Geithner conducts himself in front of the camera as if it’s the numbers, not his image, that are his primary concern — a trait that was on full display this past week, when he was in the spotlight on two pivotal issues. With the U.S. set to exceed its $14.29 trillion debt ceiling, Geithner detailed the measures his department will implement to buy Congress a few more weeks to reach a compromise. On this he was clear: Should Congress fail to raise the debt ceiling, then bottled water, canned beans and shotgun shells will replace U.S. Treasuries as the world’s safest investment.

He also took part in a forum with officials from China, whose devalued currency has emerged as a major sticking point between the two countries. For Geithner’s tenure to be viewed as a success, he will need to effectively manage the trade dispute with China over the country’s artificially undervalued currency.

With Geithner’s body of work crystallizing, we thought it would be a good time for a proper performance review. So Salon spoke with Gus Faucher, Moody’s director of macroeconomics and a former Treasury Department economist, about the looming debt battle, negotiations with the Chinese, and Geithner’s public relations issues.

Why do you think Geithner is such a political lightning rod?

His role at the New York Fed made him controversial because he was heavily involved with everything going on in 2008 with Lehman Brothers and Bear Stearns. He helped with the TARP legislation, and then he got off to a rocky start as Treasury secretary as well.

You mean because of his tax issues?

Yeah, I don’t think there was anything substantive there, but that was a public relations problem, certainly.

Couldn’t you say his overall problem is with public relations? Whether it’s his demeanor or the way he’s perceived, he just doesn’t seem too concerned about his own headlines.

I wouldn’t put it that way … I just think he’s low-key and perfectly content to be in the background. That’s good in some respects and bad in others, because when things go wrong he doesn’t necessarily have this reservoir of good will to draw on. 

But going back to his rocky start: The administration presented a financial rescue proposal and at the time it just didn’t seem too well thought out. That’s really what got him in some trouble. The administration built up what they said were Timothy Geithner’s plans to rescue the financial system, but then he got up there and it seemed like it was a lot less than what the markets were expecting. I think that hurt his credibility out of the gate.

But since then he’s done a good job in implementing administration policy and working to repair the financial system. The truth is that TARP has worked out, with the exception of the Fannie-Freddie piece, which is admittedly a big part of it. But the government is going to make money off what it gave to the banks and auto companies, and the financial system didn’t collapse, which is what we were really concerned about two and a half years ago. So he definitely looks better now than he did in early 2009.

He was in the news a couple of times this week. The first was in regard to the debt ceiling negotiation, and some of the measures the Treasury is taking to buy Congress time to negotiate. Is this an accomplishment or more of an operational duty?

It’s not really an accomplishment. The Treasury Department has a playbook and ways to maneuver around for something like this. I don’t view that as a success for Timothy Geithner personally, but to the extent he is handling the public relations aspect of it, we’re still unsure as to how the debt ceiling fight is going to play out.

What about the forum with China?

That’s another difficult, long-term thing. Some would prefer he play hardball with the Chinese and tell them to let the yuan appreciate against the dollar. But at the same time we’re running massive deficits that we need their help in funding, so he has to reassure the Chinese about the debt limit stuff and address their concerns that the U.S. will be able to honor its debt commitments. He’s treading a thin line there and you can’t really judge it on a short-term basis.

But is there any way to gauge how he’s handling the overall relationship? Were the meetings this week strictly a diplomatic formality?

I don’t think it was strictly a formality. Geithner needs to get the U.S. message across, which is that China needs to do more in terms of allowing the yuan to appreciate. But at the end of the day it’s a bilateral relationship and it’s diplomacy, not belligerency, that will get things done with them. But both parties left saying the right things, so on the message front, at least in the short term, this seemed like a success.

I think sometimes Geithner is unfairly lumped in with the Fed when people criticize U.S. economic policy. Does the Treasury have an active role in quantitative easing?

Geithner shouldn’t be involved in that and I haven’t heard that he is. If Geithner has input there, that says more about Ben Bernanke than it does about Timothy Geithner. So that’s right, you can’t judge him based on that policy.

What about unemployment? The Treasury is definitely going to be held responsible for the economy’s recovery.

