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There are three reasons why Treasury Secretary John Snow should not have caused as big of a commotion as he did a week or so ago when he almost guaranteed that interest rates would rise next year.

But there is also one very important reason why such a stir should have been expected.

The first reason not to get worked up over Snow's statement is that it wasn't really news. Snow wasn't saying anything that the Bush administration in effect hasn't said before - or for that matter, hasn't been saying for quite some time.

In fact, the Bush fiscal 2004 budget sent to Congress more than six months ago included an economic forecast showing interest rates rising significantly next year. The 10-year Treasury note, which is critical because most financial institutions use it to determine their rates on 30-year mortgages, was projected by the White House to rise from 4.2 percent in 2003 to 5.0 percent in 2004. The White House also projected that the rate on the 91-day Treasury bill would more than double, from 1.6 percent in 2003 to 3.3 percent in 2004.

So Snow was simply restating the same economic policy the administration has been using all year. Anyone following the budget and economic debate knew the administration was forecasting higher rates long before the Treasury secretary said anything about them earlier this month.

Second, the fact that interest rates are likely to rise next year is as much basic economic theory as it is Bush administration policy. If the U.S. economy picks up steam as the White House is promising, higher interest rates are virtually certain to result. Third, the much-higher-than-expected federal budget deficit means that interest rates almost certainly will be higher than they would otherwise have been, as the most credit-worthy customer on Wall Street - Washington - takes more of what is available to be borrowed and, therefore, reduces what is available for everyone else.

The reason is that the price of money (that is, interest rates) responds to the same supply and demand factors as everything else. If another of the administration's predictions proves correct - the increased federal demand for credit comes at the same time the equities market improves - and cash moves from the bond to the stock market, interest rates could be even higher still.

But even if they were just a reaffirmation of existing policy and a confirmation of economic theory, Snow's remarks rightfully caused a stir because they bordered on a Paul O'Neill-like political insensitivity to the situation.

Over the past few years, interest rates have become one of the most politically important economic statistics, in many ways on par with unemployment. Adjustable-rate mortgages alone make consumers - and voters - much more aware and leery of increasing interest rates than they have ever been before.

That makes higher interest rates a political as well as economic issue and Snow should have taken that into account. The fact that he seemed not to understand this put his remarks right up there with many of the quips that got his predecessor into political hot water with the White House.

The Treasury secretary talking about rising interest rates had to be hair-raising for Republican political operatives and the equivalent of raw meat for those analyzing and reporting on the 2004 elections. It also must have sent shivers down the spine of many Republican incumbents and prospective candidates.

Simply put, the Snow remarks were completely "off-message." The White House has gone out of its way to talk about economic growth rather than higher interest rates. To the White House, higher interest rates have always been an unavoidable by-product of economic growth. Officials also have said that the deficit is critical to achieving that economic growth, so higher interest rates are to be expected... and to a certain extent welcomed as an indication that the economic policies are working.

That actually was Snow's point as well - that growth would pick up as projected and that higher interest rates would be the indication. The problem was that he said it in a politically insensitive way that is contrary to how the White House has been talking about the budget and economy. It also let an issue out of the bag that the administration has been trying to stop from becoming a story for at least another year.

All of which begs the question: Will having unexpected Snow in October mean the White House tries to prevent it from falling again?

Question Of The Week

Last Week's Question. "Budget Battles" readers seemed to have some trouble with last week's question, which asked you to suggest the federal budget-related saying that will be most appropriate for a holiday card this year. Most of what was submitted had a decidedly un-holiday feel. Then again, these days it is hard to see how the federal budget debate lends itself to decking the halls and goodwill toward men and women.

The "I Won A 2003 Budget Battle" mouse pad goes to Michael Platner of the American Petroleum Institute in Washington for: "Happy Holidays - A Deficit Reduction Contribution Has Been Made In Your Name to the United States Department of the Treasury."

Honorable mention (but no mouse pad) goes to James Chandler, who works for the Defense Contract Management Agency and might have won if he hadn't failed to provide his mailing address, for: "Rudolph was 'outsourced!' Santa won't be coming this year."

This Week's Question. There are only eight more chances to win an "I Won A 2003 Budget Battle" mouse pad. So if you haven't sent in a response yet for any of the weekly questions, what are you waiting for?!? This week's question: When is CBO required to release the next official budget update?

Click here to send in your response, which must be received by 5 p.m. PDT on Saturday, Nov. 1, 2003. You must include a mailing address so we can send you the mouse pad if you win.

Note to government employees: Because of security procedures at many offices and facilities, your home address will be the best way to make sure the mouse pad actually gets to you.