President Obama Fails his First Hard Choice

"Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age." -President Barack Obama in his Inaugural Address

Barack Obama is failing his first hard choice as President by pushing hard for Tim Geithner to be confirmed as Secretary of the Treasury despite Geithner's serial cheating on his taxes and Geithner's utter failure in his previous job as head of the New York Fed.

Geithner's low personal profile and Wall Street's high comfort level with him will probably guarantee he'll survive Wednesday's hearing before the Senate Finance Committee. Who wants to dwell on this little guy when we finally have something big to celebrate? Besides, how important is one appointment? Newsweek thinks it's pretty important. They just listed Geithner as the 15th most powerful person in the world.

"Tim Geithner, when I nominated him, was rightly lauded by people from both sides of the aisle, from the market, from labor, as somebody who was uniquely qualified." Obama responded when questioned about Geithner's taxes. "Is this an embarrassment for him? Yes. He said so himself. But it was an innocent mistake. It has been corrected. He paid the penalties."

Geithner didn't make one mistake. He committed multiple transgressions over the course of many years. To call them "an innocent mistake" is as insulting as deducting your kid's expensive summer away camp as a childcare expense, which Geithner tried to do. Furthermore, Geithner paid the majority of his missing taxes and penalties only after he was nominated to be Secretary of the Treasury. His situational ethics are directly at odds with the culture of personal responsibility that Obama has set as his foremost goal.

Obama's selection of this ethical goal shows the shrewdness of our new president. The world didn't plunge into a deep recession just because real estate was overvalued, credit too highly leveraged, and so on. Our financial markets and models broke because they ignored the power of social norms and sent the regulators home. Markets were supposed to be self-correcting. They certainly adapted to a lack of scrutiny. A CEO's pursuit of self-interest at the expense of his shareholders or even the solvency of his own company was the natural outcome of such folly.

As head of the New York Fed, Geithner was Washington's eyes and ears on Wall Street before this crash. He saw and heard nothing coming. From crisis day one, Geithner confused the financial health of the big bankers with the financial health of the country. It's no surprise that Wall Street and both sides of the political aisle want Geithner to pick up the reins from Henry Paulson without pause. They want stock prices to head back up without a fundamental change in the rules of the game.

President Obama is nothing if not pragmatic. He knows that many Republicans fear that if Geithner's nomination is nixed, someone more stringent could be appointed. While Obama's sticking with Geithner shows political strength, it may betray Obama's anxiety about the upended global economy. Geithner not only speaks Chinese, he speaks Kissinger. His first job was working for Kissinger & Associates. This fall the Chinese government became the largest holder of U.S. Treasury debt. It can't hurt to have someone on our side of the counter who's learned to speak Kissinger's amoral language.

However, the domestic cost for keeping Geithner could literally be enormous. Obama has repeatedly called upon the wealthy to pay a larger share of federal taxes. Already he may postpone part of this pledge because of our weak economy. In the meantime, how well is the President preparing the richest in our nation for, as he warned in his Inaugural Address, a new age? As they shift their funds around, how many wealthy elites will have Secretary Geithner in mind when they contemplate making "an innocent mistake" likely to escape the IRS' notice?

In 1993, the late Senator Patrick Moynihan coined the phrase "defining deviancy down" to capture how society tolerates behavior previously considered unacceptable. Obama has defined deviancy up by minimizing Geithner's clearly intentional cheating. I hope some Senator Wednesday presses Geithner on why, given his wealth, he prepared his own taxes. My guess is that he wanted to keep his omissions to himself.

Don't many people cheat some on their taxes? Perhaps. But obviously that should disqualify them from becoming Secretary of the Treasury.

Comments

[SantaBarbaraDianne]

Only a few days in office and President Obama is making the likes of me feel really insulted.-­--- I mean, does he really think we are so stupid to actually accept his justifications for the obvious blunders he has made in this short time?

[stanton816]

It's a bit over the top to think that an ordinary IRS employee would be fired for failing to report his taxes properly. Meanwhile, someone is being nominated at the head of Treasury (and the IRS) has not properly filed his taxes multiple times. Hmmmm...

[Pat Ross]

The Geithner selective standard of acceptance is far off the mark of what Democrats themselves challenged in several of the Republican choices of responsible leadership - that shows the hypocrisy under which both political parties operate that has America so befuddled.

[PhilipTaylor]

I agree that Geithner was not the best BUT! In the appointments Obama has made must recognize that his "level headed" approach is what drives what will happen.

We have Tree Basic Choices:

1. Do NOTHING and let the BIG DINOSAUR BANKS collapse under the weight of their OWN GREED of $600 Trillion in Fake Toxic Paper (remember our GDP is $14 Trillion so this is over 42.8 years [=$600/$14] of normal GDP growth).

2. Solve the Housing Crisis by converting all “TRICK&TRAP” loans to a Government Fixed Rate of 3% and allowing all Americans to have access to that rate. Using the Internet to speed processing. This would provide strong stimulus to families of $200 to $1,800 per month increasing tax revenues for other forms of job stimulus.

3. Do a Stimulus to create job growth over the coming year(s). Tax cuts for the Middle Class and infrastructure to generate jobs and improve life for all Americans (not just the RICH)!

Or combine all three; Institute a New Government Bank to do Loans in 2 above, let Dinosaur Banks follow their destiny set by themselves, and stimulate new job creation.

#2 forces Banks to take write-down­s/write-of­fs causing off-balance-sheet accounting to be valued at the market which begins the healing process.

And #2 would simply normalize debt to today's reality and that is a 2.5% to 3% rate if you bypass the corrupt Banksters who caused this!

