Lew almost official as nominee for Treasury Secretary
by Linda Beale
Lew almost official as nominee for Treasury Secretary
Media headlines continue to tout Obama’s white male choices for rounding out his ‘new’ cabinet. Latest to the list is that he has offered his Jacob Lew, his current White House Chief of Staff, the post of Treasury Secretary. See, e.g., Obama to tap Jack Lew for top Treasury post, Washington Post.com (Jan. 9, 2013).
Jack Lew has been a slew of things–hedge fund manager at Citigroup (bailed out big bank), university administrator (administrative stuff, not academic stuff) at NYU, Clinton and Obama administration OMB administrator, State Department official, and of course White House Chief of Staff. That means he is well embedded in the Wall-Street-respecting culture of Geithner, Summers, Paulson and the rest of the DC crowd that pays too much credence to what bankers say and not enough to what ordinary Americans think. So that is one strike against him.
On the other side, as the news story in the Post notes, the GOP generally views him as a tough negotiator who stands his ground on issues that Democrats have tended to consider important. That is one big strike in his favor, especially since it is not something that his current boss is especially known for (or good at, as evidenced by the way he caved on not letting the Bush tax cuts just die of their own accord so that less stupid provisions could be put in place, especially on the corporate and estate tax side).
But what about the fact that Treasury is where most tax policy thinking goes on, and thinking about the ins and outs of statutory provisions and exceptions, and thinking about “administrative” lawmaking through regulations. Under the Bush administration, the Treasury Department put through a series of regulations that greatly facilitated concentration of corporate giants into even larger corporate giants, and did so in ways that appear to have allowed, for the first time ever, a taxpayer who engaged in a reorg transaction and received boot and stock to recognize a LOSS in the reorg transaction by allocating consideration.
In other words, the internal goings on at Treasury are just another place that corporate lobbyists (including continuing contact between former Treasury and IRS officials with the bar as they move back and forth) can influence the law in favor of lower taxes for business. Shouldn’t we care how much Lew knows about tax law and what his views on that are? I think we should.
Lew is a Harvard graduate with a JD from Georgetown (so yes, we continue to see the elite nominating their comrades in elitedom to offices in this country). He was a congressional aide and then policy adviser to Speaker Tip O’Neill in the late ’70s, when he worked on Social Security, Medicare, budget, tax and similar issues. So at least he’s got some depth of experience on those issues. He practiced law for several years, but not as a tax lawyer–he worked on electricity generation. Wikipedia says he has also dealt with Middle East issues and various other things in other short-term posts he has held. So a peripatetic acquirer of bits of experience and knowledge across a range of things, but not an economist and not a tax lawyer.
Does that make him qualified to head Treasury and to advise on what has become one of the most important areas of the law, in which we subsidize whole industries, give huge tax breaks to huge multinational corporations without even understanding how much of a break we are giving them (the bonus depreciation/accelerated depreciation/expensing regime and the active financing exception), and continue to consider that some of the richest people in the country are just “middle class”? I have my doubts.
Remember that in both of the big “economic” commissions of the last couple of years (Alice Rivlin’s, Erskine Bowles’) there were no actual tax lawyers–not even tax academics–involved. Maybe that’s one reason the ideas miss out so much on what is reasonable. Maybe it’s time that a range of tax academics were listened to about what shape the tax code needs to take, and why.
cross posted with ataxingmatter
When Jason Furman was nominated, I wrote this here at AB:
I think we can now start making some educated guess on what to expect for proposed solutions to the shift of income share to the top 1%. We’re going to try a new version of trickle down which has some form of tax code tightening, but no direct social policy influencing.
I have no faith in Jared Berstein’s opinions either, he thought Furman was an Ok pick.
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Count me a Lew supporter. He’s a genuine progressive; during the ‘fiscal cliff’ silliness, when some Administration folks wanted to consider cutting Medicaid, at McConnell’s request, Lew put a flat-out stop to by reportedly saying, “No. No. NO.” And, although he has never been a tax lawyer, as OMB administrator he has to have had a detailed knowledge of tax law; reportedly, he has an encyclopedic knowledge of tax and budget provisions, and of exactly how they work. Which means he can’t be snowed by the Repubs.
He worked only for a short time for Citigroup, in 2006-2008, I believe–undoubtedly because of his connection with Robert Rubin. Unlike Geithner, he’s not primarily a Wall Street person, steeped in that culture and strongly sympathetic to it.
I actually expect him to be a star as Treasury sec.–for OUR side; for OUR values; for the policies WE support.
Great, everyone is hanging their hat on the “he said no” to medicaid cuts.
Economic populist has a good post looking at this elephant from multiple positions notes: he also worked on former Speaker Tip O’Neill’s (D) staff when Democrats agreed to raise the Social Security retirement age in the 1980s, and he has supported similar changes to Medicare (he and Geithner were known as chief proponents of raising the Medicare eligibility age as part of negotiations).
He quotes the Nation: Lew is, as well, the steady defender of deregulation who headed Clinton’s OMB when the previous Democratic president organized the gutting of New Deal–era Glass-Steagall protections against banker adventurism. He hails from the same inner circle as Geithner and Lawrence Summers.
I’ll stick with my assesment above for Lew as I made with Furman et al.
The increase in retirement age that was part of the ultimate legislative package that came out of the Greenspan Commission was NOT part of the original deal cut between Bob Ball (representing O’Neill in the out of school negotiations that actually settled what the Commission approved) and Diok Darman who had the same role for Reagan. The deal that was actually submitted to Congress for action had a remaining hole which the opposite sides proposed to fill in two competing ways: Republicans with a increase in retirement age, Democrats with a new series of phased in increases starting in 2012 (i.e. hello NW Plan vers 1983).
House Republicans who had dissented on the Greenspan Commission Deal to the end (the final vote was either 12-3 or 15-3, but in either case with the House R’s (and a R Banker http://www.ssa.gov/history/reports/gspan2.html) the only no’s)ultimately prevailed on that last puzzle piece when the legislation actually got voted on.
Now obviously Dem’s, then in a majority in the House had a mathematical role in approving the retirement age increase. But the prevailing notion that Tip just gave up older Boomers in a deal cut between him and Ronnie over bourbon and water doesn’t meet the reality test. Tip didn’t put that piece on the table and Ronnie didn’t pick it up and for that matter neither was actually sitting at the nuts and bolts deal making table to begin with.
(By good luck and being in the right place at the right time I got an advanced copy of Bob Ball’s autobiography chapter The Greenspan Commission: What Really Happened from the editor a few years ago. A real eye opener. And a quick Google search shows it actually now in publication as a standalone 74 page book-review here): http://www.palgrave-journals.com/pm/journal/v16/n1/full/pm201032a.html
Raising the Medicare eligibility age is truly bad idea. If he really did support that, then I withdraw my support for him (as if it matters).
Just to be clear, I would prefer an actual economist to Lew, if the economist is a progressive one. But is there really any chance at all that Obama would appoint a progressive economist as Treasury secretary? Seriously?
And, thank, Bruce, for setting the record straight about O’Neill, etc.
The importance of a qualified tax lawyer cannot be overemphasized. In today’s challenging economic environment, many individuals and business owners are choosing to deal with their serious tax problems without the tax help Anaheim of an attorney who’s skilled in the field. Attempting to go it alone in these kinds of situations is a terrible mistake; doing so can have enormous and irreparable negative consequences.