For Obama, more storms on horizon
President Obama arrived back in Washington after his August vacation to deal with a hurricane, but Irene was only the first of many tests awaiting the embattled commander in chief.
With his approval ratings at the lowest point in his presidency, Obama returns to face a restless Congress, a hurricane that tore up the East Coast, continued unrest and uncertainty in the Middle East and an ailing economy that is not expected to improve much before the 2012 elections.
Obama and his Republican opponents in Congress left Washington in early August bruised and bloodied after the protracted debt-ceiling fight. As both congressional leaders and the White House were exhaling — pleased that a potential national default was dodged — Standard and Poor's downgraded the nation's credit rating. That sent markets tumbling across the globe, sparking more partisan finger-pointing.
Polls indicated that people were disgusted with both the president and Republicans on Capitol Hill after the nasty summer debate, though Obama fared slightly better.
And the president's vacation turned out to be a political liability as he attracted criticism for relaxing in ritzy Martha's Vineyard amid the economic downturn.
In-between meals and golf outings, Obama was briefed on an earthquake that hit the East Coast, Hurricane Irene and the ongoing strife in Libya as rebels appeared to be close to toppling dictator Moammar Gadhafi.
The Gadhafi news was a clear victory for Obama, especially in the wake of critics from both sides of the aisle about U.S. involvement in Libya.
Settled back in Washington, with a head start over Congress, Obama will start the fall battles with his long-awaited jobs speech, which has already garnered unrealistic expectations and skepticism from both the left and the right.
While Obama promised shortly before his vacation that his speech will include a specific plan to create jobs, analysts and lawmakers are doubtful that the president will roll out much more than the infrastructure, payroll tax and trade plans that he has been pushing Congress on for months.
The speech will preview a likely battle to be fought this autumn and all of next year on the campaign trail over spending-cuts levels and taxes. A new debt-cutting supercommittee of a dozen lawmakers has a Nov. 23 deadline to issue recommendations on the nation's debt that must be voted on by Dec. 23.
All of this comes as Republicans looking to unseat Obama next year ramp up their operations and their rhetoric, piling on a president who at this stage in the game looks vulnerable to the point of being an underdog against an unknown opponent.
In the days before his retreat from Washington, Obama appeared sharpened by his own frustration and disgust with the "dysfunction" in politics.
While his recent Midwest bus tour was panned by his opponents as a stunt, it revealed a president ready for a long and nasty campaign against Republicans both inside and outside Washington.
Whether Obama will return to the ring still sporting his combative posture is a big question hanging over the heads of Democrats, disillusioned by what they see as a pattern of caving to Republicans from Obama.
Some congressional Democrats spent much of August complaining about leadership coming from the White House, calling for Obama to fight much harder against the GOP.
Tension between Obama and liberals on Capitol Hill will continue this fall as the White House pushes three pending trade deals that are backed by Speaker John Boehner (R-Ohio), Senate Minority Leader Mitch McConnell (R-Ky.) and the powerful U.S. Chamber of Commerce.
"With the 2012 campaign season about to kick off, Obama will have to continue to contend with an uncooperative Republican majority in the House, an increasingly disillusioned Democratic Party, a restive public whose distrust of Washington seems to be fast approaching zero and a field of Republican candidates chomping at the bit to seize the Oval Office," said Lara Brown, a political science professor at Villanova University.'Dick Cheney Has Won The Day' On Foreign Policy
Joe Scarborough: 'Dick Cheney Has Won The Day' On Foreign Policy (VIDEO)
Joe Scarborough declared Dick Cheney the winner of the debate on American foreign policy on Monday's "Morning Joe."
The MSNBC host was discussing Cheney's new memoir "In My Time," when he alleged that the Obama administration was following in the footsteps of Cheney's aggressive approach foreign policy, and getting none of the flak for it. He said, "Dick Cheney has won the day on policy, as far as foreign policy goes," citing President Obama's troop surge in Afghanistan and the expansion of drone attacks.
Scarborough was quick to react when guest Wes Moore argued that the Obama doctrine's was different from Bush-Cheney's because the U.S. was not acting alone. Scarborough argued that that the U.S. was upping its actions in Afghanistan, Libya and Iraq when no one else is doing the same. He said Obama's policy seemed to be, "We can unilaterally drop bombs on any country that we wanna drop bombs on, whenever we wanna drop bombs on 'em, whether we've declared war or not."
"They can say whatever they want to say, but at the end of the day, their policies seem to be Bush-Cheney policies," Scarborough said.
He even went one step further, saying that Obama "even more excessive than Cheney on unilateralism on some fronts." As an example, he said that U.S. has replaced waterboarding, which he said happened to "two or three people" with "assassination."
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Obama's New Economic Adviser Warned of 'Disturbing Problem'
Back in March, when he still enjoyed remove from the policy fray as an academic at Princeton, Alan Krueger used unusually blunt language to sound the alarm that the American economy was staring at the sort of crisis that seemed unlikely to be fixed absent sustained and aggressive action.
