Almost since the day he took office, Treasury Secretary Paul
O'Neill has drawn attacks from both liberals and conservatives. In
Washington, this is often taken as confirmation that one is doing something
right. If both sides are against you, it is assumed, then it must be because
you are a man of principle, who does what is right regardless of the
Sometimes this is true, but not always. Sometimes liberals and
conservatives agree with each other because both are right. I suspect that
this may be the case with O'Neill. According to an August 23 report in The
Washington Post, even the career staff at Treasury have given up on O'Neill
and are leaving in droves.
As it happens, I know many of the people mentioned in the Post
article. From 1988 to 1993, I was deputy assistant secretary for economic
policy at the Treasury. Many of the staff people named as leaving due to
frustration with O'Neill are people who used to work for me. Over the last
two years, they have expressed to me directly many of the same concerns
highlighted in the Post article.
The basic problem is that O'Neill seems to have little interest
in economic policy. Consequently, there really wasn't much work to do for
the people who worked in that area. Eventually, they left for other agencies
or simply retired, rather than do nothing.
In most other agencies, the opportunity to get paid to do
absolutely nothing is the ultimate goal of the career staff. I remember
hearing from a friend at another agency who observed a colleague using
Federal Express to deliver an urgent letter from one floor to another in the
same building. The person involved was too lazy to walk the envelope to its
recipient. Apparently, this was a widespread phenomenon, because the
director of the agency had to send a memo around telling people to stop
Thankfully, the departmental offices at Treasury were largely
exempt from this all-too-common attitude. They tended to get the best and
brightest of those who work in the federal government. I always found the
professional staff to be highly competent and hardworking. They were there
for the same reason I was: to try and improve economic policy.
Historically, the Treasury Department has been the central
economic policymaking agency. Although it shares responsibility with others,
such as the Office of Management and Budget and Council of Economic
Advisers, the Treasury secretary is always the president's principal
economic counselor and spokesman.
Obviously, the Treasury's fortunes rise and fall to some extent
with those of the secretary. Some are well known to be close friends and
confidants of the president -- Nicholas Brady and Bob Rubin, for example.
Others are there solely for political reasons. Both Presidents Nixon and
Carter ended up firing their first choices.
It has never been clear why Bush hired O'Neill. They didn't know
each other previously, and the latter lacks the Wall Street background
normally considered standard for those in this position. The recent stock
market sell-off, resulting from accounting problems at many major
corporations, illustrates why it is helpful to have someone with Wall Street
experience. O'Neill has clearly not known how to properly communicate to the
financial community during this time -- he simply doesn't speak their
language -- adding unnecessarily to the stock market's woes.
Those with previous careers in finance also understand better
than O'Neill does that psychology is important. The Treasury secretary's
words matter to Wall Street. Yet, O'Neill has had a habit of making
ill-timed and ill-considered comments about exchange rates, interest rates
and international debt problems since day one. He also exhibits a frivolous
attitude toward serious issues within Treasury's purview, as shown by his
silly African tour with rock star Bono.
The result has been a shrinkage of the Treasury as the
administration's key economic agency. This has created a vacuum that has
been filled to a large extent by the White House National Economic Council.
Unfortunately, this is a very small organization without the staff,
resources or experience to deal with the broad range of economic issues
facing the nation. The Treasury is better suited to this task, but appears
to have abrogated that role.
I think it is only a matter of time before O'Neill departs --
either on his own or under pressure. I hope Bush uses the opportunity to
reinvigorate the Treasury by appointing a secretary with the stature and the
wisdom to know how to use this agency properly in pursuit of the president's
goals. I believe that man is Federal Reserve Chairman Alan Greenspan.