The Bush Administration is looking like a blast from the past. With the appointment of John Snow as Treasury Secretary, just about the only person left who served in the Ford Administration who hasn't been appointed to the Bush White House is Gerald Ford himself. What's up?
First, it's clear that Vice-President Dick Cheney's Rolodex hasn't been updated in 30 years. Let's count the Ford cronies he has helped pick to help him run the country: Defense Secretary Donald Rumsfeld, of course; both ex-Treasury Secretary Paul O'Neill and his replacement, Snow; Henry Kissinger, who heads the new commission on September 11; and William Webster, who briefly ran the new accounting oversight board.
Sure, the new head of the Securities & Exchange Commission, William Donaldson, didn't serve under Ford. But he was Under Secretary of State to Henry Kissinger under President Nixon. And he one-ups his colleagues on the six-degrees-of-separation scale by starting his Wall Street career at G.H. Walker, founded by President Bush's grandfather. Donaldson attended Yale, was a classmate of Jonathan Bush, the President's uncle, and belonged to the Skull & Bones secret society, like the President and his father. Wow.
The other, and perhaps more important, defining characteristic of the people around President Bush is that they are all so Old Economy. Snow, the chairman and chief executive of CSX, is from the railroad industry, that high-tech engine of the 19th century. His predecessor, O'Neill, came from Big Aluminum (Alcoa Inc.), Cheney is from Big Construction (Halliburton Co.), and Commerce Secretary Donald Evans and the President are from the oil patch. Outgoing SEC Chairman Harvey Pitt represented Big Five accounting. Kissinger Associates Inc. opens doors for Big Business overseas. The President has said that he missed the political turmoil of the '60s when he was at Yale. O.K. But most of his advisers and administrators missed the New Economy turmoil of the '90s. And that may not be fine.
Why? The Bush Administration is made up mostly of people who made their bones in big, traditional industries where connections and clubby ties to government matter most. There are hardly any entrepreneurs or high-tech folks who succeeded in the wild and wooly market capitalism of the '90s.
No doubt, Cheney, Snow, and Evans sincerely believe in deregulation and free markets. But let's face it, railroad, defense, oil, and drug companies are industries that often depend on government contacts and contracts for business. It's no coincidence that they field the largest armies of lobbyists and spend the most on political contributions. Snow, for example, pushed for transportation deregulation when he was in government, then became a railroad lobbyist, helping to write the rules for deregulation and finally became CEO of a big railroad company. In short, the Bush people are mostly old guys from old-style industries who are used to doing business the old-fashioned way--through their close circle of friends on the golf course or at the Business Roundtable and at quiet dinners with their pals in government.
So what if these Old Economy folks dominate the Bush Administration while the New Economy types in Silicon Valley remain outside the policymaking circles? After all, Old Economy, New Economy, supply-side--whatever--everyone agrees on cutting taxes, right? Everyone is for deregulation. What's the big deal?
The big deal is the rise of a whole new form of entrepreneurial capitalism in the '90s based on a broad investor class that finances innovation through the stock market. It's the surge in productivity growth and the impact of information technologies. It's the new boom-bust volatility to the business cycle producing high unemployment among educated, white-collar professionals. It's the new role equity values now play in generating tax revenues for government. That's the big deal.
The men around Bush, by and large, missed the '90s economic revolution and don't appear to get the implications for policy. The result? The Bush Administration turns down a Silicon Valley suggestion that it invest money to wire every U.S. house with broadband and instead passes a $182 billion bill to subsidize farmers. It raises tariffs on steel, textiles, and agriculture to protect Old Economy industries and angers countries who buy billions of U.S. high-tech gear. It backs the proposal to expense stock options to curb corrupt CEOs and threatens to take away the most important tool high-tech companies use to motivate their rank-and-file employees. It grudgingly acts to safeguard investor-class interests by blaming corporate corruption and Wall Street conflicts of interest on bad apples rather than systemic flaws. It makes ending double taxation of dividends a central part of a tax-reduction package--helping utilities, energy, industrial, financial, and materials companies that offer dividends, but not information technology companies that don't.
New Economy folks favor cutting capital-gains taxes to promote risk-taking investment over reducing dividend or even income taxes to promote demand in the Old.
It's easy to make too much of this split. Clearly, the Bush Administration is pro-business and wants to help the investor. It has the support of most CEOs, including many from high-tech companies. Moreover, ending the double taxation on dividends is likely a good thing--it will help middle-class investors get a better return and curb the ability of CEOs to help themselves to company coffers. And it's easy to slide into ageism--70-year-old Rumsfeld ran a high-tech war in Afghanistan and is leading the battle to modernize the military.
But the sameness of the Bush bunch makes one wonder if it sees the business world through an Old Economy lens that distorts the New. To restore the confidence of the investor class and get the economy back on a high-growth path will require fresh ideas, new approaches, and surely a dose of imagination. So my question to the guys around Bush is simple: Can you Wi-Fi?
By Bruce Nussbaum