What Are You Doing Here?

Judging by the photos on the walls of his vast office, the new Treasury secretary has a gentler approach to the world than, say, Vice President Dick Cheney. While Cheney likes to hunt small birds with a shotgun, Hank Paulson shoots them with a camera. Photos of unusual birds--Paulson's vacation pictures, taken by his wife--hang above Bloomberg computer terminals feeding the latest Wall Street data to his desk. "If you look around here," he tells NEWSWEEK, gesturing at his photos, "I have spent a huge percentage of my time off in beautiful places, outdoor places, saving the land, wilderness, parks ... Conservation is my passion."

Paulson is a rare species inside the Bush administration. Environmentalists see this White House as a bastion of backward thinking; Bush has angered them (and America's allies) by sometimes questioning the science of global warming. Yet Paulson cares deeply about climate change: during his seven-year run as chairman and CEO of Goldman Sachs, the investment bank issued a policy paper backing the science on warming and promoting investment in alternative energy.

In recent months Paulson has played a leading role in the administration's debate about energy--and he's had an impact on environmental policy. It was Paulson who encouraged the former oil executives in the West Wing to embrace ambitious targets to cut by 20 percent the amount of gas Americans are forecast to consume by 2017 (part of the plan outlined in Bush's State of the Union). White House officials portray the policy as a team effort, but identify Paulson as a driver. "He was very involved in the energy proposal," says a senior White House official, who declined to be named while talking about the internal debate.

Paulson had an expansive view of his job almost as soon as he started in June. By August he had identified energy security as one of his priorities, as well as Social Security reform and trade with China. A small team began working on ideas outside traditional Treasury business--some of them so politically sensitive that the team feared they might leak out before the November elections. Among them: putting a floor on the price of oil to subsidize alternative fuels. White House and Treasury officials deemed that idea too costly to administer--and out of line with GOP ideology. So Paulson's team worked with Bush's economic aides and the Department of Energy to head in a new direction: setting higher standards for fuel efficiency and alternatives like ethanol to spur new technologies. But there was some pushback. Bush's aides were concerned about the impact these proposals would have on a weakened Detroit, since higher-mileage standards favor foreign rivals. The solution was to allow for variable efficiency standards by car size.

Environmental groups were disappointed that Paulson didn't persuade Bush to wage a war against global warming. But the goal of using more alternative fuels and raising auto efficiency is still a significant change for an administration whose vice president once pooh-poohed conservation as "a sign of personal virtue." (Cheney's policy request: that the strategic petroleum reserve be doubled during the next 20 years.) Even green advocates concede there are some positive steps in the new strategy. "They are apparently serious about raising fuel-economy standards, and that is the most meaningful thing in the plan," says Dave Hamilton, director of global warming and energy programs at the Sierra Club.

To Paulson, the new energy strategy succeeds by giving something to just about everyone--even if green activists aren't totally thrilled. "Some people's expectations got so high they thought it was going to solve all the environmental problems, energy security, it was going to encompass everything, and they were disappointed," he says. "This policy has got some important positives for the environment, but they are collateral." Paulson may be an avid bird watcher, but while he's working for President Bush, he's keeping his head out of the clouds.

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