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Bush sacks O'Neill and economic adviser

President's moves show economy still his Achilles' heel

00:00 EST Saturday, December 07, 2002

WASHINGTON -- U.S. President George W. Bush yesterday sacked two of his top economic officials -- Treasury Secretary Paul O'Neill and White House adviser Lawrence Lindsey -- another indication that, for all his political triumphs, the sputtering economy remains his Achilles' heel.

Mr. O'Neill, 67, the straight-talking but politically inept former Alcoa Inc. chief executive officer, reportedly tendered his resignation at the request of the White House.

He becomes the first cabinet member to leave his job since the Bush administration took over in January of 2001.

Less than an hour later, Mr. Lindsey, 48, said he too was quitting, clearing the way for Mr. Bush to appoint an entirely new economic team to carry him to the 2004 U.S. presidential election.

White House spokesman Ari Fleischer publicly insisted that the pair had left of their own accord.

Privately, however, senior administration officials bluntly and uncharacteristically told reporters that Mr. Bush had demanded their resignations.

An early list of possible successors is laden with Bush administration insiders and people long on political savvy. They include Commerce Secretary Donald Evans, U.S. Treasury undersecretary John Taylor, White House Council of Economic Advisors director Glenn Hubbard, former Texas congressman Bill Archer, Federal Reserve Bank of New York president William McDonough and Wall Street executive Charles Schwabb.

Mr. O'Neill, who guided aluminum giant Alcoa for 13 years, repeatedly irked the Bush administration and top congressional Republicans for not toeing the party line on key policies, including the Kyoto global warming treaty and tax cuts. Mr. O'Neill, a frequent guest on television talk shows, was also prone to making blunt remarks about almost anything, making him an awkward chief economic spokesman for the Bush administration.

"Secretary O'Neill came in and didn't seem to understand the job very well," remarked Kevin Hassett, a former U.S. Federal Reserve Board economist and now a scholar at the American Enterprise Institute in Washington, D.C.

One of the keys to surviving the vicious politics of Washington is keeping onside of key players on Capitol Hill.

Instead, the outspoken Mr. O'Neill was quick to make enemies, Mr. Hassett added.

He dismissed a 2001 House of Representatives tax cut bill as "show business," prompting a flurry of calls for his resignation.

An advocate of tax simplification, Mr. O'Neill once called the U.S. income tax code "9,500 pages of gibberish." He also annoyed laid-off Enron Corp. employees by characterizing the company's 2001 collapse as "part of the genius of capitalism."

His diplomatic skills were also clumsy. He criticized international bailouts of Russia as "crazy" and called the European Union "off the wall" for rejecting the General Electric-Honeywell merger.

His comments on the U.S. dollar often caused wild gyrations in currency markets, particularly by suggesting the government had abandoned its long-standing dogma on a "strong dollar."

And with the economy in the dumps -- underscored again yesterday by an unexpected jump in the November jobless rate that revisited an eight-year high of 6 per cent hit in April -- Mr. O'Neill wasn't the steady voice of confidence the administration wanted.

"The reality is that the economy is not doing well," said economist Peter Morici, a business professor at the University of Maryland. "Paul O'Neill opposed things they wanted to do and so they needed to make a change."

The last straw might well have been reports this week that he was against a tax break on corporate dividends -- a key part of a proposed new package to stimulate the economy. Mr. O'Neill was initially lukewarm on Mr. Bush's earlier 10-year, $1.35-trillion (U.S.) tax cut plan.

Eager to avoid a repeat of what happened to former president George Bush, the White House is in no mood to the let economic problems fester in the runup to the next election, analysts said.

"They have to do something about the economy and they have less than 18 months to do it," Prof. Morici said. "They have to have good vibrations by this time next year. They have to have the economy in good shape."

The President is keenly aware that voters abandoned his father -- at least in part because the United States was too slow to emerge from recession, in spite of winning a war against Iraq.

The current president is also facing a possible war against Iraq, which risks causing economic damage to the United States.

In a brief statement, President Bush said Mr. O'Neill and Mr. Lindsey had made "important contributions" to the administration's efforts to lift the country out of recession.

"Both are highly talented and dedicated, and they have served my administration and nation well," Mr. Bush said.

Mr. Lindsey, an economist and academic, helped draft the President's economic platform for the 2000 election.

In his resignation letter, Mr. O'Neill said it's been "a privilege to serve the nation during these challenging times."

Mr. O'Neill raised eyebrows last spring when he spent a couple of weeks in Africa with rock star activist Bono, seemingly oblivious to economic woes back home.

Responding to earlier criticism, Mr. O'Neill said he was proud of his blunt talk. "I would say that I am not troubled by ruffling some feathers because I think I have been true to what I believe and what I think is right," Mr. O'Neill once said.

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