Loose Lips Won't Sink Paul O'Neill

Despite all the critics' carping, the straight-talking Treasury Secretary has the ear of the one guy who counts, George W. Bush

By Howard Gleckman

Capital insiders have begun playing a new parlor game: Guess how long it'll be before Treasury Secretary Paul H. O'Neill is out the door. Among the Beltway cognoscenti, the former Alcoa CEO is perceived to be a bit of a flake, and the scuttlebutt says he has lost the confidence of both Congress and his own President. The evidence? O'Neill didn't attend a couple of key Capitol Hill meetings recently, where lawmakers met with Fed Chairman Alan Greenspan and former Clinton Treasury Secretary Bob Rubin. This was seen as a signal that ex-Treasury boss Rubin somehow has more clout than O'Neill (see BW, 10/8/01, "Bob Rubin: Out of Office but in the Loop").

Take all this gossip with a grain of salt. O'Neill isn't going anywhere. He continues to enjoy the trust and confidence of both President Bush and key members of Congress. In fact, Bush has delegated him to negotiate the upcoming stimulus package with Capitol Hill. And he has repeatedly met in private with key lawmakers, a number of whom have gone out of their way to pat the Treasury boss on the back. "You are the man," Senate Finance Committee Chairman Max Baucus (D-Mont.) told O'Neill on Oct. 3.

So why is the Secretary stuck in the Washington spin cycle? In part, because he's unwilling to play the spin game himself. Obfuscation has become so much a part of the culture here that folks don't quite know what to do with someone who actually speaks his mind.


  For instance, last summer O'Neill suggested the real problem with the nation's retirement system is that American workers don't save enough. That seems pretty obvious to me. But for saying it, O'Neill took flak for needlessly scaring seniors.

His biggest verbal sin? When the stock markets resumed trading on Sept. 17, O'Neill suggested that equities could see new highs over the next year-and-a-half. For this he was derided as a cheerleader. Yet, if the economy rebounds by the middle of next year, as most economists believe, it's quite possible that his prediction will be on the nose.

O'Neill is a former CEO, not a politician. His bluntness can be awkward and jarring. He's also not this Administration's No.1 economic adviser. That role belongs to White House aide Larry Lindsey. But despite O'Neill's flaws, Bush seems to like and trust him.

The Treasury Secretary's real problem: He has become the fall guy for some conservatives who are unhappy with Bush's economic policy but don't want to criticize the President himself. They grumbled that the big tax cut Bush successfully achieved last spring did not include capital-gains tax reductions and investment incentives for business. And they blamed O'Neill.


  The same thing is happening with the economic stimulus package. Some on the right think the White House is once again missing a chance to enact some big new supply-side tax cuts. And they have once again fingered O'Neill for selling out to Democrats.

This is odd, because O'Neill himself is a committed economic conservative. He opposes government bailouts and subsidies, and is driven by an unshakable belief in markets. If anything, O'Neill gets in trouble when he stakes out ideologically purist positions and can't deliver on them. For instance, after blasting the idea of World Bank bailouts, he ended up backing aid to both Turkey and Argentina.

O'Neill may be too candid for his own good. But despite what you read, he's still very much a player in the Bush Administration's formulation of economic policy. And he will be for some time to come.

Gleckman is a senior correspondent in BusinessWeek's Washington bureau. Follow his views every Tuesday in Washington Watch, only on BW Online

Edited by Douglas Harbrecht

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