Treasury Secretary-designate Paul O'Neill listens to opening statements
George W. Bush's nominee to head his Treasury Department — and square his $1.6 trillion tax cut with Congress and the Fed chairman — joked during his short, painless, not-controversial-enough-for-live-coverage hearings Wednesday that he was "thinking about whether I can still get away with being a maverick for a few more days... I think I will be."
And then he was, a little. "I'm not going to make a huge case that this is the investment we need to make sure we don't go into a recession," the Nixon, Ford and ALCOA veteran told the Senate Finance Committee. O'Neill was speaking, of course, of the across-the-board tax cut his new boss has been describing all winter as, well, the investment we need to make sure we don't go into a recession.
Out of step with Reagan
Not that O'Neill is against tax cuts, or tax cuts now — "If we are going to do it anyway, then the sooner the better," he added — but he made quite clear to the committee that he thinks smoothing out the business cycle and saving the economy from recession is the Fed's job, and that the White House and Congress should stick to balancing the budget.
"It's desirable to have a situation in which we send it back when we don't need it," O'Neill said of the people's money, "but we should be in balance even with a weak economy."
This is why O'Neill's résumé does not include a top job in the Reagan administration, why he spoke up in favor of Bush the elder's infamous tax hike, and why he called the Clinton administration's record of fiscal discipline and economic stability "wonderful."
The man is not a supply-sider.
Lawrence Lindsey, Bush's designated chief economic adviser, does happen to believe that big tax cuts can pay for themselves with economic growth. Reagan thought so too. And because heavy congressional spending arguably did as much to create Reagan's massive deficits as his tax cuts did, the philosophical debate goes on.
Good buddies with Greenspan
But O'Neill's side is winning. The deficit-reduction plan that Greenspan pushed on a reluctant Bill Clinton in 1993 is the foundation of the prosperity of the last eight years. Balanced budgets, a mainstay of Republicanism in the '50s, were one of Newt Gingrich's rallying cries in the '90s, and are the one thing everybody can agree on in 2001, especially with those city-of-gold surpluses shimmering on the horizon.
Not to mention that Saint Greenspan himself, whose blessing of the Bush tax cut it will be O'Neill's first task to secure, will make fiscal responsibility his first condition.
O'Neill and the Fed chairman worked for Ford together; their continuing friendship was the main reason why he was picked, and will be the main reason he'll likely be confirmed before the sun sets on Inauguration Day. The convivial relations between Greenspan and the Clinton team have been well documented; Greenspan and at least one member of the Bush team will be even closer.
Economically speaking, O'Neill is this Bush administration's Colin Powell — unimpeachably qualified and reassuringly pragmatic. He vowed Wednesday to continue Clinton's strong dollar policy, a semi-sacred cow on Wall Street, but his business/manufacturing background makes him sympathetic to trade deficits. He's brave enough to have once backed an energy tax, but quick enough to have disavowed that stance soon after getting the call from the Austin oilmen. In short, he's the kind of guy who can talk about a trillion-dollar tax cut without everyone worrying that George W. Bush has ordered all White House calendars be turned back to 1986.
Who'll have Bush's ear?
Whether he and the supply-sider Lindsey will get along — and which of them will have Bush's ear on fiscal policy if they don't — is another question entirely. And neither O'Neill, Lindsey or Bush has given much public thought to the economies beyond American borders. But for the time being, people from Wall Street to Main Street just getting to know O'Neill can imagine him as sort of a Greenspan in street clothes, a Republican fiscal pragmatist who loves crunching numbers and getting his hands dirty, even if his plainspoken days may soon be behind him.
We could have done a lot worse.