The President Opts for More of the Same

One of the great perils of being a boss is that it is very easy to find advisers who agree with you. This often makes their advice irrelevant, because you end up doing what you would have done anyway.

President Obama has been vulnerable to this trap in the past, and he is falling into it again with his selection of Alan Krueger to be the new head of his Council of Economic Advisers, replacing Austan Goolsbee.

Obama is entitled to take advice from anyone he chooses, but at a moment when the president wants business leaders to believe that he hears and understands their concerns, and when he is trying to give the private sector confidence to hire more Americans, this appointment sends the opposite signal. Once again, Obama is bringing an academic economist with almost no private sector, real-world experience into his inner circle. Christina Romer, Obama’s first Council of Economic Advisors chair, is a professor at Berkeley. Goolsbee, who followed Romer, was the rare liberal economist from the otherwise conservative University of Chicago, where Obama himself taught. Now, Obama has reached out to Krueger, a Princeton economist whose work includes a proposal for a national sales tax.

This tax is not a terrible idea in isolation. I wrote in this space about what an American value added tax might look like. However, Krueger did not present a sales tax as a substitute for income tax revenue, but rather as a way for the government to raise additional money until it decides it no longer needs the “extra” income. I wouldn’t hold my breath waiting for that.

Regardless, Krueger’s policy preferences are not the larger point. The key theme is that this is an administration that does not understand business, does not embrace business, and does not listen to business any more than it absolutely must. The notable exception is a few politically favored industries, such as anything that can be labeled “green” – a list whose membership is subject to change without notice (see atomic energy and the president’s many positions thereon).

Who represents private industry within this administration?

On paper, that would be the Secretary of Commerce. Obama doesn’t currently have one. Gary Locke, the previous secretary, resigned last month in order to replace Jon Huntsman as ambassador to China. His proposed successor, John Bryson, is a former utility executive from California. The utility industry, being largely government-regulated, is not best suited to produce a representative for the private sector at large; more pressingly, Bryson’s nomination is currently tied up by Obama’s Republican opposition in the Senate.

The administration has tried to portray Obama’s chief of staff, Bill Daley, as a powerful representative of business. Daley was Commerce Secretary under President Bill Clinton and has spent his career ping-ponging between law, banking, corporate boards and government service. He has a presentably extensive resume, but he never started a business, or built one, or worked his way up through the ranks of one. He is Bill Daley of the Chicago Daleys, and his entrée to the boardrooms was the result of having one Chicago mayor as his father, having another as his brother, and having proximity to the political machine that put both Obama and Obama’s former chief of staff, Rahm Emanuel (the current Chicago mayor) in office.

Neither Obama, nor Daley, nor almost anyone else in high places in this administration has ever had to meet a payroll with his or her own money. The president does not seem to think this is much of a problem, but he continues to flounder at convincing businesses to hire more workers. His advisers proffer, and the president accepts, suggestions such as cutting employee (but not employer) Social Security taxes. Implementing that suggestion accomplished nothing, because Social Security taxes are not what businesses are worried about right now.

To be confident enough to hire more workers, managers need to be reasonably sure that they know and understand the environment in which they are operating. Economic visibility continues to be extremely limited. After last year’s long battle over tax rates, which was not resolved until December, we now find ourselves only 16 months away from the prospect of the tax law again reverting to a major increase for business, and for most Americans. Nobody knows that the tax structure will look like in 2013. Nobody knows whether the president’s health care overhaul will survive court challenges long enough to be implemented in 2014, or what the economic consequences will be if it does. Nobody knows how the government’s massive deficits will be brought under control.

As I commented when Obama appointed Goolsbee, the selection of a new chief adviser on economic matters to the president could have sent a positive message to the private sector, had it signaled any change in strategy or direction. Instead, Krueger is a pick who is likely to get through the nomination process and then begin giving the president the same academic point of view he’s had since he began.

By staffing his team with more of the same, Obama has effectively told us what we can expect from his economic policy for the rest of his term in office.

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