Bush’s Leadership on Economy Is Questioned

While President Bush has rallied Congress behind his post-Sept. 11 foreign and military policies, his leadership on economic and fiscal matters closer to home has proved substantially less effective, analysts and lawmakers of both parties agree.

Some Republicans and Democrats are angling to bust Bush’s budget for defense and homeland security. A tax cut modeled on Bush’s ideas, usually a wildly popular measure in the middle of a recession, barely passed the Republican-controlled House. The Democratic-controlled Senate’s version of that bill is careening far from Bush’s priorities. Conservative Republicans have grown so exercised over Bush’s Treasury secretary that some are calling for his resignation.

“You’d like to think some of his abilities as commander in chief would rub off, but that’s clearly not the case,” said Stan Collender, a nonpartisan budget analyst in Washington. “He doesn’t have that unquestioned level of authority.”

Some lawmakers and independent analysts argue that if Bush does not display more aggressive leadership, and quickly, the whole stimulus bill will collapse--with potentially calamitous economic results.

“The bipartisan consensus has not emerged; the split between the parties seems to be growing,” said William Dudley, chief U.S. economist for Goldman Sachs & Co. in New York.

A forecasting firm, St. Louis-based Macroeconomic Advisers, estimates that failure to pass a $100-billion-plus stimulus bill could prolong what most analysts now believe is a full-blown recession by months and slice the pace of growth, when it does return, by half.

Bush took a brisk step to reassert himself Tuesday when he told congressional leaders he would veto any spending--even amounts for defense and homeland security--that exceeds his request. It was the first veto threat he has issued since the September attacks.

Senior aides to the president followed up with even more incendiary rhetoric Wednesday. “The Democrats are clearly abandoning bipartisanship,” declared Lawrence B. Lindsey, Bush’s chief economic advisor. “The Democrats’ idea of a stimulus proposal is nothing more than more unemployment checks. We think paychecks are better.”

The new White House effort has yielded decidedly mixed results: Although key Republican leaders said they would support Bush’s effort to hold the line on additional spending for defense and homeland security, House Appropriations Chairman C. W. “Bill” Young (R-Fla.) said it was not clear that even the House would follow his lead.

Most of Bush’s problems on fiscal issues are being laid at the door of his economic team, which, besides Lindsey, includes Treasury Secretary Paul H. O’Neill; Mitchell E. Daniels Jr., director of the Office of Management and Budget; and R. Glenn Hubbard, chairman of the White House Council of Economic Advisors.

After getting off to a good start coping with the economic fallout of the attacks--moving quickly, for example, to minimize their disastrous effect on the airline industry--the group stumbled badly and has yet to recover.

Members issued varied and contradictory accounts of what the president wanted. Early on, for example, O’Neill counseled lawmakers to go slow in assembling a stimulus package while Lindsey called for swift and bold action. Hubbard complained of the House version of the package being too costly on the very day Daniels’ office issued an official “statement of administration policy” blessing the measure.

The team as a whole seemed to lose its political bearings at times, signaling a willingness to accept Democratic proposals for aiding the economy only to be brought up short by the attacks of conservatives like House Majority Leader Dick Armey of Texas.

The group suffered from comparison with Bush’s national security team and their own predecessors in the Clinton administration.

“The president seems fated to have the finest group of foreign policy advisors and the weakest group of economic aides in memory,” said David M. Jones, chairman and chief economist of Aubrey G. Lanston & Co., a New York bond dealer. “They’re contributing to his problem moving the stimulus legislation.”

In their defense, administration officials say they face a series of fiscal and economic conundrums that Washington has not dealt with since perhaps the start of the Korean War or World War II.

“Nobody realized for a period of time that we were going to have to think about and propose something about terrorist acts and how the economy could deal with that problem,” O’Neill said.

Economic team members assert that the White House is prepared to do whatever is necessary to advance the nation’s anti-terrorism campaign. In a recent interview, Lindsey approvingly quoted former President Franklin D. Roosevelt as saying, “The right fiscal policy is the one that wins the war.”

But the White House is severely constrained by its own early success at winning passage of a 10-year, $1.3-trillion tax cut that leaves it with fewer resources for further cuts or new spending. Analysts say the constraints are making it harder for the White House to afford the compromises needed to ensure passage of critical legislation.

Finally, team members seem divided by ideological, and sometimes personal, differences that did not exist among their predecessors.

O’Neill appears to be the most moderate and, in the eyes of many observers, the least politically adept of the group.

Daniels, who was political director for former President Reagan, is widely viewed as a staunch conservative committed to further slashing an already squeezed government.

Lindsey and Hubbard fall somewhere between O’Neill and Daniels on the political spectrum, but each brings his own, not-always-smooth-fitting qualities to his job. The former can be a stubborn bureaucratic infighter. The latter, a former college professor, devoted most of his academic career to documenting the benefits of business tax cuts.

O’Neill, who is supposed to be the White House point man on economic legislation, has proved especially troublesome in Bush’s relationship with Capitol Hill. O’Neill riled House Republicans when he described their $100-billion economic stimulus bill as “show business”--that is, filled with special-interest provisions to appeal to GOP political constituencies. For that and other irritants, Rep. J. D. Hayworth (R-Ariz.) called on O’Neill to resign.

Even Senate Minority Leader Trent Lott (R-Miss.) refused to weigh in on O’Neill’s behalf when asked recently if he should be removed from the Cabinet. “That’s the president’s decision,” Lott said.

All this could pose problems for the administration’s ability to shape the final version of the economic stimulus package. Democrats say they are ready to negotiate with the White House, but they are not sure with whom to negotiate. Senate Finance Committee Chairman Max Baucus (D-Mont.) said he would seek personal assurances from Bush that O’Neill can speak for the administration if he is designated the point man.

So far, Bush’s role in the debate about economic stimulus legislation has been limited--in part because he has been preoccupied with military and foreign policy. He has laid out broad outlines of what he wants but left it to Congress to fill in the details--with mixed results. He first proposed limiting the package to $75 billion, mostly in tax cuts; neither party is sticking to that limit.

House Republicans provided far more in business tax cuts than Bush proposed; even some conservative Republican economists complained that the bill included too many corporate breaks that would do little to stimulate the economy.