Of course, one might ask the same of Obama’s penchant for filling the most important positions in his administration — including his Vice President, Secretary of State, and Defense Secretary — with supporters of the Iraq War.  But about Geithner, Suskind unwittingly solved the mystery he raised: Kakutani notes that “one top banker quoted in these pages refers to [Geithner] as ‘our man in Washington‘ for helping avert more systemic changes affecting Wall Street.”

Geithner wasn’t chosen and hasn’t remained despite being ”associated with the deregulatory policies of the past” and despite being the bankers’ “man in Washington.”  He is empowered precisely because of those facts, as was pointed out even before Obama’s inauguration.  That Geithner and Summers were empowered after enabling the financial crisis through Wall Street subservience isn’t a mystery; it’s the explanation. (And just by the way, replacing the word “despite” with the phrase “because of” is — in general — one of the most valuable tools for translating Washington propaganda into reality; here is an excellent example showing how that works, from the first paragraph of a New York Times article two weeks ago:

Documents found at the abandoned office of Libya’s former spymaster appear to provide new details of the close relations the Central Intelligence Agency shared with the Libyan intelligence service — most notably suggesting that the Americans sent terrorism suspects at least eight times for questioning in Libya despite that country’s reputation for torture.

Note how the paragraph instantly transforms from misleading nonsense into obvious truth simply by changing “despite” to “because of”; this repeatedly is an effective instrument for deciphering propaganda — e.g., the U.S. continues to brutalize people in the Muslim world “despite” the fact that doing so produces more Terrorism and thus ensures Endless War.)

Perhaps most notable about the Suskind chapter on which Kakutani focuses is the process by which Obama featured progressive economists during the campaign, only to immediately subordinate them to Wall-Street-subservient officials once in power.  Feigning progressive leanings for political gain is Obama’s modus operandi; as Matt Taibbi recently put it in explaining why he no longer listens to Obama’s speeches:

I remember following Obama on the campaign trail and hearing all sorts of promises before union-heavy crowds. He said he would raise the minimum wage every year; he said he would fight free-trade agreements. He also talked about repealing the Bush tax cuts and ending tax breaks for companies that move jobs overseas.

It’s not just that he hasn’t done those things. The more important thing is that the people he’s surrounded himself with are not labor people, but stooges from Wall Street. Barack Obama has as his chief of staff a former top-ranking executive from one of the most grossly corrupt mega-companies on earth, JP Morgan Chase. He sees Bill Daley in his own office every day, yet when it comes time to talk abut labor issues, he has to go out and make selected visits twice a year or whatever to the Richard Trumkas of the world.

Listening to Obama talk about jobs and shared prosperity yesterday reminded me that we are back in campaign mode and Barack Obama has started doing again what he does best — play the part of a progressive. He’s good at it. It sounds like he has a natural affinity for union workers and ordinary people when he makes these speeches. But his policies are crafted by representatives of corporate/financial America, who happen to entirely make up his inner circle.

That’s why — after 2 1/2 years — we suddenly see an outburst of “fighting for jobs” and, now, a call to raise taxes on the rich.  He does that precisely because everyone — especially the rich — knows it will not and cannot happen.  We’re now formally in (re-)election season, so it’s time again to haul out the progressive music.  Some Democrats are honest and cynical enough to acknowledge that Obama is doing all these things purely for political gain and — because his re-election is their top priority — to celebrate it even while acknowledging it will never become reality (see here and here as examples).  From that perspective, I suppose having him give speeches where he advocates for jobs and taxes on the rich is preferable to his endorsing austerity and Reaganomics as he had been doing for months  But whatever else is true, none of this presages an actual change in how the government functions or, especially, on whose behalf it labors.  That’s precisely why he feels free to advocate such things without alienating his funding base.  It’s still the government of Tim Geithner and his bosses/owners; election season (combined with rising elite fear of social unrest) just requires a bit more pretense to obscure that fact.

UPDATE:  In November 2008, when progressive economists and opinionists were warning that Geithner and Summers were far too subservient to Wall Street, the prescient geniuses at The New Republic produced this (more text here):

That writers at the pro-war, Lieberman-revering, party-apparatchik TNR have again become the leading lights of progressive punditry — watch how often Obama-supporting Beltway pundits cite and echo them — speaks volumes about where establishment progressive opinion is in the Age of Obama.

