January 14, 2004

Getting Robert Rubin's Job

One final set of thoughts on the enigma wrapped inside a mystery that is Paul O'Neill:

In the New York Times this morning, Andres Martinez writes that when Paul O'Neill went to Washington, what he really wanted to have was Robert Rubin's job:

Andres Martinez: ... Mr. O'Neill would have really liked having Mr. Rubin's job. Of course, Mr. O'Neill thought he was getting Mr. Rubin's job when George Bush appointed him Treasury secretary, but in fact he was only assuming the title. Mr. Rubin's job, as described in his book, "In an Uncertain World: Tough Choices From Wall Street to Washington," was to analyze an often mystifying world, alongside Alan Greenspan and an insatiably curious president, and to shape domestic and global economic policy accordingly.

Mr. O'Neill, who had been a budget wiz in the Nixon and Ford administrations and a successful chief executive at Alcoa, was able to sift through economic data to his heart's content with his old pal, Mr. Greenspan. But he soon discovered that this was merely an academic undertaking. In addition to the damage that Mr. O'Neill did to himself with his erratic public statements, he was serving in an administration that was not eager to have facts get in the way of policies set by a "praetorian guard" of ideologues surrounding the president.

Mr. O'Neill can't tell you what it feels like to steer the world economy. For that, read Mr. Rubin's book. Mr. O'Neill's is a woeful tale of what it feels like to sit in the office once occupied by Alexander Hamilton and be subservient to people like Karl Rove and Karen Hughes.

"We need to be better about keeping politics out of the policy process," Mr. O'Neill told Dick Cheney, his old friend from the Ford administration who had recommended him for the job early on. In this tale, the Treasury secretary repeatedly implores the vice president to foster a more open and rigorous policy-making process in the White House, but to no avail. These scenes are reminiscent of a spy thriller in which the protagonist warns the head of counterintelligence that there is an enemy mole in their midst, only to discover that his confidant is actually the mole.

Long after the reader has figured it out, Mr. O'Neill finally realizes that Mr. Cheney is the leader of the inner circle, which keeps facts--whether about global warming, the deficit, steel tariffs or Iraq--from getting in the way of policy...

When I started Ron Suskind's The Price of Loyalty, I thought it would raise my--low--opinion of Paul O'Neill's fitness to be a twenty-first century Treasury Secretary. But it lowered it instead. You see, Paul O'Neill never tried to get Bob Rubin's job. He never took any of the steps needed to get Robert Rubin's job.

What do I mean? Well, IMHO, this is the way you get Robert Rubin's job. this is what you do (with all days relative to inauguration day):

