President Obama says he wants to reform public schools and greatly increase federal spending on education. But when NEWSWEEK called Education Secretary Arne Duncan's office last week, the phone rang for two minutes before someone picked up. The person at the other end said that she normally doesn't answer phones, but added apologetically, "There's a lot of empty offices around here." Duncan is not the only new cabinet appointee who is lonely at the top. Treasury Secretary Timothy Geithner, who must be the most overworked, if not overwhelmed, person in government, is surrounded by the empty offices of a dozen top officials at Treasury. He relies instead on three Bush administration holdovers and a patchwork of senior appointees who don't require Senate approval. No wonder he lost track of the AIG bonuses. Trying to prepare for the upcoming G20 summit to save the global banking system, British Cabinet Secretary Sir Gus O'Donnell vented his frustration over his government's inability to get phone calls returned by the U.S. Treasury Department. "There is nobody there," he announced in an off-the-record remark that leaked out. "You can't believe how difficult it is."
Candidate Obama wanted to bring change to Washington. To fight the old revolving-door culture, he decreed that administration jobs could no longer be used as steppingstones to more-lucrative lobbying jobs (former Obama appointees will not be allowed to lobby their agencies until the election of a new president). Obama has had no trouble attracting job applicants—he's received some 300,000 for 3,300 positions. But of the top 373 open slots that require Senate confirmation, according to The Washington Post, Obama has been able to fill only 43 so far. A superstrict vetting process has weeded out or driven off some otherwise very qualified candidates, most notably Obama's highly touted pick to reform health care, Tom Daschle. Nominated to be Health and Human Services secretary, Daschle withdrew after it was disclosed he had failed to pay about $140,000 in back taxes and interest on a car and driver provided as a corporate perk. The White House says scores of candidates are stuck in a Senate-confirmation logjam.
Staffing Treasury, at the center of the financial storm, has been a particular problem. According to a source close to the process who declined to be named discussing a sensitive matter, the Senate Finance Committee has quietly rejected candidates for top Treasury jobs because of tax issues. It's the old law of unintended consequences: in order to satisfy a public desire for squeaky-clean government, elected officials have put at risk a more critical goal: dealing expeditiously with the financial crisis.
In some ways, the tale is depressingly familiar. This is what happens when hope meets reality or, in America, when a reformer's zeal is turned over to the lawyers to implement. The White House's basic vetting questionnaire for a top federal job is now close to 100 pages long. A separate national-security vetting form can be filled out only by typewriter. The questioning by White House lawyers can be excruciatingly personal. One job dropout told NEWSWEEK he just couldn't bear to get into the messy lives of his children. Daschle was asked to produce a receipt for $30 to prove a charitable contribution.
Hiring lawyers and accountants to plow through the paperwork is very expensive. To pay for it, a top national-security appointee who has been living on a modest academic salary told NEWSWEEK that he had to take out a second mortgage. In 2006, Defense Secretary Robert Gates spent about $40,000 on his vetting process—and his record was hardly unknown to the government. He had served in the CIA for nearly 27 years. (Gates's predecessor at Defense, Donald Rumsfeld, had to spend more than $250,000.) The wealthy must then be prepared to divest themselves of stock regardless of the personal price tag.
No one's quite sure when the process got out of control. Some point to John Tower, George H.W. Bush's first choice for Defense secretary, who was shot down for drinking and womanizing. Others cite Zoë Baird, Clinton's failed nominee for attorney general, who neglected to pay taxes on her nanny or look closely into her immigration status. Obama officials say they are ahead of recent presidents in staffing the government. To fill all Senate-confirmed positions took Ronald Reagan 194 days, George H.W. Bush 163 days, Bill Clinton 267 days and George W. Bush 242 days.
Tax issues loom large now, no matter how minor they may seem. At the Senate Finance Committee, which must give approval on key cabinet posts including HHS and Treasury, an IRS agent has been detailed to run tax audits on candidates. Congress voted to confirm Geithner only after he agreed to pay $42,702 in back taxes and interest; after that, the Senate Finance Committee in effect signaled no more tax scofflaws. There was a time, not long ago, when the White House could quietly inform Finance Committee members that a nominee had a tax problem, but that the taxes were being paid up. The committee would not stand in the way. No longer. Volunteer lawyers at the White House are now furiously examining the tax returns of nominees to make sure they are clean before they are sent to the Hill. Last week the administration's candidate to lead the federal bank-bailout program withdrew his name from consideration because of a nanny problem dating back to the 1990s.
One Washington lawyer, a candidate for a senior Treasury job who asked for anonymity, expressed frustration. Although two complete tax audits by the White House found no violations, the lawyer decided to withdraw from consideration. "At some point you say, who needs it? Who needs to be personally abused and treated as a political football?" the candidate told NEWSWEEK, adding, "They can find virtually nobody from New York who doesn't have a [tax or nanny] problem."
Frustrated White House staffers point an accusing finger at Sen. Chuck Grassley of Iowa, the ranking Republican on the Senate Finance Committee, whose aides, known as "Grassleys," have a low tolerance for any unpaid taxes by Obama appointees. (Grassley says the vetting process this time is exactly the same as it was for the incoming Bush team.) Just as severe, if not more so, is Max Baucus, the committee's Democratic chairman. But Obama has to tread carefully with a committee that must approve such major legislation as health-care reform and tax increases on the rich.
"It's a mess," says Tom Korologos, a longtime Washington lobbyist who has steered, by his reckoning, more than 200 officials through the confirmation process. "I tell you what's going to happen. They're going to end up with three types of people: the ne'er-do-wells, the academics and union employees." Korologos is a Republican, and some of the whining from businessmen who don't want to tamper with their portfolios needs to be discounted. But it is true that Obama has appointed almost no business people to top jobs, and sometimes it's necessary to hire these folks—if for no other reason than because they know how the game is played. The legendary example is Joseph Kennedy, hired by FDR as the first chairman of the newly created Securities and Exchange Commission because he knew, from personal experience, just how the stock market could be manipulated.
Times have changed, of course. There was no cable TV in the 1930s, and government is much more transparent today—not a bad thing. The Obama team has become more than a little sensitive to criticism. "The idea that government is at a total standstill is just ridiculous," says a White House aid speaking under the usual rules of anonymity. "We deserve some credit for what we've gotten done in the little time we've been here, especially considering the environment we're in."
There is no simple way to find the right balance between high ethical standards and practical experience—and right away. What's really called for is common sense. When Sen. Daniel Patrick Moynihan was chairman of the Senate Finance Committee in the 1990s, he was given the tax returns of White House nominees for top federal jobs, but he did not scrutinize them. His former chief of staff, Lawrence O'Donnell, dryly explained, "Moynihan thought that Abraham Lincoln did a pretty good job choosing a cabinet when … the FBI and IRS didn't exist." Not everyone has the wisdom of Lincoln, or Moynihan. But surely there is a better way to run a government than to be searching for a nanny's tax records while the economy melts down.