At the end of a largely wonky, data-driven piece of analysis written for Bloomberg News, Krueger discounted the incessant focus on the unemployment rate -- which does not count jobless people who have grown so discouraged that they have given up looking for work -- arguing that the real action is found in the so-called employment-to-population ratio, which measures what slice of working age Americans are employed. The ratio then sat at a dismal 58.4 percent, just off the low reached the previous December, meaning that the supposed resumption of economic growth was not putting large numbers of jobless people back to work.
Even back when the economy was still technically expanding between 2002 and 2007, Krueger noted, the percentage of working age people then employed never got back to where it had been before the previous recession in 2001, at a peak of 64.7 percent.
"What this indicator tells me is that we weren't creating enough jobs long before the recession that began in December 2007," Krueger declared. "If this pattern holds, even in recovery, it points to a much deeper and disturbing problem for the U.S. economy."
Curiously, Krueger ended his piece right there, without suggesting what we might do to fix this "deeper and disturbing problem," one that is now beyond argument, given that the pattern has indeed held. (Maybe Bloomberg was parsimonious with its space? Maybe Krueger had to go teach a class?) In any event, for Krueger, the answer to that question his observation provoked has just been elevated to something greater than academic interest: It has become his problem to solve, along with the central problem of these times.
President Obama on Monday named Krueger to head the White House Council of Economic Advisers, a development that analysts construed as a sign that the administration finally grasps the public's priorities: Enough with the bickering over the debt ceiling and arguing about what government spending to cut; time for a serious and sustained focus on putting Americans back to work.
The political and policy calculus of his nomination was unimpeachable. Krueger is a highly respected labor economist who has written voluminously about the economic imperatives of the nation. His research has fairly well annihilated the nonetheless enduring red herring that raising the minimum wage exacerbates unemployment. He has studied the extent to which American workers are vulnerable to having their jobs shipped off to lower-wage countries. He has probed at length the benefits that accrue to the economy through greater education of the workforce, and he has advocated for an expansion of programs to train workers for higher-wage careers in faster-growing areas of the economy.
Krueger is in short someone who has, over an academic and public service career spanning decades, thought deeply about the state of play for American workers and what might be done to arrest the steady decline of working opportunities. From the standpoint of messaging -- the only standpoint that generally gains bandwidth in Washington -- he seems like the right guy for the job.
But the real question for the rest of the country is whether Krueger's appointment will in fact alter the policies coming out of Washington, delivering initiatives that can address the crisis he highlighted in his opinion piece early this year, laying the ground for aggressive hiring. On that score, unfortunately, there is limited reason for optimism, for the simple reason that he is walking into an administration that has so far proven unwilling or unable to marshal a fight to generate paychecks.
The Obama White House has been alternately fearful of running up short-term budget deficits with spending aimed at stimulating the economy (and never mind the research showing that austerity only increases deficits over the longer haul by putting the brakes on growth) or naively pursuing the dream of forging peace with a Republican party that has clearly bet on an extension of economic misery as the pathway to electoral gain.
President Obama cast Krueger's appointment as part of his "urgent mission" to boost "economic security", but it is hard to hear such words without retreating to the false comfort of sarcasm: How's that mission been going, and with how much urgency, really?
Obama's supposed "pivot" to jobs has been telegraphed so many times that it has become a joke -- and not a particularly funny one. What else has merited a higher priority all these months? The president has never managed to make this clear.
Krueger is replacing Austan Goolsbee, another highly respected academic economist whose nomination in September 2010 was widely portrayed as a signal that the administration was finally getting serious about jobs. But when the news broke in June that Goolsbee had decided to head back to the University of Chicago to resume teaching this fall, the message seemed clear: His efforts to spur the economy and encourage job growth had run headlong into the partisan sniping and fatal compromising that defines most of the proceedings in the capital.
The president began his administration by leaning on the counsel of Larry Summers, who as treasury secretary in the Clinton administration did as much as anyone to bring us to the crisis at hand: He rolled back regulations on the financial system despite prescient warnings of disaster from people he ridiculed and pounded.
Obama put his own Treasury under the authority of a Summers protege, Timothy Geithner, who has rarely paused when confronted with a choice between catering to mega-banks or to the interests of ordinary people: He is Wall Street's tool. At the New York Fed, he helped engineer the bailouts of big banks in 2008 without safeguarding taxpayer interests. At the Treasury, he has repeatedly shot down proposals to relieve homeowners of untenable mortgages -- a substantial drag on economic growth -- in order to protect banks from having to absorb losses.
Krueger is no stranger to the idea-killing world into which he is now walking: Until late last year, he served as assistant secretary for economic policy in Geithner's Treasury. There, he toed the party line.
In February 2010, Krueger told the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association that the Obama administration's policies seemed to be working out great.
