Government by Geithner

We are told that once again there are logjams at the Treasury Department. The Washington Post reports:

Government officials, inside the Treasury and out, say the unresolved issues are piling up in part because of vacancies in the department's top ranks. But some of the officials also cite the Treasury's ad-hoc management, which is dominated by a small band of Geithner's counselors who coordinate rescue initiatives but lack formal authority to make decisions. Heavy involvement by the White House in Treasury affairs has further muddied the picture of who is responsible for key issues, the officials add.

So we haven't made much progress on getting former GM CEO Rick Wagoner off the payroll or getting the toxic asset purchase plan off the ground. And we haven't seen roll out of the program to get credit to small business. Oh, and whatever happened to the financial regulation overhaul?

There is more to learn here than simply not to hire a "genius" who can't manage his own taxes. Yes, it is apparent that Tim Geithner, who fiddled while the financial crisis burned and had some difficulty in responding to the Asian financial crisis, lacks critical communication skills and was not the best choice for the job. But this is about more than just one hapless Treasury secretary.

Let's be honest: the entire American economy cannot be effectively micromanaged out of the Treasury building or the White House, let alone by a joint team of officials from both. The nature of a dynamic, nimble economy such as the one Americans have enjoyed is that it is not subject to the whims of politicians and the dictates of a few bureaucrats. A single company like GM, not to mention a sector of the economy or multiple sectors, is not amenable to the ponderous decision-making and political horse-trading which characterizes government decision-making.

GM, for example, now must not only figure out how to reorder its relationship with dealers and the union and make attractive cars and reduce costs. It also must please its handlers in Washington who have an agenda that often interferes with GM's desire to make a profit (i.e., survive). The Obama team may want GM to build micro-cars in Detroit; the way for GM to survive may to make mini-vans in Mexico.

One can imagine that even a Treasury secretary superstar would be hard-pressed to run car companies, redesign banks, manage executive compensation, "eliminate the cycle of boom and bust," set up and manage a toxic asset plan, stress test banks, negotiate banks' exit from TARP, and then devise a whole new set of tax hikes to pay for the Obama agenda. Pundits observe that the president is trying to do too much; in fact the entire government and the Treasury in particular don't have the "bandwidth" to run the economy as the Obama team envisions.