Analysis: Snow stays, but Treasury still shakes

WASHINGTON, Dec. 9 (UPI) -- After much speculation to the contrary, the White House announced late Wednesday that John Snow would indeed stay on as Treasury Secretary. And confirmation that Snow will continue to head the Treasury for another four years should mean that there will be no major personnel changes within the department either.

But there are rumblings about whether or not John Taylor will remain as Treasury's under-secretary for international affairs. For unlike his immediate boss, Taylor probably won't go out of his way to tow the party line on deficit spending and tax cuts, whereas Snow has undoubtedly been Bush's chief economic cheerleader throughout the presidential campaign. However, the under-secretary's comments have not been on the radar screen of most policymakers and political analysts, given that Taylor has kept his lips firmly closed on politically sensitive issues concerning the U.S. economy, including the budget.

Instead, the man tasked with dealing with the international political economy on behalf of the U.S. government focuses on just that: the international economy. But even a cursory glance at some of Taylor's public comments indicates just how much the United States is preaching the "Do as I say, not as I do" school of thought.

Taking part in the World Economic Forum's first-ever gathering in India last weekend, Taylor told business executives and global leaders that the country must step up efforts to get its finances in order.

"I was impressed to hear about new efforts at the state level to combat fiscal problems...to eliminate their budget deficit and improve management of public finances," Taylor said Wednesday in Mumbai, following a U.S.-India economic dialogue between the two governments.

Ironically, Taylor's comments come at a time when the federal deficit of the United States reached an all-time high of $412 billion in the latest fiscal year ended Sept. 30. Meanwhile, the Congressional Budget Office projects $2.3 trillion in accumulated deficits over the next decade in light of increased military and homeland security expenditures, even as the Bush administration continues to press for still more tax cuts despite the growing budgetary needs.

India is far from alone, though, in being shown either a carrot or a stick to get its own finances in order by the U.S. Treasury, usually led by Taylor. In the case of Argentina, for instance, the United States has supported the International Monetary Fund's position that the country must reign in its spending and get its debts under control before it can qualify for additional financial support from international lenders. Indeed, while the Bush administration has broadly been skeptical about the effectiveness of international institutions for the most part, it has continued to support the strict fiscal discipline required by potential borrowers from the IMF.

Yet as many international economists point out, if the United States itself were to apply for a loan from the agency, it would be flatly refused, given the rapid pace of spending outpacing revenue, in addition to its ever-growing trade imbalance with the rest of the world.

Moreover, instead of discussing the fundamental weaknesses in the U.S. economy as it currently stands with an international audience, Taylor has concentrated on discussing global growth and risks to the world economy at large.

For example, Taylor said earlier this week at the World Economic Forum in New Delhi that "an important goal of the Bush administration is to reduce poverty by raising economic growth around the world," highlighting Bush's call for increasing grants as opposed to loans to the poorest countries, and extending aid only to those countries which have already proven to make full use of financial aid given in the past.

But while he may choose to brush aside criticism about the feasibility of Bush's domestic economic plan both at home and abroad, Taylor is clearly nobody's fool. An academic who has taught at Stanford, Princeton, and Columbia, Taylor is also the only senior official in the administration to have a mathematic formula named after him. The Taylor rule on interest rates is designed to recommend how central banks should set short-term rates to achieve both price stability and growth, and continues to be used to this day.

As such, even the most vehement opponents of Bush's economic plan and Treasury Secretary Snow's seemingly blind following to the administration's proposals continue to have high regard for Taylor. So there is speculation among some Treasury officials that Taylor may depart before Snow, especially as the secretary puts social security reform as planned by the White House at the forefront of the Treasury's agenda in the second term of the Bush administration.