  1. Day -35: Read, slowly, cover-to-cover, Samuel Kernell and Samuel L. Popkin, ed., (1988) Chief of Staff: Twenty-Five Years of Managing the Presidency (La Jolla: University of San Diego Press: 0520063384).
  2. Day -34: When Bush and Cheney offer you the job of Treasury Secretary, say that you are incredibly flattered, but that you need to consult with your wife, and you need to make sure that you can take the job under conditions that will make you an asset rather than a liability to the President.
  3. Day -33: Call Dick Cheney. Tell him that you will take the job, but that it has to be under conditions in which you can be an asset to the president. Specifically: (i) the Treasury is the central department in so much of the business of government that the Treasury Secretary must attend the daily White House senior staff meeting; (ii) the Assistant to the President for Economic Policy must function as an honest broker--rather than as a Henry Kissinger-like figure--and if the Assistant to the President for Economic Policy cannot so function, then the Treasury Secretary needs to do what George Shultz did and take over the chair of the National Economic Council (or whatever it's called); (iii) there needs to be unanimous agreement on the economic policy priorities of the administration; (iv) there will be lots of things that the Base wants that are not good policy and that will create problems three, five, seven years down the road, and there needs to be explicit recognition that the priority is not coddling the Base but developing good policies to create a successful presidency; and (v) that if you are to make use of the Treasury career staff, you need to be able to pick your own team of subordinates.
  4. Day -33: If Cheney agrees to (i) through (v), write a one-page memo to Bush accepting the job, specifying (i) through (v), and expressing your extraordinary enthusiasm for working for him and in his administration. If Cheney does not agree, go back to Pittsburg.
  5. Day -33: If your conditions are accepted, call Larry Summers and ask if you can spend two days--quietly, mutely--shadowing him to see just how the job works the way he does it.
  6. Day -32: Shadow Summers.
  7. Day -31: Shadow Summers.
  8. Day -24: Spend half a day getting to know Karen Hughes. Make the point that good policies in the first year will create, by the fourth year, a powerful and successful record of accomplishment that can be a big boost to the reelection campaign. Make the point that Base-pandering policies the first year may well have backfired by early 2004.
  9. Day -21: Spend a full day getting to know the President-Elect's speechwriters. Make sure that they know that they can call on you for help and advice, and make sure that they know that you know that they have extraordinary power to shape the administration's substantive policy agenda.
  10. Day -17: Spend a full day getting to know the ex-Clinton and ex-Bush I senior Treasury staff--Rubin, Newman, et cetera.
  11. Day -14: Hire a very good Assistant Secretary of the Treasury for Public Affairs. Tell them that their chief job is to tell you--every single hour, on the hour--five things: (i) you are now Treasury Secretary, and your words move markets, be careful; (ii) every reporter in Washington gains status by catching you saying something unexpected, be careful; (iii) you can have on-the-record talks with reporters only if you have a previously-vetted set of talking points, and only if you stick to those talking points and say nothing else; (iv) you can have off-the-record talks with reporters in which any quotes or ascriptions of opinion have to be negotiated with the Assistant Secretary of the Treasury for Public Affairs afterwards; (v) you can have no other interactions of any kind with members of the press.
  12. Day -14: Hire a very good Assistant Secretary of the Treasury for Congressional Affairs. Tell them that their chief job is to tell you--every single hour, on the hour--that unscripted exchanges with Congressmen and Senators are to be reserved for your and their private offices, and that hearings are times to stay on-message and on talking points.
  13. Day -12: Decide on a common communications strategy with Alan Greenspan. Begin giving regular press conferences with Greenspan, talking about what a good economic policy would be and what the Bush administration hopes to accomplish.
  14. Day -10: Spend a full day getting to know the chairs and the ranking members of the Senate Banking and Finance committees.
  15. Day -9: Spend a full day getting know the chairs and the ranking members of the House Banking and Finance committees.
  16. Day -7: Host a meeting of the Republican economic policy Great and Good--Shultz, Baker, Brady, Boskin, Feldstein, Sprinkel, Darman, et cetera--and set out the five principles for Bush II administration economic policy: (i) fulfill the President-Elect's promise of tax cuts; (ii) run a Republican government--a small government, a prudent government, an effective government, an efficient government--(iii) maintain budget surpluses; (iv) reform entitlement spending to deal with the long-run problems of the retirement of the baby-boom generation and the growing cost and power of medical technology; (v) pursue free trade.
  17. Day -3: Spend the full day before your hearings with the White House Public Affairs and Congressional Relations staff to be, making sure that they are on your message and you are on their message.
  18. Day 0: Inauguration Day
  19. Day +1: Attend the morning White House senior staff meeting. Try to gain control of the Main Treasury building. There are 1000 people working there, 300 of whom are there principally because they like the job security, and 700 of whom are there principally because they want to make the country a better place. Tell as many people as you can that you are there to be their salesman to the White House and Congress, and that they are there to do research and analysis to make Bush administration economic policy the best economic policy the country has ever seen.
  20. Day +2: Attend the morning White House senior staff meeting. Talk to the CEA-chair designate and the OMB head-designate. Make sure they understand that CEA, OMB, and Treasury need to work together--and that their respective staffs need to view each other as allies to be cooperated with rather than adversaries to be opposed.
  21. Day +3: Go to Andrew Card's office and tell him that Larry Lindsey is not working out as chair of the NEC. Tell him that unless things improve a lot, you will be taking over as chair of NEC meetings in a month.
  22. Day +4: Ask the president what advice he has as you attempt to put into practice the five priorities of Bush administration economic policy: (i) fulfill the President-Elect's promise of tax cuts; (ii) run a Republican government--a small government, a prudent government, an effective government, an efficient government--(iii) maintain budget surpluses; (iv) reform entitlement spending to deal with the long-run problems of the retirement of the baby-boom generation and the growing cost and power of medical technology; (v) pursue free trade.
  23. Day +14: Start heading over to Capitol Hill will Alan Greenspan and White House Legislative Affairs on a regular basis to get Congressional input on and begin lobbying for the White House tax cut package.
  24. Day +28: Begin chairing NEC meetings. Issue a press release stating that Assistant to the President for Economic Policy Larry Lindsey will now spend more time rallying support for the President's economic policies and less time on the boring details of policy development.
  25. Day +84: Pass a tax cut bill that guarantees the continuation of budget surpluses no matter what. Announce that entitlement reform is the next big item on the agenda.

