(The following Reuters story by Jonathan Nicholson appears on Yahoo News.)
WASHINGTON — As railroad executive John Snow prepares to take the helm at the Treasury Department , one of his challenges, experts say, will be rebuilding the department’s once-unquestioned authority in economic policy.
In 1999, then-Treasury Secretary Robert Rubin, his deputy Larry Summers and Federal Reserve Chairman Alan Greenspan were dubbed “The Committee to Save the World” by Time magazine for their role in dealing with a succession of economic crises.
They were regarded as the undisputed managers of the world’s mightiest economy. But that was then.
After two years of credibility damage from gaffe-prone former Treasury Secretary Paul O’Neill and frequent interference from the White House, the new Treasury chief faces a tough challenge putting his department on the same pinnacle.
In January, the Bush administration laid out a $674-billion stimulus plan without a Treasury secretary to tout the plan. Snow, chosen in December to succeed O’Neill, was not approved by the Senate until late on Thursday.
That highlights how economic policy-making has changed in the Bush administration.
Aided by Rubin’s telegenic market-calming influence, the Treasury in the Clinton era widened its portfolio.
But under Bush, all policy roads seem to lead back to the White House. So Snow will have to reestablish Treasury’s role as the preeminent player and the public voice in administration economic and currency policy.
“This is a highly centralized White House,” said Larry Sabato, director of the University of Virginia’s Center for Politics.
WAITING FOR SNOW
The Treasury has also slimmed down, with many of its law enforcement functions hived off to new agencies. The Secret Service and U.S. Customs will devolve to the new Homeland Security office, while the Bureau of Alcohol, Tobacco and Firearms have been switched to the Department of Justice .
In theory, this will let Snow focus on economic issues.
However, even on economic issues, the Treasury Department will have ground to regain.
While White House economic adviser Lawrence Lindsey resigned under pressure at the same time as O’Neill, on Dec. 6, Lindsey’s post has been filled by Stephen Friedman since the start of the year, while O’Neill’s has stayed empty.
The Treasury has been run by Acting Secretary Kenneth Dam while awaiting Snow’s confirmation by Congress.
Peter Orszag, senior fellow in economic studies with the Brookings Institution and special assistant to President Clinton on economic policy, said it was a “particularly costly time” for Treasury to be without a leader.
“I think it does matter. Perception is partly reality,” he said.
Financial markets like having one clear voice on administration economic policy.
“What is significant is that when Snow is confirmed, we will now have a Treasury secretary after an odd period in which Bush was unveiling an economic stimulus plan without having an economic team to push it,” said David Gilmore, partner with Foreign Exchange Analytics.
“I suspect that at the margin, it will be somewhat reassuring to investors that a Treasury secretary will soon be in place,” he said.
Part of the decline in the Treasury’s profile may be due to how policy-making is structured in the Bush administration. With the White House at the center of things, Treasury is one of a handful of policy players, and the O’Neill and Lindsey camps often seemed publicly at odds.
Orszag said there should be an in-house arbiter to referee disputes in an administration, a role he said was played by the National Economic Council during the Clinton administration.
“They should be hashed out in private,” he said.