Bush Firings Signal Help Is On The Way

It is supposed to have been Gladstone who said that a prime minister must first be a good butcher. Gladstone would have been impressed by the butchery in Washington this weekend: At 10:05 on a Friday morning, without so much as a hint leaked in advance, the Bush administration announced that its two top economic policy-makers would be gone by the end of the year.

White House economic chief Lawrence Lindsey was dispatched in an especially bloody way. Unlike Treasury Secretary Paul O'Neill, who was allowed to pretend that he was departing of his own volition, somebody in the White House press office told CNN that Lindsey had been asked to resign.

How to understand this Friday morning massacre?

O'Neill's tenure at Treasury has been a shambles from the start. The man interpreted his appointment as Treasury Secretary as an unconditional charter to unburden himself of every thought that crossed his mind. He disparaged the Bush tax cut, praised the Kyoto treaty, and mused to a friendly reporter that maybe the administration ought to abolish the corporate income tax.

There is nothing wrong with a cabinet secretary holding dissenting opinions. There is nothing wrong with him pressing those opinions forcefully upon his colleagues and the president. And if his dissent is serious enough and the issue is important enough, it can be necessary for him to take his campaign public -- as for instance Colin Powell has done over the past 12 months with his opposition to military action in Iraq.

But the difference between Powell and O'Neill is precisely that O'Neill was never serious. He didn't break ranks in order to advance important principles; he broke ranks because it never occurred to him that a man with the power to upend every stock market on earth ought to think for a second or two before blurting his latest passing fancy. The last straw broke six weeks ago, when he defied a direct order from the President and speculated aloud about the possibility of a second bailout of the struggling airline industry.

O'Neill would have been fired a year ago if the Republicans had not lost control of the Senate in May 2001. But with Senate Democrats demanding the repeal of the Bush tax cut -- and the economy in turmoil after 9/11 -- the last thing the Bush administration wanted to do was open a debate over economic policy by sending a new Treasury nominee up to the Senate for confirmation.

Now, with Bush's leadership strengthened by the November elections and with the Senate safely back in Republican hands, and with the State of the Union address and a new economic agenda only a few weeks away, the administration can safely replace its most visible economic spokesman.

The real mystery about Friday's events is why Lindsey was so brutally axed. Lindsey was not an especially effective economic adviser. But he was nothing like the kind of spectacular failure that O'Neill was. Why not gracefully ease him out or shift him to another position?

Here are three possible explanations.

1. By firing the two men together, Bush made the firings less personal. Had O'Neill resigned alone, the headline would have been: "Bush Dumps Treasury Chief." Now instead the headline is: "Bush Shakes Up Economic Team."

2. By firing two prominent people and then waiting a while to name their successors, Bush has bought himself up to a month of eager media reports about his bold new economic agenda -- reports that will obscure the less exciting truth that he's sticking with the same old economic agenda he has had since 1999.

3. O'Neill had a background in industry. Lindsey was an academic before his appointment to the Board of Governors of the Federal Reserve in 1991. Neither had any direct experience in financial markets. But it is precisely those markets that have suffered most from the downturn since the spring of 2000. If you make cars for a living in Smyrna, Tennessee, you're probably barely aware of the recession at all; if you are an investor hoping to retire in the next couple of years, you have probably lived through two of the worst years of your life. By clearing away O'Neill and Lindsey, Bush has opened room to hire a team that commands respect and attention on Wall Street -- and that can signal worried investors that their unhappiness has been noted and that help is on the way.

How much difference will Friday's action really make? In the end, probably not all that much. The U.S. economy is suffering from two things: the collapse of asset values after the giddy boom of the 1990s and the collapse of confidence after the terror attacks of 9/11.

For the collapse of asset values, there is only cure: time. As the economy grows, corporate incomes will rise and corporate assets will recover.

For the collapse of confidence, there is also only one cure: decisive military action against terror and the sponsors of terror.

There is little that a new economic team can do to promote either cure. Which means that for many months to come, the most important news for the U.S. and world economies will be the news -- not from the Treasury -- but from the Pentagon.