O'Neill: Playbook for a Problem-Solver
President Bush's new Treasury Secretary is an independent thinker with a pragmatic bent. Paul H. O'Neill has real-world experience in applying New Economy solutions to an Old Economy manufacturing company, an analytic frame of mind that is comfortable with complex data, a nonideological view of the role of government in economic growth, and a previous tour of Washington duty in the Ford Administration where he bonded with Alan Greenspan, Dick Cheney, and Donald Rumsfeld. This is the power O'Neill can bring to bear; he will need it if he is to succeed.
The most important job ahead is coordinating policy with Federal Chairman Greenspan. O'Neill said in his Senate testimony that monetary policy was the quickest way to battle an economic slowdown, and he was right. Fiscal policy takes time, and large fiscal stimulation narrows the room for monetary action. Greenspan has implied that how much he can cut interest rates depends, in part, on the size and timing of the Bush tax cut. Indeed, the chairman prefers using the budget surplus to pay down the federal debt. O'Neill must bridge the White House and the Fed on this. He should be a force for moderation, pushing to trim back the $1.7 billion tax-cut proposal enough to give the Fed room to act.
O'Neill must also avoid the ideological fires burning within the Bush Administration. Some conservatives still hold "Ford pragmatists" such as O'Neill in contempt for their failure to hew to the supply-side line. They are apt to continue their attacks on the International Monetary Fund, World Trade Organization, and other global institutions O'Neill must work with. He may try to avoid conflict by getting ahead of international financial crises. O'Neill says in his talk with BusinessWeek (page 40) that he wants to get on-the-ground information about overseas economies and markets to anticipate crises. When he can't, he should let the markets work, and insist lenders and investors endure their share of pain. If there is no choice, O'Neill must lead the Treasury and IMF in intervening forcefully.
O'Neill's strength is his practicality. When Russia began dumping aluminum on the world markets in 1993, O'Neill persuaded Washington to negotiate what was, in effect, a minicartel to stop the dumping. It was a major reason for Alcoa Inc.'s subsequent return to profitability. When Pittsburgh wanted to revitalize its run-down river neighborhood, O'Neill put Alcoa's new headquarters right on the Allegheny River. The dazzling Alcoa Corporate Center won the BusinessWeek/Architectural Record/AIA award in 1999 for innovative architecture by doing away with private offices for senior managers, restructuring space to emphasize teamwork, flexibility, and new ideas. O'Neill personally led the process.
O'Neill, a military brat, is a tough-talking guy with an open, problem-solving mind. We wish him luck in Washington.