In Economic News: Snow Will Not Fall

Dan Ackman, 12.09.04, 9:15 AM ET - Forbes.com

NEW YORK - When he was a railroad chief executive, John Snow's company's performance was mediocre, but he did well, scoring the biggest bonuses in the business. As a Treasury Secretary, it's much too soon to gauge his performance, and it's not clear whether he was even permitted to contribute in the traditional manner of finance chiefs. But whatever he was doing was good enough, for now, since the Bush Administration couldn't find anyone better.

Following weeks of speculation, the White House announced that Snow will stay on as secretary of the Treasury, the 72nd man to follow in the footsteps of Alexander Hamilton, whose face is on the $10 bill. It may be more relevant, though, that Snow is the first man to follow in the steps of Paul O'Neill, who was fired and who accused the White House of marginalizing the Treasury Department.

O'Neill's beef was that the White House didn't want to hear his input, or input from anyone with critical or questioning views, or facts. Firing Snow might have bolstered O'Neill's charge.

As it stands, the hubbub about firing him has undermined his credibility, or his "stature," the very attribute he was said to lack. As a promoter for the president's program, he was nothing if not eager. During the campaign, he hit the hustings repeatedly. He lobbied for the dividend tax-cut plan in 2003, which passed on basically party-line vote. While Microsoft (nasdaq: MSFT - news - people ) now pays a dividend and Citigroup (nyse: C - news - people ) increased its payout, the plan does not seem to have affected corporations in any dramatic fashion.

On Snow's "watch" the value of the dollar is down, and the trade deficit is up. Both were caused by factors that were in place while he was still running CSX (nyse: CSX - news - people ). The budget deficit is at a record level in dollar terms, but at 3.6% of the nation's gross domestic product, it would be smaller than the deficits of the mid-1980s and early 1990s relative to the size of the economy, according to the Congressional Budget Office. The CBO expects it to shrink, largely because of an increase in the Social Security trust fund surplus.

All projections are assuming laws and economic conditions remain unchanged. Of course, they always change. If, for instance, interest rates rise, the federal debt payments and the deficit will increase.

Snow's supporters are reportedly disappointed that the administration didn't support him, permitting speculation of his ouster to go unrebutted.

His critics are disappointed that he wasn't ousted, in fact. They are worried that the White House needs a better salesman for its plans. According to the Wall Street Journal, these critics were looking for "someone with the stature of Clinton Treasury Secretary Robert Rubin," mentioning former Texas Sen. Phil Gramm, whom White House officials did consider. By openly seeking a replacement, the White House has reduced Snow's stature further.

Aside from Hamilton, history remembers Treasury chiefs mostly if they get in trouble by being fired, like O'Neill, or if they are promoted, like Salmon Chase, who served under Abraham Lincoln, and later became chief justice of the Supreme Court. George Shultz, who served under Richard Nixon and was later Secretary of State, falls into that category. Otherwise, they are recalled for their actions as businessmen and philanthropists (like Andrew Mellon, who served under Harding, or Henry Morgenthau who served under Franklin Roosevelt).

How will Snow be recalled? That depends on his ability to sell the program--and also what the program is, as it is now undetermined. It will depend on whether the program works. In other words, no one knows.