TOPICS > Economy

Newsmaker: John Snow

March 11, 2003 at 12:00 AM EDT

JIM LEHRER: Finally tonight the state of the American economy as seen by the new treasury secretary, John Snow. I spoke with him earlier today.

JIM LEHRER: Mr. Secretary, welcome.

JOHN SNOW: Thank you. Good to be with you.

JIM LEHRER: How much are the uncertainties over the war with Iraq affecting the U.S. economy right now?

JOHN SNOW: Oh, I think there’s a considerable – considerable effect from those uncertainties without any doubt.

JIM LEHRER: Make the connections. Give us some examples.

JOHN SNOW: Well, the connection is that there’s a premium in oil prices now. The — many investors are reluctant to put capital into businesses. Many consumers are reluctant to buy things. There’s a cloud of uncertainty that surrounds the economy, dampens markets, and causes people just to be reluctant to take action in the economy.

JIM LEHRER: So when you project ahead– let’s go through some various scenarios– just a decision to go to war, would that help just in terms of resolving some of the uncertainties?

JOHN SNOW: Jim, I think the thing that will resolve it is getting it behind us, is ending the uncertainty about the conflict, putting it behind us, and moving on. I think that will have a dramatic effect in strengthening the recovery path of the American economy.

JIM LEHRER: But first things first. What about the costs of the war itself, how do you calibrate those now at the Treasury Department?

JOHN SNOW: Well, that’s not really something we’re directly involved in at the Treasury Department. That’s — if the president decides to put our forces into the theater, he’s indicated that a supplemental will be sent up immediately, and that will deal with those, those projections of cost. I think there are too many imponderables for me to comment on that at this point.

JIM LEHRER: So what about the costs outside the military cost? Like you say, the rising cost of oil, all kinds of uncertainties that spring to that, for instance, in the airline industry there was a report out today in fact– the airline industry said if there’s a war in Iraq, the whole industry could collapse, thousands and thousands more jobs lost, all that sort of — that is in your area, is it not?

JOHN SNOW: Well, there are so many imponderables and so many uncertainties, much depends on, on which path we take and which path we go down, the duration, the termination and so on, that I think it’s — it’s almost fruitless to try and speculate on those imponderables.

JIM LEHRER: So from your point of view, you’re waiting for the war to be over in terms of calibrating what effect this war will have on the economy, if there is a war?

JOHN SNOW: If there is a war — I think the president has indicated that he’d like to avoid a war — but if there is a war, the president has indicated that a supplemental will be set up, and it would deal with the direct costs of the war. My own sense is that the economy would respond well, as it did in the first Gulf War, and get back on a much more normal path as these uncertainties that the war presents or the prospect of the possibility of a war presents are resolved.

JIM LEHRER: What effect is the rising and projected rising of the federal budget deficit having on the economy?

JOHN SNOW: Oh, very little. The deficits we’re looking at in the years ahead are relatively modest; they will decline, and I don’t anticipate any effect on our financial markets or any effect on interest rates from the deficits we will be facing.

JIM LEHRER: As you may have noticed, Paul Krugman writing in this morning’s New York Times says just the opposite, that the rising deficits, the proposed tax cuts, and the aging population add up to a fiscal train wreck that is already underway, the war costs aside. You disagree with him?

JOHN SNOW: Well, I do in terms of the immediate future. The deficits that we’ll be running for the next couple of years as we deal with the issue of rebuilding the homeland and waging the war on terrorism and putting people back to work — and that’s the president’s number one priority on the domestic economy is the tax relief plan, the jobs and growth plan to put people back to work, those initiatives and those areas will not in any way jeopardize the financial security of the United States.

There will be deficits but they’ll be modest. They’ll be manageable and they will not impinge on our financial markets. The best evidence of that of course is simply to look at the markets today themselves where we have the lowest interest rates in 45 years with market — with flow of funds into the United States debt markets that are very, very sizeable.

JIM LEHRER: Well, as you know, as Krugman said today and others have said, that’s about to end because as deficits go up, interest rates will tend to go up with it and there could be chaos. You just don’t see that happening?

JOHN SNOW: No. And financial markets look ahead. If the financial markets saw anything like what Prof. Krugman is suggesting, they would already have responded, and of course they haven’t.

JIM LEHRER: Do you and the president still believe that tax cuts make sense at a time like this when the deficits are rising and we may be on the verge of war?

JOHN SNOW: Absolutely, Jim. This economy isn’t growing fast enough and there are millions of people who don’t have jobs as a result. There is a recovery but it’s a recovery that isn’t creating enough new jobs. The president has said that he won’t be satisfied until every American who’s looking for work can find a job. His plan, his jobs and growth plan is designed to put the economy on a faster growth path and put millions of people back to work.

JIM LEHRER: As you know, as a matter of history, every time the United States has gone to war, just the opposite has happened. Taxes have gone up. The only exception was in the 1840’s in the war with Mexico. What makes it different now that we can go to war and still cut taxes?

JOHN SNOW: Well, I think you’re talking about apples and oranges if you’re comparing the Second World War with the encounter we’re going to have in the Gulf. We didn’t have tax increases with the first Gulf War, and I don’t know anybody, frankly, Jim, who’s suggesting that the remedy for the ills of the economy today would be tax increases. In fact, that would be the worst possible, worst possible medicine.

