Out Of Indiana, Into The Frying Pan

Can an old Harvard buddy keep Bush's economic policy on track?

When President George W. Bush announced the appointment of Indiana businessman Allan B. Hubbard as head of the National Economic Council on Jan. 10, you could almost hear the Beltway cognoscenti snicker. At first glance, Hubbard seems like the latest appointee whose chief qualification appears to be unswerving loyalty. A classmate of George W.'s at Harvard Business School, Hubbard is one of Bush's oldest chums and a top fund-raiser. Unlike departing NEC honcho Stephen Friedman, former chairman of Goldman, Sachs & Co. (GS ), he is not a well-known financier. Hubbard, 57, made his fortune by acquiring a band of small manufacturing outfits under the rubric of Indianapolis-based E&A Industries Inc.

But dismissing Hubbard as a mere crony would be a serious misreading of the influence he could wield. "The notion that he is some kind of naïf is off base," says William Kristol, editor of The Weekly Standard and Hubbard's boss when both were aides to former Veep Dan Quayle. "He is going to make a big splash."

Bush has to hope this prediction pans out, because his Texas-size second-term agenda presents a huge challenge. He faces bruising battles over Social Security private accounts and, next year, over tax reform. Fights with Democrats also loom over plans to limit jury awards, revive a first-term energy bill, and put tight clamps on domestic spending.

So why Hubbard? GOP sources say he's an unflappable manager with a knack for conciliation. He mastered the first as Quayle's deputy chief of staff, fending off liberal critics and White House aides who wanted the Veep dumped.

Possessed of an entrepreneur's hatred for red tape, he wound up heading the White House Council on Competitiveness, a Quayle project. There "he did everything possible to slow new regs and impose tougher requirements for [future] proposals," says an associate. His mediating skills came in later, as a member of Bush II's brain trust during the 2000 campaign. Bush's top economic adviser, Lawrence B. Lindsey, and an influential economist, former Council of Economic Advisers Chairman Michael J. Boskin, engaged in protracted debates about the shape of Bush's first tax cut. Hubbard kept the process moving. After the initial tax cut passed Congress, he remained an ex-officio member of the econ squad, serving as a key conduit to the President.


In his role as coordinator, Hubbard won't be expected to make policy as much as to ensure that the President's advisers row in the same direction. Already, there are signs that more synchronization is needed. As the Bush team has begun the push for Social Security reform, mixed signals and a lack of specifics have troubled allies.

Once he settles into the job, Hubbard is expected to be a powerful backstage presence -- much like former NEC chief Robert E. Rubin in the early Clinton years. Hubbard's closeness to Bush "gives him instant street cred," says Indiana Governor Mitchell E. Daniels Jr., a Hubbard pal who was Bush's first budget chief.

Like Rubin, Hubbard is a deficit hawk. He has privately agonized over one of the less happy legacies of Bush's first term -- an ocean of red ink. That makes him a natural ally of Budget Director Josh Bolten, who worked with Hubbard on the 2000 campaign.

For the moment, Hubbard is holding his cards close to his vest. He is expected to devote his first weeks in Washington to getting a grip on Team Bush's economic policy machinery. He will also have to attend to divesting many of his financial holdings. Once those issues are dealt with, Hubbard can turn to the task at hand -- pushing a second-term agenda that, to skeptics at least, seems to far outstrip the reelected President's political chits. In this, he can take some comfort from one fact: Both he and his boss start their labors underestimated by foes.

By Lee Walczak and Rich Miller, with Richard S. Dunham in Washington

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