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In many ways, George Bush is replacing Treasury Secretary Paul O'Neill with...Paul O'Neill. The President's choice for the job, CSX Chairman John Snow, brings a resume that's eerily similar to O'Neill's. Both were mid-level government officials who caught the eye of Vice-President Dick Cheney in the days when Cheney was Chief of Staff in the Ford Administration.
Both men have been CEOs of Old Economy companies -- a railroad in Snow's case, aluminum maker Alcoa in O'Neill's. The two are known as eclectic thinkers. O'Neill is fascinated by everything from the economics of worker safety to tax reform. Snow is an economist and a lawyer with an avid interest in trade policy.
KEY DIFFERENCE. And they have one more trait in common: Both are deficit hawks. It's a world view that might make Snow's tenure in Washington as difficult as O'Neill's was. Privately, conservatives worry about Snow's bona fides as a tax-cutter, which is central to the Bush agenda. "When push comes to shove in the conflict between tax cuts and the deficit-phobia types, Snow is going to have to choose," worries one supply-sider, who isn't sure which way Snow will tilt. O'Neill never did get aboard the tax cut uber alles bandwagon.
That's not to say Snow and O'Neill are the same man. Snow, 63, is a smooth-talking consensus-builder who knows how to avoid ruffling the feathers of Capitol Hill lawmakers. That's very different from the feisty O'Neill, who reveled in speaking his mind and was never afraid to blow the whistle on a policy he thought was dumb. Snow will, as Senator John Corzine (D-N.J.) says, "be formidable in his presentation of the President's case."
With a not-so-subtle eye on the 2004 Presidential elections, Bush began to put a new economic team in place on Dec. 6. Since Main Street, Wall Street, and Joe Sixpack are all plainly uncomfortable with an economy that can't seem to get on track, Bush decided a shakeup would give the impression of movement in a stagnant economy. As his father famously said, "Message: I care."
ROUGH EXITS. The econo-purge wasn't handled in the usual, seamless Bush way. First, he awkwardly dumped O'Neill and top White House economic adviser Lawrence Lindsey. O'Neill, especially, was said to be furious at the shoddy way he was shown the door (see BW Online, 12/06/02, "Nice Guys Finish Last. Ask Paul O'Neill"). On Dec. 9, Bush nominated Snow to the Treasury post.
Before the week is out, the President is expected to name Lindsey's successor. The likely choice is Stephen Friedman, who in the early '90s was co-CEO with Robert Rubin at Wall Street's Goldman Sachs. But supply-siders are also sharply criticizing Friedman, who they fear is another deficit hawk infected by the deadly disease of Rubinomics and thus, they suspect, insufficiently committed to the old-time religion of tax cuts.
That only compounds conservative fears about Snow, whose main job will be to sell policies that have already been developed. Bush settled on his "jobs and growth" package weeks ago. It will be built around a series of narrow tort reforms, a restructuring of Medicare, and, of course, tax cuts. Sources say the plan's first-year cost could run roughly $40 billion, pushing the deficit up to $250 billion or so. The long-term cost could run from $150 billion to $300 billion.
SKITTISH EXECS. Snow's job will be to convince the public that deficits don't matter. His role won't be so much to push the merits of Bush's policies on Capitol Hill, where the White House probably has the votes to muscle most of them through without his help. Rather, it will be to calm his fellow corporate execs, who are so skittish about the stock market and the war against Iraq that they're afraid to invest in new capital equipment. If he can settle their nerves, Snow's tenure will be deemed a success. But first, he's going to have to shed whatever Main Street worries he harbors about that deficit.
In the White House these days, red ink is of little consequence. But with the Bush political apparatus already in fall 2004 campaign mode, economic growth surely does. The President largely dodged the issue in this year's elections by successfully focusing the public's attention on his role as Commander in Chief of the war against terrorism. But he may not be so lucky in 2004, especially if the war against Iraq is long over and the economy remains sluggish.
Snow's job will be to do whatever needs to be done to make sure that the economy is a plus for Bush in '04, not a negative. He may be a smoother pitchman than O'Neill. But he may find that getting growth back on track is a lot tougher than running a railroad.
Gleckman is a senior correspondent in BusinessWeek's Washington bureau. Follow his views every Tuesday in Washington Watch, only on BusinessWeek Online Edited by Douglas Harbrecht
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