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 The World Bank GroupToday's Headlines: Tuesday, December 10, 2002 Snow Puts Emphasis on Boosting Job Growth The administration of US President George W. Bush on Monday signaled that boosting US jobs growth with tax cuts was at the top of its agenda for next year as it nominated John Snow as Treasury secretary, reports the Financial Times. "John Snow will be a key adviser on the economy and a key advocate of my administration's agenda for growth, new jobs and wider and more international trade," Bush said as he announced the nomination of Snow to replace Paul O'Neill. "I will be proposing specific steps to increase the momentum of our economic recovery." The new Treasury secretary will be the public face of the administration's effort to reform the tax code, restore international confidence in US economic leadership and rebuild investors' faith in corporate America, the story says. The replacement of Larry Lindsey, the chief economic adviser who also resigned at the White House's instigation on Friday, has yet to be named. Stephen Friedman, the former chairman of Goldman Sachs, was still considered the front-runner last night but the failure to nominate both men simultaneously caused some puzzlement in Washington. The big question, writes the Washington Post in an editorial, is whether President Bush thinks Snow will do a better job creating a clear and sound economic policy for the administration, or whether he simply believes Snow will be a more credible salesman for the Bush team's old tax cutting agenda. By appointing John Snow, a railroad executive, as Treasury secretary, and probably Stephen Friedman, as White House economic counsellor today, Bush will be getting two people who are, by all accounts, consensus builders and "listeners", the Christian Science Monitor adds. That will help the administration speak more with one voice on the economy, but not necessarily result in new initiatives. "I think the President is looking for a new messenger, not a new message," says Sung Won Sohn, chief economist at Wells Fargo Banks, of Snow's appointment. Amity Shlaes of the FT comments that a goal for Snow is consistency on the role of international financial institutions such as the IMF and the World Bank. The Bush administration has been dismayingly inconsistent on the question of bailouts for Latin America. Argentina heard Yes, then No, then Yes and then No. The story ended in financial implosion and a lurch leftward in the region. But it is not merely loan decisions that matter. Too often the US has backed plans that focus on fiscal austerity rather than relative competitiveness. Alan Beattie of the FT also comments that there will be few tears shed on the international economics circuit at O'Neill's departure, since he treated global policy coordination with disdain and its instruments, such as meetings of the G7, as a waste of time. Under O'Neill, the Treasury took a hostile line on large bailouts for countries in financial crisis, only to contradict it in practice by supporting large rescue packages for Turkey and Brazil. The change of personnel could be an opportunity to correct this imbalance but the potential for contagion and backlash means there is little chance that the US administration will want to take risks such as suspending aid to Brazil. A more substantive change may come in US support for the sovereign debt restructuring mechanism (SDRM), a new judicial procedure for bankrupt countries advocated by the IMF but opposed by many private sector investors and banks. O'Neill's enthusiasm for the idea in contrast with his predecessors but also with John Taylor, his own international undersecretary, who gave only lukewarm support was instrumental in making the SDRM a serious proposition. Because the program needs congressional approval, the loss of Treasury department backing could deal the SDRM a heavy blow. Commenting in an editorial, the FT says just as they were two years ago, those who believe the Treasury should be run by someone with serious experience of financial markets, academic economics or government will be disappointed. Unlike his three predecessors as president, but perhaps evincing an earlier era of US economic policymaking, Bush evidently favors the industrial interest when it comes to his top Treasury official. But Snow should bring some much-needed savvy to the Bush administration. That will be complemented by Stephen Friedman, the former Goldman Sachs co-chairman, who looks set to be named this week as the new head of the White House's national economic council to replace Larry Lindsey. In the two appointments, therefore, there is at least a chance that policymaking will operate in a more coherent environment. But for what purpose, exactly? The real problem with O'Neill and Lindsey was that they worked in an administration in which economic policy was dictated at every level by political priorities, says the editorial. When they were not following overtly political goals themselves, they were routinely overruled by political masters on trade, international financial bail-outs, the currency and even taxes. If it really wanted to restore its battered credibility with investors, consumers and the wider world, the Bush administration would have had the chance with last week's sackings. It could have demonstrated that the message was changing with the messenger. There is not much in yesterday's developments to inspire confidence that the serious errors of the past two years are going to be reversed. |