"In sum, the economy is continuing to recover from the most severe recession of the post-war period," Krueger declared. "It will take time for the pickup in economic activity to translate into renewed hiring, but labor market conditions should improve with sustained and solid economic growth." He added: "Administration policies have played an important role in jumpstarting economic activity and restoring stability to markets and will continue to provide support in the months ahead."
In the months since that pronouncement, the employment-to-population ratio toward which Krueger is inclined has dipped from 58.5 percent to 58.1 percent, its lowest level since 1983.
That is not Obama's fault, it must be noted. He is correct in repeatedly emphasizing that it took a lot of years and a lot of hands to turn the American economy from a prodigious job creation machine into a contraption of arbitrage that rewards the wealthiest and best-connected while condemning the rest of the population to stagnant wages and high unemployment. This came about through the financial deregulation of the Clinton years, then more of that plus tax cuts for the rich and expensive wars from the Bush administration.
The trouble is how little Obama has done to change this bleak economy. A man of clearly enormous intellect and analytical command, he shows no will to fight, seemingly reluctant to sully himself with the bloody sport known as politics.
Perhaps his naming of Krueger to his new post is a sign of change, and let us all hope so.
But until we see the initiatives and the follow through, until this administration gets deadly serious about replacing decrepit infrastructure and embracing clean energy, Krueger's dead-on assessment of the problem penned earlier this year will remain a problem diagnosed and left untreated. And that will leave tens of millions of people mired in debt, decline and dismay.
Gaddafi Family Flees To Algeria
Gaddafi Family Flees To Algeria
By BEN HUBBARD, Associated Press
TRIPOLI, Libya -- Moammar Gadhafi's wife and three of his children fled Libya to neighboring Algeria on Monday, firm evidence that the longtime leader has lost his grip on the country.
Gadhafi's whereabouts were still unknown and rebels are worried that if he remains in Libya, it will stoke more violence. In Washington, the Obama administration said it has no indication Gadhafi has left the country.
Rebels also said one of Gadhafi's other sons, elite military commander Khamis, was probably killed in battle.
The Algerian Foreign Ministry said in a statement that Gadhafi's wife Safia, his sons Hannibal and Mohammed, and his daughter Aisha entered the country across the land border. It said Algerian authorities have informed the United Nations Secretary General, the president of the U.N. Security Council, and the head of the Libyan rebels transitional leadership council.
Ahmed Jibril, an aide to rebel National Transitional Council head Mustafa Abdul-Jalil, said officials would "demand that Algerian authorities hand them over to Libya to be tried before Libyan courts."
Gadhafi's children played important roles in Libya's military and economic life. Hannibal headed the maritime transport company; Mohammed the national Olympic committee. Aisha, a lawyer, helped in the defense of toppled Iraqi dictator Saddam Hussein in the trial that led to his hanging.
Ahmed Bani, military spokesman of the council, said he was not surprised to hear Algeria had welcomed Gadhafi's relatives. Throughout the six-month Libyan uprising, rebels have accused Algeria of providing Gadhafi with mercenaries to repress the revolt.
Over the weekend, the Egyptian news agency MENA, quoting unidentified rebel fighters, had reported that six armored Mercedes sedans, possibly carrying Gadhafi's sons or other top regime figures, had crossed the border at the southwestern Libyan town of Ghadamis into Algeria. Algeria's Foreign Ministry had denied that report.
Bani said Monday that rebel forces may have killed Khamis Gadhafi in a clash Saturday. Rebel clashed with a military convoy in the town of Tarhouna, 50 miles (80 kilometers) southeast of Tripoli, destroying two vehicles in the convoy. The bodies in the cars were burned beyond recognition, he said, but captured soldiers said they were Khamis Gadhafi's bodyguards.
"We are sure he is dead," Col. Boujela Issawi, the rebel command of Tarhouna, told AP. But then he cast some doubt, saying it was possible Gadhafi's son was pulled alive from the car and taken to Bani Walid, a contested interior area.
Col. Abdullah Hussein, a former pilot in the Libyan airforce who is part of the rebels' command center in Tarhouna, said that "we heard from Bani Walid that he (Khamis) died in the hospital there."
Asked how they knew this, since Bani Walid is still under regime control, he said: "We have some people there."
It was possible this was psychological warfare. The rebels claimed to have captured Gadhafi's son Seif al-Islam, a key figure, only to have him turn up the next day and talk to reporters.
Rebel leaders have started to set up a new government in the capital Tripoli after their fighters drove Gadhafi's defenders out over the past week. Gadhafi's whereabouts are still unknown, however, and people close to him have claimed he is still in the country and leading a fight to hold onto power.
"Gadhafi is still capable of doing something awful in the last moments," rebel leader Abdul-Jalil told NATO officials earlier Monday in Qatar.
The focus of concern is Gadhafi's hometown of Sirte, his last major stronghold in the country. The town, 250 miles east of Tripoli, is heavily militarized and shows no signs yet of surrendering even though rebels say they are trying to negotiate a bloodless takeover.
