Simon Johnson: Five people who could replace Geithner
PRESIDENT Obama needs a new Treasury secretary. Timothy Geithner has made clear that he intends to leave. Furthermore, it is time to bring some fresh thinking to two vital issues: fiscal policy and financial-sector oversight.
On fiscal policy, the need is obvious. The framers of the Constitution took great care to divide powers within our government.
We can act decisively only when one party controls all branches, or when we agree that there is a grave national emergency. Whatever spin you want to put on the election, the American people voted in a Democratic president, a Democratic Senate and a Republican House. Divided we remain.
A new Treasury secretary must help the president navigate a series of difficult decisions on fiscal policy - and find a broader compromise that puts our national debt onto a more sustainable path.
House Speaker John Boehner indicated last week that new revenue could be on the table, meaning that taxes could go up.
But the Treasury secretary also has to worry about the other major cause of our economic malaise: a financial sector that is prone to blowing itself up.
Under the Dodd-Frank financial reform legislation, the secretary, as chairman of the Financial Stability Oversight Council, is at the center of all policy regarding banks and other financial institutions. There may be reason to wish for a different arrangement, but the chances of legislative changes over the next two years are essentially zero.
So who would be capable of negotiating with House Republicans and cajoling them into accepting sensible changes to our tax code, including strengthening revenue? This person also needs to be able to stand up to Wall Street - and roll his or her eyes when a lobbyist claims that a financial product or market is "too complex" for government officials to understand.
I have five suggestions, none of whom would be on Obama's short list but all of whom deserve careful consideration.
In February 2010, he testified in favor of the Volcker rule before the Senate Banking Committee and hit the ball out of the park. If you want a succinct, informed and sensible assessment of modern finance, read his testimony. (Or watch his more recent interview with Bill Moyers, in which he ruefully describes his role in ending the Glass-Steagall Act to make possible the merger of Citicorp and Travelers.)
Reed commands a great deal of respect on Capitol Hill. He is capable of negotiating with leading Republicans in the Senate and in the House. I don't know exactly what he would prefer in terms of raising taxes, but that is a broad strategic decision to be made by the president as well as a detailed tactical point that has to be worked out in discussions.
Huntsman also has good ideas on the need to increase growth as the best and most painless way to stabilize debt relative to the size of the economy. His tax reform record as governor is strong. At the same time, he is exactly the kind of pragmatist who can help Republicans understand the need to bolster our revenue base.
We have a pressing national emergency: Since 2000, we cut revenue dramatically without addressing spending. Bradley is the kind of reasonable person who can help work out how to bring the two closer to balance.
In addition, I have complete confidence that Bradley would have no trouble standing up to powerful players on Wall Street.
I also strongly recommend two people who held government posts during the first Obama administration.
Johnson, a professor at the MIT Sloan School of Management, is a co-author of "White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You."