Today President Obama appointed Austan Goolsbee to be his new chair of the Council of Economic Advisers, replacing Christina Romer, who has headed back to Berkeley. Because Goolsbee is already a member of the CEA, the appointment helps Obama avoid a Senate confirmation process that could have easily become a referendum on his administration’s economic policies.
Given that the appointment seems more one of convenience that anything else — Goolsbee is not a macroeconomist, which would seem to be what one would want at the moment. His primary expertise is in tax policy. So let’s look at some of his work:
On private research and development — where the President has proposed new incentives — Goolsbee wrote in the American Economic Review: “When the government increases R&D spending through subsidies or by direct provision, a significant fraction of the increased spending goes directly into higher wages, an increase in the price rather than the quantity of inventive activity.” That hardly seems like a ringing endorsement of more R&D tax credits.
Goolsbee has also written on investment tax incentives, which are also being pushed by Obama. In the Quarterly Journal of Economics, he writes: ” much of the benefit of investment tax incentives does not go to investing firms but rather to capital suppliers through higher prices. A 10 percent investment tax credit increases equipment prices by 3.5-7.0 percent.” It seems that Obama wants to do for capital what he’s tried to do for housing, just inflate prices without really changing the fundamentals and spend a lot of money doing so.
Here’s to hoping that Goolsbee doesn’t suffer the fate of his predecessor by abandoning everything he’s previously written in the interest of political expediency.