There was some fighting Monday on the eastern and western approaches to Sirte. Some have speculated that Gadhafi and other senior regime figures may have fled there.
A NATO officer, who asked not to be identified because of alliance rules, said there was fighting 30 miles (50 kilometers) east of Sirte. He said there are still clashes around Sirte, Bani Walid south of Misrata and Sebha further south.
Taking Sirte will mean getting past entrances that are reportedly mined and an elite military unit. Gadhafi's tribe is the most powerful in the city. Libyans familiar with the coastal city on which Gadhafi has lavished building projects say its first line of defense is a heavily fortified area called the al-Wadi al-Ahmar, 55 miles (90 kilometers) to the east.
The rebels asked NATO Monday to keep up pressure on remnants of Gadhafi's regime.
"Even after the fighting ends, we still need logistical and military support from NATO," Abdul-Jalil said in Qatar. NATO has been bombing Gadhafi's forces since March under a United Nations mandate to protect Libyan civilians.
In other developments, the chairman of the African Union on Monday accused Libyan rebels of indiscriminately killing black people because they have confused innocent migrant workers with Gadhafi's mercenaries. Jean Ping, speaking to reporters in Ethiopia, added this is one of the reasons the AU is refusing to recognize the National Transitional Council as Libya's interim government.
Ping's charges are much stronger than any that have been levied at the rebels by international rights groups. The groups have, however, expressed concern about beatings and detentions of immigrants from sub-Saharan Africa.
Gadhafi had recruited fighters from further south on the continent, but many sub-Saharan Africans are in the country as laborers.
National Transitional Council spokesman Abdel-Hafiz Ghoga denied the AU claims.
"These allegations have been made during the early days of the revolution. This never took place."
African leaders' skepticism about the rebels has led to questions about those who received money and arms from Gadhafi in past decades were now repaying him with support. African leaders have insisted they simply do not support regime change by force.
Survivors and human rights groups have said Gadhafi loyalists retreating from Tripoli after decades of brutal rule killed scores of detainees and arbitrarily shot civilians over the past week.
Council spokesman Ghoga said his representatives have collected names in cities rebels have liberated, resulting in a list of some 50,000 people rounded up by the Gadhafi regime since the uprising began six months ago. He said rebels freed 10,000 from prisons, leaving at least 40,000 unaccounted for.
In the capital, members of the National Transitional Council announced further steps to becoming an effective government. Suleiman Mahmoud al-Obeidi, the rebels' deputy military chief, announced the formation of a 17-member committee to represent the 30 or local military councils he said had been set up in the country's west.
The war was fought by disparate, local groups with only loose coordination. Bringing all local councils and rebel brigades under the council's leadership remains a challenge.
France said Monday it was dispatching a team of diplomats to reopen the French embassy there and see how France can aid the city. The European Union also was seizing a foothold in Tripoli. Kristalina Georgieva, European commissioner for international aid, said Monday the EU has opened a humanitarian office to help distribute medical and other emergency aid in the Libyan capital.
Dick Cheney Book 'In My Time'
Dick Cheney Book 'In My Time': The Biggest Revelations From The Vice President's Memoir (PHOTOS)
The Huffington Post Paige Lavender
Dick Cheney's new memoir, which officially hits bookstores August 30, reveals new details about the inner workings of the Bush administration and Cheney's life as vice president.
In an interview with NBC's Jamie Gangel, Cheney says "There are gonna be heads exploding all over Washington" when the book comes out. A slideshow of some of the biggest revelations from Cheney's book, his interviews, and the media coverage surrounding it, is below.
Alan Krueger To Succeed Austan Goolsbee
Alan Krueger To Succeed Austan Goolsbee As Chair Of White House Council Of Economic Advisers
By JULIE PACE
WASHINGTON -- President Barack Obama has chosen labor economist Alan Krueger for a top administration post as the White House scrambles for solutions to boost a fragile economy with the 2012 election looming.
A White House official said Obama will nominate Krueger to head the White House Council of Economic Advisers. If confirmed by the Senate, he would replace Austan Goolsbee, who left the administration earlier this month.
The official spoke on the condition of anonymity in order to speak ahead of Obama's official announcement on Monday.
The decision completes a wholesale shake-up of the team that Obama brought with him to the White House over three years ago. Advisers Larry Summers, Christina Romer and Goolsbee have now all departed, and Obama continues to struggle with perceptions the economy is stuck in low gear on his watch.
Treasury Secretary Timothy Geithner is the only remaining top official 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.
Krueger is likely to become an important public face for the administration on the economy. Both Roemer and Goolsbee, 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. He and his aides have suggested he'll bring forth a new jobs plan when Congress returns after the Labor Day recess.
Appearing 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."
He said that investing and focusing on the "industries of the future" are the kinds of policy directions the country needs to pursue.
Goolsbee said he doesn't think that bringing another stimulus program forward is necessarily a good idea, and maybe there should be some kind of tax incentives for companies to hire.