I agree. Does the economy need more stimulus? Yes.

And isn’t it Geithner’s responsibility to sell that to Congress?

Yes. And in that regard he’s a key part of the administration’s economic plan, and in that way the administration hasn’t done enough. There’s a strong case that needs to be made for more stimulus. Republicans in Congress don’t want to hear that, and the public doesn’t want to hear it, but that doesn’t mean that it’s not true. The administration seems to have given up on making that point and I think that’s a failure. Geithner bears some responsibility for that.

And also in terms of what the stimulus has done so far, there’s a positive case to be made about the administration’s accomplishments. It shouldn’t be me telling you that TARP has been a success and that the economy would be a lot worse without the stimulus; the Treasury Department should be making that case and I don’t think they’ve made it forcefully enough.

Geithner’s relationship with Wall Street seems like it will always be an issue. Can he change the story on this?

The most effective thing he can do right now is to jawbone. Again, he needs to make the administration’s case that in order to reduce the deficit it’s going to take tax increases in addition to spending cuts. Given the support the administration provided to Wall Street, it certainly makes sense to look for higher-income people to pay more in taxes.

What strengths does he bring to the job?

He brings a deep institutional knowledge of the Treasury Department and financial markets. His work at the Fed gave him a clear idea of what the problems were and how to get past them.

What about weaknesses?

I think his weakness is that he is not a very effective salesman of the administration’s policies.

And that’s actually a pretty big weakness, because for the administration to get anything done they need him to be a good salesman.

Absolutely, and that is a big concern. That’s part of the Treasury secretary’s role: to be the salesman of the administration’s economic policy.

Can he turn that around?

In early 2009, there was all of this talk about how he was a disaster and was going to bring down the administration. But I think he was pushing for the correct policies and a lot of that talk has blown over. He was shaky early on and there was some concern about his performance, but I’m more confident having seen him in action lately. I think he’s working his way through all of that.

From The Hill:

“… the Treasury secretary himself has the discretion to decide which bills to pay first in the event that a cash flow shortage occurs. Thus, it is he who would have to consciously, and needlessly, choose to default on our debt if the debt ceiling is not promptly raised upon reaching it. It takes a lot of chutzpah to preemptively blame congressional Republicans for a default only he could cause,”Toomey said.

He said that Geithner has argued foolishly that failing to pay welfare payments or furloughing workers would send bad market signals that are equivalent to a default.

Foolish? Here’s what Deputy Secretary Treasury Secretary Neal Wolin said in a statement in January, in response to Toomey’s announcement that he planned to introduce legislation which would require Treasury to make interest payments on its debt the first priority in the event of a failure to raise the debt ceiling.

“[T]his idea is unworkable. It would not actually prevent default, since it would seek to protect only principal and interest payments, and not other legal obligations of the U.S., from non-payment. Adopting a policy that payments to investors should take precedence over other U.S. legal obligations would merely be default by another name, since the world would recognize it as a failure by the U.S. to stand behind its commitments.”

Doesn’t sound all that foolish to me. As explicitly suggested by the recent decision by Standard & Poor’s to change the U.S. credit outlook from “stable” to “negative,” financial markets are nervous that political gridlock might prevent Washington from taking the necessary action to address its long-term fiscal situation. If a failure to raise the debt ceiling results in the United States failing to make Social Security payments — or any other statutorily required payments to U.S. citizens, the markets are unlikely to respond favorably.

And that doesn’t remotely take into account the political chaos that will break out if the Treasury privileges paying interest payments on debt owned by the Federal Reserve, China, and Japan over the social safety net. It’s really hard to imagine a stupider strategy: Stop paying unemployment benefits while doing everything you can to start another recession.

For informed critiques and summaries, I recommend Felix Salmon, Mike Konczal, and Greg Ip. Ezra Klein also does a marvelous job of putting the effort to fix Freddie and Fannie in the context of the administration’s overall reform strategy.

