Treasury Secretary nominee John W. Snow said at his confirmation hearing that his multimillion-dollar pay package at railroad giant CSX Corp. was "sort of standard fare for CEOs," and emphasized that he would forgo as much as $50 million in pay, perks and stock to take the helm at Treasury.
The cordial, four-hour hearing left little doubt that the CSX chairman and chief executive would be confirmed as the 73rd Treasury secretary. Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) said he hopes his committee will send Snow's name to the full Senate today for a final confirmation vote on Thursday.
The hearing showed how much the anger over lavish executive compensation has dissipated since it exploded last summer, as Snow's answers were not challenged. The most skeptical questioning was reserved for his defense of the administration's proposed 10-year, $674 billion economic package.
"I believe that President Bush's recent economic growth proposal moves the tax system in the right direction and the U.S. economy as well," Snow said. "It will create jobs. It will spur investment. It is an investment in the American people and their future."
Snow also stressed that he favored a strong dollar, which soothed currency markets, though the dollar had fallen against the euro in recent days.
Far from apologizing for his company's executive-compensation programs, Snow painted them as vital tools for recruiting top talent. Last year's sweeping corporate-management-reform law bans loans from corporations to their senior executives, a restriction that might have prevented CSX's board of directors from extending a large loan guarantee to Snow in 2000.
Snow told senators that he supports the loan ban but offered a caveat. CSX recently recruited a four-star Air Force general, in part by offering a guaranteed loan for his house. "I don't find that offensive," Snow said.
Likewise, he defended as "an effective recruiting tool" a CSX perk that credits the retirement accounts of some top executives with two years of service for every one year worked. He said the program puts those officials "in a more attractive position for retirement."
Most of the questioning revolved around the president's tax-cut proposal, and the skepticism came not just from liberal Democrats but also from centrists in both parties who were crucial to the passage of Bush's 10-year, $1.35 trillion tax cut in 2001.
Sen. Olympia J. Snowe (R-Maine) questioned "the stimulative value" of the centerpiece, a $364 billion proposal to slash dividend taxes. Raising the issue of expanding federal budget deficits, Snowe said Washington should "err on the side of prudence in terms of size."
Sen. Max Baucus (D-Mont.), the committee's ranking Democrat and one of the chief architects of the 2001 tax cut, was blunt about the dividend plan: "Most people think this is not right," he said.
Sen. Don Nickles (R-Okla.), the new chairman of the Senate Budget Committee, endorsed the idea of ending the "double taxation of dividends," but he differed from the White House on how to do that. Instead of giving tax-free dividends to individual investors, Nickles said he would prefer allowing companies to deduct the expense of dividends from their taxes.
The approach "would be more expensive," Nickles conceded, but it would also be "more effective and efficient."
Nickles' position is important, since the House and Senate budget committees are likely to set the broad framework of any tax cut when they establish a budget plan this spring. Like other senior Republicans, Nickles appears to be approaching the president's plan as a suggested economic package rather than a marching order.
The sharpest questioning revolved around the federal deficit. The Congressional Budget Office is scheduled to release updated forecasts today that are expected to put the 2003 budget deficit as high as $175 billion, a $30 billion increase over its August forecast. And that number does not include the costs of any additional tax cuts or a war with Iraq. Democrats used Snow's own words in a 1995 newspaper opinion piece extolling a balanced federal budget to question his advocacy of a new round of tax cuts.
"There is some level of deficits that is troublesome, that begins to tilt the financial markets," Snow said. "We're not there yet. We're a long way from there."