In its lead editorial today, The Wall Street Journal recommended Discovery Senior Fellow Richard Rahn for a high-level post in the Treasury Department to effectively push for persistent tax reduction and simplification. This story primarily examines the record of newly appointed Treasury Secretary John Snow.
President Bush’s new Treasury Secretary is a successful old-line industry CEO who moonlights at the Business Roundtable and worked in the Ford Administration. Wait, didn’t Mr. Bush just fire Paul O’Neill?
At least based on his resume, CSX Chairman and CEO John Snow looks like a carbon copy of the departing Mr. O’Neill, the former aluminum executive. The White House is whispering that Mr. Snow is a better communicator and more of a team player, which shouldn’t be too hard. The question is whether he can provide the intellectual leadership and political energy that a modern Treasury demands.
Certainly Mr. Bush’s nominee deserves the benefit of the doubt. As head of CSX, Mr. Snow made the railroad a more modern, efficient part of the national transportation network. His hard experience with antitrust and regulation could make him a useful voice in an Administration that has flopped around on telecom and other microeconomic issues. Mr. Snow also supervised the Conference Board’s recent report on corporate governance, which gives him standing to address any further Enrons.
More hopefully, Mr. Snow was an active member of Jack Kemp’s tax reform commission in 1996, privately showing as much interest in tax cuts as in simplification. CSX has also been a donor to such free-market think tanks as the Heritage Foundation and the Competitive Enterprise Institute.
On the other hand, the choice of another big business CEO hardly sets a new economic policy tone. Mr. Snow hasn’t stood out as a populist promoter of investor capitalism (Charles Schwab) or a passionate advocate of tax cuts or Social Security reform (Phil Gramm). Every recent Treasury Secretary has also had to deal with a crisis in the international economy, and Mr. Snow is a blank public slate there too.
Perhaps Mr. Snow has been keeping up with these policy debates on his own time, and as a Ph.D. economist (from Virginia, thankfully not MIT) he must be familiar with the concepts. Then again his participation with the Business Roundtable will not have honed his sharper instincts. Such collections of big business CEOs historically promote a kind of mushy moderation that follows the Beltway consensus rather than leads it, and puts the needs of established companies above those of entrepreneurs.
Mr. Snow’s recent corporate government report, for example, recommended that stock options be expensed. The lone dissent came from Andrew Grove, the Intel chairman who knows that options matter more for fast-growing start-ups than they do for 100-year-old firms. The U.S. Treasury has to worry about creating companies of the future, not just sustaining the businesses of today.
All of which means that the second-order positions at Mr. Snow’s Treasury will be crucial. One urgent need is for greater financial market know-how, both foreign and domestic. This is the time (early) in an economic recovery when big financial collapses tend to occur, and a veteran hand at Treasury is essential to steer around the shoals. Treasury veteran David Malpass, now at Bear Stearns, would add heft to Mr. Snow’s international management. So would Adam Lerrick, a gimlet-eyed student of the IMF at Carnegie Mellon.
Another need is a tax-cut firebrand. Beltway inertia always works against letting taxpayers keep more of their money, and so someone has to be tax-cutting’s champion in the bureaucracy. Our sense is that the O’Neill Treasury never really mobilized for the 2001 tax-cut fight, especially in providing intellectual support for tax cutting’s boost to economic growth (and thus tax revenues).
The assistant secretary for tax policy ought to be a household name next year on Capitol Hill and the cable networks. Richard Rahn, the former Chamber of Commerce chief economist, comes to mind for such a job (see his nearby article), as does Steve Entin, who toiled at the Reagan Treasury and has studied tax policy since then at the Institute for Research on the Economics of Taxation.
We’ll know Mr. Snow is making his mark if Treasury re-emerges as the dominant voice in Bush Administration economic councils. The White House is by definition a political shop, with fewer policy resources. Stephen Friedman, the reported new leader of the National Economic Council, will at least bring financial expertise. But his policy associations (the anti-tax-cutting Concord Coalition and the board of Fannie Mae) aren’t reassuring.
The Bush Administration and especially the U.S. economy need Mr. Snow to become an articulate advocate for pro-growth policies.