Economy & Budget

Grading Bush’s Cabinet-From A to D

President-elect George W. Bush has made surprisingly solid picks for most of his cabinet and top advisory positions. Although his first choices–Andrew Card as chief of staff and Paul O’Neill as Treasury secretary–were admittedly worrisome holdovers from the economic failures of the Bush I and Ford Administrations, his more recent picks have been, for the most part, reliable free-market conservatives. It’s reassuring that Bush is surrounding himself with ideologically anti-big-government advisers. By choosing conservative thoroughbreds to lead federal agencies, he is declaring that he will govern “as if” he has a mandate for his policies on tax cuts and personal accounts for Social Security. Bravo! But a word of caution: Ultimately, the success or failure of this administration will be determined by Bush himself–by whether he has the right instincts when the unforeseen crises occur in his administration. So with that caveat, let’s grade the Bush cabinet picks. Andrew Card, Chief of Staff: He’s a life-long Bush loyalist. He cut his teeth in politics working for the senior Bush in the 1980 GOP primaries against Reagan (never a good sign). He was the elder Bush’s deputy chief of staff and loyally supported the catastrophic 1990 tax increase. In 1994, when Card was president of the American Automobile Manufacturers Association, he appeared at a press conference with Sen. Ted Kennedy (D.-Mass.) and then-Rep. Dan Rostenkowski (D.-Ill.) to argue for Hillary Clinton’s screwy health care reform plan. National Public Radio gushed that Card was “one of the best spokesmen for the employer mandate in the Clinton health plan.” He even attacked Republicans who opposed Hillary-Care for “political grandstanding.” Card is affable and capable, but I suspect that he has not a supply-side bone in his body. GRADE: D Paul O’Neill, Treasury Secretary: The former Alcoa chairman worked in the budget office under Ford. He brought Alcoa back from the grave and converted the company into a profitable and admired global enterprise. His political record is uninspiring to say the least. He questioned the Laffer Curve assumptions of the Reagan tax cuts in the 1980s. He supported the 1990 tax increase with so much enthusiasm that he actually had Alcoa resign from the U.S. Chamber of Commerce when the Chamber opposed it. Then in 1992 he went to Bill Clinton’s economic summit and announced his support for a gas tax hike. The folks at the Capital Research Center, a public policy group that monitors corporate giving, tell me that under O’Neill, Alcoa had one of the most left-leaning philanthropy departments. He’s untrustworthy. Once a tax hiker, always a tax hiker. GRADE: D And now for the good news: Budget Director Mitchell E. Daniels: As the Gipper’s former political director, Daniels has a Reaganite philosophy to the marrow of his bones. He rejects limits-to-growth orthodoxy and believes in smaller government. This job will be a challenge for Mitch. He’s no expert on the budget, which he acknowledges. But then Leon Panetta, David Stockman and Dick Darman were all budget experts and look at the damage they did! Bush did not run as an anti-big government Republican. Daniels will have to fight other Bush cabinet secretaries to keep the agency budgets lean and mean. He’s up for the fight, but he’d better surround himself with some good people. GRADE: A- Chief Economic Adviser Larry Lindsey: Lindsey, a former governor of the Federal Reserve board, is a supply-sider. He wrote a wonderful book in the late 1980s on the successes of the Reagan tax cuts. It verified empirically the Laffer Curve effects of the Reagan tax cuts. Lindsey helped formulate the Bush tax cut, which is generally a solid pro-growth agenda of tax reduction. The issue is how much influence Lindsey will have in a cabinet with heavyweights like O’Neill, Powell, Rumsfeld, and so on. He has not been the best economic prognosticator. He was bearish on the market back when the Dow was at 6,000. Still, Lindsey will be a source of sound advice for Bush, if he listens. GRADE: B Secretary of Defense Don Rumsfeld: Another brilliant choice. When Rumsfeld runs something, buy stock in it. He has the Midas touch. He turned around the Searle drug company in the 1980s and also worked magic at General Instrument, an ailing company when he became CEO. I worked as an assistant to Rumsfeld when he was on the National Economic Commission in 1989. The purpose of the commission was to try to establish a bipartisan consensus for a tax hike. Rumsfeld worked doggedly to prevent that from happening. Expect bigger Defense budgets under Rumsfeld and lots more money for missile defense research and deployment, of which he is a huge supporter. GRADE: A- Secretary of State