Calls for U.S. Treasury Secretary Geithner’s resignation following S&P’s modest downgrading of U.S. government securities are strange. Strange and ignorant. The U.S. Treasury Secretary, our Finance Minister, has nothing to do with our deficit or our debt problem (unless you are blaming him for keeping its maturity shorter than he might). His job is to finance as best he can all of the expenditures our Congress pass and our President sign into law. It would make more sense to call for the resignation of the Congress and the President.
Unlike most countries, in the United States the responsibility to propose a budget to the legislature and to finance whatever the legislature approves are spite between the Office of Management and Budget (OMB) and the Treasury. Most other countries combine the two into their Finance Ministry. The practice else where better aligns incentives to the extent that the level of spending proposed is arrived at in full knowledge of the capacity to finance it.
If calls for Geithner’s resignation are related to debt and deficit problems, the callers need a civics lesson.
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Author: Warren Coats
I specialize in advising central banks on monetary policy and the development of the capacity to formulate and implement monetary policy. I joined the International Monetary Fund in 1975 from which I retired in 2003 as Assistant Director of the Monetary and Financial Systems Department. While at the IMF I led or participated in missions to the central banks of over twenty countries (including Afghanistan, Bosnia, Croatia, Egypt, Iraq, Israel, Kazakhstan, Kenya, Kosovo, Kyrgystan, Moldova, Serbia, Turkey, West Bank and Gaza Strip, and Zimbabwe) and was seconded as a visiting economist to the Board of Governors of the Federal Reserve System (1979-80), and to the World Bank's World Development Report team in 1989. After retirement from the IMF I was a member of the Board of the Cayman Islands Monetary Authority from 2003-10 and of the editorial board of the Cayman Financial Review from 2010-2017. Prior to joining the IMF I was Assistant Prof of Economics at UVa from 1970-75. I am currently a fellow of Johns Hopkins Krieger School of Arts and Sciences, Institute for Applied Economics, Global Health, and the Study of Business Enterprise. In March 2019 Central Banking Journal awarded me for my “Outstanding Contribution for Capacity Building.” My recent books are One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina; My Travels in the Former Soviet Union; My Travels to Afghanistan; My Travels to Jerusalem; and My Travels to Baghdad. I have a BA in Economics from the UC Berkeley and a PhD in Economics from the University of Chicago. My dissertation committee was chaired by Milton Friedman and included Robert J. Gordon.
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