So Tim Geithner plans to stick around at the Treasury Department. The cover story is that he wanted to leave to let his kid finish school in New York instead of Washington. I would say that he wanted to leave to get out from under this:
We (Goldman Sachs) have lowered our growth forecast further and now expect real GDP to increase just 2%-2½% (annualized) through the end of 2012. Since this pace is slightly below the US economy’s potential, we now expect the unemployment rate to be at 9¼% by the end of 2012, slightly above the current level.
We now see a one-in-three risk of renewed recession, for three main reasons. First, a worsening of the European financial crisis would hurt the economic outlook globally. Second, our forecast assumes that the payroll tax cut is extended for another year; if that failed to happen the fiscal drag in early 2012 would rise significantly. Third, the unemployment rate has increased in recent months, and such increases have historically had a tendency to feed on themselves.
And Goldman, who are definitely decent prognosticators about the economy (if there’s one thing they know, it’s money), isn’t really taking into account the results of Catfood Commission II, for example, or a Eurozone breakup, or some other unforseen shock to the economy. And if any or all of these factors lead to a second recession, it is likely to be worse than the first in terms of suffering.
If you were the chief economic architect of the Administration under which all of this is set to happen, wouldn’t you want to leave, too? But I guess Geithner was told that, as long as he wears that captain’s hat, he’ll have to go down with the ship.
Now, the new conservative talking point is to call for Geithner to resign, a point made by everyone from Jim DeMint to John Boehner. But they’re probably doing that with the knowledge that it cannot happen. There’s nothing Geithner would like more than to resign, but he’s being sent down into the trenches instead. So this is a nice way for conservatives to “prove” that their policy preferences aren’t being listened to and would have improved performance.