During the dark days that began Timothy F. Geithner’s tenure as Treasury secretary, he was constantly under fire, accused of bailing out Wall Street instead of helping ordinary Americans. With lawmakers from both parties calling for him to resign, it was an open question whether he’d last the year.
Geithner recounted for colleagues what his teenage daughter told him: If you were in Iraq, people would at least understand you were trying to help the country.
Geithner has not only survived but quietly gained influence, which he has used to press President Obama to curb the nation’s soaring debt even at the expense of spending that might more directly spur employment.
His success at driving the agenda signals his status as the president’s closest economic counselor. With the departure this summer of Austan Goolsbee as chairman of the Council of Economic Advisers, Geithner will be the last remaining member of the president’s original economic team and, with Federal Reserve Chairman Ben S. Bernanke, one of the two remaining architects of the great banking bailout that began in 2008, even before Obama’s election.
Geithner, who was once a registered Republican and then an independent, has a faith in the marketplace that puts him at odds with many of Obama’s traditional Democratic allies, whose skepticism about markets seemed vindicated by the financial crisis. His debut on Obama’s team was also shaky. He faced questions about whether he had properly paid all his taxes, and his initial public defense of the administration’s plan for rescuing the financial industry was uninspired, prompting anxiety in the markets.
But over the past year, he has fared better, especially at pushing his viewpoint in internal White House debates. While forces outside the White House — in particular, Republican lawmakers — have helped turn Washington’s attention to the nation’s debt, Geithner’s efforts inside the White House have shaped how Obama confronts this defining moment. At stake in the months ahead are the size of government, the generosity of the nation’s safety net, the taxes people will pay and the debt that will weigh on future generations.
The policies molded by Geithner — and the balance they strike between slashing the deficit and supporting the economic recovery — could also ultimately determine whether Obama will win a second term.
Geithner has successfully pressed Obama to announce a plan to reduce the deficit by $4 trillion, though the president ultimately proposed doing it in 12 years rather than 10, as the Treasury secretary wanted. And Geithner has argued for an approach that would include tax increases, spending cuts and politically explosive changes to government retiree programs like Social Security and Medicare.
“He pushes the envelope,” William Daley, Obama’s chief of staff, said in an interview. “The debate has a political piece that brings us back a little from what Tim may be advocating.”
Even with Geithner in favor of deficit reduction, Republicans accuse the administration of not going far enough. Urging deep cuts in federal spending, GOP lawmakers are threatening to oppose an increase in the federal debt limit, inviting what Geithner warns would be a devastating default by the government.
In a letter to Geithner last month, 17 Republican senators warned of profligate spending by the government and faulted him for scare-mongering in pressing Congress to lift the debt limit. “We believe it is irresponsible and harmful for you to sow the seeds of doubt in the market regarding the full faith and credit of the United States,” the senators wrote.
Some Democrats, meanwhile, are criticizing the administration for focusing on the deficit at the expense of creating more jobs.
Geithner says Obama must tackle the deficit now if he wants the government to be in a position to support the economy in the future and to continue to protect the elderly and the poor.
“It’s been my view for some time that unless he played a major role in shaping and negotiating the broad fiscal framework . . . we would be left without the capacity to do a whole range of things that are really important,” Geithner, 49, said in an interview. “I have been a consistent advocate of him doing that early and often.”
Stimulus vs. deficit
In the summer of 2009, Geithner was asked by a television interviewer whether tax hikes would be needed to rein in the nation’s debt. Geithner responded it was too early to tell, an early hint of the priority he put on cutting the deficit.
Political strategists at the White House were mortified. Obama had promised not to raise taxes on the middle class. This had been a centerpiece of his election campaign. At a White House briefing a day after Geithner’s remarks, he was publicly chided by Obama’s top spokesman for engaging in a “hypothetical.”