Geithner has not only survived but quietly gained influence, which he has used to press President Obama to curb the nation’s soaring debt even at the expense of spending that might more directly spur employment.
His success at driving the agenda signals his status as the president’s closest economic counselor. With the departure this summer of Austan Goolsbee as chairman of the Council of Economic Advisers, Geithner will be the last remaining member of the president’s original economic team and, with Federal Reserve Chairman Ben S. Bernanke, one of the two remaining architects of the great banking bailout that began in 2008, even before Obama’s election.
Geithner, who was once a registered Republican and then an independent, has a faith in the marketplace that puts him at odds with many of Obama’s traditional Democratic allies, whose skepticism about markets seemed vindicated by the financial crisis. His debut on Obama’s team was also shaky. He faced questions about whether he had properly paid all his taxes, and his initial public defense of the administration’s plan for rescuing the financial industry was uninspired, prompting anxiety in the markets.
But over the past year, he has fared better, especially at pushing his viewpoint in internal White House debates. While forces outside the White House — in particular, Republican lawmakers — have helped turn Washington’s attention to the nation’s debt, Geithner’s efforts inside the White House have shaped how Obama confronts this defining moment. At stake in the months ahead are the size of government, the generosity of the nation’s safety net, the taxes people will pay and the debt that will weigh on future generations.
The policies molded by Geithner — and the balance they strike between slashing the deficit and supporting the economic recovery — could also ultimately determine whether Obama will win a second term.
Geithner has successfully pressed Obama to announce a plan to reduce the deficit by $4 trillion, though the president ultimately proposed doing it in 12 years rather than 10, as the Treasury secretary wanted. And Geithner has argued for an approach that would include tax increases, spending cuts and politically explosive changes to government retiree programs like Social Security and Medicare.
“He pushes the envelope,” William Daley, Obama’s chief of staff, said in an interview. “The debate has a political piece that brings us back a little from what Tim may be advocating.”
Even with Geithner in favor of deficit reduction, Republicans accuse the administration of not going far enough. Urging deep cuts in federal spending, GOP lawmakers are threatening to oppose an increase in the federal debt limit, inviting what Geithner warns would be a devastating default by the government.