Masterful piece of writing in today’s NYT by editorial board member Teresa Tritch on the job description of the new Treasury secretary. Secretary Geithner was met at the door in January of 2009 by a financial market meltdown and correctly undertook reversing that as his first job. As the figures below reveal—graphs I’ve chosen to amplify the point in the Times piece—that part of the market has recovered. The job market has not.
But “wait a minute!” you say. That’s the labor secretary’s job—the secretary of the Treasury is responsible for financial markets, making sure our borrowing costs stay low (so s/he must worry about the budget deficit), international trade—stuff like that, right?
Wrong! Or, at least only partially right. S/he must recognize the linkages between all of the above and the largely unfinished business of economic recovery.
–Yes, budget deficits are on the docket—but the near-term challenge is to offset fiscal contraction with temporary jobs measures to complement the Fed’s aggressive monetary policies and finally break the seemingly endless growth-slog in which we’ve been stuck for five long years.
–Yes, financial markets are on the docket—but the goal here is to provide the oversight to break the bubble-and-bust syndrome that’s been far more devastating to Main St than Wall St, as the figures below emphasize.
–Yes, international trade is on the docket—but the goal here is to support our exporters by fighting currency managers who hurt our competitiveness by making the dollar artificially expensive relative to their currencies.
That is, in every policy matter, the new secretary must envision a new client:
Seen in that light, the Treasury’s No. 1 client, and the focus of its policies, must be the low- and middle-income working Americans who last saw any real income gains in the 1990s; the 12 million Americans who can’t find work; the 8.2 million who can find only part-time jobs; the 12 million borrowers who are underwater on their mortgages.
That is not a call to populism. It is a matter of survival. The existential threat today is the grindingly slow economy — characterized by persistently high unemployment, stagnant wages, crushing debt and, as a result, consumer demand that is too weak to propel business investment. In developing and promoting economic policy in the next four years, President Obama and a new Treasury secretary must not mince words in asserting that such prolonged hardship, unaddressed, will end not with a rebound but with a permanently reduced standard of living in the United States…
President Obama has a lot more existential matters on his mind today, as he must. But I hope he reads and absorbs this message as he considers this critical appointment.
Sources: NIPA, tables 1.12 and 1.14 for profits and compensation. The top figure plot the change in profit shares by sector as a share of national income, not GDP.