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In Defense of Snow
What more could we ask for in a Treasury secretary?


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Donald L. Luskin

It’s fashionable on both the left and the right to have a low opinion of Treasury Secretary John Snow. He is constantly rumored to be just about to be fired by President Bush. And a Wall Street Journal poll of economists last week found him not to be an effective Treasury secretary by a margin of almost two to one.

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I’ve criticized Snow myself from time to time, but permit me to be unfashionable. I’ve come to believe that John Snow is doing a terrific job.

Since he was nominated by the president in January 2003, he has been at the center of the Bush administration’s best economic initiatives. In his first months in office, he helped push through the 2003 tax cuts on personal income, dividends, and capital gains. Those tax cuts were arguably the Bush administration’s single best economic policy initiative — the catalyst for a sharp turnaround in economic growth and job creation.

Those tax cuts probably wouldn’t have happened were it not for Snow’s tireless salesmanship. The only time I ever met Snow, in fact, was at a presidential briefing on the tax cuts with a small group of economists in April 2003. As soon as the meeting broke up, Snow raced up to me, grabbed me by the arm, and took me and two other economists out to the White House lawn where he whipped up a spontaneous press conference to ballyhoo the tax cuts. A month later, they were law.

If the tax cuts were the administration’s finest economic hour, then its 2002 steel tariffs probably were its worst. They were implemented under Snow’s predecessor, Paul O’Neill. They were rescinded in Snow’s first year in office.

And Snow has been instrumental in turning back a dangerous bipartisan drift toward protectionism in Congress. A year ago Democratic Senator Chuck Schumer and Republican Senator Lindsey Graham won a test vote — by an overwhelming veto-proof margin — on a bill that would slap an across-the-board 27.5 percent tariff on Chinese imports unless China radically revalued its currency. Snow responded by embarking on three months of intense shuttle diplomacy, bouncing back and forth between Beijing and Washington. When it was done, China agreed to a token revaluation, and Schumer and Graham had withdrawn their bill.

If that bill had passed, in my judgment it would have been the worst trade legislation since the Smoot-Hawley Tariff Act that triggered the stock market crash of 1929 and the Great Depression of the 1930s. It would have amounted to a 27.5 percent sales tax on many U.S. consumer goods, and it would have dangerously destabilized the entry of China into the community of modern nations. With the potential ripple effects of retaliatory measures from China and other nations, it’s not an exaggeration to say that the Graham-Schumer bill risked a global depression. (Disturbingly, that 27.5 percent “solution” is now back on the table.) At the time, John Snow stopped it cold, yet I don’t recall seeing his face on the cover of Time magazine.

Perhaps John Snow’s problem is that he has done too good a job. In 1999, Time magazine put Clinton Treasury secretary Robert Rubin on its cover, along with Fed chair Alan Greenspan and deputy secretary Larry Summers. The magazine dubbed the three “The Committee to Save the World.” This was after the collapse of several Asian economies, the default by Russia on its sovereign debt, and the failure of the giant hedge fund Long Term Capital Management.

You see, under John Snow, nothing terrible like that has happened. He has kept the financial world from needing to be saved in the first place.

So why doesn’t Snow get the respect he deserves? That’s a silly question: Thanks to the bias of the mainstream media, there’s no one in the Bush administration who gets the respect he or she deserves.

Snow may not be a glamorous Wall Street legend like his aristocratic Democratic predecessor Robert Rubin. He’s an unglamorous former railroad executive, a short balding man who has the misfortune to rather resemble the little fellow on the Monopoly board, minus the mustache. An unfortunate mascot of capitalism, perhaps, but when it comes to pro-growth free-market economics, Snow is the real deal.

Snow is an economics Ph. D., whose work has centered on the importance of deregulation. He earned his degree at the University of Virginia, where he studied under two Nobel Prize winners. He taught economics at the University of Maryland and the University of Virginia.

His economic philosophy was on brilliant display in a speech last week, in which he candidly attacked the statist anti-growth economics of “The Hamilton Project,” a new undertaking at the Brookings Institution, the liberal think tank.

The Hamilton Project is just the kind of thing the media loves — the same media that loves to hate John Snow. Its agenda is to promote wonderful new ways that government can get involved in managing the economy, under the guise of “growth” and “fiscal discipline.” Robert Rubin is on the advisory board, of course, along with various other Clinton administration officials like Roger Altman, Bush-hating liberal professors like George Akerlof, and big-time Democrat donors like businessmen John Doerr and Steven Rattner.

And to name this liberal love-fest after Alexander Hamilton, the iconic Treasury secretary, is a slap in John Snow’s face.

In an administration often criticized by its own supporters for failing to vigorously confront its critics, Snow minced no words on the Hamilton Project. He said last week that it argues

for a deceptively simple approach … calling for both ‘fiscal discipline, and for increased public investment in key growth-enhancing areas.’ Well, if you do the math, growing the public sector — that is, making government bigger — and achieving fiscal discipline, can only lead to one thing: higher taxes. And higher taxes always mean a larger role for government and a smaller role for the private sector … that is antithetical to growth itself.

What more could we ask for in a Treasury secretary? Snow is an effective economic diplomat. He’s a principled spokesman for growth and freedom. During his tenure the economy has boomed.

I like John Snow, and I hope he sticks around.

– Donald Luskin is chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. He welcomes your visit to his blog and your comments at [email protected].



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