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The post of Treasury undersecretary for all things international has been vacant for a year. This is a power position once held by Larry Summers. The undersecretary is the Treasury’s point person with the IMF, the World Bank, the G7 economic summits, currency politics, and global tax and trade policies.
A leading candidate is Jay Shambaugh, according to Politico, whose Wednesday article cited “three people familiar with the matter.” If true, this a bizarre choice.
Shambaugh is an exponent of the naïve globalism that has long undermined U.S. economic interests—and that Biden has been working to reverse. Shambaugh’s stance would undercut Biden on industrial policy to reshore American jobs, as well as his firm stance against China’s predatory trade strategy.
Shambaugh served on the Obama Council of Economic Advisers from 2015 to 2017. There, he was a huge supporter of the Trans-Pacific Partnership, a corporate trade deal that Congress refused to approve. He characterized TPP as “one of the biggest buttons we could push that would increase growth.” He has described tariffs as a tax on the consumption of low-income households.
From the Council, he went to Brookings, where he became head of the Hamilton Project, a centrist research enterprise founded and underwritten by Robert Rubin. Shambaugh epitomizes the orthodox economic thinking of the Clinton and Obama eras on trade.
Why is Shambaugh even under consideration? He would be a thorn in the side of three top Biden economic officials—Katherine Tai, the U.S. trade rep who has reversed the traditional policy of corporate globalism; the president’s chief of the National Economic Council, Brian Deese, a prime architect of the shift to industrial policy and reshoring; and national-security adviser Jake Sullivan, who has reversed his own previous support for naïve globalism for the sake of economic security. Shambaugh is well to the right of the current Council of Economic Advisers.
One likely promoter is Shambaugh’s prospective boss, Treasury Secretary Janet Yellen, who has publicly attacked Biden’s China tariffs as taxes on consumers. The other key undersecretary, in charge of domestic finance, is Nellie Liang, a thoroughly orthodox official whom Yellen brought over from the Fed.
There is often fraught negotiation between the White House and Cabinet secretaries on key subcabinet jobs. According to one knowledgeable observer, it is hard to imagine the Treasury’s top international official being appointed over the objections of the NEC and the NSC.
Though Biden has embraced industrial policy for the sake of U.S. jobs, there remains a powerful undertow by the old guard in league with financial and corporate interests, at the Departments of Treasury, Commerce, the Fed, and the career staff of USTR. The last thing Biden needs to do is reinforce that with this top Treasury appointment.
