4 Modest Wishes for New Treasury Secretary Jack Lew
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3. Please don’t help rich people and corporations hide their money in overseas tax havens.
In Geithner’s response to Senator Levin’s questions, he pledged to “treat the offshore tax abuse issue as a high priority.” Behind closed doors, he has reportedly advocated a shift to a “territorial” tax system that would exempt U.S. corporations’ foreign earnings, giving them even more incentive to disguise U.S. profits as income earned in tax havens. In his most recent book, Bob Woodward wrote that in negotiations with House Speaker John Boehner, Geithner said “The goal is territorial.” Boehner’s staff confirmed the accuracy of the quote.
As a Senator, Obama co-sponsored legislation with Levin to crack down on tax haven abuse – a practice that drains an estimated $100 billion per year from Uncle Sam’s coffers. Fixing the problem would also help level the playing field for small businesses that provide more than half of U.S. jobs – and don’t have accounts in the Caymans. Mr. Lew, you could help make this a legacy issue for Obama.
4. Don’t be a jerk to other governments
Lew doesn’t seem to have much international experience, but he wouldn’t have to do much to improve on the current Secretary’s record. Geithner has sparked animosity by attempting to impose his opposition to some fair taxation ideas on other countries. After receiving a lecture against financial transaction taxes from her U.S. counterpart, the Austrian finance minister commented dryly, “I found it peculiar that even though the Americans have significantly worse fundamental data than the euro zone that they tell us what we should do and when we make a suggestion ... that they say no straight away.”
Geithner has also been the main advocate of using U.S. trade agreements to limit other governments’ ability to control volatile financial flows. When more than 250 economists urged the administration to lift current trade restrictions on the use of capital controls, Geithner was dismissive. As a result, U.S. trade officials are pressuring the 10 countries negotiating a Trans-Pacific Partnership trade deal to give up this legitimate policy tool. By contrast, the International Monetary Fund’s new “institutional view” in support of capital controls makes them look like a beacon of enlightenment. Mr. Lew could make sure governments around the world have all the tools they need to prevent financial crisis.
This humble wish list doesn’t cover every important issue on the next Treasury Secretary’s plate. I haven’t even gotten into the core question of whether he or she will put the interests of ordinary homeowners and Main Street businesses above those of Wall Street. But it has allowed me to get some of my gripes about Geithner off my chest. And I can only hope that the incoming Secretary may learn a few lessons from his predecessor’s shortcomings.