Fire O’Neill
Empty Treasury.

By NR Editors
December 4, 2001, 2:30 p.m.

EDITOR’S NOTE: “The White House, increasingly dismayed by the poor performance of Treasury Secretary Paul O’Neill, is quietly chatting about ways to dump and replace him,” Tuesday’s New York Post reports. National Review recommended just this in an editorial in the October 18th, 2001 issue.

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.