28 January 2003, 17:41  Snow Faces Test in U.S. Senate Over Plan to Cut Taxes

Washington, Jan. 28 (Bloomberg) -- U.S. Treasury Secretary nominee John Snow faces his first test as a salesman for economic policies when the one-time proponent of balanced budgets tells senators today that he backs the president's $670 billion tax-cut plan. While lawmakers predict Snow will win confirmation as the 73rd Treasury chief, they plan to use today's Senate Finance Committee hearing to probe him on President George W. Bush's proposal to eliminate taxes on dividends, accelerate income-tax reductions and aid the unemployed. Snow also faces questions on the dollar's decline, and why his pay as chief executive of CSX Corp. outperformed the railroad company's stock. ``There's going to be a lot of questions about the tax proposals from the White House, but more importantly there's going to be some issues dealing with corporate governance,'' said Senator Charles Grassley, the committee's chairman and an Iowa Republican, in an interview with Bloomberg Television.
The hearing begins at 9:30 a.m. Washington time. ``He's a solid pick -- he's going to get confirmed,'' said Senator John Breaux, a Louisiana Democrat. Bush ousted Paul O'Neill in December and tapped Snow, the CEO of the No. 3 railroad, to replace him after the U.S. lost jobs for a second year and had a third straight annual drop in stock values. Bush wants Snow to help push through Congress a 10-year economic plan that some Democrats say would do little more than help the rich.
Deficit Concern
Democrats complain that Bush's plan to end taxes on stock dividends and accelerate income-tax cuts will boost the deficit and do little for the economy. Several economists estimate the budget deficit may reach $300 billion or more this year. To win confirmation, the 63-year old Snow may have to reconcile his previous support for a balanced federal budget with the administration's tax-cut plan. Last February, Snow warned a stimulus package at that time might trigger ``problems down the road,'' and in 1995 he led a $2 million advertising campaign for a balanced budget as chairman of the Business Roundtable. ``It's standard Senate theater to raise old quotes, and Snow will certainly be asked to respond to his past statements on deficits,'' said Kevin Hassett, resident scholar at the American Enterprise Institute and one of 15 economists who briefed Bush on the economy last week.
Strong Dollar?
Currency traders also will seek policy clues in Snow's remarks on the dollar. The White House in recent weeks signaled Snow won't change the eight-year support for a strong dollar, which economists say limits inflation at the cost of disappointing manufacturers who want a weaker dollar to help boost exports. The dollar fell 15 percent against a group of six main currencies last year, the biggest decline since 1987. So far this year, it's down 2.6 percent. The dollar fell yesterday for a record 10th straight day against the euro. Snow also will be the first corporate executive to seek a Cabinet post since accounting scandals at companies including Enron Corp. and WorldCom Inc. Those crises brought attention to companies' accounting practices, weak oversight by directors and exorbitant pay packages. Some senators have said they want the nominee's ties to other companies reviewed. While at CSX, Snow served at various times as a director of at least 22 other companies, including Circuit City Stores Inc., U.S. Steel Corp., Johnson & Johnson and Verizon Communications Inc.
Corzine on Conflicts
``The record needs to be examined,'' Senator Jon Corzine, a New Jersey Democrat and a former Goldman, Sachs & Co. chairman who is not on the confirmation panel, said last week. ``I'd like to examine it in detail and see whether there were conflicts.'' The nominee will cite his membership of a Conference Board panel that investigated corporate malfeasance and last week's pledge to go beyond the requirement of the law and sell his CSX holdings and stock in 60 other companies if confirmed. Snow became CEO of CSX in 1989 and built a personal net worth estimated at $100 million. He sold ships, barges and warehouses to focus CSX on the railroad and led the purchase of Conrail Inc. assets with Norfolk Southern Corp. for $10.2 billion in 1997. Logjams after that takeover almost wiped out 1999 profit, and CSX stock trades at about half its price before the Conrail offer. During the decade that ended in December, CSX shares fell 17 percent while the Standard & Poor's 500 Stock Index more than doubled. Snow's salary rose to $1.25 million last year from $961,000 in 1996.
Administration officials have prepped Snow to handle questions about his former memberships to the Augusta National Golf Club, which excludes women, and the Commonwealth Club in Richmond, Virginia, which once barred blacks. The nominee also may be asked for more details on a 1988 child-support dispute with his first wife and an arrest for drunk driving in 1982; at Treasury, he would oversee the department's newly formed Alcohol and Tobacco Tax and Trade Bureau. //www.quote.bloomberg.com

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