Thursday, August 15, 2013

A Very Back-Handed, But Sincere, Apology to Secretary Geithner

-- Posted by Neil H. Buchanan

My new Verdict column today discusses (not in this order) Al Gore, Danny Ainge, Tim Geithner, and the IRS non-scandal scandal.  The unifying idea is that some falsehoods become known truths, and I try to explain how this can happen, even among the ideologically uncommitted.

One possible explanation, which I do not discuss in the column, is "the Big Lie," where a phalanx of committed operatives convinces everyone that a lie is true through ceaseless repetition.  There is certainly a big element of that strategy afoot in Republican circles, at least since the Contract on America in 1994, so much so that the term "talking points" has now become an accepted term of speech.  Democrats have tried to mimic the Republicans' "message discipline" (another euphemism for the concept), with less success, but Newt Gingrich was uniquely successful in getting every Republican politician and sympathetic commentator to repeat, repeat, repeat.  We also now know that he did not just ask them to repeat the exact phrases over and over again, but to overuse words like "sick," "pathetic," and "treasonous" to describe anything with which they disagreed.  This had the effect both of demonizing the opposition, and degrading the language in a way that Orwell would have recognized with disgusted admiration.

Again, however, my explanation in today's column is not based on the Big Lie.  Instead, I try to understand how something that is plainly false is quickly accepted as true, not through repetition, but because it somehow seems like it might be true, and it's not quite important enough to verify.  My broader point is that the big fizzle of the IRS non-scandal scandal does not guarantee that the claim that "Obama used the IRS to punish his political enemies" will suffer the same fate as "Obama was not born in the United States."  Why?  Because, for a lot of people, the IRS non-scandal scandal seems like something that might be true, and even the mainstream press called it a scandal for a long time ... and aren't all those politicians a bunch of crooks, anyway?  (Part of Gingrich's lasting damage flowed from his understanding that his side wins even when they look like evil idiots, so long as they can convince people that everyone else is, too.)

Part of my agenda in the column was, as strange as it might sound, to apologize -- sort of -- to former Treasury Secretary Tim Geithner.  It is not much of an apology, I admit.  I still think he was a bad choice to head Treasury in the first place.  He is a faded copy of Robert Rubin and Larry Summers (about whom I hope not to have to write an anguished post, when the next Fed chair appointment is announced), whom a friend of mine once described as "winning the lottery ... twice."  That is, for no good reason (based on apparent talent, or prior performance), Geithner was picked to be the President of the New York Fed.  And then, based on a very unpromising performance in that job, he was anointed Obama's top economics advisor -- just when the economy was teetering on the brink of total collapse, largely because of the financial deregulation that Geithner's mentors had engineered under Bill Clinton.

But the reason I felt the need to discuss Geithner at some length in the column is that I only recently discovered that "the Geithner TurboTax defense" is complete nonsense.  Readers might remember that Geithner was one of several Obama appointees (along with Tom Daschle and Nancy Killefer -- who?) who, during the vetting process as Obama took office in 2009, were discovered not to have paid certain taxes.  Geithner's situation was especially egregious, because the self-employment taxes that he failed to pay when he worked at the International Monetary Fund were based on a tax rule that every IMF employee is told applies to him or her.  Geithner was allowed to pay the back taxes, apparently without penalty.

Even though Geithner had been nominated to be the head of the department in which the IRS sits, and even though tax compliance has become a huge deal politically and economically (and even diplomatically), Obama stuck by his man.  Geithner served throughout Obama's first term, doing some things right, but certainly also playing a major role in Obama's disastrous deficit obsession (especially in engineering the "pivot" away from worrying about the recession to worrying about the deficit) in 2010.  Because it was so obvious in advance that Geithner would favor such a bad policy agenda, I opposed his nomination.  The bad optics of the tax thing -- sloppiness, after-the-fact payment, and special treatment -- just nailed the case shut.

OK, so one might reasonably ask, if this is the way Buchanan apologizes, what does it sound like when he really criticizes someone?  Here is the apology: Tim Geithner has been wrongly accused of blaming his tax mistake on the computer program TurboTax, and I believed and repeated that lie. That was wrong.  Even worse, the country has been seriously misled by those who suggest that the special treatment Geithner received was because of any such defense.

To dispense with that latter claim first, the timing is simply wrong.  By the time Geithner was testifying in front of the Senate Finance Committee in January 2009, which is where he talked about TurboTax, he already had been given the special treatment that rightly angered people (including me).  Yes, Geithner did receive the kid gloves treatment, but it was of the standard variety in which someone in the public spotlight is allowed to clumsily "make it right" long after the fact.  Politicians try to give back political donations when the public finds out that the donors are unsavory, and doing so is usually enough to make it all go away.  It is ridiculous, but it is pretty standard.  What made Geithner's situation clearly different, as I have argued, is that he wanted to be the IRS's boss.  (Just as one small example, when the tax code mentions "regulations issued by the Secretary," it is referring to the Secretary of the Treasury.)

But it is the first claim, that Geithner invoked a "TurboTax defense" at all, that is so absurd.  As I describe in my Verdict column, I had not watched Geithner's confirmation hearings, and I ignorantly accepted the reports that he had blamed TurboTax for his error.  Then, not long ago, I clicked on a TaxProf blog post that mentioned "the Geithner/TurboTax defense," which included a link to a YouTube video.  "What the heck," I thought.  "It's not even three minutes long.  This will be fun."  For those readers who have not read the Verdict column, I will copy the transcript of the relevant 37 seconds here.
Senator Grassley: Did you use software to prepare your 2001 and 2002 tax returns?

Mr. Geithner: I did.

