Paul O`Neill on Budget & Economy

Former Treasury Secretary (Pres. Bush Cabinet)

Jan. 2000: business leaders say we're headed into recession

Bush tapped Paul O'Neill to be the new Treasury secretary. O'Neill looked great on paper--chairman of Alcoa, and a Ford administration budget official. He had the mix of business & public service the president-elect was looking for. But on the phone he was grumpy. When I asked about the January meeting, he turned angry. "Why would the president meet with business leaders?" he demanded. That was his job as Treasury secretary. He, not that president-elect, should hold such meetings. The meeting Bush wanted, he said, would be a useless PR excuse, much like one O'Neill had attended for Bill Clinton in 1992.

O'Neill skipped the meeting with business leaders--which was a bad sign. Bush heard news behind closed doors was sobering and valuable. Business leaders from all parts of the country and all parts of the economy said sales were dropping and profits weakening. The country was headed into a recession & the Treasury secretary designate had missed an important session on what to do about it.

Source: Courage and Consequence, by Karl Rove, p.219 , Nov 2, 2010

Cheney to Treasury: “Deficits don’t matter”

Former Treasury Secretary Paul O’Neill was told “deficits don’t matter” when he warned of a looming fiscal crisis.

O’Neill, fired in a shakeup of Bush’s economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from “the corporate crowd,” a key constituency.

O’Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. “You know, Paul, Reagan proved deficits don’t matter,” he said, according to excerpts. Cheney continued: “We won the midterms (congressional elections). This is our due.” A month later, Cheney told the Treasury secretary he was fired.

The vice president’s office had no immediate comment, but John Snow, who replaced O’Neill, insisted that deficits “do matter” to the administration.

Source: Adam Entous, Reuters, on AOL News , Jan 11, 2004

Bush team not pushing Reaganite supply-side arguments

Instead of pushing Reaganite supply-side arguments, the Bush team is stressing the demand side: It proclaims that reducing taxes will put money in consumers’ pockets and so prime the economic pump. Consider, first, the deafening supply-side silence. Back when Reagan was pushing his first tax plan, his people preached that big cuts in marginal rates would sharpen incentives for workers, and that harder work would in turn boost output.

Now contrast that with Treasury Secy. O’Neill’s performance before the House tax committee last Tuesday. At one point, [he was asked] how much additional economic growth we might anticipate from the president’s tax plan. Far from jumping at this opportunity, O’Neill evaded the question. “I suppose I could give you something for the record,” he replied, but neglected to do so. In his extensive testimony, O’Neill made the supply-side argument about work incentives only in passing, and was even more diffident about the link between those incentives and faster growth.

Source: Sebastian Mallaby, Washington Post, Page A33 , Feb 19, 2001

Committed to maintaining strong dollar

Treasury Secretary O’Neill insisted today that the Bush administration is committed to maintaining a strong dollar and rejected speculation that the US might encourage a drop in its value to bolster economic recovery by spurring American exports. O’Neill also sought to reassure his peers [at the G-7 Summit] that he is convinced the US will stage a solid recovery this year and resume its role as the locomotive driving economic growth.

O’Neill was quoted last week saying: “We are not pursuing, as often said, a policy of a strong dollar. In my opinion, a strong dollar is the result of a strong economy.“ The comments, which currency markets viewed as a modification of the Clinton administration’s emphasis on a strong dollar, caused the dollar to plummet in value against the euro until the Treasury Department issued a statement denying a change in policy. O’Neill seemed exasperated at how billions of dollars can churn on currency exchange markets based on a strained interpretation of his words.

Source: William Drozdiak, Washington Post, Page A31 , Feb 18, 2001

Transform old economy to new economy

O’Neill’s unique experience transforming an old economy firm into a new economy success has been chronicled as a study by the Harvard Business School, and studied in business schools across the nation. O’Neill has gained valuable insights into international finance and the global economy as head of a major corporation with 140, 000 employees spread across 36 nations.
Source: Dept. of Treasury web site, “Secretary’s Bio” , Feb 3, 2001

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