Our Man at Treasury

The view from Michael Klein’s office window is a bit different from his usual one at the Fletcher School, where he’s a professor of international economic affairs. Now he sees the White House.

Since June, Klein has been on leave from Fletcher, serving as the chief economist in the U.S. Treasury’s Office of International Affairs. He’s leading research and writing policy briefs on current economic topics. Working in the main Treasury building on Pennsylvania Avenue, he finds the view isn’t the only thing that’s changed. While the articles he writes for academic journals might be years in gestation, now if he takes more than a week to draft a policy brief, it will be stale—yesterday’s news.

Klein and his colleagues, permanent staffers at Treasury and interns from schools like Fletcher, provide the background for Treasury Secretary Tim Geithner to formulate U.S. international economic policy. The goal of the international office, says Klein, is to help foster sustained growth and economic stability in the United States and encourage policies that do the same in other countries.

“It’s been interesting—and a real learning experience,” Klein says. Seeing the political dimensions of economic policymaking “has been eye-opening,” something that academic economists don’t always pay enough attention to, he says. “That’s a very important aspect to how policy gets done, both domestic politics and international politics.”

He was offered the job by his current boss, Lael Brainard, the undersecretary for international affairs at Treasury, who reports to Geithner. Klein got the call because of his policy-oriented research on topics such as exchange rates, and, he suspects, because as a faculty member at Fletcher, people assume he stays abreast of the latest economic policies and can explain them in plain English.

He’s renting an apartment in downtown Washington, D.C., and returns to Boston on the weekends. That isn’t the only big change, he says with a laugh. Known as one of the more casual dressers at Fletcher, he says his students and colleagues “would be shocked to see how well I dress every day now. I’ve gotten very good at tying a Windsor knot.”

Heft and Depth

International economics is more important than ever. “The crisis that we’ve had over the last few years has demonstrated the way in which events in one country can affect what happens in other countries,” Klein says. “So in the Office of International Affairs, there is a real focus on how international events affect the U.S., and how the U.S. affects the world.” That has meant, for example, dealing with debt challenges in Europe, which threatened to stall the U.S. economic recovery last spring, and controversy over U.S. monetary policy, which led to “cries of currency wars from some in emerging market countries in the fall,” he says.

His role, Klein says, “is to provide intellectual heft and depth to what’s going on in the international affairs division.” In meetings and policy briefs, he draws on his knowledge of—and contributions to—scholarly research on topics to provide background about current concerns for top-level policymakers at Treasury. “It’s providing a context and framework for thinking about issues,” he says.

Klein is a bit cagey about the exact issues he’s working on at the moment—that’s part of playing politics in Washington. But he does offer one general topic as an example: rebalancing. That’s about trying to find a healthy equilibrium in the current account balance between countries—essentially between surpluses that are too big (think China) or deficits that need to come down (think you and me, buying all those goods from China, and the U.S. not selling enough in return). It’s a topic Klein has written on in academic journals, and that knowledge is useful in formulating U.S. economic policy.

Serving in the Treasury has given him a greater appreciation for public service. “The people working here are really top notch,” says Klein, the William L. Clayton Professor of International Economic Affairs. “It’s very inspiring to see people really working very hard for the public good.”

“The Fletcher School has always been an institution that values both scholarly research and practice,” says Dean Stephen Bosworth. “Michael will now be even better able to help prepare his students for public service, for those who decide that’s what they want to do. It’s also a mark of some distinction for the school to have one of our tenured faculty members chosen for this kind of position.”

When he heads back to Fletcher for the fall 2012 semester, after finishing his stint at Treasury and a sabbatical, Klein says he will bring a new perspective to his classroom. “I think it will enhance my ability to convey how economic policy is actually understood and conducted,” he says, “and what some of the constraints are, in a way that I would not have been able to do before having had this experience.”

Taylor McNeil can be reached at taylor.mcneil@tufts.edu