Yet O'Neill didn't establish a unified, public position with Greenspan on what a good tax cut bill would look like. He didn't show up at the 7:30 AM White House senior staff meetings and say gain an idea of what the pulse was of those who saw George W. Bush all the time. He didn't make Larry Lindsey scared enough of him to play the role of an honest broker, and he didn't elbow Lindsey aside and take over the role of economic policy coordinator himself. He never talked to the speechwriters personally. He didn't convince the White House Political Affairs people that they needed to help create a record of policy accomplishment that would produce a good situation in 2004 rather than to flatter the Base.

But these are all things you need to do--if, that is, you want to have Robert Rubin's job, and aren't satisfied with being an empty suit with White House mess privileges.

You fight, or you quit. Threatening once or twice to quit may be the best way to fight. You find allies, and you caucus with them. Even though Larry Lindsey is not playing "honest broker," there still is a very powerful quadrumvirate for a rational economic policy at the start of the administration: Greenspan, O'Neill, Daniels, and Hubbard. And there are the 1,000 people who work in Main Treasury who work for you, and who can be set to work making phone calls, quizzing their opposite numbers in other agencies, talking to the press, and doing other things to leverage your influence over politics and policy.

Moreover, O'Neill had another powerful network at his disposal: Rumsfeld, Cheney, and O'Neill were (are?) friends, with powerful memories of working side-by-side in the Ford administration. Yet O'Neill did not strengthen those ties either--did not corner Rumsfeld and Cheney, ask them what was going on, and refuse to let them out of the room until they gave a satisfactory answer. Indeed, I am sure that Cheney and Rumsfeld are deeply disappointed in O'Neill: he was supposed to keep domestic policy on track, just as Rumsfeld was supposed to manage security policy and Cheney manage George W. Bush and the political operation. Remember, Cheney wanted O'Neill in the administration, and wanted him very badly.

O'Neill did none of the things that he needed to do in order to get Robert Rubin's job. Why not is unclear. He did suffer from CEO disease--that is, after a decade of everyone who works for ALCOA telling him that he is a genius and that every one of his words is pure gold, he did believe it and could not readjust. He sent his deputy to ask if O'Neill could attend the 7:30 White House senior staff meeting, but apparently thought it beneath his dignity to ask himself (or to just show up).


Paul O'Neill, Unplugged, or What Would Alexander Hamilton Have Done?

By ANDRES MARTINEZ

Read Robert Rubin's recently released memoir and "The Price of Loyalty," Ron Suskind's new book on Paul O'Neill's time in the Bush administration, and a few things become apparent. The first is that Mr. O'Neill would have really liked having Mr. Rubin's job.

Of course, Mr. O'Neill thought he was getting Mr. Rubin's job when George Bush appointed him Treasury secretary, but in fact he was only assuming the title. Mr. Rubin's job, as described in his book, "In an Uncertain World: Tough Choices From Wall Street to Washington," was to analyze an often mystifying world, alongside Alan Greenspan and an insatiably curious president, and to shape domestic and global economic policy accordingly.

