What the Paulson Appointment Means (No More Lyndon Baines Bush)

Liberal friends have told me that they can't understand why Hank Paulson took the job at Treasury. Irwin Stelzer translates that question for me in his piece today when he says that "[Paulson's appointment] shows that talk of the death of [the] administration is more than a bit premature." This is what makes liberals unhappy about the pick; it shows that the administration has more life.

Stelzer holds out very high hopes for Paulson, who will be able to provide a steady hand during what Stelzer views as an inevitable meltdown stemming from both irresponsible derivative traders and mergers/going-privates fuelled by cheap debt. Any significant rise in rates will smash highly-leveraged new entities. Stelzer also argues that Paulson is the right person to persuade China to let its currency rise gradually, encourage the administration to embrace proposals for emissions reduction, and help Bush with his first vetoes against wasteful spending bills. Finally, Stelzer implies that Bush will have to listen to Paulson, for Paulson's resignation "would be a wound from which the administration could not recover." This "merger" between Goldman Sachs and the White House seems to be a merger of equals -- or at least one where the "acquired" has unusual clout.