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An Angell in Waiting?
The right guy for Treasury.


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Larry Kudlow

If the kangaroo court Florida Supremes are ever stopped, and George Bush becomes the next president, he’s going to have to pick a cabinet. And though it cannot yet be completely confirmed, there are strong rumors coming from the Bush camp that former Fed Reserve board member Wayne Angell is under serious consideration for the key post of treasury secretary. This story was first scooped by supply-sider Jude Wanniski in his client newsletter. I have phoned around to sources in the Bush campaign and people who are close to Angell, and I now believe the story has legs.

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If Angell were in fact chosen to run the treasury department, it would be a spectacular appointment. Angell is a brave free-enterprise warrior who has long labored in the supply-side vineyards of sound money, lower tax rates, deregulation, and free trade. As a Fed member he had a good relationship with Alan Greenspan, as the two were frequent tennis partners.

Importantly, in monetary affairs, a key treasury domain, the pro-growth Angell believes in a strong and stable dollar, and has always opposed the Phillips Curve trade-off between unemployment and inflation. Both as a Fed member and a Wall Street economist, Angell has been a leading advocate of a market price rule, using commodities (including gold) and financial interest-rate indicators, to guide the Fed money supply and interest-rate policies.

In view of the slumping economy and sinking stock market, George W. Bush will surely seek lower interest rates from the Fed. Angell’s recent writings show that he believes that the current Fed funds interest-rate policy is 50 basis points (one half of 1 percent) too high, based on declining bond rates, soft commodities, and a low gold price.

Angell would also fit Bush’s bill on supply-side tax cuts to promote economic growth. Down through the years, the Kansan has always pressed for the growth-incentive model of lower marginal tax rates and overall tax simplification. Indeed, sources tell me that he would press for a tax cut that would be retroactive to January 1, 2001, rather than a delayed cut effective a year later. In this way, individuals would not defer spending and investment decisions to capture the benefits of lower tax rates a year hence, but instead would act immediately with a retroactive cut.

The combination of increased Fed liquidity, a lower Fed funds rate, and across-the-board relief on marginal tax rates would plant the seeds for the next economic boom during a Bush administration. Angell also is a strong supporter of gradually converting the moribund Social Security system to personally owned retirement accounts invested in the financial markets.

Thus far, the names surfacing as treasury candidates are solid, if unspectacular, Republican citizens: broker Donald Marron, investment banker Jack Hennessey, and commercial bankers Walter Shipley and Sandy Warner would all be adequate to the job. But frankly, Wayne Angell stands head and shoulders above these candidates in terms of his theoretical beliefs and his practical hands-on experience in all areas.

The Bush people have been particularly mum about the treasury job, but it does in fact appear that Angell is on the short list. If he can get the position, watch the animal spirits of risk capital and the stock market rebound immediately from their year-long slump.



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