The Stewards of a Bush Economy?
Needed: Strong ties to the Street--and Greenspan

The familiar faces of a George W. Bush Administration would bring back memories of Washington past--especially when it comes to defense and foreign affairs. But economics, Dubya-style would be different from the last Bush Administration. The making of economic policy is likely to resemble the model employed by the man who ousted Bush's father: Bill Clinton.

Facing shaky markets, antsy consumers, and political turmoil, Bush is shopping for a powerhouse Treasury Secretary who projects wisdom and calm--and understands global markets. In short, confesses one Bushie, ''we need someone like Bob Rubin,'' the ultrasmooth Wall Street veteran who was Clinton's Treasury Secretary before Lawrence H. Summers.

But whom to pick? Transition scouts are said to be eyeing heavyweights such as retired Chase Manhattan (CMB) Chairman Walter V. Shipley and businessmen like Enron (ENE) CEO Kenneth Lay.

Lawrence B. Lindsey, Bush's most trusted economic adviser, was once a favorite for the top Treasury job. Now, he would likely end up at the White House. He would coordinate policy under a system that closely resembles the National Economic Council that Clinton created in 1993. But since Lindsey thinks the NEC was too high-profile, he might prefer that his policy shop revert to its Republican moniker, the Economic Policy Council.

TWOFER? Such behind-the-scenes work is actually a better fit for Lindsey, a former Harvard University economist and Federal Reserve governor. But Lindsey's role as Bush's consigliere may make it harder to recruit a corporate star for Treasury. For Bush, ''loyalty and chemistry are most important,'' says one adviser. An outsider Treasury chief trying to maneuver through the campaign veterans could face a tough slog.

Bogged down in Florida's electoral swamps, the Bush camp hasn't yet had to fit together the pieces of the economic team. Shipley appears to head the list for Treasury Secretary, but other names keep surfacing. One twofer notion: Tap New York Federal Reserve Bank President William J. McDonough for Treasury chief, to score both a Democrat and someone close to Fed Chairman Alan Greenspan. Other candidates include Donald B. Marron, CEO of PaineWebber (PWJ); John M. Hennessy, head of Credit Suisse First Boston's equity division; Gerald L. Parsky, chairman of Aurora Capital Group in Los Angeles and a major Bush fund-raiser; and leveraged buyout financier Theodore J. Forstmann.

To head the Office of Management & Budget, Bush may try to enlist John F. Cogan, a Stanford University economist and veteran of the Reagan and Bush OMB teams. Cogan, however, doesn't seem anxious to return to Washington. The job could instead go to former House Budget Committee Chairman John R. Kasich (R-Ohio), though some Bush advisers regard Kasich as too much of a loose cannon. Another Ohio Republican, Representative Rob Portman, is on the short list, along with Timothy J. Muris, a regulatory specialist at George Mason University.

Filling other economic jobs would be complicated by the situation at the Fed. Bush would need candidates immediately for three of the seven seats on the Fed board. Lindsey works well with Greenspan. But Bush's nominees would set the tone for dealings with the Fed chief, blamed by many Bush loyalists for the recession that cost President George Bush reelection in 1992. ''If they want a happy relationship, they should sit down with Alan and discuss these jobs,'' says a former central banker.

One conciliatory move under consideration is renominating Clinton appointee Roger W. Ferguson Jr., a banking expert who is the only African American on the Fed board. Trouble is, if Ferguson got a new term, he would have a lock on the Fed's vice-chairmanship until 2003--robbing Bush of a plum that he would need to attract top GOP talent. Bush adviser John B. Taylor, an influential monetary economist from Stanford University, would be more likely to join the Fed as the No. 2 than to accept a governor's seat.

FREE-TRADERS. If he doesn't go to the Fed, Taylor is the favorite to chair the White House Council of Economic Advisers. Taylor doesn't share Lindsey's strong supply-side leanings, but both men agree that in a slowing economy, a case can be made for accelerating Bush's tax cuts.

A host of lesser economic jobs await the filling of the top slots. Don Evans, a Texas oilman and Bush's genial campaign chairman, is one possibility for Commerce Secretary (table). Another candidate for Commerce is Representative Jennifer B. Dunn (R-Wash.). The U.S. Trade Representative job could go to Treasury veteran Robert B. Zoellick or campaign issues director Joshua Bolten. Both are savvy free-traders with loads of international experience.

As the electoral murk clears, markets will soon be asking what remedies the President has in mind for a slowing economy. The Texan's advisers insist they're not worried because they'll have a stimulative jolt waiting in that big Bush tax program. ''The tax cut was designed as good policy for the long run, not as fine-tuning,'' says one Bush economist. ''But a slowing economy certainly adds to the arguments in its favor.'' It also adds to the urgency to get a top economic team together--ASAP.

By Mike McNamee, with Dan Carney and Laura Cohn, in Washington

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

How Bush Would Lead

TABLE: Slim Mandate, Big Headaches: What W Would Have to Do

The Stewards of a Bush Economy?

TABLE: The Cabinet: How Bush Might Reach Out

Commentary: The Search Begins for a Democratic Savior

Pockets of Power in the Senate

TABLE: Centers of Influence

Commentary: What a Bush Foreign Policy Would Look Like

E-Mail to Business Week Online

Copyright 2000-2009, Bloomberg L.P.
Terms of Use   Privacy Notice