The markets fell sharply this morning on the news that the U.S. economy lost another 40,000 jobs in November and the unemployment rate spiked to 6 percent. Then the markets rallied on the news that Treasury Secretary Paul O'Neill and Lawrence Lindsey, the White House's chief economic adviser, had both resigned.
The Bush administration now seems to understand what its many critics—including Moneybox—have been saying for months. Its economic program is nonexistent. In October, Moneybox tagged O'Neill, Lindsey, and Harvey Pitt as the weak links of the Bush economic team: All are now gone, with no replacements in sight. The administration seems to have decided that the cure for a nonexistent economic program is a nonexistent economic team.
It's a bit mystifying why the resignation of the Treasury Secretary and the top economic adviser should be cause for Wall Street celebration. The market rise could represent a vote of faith for Glenn Hubbard, the chairman of the Council of Economic Advisers, just about the only economist in the administration who still has a job. Or it could represent a fervent (and completely without foundation) hope that some bang-up replacements are waiting in the wings. But Hubbard, while competent, can't possibly run the entire economic portfolio. And while it's good news that the scrub-laden first team has been benched, there are no Lou Gehrigs waiting to step into the shoes vacated by these Wally Pipps.
O'Neill's resignation, which has been rumored almost from the day he took office in January 2001, surprised no one. With his tendency to go off-message, predilection for mals mots, and idealistic inclinations—remember the Africa Bono tour?—O'Neill was a liability to a message-obsessed, hard-nosed administration. What's more, with the Democrats banished from power and Federal Reserve Chairman Alan Greenspan on board the tax-cut express, O'Neill was one of the last dissenting voices for fiscal sanity. In recent days he let slip the heresy that the economy appeared to be recovering and might not need another massive deficit-increasing tax-cut package. The fact that the erratic O'Neill turned out to be the voice of economic reason in this administration is a sign of how dismal economic planning has become.
The removal of Lindsey was more symbolic than tactical. After all, as a supply-sider, Lindsey was generally for any tax cut, regardless of fiscal consequence. But he had never established a significant media presence and lacked the personality to sell policy to Congress, the media, or the public. The cashiering of the unloved Lindsey is being retailed by the White House spin machine as evidence that Bush is somehow engaged with the nation's economic problems.
One of the failings of the Bush economic policy is that nobody seems to think more than one day ahead. They never had a plan about what to do if the surplus projections turned out to be fantasies (which they did) or gave any thought to how slapping tariffs on imported steel and increasing farm subsidies might undermine their alleged interest in free-trade agreements.
These personnel moves are similarly one-day schemes. A prudent planner would have somebody waiting to fill at least one of these crucial positions, especially at a time when the economy is stumbling. But the Republicans, oddly for the party of capitalism, don't have a cadre of credible wise men (or women) to turn to, as they do with security policy. Nor do they have any sense of urgency. The Accounting Oversight Board, created last summer, is without a leader since William Webster flamed out. It's been five weeks since Harvey Pitt tendered his resignation—which can hardly have come as a surprise—and there's no sign of a successor at the SEC. Anybody out there think we'll have a new Treasury Secretary before, say, March?
Until then, we've got an Ichabod Crane economic policy—headless, and galloping wildly on a horse named Tax Cut.