Treasury Secretary Jack Lew Trips in Europe

by John M. Curtis
(310) 204-8700

Copyright April 9, 2013
All Rights Reserved.                                         

      Approved for Treasury Secretary by the U.S. Senate Feb. 28, 2013, 57-year Jack Lew officially replaced 51-year-old Timothy Geithner, another member of President Barack Obama’s team with limited economics background.  Despite moving up the ranks to eventually run the New York Fed, Geither had no formal training in economics.  Following a similar path, the same thing can be said about Lew, who holds an A.B from Harvard College and law degree from Georgetown but has no formal economics training.  Rising through the ranks, Lew wound up in the Office of Management and Budget in the Clinton years, eventually becoming director in May 21, 1998, leaving Jan. 20, 2001.  When he left government service in 2001, Lew joined New York University as a Clinical Professor of Public Administration, paid the un-Godly sum of $840,239 for 2002-03 academic year.

             While at NYU, Lew helped end graduate students’ collective bargaining rights, something inconsistent with his stated support of unions.  After leaving NYU, Lew joined Citigroup in 2006 as Chief Operating Officer of its Alternative Investments, a proprietary trading group.  Lew oversaw investments in a hedge fund that shorted the real estate market in 2008, supervising transactions at the notorious Ugland House in Georgetown, Cayman Islands, known for its offshore tax shelters.  Once called “either the biggest building in the world or biggest tax scam in the world” by Obama during his 2008 campaign, it’s mind boggling that Obama promoted Lew to Treasury Secretary.  Now Lew ventures across the Atlantic, lecturing the U,K and Europe about the evils of “austerity,” despite Congress approving $85 billion in mandatory yearly spending that could toss thousands of federal workers into unemployment.

             Whatever economic problems the U.K. or E.U. faces today, it pales in comparison the historic 2008 meltdown that caused the collapse of the U.S. banking system.  Lew shorted mortgage-backed securities in 2008 as a time when Citibank nearly went bankrupt, dropping to $2 a share.  Most fiscal conservatives in the U.S. Congress, including House Budget Committee Chairman Paul Ryan (R-Wis.), House Majority Whip Eric Cantor (R-Vir.) and Sen. Rand Paul (R-Ky.) all back the $85 billion “sequester” to reduce U.S. budget deficits and mushrooming national debt.  When U.S. credit was downgraded by S&P Aug. 6, 2011, its was related in part from a 10% debt to GDP ratio, causing financial markets to devalue the U.S. dollar.  Lew has zero credibility telling the U.K. and Europe that they should be spending their way out of the current economic downturn.

             Lew told EU officials that they should ease austerity policies that have damaged the economies of Greece, Poturgal and the U.K., driving up unemployment in otherwise prosperous Eurozone countries.  Any simpleminded view of the European economy knows that the 1999 experiment with the “euro” or common currency hasn’t panned out.  Based largely off the value of the Deutsche mark, other less export-based European economies, like Greece, Cyprus, Portugal, Ireland, etc., simply can’t transact in the euro’s inflated value.  Greece’s developing world economy couldn’t translate the Drachma into more inflated Euro-dollars, leaving government institutions out of cash.  When Lew tells the U.K. and Europe to end austerity, he needs to know where’s the money coming from, certainly not the U.S. Federal Reserve Board.  Frankfurt-based European Central Bank has refused to supply the cash.

             Cutting many U.S. agencies by 5%, the mandated government spending cuts that went into effect March 1 could also potentially plunge the U.S. economy back into recession.  Fed Chairman Ben S. Bernanke warned Congress about going forward with the “sequester” at a time of slow growth.  While Lew’s correct that spending cuts reduce the economy’s overall Gross Domestic Product, currently running about 1.5%, it’s also true that spending cuts could plunge the U.S. economy into a double-dip recession.  Lecturing Europeans about what the U.S. did to climb out of recession falls on deaf ears.  Unlike the U.S., the EU has not common tax base or central bank that’s willing to print money and pass the debt on to member states.  German, French, Dutch and Belgium officials have made it clear they’re not willing to incur more debt to bail out less prosperous EU or Eurozone countries.

               Whatever Lew’s deficit in his economics background, it pales in comparison to his lack of common sense.  Starting out on the wrong foot, Lew should be asking his European counterparts for their take on the U.K. and EU economies, not lecturing them on evils of austerity.  With conservatives in Congress backing austerity, there’s nothing unusual about the current European approach.  More background in the relationship between the Eurozone and ECB should help clarify why things are done differently in Europe.  Taking his anti-austerity message to Europe is yet another neophyte blunder chocked up inexperience but more importantly based on a lack of international economics savvy.  Before Lew causes more damage to U.S. credibility, he should do his homework before venturing into uncharted waters.  Beyond that, a touch more common sense would go a long way.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.