The first step toward recovery, it is often said, is admitting you have a problem. That's what President Bush did yesterday.
By pushing out his top two economic officials -- Treasury Secretary Paul H. O'Neill and National Economic Council Director Lawrence B. Lindsey -- Bush acknowledged that the U.S. economy is in trouble and that he will be blamed for it in 2004 if growth is not restored. The housecleaning signals at a minimum that Bush believes he needs fresh faces to sell his economic policies to Wall Street and Main Street, and it may also reflect a worry that the policies themselves have not been bold or creative enough.
It was just a coincidence that the purge of O'Neill and Lindsey came on the same day a report showed that the unemployment rate unexpectedly returned to an eight-year high of 6 percent last month; the decision was made Wednesday, and O'Neill and Lindsey were advised Thursday that their resignations were expected. But the uncharacteristic move by Bush to cut loose two loyal members of his team reflects the danger a lumbering economy poses to Bush's reelection prospects.
Until now, Bush and his aides have blamed the economic malaise on terrorists, on the policies of President Bill Clinton or on Senate Democrats for blocking Bush's agenda. But now, midway through his term and with Republicans in control of Congress, opinion polls give Bush poor marks on handling the economy. Administration officials are concerned that Bush could suffer the fate of his father: losing the presidency because he appeared to deny a struggling economy.
"First and foremost in presidential elections, people tend to vote their pocketbooks," said Ken Duberstein, a Reagan White House chief of staff. The economy did not hurt Bush and the GOP last month because local issues are paramount in midterm elections, Duberstein said, but it could be a liability in 2004. "There was a sense in political Washington that the economic message was not being delivered with confidence," he said.
The shake-up does not come without cost. It could be taken as an acknowledgement that Bush's economic team and his economic policies have failed to lead the economy into a healthy recovery. Bush will have trouble arguing, as he has consistently, that the fundamentals are in place for a robust rebound. "It's like in baseball: If you're not winning, you change the coach and manager," said Steve Forbes, the publisher who led a conservative challenge to Bush in the 2000 GOP primaries.
The move could also damage one of Bush's most admired traits: his fierce loyalty to his staff, which is returned in the form of a discreet White House that rarely leaks internal disagreements. Though it has been widely reported that both officials' jobs were in jeopardy, Lindsey recently told friends that he was secure because the president's code of loyalty did not allow for politically advantageous firings.
But Bush decided Wednesday in a meeting attended by his top political strategist Karl Rove, Chief of Staff Andrew H. Card Jr. and Card's deputy, Joshua Bolten, that the stakes -- delivering a coherent economic policy before 2004 -- were too high for him to indulge in the luxury of loyalty.
"My strong guess is this is painful for the president because he likes these guys," said Vin Weber, a Republican lobbyist who is close to the White House. "I like both of them, too, but it's a very positive sign that it's a no-nonsense administration when it comes to policies that are going to move the country for the next two years."
O'Neill and Lindsey were said to be fuming at the treatment they received, and Bush press secretary Ari Fleischer did little to discourage the idea that the two men had been shown the door. Asked repeatedly to challenge the notion that the two were forced out, Fleischer would say only, "They both resigned." Bush stayed out of public view.
"Give credit to Rove and the boys -- it was a big move, it was necessary and they did it," said strategist Scott Reed, who ran Robert J. Dole's presidential campaign. "You can't afford to go into election without an economic spokesman. As we learned during the stock market slowdown this summer, Bush can't be his own economic spokesman. They're coming out with a new economic growth plan, and they need new spokesmen to sell that to Wall Street and Main Street."
Floating the names of anti-tax candidates to be Treasury secretary -- among them retiring Sen. Phil Gramm (R-Tex.), former House Ways and Means chairman Bill Archer (R-Tex.) and retiring House Majority Leader Richard K. Armey (R-Tex.) -- conservatives entertained hopes that Bush would adopt a more aggressive economic policy. "Part of the problem was policies criticized as being too powerful turned out to be too weak," Forbes said, calling for an immediate and permanent acceleration of last year's tax cuts and of new cuts in capital gains, dividends and corporate taxes.
But administration officials and GOP economists cautioned against expecting radically new policies. Though Bush's new economic stimulus package probably won't be unveiled until January, after a new team is named, the policies -- likely to be modest tax cuts -- are unlikely to change. Bush aides say the problem wasn't the message but the messengers.
"The shortcoming has not been so much substance as style," a White House official said. "They were unable to be effective in carrying the president's message. At the beginning of the administration, that was not as important as it's about to become."
Though Lindsey and O'Neill were known to have their policy quarrels, Bush saw their flaws more in their public presentation of his themes, with Lindsey appearing to be too ideological and O'Neill unpredictable. Bush aides once jokingly compared an O'Neill news conference to "watching a child play with a loaded gun."
Republicans have some concern that the confirmation hearings for a new Treasury secretary and a new Securities and Exchange Commission chairman will give Democrats a chance to highlight Bush's economic failures and their alternatives.
Democrats may point out that unemployment and the trade deficit have grown under Bush while economic growth has diminished, the stock market has plunged and the federal budget has swung from surplus to deficit. Sen. Joseph I. Lieberman (D-Conn.), a possible presidential candidate, said yesterday: "When you're headed in the wrong direction, you don't just need new people in the deck chairs -- you need to change course."
But Republicans said Bush's timing -- with the midterm elections safely behind and long before his reelection campaign -- gives the president and the economy plenty of time to recover. "We're seeing a very disciplined White House looking ahead to the election," said GOP pollster Bill McInturff. "If we're enjoying 4 percent economic growth in 2004 with a reasonable international environment, there's no precedent for defeating a popular incumbent."
Staff writer Glenn Kessler contributed to this report.