Why Not Name Alan Greenspan to Replace Snow as Treasury Secretary?

The Washington Post reported on Sept. 9 that Treasury Secretary John Snow is once again being shown the door. His rumored replacement is White House Chief of Staff Andrew Card, who would then be replaced either by deputy chief of staff Karl Rove or Office of Management and Budget Director Josh Bolten. This sounds like a bad plan to me.

It was only a few months ago that there were almost daily leaks from the White House about Snow being dismissed. When asked to comment on the record, the White House denied any intention of firing him. Secretary Snow could stay as long as wanted to, a spokesman said, "provided it is not very long," the Post reported.

Although Snow eventually got a White House reprieve, he might as well have left, for all the influence he appears to have. Even though the secretary of the treasury chairs the board of trustees of the Social Security trust fund and even though the department is well staffed by economists with deep knowledge of the subject, this expertise seems never to have been drawn upon.

Instead, fundamental reform of our nation’s oldest and largest entitlement program was largely entrusted to a couple of mid-level White House staffers with neither the experience nor the resources to manage such an important project. Indeed, although there has been much discussion of a Bush "plan" to reform Social Security over the last year, in fact no such plan exists. It remains a bare-bones idea, with no flesh in the form of details or legislative language that would allow anyone to analyze its specific features.

Little wonder, then, that the reform effort has gotten no traction, despite an enormous commitment of time by the president in giving pep talks all over the country. This effort required a detailed plan in advance, however — one that was fully fleshed out with appropriate analyses and explanations of its specific features to be successful. Moreover, it assumed that this material had been available long enough for the policy community in Washington — on Capitol Hill, in think tanks, among reporters — to have fully absorbed the details and been able to discuss them knowledgably.

This is, in fact, the way that large policy initiatives historically are done. Usually, there is a report drafted by the Cabinet department with primary expertise, which is published by the Government Printing Office and widely distributed. Such a report would explain the philosophy and rationale for the policy change, and contain a detailed proposal with extensive background, explanations of each provision, and evidence and argumentation for the change.

Nothing like this was done for Social Security. True, a commission did a report four years ago, but it was just a general overview and did not endorse a particular proposal. We are still waiting for such a proposal from the White House. Lacking that, members of Congress and think tanks supporting reform were forced to come up with their own plans, thereby dissipating support for reform among competing and often conflicting efforts.

Had the Treasury been put in charge of the reform effort, I believe that it would be much closer to enactment. But instead of using the department to flesh out the Social Security plan and coordinate with financial experts to fine-tune its provisions to be sure it would work, Secretary Snow was sent to the boondocks to give speeches to schoolchildren. Little wonder, then, that public support for Social Security reform was anemic and the political prospects virtually nonexistent even before Katrina.

Yet despite the widespread criticism of the White House for putting an inexperienced political hack in charge the Federal Emergency Management Agency, it appears poised to do the same thing to the Treasury Department. But as Katrina shows, while it’s not too hard to run a government agency during normal times, it can be extremely difficult in a crisis. In such circumstances, we desperately need people with leadership skills and technical expertise, neither of which former FEMA Director Michael Brown had.

Many experts are now deeply concerned about the stresses and strains in the financial sector of the economy and fearful that a crisis could emerge at any moment. The huge budget and current account deficits, rising energy and gold prices, a bubble in the housing market, out-of-control hedge funds and a corporate pension system in the process of collapse are just some of the things that could trigger a financial crisis. Should that happen, I fear that Andy Card would be as out of his depth as Michael Brown was in New Orleans.

If President Bush feels compelled to replace Secretary Snow, the obvious choice is Alan Greenspan, who retires as Federal Reserve chairman in January. No one doubts that he will know what to do in a financial crisis.