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Friday, 6 December, 2002, 15:59 GMT
Not the doctor the economy needed
US Treasury Secretary Paul O'Neill
O'Neill's outspoken style didn't mesh with Bush policies


US Treasury Secretary Paul O'Neill's sudden resignation on Friday is perhaps Washington's worst kept secret in recent memory.

The former Alcoa chief had been rumoured to be on the way out for months, after a series of missteps put his policy stances at odds with those of the White House.

"The timing is a surprise, the fact is not," said Ram Bhagavatula, chief economist at the Royal Bank of Scotland.

"This has been rumoured for so long, and it finally happened."

Cheerleader

Certainly, in recent weeks there has not been a clear meeting of minds between the Treasury and the administration, Mr Bhagavatula said, most notably on the need for additional stimulus packages to get the US economy moving again.

The Bush administration has been pushing for acceleration of tax cuts that were part President George W Bush's $1,350bn (857bn) tax cut that he signed into law in June 2001.

But the treasury secretary has continued to cheerlead the economy rather than address its shortcomings.

He alienated some on Wall Street by failing to aggressively pursue pro-growth strategies like those of Clinton administration officials.

"By his reluctance to shout as loudly and as often as his predecessor-but-one, Robert Rubin, that a strong dollar is good for America, Mr O'Neill has been deemed by the markets to be a bit wobbly on the issue," said Ian Shepherdson, chief US economist at High Frequency Economics.

The wrong man?

The simultaneous resignation of White House senior economic adviser Larry Lindsey, a former central bank governor, shows Mr Bush hopes to project an image that he is focused on the economy.

With Mr Bush facing re-election in less than two years, the president does not want to appear ineffective on domestic economic issues, having devoted much of his energy to the war on terrorism.

Analysts assess Mr O'Neill's performance at the head of the treasury as ho-hum, with some more bluntly saying he was the wrong man at the wrong time.

"Mr O'Neill failed to supply the type of economic leadership that a recessionary and then sluggish economy was in need of," said John Lonski, senior economist at Moody's Investor Service.

'Showbusiness'

Aside from his lack of acumen on economic issues, Mr O'Neill suffered from the same sort of political missteps that recently caused the resignation of Securities & Exchange Commission Chairman Harvey Pitt.

He alienated members of his own party after he called a Republican economic stimulus package crafted by House members "showbusiness".

He also opposed Mr Bush's tariff proposals to protect the US steel industry, saying they were not a long-term solution.

In addition, he appeared indifferent to the plight of Enron workers who lost everything when the energy trading giant went belly-up, destroying employee retirement funds.


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