O'Neill, whose resignation was announced on Dec. 6, leaves office with a track record that disappoints his many admirers in Corporate America, his detractors on the Republican Right, and his many critics in the Democratic Party. While George W. Bush has been the Teflon President, with none of the criticisms of his Administration sticking to him, complaints about White House economic policy stuck to O'Neill like Velcro.
LOYALTY ABOVE ALL? Bush's removal of O'Neill and White House economic adviser Lawrence B. Lindsey says something new and important about the President's management style. The conventional wisdom about Bush is that he values loyalty above all. But by jettisoning two loyal lieutenants, he's signaling voters that he wants to do more to turn around the struggling economy (see BW Online, 12/06/02, "Bush's Shuffle: What's in the Cards").
Bush knows that with the Republicans' 2002 election sweep, he'll get either the credit or the blame for the nation's economic performance from here on. He won't be able to blame Bill Clinton or Senate Democratic obstructionism any longer. Meanwhile, a Dec. 3-4 Fox News/Opinion Dynamics Poll finds that 86% of Americans are concerned about the economy, and 65% believe that the country is still in recession. No wonder just 47% approve of Bush's handling of the economy. That's why White House political advisers thought it was time to signal a major change.
In some ways, O'Neill's failures are a result of the expectations game. He fell short because of expectations that, as one of the top CEOs in the U.S., he would do a smooth job of running the demanding Treasury Dept. and dealing with the dangers of the Washington shark tank. He couldn't live up to the standards created by his superstar predecessors, from Robert E. Rubin to James A. Baker III. And the Bush economic team always seemed overshadowed by the highly regarded foreign policy crew, headed by Defense Secretary Donald Rumsfeld, Secretary of State Colin Powell, and National Security Adviser Condoleezza Rice.
O'Neill has himself to blame for some of his problems. In a White House that demands discipline from its spokespeople, his comments were often painfully blunt and sometimes "off message." While President Bush was said to view O'Neill's candor as refreshing, other colleagues reacted with chagrin.
O'Neill never developed a good relationship with Wall Street
He angered powerful lawmakers from both parties. Capitol Hill Republicans were upset when, during O'Neill's confirmation hearing, he questioned whether Bush's tax cut proposal would do much to juice the economy. He later compounded the damaged by dismissing as "show business" House GOP tactics to win a big tax cut. That miffed conservatives, who viewed him as an enemy of supply-side tax cuts and an apologist for environmentalists on the controversial issue of global warming.
O'Neill also made an enemy of one of the Senate's most powerful Democrats, Appropriations Committee Chairman Robert Byrd of West Virginia. Clearly aggravated when Byrd accused him of being out of touch with average Americans, O'Neill shot back that he had been born "in a house without water or electricity. So I don't cede to you the high moral ground of not knowing what life is like in a ditch." Byrd's many enemies enjoyed the exchange, but O'Neill paid a price.
Despite the Treasury Secretary's corporate ties, he never developed a good relationship with one of Treasury's key constituencies: Wall Street. Indeed, he alienated the Street with comments describing financiers as "not the sort of people you would want to help you think about complex questions" and maintaining that he could learn to be a trader "in a couple of weeks."
EASY TARGET. Democratic National Chairman Terry McAuliffe, responding to O'Neill's ouster, alluded to the tiff. "Congratulations to President Bush," said McAuliffe. "After numerous unsuccessful attempts, he finally figured out how to make the market go up. He fired his economic team." The markets certainly didn't take the resignations hard. The major indexes closed modestly higher on Dec. 6.
Here's perhaps the most unfair aspect of O'Neill's forced departure: While his straight talk made him an easy target, what he said turned out to be true more often than not. He was criticized for his economic cheerleading after September 11, for example. In fact, the economy did start to rebound after the horror of the terrorist attacks began to fade. He sent shock waves through currency markets when he suggested that the Administration was "not pursuing a policy of a strong dollar" but instead would focus on the economy. Once again, his statement was absolutely true.
The Secretary's plain talk ruffled some feathers, but it endeared him to many, too. "I enjoyed Paul O'Neill's candor about everything," says incoming Senate Finance Committee Chairman Charles Grassley (R-Iowa). "More of his unreserved honesty is needed inside the Beltway."
BONO'S BUDDY. O'Neill also didn't get the credit he deserved for winning passage of Bush's tax cut. The Cabinet official worked tirelessly to twist arms on the Hill and give the President a narrow Senate victory. O'Neill also deserves kudos for aggressively pursuing terrorists' financial networks in the U.S. and abroad. And he focused international attention on economic development in Africa -- thanks in large part to his "odd couple" trip to the continent with rocker Bono.
In the end, however, O'Neill's real accomplishments are likely to be overshadowed by the circumstances surrounding his departure and the fact that the economy struggled on his watch. That's the blunt truth about a nice guy and a terrific exec who became the Velcro Treasury Secretary. Dunham is White House correspondent for BusinessWeek, while Miller covers economic policy