The O’Neill Death Watch

Among the less far-reaching consequences of Sept. 11 has been the demolition of Chatterbox’s predictions concerning Donald Rumsfeld. Chatterbox had argued (here, here, and here) that the defense secretary was in deep trouble and would probably be gone by early next year. On that fateful Tuesday, Chatterbox was contemplating writing a fourth item spotlighting Rumsfeld’s Sept. 10 declaration of “war on [the Pentagon] bureaucracy,” which struck Chatterbox as a desperation move. Now, of course, Rumsfeld’s lack of skill in shaping the Pentagon budget is no longer an issue, because the Pentagon is going to get all the money it wants. Today, the only person at war with the Pentagon is Osama Bin Laden, who smashed a large chunk of it and killed 125 people who work there. Rumsfeld’s job is safe.

But that doesn’t mean Chatterbox will retire the Death Watch. (Now that government employees are actually dying, Chatterbox probably should rename this the “departure” watch, but that isn’t very catchy, is it?) With Rummy in clover, the Moving Finger, having writ, moves on to Treasury Secretary Paul O’Neill. The general dissatisfaction with O’Neill has reached some sort of crescendo in the aftermath of his highly public humiliation at the hands of the Senate Finance Committee, which called in O’Neill’s Democratic predecessor, Robert Rubin, to join Alan Greenspan last week in a closed-door briefing to which O’Neill wasn’t invited. Ouch, babe! A few days later, the Wall Street Journal, a publication whose news staff is usually reluctant to alienate any sitting Treasury secretary, said on its front page that O’Neill is “often criticized for lacking sufficient credibility with financial markets.” Double ouch! Today, the New York Times follows up with a story by Joseph Kahn arguing that O’Neill has little influence over the Bush administration’s economic policy (a point the Journal piece, which ran yesterday, also argued). This is a highly unusual, some would say untenable, situation for a Treasury secretary to find himself in.

[Correction and Amplification, Oct. 3: O’Neill was invited to last week’s briefing, but declined so he could attend a National Security Council meeting and meet with the Japanese prime minister. It was another, earlier Capitol Hill meeting with Alan Greenspan (and, in this instance, Bush chief economic adviser Lawrence B. Lindsay) to discuss the post-Sept. 11 economy that O’Neill was not invited to, according to Kahn in the New York Times. Also, Chatterbox somehow missed that the Journal’s Page 1 has suggested not once in recent days, but twice that O’Neill has no credibility with financial markets. David Wessel’s Sept. 27 “Capital” column concludes that “When the day comes, as it will, that Mr. O’Neill needs the markets and ordinary Americans to believe him, he may discover that credibility, once squandered, is not easily regained.”]

Why is O’Neill being shunned? In truth, many of the criticisms seem unfair. O’Neill annoyed tax-cut true believers early on by stating that the Bush tax cut wouldn’t provide immediate stimulus to the economy. That’s absolutely true; we are now very likely at the beginning of a recession, albeit one that Chatterbox judges likely to be short due to the massive Keynesian spending occasioned by the World Trade Center towers’ destruction. In the Times story, O’Neill is also knocked for having told a TV interviewer that he didn’t think the economy was headed for recession. Apparently, this made him look like a fool. But if O’Neill had said the economy was headed for recession, he surely would have been criticized for helping to bring one on.

Still, who said Washington was fair? More to the point, who said the markets were fair? If the markets don’t find O’Neill credible, and the Journal is actually saying so out loud, there’s nothing left to discuss. Chatterbox predicts that President Bush will soon inform O’Neill that he is not a wartime consigliere.