Mr. O'Neill, who had been a budget wiz in the Nixon and Ford administrations and a successful chief executive at Alcoa, was able to sift through economic data to his heart's content with his old pal, Mr. Greenspan. But he soon discovered that this was merely an academic undertaking. In addition to the damage that Mr. O'Neill did to himself with his erratic public statements, he was serving in an administration that was not eager to have facts get in the way of policies set by a "praetorian guard" of ideologues surrounding the president.

Mr. O'Neill can't tell you what it feels like to steer the world economy. For that, read Mr. Rubin's book. Mr. O'Neill's is a woeful tale of what it feels like to sit in the office once occupied by Alexander Hamilton and be subservient to people like Karl Rove and Karen Hughes.

"We need to be better about keeping politics out of the policy process," Mr. O'Neill told Dick Cheney, his old friend from the Ford administration who had recommended him for the job early on. In this tale, the Treasury secretary repeatedly implores the vice president to foster a more open and rigorous policy-making process in the White House, but to no avail. These scenes are reminiscent of a spy thriller in which the protagonist warns the head of counterintelligence that there is an enemy mole in their midst, only to discover that his confidant is actually the mole.

Long after the reader has figured it out, Mr. O'Neill finally realizes that Mr. Cheney is the leader of the inner circle, which keeps facts--whether about global warming, the deficit, steel tariffs or Iraq--from getting in the way of policy.

Mr. O'Neill did manage, for a time, to head off talk of a tax cut on dividends. But when the issue comes up once more right after the midterm elections, and Mr. O'Neill again notes that the country cannot afford it, Mr. Cheney cuts him off: "Reagan proved deficits don't matter. We won the midterms. This is our due."

To his credit, President Bush, who is depicted as having a hard time following the discussion, wonders at the same meeting whether he hasn't already given wealthy people enough of a break. That's when Mr. Rove chimes in that the president ought to "stick to principle."

Mr. O'Neill came to feel that he, Christie Whitman and Colin Powell were essentially hired for cover by a president who had pledged to govern from the center, but really had no intention of doing so.

Mr. O'Neill was a Nixonian Republican caught up in a Reaganite restoration. He had admired how President Bush's father, when faced with a dire fiscal outlook, had reneged on his "no new taxes" pledge. And while some Democratic liberals had viewed President Bill Clinton's fiscal discipline as a betrayal, for the likes of Mr. O'Neill it represented the triumph of Republican values.

The new Treasury secretary and Mr. Greenspan shared concerns that even the bulk of the first round of tax cuts in 2001 could prove unaffordable if projected $5.6 trillion surpluses over the next decade turned out to be a mirage (as they did). That's why Mr. O'Neill, whose presidentially conferred nickname was downgraded over time from "Pablo" to the "Big O," tried to get Mr. Bush to agree to condition the phasing in of these cuts on the availability of surpluses.

He failed. "I won't negotiate with myself," the president told his Treasury secretary, as if responsible economic stewardship was a compromise too far.

The White House is upset that a departed cabinet member has provided such an intimate and devastating portrait of presidential decision-making--in an election year, no less. But Mr. O'Neill, who comes across as somewhat naive and politically tone-deaf in this thick stew of self-justification and insider revelation, also feels betrayed by a White House that discouraged any serious policy debates.

Whether it's Mr. Cheney's energy task force, the supposedly independent commission on Social Security reform or the president's ridiculously scripted Waco economic summit meeting in the summer of 2002, the Treasury secretary continually registered his deep shock at what he rightly considered shoddy, if not dishonest, decision-making.

"When you have people with a strong ideological position and you only hear from one side, you can pretty much predict the outcome," he says of the energy task force. Too often, the fix was in, as when steel tariffs were imposed, and when Mr. O'Neill's post-Enron efforts to make chief executives more accountable for their companies' misbehavior were thwarted by White House concerns about "the base."