UPDATE II: VastLeft expresses some of this in cartoon form:

As indicated, I at least appreciate the candor of those (such as the above-linked commentators) who acknowledge that this will not become reality and is not even designed to, but celebrate it because it will help Obama get re-elected by making the GOP (rather than him) look like the servants of Wall Street.  It’s the ones pretending that this eleventh-hour election-time awakening is reflective of some sort of substantive significance that are hard to bear.

On “Fox News Sunday,” Geithner repeatedly deflected host Chris Wallace’s questions about the details of a contingency plan. “We do not have the ability, Chris, to protect the American people from the consequences of Congress not taking that action,” Geithner said.

Watch Geithner avoid the specifics with Wallace in the clip below, via Mediaite:

Geithner expressed confidence that a deal would be reached ahead of the Aug. 2. deadline, but noted that whether or not the deal would be good for the economy was a different matter. He told Schieffer that the Obama administration faced a difficult task in trying to broker the “biggest deal possible.”

Watch Geithner’s appearance below, via CBS:

This has always been a ridiculous notion, but Geithner’s letter provides the most in-depth and strongly worded rebuttal we’ve heard from the Obama administration so far.

Some key excerpts:

Dear Senator DeMint…

I have expressed my concerns about this idea before, but I will restate them to be clear: this “prioritization” proposal advocates a radical and deeply irresponsible departure from the commitments by Presidents of both parties, throughout American history, to honor all of the commitments our Nation has made…

At its core, your letter is based on an untested and unacceptably risky assumption: that if the United State were to continue to pay interest on its debt — yet failed to pay legally required obligations to its citizens, servicemen and women, and businesses — there would be no adverse market reaction and no damage to the full faith and credit of the United States. Again, this idea is starkly at odds with the judgment of every previous Administration, regardless of party, that has faced debt limit impasses.

“Prioritization” also fails to account for how payments on principal would be made if investors were to lose confidence in U.S. creditworthiness. In August of this year, for example, more than $500 billion in U.S. Treasury debt will mature. Under normal circumstances, investors who hold Treasuries purchase new Treasury securities when the debt matures, permitting the United States to pay the principal on this maturing debt. Yet in the scenario you advocate, in which the United State would be defaulting on a broad range of its other obligations, there is no guarantee that investors would continue to re-invest in new Treasury securities. In fact, some market participants have already indicated that they would be disinclined to do so. As one of the major ratings agencies concluded in a recent report, failure to pay non-debt obligations “would signal sever financial distress and potentially imminent debt default,” prompting the U.S. sovereign rating to be placed on “Rating Watch Negative.”

If investors chose not to purchase a sufficient volume of new Treasury securities, the United States would be required to pay the principal on maturing debt, and not merely the interest, out of available cash. Yet the Treasury would be unable to make these principal payments without the continued confidence of market participants willing to buy new Treasury securities. Your proposal assumes markets would be unconcerned by our failure to pay other obligations. But if this assumption proved incorrect, then the United States would be forced to default on its debt.

Geithner is undoubtedly correct on this. As he notes elsewhere in the letter, the U.S. government is currently is borrowing 40 cent on every dollar. Without an agreement to raise the debt limit, the government would thus have to cut its current spending by 40 percent. Never mind the fact that spending cuts on that scale would immediately plunge the economy into recession. The fantasy that “market participants” would stand by and watch such the U.S. government commit fiscal suicide without running for the hills screaming in holy terror represents new heights in GOP ludicrousness.

In the past, it’s always been easy to dismiss Jim DeMint as a resident of the extreme right-wing of the Republican Party — and therefore unrepresentative of mainstream reality. But right now, in a political climate in which Michele Bachmann is considered to have a legitimate shot at winning the Republican nomination for president, it’s much harder to find an oasis of complacency from which to watch this madness.

Geithner’s stated position is that without long-term action on the deficit, the government will not be able to continue to support social welfare programs.

Geithner says Obama must tackle the deficit now if he wants the government to be in a position to support the economy in the future and to continue to protect the elderly and the poor.

