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January 14, 2013

In Lew of progress

Obama’s Treasury nominee is more a creature of Wall Street than Main Street.

Amid a constantly changing world, there are some things upon which we can always rely. The sun will continue to rise in the east. Pat Robertson will make some deeply offensive comment in the wake of the latest terrorist attack, school shooting, or natural disaster. CBS will continue to broadcast Survivor, even though the show has been set in just about every far-flung locale. And people like Jacob Lew will continue to be nominated for Secretary of the Treasury.

If confirmed by the U.S. Senate, Lew will succeed Timothy Geithner, who cultivated deep ties to Wall Street titans in his previous role as president of the Federal Reserve Bank of New York. Geithner himself followed Hank Paulson, who presided over the Bush administration’s response to the 2008 financial crisis. Paulson came to Washington from Goldman Sachs, where, as CEO, he earned $37 million in 2005.

Prior to joining the Obama administration as a deputy to Secretary of State Hillary Rodham Clinton, Lew served as the Chief Operating Officer for Citigroup’s Alternative Investments unit. In 2009—after Citigroup received an infusion of government bailout fund—Lew reaped a nearly million-dollar bonus. As the Wall Street Journal noted last week, Lew oversaw his unit’s disastrous investments in real estate in the run-up to the housing crash. For some reason, though, Lew’s supporters cite his Citigroup tenure as a qualification in his quest to become the nation’s top financial official. President Obama lauded Lew, his current Chief of Staff, for “having worked—and succeeded [!]—in some of the toughest jobs in Washington and the private sector.”

To be sure, Lew’s Wall Street career should not automatically disqualify him from serving as Treasury Secretary. Perhaps he regrets his part in the financial industry’s pre-crisis excesses. Even Citigroup’s former CEO, Sandy Weill, once a leading supporter of financial deregulation, now thinks Clinton and Bush administration deregulators went too far. If Lew, as Treasury Secretary, demonstrates a willingness to challenge entrenched interests head-on, he’ll go some distance toward atoning for his past errors. Regrettably, however, his track record as an Obama administration official suggests that we should expect nothing of the sort.

Lew’s former colleagues on Wall Street have been some of the most prominent champions of austerity policies, as the New York Times reported on Thursday. Unfazed by the ruinous effects the austerity agenda has wrought on Europe, Wall Street deficit-scolds endorse significant cuts in the nation’s already-feeble welfare state. Lew accepts their platform lock, stock, and barrel. As director of the Office of Management and Budget in July 2011, Lew was the Obama administration’s chief emissary to congressional Republicans as the two camps sought to forge a “grand bargain” to slash the federal budget deficit. Tea Party Republicans, wary of any form of cooperation with our Kenyan socialist president, scuttled the deal, but Lew and House Speaker John Boehner had already laid the groundwork for drastic spending cuts. Lew signaled the administration’s support for a $4 trillion deficit reduction deal that would entail $2 trillion in cuts to social programs and another $1 trillion in cuts to Medicare and Social Security. Had such a deal been enacted, the poor would have borne the brunt of deficit reduction.

Of course, every indication is that President Obama himself supported the Boehner-Lew framework. Why, then, worry about his nomination of Lew, who simply agrees with the president’s centrist economic policies? Won’t the administration pursue austerity and adopt a non-confrontational posture toward financial elites regardless of whether Lew is confirmed? While the president has never been as liberal as his most progressive supporters hoped, it’s hard to deny that his administration’s often poor negotiating strategy is responsible for such debacles as the 2011 “grand bargain” framework. Had Obama’s chief negotiator effectively conveyed support for a deal that reduced the deficit by having the rich pay their fair share—rather than reducing support for the most vulnerable citizens—perhaps the president wouldn’t have been backed into supporting such a regressive proposal.

One would be remiss to fail to note that the political climate in 2011 was sharply different from that of early 2013. The president faced an impending campaign for re-election. Months earlier, a Tea Party wave had swept Congress, and the president’s approval ratings continued to sag in the face of persistently high unemployment. In light of Obama’s reelection and the repudiation of conservative Republicans last November, in addition to an improving economic outlook, perhaps Obama officials—including Lew—will feel emboldened in future dealings with congressional Republicans. Alas, a little-discussed episode from Lew’s past indicates that he will remain a force for anti-progressive centrism.

The first-rate labor journalist Josh Eidelson reported recently that as a top administrator at New York University in 2004, Lew spearheaded NYU’s effort to quash the school’s graduate student union. Although the union boasted overwhelming faculty and student support, Lew successfully pushed to have the graduate students’ collective bargaining rights taken away. Even within the progressive enclave of Greenwich Village, Lew lent his wholehearted support to the profoundly damaging neoliberal economic agenda. Is there really any reason to believe he’ll stand up to John Boehner and Mitch McConnell when they demand further safety net retrenchments?

At this point, there’s little reason to believe that Lew won’t be confirmed as the next Treasury Secretary. Republicans, who increasingly inhabit the ideological fringe, may attack Lew for his longstanding Democratic ties, but the policy gulf between him and right-wing neoliberals is quite narrow. That a president reelected with the support of working class voters in places like Ohio and Michigan has chosen this man to be the face of his economic policy is most dismaying.

Luke Brinker is a graduate student in the MAPSS program.

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