The Education of Paul O'Neill

By Barnes, Fred | The International Economy, May 2001 | Go to article overview

The Education of Paul O'Neill

Barnes, Fred, The International Economy

The iconoclastic gadfly becomes a disciplined team player.

Paul O'Neill had been away from Washington and government service for twenty-four years when he returned last December for a private meeting with George W. Bush at the Madison Hotel, four blocks from the White House. O'Neill, credited with reviving Alcoa as the world's leading aluminum company, had just retired. Bush, only a few days before, had prevailed in the five-week recount in Florida and won the presidency. They had a mutual friend, Bush's vice president, Dick Cheney, who had invited O'Neill to the meeting.

Bush was having difficulty choosing a Treasury secretary. His transition staff had come up with a list of wealthy campaign donors, investment bankers, and Wall Street types, several of them personal friends of Bush. But he was dissatisfied, and so Cheney mentioned O'Neill, with whom he'd worked on the Nixon and Ford White House staffs in the 1970's. Bush had met O'Neill once, years earlier, but had scarcely talked to him. There was considerable doubt they would hit it off. O'Neill is intense, intellectually assured, and blunt to the point of arrogance--not the sort of person the easygoing and gregarious Bush is normally drawn to. But Bush was impressed, and Cheney's strong endorsement was critical. Later, with O'Neill installed at Treasury, Bush described him as "a pretty darn unusual man."

This was truer than Bush may have thought. First impressions are supposed to be 90 percent of politics, and O'Neill's early weeks as treasury secretary created a bad one. He sounded off like a corporate CEO who expected his adoring staff to cheer him on. He raised doubts about his support for Bush's tax cut and whether Bush would pursue a strong dollar policy. He insulted Wall Street and belittled stock traders. He irritated fellow Cabinet members--particularly Energy Secretary Spencer Abraham and Health and Human Services Secretary Tommy Thompson--by homing in on their issues. He passed out the text of a speech he'd given in 1998 on global warming at a Cabinet meeting, an action seen as bad form. Despite a media clamor, he stubbornly refused to sell Alcoa stock options. The early verdict on O'Neill was that his stay at Treasury would be a short one.

Then, two things happened. The White House did not grow alarmed over O'Neill's troubles. "Everybody who looked at him and talked to him believed he'd be fine," insisted a senior Bush adviser. Only once did Andy Card, the White House chief of staff, call O'Neill for an explanation. That was when The New York Times reported that O'Neill had been ambivalent during his confirmation hearing about the president's plan for cutting taxes. Conservatives, especially supply-siders who'd been influential in crafting President Reagan's tax cut two decades ago, were alarmed. "How'd this happen?" Card asked. O'Neill blamed the Times for misinterpreting his comments, and the transcript tended to back him up.

The other thing that happened was O'Neill's doing. He changed, and changed dramatically. He stopped holding forth in public on any subject. He now limits his comments to the two or three issues he's actually working on. He sold his stock, bowing to pressure with the convenient excuse that his broader-than-usual portfolio for a Treasury secretary had raised the prospect of more conflicts of interest. He courted Wall Street, showing up for speeches and recruiting the respected Peter Fisher from the New York Federal Reserve as his undersecretary for domestic finance. He resolved any doubts about the Bush administration's position on the dollar. He sought to become the chief salesman for Bush's $1.6 trillion tax cut, as had Treasury Secretary Donald Regan in 1981 for Reagan's tax package. At White House meetings of the legislative strategy group, he exhorted Bush aides with pep talks. Among his favorite lines: "Fight for the 1.6!" He forged ties with members of Congress, notably Republican Bill Thomas of California, the influential chairman of the House Ways and Means Committee. …

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