WASHINGTON, 7 December 2002 — There was a surprise shake-up in the Bush Administration yesterday, when the White House announced the president was overhauling his economic team. Both Treasury Secretary Paul O’Neill and economic adviser Larry Lindsey resigned as a result of the White House’s growing concern over the ailing economy. US media said the two men were forced out.
An administration official said O’Neill quit “at the request of the White House,” making him the first Bush Cabinet official to leave. Less than an hour later, Lindsey, who is director of the National Economic Council, also tendered his resignation, which was more widely expected.
Bush advisers have been increasingly worried that a slow economy could dampen the president’s re-election prospects. In addition, the unemployment rate rose to 6 percent, the highest in nearly nine years.
The White House said it does not blame O’Neill, but feels a shake-up of the economic team would show that Bush was doing everything he could to improve the economy.
But why were the dual resignations announced at the end of the week?
“Regarding the timing factor, the Bush Administration has discovered that Friday is a good day to do things, because people don’t want people to pay attention to it,” said economic expert Dean Baker, co-director of the Washington-based Center for Economic and Policy Research.
‘The motivation is that both of them are somewhat outside the mainstream of the Republican Party,” said Baker.
“O’Neill is from an industry background and there are people on Wall Street who don’t feel comfortable with him. “In the case of Lindsey, he’s a libertarian; he’s not entirely in sync with the Republican line either.”
Baker said he suspects that Lindsey was not supportive of a war on Iraq.
“You may recall that he came up with an estimate that the cost of a war on Iraq would be in the range of $100 to $200 billion, which is not a ridiculous number, but is on the high side, and I don’t think that the administration is happy with their chief economic adviser making estimates on the high side,” said the economist. Baker said the resignations were probably planned, as “they like to do things on Friday. But it was good timing, as I’m sure they would like this to get media attention, instead of the rising unemployment rate.”
As for possible replacements, Baker said he heard that Charles Schwab, the founder of a discount brokerage firm, had been mentioned. “Schwab is close to Wall Street and he fits the bill. Someone also mentioned Philip Graham (outgoing Republican senator from Texas), whose wife is closely tied to Enron.
That appointment would surprise me, but then it wouldn’t be the first time the White House has made decisions that surprised me.”
Baker said Wall Street has just corrected from a bubble, but it is not unrealistically low.
“The biggest problem for the economy is that we are recovering from that bubble and we just lost another 40,000 manufacturing jobs, and United Airlines may declare bankruptcy.”