[Annette Smith]

Sorry if I'm horribly naive but what if there are no adequate candidates for the job who haven't cheated on their taxes?

[Samalabear]

LOL. It's a great question!

[libcrusader]

People with integrity don't cheat on their taxes.

[applescruff]

The thing is if this had been a nominee in a Bush administration this would have never come to light. That's the advantage a President has when he has bought off the judicial sytem and everyone involved in the process.
If we were talking millions here then maybe that would be a problem but who among us can be sure that our taxes are being prepared properly when they are such a thicket of uncomprehensible rules and exceptions?Another problem we need to have changed in this country.
Lets look at the benefits the Iraq war did for Dick Cheney's Haliburton Stock portfolio if we want to find intentional crimminal behaviour.

[Nancyok]

warren Buffett...­.if only....
As a small business owner whose accountant and business manager freakishly passed away within a month of each other, I live in fear that I'm doing something wrong tax-wise. But my industry has plunged to such a degree that I can barely afford to stay in business even without hiring someone to sort it all out or find the time amongst the salvaging of what revenue I can to thoroughly check out what my late accountant's assistant is managing now. Tax code is so complex that the experts mess up, so I come down light on Geitner's initial mistake. BUT, I have yet to hear sufficient explanation for why he didn't come clean and fully resolve this once he knew. No, I couldn't afford to pay a $34,000 tax bill all at once, but frankly, he could. Obama needs the people to have faith in this choice above all others to support his stimulus and bailout. I think without a more detailed and forthcoming explaination that the people can understand, the crucial trust will never come.

[WoodyGrant]

From an AP Story:
" Timothy Geithner can get confused over the laws governing the withholding of tax, anyone can, experts say.
U.S. tax laws are particularly complicated and full of land mines for the unsuspecting, as everyone from the Treasury secretary nominee to self-employed business owners and average taxpayers can confirm.
The Association of Chartered Certified Accountants, the global body for professional accountants, views the U.S. tax regime as one of the world's most complex, according to Chas Roy-Chowdhury, London-based head of taxation.
"Even tax professionals could get it wrong," he said, referring to the requirements involving self-employment taxes that tripped up Geithner as well as U.S. tax law in general."
http://www.google.com/hostednews/ap/article/ALeqM5gR7GRm_U6rxs9KoWxZ40Mx-vsWqQD95OFAD00
Enough said. Klein's argument doesn't hold water.

[obamagirl1968]

Exactly! The tax code is much to complicated. Any individual with a high school education should be able do their own taxes easily. Someone with advanced degrees, tax or financial experience should not be able to be tripped up so easily. The tax code needs to be simplified!!

[claylandg]

I tell ya this man shouldn't be voted in.He's been in the mess the whole time and didn't do enought to help recognize problems . Now he's sorry he made a mistake, Bull. I wish one of the people that was asking him questions whould have just been honest and letting him have it. I mean really when he worked for all that money and didn't pay any taxes he knew he was supose to but he was trying to slip in buy everyone and he got caught, this isn't the man i want to be heading this department. Obama's mistake in appointing him for the job.

[leorising]

I never have understood why such an intelligent man (Obama) would make such a terrible choice (Geithner), and the author has spoken to this eloquently. Imagine, if you will, that Geithner removes his name from consideration. Who is the obvious next choice? That's where I get stuck.

[kentuck]

I am not so concerned about about his cavalier attitude about paying taxes as I am his supportive attitude of the big investment banks and other unwise financial leaders, of which he was one. He is the fox guarding the henhouse, in my humble opinion.

[sarah bhf]

Geithner should withdraw his name. I have no faith in a Treasury Secretary who is so imcompetent. The Treasury Secretary oversees the IRS; how can someone who has made such egregious tax mistakes be confirmed? Linda Chavez was not confirmed as the Labor Secretary because she had hired an illegal nanny. How is this different? Actually, this is worse since the stakes are higher right now. A Treasury Secretary must be chosen in whom we have faith that he is competent and honest.

[Chlowina]

So I look at the people in bushes administration and see they are lacking even more in integrity and honesty. Cheney, Rumsfeld, etc. Liars and deceivers.

[repearwo]

President Jimmy Carter was a fine man, even a great man, but he was a lousy President because he was not pragmatic enough. Pragmatism is what is required. Change is a process. We can have a revolution, but revolutions fail quickly in historical terms and the backlash is disruptive. Lyndon Johnson brought a revolution in the wake of JFK's death and caused a counter revolution in 1980a short 17 years later.

The left, of which I am a part, is just going to have to get used change by the inch. If any one is watching, Obama has pretty much control of his ship of state and will do just fine bringing us through the difficult days ahead.

Our Constitution is designed to keep change from happening too fast, but it also insures change when the people want it.

[JayEsbe]

The first time I saw Geithner, my blood ran cold. I don't think I've ever seen anyone who looked more like a blood-sucking gargoyle, than this guy. I scolded myself for judging a book by it's cover, but my gut feeling remained and my flesh crawled every time I saw the man. Now I find out he's not only a tax cheat, but actually used the statute of limitations to take two years off of what he owed once he finally paid up? This guy looks like pure evil BECAUSE HE IS, and I don't know what Obama was thinking in tapping him, but I hope to God he un-taps him.

[SantaBarbaraDianne]

Could it be that he is surrounding his self with people of low scruples in order to have an administration that is mallable enough to help his shady agenda?

[Canuck27]

I find it a great relief to be talking about whether or not an administration official made a mistake or tried to cheat on his taxes instead of talking about mistakes like starting illegal wars, torturing people, wire tapping citizens, abandoning victims of a hurricane, ya know little things like that.