Cheney gives O'Neill the boot

WASHINGTON, Dec. 7 (UPI) -- Treasury Secretary Paul O'Neill was told to resign by Vice President Dick Cheney and White House economic adviser Lawrence Lindsey got the word from White House Chief of Staff Andrew Card, newspapers reported Saturday.

Both The New York Times and The Washington Post agreed it was Cheney who called O'Neill prior to Friday morning's departure statement. The Washington Post said Card reached Lindsey by telephone at home Thursday night, where he was snowed in.

O'Neill and Lindsey's resignations were accepted Friday morning as the Labor Department reported the highest level of unemployment in several months. White House spokesman Ari Fleischer had refused to answer the question whether they were pushed.

Although the resignations were announced shortly after the Labor Department reported the unemployment rate climbed back to 6 percent in November, matching April's rate, the departures were set to happen independently of the most recent bad economic news, the reports said.

O'Neill was "angry and hurt," the Times said, when Cheney -- who brought O'Neill into the administration -- delivered the ultimatum, having decided the economic team must be changed as long ago as early November.

One senior administration official told the Times, "We didn't say we want you to take three weeks to think about it."

The Times report said Bush political adviser Karl Rove began to believe both men had to go in the summer but it took months longer to persuade Cheney and White House Chief of Staff Card.

The Washington Post Saturday reported the leading candidate to replace Lindsey is Stephen Friedman, a former chairman of the investment bank Goldman, Sachs & Co.

O'Neill is likely to be replaced by a corporate executive and the two will be announced together soon in an effort to convey concern for "both Wall Street and Main Street," a senior aide told the Post.

As assumed, long-time O'Neill friend and Alcoa colleague Ken Dam, the deputy Treasury secretary, will be leaving with O'Neill, the Post said.

President George W. Bush has for weeks stressed concern over an economy that he concedes is just "bumping along" and has spoken passionately of his determination to create jobs for people who want to work. He had also defended both O'Neill and Lindsey against persistent criticism.

Interest rates are down, inflation is down and economic growth is occurring, but much more needs to be done to stimulate the economy, Bush said throughout last month's midterm election campaign.

"My economic team has worked with me to craft an economic agenda that helped lead the nation out of recession and back into a period of growth," Bush said Friday in a statement on the resignations . "I appreciate Paul O'Neill and Larry Lindsey's important contributions to making this happen.

"Both are highly talented and dedicated, and they have served my administration and nation well. I thank them for their excellent service."

"They resigned," Fleischer said repeatedly when asked if the departures were part of a house cleaning. "I've said everything I'm going to say" on that.

"The answer will always be the same. They resigned."

O'Neill, 67, has been a lightning rod for criticism by Democrats and others over the economy, an issue they will hammer in the 2004 Presidential Election unless there is a dramatic improvement.

"The data continues to be mixed on the economy," Fleischer said, and Friday's unemployment figure "was a setback" for positive trends.

A shake-up of the administration's economic team, however, was not an attempt to breathe new life into economic stimulus, he added.

"I think it's fair to say that the president looks at the economy as a matter that is bigger than any one person or any one expert. And the president looks forward to working with the Congress to advance policies and plans that help get the economy growing even stronger," Fleischer said.

Fleischer said no successor for O'Neill is in place and that the president is looking for a candidate with government and private-sector experience as well as "the confidence of the markets."

Economist Steve Moore, who heads the Club for Growth, a pro-supply-side political organization, sees the openings as a chance for the Bush administration to really move ahead on the economic front.

"America needs a committed and enthusiastic supply-sider in both these jobs," Moore told United Press International. "Paul O'Neill was never a big fan of the tax-cut agenda and that hurt him," Moore said, mindful of the fact that neither O'Neill nor Lindsey had good relations with members of Congress.

"If you are trying to pursue major economic reforms, you cannot succeed if you cannot get along with members of the House and Senate," he said.

Moore says that what the economy needs right now more than anything else are policy-makers who are "passionate advocates of supply-side economic policies including free trade, supply-side tax cuts and tax reform."

For the Treasury job, Moore recommended former Texas Republican Sen. Phil Gramm, magazine publisher Steve Forbes or former Delaware GOP Gov. Pete du Pont, all of whom are leaders of the supply side movement. Other names in the mix were that of centrist Democrat and deficit hawk Sen. John Breaux, Commerce Secretary Don Evans and a variety of Republican securities firm executives.

The Washington Post said Friedman, Lindsey's likely replacement, was once Deputy Chief of Staff Joshua Bolten's boss and that the final decision to oust O'Neill and Lindsey came in a Wednesday meeting of Bush, Bolten, Card and Rove, clearing the way for Cheney to call O'Neill.

"The one thing O'Neill was a star on was tax reform," Moore says. "We need a team that is going to pick up the torch and run with the idea of replacing the income tax with either a flat tax or a consumption-based system. The key components of any plan are lower rates, simplicity and an end to the double-taxation of savings and investments."

Moore also wants to see a supply-sider replace Lindsey as head of the National Economic Council to increase the push for pro-growth policies inside the White House. Among those Moore hopes the president considers are financier Charles Schwab, former U.S. Chamber of Commerce Chief Economist Richard Rahn or Charles Kadler, the chief economist for the investment firm J. W. Seligman.

O'Neill was head of the industrial giant Alcoa when Bush tapped him to be his administration's first treasury secretary, largely because of his close relations to Vice President Dick Cheney and Federal Reserve Chairman Alan Greenspan.

Lindsey is a prominent supply-side economist who was appointed a Federal Reserve governor by the current president's father. Lindsey also played an important advisory role in President George W. Bush's 2000 presidential campaign.

Both men have been the focus of criticism from the GOP pro-growth wing for some time. Calls for O'Neill's resignation have built steadily almost from the beginning.

Initial statements that he intended to keep some $100 million in stock in Alcoa following his appointment stirred up a hornet's nest, and O'Neill had to reverse course and divest. He was also heavily criticized for failing to talk up the stock market as it tumbled last summer.

Early speculation about replacements also include retiring House Majority Leader Dick Armey of Texas and Bill Archer, former chairman of the House Ways and Means Committee -- all favorites of the GOP's pro-growth wing.

In reacting to O'Neill's resignation, Sen. Patrick Leahy, D-Vt., said: "Secretary O'Neill is not the problem, the (Bush) administration's policies are. In fact he has often been a constructive influence.

"Delaying this step until after the elections is cynical enough, but it will be worse if the White House tries to cast him as the emblem of what's wrong with the economy," Leahy's statement added. "If they do that, they will be misleading the American people and ignoring the things that really are holding the economy back."