Colin Powell: He’s got towering public approval ratings and is easily America’s most politically savvy military general since Ike. On economics, Powell’s views are a mystery. He supports free trade. He supports a strong dollar. Whether he understands Laffer Curves, capital flows, and financial markets is anyone’s guess. Many conservatives are uneasy about Powell because he favors abortion rights and affirmative action and thinks the GOP should be less aggressively anti-big government. He’s a self-described political moderate. He will be a powerhouse at the State Department and will be given a relatively free hand to run America’s foreign affairs. He’s no knee-jerk interventionist for touchy-feely causes. He says he opposes “half-hearted warfare for half-baked reasons.” He wrote in his memoirs that “when the United States goes to war, it should be for a clear purpose and the outcome should be overwhelming victory.” He supports a bigger defense budget and more funding of SDI–and no doubt he will prevail on both counts. GRADE: B National Security Adviser Condoleezza Rice: Rice, the daughter of Alabama cotton farmers, will be the first black national security adviser. She wrote an absolutely brilliant piece in a recent issue of Foreign Affairs magazine. The thrust was that the purpose of U.S. foreign policy should be for the United States to promote democracy and capitalism around the globe. Precisely! She is suspicious of U.S. humanitarian interventionism and says that the U.S. “should not be the world’s 911.” She thinks U.S. troops should be deployed only to promote U.S. national security interests, which will be a nice change of direction in U.S. foreign policy. The Clintonites believed that U.S. troops should be employed only when U.S. national security interests are not at stake–thus Somalia, Bosnia, Haiti, etc. Rice is also a supporter of SDI, but some conservatives wonder if she is a staunch supporter. GRADE: B Atty. Gen. John Ashcroft: Wow! The left has reacted with venom to this in-your-face choice. Ashcroft is an unflinching cultural and economic conservative. He’s pro-gun, anti-abortion, pro-death penalty, and opposed to the Clinton Justice Department’s anti-trust witch-hunt. If Janet Reno represented darkness, Ashcroft is light. He will use the prosecutorial powers of the Justice Department to hunt down the criminal behavior that took place in that department under Reno. (This has the left terrified! In fact, many conservatives suspect the shredders are working overtime in the West Wing and at the Justice Department in these final days of Clinton.) The most important economic duty of the attorney general is to oversee the anti-trust division of the Justice Department. Anyone would be an improvement over Joel Klein. I expect Ashcroft to quit the witch-hunt against Microsoft, and similar cases against Intel and others. Finally, the trial lawyers hate Ashcroft, which is a very good sign. Expect litigation reform to get a very sympathetic hearing in this administration. If he is confirmed, he’ll be terrific. GRADE: A Secretary of HHS Tommy Thompson: Health and Human Services has about a $350-billion budget, so this is a big job. It has oversight of Social Security reform, health-care reform, and welfare reform–three big priorities for Bush. In his 14 years as Wisconsin governor, Thompson established impeccable credentials as a policy innovator on issues ranging from welfare reform, to school vouchers and charter schools, to tax restructuring. Thompson was the first governor in the nation to totally overhaul the welfare system to encourage work, economic self-sufficiency, education and marriage. His reforms have been controversial, but mostly effective. The welfare caseload declines of more than 60% in Wisconsin have outpaced the reductions in other states. Thompson has been a champion of Milwaukee’s highly touted school voucher program–and his administration has successfully defended the vouchers in the courts. He has cut the income tax four times, most recently in 1999. Still, conservatives in the state grouse with some justification that Thompson has moved to the left ideologically in his last two terms. He has endorsed new taxes on cigarettes and gasoline. And he supports taxing the Internet. In many ways Thompson is a political enigma. His first two terms as governor produced some truly historic public policy accomplishments, but his last two terms have been mildly disappointing as he has jockeyed himself into the middle of the political playing field. His views on Social Security and health care reform are not well formulated. He needs to be coached. But this appointment indicates that Bush is serious about continuing tough-love solutions to the welfare crisis. GRADE: B EPA Director Christine Todd Whitman: