Should Geithner resign?

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.

About wcoats

Dr. Warren L. Coats specializes in advising central banks on monetary policy, and in the development of their capacity to formulate and implement monetary policy. He is retired from the International Monetary Fund, where, as Assistant Director of the Monetary and Financial Systems Department, he led missions to over twenty countries. Before then, he served as Visiting Economist to the Board of Governors of the Federal Reserve System, and to the World Bank, and was Assistant Prof of Economics at the Univ. of Virginia from 1970-75. Most recently he was Senior Monetary Policy Advisor to the Central Bank of Iraq; an IMF consultant to the central banks of Afghanistan, Kenya and Zimbabwe; and a Deloitte/USAID advisor to the Government of South Sudan. He is currently a member of the Editorial Board of the Cayman Financial Review and until the end of 2013 was a member of the IMF program team for Afghanistan. His most recent book is entitled "One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina."
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