President Bush's selection of a savvy Wall Street veteran to be his third treasury secretary is winning widespread praise, but Democrats say it will take a change in policies — not just personnel — to deal with budget and trade deficits and other economic problems.
With his approval rating at record lows despite strong economic growth and low unemployment, Bush announced Tuesday that he was turning to Henry Paulson, chairman and chief executive of Goldman Sachs, to become the administration's chief economic spokesman.
By choosing a 32-year veteran of one of Wall Street's premier investment houses, Bush is hoping for the same economic credibility that Bill Clinton gained when he picked Robert Rubin, one of Paulson's predecessors at Goldman Sachs, as his treasury secretary.
While both Snow and O'Neill came from corporate America, the administration decided it needed someone with high standing on Wall Street to be a more effective salesman for its economic program.
"Mr. Paulson's experience in running Goldman Sachs, a global financial firm involved in all kinds of sophisticated corporate and financial activities, makes him a near-perfect appointment," Allen Sinai of Decision Economics said in a typical Wall Street reaction.
Snow had been rumored to be on his way out for more than a year, but the selection of Paulson, 60, came as a surprise because of recent administration signals that it had failed to lure a big Wall Street name as a replacement.
White House press secretary Tony Snow said Bush met with Paulson on May 20 and Paulson accepted the job the next day. He said White House chief of staff Joshua Bolten, who used to work at Goldman Sachs, was the matchmaker, and the president sealed the deal after Paulson expressed reservations.
"I know that there had been some conversations, and that he expressed reluctance — I'm not sure it was a flat `No,"' Snow said Wednesday. "I do know that the final answer was yes and I do know that Josh Bolten continued to speak with him."
Snow did not elaborate on how the president convinced Paulson to do the job. "It is safe to say that he (Paulson) had some reluctance about doing it, and was insistent on a series of conditions, and apparently his concerns were addressed," Snow said.
While Paulson was chosen to bolster confidence on Wall Street about the administration's policies, investors on Tuesday ignored the initial news to focus instead on worries about higher oil prices and sliding consumer confidence, pushing the Dow Jones industrial average down by 184 points.
Analysts said the sell-off, one of a number of recent steep slides, highlighted the challenges Paulson faces at a time when inflation is threatening to accelerate and economic growth is slowing.
Given this administration's past practice of using its treasury secretary chiefly as a salesman for policies set inside the White House, some analysts questioned how much impact Paulson will have.
"Will the new treasury secretary have any more influence than his two predecessors did, and will this administration be able to get anything through Congress with just 2 1/2 years to go?" said David Wyss, chief economist at Standard & Poor's in New York.
Bush's top second term domestic priority, Social Security overhaul, is currently dead, his drive to overhaul the tax code is in the deep freeze, and Democrats are massing to defeat the president's effort to make permanent his first-term tax cuts, charging they are unaffordable in light of huge budget deficits.
"The Bush administration must use its remaining years in office to right the fiscal wrongs of its first term," said Rep. Charles Rangel, top Democrat on the tax-writing House Ways and Means Committee.
"It is essential that Mr. Paulson provide a realistic viewpoint of the serious issues facing the American economy," said Sen. Jack Reed, D-R.I.
Sen. Charles Schumer, D-N.Y., said Paulson's long experience in dealing with China should help in the administration's campaign to get the Chinese government to allow its currency rise in value against the dollar as a way of dealing with a record $202 billion U.S. trade deficit with China.
In his writings and speeches, Paulson has been a strong supporter of the administration's tax cuts and its free-trade agenda. He also gave a pivotal speech in 2002 in support of a crackdown on corporate crime in the wake of the Enron Corp. and other business scandals.
A strong environmentalist and devoted bird watcher and fisherman, Paulson has supported the need to attack global warming, a stand that could put him at odds with Bush's environmental views, although treasury does not have responsibility for those issues.
Paulson, a Christian Scientist who does not drink or smoke, has used a fortune estimated at well over $500 million to make generous contributions to Republican candidates, according to the Center for Responsive Politics, a campaign watchdog group.
During a brief White House announcement ceremony on Tuesday, Paulson called the American economy "truly a marvel, but we cannot take it for granted. We must take steps to maintain our competitive edge in the world."