift. On the other hand, Americans save very little, critical infrastructure has been neglected, and the president-elect warned of government deficits in the trillion-dollar range for years to come.

Efforts to spur short-run consumption can worsen the long-run problems by increasing the government budget deficit and depleting personal savings.

Here is a suggestion to address both the short-run and long-run problems. I pose it only as a suggestion for serious discussion; I’m not sure it is the best way to go. But here goes: Why not pass a 5 percent consumption tax to take effect two years from now? There are many different ways to implement a consumption tax, but for simplicity think about a national sales tax.

In the short run, the anticipation of a consumption tax would encourage households to spend money now, rather than after the tax is in place. Along with the rest of the economic recovery package, this would help jump-start spending in the economy and thereby increase production and employment.
In the long run, a 5 percent consumption tax would raise approximately $500 billion a year, and fill a considerable hole in the budget outlook. In addition, a consumption tax would encourage more saving in the long run. Many economists consider a consumption tax an efficient way of raising tax revenue, especially in a global economy. The prospect of greater revenue flowing into federal coffers would probably help lower long-term interest rates because the government would need to borrow less down the road, and further bolster the economy.

The main downside of this proposal is that taxes reduce economic activity. But the government must make critical trade-offs, and a consumption tax could be the most efficient means to raise revenue to finance essential government functions. Over time, if the budget picture improved, income taxes or corporate taxes could be reduced and the revenue replaced by the consumption tax.

Another downside is that a consumption tax is a greater burden for the poor, who spend a relatively high share of their income. But this can be compensated by exempting essential items, like rent and nutritious, or by providing a rebate to low-income households.

This analysis only scratches the surface. As I said, I propose the idea only for discussion at this stage, but it is worth considering. What do you think?