Jim Sinclair's Commentary
Up until November, maybe. This administration trucks no mavericks. It sets a course and maintains it.
The Formula is correct so don't fall for the spin of a strong independent Chairman of the Fed and independent Secretary of the Treasury that will change the economic course set so far.
You must see the picture being painted by the old master tactician, the man Robert De Niro portrays in Wag the Dog.
forbes.com
Paulson aims to restore Treasury's clout
By MARTIN CRUTSINGER, AP Economics Writer Sun Oct 8, 7:53 AM ET
When it comes to treasury secretaries, President Bush may find that the third time is the charm.
His latest - former Goldman Sachs chief executive Henry Paulson - has sent a strong signal in his first three months that the Treasury Department once again is a player in economic policy debates.
Paulson has staked out U.S.-China relations as his special prerogative. He also has let it be known that he plans to tackle the government's biggest budget headache - the strains on Social Security and Medicare from the looming retirement of 78 million baby boomers.
But even with all his Wall Street savvy and drive, it remains to be seen just how much success he will have with little more than two years left in the Bush presidency.
Paulson, sworn in on July 10 as the 74th treasury secretary, wasted no time signaling he planned to follow a far different playbook than the one used by Bush's first two treasury chiefs, Paul O'Neill and John Snow.
O'Neill, the former head of aluminum producer Alcoa Inc., got in trouble for his unscripted comments and the view at the White House that he was not a team player. After being forced out in December 2002, he collaborated on a highly critical book about the Bush administration.
Snow was a chief executive at railroad giant CSX Corp. who was brought in to fix the O'Neill problem. Snow stayed on message to the point that his relentless happy talk about the economy harmed his credibility. He was seen on Wall Street as a cheerleader with little input into the actual policies the administration was pursuing.
As the head of the investment firm Goldman Sachs, Paulson already had plenty of credibility on Wall Street when the administration sought him out for the Treasury job.
His price for taking the job was to win pledges the administration would support his effort to restore the Treasury's former clout and would not ask him to make political trips for the administration - as Snow had done repeatedly during the 2004 campaign.
Paulson hit the briefing sessions during his early weeks on the job, getting up to speed on all the issues the department oversees.
He met with influential lawmakers in sessions intended to emphasis his desire for bipartisan solutions. He also met with his Cabinet colleagues and major interest groups.
Treasury employees have learned to adapt to Paulson's hurry-up style of operating, which includes weekend meetings at his home. Staffers often arrive at work to find long telephone messages Paulson has dictated during the night, giving them a to-do list, a carry-over from his days at Goldman Sachs.
As a sign of Treasury's new influence, Paulson persuaded Allan Hubbard, Bush's good friend and the head of the president's National Economic Council, to accompany him to China in September. Hubbard's presence was an important signal to the protocol-conscious Chinese of the new secretary's standing with Bush.
The trip's chief achievement was creation of a high-level strategic economic dialogue headed by Paulson and Chinese Vice Premier Wu Yi that will meet twice a year.
This panel will deal not only with economic issues such as copyright piracy and China's undervalued currency but also energy and the environment, giving Paulson sway over a wide portion of U.S.-China relations.
After returning home, Paulson gained ground in the delicate area of China's currency. American manufacturers contend the Chinese are undervaluing the yuan to gain competitive advantages that have contributed to America's soaring trade deficits with Beijing.
Paulson persuaded the National Association of Manufacturers' board of directors to back away from supporting a House bill that would have opened the way to penalties against Chinese products. The secretary also won agreement from two senators to drop their push for an even more punitive measure that could have required 27.5 percent tariffs on all Chinese products.
"When Paulson came to speak to our board, he was pretty convincing," said Frank Vargo, vice president for international affairs at NAM. "He told us he knows how important it is to get China's currency to move. He said, 'I believe I have a way of going about it that can work and I need your support.' And he got it."
Sen. Charles Schumer, who along with Sen. Lindsey Graham, R-S.C., agreed to drop their tariff legislation, said Paulson has been impressive in his early months on the job.
"The big question is will Paulson really be in charge like other treasury secretaries were not allowed to be," Schumer, D-N.Y., said in an interview. "At the outset, it looks like he is and that is good for the country."
Still, if Paulson does not produce, his early support could dwindle. His aides realize that as they prepare for the first meeting of the new U.S.-China panel in Beijing in December.
Paulson also has been meeting with Federal Reserve Chairman Ben Bernanke and other market regulators to make sure the government will be up to the task of handling any future financial market disruptions.
In his first major speech as secretary, Paulson said the growth in Social Security, Medicare and Medicaid was the "biggest economic issue facing our country." He said trying to find a solution was a leading reason that he took the job.
That could prove to be a tall order, however, given the glaring lack of success Bush had in 2005 with a proposal to partially privatize Social Security. It went nowhere in Congress.
"If Paulson can move the ball forward on entitlement reform, that will be a major test of whether his heavyweight reputation can deliver on something that is extremely important for the country economically," said Nicholas Lardy, an economist at the Institute for International Economics. |
