TCS Daily

It Ain't Beanbag

By James Pinkerton - December 9, 2002 12:00 AM

OK, politics is a rough game. But sometimes it's rougher than it has to be. Larry Lindsey just learned that the hard way.

The White House insisted, not too insistently, that Lindsey and Paul O'Neill "resigned." That was Ari Fleischer's story, and he was sticking to it. But the headlines in Saturday's paper were brutal. Paul O'Neill was "ousted," and Lindsey was "dismissed," said The New York Times. The Washington Times said both men were "sacked." Newsday bannered that both got "pink slips." And The Washington Post treated Lindsey in the most backhanded way of all: "Bush Ousts O'Neill and a Top Adviser." Poor Lindsey: he's the bureaucratic equivalent of the murdered Nicole Brown Simpson and her "friend." And the editorial pages were no nicer; The New York Times chortled that it was time for a "housecleaning" of "economic ideologues."

One could make a case that Treasury Secretary Paul O'Neill had to go, by any means necessary. He was testy and temperamental. And while he was one of the most refreshingly candid officials in modern times-he once snapped, "We've spent trillions of dollars [foreign aid] and there's damn little to show for it"-he learned, finally, that candor can be the worst faux pas of all. If the Treasury job is to babysit Wall Street-which never met a foreign bailout it didn't like-then O'Neill was obviously the wrong sitter.

But Lindsey, who had masterminded George W. Bush's economic policy since the late '90s, deserved better. After all, it's not as if the economy is tanking in 2002. Thanks in no small part to the policies Lindsey championed-and in spite of 9-11, and in spite of the 30-month deflation of the '90s stock market bubble-real GDP growth was 3.1 percent in the third quarter of this year. That's the sort of economic resilience that Lindsey had prophesied; he was, after all, one of the sturdiest champions of supply-side economics. Indeed, back in 1990, he published a Lafferish manifesto, The Growth Experiment: How the New Tax Policy is Transforming the U.S. Economy, in which he boldly entitled a chapter "The Great Surplus of '99." That's right: contra all the conventional wisdom of those green-eyeshade days, Lindsey nailed it: Uncle Sam, liberated from punitively high marginal tax rates, would grow his way out of the deficit.

I have known Larry Lindsey since the days when he was a staffer for Ronald Reagan's Council of Economic Advisers; during the Bush 41 administration, we sat next to each other in the Old Executive Office Building. Needless to say, we were both dismayed to see President Bush break his "read my lips, no new taxes" pledge in the spring of 1990. But Lindsey soldiered on, as the negotiations dragged on-and dragged 41's presidency down.

For months during that bleak summer of '90, the budget-deal negotiations were being held at Andrews Air Force Base. Every day, the White House worthies would travel out to lock horns with Congressional Democrats; yet the Bushmen, having begun the fiscal bidding with a base-destroying, promise-breaking concession on the tax issue, had no good cards to play. So every afternoon, the Democrats would leak the Republican position to The Washington Post, complete with their Bush-bashing, class-warfaring spin. And the next morning, every morning, the Post would gleefully report that the Bush plan, whatever its particulars, would enrich the rich and harm the poor. Where was the Republican counter-spin? There wasn't any, because the White House had decided not to fight back, lest the Democrats get mad and walk away from the deal-and Dick Darman's chance to be Time magazine's "Man of the Year." Poor Lindsey. Every morning, he'd show up at the Office of Policy Development staff meeting, held in Roger Porter's West Wing office, and offer up data to refute the terrible budget-deal headline in the Post. He could always find a way to show that the latest Bush proposal, bad as it was for savings and investment, wasn't as bad as that of the Democrats. He would show up with his charts and talking points, sliding them across the table to Porter, his boss. And Porter would stuff the paper into his briefcase. And when that briefcase filled up, he got another briefcase.

Lindsey understood what was happening, but as he told me at the time, he felt it was his continuing duty to provide the best information to his superiors. And they, in turn, regarded him as a good fellow, even if he was a little bit too anti-tax. In 1991, the elder Bush appointed him to the Federal Reserve Board. He stayed there for more than five years, then going to the American Enterprise Institute and private consulting, and, from there, to the Bush campaign in the late '90s.

Over the last few weeks, Lindsey was putting together a plan for boosting economic performance by reducing the tax burden on the economy. Of course he was, having written a prescient book on the topic.

So what went wrong? The Washington Post reported on Saturday that Bush decided to get rid of Lindsey after the economist told The Wall Street Journal in mid-September that a war with Iraq could cost as much as $200 billion. "That made it clear Larry just didn't get it," one official told the Post. One might ask: "Didn't get what?" Since when do wars-and the nation building, rebuilding, that must follow-come cheap?

Now friends and critics alike will ask: will Lindsey's replacement offer the American people an honest accounting of the costs?

Of course, that's often the fate of economists in the White House-to let the facts get in the way of the spin. Charles Schultze, chief economist under President Carter, remembered that his unloved task back then was to be the person at every meeting, reminding the spinners and wishful thinkers that concepts such as "opportunity cost" could not be waved or speechified away. So after awhile, he didn't get invited to many meetings. A quarter-century later, nothing much has changed; when the chips are down and the costs are going up, serious rigorous, economists are unwanted-and expendable.

So Larry Lindsey won't be going to the Roosevelt or Cabinet rooms for much longer. And of course, jobs in the White House are honors for a brief period of years, not sinecures for a lifetime. When higher-ups tell White House aides that they serve at the pleasure of the president, they mean it.

George W. Bush may think that now he will be able to propose a 2003 agenda-which probably won't be much different from what Lindsey would've advocated-free and clear from any of the accumulated baggage of the first two years of his presidency. And maybe he will be. Maybe he did what he had to do. That's politics for you. Raison d'etat can be a tough mother.



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