DAVID BROOKS What Geithner Got Right

NYTimes

It’s amazing to go back and read what people were saying about Timothy Geithner in the spring. Many people said he looked terrified as the Treasury secretary, like Bambi in the headlights. The New Republic ran an essay called “The Geithner Disaster.” Portfolio magazine ran a brutal, zeitgeist-capturing profile that concluded by comparing Geithner to Robert Redford’s hollow man character in “The Candidate.”

The criticism of his plan to stabilize the financial system came from all directions. House Republicans called it radical. Many liberal economists thought the plan was the product of hapless, zombie thinking and argued that only full bank nationalization would end the crisis. The Wall Street Journal asked 49 economists to grade Geithner. They gave him an F.

Well, the evidence of the past eight months suggests that Geithner was mostly right and his critics were mostly wrong. The financial sector is in much better shape than it was then. TARP money is being repaid, and the debate now is what to do with the billions that were never needed. It now seems clear that nationalization would have been an unnecessary mistake — potentially expensive and dangerously disruptive.

The course of events has vindicated the administration’s handling of its first big challenge. Obama could have flinched when the torrent of criticism was at its peak. But the president’s support for Geithner never wavered. Geithner never lost confidence in his policy. Rahm Emanuel mobilized to improve the presentation of the policy. The political team worked hard to deflect criticism from Geithner onto themselves.

In retrospect, their performance during this trial was impressive.

Events also vindicate Geithner’s basic policy instincts. The criticism back then was that Geithner was neither bold nor visionary. He was too cautious, too much the insider and bureaucrat.

But this prudence was the key to his effectiveness. In interviews and testimony, Geithner uses the word “balance” a lot. He talks about finding the right balance point between competing priorities. He also talks like a historian who sees common tendencies in certain contexts, not a philosopher who seeks clear general principles that apply across contexts.

This mentality makes it hard for him to project bold conviction, but it makes him flexible in the face of specific problems. When financial confidence is cratering, Geithner concluded, government should generally be as aggressive as possible, as early as possible. At the same time, it should try not to do things that the market does better, like set prices or run companies.

Geithner’s path was a middling one, but it helped the country muddle toward recovery.

If you wanted to step back and define Geithner’s philosophy, you’d probably say that he starts with a set of fairly conservative instincts about the role of government, which put him on the centrist edge of the Democratic Party.

In an interview on Wednesday, for example, I asked Geithner what government could do to help promote innovation. Usually when I ask leaders that, they reel off some cool technologies that government should promote — windmills, nanotechnology, etc. Often they sound like children trying to play at being entrepreneurs. Geithner didn’t do that. He said that government’s limited job was to get the underlying incentives right so the market could figure out what innovations work best. That suggests a pretty constrained view of government’s role.

On the other hand, you would also have to say that Geithner, like many top members of the Obama economic team, is extremely context-sensitive. He’s less defined by any preset political doctrine than by the situation he happens to find himself in.

In the next few months, Geithner will be confronted with a cross-cutting set of pressures. First, the need to reduce the deficits, which is uppermost on his mind. Second, the rising populism in Congress, which has to be battled sometimes and appeased sometimes by an administration that hopes to get things passed. Third, intense public cynicism about government, which means that every debate is washed in negativity.

Most important, there’s the jobs situation. If job growth returns, that will be a sign that the recovery is normal and Geithner and the administration can return to a more moderate path. If employment does not rebound or the economy double dips, that will be a sign of systemic problems. Geithner and his colleagues will probably adopt a much more activist posture and have to throw their lot in with the left.

I hate to rely on the most overused categories in punditry, but they really do apply here. Some administrations are staffed by hedgehogs, who are guided by a few core principles. But this one is staffed by foxes, who respond flexibly to situations. In the administration’s first big test, that sort of pragmatism paid off.