When Mr. Cheney finally called to fire his old friend in November 2002, the O'Neill account quotes him as saying, "We'd really like to do this in an amicable and gracious way."

It was clearly too late to start down that road.

Posted by DeLong at January 14, 2004 06:01 PM | TrackBack

Comments

Ha ha ha. You're such a kidder, prof DeLong.

It was never about the job. It was about the power. That's the way of it with this crowd.

Posted by: Alan on January 14, 2004 06:54 PM

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CEO disease is epedemic in this administration.

Posted by: MKHack on January 14, 2004 07:06 PM

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if you believe that procedure would have won the day you have not been in a revival tent. non believers were doomed from the get go.

Posted by: honza on January 14, 2004 07:10 PM

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Brad: If Cheney does not agree, go back to Pittsburg.

And that is where it all ends. (iii) in particular is just silly - it means Treasury Secretary demands a veto power over economic policy priorities when there is a bunch of people that would just love the job.

Posted by: Leopold on January 14, 2004 07:53 PM

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Mr. DeLong, you're hired. Just as soon as Bush/Cheney are impeached and I'm elected President.

Posted by: John Thullen on January 14, 2004 08:21 PM

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Condition iii would probably be a deal-breaker for me too, and I don't even play Napoleon in my dreams.

Here's the problem with what Brad's proposing: the core idea that a guy who came to town with experience in *actual* administrations should have been able to i) anticipate the kind of nuttiness this crowd dreamed up and ii) set conditions that would prevent it and iii) at the same time assure rational economic policy.

The varieties of possible craziness are so great that you just can't anticipate some of them, it's impossible. I don't think Brad himself would have set these conditions in December 2000. Some likely conditions yes, but these very ones?

I doubt that even Rubin himself had the arrogance to insist on a free hand and supremacy over the White House itself.

I'm agnostic on whether O'Neill could have been a good one or not. But maybe he suffered less from what we'd call CEO disease than from the disease called rationality?

Posted by: Altoid on January 14, 2004 08:28 PM

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Perhaps my reading the entire book would soften the impression, but from the excerpts posted here it sounds more like O'Neill wanted Bush's job-- and failed to realize that it was already taken. Or is Middle East policy part of the Treasury Secretary's portfolio now?

Since only about 40% of the deficit is attributable to the tax cut, how were they supposed to "pass a tax cut bill that guarantees the continuation of budget surpluses no matter what"?

Posted by: Paul Zrimsek on January 14, 2004 08:43 PM

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>>Perhaps my reading the entire book would soften the impression, but from the excerpts posted here it sounds more like O'Neill wanted Bush's job<<

Say, rather, that O'Neill wanted the same job for economic policy that Rumsfeld got for security policy...

And the strangest thing of all is that I believe that Cheney was offering O'Neill the economic policy-equivalent of Rumsfeld's job: the three buddies from the Ford administration, after all...

Posted by: Brad DeLong on January 14, 2004 09:10 PM

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"Since only about 40% of the deficit is attributable to the tax cut, how were they supposed to 'pass a tax cut bill that guarantees the continuation of budget surpluses no matter what'?"—Paul Zrimsek

That's a damn good question and I'd like to hear DeLong's answer. It seems to me that critics of the administration should acknowledge that Bush's tax cuts didn't destroy the surplus, the economic downturn did—the misconceived tax cuts transformed a difficult situation into an impossible situation. That is indictment enough of this administration; there's no need to gild the lilly.

Similarly, crafting a budget that retained a surplus in these conditions poses an insurmountable problem for conservatives who believe that it is only cuts in spending that have been neglected.

It seems to me that pinning the blame for the disapearance of the surplus on Bush's tax cuts is as intellectually dishonest as the supply-side fantasy that the cuts would eventually be self-financing. Such views are already in such a highly-politicized mode that responsible policy analysis is already made irrelevant.