Goolsbee left the administration to return to the University of Chicago, but is expected to play an informal role in Obama's re-election campaign.
Krueger's appointment was first reported by the Wall Street Journal.
Obama nominates Alan Krueger
Obama nominates Alan Krueger to lead economic council
Krueger is a highly respected but relatively unknown specialist in employment and the workforce. He served as chief economist at the Treasury Department in the Obama administration's first two years.
 President Obama, right, promises to rely on Alan Krueger for recommendations “based on the best evidence” about what’s best for the economy. (Win McNamee, Getty Images / August 30, 2011) |
In nominating Krueger, Obama picked a highly respected specialist in employment and the workforce who served as chief economist at the Treasury Department in the first two years of the Obama administration. During that time, Krueger, 50, worked on tax incentives to encourage employment and on programs that sparked auto purchases and municipal building projects — the kinds of plans Obama is expected to unveil in coming weeks to spur job creation.
Although Krueger would clearly add weight to an economic team that has been hit by a raft of departures, he is relatively unknown and his appointment signals a continuation of the current middle-of-the-road course on economic policymaking, despite some Democrats' call for more aggressive action, including additional government stimulus to boost the flagging economy.
Krueger's selection came on a day investors' confidence rose after new data showed that consumer spending grew solidly in July, in part because of stronger car sales. Stocks surged, and some economists slightly upgraded their outlook for third-quarter economic growth. For a sustained stronger level of consumer spending, however, analysts say the economy needs to generate more jobs and incomes. The August unemployment and jobs report will be released Friday.
The appointment drew support from both liberal and conservative economists, but it was immediately denounced by Republican political leaders who pointed to Krueger's past advocacy of ending tax breaks for big oil companies and capping greenhouse emissions to encourage corporate moves toward a clean-energy economy.
In introducing Krueger in the Rose Garden on Monday morning, Obama promised to rely on the Princeton University economist for recommendations "not based on politics, not based on narrow interests, but based on the best evidence" about what's best for the economy.
Administration officials say they expect Krueger will be confirmed quickly, given that he already cleared congressional scrutiny to serve at the Treasury. And the White House released several recommendations praising Krueger and his work, including one from Greg Mankiw, Council of Economic Advisors chairman under President George W. Bush, and from Martin Feldstein, who held the position under President Reagan.
Krueger would succeed Austan Goolsbee, who left this month to return to the University of Chicago. Goolsbee's departure was part of the breakup of what many considered an all-star economic team that included former Treasury Secretary Lawrence H. Summers, Great Depression scholar Christina D. Romer and former Federal Reserve Chairman Paul A. Volcker.
"Krueger gets you part of the way back," said Dean Baker, co-director of the Center for Economic and Policy Research, a think tank in Washington.
"How much difference does it make? … I don't expect him to win an argument if [William] Daley and [David] Plouffe are on the other side," Baker said, referring to Obama's chief of staff and senior advisor, respectively.
White House press secretary Jay Carney suggested as much. While praising Krueger's credentials as an academic and working economist, he indicated Krueger's addition wouldn't radically change the course the president pursues.
Krueger will be "an important member of the economic team," said Carney, but "the president sets economic policy."
Among others considered for the position was Rebecca Blank, a macro-economist at Northwestern University who served as a member of the Council of Economic Advisors during the Clinton administration.
As an academic, Krueger is best known for his work on minimum wages. Krueger's research with other economists, including David Card at Berkeley, showed that raising the minimum wage doesn't lead to job losses, as is often claimed.
Responding to the nomination Monday, several Republicans inferred that Krueger would advocate raising minimum wages as a way to boost employment.
Administration officials said Krueger's appointment doesn't mean the president is weighing that as a possible proposal.
If confirmed, Krueger could play an important role in bringing his polished, down-to-earth perspective to communicate and sell the president's economic policies to the public, say economists who know him.
"He's a very well-spoken, articulate economist," said Lawrence Mishel, president of the Economic Policy Institute in Washington. That institute and other groups have been pushing for strong stimulus from the White House to fight unemployment, which remains above 9%.
Mishel said he wasn't expecting a great deal out of Obama's upcoming jobs plan. "They've already handcuffed themselves" with the budget agreement, he said. "They don't have much room to increase spending."
Obama's economic team is putting the final touches on a jobs plan expected to provide job training, tax credits and investment in infrastructure as ways to get people back to work.
Advisors think the president has a compelling case to make, and that the public will object to knee-jerk opposition to a jobs plan that makes sense to them.
The elements of Obama's proposal would have "significant impact" if only Congress can set aside politics and look together for solutions, Carney said Monday.
"If the entirety of his proposals are passed by Congress," Carney said, the "impact will be very beneficial to the economy and on employment."
The campaign for public support officially begins after Labor Day next week, with the president's unveiling of the specifics of his jobs plan. But the Krueger announcement Monday was a late-summer reminder to members of Congress that he's staffing up and preparing to talk about little else for the foreseeable future.
