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Treasury Secretary Jack Lew speaks out on his wild week

Andy Serwer
Editor in Chief

Barring a financial meltdown, the Treasury Secretary’s work is usually behind-the-scenes stuff. Weighty to be sure, but not exactly headline grabbing. This week has been an exception, which Jack Lew acknowledged as he sat down for an interview Thursday at the historic Treasury Building in Washington, D.C. With the conversation zipping from a sweeping trade bill, to high-profile, tough-love negotiating with the Chinese, to a possible Greek denouement -- oh and did we mention a little controversy over the $10 bill -- Lew appeared to be positively energized, and dare we say, even a bit outspoken, for this usually oh-so measured man.
Lew certainly didn’t mince words when it came to Greece, which faces a deadline in a matter of days to renegotiate its debt package. “I hope they take this weekend seriously. The thing about the conversations around Greece that have been of concern to me is the number of deadlines, the number of times it's gotten right to the edge,” says Lew, who’s been in regular touch with European leaders including Greek Prime Minister Alexis Tsipras.

“The risk of an accident goes up the more times you have these [situations, and] everyone rushes to a deadline. I hope they can reach an agreement that prevents Greece from going through the deep pain that a breakdown would cause, and it doesn't create risks to either the European or the global economy. This is not the time for a shock.”
Earlier in the week, Lew was engaged in nitty-gritty negotiations with senior Chinese officials at the two-day Strategic & Economic Dialogue talks in Washington. Lew wasn’t shy about calling out the Chinese, saying: “We've made it very clear that they do things that are unacceptable. And our point has been you have to stop having government-enabled theft of trade secrets through cyber means. It's important that they know these are issues that potentially very much could interfere with the relationship that they want to have with the United States.” Lew says progress was made with the Chinese in terms of commitments on currency exchange rates, opening up its markets and “on the information technology issues; they have suspended a process of putting in place rules that we've said were very troubling.”

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And in a rare show of bi-partisanship in Washington this week, the Senate passed a so-called fast-track trade bill that grants President Barack Obama Trade Promotion Authority (TPA), by a vote of 60-38, putting Republicans and the Obama administration on the same side of the aisle, while the dissent was populated by disenchanted Democrats who were taking into account labor union and environmentalist constituents who opposed the bill. Why were the unions against it, I asked Lew?

“Look, it's been a difficult time in a number of sectors of the economy,” he said. “And I understand very much the impact the change has had on the lives of workers. We're committed to bringing back trade agreements that meet the high standards that we've committed to. So it's not just any trade agreement, it has to be a trade agreement that protects worker rights, that protects the environment. “
Separately, Lew warned that is was a mistake for Congress to let the Internal Revenue Service languish. “I think it's very shortsighted to underfund the IRS,” he said. “For every dollar that they don't have to enforce our tax laws, it means we collect less tax revenue.  So it is not fiscally conservative, and it's not a good thing in a tax system that is really based on voluntary compliance. There ought to be the sense that people who don't do the right thing will get caught.”

As for our tax system, Lew was even more blunt: “I think our business tax code is something that is broken. We saw that last year so clearly through the pattern of inversions that was so unpopular in this country. The cause of it is a broken tax code. We have the highest statutory tax rate in the developed world. But our average tax rate is about average. That means we have all these loopholes and deductions that are making it necessary for the tax code to stay higher than is competitive."

The problem is fixable, Lew says, “You broaden the base.  You eliminate a lot of deductions and credits.  And you lower the rate."
On the economy, Lew was cautiously sanguine, noting slow and steady improvement. The Treasury Secretary also made an interesting point about the financial markets: “It's only natural that as we get back into a more normal economy, there's more volatility,” he says. “Kind of interesting.  Two years ago everyone worried about low volatility.  Now people talk about high volatility. Business cycles, you know, have a pattern to them.”
Ok, ok, but what about the woman on the $10 bill conundrum? The issue that, well ‘exploded’ is too strong a word maybe, but certainly got all kinds of attention this week, particularly after former Federal Reserve Chairman Ben Bernanke wrote in a blog post that though he applauded Lew’s decision to put a woman on a U.S. bill, he was “appalled” by Lew’s decision to replace the highly-respected Alexander Hamilton, and among others suggested getting rid of the controversial Andrew Jackson on the $20. Lew has taken heat for this, but doesn’t seem to be backing down.
“To be clear as to why it's the $10 bill, we have a very disciplined process where we review the currency,” Lew says. “For reasons of security, to make sure that we're protecting our currency against counterfeiting -- there's a committee that determines which piece of currency is the next one that needs to be redesigned. So the $10 bill, for a number of years now, has been next in line. The $20 bill has been modernized more than the $10 bill.  And I don't think that it could be justified to break the cycle and choose -- to go against the security concerns -- which is what drives us. I have been clear from the very beginning that we will continue to honor Alexander Hamilton on our currency.  He will continue to be on the $10 bill.”
Whoa. How can that be? “There's a range of design issue in terms of what the look and feel of our currency will be. We've also left open the possibility of having different bills.  You know, a bill that has Alexander Hamilton; a bill that has a woman. As we look to represent more of American history on our currency, I think that's an idea that we have to take very seriously.  [But] it's time to put a woman on our currency. I think we've waited long enough.”
Ok, so which woman will get tabbed? “There are a lot of candidates,” Lew says, “And I invite anyone who wants to give us their thoughts to let us know.  We have a hash tag, #TheNewTen, and a website the NewTen.Treasury.gov.”
Any personal favorite? “I'm gonna keep my thoughts to myself for right now.” You get the final vote? “I do.” Hmmm. That sounds like a process to keep Jack Lew energized for many weeks to come.