MB Civic

By EDMUND L. ANDREWS

WASHINGTON, July 10 — Henry M. Paulson Jr. took over on Monday as Treasury secretary and as President Bush’s top economic adviser, filling out a new economic team with a more pragmatic cast for the final two and a half years of this administration.

Mr. Bush, who wooed Mr. Paulson from his post as chairman of Goldman Sachs, said on Monday that the former executive would have a central role in setting the agenda and implied that the Treasury Department would regain some of the power it lost to White House advisers during Mr. Bush’s first term.

“Hank Paulson will be my leading policy adviser on a broad range of domestic and international economic issues, and he will be my principal spokesman for my administration’s economic policies,” Mr. Bush said before Mr. Paulson was sworn in.

Mr. Paulson, who has a net worth of more than $700 million and has announced plans to sell $470 million worth of Goldman Sachs stock, is probably the richest Treasury secretary in history.

White House officials seemed intent on coordinating Mr. Paulson’s arrival with a broader effort to generate more excitement for Mr. Bush’s economic agenda and record.

Administration officials are frustrated that Mr. Bush’s popular support has plunged, mainly because of the war in Iraq, even as the economy has grown briskly and unemployment has remained comparatively low at 4.6 percent.

On Tuesday, the administration plans to announce that this year’s budget deficit will be lower than projected because tax revenues are climbing faster than expected.

Last Friday, Mr. Bush visited a microelectronics factory near Chicago to highlight the nation’s high-technology strength and the newest employment statistics.

But Mr. Paulson will be taking over at a time when the economy appears to be slowing, inflation is rising and gasoline prices have climbed to nearly $3.20 a gallon in many regions.

The Federal Reserve has raised interest rates 17 times in two years and is expected to increase them at least once more. The once-sizzling housing market has slowed noticeably, with prices edging down in some cities and homes remaining on the market much longer than in the recent past.

Although Mr. Bush’s economic policy, with its emphasis on tax cuts, deregulation and trade, has a distinct ideological cast, Mr. Paulson will be leading a new economic team that has an early reputation as more pragmatic than ideological.

Mr. Bush’s chief of staff, Joshua B. Bolten, is a former Goldman executive who is trying to improve ties between the White House and Congress. Rob Portman, who recently took over as director of the Office of Management and Budget, served as Mr. Bush’s chief trade negotiator and, before that, was a Republican representative from Ohio known for his expertise on pension and saving issues.

White House officials are hoping that Mr. Paulson can develop the kind of stature that was accorded to James A. Baker III under President Ronald Reagan, and Robert E. Rubin, another former chairman of Goldman Sachs, under President Bill Clinton.

To help guide him through an administration thick with existing relationships and rivalries, Mr. Paulson recruited James R. Wilkinson, a senior adviser to Secretary of State Condoleezza Rice, as his chief of staff. Mr. Wilkinson has a reputation as a shrewd political adviser and one with a background in foreign policy as well.

Before working under Ms. Rice, Mr. Wilkinson was a communications strategist at the National Security Council and, before that, communications director for the United States Central Command during the first year of the war in Iraq.

Mr. Paulson suggested that his top priorities would be international issues; he said little about major domestic initiatives. His most forceful remarks were about the need to promote a greater engagement in the world economy.

“We must always remember that the strength of the U.S. economy is linked to the strength of the global economy,’’ he said after being sworn in by Chief Justice John Roberts. “If we retreat from the global stage, the void is likely to be filled by those who do not share our commitment to economic reform.’’

Mr. Paulson could have his hands full on the international front. With the trade deficit approaching $800 billion this year, the United States needs to attract more than $8 billion a day from foreign investors to pay for its current level of consumption.

A loss of confidence in the dollar could aggravate inflation pressures by pushing up import prices. It could also push up long-term interest rates, which remain surprisingly low even though the Fed has pushed up overnight rates.

Mr. Paulson’s other challenge will be budget issues. Though tax revenues have increased sharply this year, spending continues to climb rapidly as a result of the war in Iraq, hurricane relief and the new Medicare prescription-drug program.

Despite more than four years of economic growth, tax revenues have barely recovered to their level in 2000 and the deficit is still likely to be about $300 billion this year.

Mr. Bush made it clear that he expected Mr. Paulson to help make his tax cuts permanent, which would cost more than $1 trillion over the next decade.

“Our first challenge is to keep taxes low,’’ Mr. Bush said. “Hank understands that cutting taxes has helped launch the strong economic expansion that is lifting the lives of millions of Americans.’’

Mr. Paulson was more demure.

“We need to pursue economic and regulatory policies that are responsive to today’s world,’’ he said. He did not mention tax cuts, one way or the other.