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Geithner tax and housekeeper problems jolt Obama

Geithner tax and housekeeper problems jolt Obama

After a nearly seamless transition, President-elect Barack Obama has been buffeted by a string of embarrassing jolts within the space of two weeks.
The disclosure on Tuesday that his choice for treasury secretary, New York Fed chief Timothy Geithner, failed to pay $34,000 in taxes and employed a housekeeper without proper immigration papers was another jarring distraction just days before his inauguration _ and raises fresh questions about his team's judgment, vetting procedures and political sensitivities.
It follows New Mexico Gov. Bill Richardson's sudden withdrawal on Jan. 4 from consideration as commerce secretary, citing a federal investigation into how his political donors landed a lucrative transportation contract.
Senate Democratic leaders and Obama transition officials immediately voiced confidence in Geithner and called for his quick confirmation once Obama is sworn in and is able to formally nominate him _ citing the important role Geithner will play in dealing with one of the nation's severest recessions in decades.
But the delinquent-tax part of the new disclosure, in particular, is a huge liability for Geithner, given that as treasury secretary he would oversee the Internal Revenue Service which collects taxes.
It's also one of those issues that ordinary Americans can readily understand _ the consequences of not paying taxes properly and on time. You don't mess with the IRS.
At issue is Geithner's failure to pay appropriate Social Security and Medicare taxes when he worked for the International Monetary Fund between 2001 and 2003. He had paid some of the back taxes in 2006 after the IRS sent him a bill. When the Obama transition team discovered he owed even more back taxes, Geithner paid those additional taxes days before Obama announced his choice in November, according to the Senate Finance Committee considering his nomination.
Obama's staff told senators about the tax issues on Dec. 5.
Geithner also didn't realize a housekeeper he paid in 2004 and 2005 did not have current employment documentation as an immigrant for the final three months she worked for him, according to the materials released by the committee.
It was clearly unwanted news to a team that had prided itself on efficiency and raw talent.
Incoming White House spokesman Robert Gibbs called Geithner's missteps "honest mistakes, which, upon learning of them, he quickly addressed." But serious issues were raised about the performance of Obama's team in vetting Geithner that are not likely to go away soon.
In another jarring episode, Obama and Senate Democrats also were outmaneuvered by disgraced Illinois Gov. Rod Blagojevich and Roland Burris, the man he chose to fill Obama's vacant Senate seat.
Obama at first endorsed the hard line taken by Senate Majority Leader Harry Reid and other Senate Democrats that they never would accept an appointment from Blagojevich. But Burris, a black politician who had an unblemished reputation, made a good-will overture to Senate Democrats. Illinois constitutional law seemed to be on his side. Both Reid and Obama reversed course and signaled to Senate leaders that they should seat Burris.
"These are very smart people. But they're not reading the politics carefully," said Paul C. Light, professor of government and public service at New York University. "They've allowed themselves to be backed into a corner by a disgraced governor of Illinois and hoodwinked by several of their own nominees and perhaps by their own hubris."
Obama's team may be brilliant and experienced, "but what they lack is common sense," Light said.
On a less consequential matter, Obama also stumbled when he failed to notify incoming Senate Intelligence Committee Chairwoman Dianne Feinstein that he was about to name fellow Californian Leon Panetta, who had been President Bill Clinton's budget director and chief of staff after a long congressional career, to the job of CIA director. Although popular and experienced as an administrator, Panetta lacked an intelligence background and the surprise selection put Feinstein in a difficult position.
The jarring bumps in the road to Obama's inauguration are "really quite stunning for a transition team that has so carefully studied everything that might go wrong, and which was faultless up until about a week ago," said Stephen Hess, an authority on presidential transitions at the Brookings Institution.
The disclosures on Richardson and Geithner are "stunning news," Hess said. "And coming so close to the inauguration, it's harder to put the pieces back together."
Senate Finance Committee Chairman Max Baucus said after a closed-door committee meeting on the subject on Tuesday that, while he was disappointed with the new information, Geithner had taken steps necessary to fix the problems, and the mistakes he made "do not rise to a level of disqualification."
But the panel's senior Republican, Sen. Charles Grassley of Iowa, raised questions about the disclosures.
Geithner may have one thing going for him: The public may be more far more concerned about the economy at this point than over the would-be treasury secretary's past mistakes.
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EDITOR'S NOTE _ Tom Raum has covered Washington for The Associated Press since 1973, including five presidencies.