President Makes Move to Avoid His Father’s Fate

WASHINGTON â€”  President Bush’s overriding aim in dismissing his Treasury secretary and top economic aide Friday is to dodge the fate of his father, whose success at war foundered on a weak economy and a sense among ordinary Americans their workaday concerns had been overlooked.

In an almost eerie fashion, the arc of Bush’s career in the White House has followed that of the elder President Bush from tepid voter endorsement to towering popularity for military and foreign policy successes.

And that’s precisely where the current president wants the parallel to stop, because the elder Bush was never able to translate battlefield victory into ballot box triumph. He was forced to look on helplessly as his economic advisors squabbled while a sinking economy demolished his reelection chances.

A bad economy is the current president’s “only vulnerability,� conservative activist Stephen Moore said.

The abruptness of the president’s decision to demand the resignations of Treasury Secretary Paul H. O’Neill and economic advisor Lawrence B. Lindsey conveyed Bush’s intent to try to start anew on economic and domestic policy issues even as the country appears headed for another war with Iraq.

Although there has been grumbling about both men since the earliest days of the administration and a recent flurry of rumors that one or the other might go, White House officials such as Bush political advisor Karl Rove had gone out of their way to squelch talk of a shake-up. As a result, even administration allies were caught off-guard.

“I was told this wasn’t going to happen,� fumed Grover Norquist, president of Americans for Tax Reform, a conservative lobbying group. “I was working with these guys just a few days ago.�

“I have to say I am truly mystified why this happened,� added Moore, the president of Club for Growth, a conservative campaign organization.

The mystery was all the deeper because the White House was thought to be on the verge of rolling out a new round of tax cuts aimed at boosting the economy -- a move that it seems will be delayed until the administration can name replacements for O’Neill and Lindsey.

Nevertheless, the aim of the personnel and policy actions is the same, to get the economy to grow strongly before the 2004 campaign or, failing that, to make sure the public sees that the president is making an effort. The White House faces formidable odds on both counts.

On the policy side, almost every element of the administration’s proposal to surface in recent weeks has involved tax cuts that are touted as helping businesses and investors, but that many analysts believe would be ineffective and costly.

For instance, White House officials including R. Glenn Hubbard, chief of the president’s Council of Economic Advisors, have said that the administration would like to eliminate the so-called “double taxation� of dividends, the portion of profits firms pay to their shareholders.

Tax-cut advocates have long advocated the move, arguing that the current arrangement unfairly permits the government to take two bites of the same apple, taxing profits at the corporate level and again when they are received as dividends by shareholders.

The administration has added to the list of benefits, arguing that the end of double taxation would attract investors back to the stock market, help push up depressed share prices, revive business investment and boost growth. Hubbard has gone so far as to suggest the move would produce a supply-side effect similar to that claimed by tax-cutters of the early Reagan administration and allow the government to recoup as much as half the $25-billion cost of the change.

But independent analysts say that there are two big difficulties with the administration’s case.

The first is that Corporate America’s most immediate problem is not over-taxation, but overcapacity. Companies in a wide swath of industries have bought more plants and equipment than they know what to do with, and they are unlikely to buy even more, even with a tax break. The second is that Washington has already swung from mammoth surpluses to mammoth deficits at least in part because the president’s 10-year, $1.35-trillion tax cut, and any further tax cuts would only feed to the problem.

On the personnel side, the departure of O’Neill and Lindsey adds to the disarray among key economic and regulatory officials in the administration.

The administration’s point man on this year’s corporate scandals, Securities and Exchange Commission Chairman Harvey L. Pitt, was forced to resign after failing to tell the White House or fellow commissioners that his choice to head a new oversight panel had been accused of some of the very unsavory practices he was supposed to root out.

Pitt’s choice for the accounting oversight panel, former FBI and CIA Director William H. Webster, also resigned.

Those two departures, plus Friday’s resignations, leave Hubbard as the only prominent member of the Bush economic team still in place.

Despite these problems, Bush appears determined to avoid the mistakes of his father and push a broad economic agenda even as he pursues the war on terrorism and on Iraq.

“Look at the big picture,� Moore said. “You have an enormously popular president who’s just won a fabulous election against the odds and is about to fight a war that, if it goes well, will add to his luster.

“A recession is the only thing that could derail the Bush locomotive,� he added, and the president has signaled he will to do everything in his power to ensure one does not come between him and his reelection.