In Praise of a Plain Talker
If candor is a sin, then Treasury Secretary Paul H. O'Neill may never make it to heaven. He roils the markets, annoys the White House, infuriates Congress, angers Wall Street, and drives the Europeans and Japanese nuts. Washington disparages him as a clumsy ex-CEO out of his element and contrasts him to his smooth, politically adept predecessor, Robert Rubin. We see O'Neill in a different light: as a straight talker who prefers telling the truth to playing the Washington insiders game or mindlessly mouthing politically correct ideology. O'Neill is to economic policy what Donald H. Rumsfeld is to defense policy ("we bomb, that's what we do"). In an era that demands honesty and frankness from our leaders, he stands tall. While O'Neill may cause consternation to the President's politicos, it's time George W. Bush gave him credit for being one of his Cabinet's outstanding assets.
Check O'Neill's record on controversial calls. Within weeks of taking office, he said that the U.S. doesn't have a strong-dollar policy. Only the markets can determine the value of a currency, and the best way to keep it healthy is through good fiscal and monetary policy. Any first-year economics student knows this to be true. But critics, from hard-dollar conservatives to Wall Street bankers, charged O'Neill with undermining the financial markets and hurting the economy. He did neither. The dollar is up 8% since he spoke.
O'Neill raised the most hackles when he described the House version of the ill-fated stimulus bill as "show business." The Republican-backed bill that corporations desperately lobbied for did away with the alternative minimum tax for big companies. The bill never made it out of the Senate. In light of the scandal at Enron Corp.--a company that paid no taxes during years of big profits--the House would have saved itself from embarrassment had it listened to the Treasury Secretary.
Then there was the time the entire economics profession blasted O'Neill when he questioned whether the U.S. economy would really fall into recession as a result of September 11. He said there simply wasn't sufficient data and the quarter might show some growth. Of course, with revisions of the fourth-quarter gross domestic product now showing an increase, O'Neill turned out to be wisely cautious.
O'Neill was right about Argentina, too. He said an Argentine default would not automatically lead to a global meltdown in the debt markets. This was contrary to conventional wisdom. He supported one bailout, then refused a second, sending Argentina into default. Yet Brazil, Chile, Mexico, and Russia escaped any contagion effect and are doing well.
The flinty former Alcoa Inc. (AA ) CEO is now ruffling feathers by suggesting ideas on how to get chief executives to be more accountable. The image of former Enron execs testifying on TV that they had no knowledge of what was going on there is hardly believable, and ex-CEO O'Neill probably knows that. But White House politicos are angry with him for opening what may be a Pandora's box of litigation. They have a point, but pounding O'Neill is not the answer. In a post-Enron world, he embodies Main Street values. Smart pols should realize that O'Neill's credibility counts for a lot these days.