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December
6, 2002, 10:35 a.m.
Fire
O’Neill
Empty Treasury.
By
NR Editors
EDITOR’S
NOTE: Treasury Secretary Paul O’Neill resigned today, reportedly
at the request of the president. National Review called for
O’Neill’s resignation a year ago in an editorial, reprinted
here.
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f Republicans have a coherent economic policy, they are hiding it well.
They have spent most of the year making Keynesian arguments for watered-down
supply-side measures. Thus the tax cut passed this spring was supposed
to "put money in people's pockets" to be spent. When Democrats
correctly pointed out that cutting tax rates effective in 2006 would not
in fact lead to a spending boom, the Republicans were forced to agree
to a tax rebate. The importance of improving incentives to work, save,
and invest was lost.
The House Republicans'
stimulus bill is the same conceptual morass. It accelerates the date at
which the spring tax cuts become effective — but not for the top
brackets, lest Democrats balk. It cuts the capital-gains tax rate by a
puny two points. And it includes another round of tax rebates.
The Bush administration
has largely been AWOL during this debate, except to insist on bipartisanship
now that we are at war. What's the risk of making its case? That Democrats
will stop supporting the war because they dislike Republican economic
policy? It's an unlikely prospect, and one for which the voters would
punish the offending party soon enough. The administration may hope that
the economy will recover on its own, and the drop in oil prices and interest
rates certainly makes that a possibility. But since Congress is going
to pass a stimulus, the administration should shape that stimulus to be
effective.
In any case, the
administration lacked a coherent economic message before either the terrorist
attacks or the drop in oil prices. Part of the trouble is that the man
who should be its voice on economic matters, Treasury secretary Paul O'Neill,
is manifestly unsuited to the job. He spent the first months of his tenure
trying to improve worker safety and office cleanliness at Treasury —
when he wasn't trying to get Bush to regulate carbon-dioxide emissions.
In congressional testimony, he undercut the administration's pitch for
tax cuts. He has been a force within the administration for rebates. Rather
than constructive action, all conservatives have gotten from O'Neill is
pie-in-the-sky talk about abolishing the corporate income tax.
When President Bush
nominated him, he said O'Neill was "a steady voice," someone
"who can calm people's nerves, calm the markets." Instead, the
secretary's most notable effect on the markets has been to roil them with
ill-considered remarks about the dollar. One journalist concluded of O'Neill
that "if he can't learn to keep his lips buttoned and continues his
gaffe-prone ways, he risks being branded permanently as a buffoon."
And that journalist was one of O'Neill's defenders. At a moment
of economic difficulty, we have a Treasury secretary who inspires confidence
neither on Wall Street nor in Washington. O'Neill should go.
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