Grassley: You did not?

Geithner: I did.

Grassley: Oh, you did. OK, uh, which brand did you use?

Geithner: Uh (hesitates and smiles uncomfortably), I’ll answer that question, sir, but I want to say, these are my responsibility, not the ... not the tax software responsibility. But I used TurboTax to prepare my returns.

Grassley: Uh, did the software prompt you to report income and pay self-employment taxes on your IMF income?

Geithner: Uh, not to my recollection, Senator. 
Every time I have watched that video, I have been astonished.  In the lead-up to that exchange, Geithner was a bit unctuous, but less so than most political appointees, and he was about as apologetic and honest about having been wrong as one could hope.  But three points simply jump out from the transcript above: (1) Geithner did not bring up tax preparation software, Grassley did.  (2) Geithner showed genuine discomfort about even discussing the name of the software, and he specifically refused to blame the software for his error.  And most interestingly, (3) Grassley is the one who brought up the question of whether the software is properly written to catch Geithner's particular tax situation at the time.

None of those facts mattered, unfortunately.  Even news reports that accurately quoted Geithner's response framed the testimony as if Geithner had "blamed TurboTax."  And as I noted, apparently well-meaning people now believe not only that he said something that he never said, but that his special treatment was a result of having blamed the software.

As a result, other taxpayers have subsequently screamed that they, too, should be able to blame TurboTax.  The fact, however, is that the law is very, very clear that taxpayers cannot escape responsibility by blaming tax prep software.  Thus, every time a court is presented with a case in which the taxpayer has invoked "the Geithner TurboTax defense," the court rightly dismisses the case.  And then the blogs go crazy again, saying that regular people should get to do what Geithner did.

Again, there is an absolutely legitimate claim that Geithner received special treatment, and that that treatment undermined the public's confidence that the government is of laws, and not men.  (And to repeat myself further, Geithner was -- both ex ante and ex post -- a terrible choice for Treasury Secretary, as a policy matter.)  What he did, however, was not an effort to invoke some novel tax defense.  He did what political appointees do, when a problem was found on his record.  He tried to fix it after the fact, and his political prominence greased the skids.

Geithner's special treatment unfortunately reinforced the notion that both parties are opportunistic and sleazy.  But he did the exact opposite of what his detractors claim he did.  Perhaps it does not matter when people are angry for the wrong reason, but I think it does.  Revile Geithner for being the wrong man for the job, and even for being the beneficiary of cronyism, but not for having tried to blame his computer software for a tax problem.


The Dismal Political Economist said...

This apology is not necessary. Mr. Geithner gets no credit for not blaming the software. His tax issues are more complex than just not paying self employment tax on his income. Specifically when Mr. Geithner was audited he paid the back taxes that had not passed the statute of limitations, but apparently it was only after he was nominated that he went back and paid his past due taxes that he legally did not owe because of the statute.

Had really been concerned about his error as a public official he should have paid all of the money he escaped, not just what he legally owed. There were apparently also other issues including a deduction for camp expenses as child care. Of courses the real issue here is that as President of the NY Fed Mr. Geithner was a principal player in the financial crisis and that alone should have disqualified him from the Treasury position.

Mr. Buchanan is absolutely correct that this man should never have been head of Treasury, and also correct that if Mr. Summers is appointed head of the Fed that will be a monumental error on the part of a President whose economic policies and positions are already highly suspect.

Shag from Brookline said...

I've been a regular visitor at the TaxProf Blog for some time. The daily Tax Scandal count that continues there is somewhat troubling as it is not clear whether Prof. Caron really thinks this is a real scandal. Commenters at other blogs claiming this is a real scandal point to the daily posts at TaxProf as proof. Just last week I put up a comment on TaxProf's daily Tax Scandal post substantially as follows: "Count up continues - but why?" Perhaps the system swallowed my comment, as it does not appear. In the past, some of my comments at TaxProf on other subjects have disappeared, perhaps because Prof. Caron did not like my comments.

Neil H. Buchanan said...

In response to Shag from Brookline's comment, I believe that I know Prof. Caron well enough to say that he would NEVER delete comments from his blog because he disagrees with them. I certainly have my differences with him on many things, but the explanation for the disappearance of comments from his blog surely lies elsewhere.

I do find it interesting -- and not at all surprising -- that TaxProf's continuing coverage of the non-scandal is being used as validation by right-wingers. This is why the "safe" path is never safe: in this universe, all strategies (including staying the course) have political implications.

For what it's worth, I think the most charitable (and accurate) way to describe what happened at TaxProf is to compare it to the people who put up American flags everywhere after 9/11/2001. It's a ratchet: Once you've shown your patriotism by putting up the flag, how can you ever take it down?

Shag from Brookline said...

Take a peek at TaxProf's "The IRS Scandal, Day 103" featuring Glenn Harlan Reynolds' USA Today Op-Ed "Scandals Costing Us American Exceptionalism." I take this as Prof. Caron's endorsement that indeed there is an IRS Scandal, beyond your suggested "patriotism."

Neil H. Buchanan said...

Just to be clear, I did not say that Prof. Caron was calling it a scandal because of patriotism. I was drawing an analogy: Just as some people found themselves "stuck" after putting up flags post-9/11, people who jumped on board the non-scandal earlier this year might similarly feel kind of stuck with the decision, because it's very different to renounce a label than never to have endorsed it in the first place.

And to be even more clear (and redundant), I am very disappointed in TaxProf's handling of the non-scandal. I just don't think Prof. Caron's linking to people like Reynolds constitutes an endorsement. He also links to my non-scandal scandal columns and DoL posts, and I don't view him as endorsing my position, either.