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. Last Updated: 07/27/2016

Bush Shuffles Economic Team, Dumps O'Neill

WASHINGTON -- U.S. President George W. Bush revamped his economic team Friday as Treasury Secretary Paul O'Neill and economic adviser Larry Lindsey resigned at the request of the White House amid growing concern about the ailing economy.

Bush advisers have been increasingly worried that a lagging economy could hamper the president's re-election prospects. The unemployment rate shot up to 6 percent in November, the highest in eight years, the government said Friday.

Presidential advisers do not blame O'Neill for the uneven economic recovery, but they have long recognized that a shake-up of the economic team would help indicate Bush was doing everything he could to improve matters.

"My economic team has worked with me to craft an economic agenda and help lead the nation out of recession and back into a period of growth," Bush said through his press secretary, Ari Fleischer. "I appreciate Paul O'Neill and Larry Lindsey's important contributions to making this happen."

The resignations came four weeks after Securities and Exchange Commission Chairman Harvey Pitt resigned under fire.

O'Neill, 67, was the first member of Bush's Cabinet to leave. Officials expected him to be replaced quickly; a search already was under way.

Among those mentioned as possible successors are Joseph J. Grano Jr., head of UBS Paine Webber in New York; investment counselor Charles Schwab; retired House Ways and Means Committee Chairman Bill Archer, a Texas Republican; and Senator Phil Gramm and House Majority Leader Dick Armey, a pair of Texas Republicans and economists who leave Congress in January.

Gramm, however, has just taken a lucrative post at UBS Warburg and is said to be eager to make money after years in the public sector.

Senate Democratic leader Tom Daschle, who has frequently criticized Bush's handling of the economy and called on him to fire his economic team, said the shake-up was not enough.

"Firing its economic team is an overdue admission by the Bush administration that its economic policies have failed," Daschle said in a written statement. "However, the fundamental problem is that this administration has no comprehensive plan to get the economy back on track."

Senate Republican Leader Trent Lott said the departures of O'Neill and Lindsey were "an opportunity for the administration to think about the best people to bring in as they try to develop an economic growth package."

Just after the November elections, White House advisers began speculating that Lindsey and O'Neill would be asked to leave. Bush said at the time: "My economic team came in during very difficult times. There was a recession, terrorist attack, corporate scandals. We have done a lot to return confidence and to provide stimulus through tax cuts ... and for that [the team] deserves a lot of credit."

At the White House, Fleischer said the president credits O'Neill and Lindsey with playing key roles in securing tax cuts and legislation promoting free trade and guaranteeing terrorism insurance to businesses. "They have both served the president ably and well in leading the nation from a period of recession into a period of growth," Fleischer said.

Still, senior White House officials said the men had been told their departures would be welcome because Bush wanted to shake up his economic team.

"It has been a privilege to serve the nation during these challenging times," O'Neill said in a letter to the president. "I thank you for that opportunity."

During his nearly two years as treasury secretary, O'Neill's blunt-speaking style served as a lightning rod for detractors and sometimes could even make his supporters wince.

O'Neill, who left his job as chairman of Alcoa, the world's biggest aluminum maker, to take the Cabinet post, touched off a furor when he said he would keep nearly $100 million worth of stock in the company. Under fire by critics about potential conflicts of interest, he eventually reversed course and sold the stock.

As the president's chief economic spokesman, he was frequently criticized as being either too enthusiastic about the economy's prospects and the stock market or too ho-hum.

"I think Paul O'Neill was the Jimmy Carter of treasury secretaries," said economist Richard Yamarone of Argus Research Corp. "He was a good and honest man with good intentions, but he just didn't get the job done. I don't think the administration's economic message got out. "

When Wall Street reopened after the Sept. 11, 2001, terrorist attacks, O'Neill turned into an economic cheerleader, predicting on Sept. 17 that the Dow Jones industrial average could be approaching all-time highs within 12 to 18 months.

As the stock market melted down that day, O'Neill declared that "the people who sold will be sorry that they did it." He also pooh-poohed the notion that the economy could be headed into a recession. It was.

Early in his term, O'Neill's mixed comments on the U.S. dollar rattled currency markets and perplexed currency traders. He described traders as people who "sit in front of a flickering green screen" all day and were "not the sort of people you would want to help you think about complex questions."

Still, Bush and his aides defended O'Neill's salty style.

"The president enjoys his blunt, plainspoken approach," Fleischer said last year. Despite the controversies around O'Neill, he said, "the president has never had a moment of concern."

O'Neill called the U.S. income tax code "9,500 pages of gibberish." He roiled the Social Security debate by declaring that the able-bodied should save for their own retirement and medical care.

He criticized international bailouts of Russia as "crazy" and called the European Union "off the wall" for rejecting the General Electric-Honeywell merger.