Obama Names New Economic Adviser

If you liked "Cash for Clunkers," you'll love Alan Krueger, President Barack Obama's new choice to chair the White House Council of Economic Advisers.

Krueger, an economics professor at Princeton University, was chief economist at the Treasury Department during Obama's first two years in office. There, he analyzed the economic impact of "Cash for Clunkers," the program that provided a tax rebate of up to $4,500 to consumers who traded in gas-guzzling used vehicles for fuel-efficient new vehicles. The program succeeded in boosting new auto sales—while it lasted. Once the tax incentive expired, however, auto sales plummeted.

Krueger also worked on the HIRE Act, which gave employers tax breaks for hiring unemployed people in 2010. Like "Cash for Clunkers," that program was designed to have an immediate impact on the economy by providing a temporary incentive to spend. A year ago, the Treasury Department reported that businesses had hired 7 million workers who were eligible for the HIRE Act's tax breaks. Numbers aren't available yet on how many businesses actually claimed these tax breaks. Plus, it's not clear how many of these workers would have been hired if there hadn't been a tax break.

Meanwhile, many other businesses continued to lay off workers, not hire them. Despite the HIRE Act, the unemployment rate remains above 9 percent. Businesses aren't going to add workers simply because they temporarily don't have to pay their share of payroll taxes for them. They will hire workers if they see increased demand for their products and services.

This history lesson is important because Obama will soon outline another set of proposals aimed at getting businesses to hire more workers. Krueger, who replaces Austan Goolsbee, will be one of Obama's top advisers as he puts the finishing touches on this plan.

Today, as he introduced Krueger with remarks in the Rose Garden, Obama indicated something like the HIRE Act will be included in his new jobs plan. "Next week, I will be laying out a series of steps that Congress can take immediately to put more money in the pockets of working families and middle-class families, to make it easier for small businesses to hire people, to put construction crews to work rebuilding our nation's roads and railways and airports, and all the other measures that can help to grow this economy," Obama said.

"These are bipartisan ideas that ought to be the kind of proposals that everybody can get behind, no matter what your political affiliation might be," he said.

House Republicans, however, will balk at any ideas that require additional federal spending. Instead, their jobs plan will focus on reducing the regulatory burden on businesses and allowing small-business owners to take a tax deduction equal to 20 percent of their income. The goal of this tax deduction is to "immediately free up funds for small-business people to retain and hire new employees, and reinvest in and grow their businesses," said House Majority Leader Eric Cantor.

"What we're looking to do as we return to Washington next week is focus on how we stop the federal government from making it so difficult for small-business people to create jobs," Cantor told Fox News.

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Kent Hoover is the Washington bureau chief for bizjournals.