3. Allowing the Team to Unravel

During its first two years in office, Team Bush showed remarkable cohesion—and remarkably little backbiting. The administration included some of Washington’s most renowned and experienced in-fighters; yet, at least in public view, the policy debates were civil and the team remained tight.

Tight and disciplined, that is, except for the economic team. From almost the beginning, Bush’s economic team attracted fierce fire. Unlike the foreign policy team—led by Rumsfeld, Powell, and Rice—the economic team seemed missing in action. As economic problems increased—the collapse of Enron, WorldCom, CEOs in handcuffs, a stock market crash, and a ballooning budget deficit—media attention on the economic policy team became intense. When team members fumbled several key decisions, public criticism, even among the president’s friends, also grew.

Budget director Mitchell E. Daniels, Jr. took early shots for being abrasive with members of Congress. A former executive at Eli Lilly, Daniels came to Washington to be the tough guy in Bush’s effort to hold the line on federal spending. That’s why Bush nicknamed him “the Blade.” Daniels took the moniker to heart in setting a tough position in dealing with Congress. In a widely read op-ed in the Washington Post, he roundly criticized budgetary practices in Congress. He wrote: “All the incomprehensible maneuvering and circumvention does more than waste time and, usually, taxpayer dollars; it demeans the practice of government and fuels public contempt for the entire process and the people accountable for it.”

During the 2001 debate over Bush’s tax cut plan, Daniels blasted Senate proposals to reduce the size of the cut. Disputes between budget directors and Congress are nothing unusual. The budget is often the flash point in the relationship between the White House and Capitol Hill, and the budget director is usually the point person in the conflict. But the senators trying to shrink the deficit were Republicans, and Daniels’s harsh words not only caused conflict with Congress, they angered members of the president’s own party. However, Bush continued to support Daniels with vigor—he was taking the strong line the administration needed on the budget.

The other members of the president’s team encountered tougher criticism, though. Economic analysts complained that Treasury secretary Paul O’Neill’s missteps spooked the markets. In the administration’s first weeks, critics complained that O’Neill was talking down the economy and driving stock prices lower. When the market collapsed in 2002, critics argued that O’Neill should have taken a stronger role in rebuilding confidence.

O’Neill, a former CEO of Alcoa, prided himself as an executive who spoke his mind. As Treasury secretary, however, he was criticized for gaffes and inconsistency, for raising his voice but failing to inspire confidence. After September 11, he urged investors to buy stocks and predicted a big upswing in prices (stocks dropped precipitously). A February 2002 statement in Germany saying that the U.S. was not pursuing a strong dollar policy caused the dollar’s value to fall sharply and led to a quick clarification by Treasury officials in Washington.

In June 2002 he said that “throwing the U.S. taxpayers’ money” at Brazil “doesn’t seem brilliant to me,” a statement that drove down prices on the Brazilian financial markets and provoked Brazilian president Fernando Henrique Cardoso to call Condoleezza Rice to complain. When stock prices were falling in June, O’Neill was touring Africa with Irish rock singer Bono. One investment manager in New York complained, “He doesn’t inspire much confidence.” In fact, “He seems to put his foot in his mouth and stumble. I don’t think he’s helping the cause.” One Republican business leader was far more brusque, saying: “There are a lot of people who would like to see him gone in the next half hour.”

The chairman of the National Economic Council, Lawrence B. Lindsey, was disparaged for being disorganized. Lindsey came regularly to Austin during the 2000 campaign to tutor Bush on economic issues, and he was a prime architect of the $1.3 billion tax cut. As a scholar in the capital’s American Enterprise Institute, Lindsey was a Washington insider. Within the administration, however, Republican insiders questioned whether he had the political skills for the job. After the 2002 midterm elections, Bush decided O’Neill and Lindsey had to go. He sent Vice President Cheney to deliver the news, and both officials resigned the next day.

The administration’s biggest problem, however, came in securities regulation. Harvey L. Pitt was widely regarded as one of the nation’s best lawyers. He had previously served in the Securities and Exchange Commission, and he seemed an ideal appointment to head the SEC in the Bush administration. The Senate confirmed him unanimously. But his troubles began almost immediately, and in just 14 months he became a “political pi ata,” as one Democrat in Congress labeled him.

Aides complained he was mercurial, sometimes brilliant, sometimes obsessing over insignificant details. Observers criticized him for too often relying on old friends instead of the SEC’s experienced career staff. He obsessed over secrecy. Senior commission officials came to believe they could not trust him. In addition, Pitt rankled members of Congress by suggesting his position ought to be elevated to cabinet status, a change that would have brought him increased prestige and a higher salary.

Amid the personal turmoil, Pitt received deafening criticism for failing to get ahead of the collapse of Enron and WorldCom. He signaled he was about to appoint John H. Biggs, chairman of TIAA-CREF (the huge firm that manages pensions for college teachers), to head the new board to oversee the accounting industry. Biggs was well-known for his tough views and for his commitment to frame stricter rules for accountants. Several weeks later, however, he surprised both Biggs and many observers by instead appointing William H. Webster, former director of both the CIA and the FBI.

Just a few days after the SEC approved Webster for the post, however, Webster revealed he had headed the audit committee of U.S. Technologies, a company later accused of fraud. For the new top cop of the accounting industry, the revelation was poison. Pitt and Webster soon resigned, Pitt on election night in 2002. “The auditing of the auditors has been as reliable as the auditors themselves,” the Washington Post wrote in a critical editorial.

Bush quickly put together a new economic team. CSX executive John Snow became Treasury secretary, and Stephen Friedman, former chairman of Goldman Sachs, took over as head of the National Economic Council. Aetna executive and investment analyst William H. Donaldson was named to chair the Securities and Exchange Commission. Snow and Donaldson had both served in the Ford administration—Snow in the Transportation Department, Donaldson in the State Department.

Like Bush’s other key appointments, they shared ties to Bush and his family. Donaldson had met Bush’s uncle at Yale and was an old friend of his father. Snow had participated with Bush in a roundtable discussion on the economy. Friedman had served on Bush’s foreign intelligence advisory board.

With the appointments, Bush sought two things. First, he wanted to name smart, strong, commanding figures whose presence could help calm the financial markets and convey gravitas, a term discussed much but seldom used to describe Bush’s first economic team. Second, he wanted powerful team members who supported the administration’s economic strategy and vigorously conveyed the message. In naming Snow, for example, he said that the new secretary would be “a key advocate of my administration’s agenda for growth, new jobs, and wider, more international trade.”

Bush’s problems with his first economic team were surprising and tinged with irony. After all, he was an MBA with a deep business background. He built his team with business executives, and the officials he named to the key economic posts were all trusted, experienced advisers. But some of his appointees, like Pitt and O’Neill, never fared well in the Washington fishbowl. The first economic team proved unable to effectively articulate the administration’s policies. Discipline alone wasn’t enough, and Bush hoped for better with his second team.

Team Bush. Leadership Lessons from the Bush White House
Annals of Cases on Information Technology (v. 5)
ISBN: 71416331
EAN: 2147483647
Year: 2002
Pages: 114

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