[Nasional-e] It's still the economy, stupid

Mon Dec 16 01:24:02 2002

It's still the economy, stupid

U.S. President George W. Bush has shaken up his economic team. The moves had
been long expected. Despite the U.S. administration's claim that the
economic downturn was the product of events beyond its control -- an
assertion that is largely true -- the president's top officials were not
doing him much good either. Their penchant for gaffes and contradictory
statements had undermined domestic and international confidence in his
policies. Mr. Bush understands the importance of a team that speaks with one
voice. Above all else, he is focusing on the 2004 elections, and he knows
that the outcome will depend primarily on the state of the U.S. economy.

Last week, Mr. Bush dismissed Treasury Secretary Paul O'Neill and chief
economic adviser Lawrence Lindsey, president of the National Economic
Council. Those moves followed the resignation of Mr. Harvey Pitt, the
embattled chairman of the Securities and Exchange Commission. Mr. O'Neill
was the colorful former president of Alcoa, whose blunt talk delighted the
media, rattled markets and horrified a White House that demanded consistency
and the appearance of competence and control at all times.

Mr. O'Neill's gaffes were memorable. He offended Wall Street by announcing
that he could learn a trader's job in two weeks. Before his first Group of
Seven meeting he appeared to abandon the long-standing U.S. support for a
strong dollar in a statement that shook markets and his counterparts. He
insulted Brazilians by implying that economic aid for them was pointless as
it only fled the country into secret overseas bank accounts. Mr. Bush had to
step in to assuage bruised feelings.

Mr. O'Neill's biggest problem was his tendency to stray from the
administration's economic line. Mr. O'Neill was less than enthusiastic about
the tax cuts the president fought for when he first came to office. He had
also expressed reservations about a new stimulus package so large it could
send the country back into huge deficits. Moreover, the Treasury secretary
had crossed swords with Congress a few times, and there were concerns that
he would not have the clout -- or the credibility -- to sell the president's
economic plan on Capitol Hill or Wall Street.

Mr. Lindsey faced similar concerns. While his ideological credentials were
impeccable, he was faulted for being a poor administrator and salesman when
those skills were going to be needed most. Mr. Pitt had had an embattled
tenure that was marked by accusations that he was too close to the industry
he was supposed to regulate. Questions about his ethics dogged him from the
moment he took office.

These men were all judged a liability as the White House turned to focus on
the 2004 ballot. White House strategists know that while two issues are
foremost in the minds of the American voter -- the economy and the
possibility of war with Iraq -- the former will always take priority. No
matter what his faults, Mr. Bush has a key appreciation of politics. The
defining event in his political consciousness was his father's defeat by Mr.
Bill Clinton in the 1992 ballot. Even though the first President Bush had
reached historically high popular support levels following the overwhelming
victory in the Persian Gulf War, he was defeated by the Arkansas governor
because of dimming economic prospects for American voters. Then, as now,
"it's the economy, stupid."

The current White House resident is determined to avoid that mistake. With
consumer confidence dipping -- a recent poll shows it falling after
recovering from an eight-year low in October -- Mr. Bush knows he has to
have a visible recovery before the ballot. Mr. Clinton was the beneficiary
of policies put in place by the first President Bush; unfortunately, the
results did not materialize in time for Mr. Bush to get credit.

The problem now is that there are differing views on the appropriate remedy.
As in the days of President Ronald Reagan, the Republican Party is split
between advocates of deep tax cuts and those who want more fiscal
responsibility. One of Mr. O'Neill's biggest blemishes -- to the Bush
team -- was his concern about another $300 billion in tax cuts that serve as
the foundation of the president's recovery plan. Conservatives now worry
that the new team -- Treasury Secretary nominee John W. Snow and Mr. Stephen
Friedman, former head of Goldman Sachs, who will lead the National Economic
Council -- may not have sufficient tax-cutting fervor.

Some call this "a debate for the soul" of the GOP. Perhaps, but the stakes
are much higher than that. American leadership is based, ultimately, on the
country's economic strength. The failure to get its house in order and the
economy back on its feet will have repercussions that extend far beyond the
election results in 2004. Policies, not personalities, must be the focus.