We need to get the economy moving, we need to get it growing, we need to put people back to work, and the president’s tax plan is designed to do that. It will create half a million new jobs by the end of this year, a million and a half additional jobs by the fourth quarter of next year, and over two million jobs by 2005. We have to recognize that we have a jobs deficit and a growth deficit problem in America today and that ought to be priority number one.

JIM LEHRER: The experts aside, just to the average American layman and the polls reflect this, they’re having trouble understanding why at a time when the deficit is rising, which means we need more money in the federal budget and when we have the prospect of a war where even you would concede we don’t even know what the costs are going to be, that why we wouldn’t freeze things and hold the money we do have, you know, in terms of federal revenue, rather than decrease it by cutting taxes, can you explain that in just lay terms as to why that makes sense?

JOHN SNOW: Well, I think it makes sense because we have to grow the economy, and a bigger economy, a stronger economy, an economy that puts people to work is an economy that generates more revenues, more revenues that help end the deficit, that help grow the government, the ability to pay down the debt, so a strong economy is consistent with, in fact, is an essential condition, an essential condition to balancing the budget.

We got into surplus when the economy was performing at very, very strong levels, and we won’t get back to, back to balance until we get the economy performing better. Now, it’s not alone enough — we also have to constrain spending, but an essential condition, a necessary condition of getting the budget balanced again is to have greater growth and more revenues in the American economy.

JIM LEHRER: Now, on the tax cuts specifically, the Democratic charge has been that they favor the rich, and that charge seems to be sticking a little bit. Does that concern you?

JOHN SNOW: Well, the facts on that are to the contrary. The so-called “rich” will pay — that is, the top two income classes under the tax cut system, will pay more of the tax burden of the country if the president’s plan is adopted and the lowest tax-paying groups will pay a smaller portion of the total revenue of the country received from taxes if the president’s plan is adopted. So I think the facts are just to the contrary.

JIM LEHRER: But as you know, the critics say that that’s all kind of mumbo jumbo because it’s an all average — it’s taking Bill Gates’ tax cut, which will be sizeable, because he makes a lot more money and then putting it on the same page and doing a lot of mathematics with somebody who’s making $25,000 a year, and then saying, well, the average is thus and this and that and so — you’re confident and you’re at ease with the idea that this is a fair tax cut as proposed by the president?

JOHN SNOW: I think there’s no doubt about that fact, and it isn’t really mumbo jumbo. You just take the top 10 percent and you ask the question how much are they paying now and how much will they be paying afterwards and you take the second 20 percent, or 10 percent, and you say, how much are they paying now, and how much will they be paying afterwards, and so on, all through the taxpayer groups, and when you do that math, and it’s very straightforward math, the highest taxpaying groups are paying more of the burden of the total federal government afterwards and the lower paying tax groups, lower income groups are paying less, so I think it’s very hard to make that, to make those charges stick.

The important thing, the really important thing is that we create more jobs and put people to work, and grow the economy, so that the abundance of America is shared with everyone; that’s what the president’s plan is designed to do.

JIM LEHRER: You were brought in to replace Paul O’Neill as the treasury secretary after he and rest of the president’s team were fired essentially because the economy wasn’t doing very well. How much pressure do you feel on yourself to fix this economy soon or else?

JOHN SNOW: Well, I’m a great supporter of the president’s tax plan; it’s just good plain economic policy. It simplifies the code, it lowers marginal tax rates, it ends the unfair double taxation of dividends and it will put the economy on a much better course. I’m spending most of my time today, Jim, trying to sell this package and I’ll be leaving shortly to visit with some members of the Congress to try and advance the case for this package. I think it’s awfully important that the president’s plan get adopted and it’s my number one priority.

JIM LEHRER: Do you feel you have the power and authority to truly have an impact on the economy, or is it just selling the plan that the president already had when you came on board and he said, okay, now, Snow, go sell this, is that it, I mean, do you feel you have additional ability to shape the future of the U.S. economy as treasury secretary?

JOHN SNOW: Absolutely, the president has asked me to be the head of his economic policy team, to be his spokesman on economic policy; those are responsibilities I take very, very seriously. I was consulted on the tax plan, the dividends, and the acceleration of the marginal tax rate deductions, and the other features of this plan. I endorsed them. I supported them and I’m proud to be associated with the Bush administration’s efforts to get this good tax policy, this tax policy that will put people to work, and grow the economy, I’m proud to be associated with this plan and getting it enacted, so the important thing is to get it enacted.

JIM LEHRER: Back and finally to where we began, are you frustrated a little bit, though, Mr. Secretary, trying to even talk about this as long as the specter of war hangs over everything?

JOHN SNOW: Well, it complicates it some — there’s no doubt about the fact — but I think we have to focus on what’s really important long term, and that’s putting people to work; that’s creating jobs, and it’s growing the economy. So yeah, I wish we didn’t have the distraction of all sorts of other things but the fact is this — the geopolitical situation will be dealt with, and we have this underlying issue of an economy that’s under-performing, an economy that’s falling short of its potential, an economy that isn’t creating as many new jobs as it should and I think that’s my number one priority.

JIM LEHRER: Mr. Secretary, thank you very much.

JOHN SNOW: Thank you. Good being with you.