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Published: Saturday, 12/7/2002

Blunt O'Neill generated almost constant controversy

BY ANN McFEATTERS
BLADE WASHINGTON BUREAU CHIEF

WASHINGTON - Paul O'Neill was a magnet for controversy the moment he surprised himself by returning to Washington as President Bush's Treasury secretary. Outspoken and disdainful of Washington's back channels, he easily saw eye to eye with Mr. Bush but from day one was seen as the unpredictable cabinet maverick.

Mr. Bush said he admired Mr. O'Neill's hands-on experience, grasp of numbers, and basic common sense as the Alcoa CEO credited with turning around the once-stumbling global aluminum company based in Pittsburgh. But Mr. Bush's economic team, outshone from the start by his strong foreign policy team, never jelled. Internally, it was always at odds on how to fix the economy, jolted by recession, the plunging stock market, and corporate scandals.

Mr. O'Neill's announcement yesterday, two days after his 67th birthday, that he is resigning, coupled with the pending resignation of Mr. Bush's chief economic adviser, Lawrence Lindsey, put teeth to persistent rumors that Mr. Bush wants to start over and revamp his entire economic team as worries about the sagging economy mount. Sources in the White House said that the President did not directly ask Mr. O'Neill to resign. Neither did he ask him to stay.

The handwriting has been on the wall for months. The Nov. 5 resignation of the embattled Securities and Exchange Commission chairman, Harvey Pitt, with whom Mr. O'Neill had major issues, was seen as just the start.

Mr. O'Neill and Mr. Lindsey differed dramatically on the extent of new tax cuts. The internal turmoil within the White House became so loud that the administration was accused of having no central economic message. With the President preparing to run again in 2004, he needed to get control of his message.

Business yesterday did not seem ready to mourn Mr. O'Neill's departure. Asked for comment on the shakeup, Thomas Donohue, president of U.S. Chamber of Commerce, the world's largest business federation, said briefly, “On behalf of the business community, I want to wish him well, and I am certain he will continue to make significant contributions to our nation in whatever endeavor he chooses.”

The straight-talking Mr. O'Neill was no stranger to Washington when he arrived in January, 2001. From 1967 to 1977 he was at the White House budget office, rising to deputy director of the Office of Management and Budget in 1974. He then went to International Paper Co. and on to Alcoa, where he was won acclaim for restoring to life what many thought was a manufacturing mastadon.

But as soon as Mr. O'Neill was nominated by Mr. Bush, even with widespread support on Capitol Hill, some conservatives began whispering he was a bad choice because he advocated a higher gas tax in 1992. The press giddily followed all of his off-the-reservation comments and publicized his streaks of independence, from his support of curbs on global warming to his sometimes whimsical remarks on the dollar. The markets became nervous when he spoke off the cuff. Wall Street brokers openly belittled him, as he did them.

His very first controversy as the nominee erupted on almost the worst possible issue, when he said he would keep $100 million of Alcoa stock as a Cabinet member. Eventually, in the face of warnings he was playing with conflict-of-interest fire, he reluctantly sold it.

Under constant grilling on Capitol Hill, he grew testier as the months passed and the criticism escalated as the economy worsened.

His verbal joustings with such lions of the Senate as Sen. Robert Byrd (D., W.Va.) made front-page news. He was hung with such sobriquets as “Loose Lips” and “The Gaffester.'' He supported the President's $1.3 trillion tax cut package passed in 2001, saying it was a tool that should be used to boost the economy. But he never convinced anyone that he fully supported making the tax cut permanent after 2010.

Mr. Bush, who prizes loyalty as much as his father did, found himself defending his Treasury secretary again and again over charges that he wasn't a team player. Whether or not it was true, the perception grew in Washington that Mr. O'Neill was losing his clout with the President on his recommendations on such important policy issues as tax cuts, health care reform, international trade, Social Security, and Medicare.

Mr. O'Neill earlier this year said it was “not acceptable” that Mr. Bush had failed to file a timely “Form 4” to disclose his 1990 sale of Harken Energy Corp. stock when he on the company's board. Mr. Bush sold the stock shortly before the company announced $22 million in losses.

Rumors that Mr. O'Neill would be the first Cabinet official to leave grew stronger. He was accused of being inept in helping to oversee the world's economic machinery from his perspective as a manufacturer, either without a good understanding of capital markets or disdain for them.

And increasingly he was unfavorably compared with Robert Rubin, who as Treasury secretary in the Clinton administration presided over an economic boom.

Mr. O'Neill never stopped saying he wished the rules of the game in Washington would change in dealing with financial crises and chafing that perception is everything in politics.

“I think the world would be better off if we were able to tell each other the truth more frequently than it seems convenient to do now,'' he said earlier this year.

But as he prepares to leave office, there's little evidence any rules in Washington have changed.

Some time ago he dropped his ambitious plans to change the tax code, which he once called “gibberish.''

Now he is telling friends his next goal is to work to prevent medical errors that take thousands of lives.



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