Posted by: Keith M Ellis on January 14, 2004 09:48 PM

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Those of us who remember Greenspan's 2001 testimony--or who have read Suskind's book--will recall that Greenspan wanted triggers: tax cuts would be reversed if revenues dropped and the surpluses were threatened.

Posted by: Brad DeLong on January 14, 2004 09:53 PM

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Yes, the tres amigos, reliving the good times . . .

But I think O'Neill could have had a cognate job with Rumsfeld's only if he was as utterly willing and able to conceal, lie, manipulate, and hornswoggle the guy he answered to as Rumsfeld has proven to be.

From what I've heard of him in interviews, O'Neill does seem to have believed that his job was to serve the chief as honestly as he could, and that the chief was actually accountable. The others don't seem to show much of that.

How exactly Cheney and Rove and Rumsfeld and the other eminences grises fit into the whole picture, and who among them actually pulls Bush's leading strings, is a question the Constitution's framers tried very hard to make unimaginable, I think. Only one branch of the three answers to a single individual, after all.

Posted by: Altoid on January 14, 2004 09:56 PM

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But my point was that there would have been deficits even in the absence of tax cuts (though I believe my 40% figure was in error; now that I think of it, this was the percentage of the total fiscal swing from surplus to deficit that could be charged to tax cuts, which were more like 60% of the deficit alone). So how were the triggers supposed to ensure the continuation of surpluses?

This business of O'Neill conspiring with Greenspan to thwart his boss's will does make me wonder just what the "loyalty" of the title was supposed to consist of.

Posted by: Paul Zrimsek on January 14, 2004 10:33 PM

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"...will recall that Greenspan wanted triggers: tax cuts would be reversed if revenues dropped and the surpluses were threatened."

Which still would not have prevented deficits in 2002 and 2003, at least. We would have deficits without the tax cuts. You know this.

Again, I hardly think that saying so amounts to any sort of defense of the administration. It's more like saying, yeah, we were gonna jump out of this plane no matter what so I'm *really pissed* that our jump partner pulled us both out of the plane before we put on our chutes.

The theory was, supposedly, the guy with the fancy watch said, we'd be *much lighter* without our chutes and we'd be able to fly like birds. Right.

Anyway, we were gonna fall anyway—without the chute, the landing's a bitch. Where's the asshole with my chute? is what I want to know. I think he's on the board of directors of Haliburton.

Posted by: Keith M Ellis on January 14, 2004 10:38 PM

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"....And the strangest thing of all is that I believe that Cheney was offering O'Neill the economic policy-equivalent of Rumsfeld's job: the three buddies from the Ford administration, after all..."

Cheney is probably more sophisticated than that. I think he was hiring Rumsfeld as a go-getter operations manager and hiring O'Neill as chief number cruncher, accountant, budget wizard. He was allowing neither one a say on policy. It worked with Rumsfeld -- I mean that guy is probably 70 years old and he still loved to micro-manage missile targeting in Afghanistan and Iraq!!!-- but O'Neill created problems. After all, O'Neill knew a bit of math.

And I think policy guy at Defense Department was/is Wolfowitz, not Rumsfeld. And at that, Wolfowitz was/is chained too, to his own ideas that he .... I can't find a word here... about 10 years ago or so.

Posted by: bulent on January 14, 2004 10:41 PM

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Current deficits are 1/3 tax cuts, 1/3 spending increases, 1/3 recession.

Go out ten years, however, and deficits are 60% tax cuts, 30% spending increases, and 10% changes in economic and revenue assumptions.

Posted by: Brad DeLong on January 14, 2004 11:11 PM

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Yes. I didn't say otherwise. But an awful lot of people have the mistaken impression that the budgetary picture would be all roses and wine were it not for Bush's tax cuts.

The point I'm trying to make—aside from the obvious one that the correct response to mendacity is honesty—is that the truth of the matter only underscores the deep irresponsibility of the Bush tax cuts. Not *only* were the cuts not an effective stimulus, not *only* are the cuts likely to accelerate the advent of a social security/medicare crisis that otherwise might have been averted, but the projected surpluses on which they were initially justified were fantastical from the get-go. It's dishonesty colluding with incompetency to seduce fantasy.