Back in 1994 Whitman, who has been picked to head the Environmental Protection Agency, soared to national prominence by ousting flamboyantly pro-tax incumbent New Jersey Gov. Jim Florio (D.). Whitman won by promising a 30% income tax cut. The plan, designed by Steve Forbes and economist Larry Kudlow, was a political and economic coup. The state’s moribund economy revived in the wake of the rate reductions and Whitman’s popularity initially soared. She cut 12 other taxes in 1994 and 1995 and was relatively tight-fisted on controlling state spending. She converted a massive budget deficit left behind by Florio into five straight years of surpluses, proving that the Laffer Curve works on the state level, too. Since very narrowly winning a second term, Whitman has moved to the left fiscally. In her second term she’s raised taxes rather than cutting them. Most important for the EPA job is her record on the environment. She should be more pro-business than the outgoing director Carol Browner. The Washington Post notes that in New Jersey, Whitman cut the state environmental budget by 30%, she relaxed EPA enforcement, she promoted voluntary rather than heavy-handed mandatory compliance measures, and she was pro-development. But she also fought against ocean-dumping and for a controversial one-million-acre land set-aside program. I don’t entirely trust Whitman. She’s a country-club Republican. I expect her to be worse in this job than most industry groups are hoping. Papa Bush’s EPA director was one of the worst in modern times. We’ll see. GRADE: C RNC Chairman Jim Gilmore: The appointment of Gilmore, the Virginia governor, to head the Republican National Committee is important primarily because he is one of the nation’s fiercest opponents of Internet taxation. As the chairman of a national study committee on the issue, Gilmore has bucked many other GOP governors by denouncing Internet taxes as unnecessary and economically counterproductive. His selection as RNC chairman is a strong indication that Internet taxes are going to be off the table for the next few years. As Virginia governor, Gilmore made his mark by pledging to eliminate the hated car tax. But he’s been a big spender in the state house, according to a recent Cato Institute study on the governors. GRADE: B Interior Secretary Gale Norton: There couldn’t be a more stark contrast between the anti-development ideology of departing Secretary Bruce Babbitt and the pro-free market environmental and land use proclivities of Gale Norton. Under Babbitt, millions of federal acres were bought up by Uncle Sam and taken out of circulation for development. Norton, who served as the attorney general of Colorado and has worked for the right-wing Mountain States Legal Foundation, takes a much dimmer view of federal ownership and regulation of Western lands. She has a Western perspective on the issue of public lands, which is to say that she favors allowing federal land to be put to its highest value-added usage. She will support more drilling, more grazing, and more paving. She is stiffly opposed by most environmental groups and will be portrayed as pro-industry and anti-conservation. She vows to end the federal government’s “war against the West” waged during the Clinton era. Like Bush himself, she favors opening up Alaska and other federal lands to oil and gas exploration. “Just as free markets triumphed over communism,” says Norton, “we will now have the opportunity to shift power out of Washington back to the states.” GRADE: A Energy Secretary Spencer Abraham: Abraham lost big in his Senate reelection bid in Michigan but could do a lot for the state as the head of Energy. He is pro-automobile, pro-energy development, and pro-free trade. Look for this department to shift from a focus on conservation to a focus on exploration and domestic drilling. Abraham is also an unrelenting supply-sider. He loathes taxes. Don’t expect a carbon or BTU tax anytime soon. But he also tended to support the union agenda (he’s from Michigan after all) on issues like parental- leave legislation and the minimum wage. GRADE: B The Bush cabinet will have a center-right gravitational pull–which means Bush is off to an astonishingly good start. His willingness to appoint controversial free-marketers is a very reassuring sign. It suggests that he won’t mind offending the Washington intelligentsia or disregarding the advice of the eggheads at the New York Times. If I would have any complaint it would be that there are too many Old Economy corporatists among this group and a few too many Republicans from the country club set. But one can’t have everything. If Bush’s policies prove to be as sound as these appointments, he should have a successful presidency.


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