Obama Aide to Join Growth Debate
Obama Aide to Join Growth Debate
SARA MURRAYAlan Krueger, President Barack Obama's pick to head the White House Council of Economic Advisers, will likely serve as an administration advocate for more aggressive government intervention to revive job growth.
President Obama may soon have a new economic advisor. Alan Krueger, a Princeton University labor economist who specializes in unemployment, may soon be joining the White House's Council of economic advisors, WSJ economics editor David Wessel reports on the Markets Hub. (Photo: Getty Images.)
"Our great ongoing challenge as a nation remains how to get this economy growing faster," Mr. Obama said Monday at the White House announcement of Mr. Krueger's nomination.
If confirmed by the Senate, Mr. Krueger would take on the job amid a bitter Washington battle over how best to strengthen the nation's fragile recovery. The economy barely grew in the first half of the year, and unemployment was 9.1% in July.
Many Democrats are calling for more government spending or tax cuts to stimulate stronger growth, but many Republicans are demanding deeper spending cuts to reduce the growing federal debt. Mr. Obama is planning to deliver a speech next week on proposals to rein in the deficit and spur job creation.
Mr. Krueger, a Princeton University economics professor and former Obama administration official, has supported both tax cuts and spending programs to help stimulate growth in recent years, including incentives to encourage employers to hire jobless workers. He also backed Build America Bonds, a program that allowed states and localities to sell taxable municipal bonds and receive a federal subsidy.
![[Krueger]](http://si.wsj.net/public/resources/images/NA-BN081_Kruege_DV_20110829161757.jpg)
Getty Images President Obama introduced Alan Krueger Monday at the White House.
He served as assistant Treasury secretary for economic policy in the first two years of the Obama administration, where he helped design the "cash for clunkers" program to boost auto purchases.
"What you're likely to see is, he does believe the federal government can do more to help in this economy," Cecilia Rouse, a Princeton University economist and former CEA member, said of Mr. Krueger. "He will be a voice for more investments."
The nomination was mostly lauded by economists across the political spectrum. Among conservatives who voiced support were Republican Douglas Holtz-Eakin, who advised Sen. John McCain's campaign in 2008, and Gregory Mankiw, a Harvard University economist who chaired the CEA during the administration of former President George W. Bush.
Mr. Mankiw said Mr. Krueger's previous stint in the Obama administration means he is already familiar with most of the players and policies. "I think this is a continuity appointment not a change-direction appointment," Mr. Mankiw said.
But the Republican National Committee took on Mr. Krueger in a news release Monday, calling him a proponent of higher taxes and saying he is "wrong on stimulus and jobs."
A White House spokeswoman said Mr. Krueger wouldn't be available for interviews with the confirmation process under way.
Mr. Krueger's academic work touches a broad range of topics, from the economics of popular music to the origins of terrorism. He is best known for his research on unemployment and the minimum wage. Among his most recent research was a study of how 6,000 jobless workers in New Jersey spent their time. He found the longer they were out of work, the less time they spent job-searching—contrary to expectations that they would search harder as they neared the end of their unemployment benefits. One of his particular concerns is long-term joblessness and the prospect that unemployed Americans could grow discouraged and drop out of the labor force. He is a proponent of initiatives to draw jobless workers into productive activity, either through job-placement programs, volunteer work or training.
Mr. Krueger, 50 years old, earned his Ph.D. in economics from Harvard in 1987 and has been on Princeton's faculty ever since. He worked as chief economist at the Labor Department during the Clinton administration.
Mr. Obama has seen a stream of departures from his original economic team in the past year, including Lawrence Summers, who served as his top economic-policy coordinator, Christina Romer, his first head of the CEA, and Austan Goolsbee, whom Mr. Krueger is slated to succeed.
As an academic, Mr. Krueger sometimes jumped into bitter and partisan disagreements. He strongly disagreed with conservative economists who argued that minimum-wage laws stifled employment growth.
He also has been a prominent figure in academic battles over school vouchers. Data on the effectiveness of school-voucher experiments in places like New York and Wisconsin have been especially hard to read. Academics have argued for more than a decade over how to interpret various studies, with right-leaning economists supporting vouchers and left-leaning economists expressing skepticism.
In one noteworthy disagreement, Mr. Krueger challenged the work of a Harvard professor, Paul Peterson, who said voucher experiments in New York showed school-choice programs helped African-Americans. Mr. Krueger said they didn't. The two and their co-authors embarked on years of sometimes testy statistical challenges against each other in different academic publications over the results of the New York voucher studies.
Mr. Peterson didn't respond to a request for comment.
Mr. Krueger is an attractive choice in part because he has recently made it through the difficult Senate confirmation process. However, his prior confirmation for the Treasury slot doesn't guarantee he will be confirmed again. The CEA chairman is seen as a higher-profile position and the confirmation process may prove more politicized now, with an election year looming.
