TCS Daily

Greenspan for
Treasury Secretary

By James K. Glassman - December 9, 2002 12:00 AM

A source at the White House this morning said that John Snow, the chairman of CSX, is the likely choice to be the next Secretary of the Treasury. Snow is an unusual businessman. He has a Ph.D. in economics as well as a law degree. He's served in government, and he's done a good job running a large corporation in tough times. But Snow is not the very best choice for the job of Secretary of the Treasury, and there's still time (maybe a few hours, maybe more) for President Bush to get it right.

The departure last week of Paul O'Neill, the Treasury Secretary, and Larry Lindsey, the top White House economic advisor, was no surprise. The abrupt manner of their exits was. The administration evidently wanted to convey the impression that it was making a fresh start, getting serious about economic policy. That's fine, but it raises expectations. O'Neill's successor, especially, has to be first-class.

While I liked both men who resigned Friday, their demeanors were clearly unsuited to their jobs. O'Neill's flat affect hid what appeared to be a seething anger at Washington ways. His desire to convey an impression of independence led him to do goofy things - goofy for a Treasury Secretary, that is - like trying to influence environmental policy as a climate-change greenie at his first Cabinet meeting and making predictions, to the percentage point, of GDP growth and of a stock-market resurgence.

(His Africa tour with Bono, often cited as one of his gaffes, actually was a good idea. World poverty is, indeed, the most important long-term challenge we face, and Africa is ground zero. The problem is that tour was the single most noteworthy thing O'Neill did, while it should have ranked 20th or so.)

Lindsey, who was formerly my colleague at the American Enterprise Institute, deserves credit as the author of a tax-relief package that both helped George W. Bush win the presidential election and dampened the 2001 recession. But Larry is a gloomy guy - and, even if his pessimism has been prescient, it's not the right style for this president.

The administration is embarking on a policy that should be no more surprising than last week's dismissals (tax cuts aimed both at increasing business investment and consumer spending, a tight rein on spending, freer trade and Social Security reform). At the very least, it needs a presenter on economic policy to match the folks on the national-security side: Rumsfeld, Powell and Rice.

The most plausible scenario that has been floated is that Snow - who, by the way, sits on the AEI board - would move to O'Neill's job; Glenn Hubbard, another of my former AEI colleagues, who, as a respected academic, now heads the Council of Economic Advisors, would become Snow's deputy secretary, adding heft; Stephen Friedman, former chairman of Goldman Sachs, would take Lindsey's job; and Gregory Mankiw, a Harvard professor who has written the most popular college textbook on economics, would take Hubbard's post.

But, if President Bush wants to make a bold move, he should name Alan Greenspan the new treasury secretary. Kevin Hassett, also of AEI, raised this idea in a TechCentralStation piece Aug. 1. Now, he's needed more than ever, for lots of reasons: Fiscal policy needs a formulator and a great spokesman. Greenspan's presence at Treasury would reassure markets during the early stages of his successor's term. His presence would greatly enhance the prestige of the Bush economic team, lifting it to at least the level of the national-security team. And Greenspan can articulate conservative, free-market principles better than anyone in the world - besides Milton Friedman, who's not available. And, by the way, Greenspan has also been a true believer in high technology, and its champion. He'll be the best friend that Silicon Valley will have in the administration.

Why would Greenspan do it? First, his fourth - and almost certainly last - four-year term as chairman of the Federal Reserve Board ends in June 2004. Greenspan has done a superb job transforming U.S. monetary policy. He's smart enough to be bored doing what he's doing now, and he needs intellectual challenges. In fact, when he goes to Capitol Hill, he is invariably asked more questions about fiscal policy (taxes, spending) than about monetary. As Treasury Secretary, he will be free to develop, articulate and implement those policies, rather than just talking about them from on high. That's a challenge, and an attractive capstone to any career.

Won't the markets be frantic about Greenspan's successor? Not if the president makes the obvious choice - Harvard economist Martin Feldstein, who was formerly chairman of the Council of Economic Advisors under Reagan and heads the distinguished National Bureau of Economic Research. Feldstein was also mentor to Lindsey, Hubbard and many other conservative economists. Greenspan and Feldstein: a socko combo!

But isn't Greenspan too old? Not at all. He turned 76 in March, but he's a spry guy, and his age is probably more an asset than a liability. He's been through it all, including, as a child, the Great Depression. And don't forget that the greatest Treasury Secretary of the 20th century, Andrew Mellon, served until he was 77. More recently, Bill Clinton's first Treasury Secretary, Lloyd Bentsen, served till 73.

There are other decent free-market choices for the post - Feldstein himself, who is probably the most persuasive advocate in the nation for privatizing Social Security, or Robert Zoellick, the dynamic and brainy U.S. Trade Representative. But Greenspan is a better explainer than Feldstein, and Zoellick still needs some seasoning. Why not the best?

Anyone Bush chooses will be stacked up against Bob Rubin, Clinton's second Treasury Secretary. Rubin's reputation has been inflated, and he's been hurt by his intercession on behalf of Enron. But he's still worshipped in the press. Nevertheless, hardly anyone in America would doubt that Greenspan stands taller than Rubin.

In one courageous move, Bush could strengthen his economic policy - and the public's perception of it. After all, isn't that why O'Neill and Lindsey were shown the door?



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