Jury still out on whether Paulson measures up

Henry Paulson

Henry Paulson says he likes to run at problems, not away from them, and as the Bush Administration's third Treasury secretary, the former Goldman Sachs chairman faces some big ones.

Two months after Paulson was sworn in, President George W. Bush is counting on him to press China on its currency system, help get the Doha Round of world trade talks back on track and re-energise the effort to rein in entitlement spending.

Paulson is also the chief emissary to financial markets. In Beijing last month, he tried to get China to tackle economic reforms and make its currency more flexible, which could help shrink the huge US trade deficit. He claimed a victory before he left.

But some analysts have their doubts. "I don't think there's been a significant break from prior policy at all, which was to quietly keep encouraging China to adopt flexibility but without indicating any penalty if they didn't do so," said New York-based economist Roger Kubarych of Hypovereinsbank.

There clearly has been a break in style at Treasury to stress differences between Paulson and his two businessmen predecessors - one-time CSX Corp head Snow and former Alcoa chief Paul O'Neill, who was forced out in December 2002.

O'Neill was seen as loose-lipped and Snow was viewed more as a salesman than a policy-maker.

Paulson is more deliberate. Early on, his staff made known he had a deal with the White House: he would not travel to key election states like Ohio to trumpet the latest economic news, as Snow had to in 2004.

Some liken Paulson's elevated role to that of former Treasury chief Robert Rubin, a Wall Street veteran who served under President Bill Clinton.

In China, Paulson spurned reporters' efforts to pry out details of talks, but back in Washington, he got restive lawmakers to set aside proposed punitive tariffs against Chinese imports, a feat Snow had not managed.

One issue Paulson wants to tackle is the soaring costs of health and retirement programmes for older Americans. He has stressed that he wants bipartisan solutions, but the Bush Administration's push to change social security proved polarising .

Much may depend on who controls Congress after next month's election.

- REUTERS