Posted by: Keith M Ellis on January 14, 2004 11:33 PM

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"...Go out ten years, however, and deficits are 60% tax cuts, 30% spending increases, and 10% changes in economic and revenue assumptions...."

Hufs! Economic conditions causing budget deficits even ten years from now?

I think that's another reason to get that 16 year mandatory education simulation study done. And sooner the better.

Posted by: Bulent Sayin on January 15, 2004 12:46 AM

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Here is this knowledge@wharton story on Kenneth Cole:

http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&ID=918

(They want registration.)

It is story that tells us that you need from now on a good background in higher education even in "frivolous trade" like selling shoes and perfumes. This is 21st Century -- unless of course we let certain characters take us back to McCharty era, and then all the way back to the stone age!


Posted by: bulent on January 15, 2004 01:13 AM

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As far as CEO disease goes...

Of the ex-CEO's in this administration, who had the best performance?

Bush almost certainly had the worst performance. Frighteningly, I hope this is the case - it would be scary if there were someone less competent in the administration.

Posted by: Jon H on January 15, 2004 01:58 AM

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We suspected Bush wanted yes men on the economic team from the beginning and we knew after the Waco summit, he KNEW wanted yes men. Bush would not want a Robert Rubin as Treasury Secretary, which simply means PauL O'Neill was not being offered Rubin's job - just a title. If he realized what we now know - he should have declined Cheney's offer.

Posted by: Harold McClure on January 15, 2004 04:55 AM

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Huah! Look a this!

"A percentage point increase in the supply of college graduates raises high school drop-outs' wages by 1.9%, high school graduates' wages by 1.6%, and college graduates wages by 0.4%. The effect is larger for less educated groups, as predicted by a conventional demand and supply model. But even for college graduates, an increase in the supply of college graduates increases wages, as predicted by a model that includes conventional demand and supply factors as well as spillovers."


Source:Enrico Moretti, NBER Working Paper No. w9108 Issued in August 2002

Link to Abstract:

http://papers.nber.org/papers/w9108

So is somebody going to get that 16 year mandatory ed simulation started?

Posted by: Bulent Sayin on January 15, 2004 06:57 AM

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Having seen Rubin, Summers and O'Neill (to a much lesser extent) in action, the big problem is that O'Neill was just plain unsuited for the job. I think the biggest factor is that Bush and O'Neill weren't personally invested in each other the way Clinton and Rubin/Summers were.

Part of this is because O'Neill was simply not a good philosophical match with Bush (green-eye shade Republican vs. supply-sider), and part of it is Bush's inscrutablity (as Suskind notes in his book). Rubin and Summers, on the other hand, were almost completely in sync with the Clinton agenda. (Part of that, of course, is that Rubin especially helped shape that agenda.)

I do think O'Neill wanted to work with the Treasury staff, but there simply wasn't any scope for doing so; don't forget he was a civil servant at one time. (For example, his first day as Secretary, he did walk the halls and introduce himself to people.) When you have an agenda that is largely ideological, rather than practical, you don't need technicians, you need idealogues.

BTW Brad, is that you sitting next to Linda Robertson in the picture at Rubin's confirmation hearing in his book?

Posted by: Dave on January 15, 2004 07:00 AM

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Brad, I'm confused, because my reading of the book--though I'm not quite finished yet--is that O'Neill felt misled by Cheney.

He trusted his old pal as an honest broker--which is why he didn't set up the conditions you desrcibe--only to find, to his horror, that Cheney was an ideologue bent on killing Kyoto and advancing the Reagan "revolution."

So it seems that you're beniftting from hindsight on this one.

Am I mischaracterizing the book?

Posted by: praktike on January 15, 2004 07:59 AM

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Brad, with Bush's campaign promises, it is difficult for me to believe that O'Neill was being offered a real job. Perhaps O'Neill understood he was being offered a title but hoped to change the offer once inside?