But let’s step back from the details for a second and look at the larger strategy. The Treasury, it seems to me, is playing a pretty smart game. Unless Tim Geithner had come out and declared that his goal was to completely — and immediately — remove the government from any role whatsoever in the housing market, Republicans would surely have seized upon whatever the White House recommended and declared it to be socialist tyranny of the highest order. But now there’s a little more pressure for Congress to articulate its own proposed solution within the parameters sketched out by the government.

The right definitely won’t be able to accuse the administration of trying to whitewash the responsibility of the government-sponsored enterprises for the great housing mess. The white paper released by the Treasury acknowledges that Fannie and Freddie played an important part in fueling the housing boom and exacerbating the financial crisis. Not the most important role, but not an insignificant one either. One would hope that this would mollify some of the Republicans who have been bashing Fannie and Freddie for years.

But a complete withdrawal of the government from housing doesn’t make much sense. As the white paper explains, the original rationale for creating Fannie and Freddie dates back to a devastating collapse of the housing market during the Great Depression. Maintaining a stable climate for housing finance is critical to avoiding the damage caused by sharp cyclical downturns and accompanying credit crunches.

Moreover, if Tea Party Republicans remain resolute on abolishing any government role at all in the housing market, they will soon find themselves facing a formidable array of interests. Any removal of government involvement will mean that mortgages get pricier — because the less the government backstops credit, the more risk there will be for the private sector. Take the government out completely, and you end up making it much harder for Americans to buy homes, which hurts lenders, banks, builders and everyone else whose livelihood is connected to the housing industry.

I am not optimistic about the prospects for translating the Treasury’s proposals into legislation that will pass muster in Congress in the next two years — Republicans simply have too much invested in preventing Obama from achieving significant legislative victories. But Obama’s opponents will not be able to claim that his administration is ignoring the problem, and if his critics think they have a better solution, they’re going to have to show how it  addressed the issues that the Treasury has raised: How do you get the government out of the housing market, while at the same time ensuring that housing market ups and downs don’t pose too dangerous a risk to overall prosperity? The administration has put its marker down. Now let’s see what the other side has got.

But as of Tuesday, according to the Treasury, the U.S. government is only $279 billion away from hitting the debt ceiling. So for the time being, the Treasury is rolling up the Supplementary Financing Program so as to free up some cash, and postpone the debt ceiling reckoning for a little while longer. The Treasury did exactly the same thing the last time the U.S. threatened to hit the ceiling, so there’s nothing particular striking or unusual about the move.

However, two other news items in the last 24 hours underscore how serious the longterm budget situation is, and are likely to affect the outcome of negotiations between the White House and Republicans over extending the debt ceiling. Standard & Poors downgraded Japan’s credit rating and the Congressional Budget Office reported that, largely as a result of the tax-cut deal, the budget deficit this year will be $1.5 trillion.

Japan’s downgrade is a warning shot: At some point, $1.5 trillion deficits will finally begin to upset the markets. In their explanation of the downgrade S&P cited Japan’s lack of political will to deal with their government finances. The same is abundantly true for the U.S. Any realistic appraisal of the U.S. fiscal situation has to conclude that a mixture of revenue increases and spending cuts is imperative for the long run. Instead, we’re busily decreasing revenue and making only trivial cuts.

I’ve been arguing here for years that it is critical not to go overboard on fiscal austerity when the economy is still fragile, because that would be entirely self-defeating. If you remove government demand from the economy, you could have slower growth, which means even less tax revenue, which puts even more strain on government finances. But the question then becomes, when? When is the right point to trim sails?

Yesterday’s upbeat new home sales data inspired the private forecasting firm Macro Advisers to double down on their prediction that GDP growth for the first quarter will be a very robust 4 percent. On Friday, the government will release its first stab at estimating fourth quarter growth, and the consensus prediction right now is around 3.7 percent. If that level of growth is sustained for a two or three quarters, then the pressure to deal with the U.S. fiscal imbalance will ramp up considerably. And maybe it should.

On the other hand, Thursday’s huge 51,000 jump in jobless claims injects a new note of uncertainty into the equation. The Labor department is blaming snow for a backlog of claims, but that’s still a horrible number, no matter how bad the weather.

And so we march forward, into a pea soup-thick fog of baffling uncertainty.