Topic: Government & Politics

Geithner: A Sign of Ethical Compromises to Come
(1/24/2009)

The confirmation of Timothy Geithner, Barack Obama's nominee for Treasury Secretary, was an early indication of where the country’s ethical standards may be heading during a period of protracted financial crisis. In times of stress, attention to ethical values often become lax, as non-ethical considerations, like survival, literally push considerations of right and wrong into the background. This is a dangerous development whenever it occurs, but it would be especially perilous now, when a collapse of trust is at the foundation of the nation’s economic problems. Lenders do not trust borrowers. Investors do not trust the financial markets. Nobody trusts the government.

Society cannot function without trust in people and institutions. Re-building the public’s trust, which will only arise out of a renewed emphasis on ethical values and leaders who embody them, is absolutely essential.

And yet, when it was revealed that President-elect Obama’s nominee for the Cabinet post that will oversee the country’s finances did not pay his own taxes for four years, what was the immediate response of the incoming administration, Congress, and much of the media? Here is Obama Chief of Staff Rahm Emmanuel on “Meet the Press”:

“Well, as Tim said, you know, it was a big mistake, it was an embarrassment. But he is the right guy for this job, which is why he has bipartisan support: Senator Hatch, Senator Lindsey Graham, Senator Judd Gregg. He has the right type of qualifications for this challenging moment in time.”

No, he doesn’t. And he isn’t the “right guy for the job.” Because the primary qualification for any public servant, but especially a new Secretary of the Treasury dealing with a crisis fueled by widespread greed and reckless financial management, is that the public can trust that he won’t be ruled by greed; that he will be financially responsible; that he will show good judgement; that he will put the well-being of those to whom he has a fiduciary responsibility above his own needs and desires.

Geithner did not pay Social Security and Medicare taxes for four years (2001-2004), despite having been instructed in a handbook by his employer, the International Monetary Fund, on how to pay his self-employment taxes, and after his employer gave him money specifically for that purpose. The unpaid taxes in 2003 and 2004 were discovered during a 2006 audit by the Internal Revenue Service, and the earlier unpaid taxes were found during a background investigation by Obama's transition team before Geithner was nominated in late November. Even though he had known about his tax deficiencies since 2006, Geithner did not pay up until he was about to be nominated for Secretary of the Treasury. Mistake? That was the buzz-word Geithner’s handlers decided he would use to tip-toe through his grilling by the Senate, much like “personal misconduct” was the euphemism of choice during President Clinton’s impeachment trial.

No matter how you look at it, this was not “a mistake.” At best it was many, many mistakes, and given the timing of Geithner’s payment, calling them “mistakes” seems to be giving him the benefit of some very large doubts. Nor is it admirable, as some of Geithner’s defenders have suggested, that he paid his overdue 2001 and 2002 tax bills despite the fact that the statute of limitation had passed on these offenses. The statute only bars legal action; it does not erase a debt. But it certainly looks as if Geithner would have gladly pocketed the Treasury’s money if he wasn’t going to face Congressional scrutiny. Of course, that would have been a “mistake,” too.

A very profitable mistake.

Government ethics statutes and codes are full of the term, “appearance of impropriety.” The appearance is just as damaging as true impropriety, because the appearance undermines trust. It is unlikely that we will ever know whether Geithner was just epically inept (“made mistakes”) or whether he was trying to stiff the I.R.S. But we do know that his conduct looks suspicious, and absolutely has the appearance of impropriety. And that the type of impropriety----tax evasion---is intolerable on the part of the individual nominated to oversee the national tax system. That appearance is outrageous for the leader of the national financial recovery efforts.

And it is intolerable for a key leader in the national trust recovery efforts.

This should be obvious to all. Instead, what we heard was a chorus of voices arguing that difficult times justify flawed leaders, when in fact the opposite---that difficult times require leaders with integrity--- is true. “With the economy so fragile,” wrote the Associated Press, “many senators are loath to rattle financial markets by rejecting someone with Mr. Geithner’s qualifications and international respect.” The dangerous components of this argument are:

  • Ethics are secondary to results. If a tax cheat has the skills to get the nation out of a financial mess, and the mess is bad enough, then the fact that he’s a tax cheat doesn’t matter.
  • If you are valuable enough, society will forgive the fact that you are unethical. If you are successful, it will look the other way.
  • Lacking ethics is only a problem if you fail, or if you are replaceable.
  • There is nobody in the United States who is qualified to do this job and who has a clean record of conduct.

The first three statements are recipes for societal chaos, institutionalized elitism, cynicism, and injustice. The last statement is just absurd.

Linda Chavez, a conservative political columnist and perennial GOP standard-bearer who had her own nomination (as W’s Labor Secretary) de-railed by “appearance of impropriety” issues, has opined that whether Geithner’s nomination will survive depends on public opinion. "Is the public going to accept his explanation?" she asks. Sadly, this is typical of the Republican attitude toward ethics generally over the last eight years, inspired, perhaps by the Clinton years: it isn’t whether something is right or wrong that matters, but whether the public will buy the efforts to rationalize and spin it away. Well, Chavez is wrong too. The government is supposed to point the public to high standards, not the lowest standards it can get away with. The public is usually too willing to embrace ethically dubious leaders who they think can “make the trains run on time.” Ask the supporters of Ted Stevens, Tom DeLay, Richard Daley, and Marion Berry.

A Secretary of the Treasury who ducked his taxes is not a high standard, and never can be. At this time, in this crisis of finances and trust, it is worse than that. It is a dangerous standard.

Mistakes or not, Timothy Geithner should not have been confirmed. But he was, and regardless of his own performance, we may have learned that in important and alarming ways for our country and our culture, things are not going to be changing after all.

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