The job of Treasury secretary is arguably the most important one President Obama will fill in his second term. It’s certainly the choice that will most affect the American people’s daily lives, future hopes and aspirations. And it may well shape the president’s legacy.
The President had options. He might’ve chosen Sheila Bair, for example, which would have finally given the nation an economic leader who was right about the implications of Wall Street’s reckless behavior. That would have also shored up the role of women in executive branch leadership in the second Obama term. But that was not to be, and he has reportedly chosen White House Chief of Staff Jack Lew for the role.
By all reports, Jack Lew is a decent, bright, and conscientious guy. While he’s not a populist by any stretch of the imagination, he may give the progressive economic agenda – which is really the agenda of most Americans, including most Republicans – a fairer hearing than the current Treasury Secretary has done.
Unfortunately, Lew is also associated with a failed and tarnished intellectual axis: the Robert Rubin/Larry Summers economic school. He also worked for a time on Wall Street, which reinforces the perception of a revolving door between our financial sector and the economic leadership of both parties. Even more unfortunately, he spent that time at Citigroup, the absurdly mismanaged megabank whose formation was made possible by Bill Clinton insiders like former Treasury Secretary Rubin (who promptly enriched himself even as the bank collapsed, contributing heavily to the global financial crisis in the process.) And he ran a fund that accomplished the nearly impossible feat of both betting against the American homeowner and losing money.
But he still has a chance: He’s capable, and Americans love a redemption story.
Advise and Consent
But Jack Lew won’t become Treasury Secretary until the confirmation hearing’s completed. For the Senate, as well as the President, this is a critical choice.
Republicans are reportedly irritated with Lew. They say he was “disrespectful” and “dismissive” toward them as White House Budget Director. But the Republicans’ professed fiscal beliefs are to modern economics what magic carpets and levitation are to modern aviation: absurd and trivial superstitions. If he only acted “condescending” or “dismissive,” Lew displayed considerable restraint.
The meaningful questions must come from Democratic and independent senators. They have an obligation to the public, and even to the Administration, to ask the right questions that will clear the air on Lew’s own past and, more importantly, let the public’s voice be heard.
Here are some of them.
Questions: The State of the Economy
According to the Treasury Department’s website, the Secretary Treasury is “the principal economic adviser to the President.” What do you consider our most urgent economic problem today? If that issue is not jobs, wage stagnation, or Americans’ ability to get ahead in life, why not?
The political debate in Washington has centered around deficit reduction, but one of the best ways to reduce the deficit (as a percentage of the GDP) is by growing the entire economy. How will you advise the President to do more to encourage economic growth?
The International Monetary Fund just acknowledged that it underestimated the negative impact of government spending cuts. What will you do to prevent our own austerity measures from further harming the US economy?
Questions: Fresh Thinking
Most of the leading economic figures of the Clinton era and first Obama term were wrong about key economic issues, especially the housing bubble and the harmful effects of Wall Street deregulation.
Meanwhile the people who were right seem to have been shut out of the process, denied any chance to advise the President and his team. This includes Nobel Prize-winning economists like Paul Krugman and Joseph Stiglitz, as well as regulatory leaders like Sheila Bair and Brooksley Born.
What will you do to ensure that these people are given access to both you and the President when important decisions are being made?
Questions: Social Security
The Secretary of the Treasury serves as Board Chair and Managing Trustee for the Social Security Trust Fund. Please clarify the following for the public, as well as for the politicians in the room who insist that the funds which the Federal government borrowed from the Fund are “just IOUs”: Aren’t the Fund’s legally executed instruments just as binding as the Treasury bonds held by any Wall Street bank, foreign government, or private citizen?
The Social Security Trust Fund also faces a potential shortfall in a couple decades which could lead to a reduction in benefits. Please tell us which solution you prefer:
1) Raising the payroll tax cap on high earners (the most popular option among voters across the political spectrum)
2) Cutting benefits (the least popular across the political spectrum)
3) A financial transaction tax
Lastly, please tell us whether you think Social Security’s funding should be discussed in the context of deficit reduction, given that it’s forbidden by law from contributing to the deficit.
The Treasury Secretary also serves as Board Chair and Managing Trustee for the Medicare Trust Fund. Please tell us which of the following solutions you intend to pursue and why:
1) Shifting costs to America’s seniors by raising the eligibility age and cutting benefits
2) Reducing health care costs, by addressing the factors which make U.S. costs so much higher than those of other developed nations
Millions of Americans have lost their homes to foreclosure. Forty million Americans live in houses that are “underwater.” Please tell us whether you are satisfied with the Administration’s efforts to date on their behalf, and what else you would do to help them.
Specifically: How will you respond to reports that the HAMP program has benefited banks while often causing hardship to homeowners? How satisfied are you with the administration of funds under the $25 billion settlement over bank foreclosure fraud? Do you think that homeowners and third-party investors have been well-served by that program?
Questions: Wall Street Fraud and Mismanagement
Given the evidence uncovered by the Financial Crisis Inquiry Commission, do you stand by your statement that Wall Street deregulation, and its subsequent criminality and mismanagement, didn’t cause the financial crisis of 2008?
Does it concern you that no Wall Street bankers have been indicted, despite the many billions that have been paid to settle charges of fraud?
What are your thoughts about the implementation of the Dodd/Frank financial reform bill? What are your thoughts on the Volcker rule? What additional reforms do you believe are needed to keep us safe economically?
Lastly: When is a bank “too big to fail”?
More specifically, is Citigroup too big to fail? Should it be broken up, as the President reportedly directed your predecessor to do at one point?
Is there anything you regret about your time at Citigroup? What experience did you gain, either positively or negatively, which will help you better serve the American people as Treasury Secretary?
Questions: Money and Power
The American people bailed out Wall Street, yet over the past four years Wall Street has prospered while the American people have struggled. Why do you think this is?
Do you believe Wall Street has too much influence in Washington? If not, how do you explain the difference between Wall Street’s fortunes and Main Street’s since the crisis of 2008?
If you are confirmed, you will be taking office at a critical time in the American economy. How would you like to be remembered, and how would you like the President to be remembered, when it comes to economic issues?
Finally: If you could sum up your aspirations for your tenure in one sentence, please share that sentence with us now.