Executive Savvy for the Treasury

President-elect George W. Bush’s choice of Paul H. O’Neill as secretary of the Treasury is in many respects reassuring, for O’Neill has spent 16 years in federal government and worked closely with Federal Reserve Chairman Alan Greenspan, whom he calls a friend. That may come in handy if Bush and Greenspan clash over the incoming administration’s potentially inflationary plans for large tax cuts.

O’Neill’s 24 years as top executive of multinational paper and aluminum conglomerates has given him wide experience in negotiating international business deals but less in managing the flow of international capital. Bush needs to add some high-profile financial experts to O’Neill’s Treasury to inspire confidence abroad.

O’Neill, 65, comes to Washington equipped to lead Bush’s economic team on many domestic issues. He has had a bird’s-eye view of the federal government and its programs, starting as a policy analyst at the Office of Management and Budget, ultimately rising to associate director. In 13 years at Alcoa, he transformed a bloated corporate dinosaur into an efficient and profitable global manufacturer of aluminum.

Unlike steel producers, he did not ask for government protection from imports while overhauling the company, and he supports Bush’s free-trade policy, which is of particular importance to California, America’s largest exporter.

A pragmatist and a fiscal hawk, O’Neill was critical of the tax-cutting supply-side policies of the Reagan era. He will now have to implement Bush’s plan, which bears similar policy features, including a $1.3-trillion tax cut. It will be his job to ensure that the plan does not endanger the government’s fiscal balance or the central bank’s monetary policies aimed at steering the economy to controllable economic growth. He should become an advocate of restraint in a Washington where scoring political points seems more important than prudent management.

Unlike his immediate predecessors--a respected economist and a Wall Street heavyweight--O’Neill has little experience in international finance. That could hurt the Treasury’s stature as the center to which international financial organizations and finance ministries look for guidance, especially in times of crisis. In appointing O’Neill’s deputies, Bush therefore should turn to candidates with experience and recognition in the world financial markets.