“It’s been my view for some time that unless he played a major role in shaping and negotiating the broad fiscal framework… we would be left without the capacity to do a whole range of things that are really important,” Geithner, 49, said in an interview. “I have been a consistent advocate of him doing that early and often.”

There is a level on which Geithner’s rationale makes sense. The Republican strategy is to seize upon (and create) big deficits as a tool to eviscerate government. Their successful execution of this strategy poses a serious challenge to the safety net. If no action is taken by Democrats to get spending and revenue aligned in the long term, then Medicare and Medicaid will be in big trouble.

I don’t think any left-of-center economists would seriously disagree with that. Their position has always been that the smart strategy is short-term stimulus paired with a long-term plan to stabilize government finances. With government borrowing costs at historically low levels, now is the time to put as much energy into job creation as possible.

But aside from what should be the overriding government responsibility to deal as forthrightly as possible with massive unemployment and economic hardship, there’s also a realpolitik issue that Geithner seems to be missing. Voters care more about how the economy is faring when they head to the ballot box than they do about the state of the deficit. And as is already clear from the initial campaign salvos from credible Republican presidential candidates such as Mitt Romney and Tim Pawlenty, the 2012 election is going to be a referendum on the economy.

By ruling out any further stimulus — and, even worse, by abandoning efforts to keep the economy growing far too early — Geithner has helped to make Obama and the Democrats extremely vulnerable in 2012. If Republicans take the White House and the Senate in 2012, then it really won’t matter whether Geithner’s deficit pivot could have preserved “the capacity to do a whole range of things that are really important.” Healthcare reform will be dead. Banking reform will be dead. Medicare and Medicaid will face a deeply uncertain future.

Geithner doesn’t deserve all the blame here. Obama picked him and Obama backed him to the hilt. There’s also a very real political question as to whether anything that could meaningfully have altered the economic growth path could have been pushed through Congress. And it’s also not Obama or Geithner’s fault that an earthquake and tsunami forced Japan into recession, or that oil prices spiked, or that Europe’s sovereign debt woes or a possible slowdown in Chinese economic growth have put a damper on global economic conditions.

But the electoral problem for Obama may not hinge on whether or not the president has the actual power to make manifest his will on job creation, but rather on whether he is perceived to be trying. Is he giving it his best shot? Is he making it clear to the general public what constraints have been placed on him by the opposition party and external events?

The answers are no, and no. And judging by Goldfarb’s Geithner profile, the White House is fine with that. It’s going to be a tough platform to run on, if the economy continues to slump as the campaign heats up.

In large part the lack of reaction has to do with the fact that everyone concerned already knew that the technical breach of the ceiling would be a non-event. Secretary of the Treasury Tim Geithner has been explaining for months that the government was prepared to avail itself of a familiar set of accounting tricks to postpone the date when the government could no longer pay its bills outright. Monday’s real news was Geithner’s letter informing Congress that — as of May 16 — the Treasury had stopped investing in a couple of government employee retirement funds — a legally authorized move to gain some breathing space that has been made several times before in previous debt ceiling squabbles.

According to Geithner, the real drop dead date for the debt ceiling is still 11 weeks away, on Aug. 2.

Which leads us to part two of the debt ceiling charade. Eleven weeks is an eternity in political terms. Unless bond investors start to get worried, there will be no real pressure to move beyond rhetoric and into real deal-making for at least a couple of months. There’s going to be a lot of political bluster between now and then, but we can safely ignore almost all of it. The debt ceiling will get raised — the only meaningful question, as I’ve written many times before, is what kind of deal gets cut that will cobble up enough votes to pass it in both the Senate and the House.

The emerging consensus appears to be that we are not going to see some grand bargain that mixes in revenue increases with big changes to entitlements. But it’s impossible to imagine Republicans voting for a debt increase without some meaningful moves to cut government spending, possibly in the short term. How ugly the horse-trading gets depends on how long the bond market stays calm and how willing Obama is to play chicken with John Boehner. Polls suggest that the general public is opposed to raising the debt ceiling, which gives Republicans leverage. But any economic disruption that resulted from a protracted battle over the debt ceiling — or an outright failure to raise it — would inevitably be blamed on Republicans. The GOP has a lot to lose.

There’s your basic story line. I don’t expect it to change much until we get into the heat of the summer.