It's likely the White House chortled Monday when President Bush
offered up CSX Corp. chairman John W. Snow as the new treasury secretary.
They deserve a chortle or two. In the heavy speculation that followed Paul
O'Neill's firing, Snow's name wasn't on anyone's list of possible
Apparently, Vice President Dick Cheney quietly led a search team
that came up with Snow. In contrast, the White House loudly leaked the name
of investment banker Stephen Friedman to replace Larry Lindsey as head of
the National Economic Council. Neither the stock market nor the rest of the
world (nor me) knows much about these men. But after two-dozen phone calls
on the subject, I learned that Snow is highly regarded and Friedman is not.
Let's start with Snow.
"Very good!" Jack Kemp told me. The supply-side father said that
as a member of the Kemp Commission on tax reform in the mid 1990s, Snow
bought into the economic-incentive model, understood the link between risk
and reward and fully supported the flat-tax recommendations of rate
reduction, simplification and reform that were proposed by the commission.
Heritage Foundation President Ed Feulner, also a member of the
Kemp Commission, seconded this praise. Feulner said "(Snow) signed on
enthusiastically to the flat-tax recommendation," attended all meetings,
worked hard and was effective.
Former Reagan budget director Jim Miller said Snow got high
reviews at CSX, where he started out as a Washington rep, moved to
operations and quickly rose to CEO. He said Snow is a great organizer and
communicator, and added that Snow studied under free-market Nobelist James
Buchanan when working on his Ph.D. in economics at the University of
Snow is also a strong deregulator, especially in transportation
(a weak Bush link under Norman Mineta). In addition, he's a staunch advocate
of better corporate governance and ethics. If he has a downside, it's that
he might be obsessive over deficit reduction. According to Jim Miller, Snow
echoed this misguided sentiment when he was head of the stodgy Business
Roundtable. Miller added that "it's important that Snow move back to first
It is surprising the White House would recommend two old-economy
candidates for the Treasury post. First, it was O'Neill from the aluminum
industry. Now, it's Snow from railroads. Many would have preferred a
younger, new-economy Treasury man, someone more in tune with the critical
technology sector. But it can be reliably anticipated that John Snow will
carry the ball for the Bush administration's forthcoming pro-growth tax-cut
Unfortunately, the same cannot be said for former Goldman Sachs
executive Stephen Friedman.
In a half dozen phone calls, I couldn't find a positive word for
Friedman. Naturally, no one wanted to be quoted. But from deep-background
interviews, I can report comments like "nasty," "arrogant," "ineffective,"
"not a detail guy" and "unpopular." One former Goldman partner told me he
still cannot understand why Friedman abruptly left the lucrative partnership
in the mid 1990s. "He just walked out the door one day," he said. A money
manager who knows Friedman said he jumped ship because Goldman's earnings
were imploding. This individual, a conservative, said, "Look, I may not have
agreed with him, but (Clinton's Treasury chief) Bob Rubin was a smart guy.
Friedman was not."
Several people expressed dismay at Friedman's link to the
Concord Coalition, a group that consistently opposes tax cuts and obsesses
over deficits. Friedman was vice chairman of the group and apparently had no
strong political views other than deficit-bashing. Another source said
Friedman contributed at least as much to Democrats as to Republicans,
including heavy support for Sen. Chuck Schumer and at least some help for
I do not know Friedman or much about him. Of course, his critics
could be wrong, and numerous supporters may pop up in the days ahead. That
said, seldom have I heard such uniform badmouthing and disparagement of any
Snow and Friedman will supposedly help Bush put the final
touches on an excellent pro-growth plan that includes a lower tax burden on
dividends, faster write-offs on business investments, expanded supersaver
IRA and 401(k) accounts, and an acceleration of last year's income-tax cut.
My early investigations suggest that John Snow will be a strong supporter of
this package at Treasury, but that Stephen Friedman could be a tax-cut
opponent in the White House. Should Friedman embrace the faux politics of
class warfare and deficit obsession, he'll only chip away at the tax cuts
that will drive growth and the 2004 election.
Hopefully, this bipolar combination won't occur. The last thing
Bush needs is more economic warfare among his own senior staff. Democratic
opposition will be problem enough.