Posted by: Stan on January 15, 2004 08:23 AM

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"...which keeps facts--whether about global warming,..."

Oh, puhlease! Any "facts" that Paul O'Neill would get about global warming would come from the Intergovernmental Panel on Climate Change (IPCC).

And they are **lying.**

The IPCC's behavior regarding global warming is almost certainly the greatest scandal in the history of environmental "science."

Mark Bahner (environmental engineer)

P.S. http://markbahner.50g.com (apologies for the ads...temporary site, while I evaluate moving to a new ISP)

Posted by: Mark Bahner on January 15, 2004 09:29 AM

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Brad, you should read Lindsey's write up in WSJ today, where he claims Bush in 98 thought there was a bubble and wanted tax cuts to cushion the pop. http://www.opinionjournal.com/extra/?id=110004553
Pretty strong defense of Bush, and the fact that Bush's political policy overrode the deficit consideration. Interesting that the Bush cut fiscal stimulus agreed with the Greenspan rate cut (first of 13) -- and seems to have worked.

You can't prove the 1/3 cuts, spending, recession, can you Brad? Even though I believe you and pretty much accept the numbers, I recognize it as merely belief. I note the complaints, here especially, of a no-jobs recession end. I strongly beleive that, without the tax cuts, we'd STILL have more recession.

The bubble pop was Depression level. HUGE deficits are macro justified. And spending is needed in all ways: to support general consumption, general investment, and yes, even specific industry (steel) support where market-bankrupt firms can be restructured to become profitable at lower gov't/ social subsidy cost than the social cost of more closures. No way can I prove this; just belief.

But your list of what O’Neill should have done seemed GREAT. Thanks!

Posted by: Tom Grey on January 15, 2004 10:32 AM

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While I agree with your "what he should have done" scenario, I think it is the product of hindsight, not a failure of forsight. I think that O'Niel came into the administration and expected the process to be similar to his experiences with previous administrations. The book charts his progress in coming to the realization that this administration was fundamentally corrupted by political considerations. There was no policy apparatus as he understood it. Instead, policy decisions were subordinated to and determined by political goals.

I don't think that O'Niel could have reasonably forseen this eventuality. When Bush was first elected, by the narrowest of margins, which included losing the popular vote, there was a weak mandate and a lot of talk of bipartisanship. It was only later that the naked, agressive, partisan nature of this administration became clear, and by then it was too late.

Posted by: IMU on January 15, 2004 11:09 AM

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The comments from PRAKTIKE strike me as most probable: O'Neill was mislead. He wasn't dealing with the same Dick Cheney he knew from the Ford years. Halliburton and the Bush oligarchy had intervened.

Your recipe for O'Neill's West Wing success would likely work in most corporate organizational settings, including mine, but clearly not in this White House. How could it when Cheney ends all discussion with "Reagan proved deficits don't matter. We won the midterms. It's our due."

And I'm still awaiting a media analysis of exactly who "our" refers to in the above quote. I have my hunches.

An aside: Alan Murray is not often someone I agree with, but his prescription for rational tax reform is right on. And thank you for broadcasting it.

Posted by: Rod Proctor on January 16, 2004 01:52 AM

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An addendum:

And of course, at risk of repeating what others and yourself may have said, the bottom line is simple: This White House is all about ideology and power in search of justification; be it taxes, Iraq or whatever. And that is gravely dangerous to us all.

Posted by: Rod Proctor on January 16, 2004 02:56 AM

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Professor DeLong's advice is very good. For anyone taking on a new managerial responsibility, not just for cabinet officials: Know what you want to accomplish, and have a plan to do it.

Since it seems O'Neill did nothing like that, I'd say that's even more reason to laugh this silly book out of town. And, heavens to betsy, I've found another Democrat with whom to agree today:

http://www.washingtonpost.com/wp-dyn/articles/A21419-2004Jan15.html

Posted by: Patrick R. Sullivan on January 16, 2004 07:31 AM

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