Changing the economic guard

WASHINGTON -- If Lawrence Lindsey resigns as President Bush's National Economic director, would the administration's economic leadership problems be solved while Paul O'Neill remains as secretary of the Treasury? The confidential answer from the White House is an unequivocal "no." Lindsey will not stay much longer, but published reports that he will go while O'Neill stays at Treasury as the administration's chief economic spokesman are not in touch with reality. President Bush's business supporters have told him for months that he must fill the Treasury portfolio with someone who believes in his tax-cutting strategy, or else follow his father as a one-term president. There are signs the president finally has accepted this advice. Neither Lindsey nor O'Neill will be handed a pink slip immediately but will slowly fade away, saying they have resigned to tend private concerns. Delay is necessary because there is no clear successor at Treasury. After O'Neill, the White House flinches at the thought of picking another CEO. Nobody in Wall Street looks good. Something very different at the Treasury may result. The White House recognizes but cannot publicly admit that its problem is Treasury secretary, not National Economic director. The latter position was created in 1993 specially for financial maven and Democratic donor Robert Rubin, but he exerted little impact until he moved into the Treasury in 1995. While confined to a coordinating job, Lindsey for months has been mercilessly battered and blamed in newspaper accounts for lack of a dynamic Bush economic policy. Anonymous administration sources attack Lindsey, a highly unusual practice within the Bush team. The largely mute O'Neill is not the culprit. R. Glenn Hubbard, chairman of the president's Council of Economic Advisers, raises suspicions by invariably coming out well in these stories. Friends of Lindsey are more than suspicious. They claim hard information that Hubbard, on leave as a Columbia University economics professor, has waged a disinformation campaign against his colleague. Lindsey has said as much to White House aides, who have questioned Hubbard. He denies committing an offense that carries a death sentence under George W. Bush. Larry Lindsey is a devoted Bushie. He left Harvard's economic faculty to join the White House staff of the elder George Bush, who later made him the youngest Federal Reserve governor ever (while Hubbard was a mid-level Treasury official). In 1999, Lindsey, then a seven-figure economic consultant, was called upon by the younger Bush as his 2000 campaign economics expert. In that role, he became one of Gov. Bush's favorites. National Economic director turned out to be a much tougher job, particularly when Lindsey is compared with the silky-smooth performance of his national security counterpart, Condoleezza Rice. Lindsey suffered after he was quoted as estimating a $100 billion cost for attacking Iraq and he failed to get a late-blooming tax stimulus off the ground this fall. O'Neill is widely perceived as turning up his nose at Bush's tax cuts. Indeed, he insists he believes that any secretary of the Treasury cannot hope to seriously influence the massive U.S economy. Neither political nor ideological, O'Neill was a career civil servant who flourished in the corporate world. He came to the Treasury because Dick Cheney remembered him from bygone Nixon administration days as one of the smartest bureaucrats he had ever met. It is hard to find a prominent Republican who does not consider the O'Neill appointment a serious mistake. However, the president, always loath to punish loyal lieutenants, was immobilized by demands from Sen. Tom Daschle and other Democrats for a new economic team. Now, with his term half gone, the president can consider a change at Treasury. But who, if not a CEO or a Wall Streeter? Financier Gerald Parsky, Bush's lieutenant in California, was an assistant Treasury secretary in the Ford administration and would vigorously promote Bush's tax policies; but he is a controversial figure, under attack from the California Republican right. Retiring Sen. Phil Gramm knows economics and politics, but is eager to start a new career in investment banking. The name of Democratic Sen. Zell Miller of Georgia is being mentioned in Bush's inner circle. The point is that the president seeks a real advocate at the Treasury for the first time.