I.O.U.S.A - Addison Wiggin [40]
One of the most outspoken critics of this legislation was the Bush administration ’ s own Treasury secretary, Paul O ’ Neill.
Mr. O ’ Neill has a reputation for having a rather direct way of presenting his ideas and opinions — a trait that would eventually cost him his job.
In 2001, President Bush asked Mr. O ’ Neill to leave the private sector to join his administration as Treasury secretary. O ’ Neill, who has had a long and decorated career in Washington, having served in the Kennedy, Johnson, Nixon, and Ford administrations, was initially excited at the prospect of working under Bush 43.
“ I saw lots of things in our economy and our society that needed to be done, and I was encouraged to believe that Bush 43 was up for the diffi cult political things that needed to happen to make course corrections, ” he told us when we met with him in Washington, D.C., in the spring of 2007. “ Those c05.indd 78
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Chapter 5 The Leadership Defi cit 79
course corrections still include fi xing the Social Security and Medicare trust funds, and fundamentally redesigning the way the federal tax system works. I thought there was some prospect that President Bush would entertain the diffi cult political choices that needed to be made in order to act on these things, and I had spent a lot of time thinking about these things over a period, the better of part of forty years, so I was anxious to have a go at it. ”
O ’ Neill told us that he agreed that the economy was up to the fi rst round of tax cuts. When these fi rst cuts came through, the United States was in surplus condition, and on top of that, taxes had crept up above 20 percent of GDP.
Historically, 18 percent of GDP is healthy for the economy, provided the government can keep its spending in check. Even more would be healthier.
However, as Bush began to argue for further cuts, O ’ Neill became concerned.
“ I honestly
didn ’ t think that was the right thing I argued during the second half to do because I continue to believe of 2002 that we should not have we needed the revenue that we another tax cut because we needed were then collecting to work on the money to work on important policy issues that would shape
the Medicare/Social Security prob-
the nation going forward, and we
lems, ” he explained. “ To work on needed to have, in effect, “ rainy fundamental tax redesign after 9/11 day money ” for the prospect of Iraq while worrying about whether there
and another set of attacks like 9/11.
was going to be another attack or — PAUL O ’ NEILL
a series of attacks would cost hun-
dreds of billions of dollars.
This was not a popular view, and it led to the now infamous discussion that the former Treasury secretary had with Vice President Cheney on the effect of tax cuts on defi cits.
O ’ Neill tried to warn the administration that the budget defi cit was expected to top $ 500 billion in 2002 alone. Since Americans were paying low taxes now, he argued that their children and grandchildren would have to pay off their debt by paying higher taxes in the future. He also argued that Social c05.indd 79
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80 The
Mission
Security and Medicare were in dire need. Since the economy
Ronald Reagan
proved defi cits
was going to be in the positive territory and would likely stay
don ’ t matter?
that way for the next couple of years, why risk a budget defi cit During Reagan ’ s
and add more to the national debt?
tenure at the White
At this point in the conversation, the Vice President cut House, the United
O ’ Neill off and uttered the now infamous words:
“ When
States ran very
large defi cits, and
Ronald Reagan was here . . . ” According to O ’ Neill, Cheney those within that
said that “ he proved that defi cits don ’ t really matter and so administration
it ’ s not a consideration or a good reason not to have an addi-believe that there
tional tax cut. ’ ”
was very little
short - term effect
“ I was honestly stunned by the idea that anyone believed on the economy.
that Ronald Reagan proved in any