President George W. Bush has appointed Goldman Sachs Chairman Henry Paulson as Treasury Secretary to replace John Snow, reports the Washington Post. The hunt for a new Wall Street honcho to head up the economic portfolio has been in train for months but Paulson apparently took some persuading. Rumor last week was that the president was about to appoint his old Texas buddy Don Evans but Paulson was apparently just playing hard to get.

And it’s not hard to understand why. There is a credibility gap on economic policy that John Snow, another captain of industry, was not able to bridge. Part of the problem may have been Snow’s lack of charisma, but economic policy is not ultimately a PR job. Whatever the numbers have been - and it’s not a disaster by any means with a soft landing in housing, some strong economic growth and retail sales in recent quarters - but economic confidence and confidence in the administration’s policy has been greatly overshadowed by two things - the war in Iraq and the price of gas.

I only have a 12-gallon tank on my car, so I’ve only gone from paying $20-something to $30-something to fill up. But I’ve used pumps in recent weeeks where the previous driver was putting $70 and $80 worth of gas into his or her vehicle. Those kind of prices have a gut-level impact that no amount of smooth talk from the Treasury secretary are going to calm. Couple that with our individual and national levels of indebtedness and pretty soon people are going to be nervous about spending money.

And talking up the tax cuts doesn’t help matters. The short take on tax cuts is that most people are not getting much benefit: Plenty of people, many of whom are likely Republican voters, are stuck with the alternative minimum tax and everyone else is getting hit with more FICA even if they were getting tax cuts. If you want the long take on taxes, see my column a few weeks back in the Business Press.

And confidence is down significantly, says the Conference Board. The Associated Press reports that the business group’s consumer condidence index fell in May to 103.2 down from 109.8 in April.

The only comforting news was that analysts were expecting a much bigger fall. The Expectations Index, which measures the six-month outlook, also fell. The guess is that gas prices have finally pushed consumers to the tipping point. The news service cites a survey for the National Retail Federation that says more than 75 percent of consumers say gas prices have affected their spending habits.

If that’s right, it will make Paulson’s sales job all the harder, especially if the administration is expecting him to win some accolades for Republicans before November. Getting credit for economic success and building confidence will take a longer time frame unless there is some miraculous way to get gas back below $2.20 a gallon.

And even if Paulson can pull off a public relations and economic policy miracle, the war in Iraq is still weighing on people’s minds. So long as that continues to look like a mistake to most people, the administration cannot expect a big jump in confidence.