Tax Cuts, Trade Head Up Nominee’s Hearing

Henry M. Paulson Jr., the White House nominee for Treasury secretary, used his confirmation hearing Tuesday to praise President Bush’s tax cuts and to promise to keep American businesses competitive through improved trade negotiations with China.

“I feel very strongly that we should not be increasing taxes now,” Paulson, 60, told the Senate Finance Committee. “I watched the role tax cuts played in getting the economy where it is.”

Paulson, however, said tax cuts did not pay for themselves, as the Bush administration has argued. But he said that as chairman and chief executive officer of Goldman Sachs, the big securities firm, he saw tax cuts help Wall Street rebound after the Sept. 11 attacks.

If confirmed, Paulson is expected to bring clout and energy to a department that Sen. Max Baucus (D-Mont.) described as “suffering depressed morale and a diminished policy role.”

He would be Bush’s third Treasury secretary, replacing John W. Snow, the former CSX Corp. railroad executive who announced his resignation last month after 3 1/2 years in office.

Sen. Charles E. Grassley (R-Iowa), chairman of the Finance Committee, said he hoped to see Paulson approved by the Senate before the July 4 congressional recess. Snow steps down July 3.

There appeared to be no opposition to the nomination among committee Democrats on Tuesday. Sen. Charles E. Schumer (D-N.Y.), who introduced Paulson, said he supported him “wholeheartedly.” Schumer said Senate Minority Leader Harry Reid (D-Nev.) also supported Paulson’s confirmation.

Democrats asked Paulson for assurances that, once confirmed, he would brief the committee on a controversial Treasury program that monitors international bank transactions in an attempt to track terrorist financing.

Paulson said that he had not been briefed about the program, but that once he was confirmed he would “be all over it.”

“I totally agree that we need to communicate, and we need to figure out the proper channels to do that,” he said.

Sen. Ron Wyden (D-Ore.) said he first learned of the program from media reports last week. According to those reports, the U.S. government uses administrative subpoenas, which are secret and not reviewed by judges or grand juries, to obtain information about bank transfers from a consortium called SWIFT, the Society for Worldwide Interbank Financial Telecommunication.

Baucus said he had already written a letter to Bush asking whether the administration had also reviewed private tax records without briefing members of Congress.

As Treasury secretary for the next 2 1/2 years, Paulson said he would be prepared to champion Bush’s efforts to restructure Medicare and Social Security, both of which Paulson said were underfunded and “threaten to unfairly burden future generations.”

If confirmed, Paulson also would face a large national deficit and a looming trade deficit with China.

Paulson has visited China more than 70 times during his career, and committee members said he was likely to have unique insight and access.

Paulson attended the hearing with his wife, Wendy, and a handful of friends from Goldman Sachs.

A graduate of Dartmouth College and Harvard Business School, Paulson worked at the Department of Defense and as a staff assistant in the Nixon White House before joining Goldman Sachs in 1974. An avid bird-watcher, he was elected in 2004 to be chairman of the Nature Conservancy, a charity that has drawn criticism for certain land deals.

Grassley said that the Senate Finance Committee asked the Nature Conservancy to provide an audit record from Paulson’s tenure, but that the charity had not yet complied. When Grassley asked Paulson about the delay Tuesday, Paulson recommended the committee ask the IRS for the financial record, in which case the record would “be kept in confidence” and not become public.

After the meeting, Grassley said he believed the Nature Conservancy record should be made public and would pursue ways to accomplish that. But he said he did not believe the issue would stand in the way of Paulson’s confirmation.

Paulson received $35.06 million last year from Goldman Sachs in compensation, including stock options. The White House has said he would sell his Goldman Sachs holdings, worth $470 million, to meet government conflict-of-interest requirements.