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Real GDP was revised to a 1.0% annual growth rate in Q2
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Real GDP was revised to a 1.0% annual growth rate in Q2 from a prior estimate of 1.3%. The consensus had expected 1.1%.
Net exports and inventories were revised downward while business investment in equipment/software, commercial construction, and personal consumption was revised up.
The largest positive contributions to the real GDP growth rate in Q2 were business investment in equipment/software and commercial construction. The weakest component was inventories.
The GDP price index was revised up to a 2.4% annual rate of change. Nominal GDP growth – real GDP plus inflation – was revised down slightly to a 3.5% annual rate from a prior estimate of 3.7%.
Implications: Real GDP growth in the second quarter was revised down slightly and came in very close to consensus expectations. However, the composition of growth was more promising for the economy in the second half of the year. Business investment was revised upward, increasing the production potential of US companies, and inventories were revised down, leaving more room for future re-stocking of shelves and showrooms. It should be obvious at this point that the expansion of government spending to “stimulate” the economy hasn’t worked. The government expansion is helping create inflation, not real GDP growth. GDP prices increased at a 2.4% annual rate in Q2 and are up 2.1% in the past year. Meanwhile, real GDP is up 1.5% from a year ago. Nominal GDP – real GDP growth plus inflation – is up 3.7% from a year ago, signaling that the Fed’s zero interest rate policy is too loose and the inflation trend will continue upward. The best news from today’s report is that corporate profits increased at a 12.8% annual rate in Q2 and are up 8.3% versus a year ago. Most of the increase is due to domestic non-financial companies, among which profits increased at a 38.6% rate in Q2 and are up 14.2% versus a year ago. Profits are at an all-time record high and are the highest share of GDP since 1950. In other recent news, new claims for unemployment insurance increased 5,000 last week to 417,000. The strike at Verizon, which is now over, added at least 8,500. Continuing claims for regular state benefits declined 80,000 to 3.64 million, the lowest level since September 2008. We also have some good news on the housing market. The FHFA index, which measures prices for homes financed by conforming mortgages, increased 0.9% in June, the third straight monthly rise and the largest gain for any month since 2005. Still, the index remains 4.3% below where it was a year ago.
Stocks Undervalued by 65%
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Stocks Undervalued by 65%
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Market turmoil and a cycle of shrill headlines and worrisome “breaking news” convinced many to evacuate the equity markets. That was a mistake. The odds of recession are low, but the stock market seems to have priced one in, anyway.
We use a capitalized profits model to value stocks, dividing corporate profits by the 10-year Treasury yield. We compare the current level of this index to that from each quarter for the past 60 years to estimate an average fair-value. Not only are 10-year yields low (2.2%), but corporate profits are growing strongly. As a result, and hold onto your hats, this top down model says that the fair-value for the Dow is currently 40,000.
However, we think the Treasury market is in a bubble. So, instead of a 2.2% yield, we use a more conservative discount rate of 5% for the 10-year Treasury. This generates a “fair value” of 18,500 on the Dow and 1,940 for the S&P 500. In other words, the US equity markets are currently undervalued by about 65%.
Obviously, there are many moving parts to this model. Interest rates could go higher than 5%, profits could fall or both could happen. Profits, for example, are now 12.9% of GDP, the highest in measured history (back to 1947) except for one quarter in 1950.
So what does our model say if profits revert to the historical mean of about 9.5% of GDP? Even in that scenario, and assuming a 5% yield on the 10-year Treasury, equities are about 21% undervalued, with fair value at 1430 for the S&P 500 and 13,700 for the Dow.
The problem with this scenario is that it takes the worst of both worlds: a major decline in profits and a surge in interest rates. In the real world, a large decline in profits would normally be accompanied by a drop in bond yields. In other words, our model says the risk of investing in equities today is very low.
This is the opposite of what was happening back in 1999/2000. Back then, the market was over-valued and an ounce of gold traded for roughly 4 shares of Intel (INTC). Today it is trading for about 75 shares. Stocks look cheap and we think fears about the economy are overblown.
Yes, it would be good to trade the ups and downs of this market, but we don’t know anyone who can do that consistently. Rather, we focus on valuation, risk and reward. And right now, we believe the reward outweighs the risk by more than many people seem to believe. Fear will not disappear overnight, but the model says it is overblown and stocks are extremely attractive.
Personal income increased 0.3% in July
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Personal income increased 0.3% in July
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Personal income increased 0.3% in July, matching consensus expectations. Personal consumption rose 0.8%, easily beating the consensus expected gain of 0.5%. In the past year, personal income is up 5.3% while spending is up 5.1%.
Disposable personal income (income after taxes) was up 0.3% in July and is up 4.0% versus a year ago. The gain in July was led by private-sector wages and salaries as well as dividends.
The overall PCE deflator (consumer inflation) increased 0.4% in July and is up 2.8% versus a year ago. The “core” PCE deflator, which excludes food and energy, was up 0.2% in July and is up 1.6% since last year.
