The Clunky Past of Alan Kreuger, Obama's Economic Adviser Nominee

Princeton's Alan Krueger will tackle unemployment and his academic past.

ByABC News
August 31, 2011, 12:28 PM

Sept. 1, 2011 — -- Princeton economist Alan Krueger, President Obama's nominee for top White House economic adviser, has drawn fire over his work on the "cash for clunkers" program and controversial academic papers on job creation and health care mandates.

Krueger is expected to play a key role in shaping the White House's plans to solve the lingering unemployment problem.

Obama nominated Krueger on Monday to chair the three-person Council of Economic Advisers (CEA), on which the president said he relies "to provide unvarnished analysis and recommendations, not based on politics, not based on narrow interests, but based on the best evidence -- based on what's going to do the most good for the most people in this country."

Roberton Williams, senior fellow with the Tax Policy Center, said the toughest challenge for the CEA chair will be to help solve persistent joblessness.

"Unemployment is a really hard problem to solve. If it was easy, we would have solved it long ago," he said.

Though Krueger has a tough road ahead of him, the role of CEA chair is one of the most prestigious economic policy jobs in the country.

"For somebody who wants to influence policy it's about as good of a job as you can get," William said.

Krueger was chief economist at the U.S. Treasury and assistant secretary for economic policy at the Treasury Department from May 2009 to November 2010, just as the White House implemented the cash allowance rebate system, or "cash for clunkers" program which lasted from July through August 2009.

"In the first two years of this administration, as we were dealing with the effects of a complex and fast-moving financial crisis -- a crisis that threatened a second Great Depression -- Alan's counsel as chief economist at the Treasury Department proved invaluable," the president said.

Critics of the rebate program, which allowed Americans to trade an older gas-guzzling vehicle for $3,500 or $4,500 of credit towards a new car, say its results were short-lived or unclear in boosting car sales and the economy at best.

About 700,000 cars were traded as a result of the program and according to the National Highway Traffic Safety Administration estimates, Cash for Clunkers resulted in a $3.8 billion to $6.8 billion increase in GDP and over 60,000 jobs created or saved.

But, which provides automotive information, estimated that of those 700,000 cars, only 125,000 were incremental sales while the remaining would have been sold independent of the program. Edmunds also estimates the program cost taxpayers $24,000 per vehicle sold.

Edmunds' CEO Jeremy Anwyl told ABC News "cash for clunkers" evolved from an environmental plan to remove inefficient, polluting cars off the road into an economic program.

"It was less effective from an environmental standpoint and not effective from an economic perspective," Anwyl said. "It tried to do too many things."

As chief advisor to Treasury Secretary Timothy Geithner, Krueger had a role in almost every tax policy that originated out of the White House during that time, but that does not necessarily mean he supported them, according to Williams.

"What people do publicly does not necessarily reflect their personal views. It was an administration policy and he supported it," Williams said.

Other policies that Krueger may have helped implement were the Hiring Incentives to Restore Employment, or HIRE, Act from March 2010 and a Social Security payroll tax cut which provided a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. The payroll tax cut was a part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act approved in December 2010.

A White House spokeswoman said Krueger is not conducting press interviews as he awaits confirmation for his new role from Congress.

A spokeswoman for the Treasury Department provided a statement to ABC News.

"In response to the financial crisis that left millions of Americans out of work and millions more families struggling to make ends meet, the Administration designed a number of programs to boost the economy," the spokeswoman said. "While those programs, including "Cash for Clunkers" and the HIRE Act tax credit, were successful at putting Americans back to work and spurring demand in some of the hardest hit sectors of our economy, there is more work to be done and we won't rest until every American who wants a job has one."

While Krueger has a few degrees of separation from the White House's past economic policies, his past research, on the other hand, has sparked some controversy.