Did Geithner Really Kill The Recovery?

Zachary Goldfarb’s reporting in the Washington Post has revealed an important piece of information about why the economy is slowing down. Forget about Republicans in Congress and their gold-bug nonsense, blame Timothy Geithner for pushing austerity from day one:

The economic team went round and round. Geithner would hold his views close, but occasionally he would get frustrated. Once, as Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was “sugar,” and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.

Wrong, Romer snapped back. Stimulus is an “antibiotic” for a sick economy, she told Geithner. “It’s not giving a child a lollipop.”

But is Geithner the source of all our current woes? Or would any Treasury Secretary make a similar argument?

It’s one thing if high unemployment can be pinned on Republicans treating Atlas Shrugged as gospel but it is another when the prime driver of the austerity caucus is from the White House itself. It’s unsurprising, then, that most of the criticism of Geithner is emerging from liberal sources.

John Judis at The New Republic writes that Geithner “is also behind the Obama administration’s unseemly obsession with reducing the debt and deficits -- even if that should throw a few people out of work, prolong the Great Recession well into this decade, and pitch American politics to the right.” Paul Krugman describes the reporting on Geithner’s role as “deeply depressing” and Atrios simply notes: “We Are Doomed. Geithner is awful.”

But when FrumForum called up noted conservative economist Bruce Bartlett for his take, he suggested that blaming Geithner ignores the fact he is simply doing what any other Treasury Secretary would have done, and that his critics should really be concerned about the institution of the Treasury, not the person:

The Treasury Secretary really has one job, and one job only, which is raising the money to pay the government’s bills, either through taxation or through borrowing.

... There has never been a Treasury Secretary in the history of this country that wouldn’t have his life made a lot easier by having as little as possible to have to borrow or raise in terms of taxation. It’s an institutional attitude.

As for why it’s hard to get a person into Geithner’s job who might be more willing for the U.S. government to take on larger bills in the short term to help with an economic recovery, Bartlett explained the powerful financial interests which would oppose such a policy:

If they ever tried to appoint somebody, say a Robert Reich or another outspoken liberal, the constituency of the Treasury, which is essentially Wall Street, would have a cow it. It would be extraordinarily embarrassing to the President. You can’t even get appointed to the Federal Reserve if you have a Nobel Prize in economics.

The situation is not entirely without options (Bartlett suggested that had the President focused on the weak economy instead of healthcare reform, he could have used the bully pulpit to keep Washington seized of the jobs situation) but short of Obama appointing a liberal or progressive economist during a recess appointment, it seems that whoever would have been Treasury Secretary would have had a strong voice in pushing against stimulative measures.

This ultimately suggests that while a lot of criticism has been directed at conservatives in the Congress, more attention also needs to be given to the institutions within the executive branch and the incentives they face.