After adjusting for inflation, “real” consumption was up 0.5% in July and is up 2.3% versus a year ago.
Implications: Income and spending were doing well in July, before recent financial volatility, and revisions to prior months show more momentum for the economy. Personal income grew 0.3% in July, as the consensus expected, but a stronger 0.7% including upward revisions to prior months. Spending was up 0.8% in July, beating consensus expectations, and grew 1% including upward revisions to prior months. Spending on durable goods, such as autos, increased 1.9%, showing that supply-chain disruptions from Japan are abating. Overall consumption prices rose 0.4% in July and are up 2.8% in the past year. Meanwhile, “core” consumption prices, which exclude food and energy, continue to accelerate, up a tame 1.6% in the past year, but up at a 2.2% annual rate in the past six months and a 2.5% rate in the past three months. Higher core inflation makes it difficult for the Federal Reserve to justify doing any additional quantitative easing. In our view, it makes it tough to justify committing to short-term interest rates near zero for the next two years. The Fed must be confused about how core inflation could be rising when the unemployment rate is above 9% and capacity utilization in the industrial sector is below 80%. In their worldview, core inflation should only be rising when resources are constrained, and we’re not even close to that environment in their thinking. In other news this morning, pending home sales, which are contracts on existing homes, declined 1.3% in July. However, given the 2.4% increase in June we still expect an increase in existing home sales (which are counted at closing) in August.
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The Welfare State's Road to Riots
The Welfare State's Road to Riotsby James A. Dorn
If the riots in Britain have taught us anything, it is that when government fails in its most basic function — protecting persons and property — civil society ends, and warfare begins. The rise of the welfare state has eroded respect for private property rights and fostered a socialist mentality that dulls individual responsibility.
The U.S. is quickly catching up with European welfare states. Entitlement spending has skyrocketed since the Great Society programs of the mid-1960s, especially Medicare and Medicaid. Those two programs along with Social Security now account for more than 40 percent of federal spending, which itself has risen to 25 percent of GDP, or nearly $4 trillion. If all entitlement spending is included, payments to individuals account for 66 percent of federal spending.
The transformation from limited government (true liberalism) to the welfare state has no constitutional basis. The three branches of government have failed in their solemn duty to uphold the Framers' Constitution, or what F. A. Hayek called "the constitution of liberty."
The lesson from the British riots is that when government overextends itself, it will fail to do what it is supposed to do: protect persons and property.
It is not free enterprise and limited government that led to the riots in Britain; it is rather their demise. The U.S. should wake up and recognize the danger the welfare state poses to property — broadly understood as rights to life, liberty, and the pursuit of happiness.
The most fundamental question facing any society is the role and scope of government. The Framers of the Constitution accepted the idea that the primary role of government is to safeguard private property. In 1792, James Madison, the chief architect of the Constitution, wrote, "Government is instituted to protect property of every sort. ... This being the end of government, that alone is a just government, which impartially secures to every man, whatever is his own."
The Preamble to the Constitution states that the purpose of the charter is to "establish justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty." To "establish justice" means to prevent the violation of an individual's natural rights or property rights; it does not give the federal government an unlimited power to take private property and interfere with freedom of contract.
Madison and the other framers would not have enumerated — and therefore limited — the powers of the federal government in Article 1, section 8, if they thought a redistributive state was just. Nor would they have added a Bill of Rights.
James A. Dorn is vice president for academic affairs with the Washington, D.C.-based Cato Institute and editor of the Cato Journal.
More by James A. Dorn
Amendments to the Constitution — notably the Thirteenth, Fourteenth, and Fifteenth — further strengthened property rights. But the Progressive Movement (1890s–1920s) began to erode the Framers' Constitution. Today, the broad interpretation of the General Welfare Clause, the Commerce Clause, and other clauses have expanded the powers of the federal government far beyond that envisioned by the Framers. In doing so, the meaning of justice has been turned on its head: from its legitimate meaning of safeguarding property to its modern meaning of using taxes, regulation, and laws to redistribute income and wealth to achieve "social justice."
The problem is that when government is seen as an instrument for "doing good" rather than a force for preventing harm, there is no end to government mischief. By its very nature government operates by coercion, not consent; and as Milton Friedman liked to remind us, when government spends other people's money, it will naturally want to do more and more.
The lesson from the British riots is that when government overextends itself, it will fail to do what it is supposed to do: protect persons and property. If an anti-market and socialist mentality replace an ethos of liberty and responsibility, then the harmony that results from limited government and free markets will disappear — and hooligans will gain the upper hand.
The massive U.S. debt is a reflection of the rapid growth of entitlements and a do-good vision of government. Next year's elections will be a referendum on the size and scope of government. If Americans return to the Madisonian principle of justice that underlies the Constitution — and is the foundation of morality — the future of peace and prosperity will be bright. If they adhere to the illiberal principle of "doing good with other people's money," the welfare state will grow and eventually put out the light of liberty.
The Huffington Post Katherine Fung