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March 25, 2005

Great Responsibility without Great Power S**** Bigtime

It is hard for the Bush administration to find people to fill the empty seats in the U.S. Treasury because--in this administration--senior Treasury officials have great responsibility but no power. The New York TImes is displeased, and inveighs against the vacant Treasury Bench:

Treasury's empty seats are cause for alarm: Don't be fooled by the location of the U.S. Treasury, right next door to the White House. The department has suffered a steady diminution of prestige and influence during the Bush administration, starting with the unceremonious firing of its first Treasury secretary, Paul O'Neill, less than two years into the job, in part for suggesting that deficits do, in fact, matter. Things have been downhill ever since. Last December, Republican power brokers made no bones about wanting to oust the current Treasury secretary, John Snow, only to find that the administration couldn't entice anyone better to take the job....

[F]rom the start of his administration, tax policy and economic policy - the purview of the Treasury - have been handmaids to politics and ideology emanating from the White House. Without the clear-cut opportunity to drive policy-making, the best and the brightest aren't exactly clamoring for jobs at Treasury. And Snow is still in his post, reprising his first-term performance as cheerleader for Bush's tax cuts in his current role as salesperson for Bush's misbegotten plan to privatize Social Security.

Meanwhile, vacancies are piling up. The post of deputy secretary, the No. 2 job, has been vacant for nearly two months, and the first-choice candidate recently removed his name from consideration. The post of under secretary for domestic finance, the Treasury's main liaison with Wall Street and the person responsible for issuance of the federal debt, has been open all year. The job of assistant secretary for tax policy has also gone unfilled this year, a disturbing absence at a time when the president is calling for comprehensive tax reform. And on Monday, the under secretary for international affairs, the person who coordinates with the World Bank and International Monetary Fund and steps in when a country like Argentina or Brazil teeters on collapse, announced his resignation effective April 22.

The United States faces unprecedented financial risks, uncertainties and challenges, right now. The interplay of the federal budget deficit with record deficits in trade and global transactions has become the focus of the international financial community, with repercussions for the dollar, inflation, interest rates and economic growth.

The clear lack of a deep bench from which to fill vacancies is cause for alarm, as is the extent to which America's complex economic problems are beyond the ken of a mostly political, loyalist band of policy makers. That alarm, insistent though not yet overwhelming, would quickly reach deafening proportions if the United States were forced to respond to a sudden, destabilizing event like the Sept. 11 attacks without a credible Treasury team.

To attract the people the Treasury needs, the White House must assure the best candidates that they will exercise true power and influence. The administration must also work in good faith, and with all due speed, to reach consensus with the Senate on its Treasury nominees, which would streamline the confirmation process and, in so doing, begin to restore the Treasury to its vital place and function.

Let's see who is at the Treasury right now:

Secretary: John W. Snow
Deputy Secretary: VACANT
Under Secretary (International Affairs): Tim Adams (designee) Under Secretary (Domestic Finance): VACANT
Under Secretary (Enforcement): Stuart Levey
General Counsel: Arnold I. Havens
Treasurer: Anna Escobedo Cabral
Assistant Secretary (Economic Policy): Mark Warshawsky
Assistant Secretary (Financial Institutions): VACANT
Assistant Secretary (Financial Markets): Timothy Bitsberger
Fiscal Assistant Secretary: Donald V. Hammond
Assistant Secretary (International Affairs): Randal K. Quarles
Assistant Secretary (Legislative Affairs): John Duncan
Assistant Secretary (Management): VACANT
Assistant Secretary (Public Affairs): Rob Nichols
Assistant Secretary (Tax Policy): VACANT
Assistant Secretary (Terrorist Financing): Juan C. Zarate
Assistant Secretary (Intelligence and Analysis): VACANT

Now that's just loony...

Now the reason that 1/3 of the most senior posts are vacant is clear: in spite of the faux-investment-banker fashion style of the Treasury, the jobs are not that highly paid, and so they are worth doing only if they are fun. And if you lack power and influence and the authority to implement good policies, the jobs aren't fun. Great responsibility without great power makes for unhappy campers.

Why this Treasury has no power is unclear. Paul O'Neill was extremely effective as a Deputy Director of the Ford OMB and as President of Alcoa, where he successfully organized a global aluminum cartel. He was well known to have very close ties with Cheney, Rumsfeld, and Greenspan. With the depth and power of the Treasury staff that Summers and Rubin left him, he ought to have wiped the bureaucratic floor. John Taylor was, I am told, highly effective in the Bush-the-First administration at the CEA, and is a superb economic thinker and macroeconomic analyst.

The stories I hear--which may or may not be accurate--are that Paul O'Neill had caught a very bad case of CEO disease while at Alcoa, that John Taylor never figured out how to use his staff as he went from a boss of 3 at the CEA to a boss of 300 at the Treasury, and that Assistant to the President Larry Lindsey never figured out that his influence and longevity depended on his orchestrating a consensus on good policies within the economic policy team, and that his use of the press corps to leak-bomb other economic policy team members was highly counterproductive (Lindsey was fired when O'Neill was, at the end of 2002).  

Posted by DeLong at March 25, 2005 01:13 PM