Selecting a new treasury secretary is tough in normal times, and these are anything but.
Experts say the new secretary must bring sufficient clout to Capitol Hill to push through budget and tax deals and enough stature to calm financial markets, should they begin to melt down again.
Treasury Secretary Tim Geithner won’t be staying on for President Barack Obama’s second term. A former president of the Federal Reserve Bank of New York, Geithner took over when the global economy was in freefall and financial markets were tumbling.
The economy has since stabilized, albeit returning to an anemic pace of growth and subpar job creation. Recession isn’t necessarily in the rearview mirror, however, as the so-called “fiscal cliff’ approaches. Failure to reach a deal on taxes and budget cuts could leave the economy hurling backward.
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Meanwhile, Europe’s debt crisis appears far from over and can still contaminate global markets. And a new leadership team is about to take power in China.
It’s against that backdrop that the president will select a replacement. White House spokesman Jay Carney said Friday that Geithner plans to stay through the inauguration in January and will be a “key participant” in negotiations on the fiscal cliff – a series of tax measures that have expired, or are set to expire at year’s end, along with automatic, deep budget cuts that will take effect unless lawmakers agree to an alternative plan.
Almost unanimously, experts said that Geithner’s replacement needs to be someone with muscle in Washington and luster to please Wall Street and global financiers. Those aren’t always qualities easily found in a single person.
The name most discussed as Obama’s pick is Jack Lew, currently his chief of staff and a longtime Washington insider, having also served as the administration’s budget director. Although disliked by some key congressional Republicans, Lew knows policy issues inside and out and has the president’s ear.
The two other most frequently mentioned names have more heft outside the nation’s capital, but for that reason they may have limited chances.
Erskine Bowles was Bill Clinton’s chief of staff and the co-author of an exhaustive report last year by a presidential commission that offered a way forward on the nation’s twin crises of debts and deficits. Financial markets like Bowles, and he has a reputation for being both a numbers wonk and someone who can reach across the aisle.
The other top choice said to be under consideration is Larry Fink, founder of BlackRock, the world’s largest money manager, with more than $1 trillion in U.S. pension funds under its management. He is versed on financial regulation and global finance, is a heavyweight in the financial sector and, perhaps more importantly, doesn’t have the stigma of being a Wall Street banker.
“He’s a very well-respected person in the financial community and neither he nor Bowles would have any trouble getting through confirmation, or would Lew,” said Laurence Meyer, a former vice chairman of the Federal Reserve and senior managing director for the financial forecaster Macroeconomic Advisers. “This is a good group of candidates – Bowles and Lew with a lot of experience, and Fink with a lot of experience outside government, but a commanding person who is without a doubt up to the job.”
The problem with Bowles is that his plan – authored with former Wyoming Republican Sen. Alan Simpson and shorthanded as Bowles-Simpson – starts at a place where many Democrats don’t want to end up. The plan proposes funding changes to Social Security, Medicare and perhaps ending popular tax breaks like the mortgage interest deduction.
Obama’s treasury pick comes at a pivotal time. House Speaker John Boehner, R-Ohio, has called for tax reform and a long-term budget deal in 2013, harkening back to the 1986 deal struck between President Ronald Reagan and House Speaker Thomas “Tip” O’Neill. Now, like then, there were pressures on debt, deficits and a needed revamp of taxation.
“It’s a fascinating array of interrelated issues. The key appointments are so crucial,” said Murray Weidenbaum, commonly called the architect of Reaganomics and head of Reagan’s Council of Economic Advisers in 1981-82.
He said the first order of business for Obama is to pick a strong-willed secretary who knows how to work Capitol Hill.
“If he’s a boy, not a man, he’s not going to be effective on the Hill,” said Weidenbaum, now a professor at Washington University in St. Louis.
The Obama administration has put a premium on loyalty and team play, which makes the independent-minded Bowles a less likely choice, despite knowing the ways of Washington, he said.
Awaiting the next treasury secretary are thorny international issues such as pressure to tighten economic sanctions on Iran to curb its nuclear ambitions, and a whole new leadership team expected in China soon.
“I think China will continue to be a focus, but it will shift from currency (issues) to perhaps intellectual property rights,” said Meyer, suggesting that patent and trademark enforcement will garner more attention than the annual congressional attack on China’s alleged currency rate manipulation. “It’s just silly political posturing.”
Less visible but also important is who Obama taps to be the next commerce secretary. The post remains vacant since the sudden June departure of John Bryson, and it’s a position of importance, given the likely renewed focus on export promotion and trade agreements.
“Trade policy has been run out of the White House for the last four years,” said William Reinsch, a former Commerce Department undersecretary and president of the National Foreign Trade Council, the trade lobby for big global companies. “I don’t suspect that will change significantly. They’ve had a hard time finding a commerce secretary, or keeping a commerce secretary – both actually. I don’t quite understand it because other Democratic administrations haven’t had a problem coming up with a competent businessman or other people.”
Lesley Clark in Washington contributed.