O'Neill, Lindsey resign
Treasury secretary, top adviser leaving in major shakeup of Bush's economic team.
December 6, 2002: 6:18 PM EST

NEW YORK (CNN/Money) - Treasury Secretary Paul O'Neill and Larry Lindsey, the White House's top economic adviser, both resigned Friday in a dramatic shakeup of the Bush administration's team charged with reviving the nation's troubled economy.

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White House Press Secretary Ari Fleischer reads the president's statement regarding the economic team shake-up and answers a few questions.

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No successors have been announced. Senior administration officials told CNN that both men were asked to resign by the White House. Presidential spokesman Ari Fleischer wouldn't comment directly when asked if the two were forced out, saying only that each had resigned.

"My economic team has worked with me to craft an economic agenda that helped lead the nation out of recession and back into a period of growth," Fleischer said, reading a statement from Bush. "I appreciate Paul O'Neill's and Larry Lindsey's important contributions to making this happen."

Fleischer said Lindsey had expressed interest in returning to the private sector and that O'Neill wanted to work to improve health care and education in the Pittsburgh area.

Fleischer would not directly answer a question of whether the president thought the change in his economic team would help spur growth for the nation's economy.

"I think it's fair to say the president looks at the economy as a matter that's bigger than any one person or any one expert," he said.

While some measures show the U.S. economy growing again after last year's brief recession, unemployment remains stubbornly high, manufacturing is still struggling and the stock market looks set to fall for the third year running, something that hasn't happened since 1941.

Treasury Secretary Paul O'Neill  
Treasury Secretary Paul O'Neill

The departures were announced after news that the U.S. unemployment rate jumped unexpectedly to 6 percent in November, matching an eight-year high set in April and highlighting the problems with the economy.

While stocks rallied after the announcement, with the Dow Jones industrial average ending higher after reversing a 120-point loss, the Dow finished off for the week, ending a streak of eight straight weeks of gains.

Republicans in Congress, who were often critical of O'Neill, said the moves were positive for the administration as the new Republican-controlled Senate prepares to convene next year. The departure of O'Neill is seen as a sign of a new push for tax cuts by the administration.

But Democrats saw it as a sign of problems with the administration's economic policies.

"This confirms that the Bush economic plan is not working," Sen. Kent Conrad, the North Dakota Democrat who is outgoing chairman of the Senate budget committee, said in a statement.

"As the news this morning of increased joblessness and earlier reports of exploding deficit and debt reveal, the president's economic policy is a disaster. Obviously, the secretary of the treasury and Mr. Lindsey are being sacrificed to protect the president. Sadly, the removal of these economic officials will do nothing if they are simply replaced with yes-men committed to the president's relentlessly partisan agenda of pushing tax cuts at the expense of all else."

Larry Lindsey, former head of the White House National Economic Council  
Larry Lindsey, former head of the White House National Economic Council

O'Neill, the former CEO of Alcoa, and Lindsey, a former Federal Reserve Governor and architect of the tax cut plan President Bush ran on in 2000, are the second and third major members of the administration's economics team to announce a departure in the last four weeks. Securities and Exchange Commission Chairman Harvey Pitt submitted his resignation on election night.

Possible successors for O'Neill include outgoing Sen. Phil Gramm, R-Texas, and Charles Schwab, founder of the discount brokerage bearing his name, while top contenders for Lindsey's job are R. Glenn Hubbard, chairman of the White House Council of Economic Advisers, and Harvard University economist Martin Feldstein, according to political and economic experts.

Lindsey was widely expected to leave the administration. The Washington Post reported in early November that Lindsey was making subtle inquiries about returning to private sector work on Wall Street, and that his aides were looking for positions on congressional staffs.

O'Neill's departure also has long been predicted. He is generally seen as not being able to get along with Republicans in Congress, as well as not having the support of Wall Street.

"O'Neill's gaffs have hurt him. There aren't a lot of Republicans on the Hill who like him. But he seemed to have the president's confidence," Greg Valliere, chief political economist for Charles Schwab Washington Research Group, said recently, before O'Neill's departure was announced.

"O'Neill has been more optimistic about the economy and resistant to additional stimulus, so I suppose one could read between lines that he was losing that battle, and the administration is more likely to propose aggressive stimulus now," Alan Levenson, chief economist for T. Rowe Price Associates, told Reuters.

O'Neill's letter of resignation to President Bush was brief and gave no reason for the departure.

"I hereby resign my position as Secretary of the Treasury. It has been a privilege to serve the nation during these challenging times," it said. "I thank you for that opportunity. I wish you every success as you provide leadership and inspiration for America and the world."  Top of page

Reuters contributed to this report

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