Treasury Secretary-designate John W. Snow expressed concern Tuesday about the long-term consequences of rising deficits but insisted that President Bush's tax cuts would not push the nation into the danger zone.
During a four-hour confirmation hearing before the Senate Finance Committee, Snow parried questions about the economy, the dollar and his own compensation as a corporate chief executive.
But he spent most of his time defending the 10-year, $670-billion tax cut proposal Bush will submit to Congress next week, and the reappearance of federal deficits after four years of budget surpluses.
"Yes, deficits matter," Snow said several times in response to prodding by committee members. "We can't allow ourselves to get into the situation ever again that we were in the late '80s and for much of the '90s. I'm not happy about these deficits at all. The president's not happy about these deficits."
Snow, a 63-year-old railroad company executive, was chosen by Bush in December to replace Paul H. O'Neill, the painfully blunt Treasury secretary who was shown the door as part of a midterm shake-up of the White House economic team.
Although some Democrats have criticized his pay and performance as chairman and chief executive of CSX Corp., Snow is expected to win the Finance Committee's endorsement today and Senate confirmation by week's end.
"I am confident that you are the right person for the job," Senate Majority Leader Bill Frist (R-Tenn.) told him at the start of his confirmation hearing.
Bush, speaking during a Cabinet meeting at the White House, urged the Senate to move quickly. "I look forward to having him join us here at this table," the president said.
Snow was subjected to surprisingly few questions about his record at CSX, where he has received more than $50 million in stock, options and other compensation since becoming chairman in 1991. CSX stock has trailed the market over the same period.
He described his pay package as "sort of standard fare for CEOs of Fortune 500 companies." As part of an agreement to divest most of his financial holdings, he said he would give up stock options worth $25 million to $50 million and other benefits worth $15 million.
Snow was not asked about a decision by the CSX board to forgive a $25-million loan made to him to purchase company stock. The action ensured that Snow would not lose money as the stock price declined. Nor was he asked about a 1982 charge of drunk driving or a 1991 child-custody dispute with his ex-wife.
During his testimony, Snow tried to strike a balance between the competing demands of economic stimulus and fiscal restraint. As leader of the president's economic team, he would be expected to promote the big tax cuts Bush says are needed to spur the recovery and stimulate long-term growth. But as the nation's chief financial officer, he must convince the markets that Bush's economic plan will not bury the Treasury in debt.
The Congressional Budget Office is expected to issue a report today predicting that this year's deficit will be substantially higher than the $145 billion projected in August. Some private economists say the shortfall could reach $300 billion.
Snow said the red ink was the unavoidable consequence of the nation's current priorities: financing the war on terrorism, providing for homeland security and giving the economy a boost.
Although worrisome, today's deficit is "relatively modest" in relation to the size of the U.S. economy, he said. The shortfall amounts to about 2% of the nation's gross domestic product, compared with a high of 5% in the mid-1980s.
"We have the lowest interest rates in 40 years. That's not a sign of financial markets being deeply disturbed about deficits," Snow said.
That could change, he acknowledged, "if we ever give the financial markets reason to think that we are not committed to fiscal responsibility."
Snow was reminded by Democrats that as chairman of the Business Roundtable, a corporate lobbying group, he was an outspoken advocate of deficit reduction. One committee member read from a 1995 newspaper article in which Snow said a balanced budget would reduce long-term interest rates by as much as 2 percentage points.
Snow said he remained concerned about the long-term effect of deficits, particularly on Washington's ability to keep Social Security and Medicare on a sound footing when the baby boomers begin to retire.
"We need to be thinking now about the cost of these huge unfunded promises we've made to future generations," he said. "Demographics will overwhelm us."
But he said the president's tax-cut package was needed to put the economy on a path toward faster growth, which he described as the best way to turn projected deficits into surpluses.
Snow defended Bush's plan against accusations that it would shower most of its benefits on the rich by reducing the top income tax rate and eliminating the tax on corporate dividends.
Snow said he was not insensitive to the needs of working-class Americans. "I counted myself among the working poor years ago when I was working my way through college," he said. "The best thing we can do for the working poor is make the economy stronger."
But he did not agree with Democrats who said the Bush proposal should be expanded to provide cash rebates to about 30 million low-income workers who pay no income taxes.
"They will be helped greatly by the job effects of this budget and by the growth effects of this budget," Snow said. He cited administration estimates that the tax-cut plan would stimulate creation of 500,000 jobs by the end of this year and 1 million more by the end of 2004.
Addressing one of the most sensitive issues facing a Treasury secretary, Snow stated unequivocally that he favors a strong-dollar policy: "A strong dollar is in the national interest."