The problems at Treasury

Posted: Apr 12, 2005 12:00 AM

As taxpayers file their returns this week, the agency that administers the tax system is under siege. An unusually large number of senior-level positions at the Treasury Department are vacant, and increasingly it appears to be out of the loop on key issues within its purview. This downgrading of the second-ranking department in government is one reason why President Bush is having trouble pursuing his domestic agenda.

 I was working at Treasury in 1989 during its 200th anniversary. President George H.W. Bush got a big laugh from the crowd when he noted that George Washington had nominated Alexander Hamilton to be secretary in the morning, he was confirmed by the Senate the same afternoon and sworn into office that evening.

 In 1789, a good chunk of the entire federal government resided at the Treasury Department. Over the years, many of these functions, such as the Coast Guard, have been stripped away and given to other departments. Just recently, the Department of Homeland Security was given several Treasury bureaus, including the Secret Service and the Customs Service.

 Nevertheless, Treasury has always been the premier economic agency of the government. Generally speaking, the Treasury secretary is the administration's principal economic spokesman, and the department attracts the best and brightest of those with an economic bent who wish to serve in government. This was especially the case during the Clinton administration, which had an extremely high level of talent at Treasury.

 The department's expertise has been sorely missed during the Social Security reform debate. It is now clear that the White House put insufficient resources into developing its proposal -- such as it is, with no detailed plan yet on the table. As chairman of the board of trustees of the Social Security system, the Treasury secretary ought to have been at the forefront of developing this plan. Instead, he has been used only as a salesman.

 Today, Treasury has fallen on hard times. The first secretary of the Bush administration, Paul O'Neill, was summarily fired for reasons that are still unclear. The current secretary, John Snow, was publicly humiliated when the White House let it be known that it was searching for a replacement last year. Snow was retained only because the White House apparently couldn't find who it was looking for.

 Now, most of the key sub-Cabinet positions are vacant, and it appears that the administration is having great difficulty filling these positions. Among those currently vacant are the deputy secretary, two of the three under secretaries, five assistant secretaries and a number of other key positions. In some cases, nominations are pending, but in others there is no one even in the pipeline.

 This is really quite amazing, because normally Treasury has no trouble attracting very high quality people for its senior positions. Those I worked with were very impressive, and many went on to greater things. But now, it seems that the prospect of working there has become significantly less attractive. There are several possible reasons:

  • All power is centralized in the White House, and the department really has no control over the issues that are its responsibility. According to the new issue of International Economy magazine, White House Chief of Staff Andrew Card, Deputy Chief of Staff Karl Rove, and Office of Management and Budget Director Joshua Bolten make all economic policy decisions. The Treasury secretary is not involved.
  • People are reluctant to work for a secretary who appears to have lost the president's confidence and may be a short-timer.
  • They don't want to waste their time giving speeches to high school classes in North Dakota or local businessmen in Montana, as Snow has been doing. He should be using his limited time more effectively on things like tax compliance, stabilizing the dollar, fighting protectionism, and financing the huge budget and current account deficits.

 In other words, people want to work at Treasury to do what the department historically does -- develop tax and financial policy, manage exchange rates and other international economic issues, and be the administration's principal liaison to Wall Street. Giving speeches to high school students and being forced to implement policies that Treasury had little say in developing just isn't as interesting.

 Add to this the fact that the nomination and confirmation process has become even longer and more burdensome in recent years, and one can easily understand why people would avoid the prospect of working at Treasury.

 The problem is that we have a Treasury Department for a reason. It fulfills a necessary governmental function even in a minimalist state. One of these days, we may have some sort of financial crisis that will demand the full use of Treasury's expertise. I just hope there is someone there to answer the phone when that day comes.