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The Four Horsemen of Bush Economic Policy

From the Winter 2003 issue of The International Economy: An emerging system of seemingly obscure officials takes over.

11:00 PM, Jan 19, 2003 • By FRED BARNES
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GLENN HUBBARD is the most influential chairman of the Council of Economic Advisers in two decades. His job is to provide economic analysis for the White House, primarily on domestic issues such as taxes and jobs. The sudden popularity of eliminating the taxability of stock dividends--that's Hubbard's doing. As a young U.S. Treasury Department official ten years ago, he circulated a fifty-page study advocating the change, and he followed up this year by prevailing on President Bush and his senior aides to support the idea. And Hubbard was also active in feeding information and analysis to the presidential commission that looked at one of Bush's pet projects, reforming Social Security and creating individual investment accounts.

But Hubbard, 44, has stretched his role far beyond tinkering with the tax code and overhauling the pension system. When an international bankruptcy system was being talked up at Treasury and the International Monetary Fund, he crafted his own proposal for a new global arrangement. He also weighed in with his take on bailouts for Brazil and Argentina. Hubbard, a free-market economist from Columbia University, "is an impressive guy and his views are respected across the range," says a top Bush assistant.

That's putting it mildly. Hubbard exemplifies what's happened to economic policymaking in the Bush Administration. From the start, Bush's national security team--Vice President Dick Cheney, Secretary of State Colin Powell, Defense Secretary Donald Rumsfeld, national security adviser Condoleezza Rice, CIA director George Tenet--have performed dazzlingly. But the economic team, led by Treasury Secretary Paul O'Neill and National Economic Council chief Larry Lindsey, stumbled. O'Neill was out of sync ideologically with Bush, and Lindsey failed to run the NEC to Bush's satisfaction.

The result: little-known officials quietly stepped up to fill the gap. Josh Bolten, 48, the deputy White House chief of staff, took charge of the underperforming economic apparatus and the task of sharpening ideas for the president's consideration. Hubbard emerged as a major player in administration policy circles. At Treasury, the undersecretary for domestic affairs, Peter Fisher, a 46-year-old Democrat, became the person the White House relies on. And Karl Rove, Bush's top adviser on politics and practically everything else, has involved himself as a kind of overseer of economic policy. "Everything crosses his desk," says an economic aide.

Even with the departure of O'Neill and Lindsey, the makeshift system of seemingly obscure officials (Rove is the exception) with enormous clout remains. Their replacements, railroad executive John Snow at Treasury and Wall Street investment banker Stephen Friedman at NEC, have been brought in as advocates of Bush's new economic growth policies--policies that were fully developed before they arrived. Another big name with diminished influence is Alan Greenspan, the Federal Reserve chairman. Greenspan was close to O'Neill. The firing of O'Neill was "a shot across the bow" of Greenspan, an administration official says. At the White House, there's a feeling the Fed has fallen behind the economic curve. This is bad news for Greenspan, hardly a friend of the Bush family after his tight money policy helped doom the re-election chances of President Bush senior in 1992. White House aides can recite the date--June 2004--without hesitation. That's the deadline for the chairman's reappointment. For Greenspan, the message in the O'Neill canning is that the same awaits him should he jeopardize Bush's re-election prospects by raising interest rates.

The economic role played by Rove is a sensitive issue at the White House. So is the part played by Cheney. If they are seen by the political community and the public as manipulating Bush, it damages his image. In any case, Rove especially and Cheney to a lesser extent were the key players in the decision to change direction in economic policy last fall. For months, the administration's line had been that the economy was recovering nicely from the 2001 recession and no further stimulus was needed. This was a strongly held view of O'Neill. But last October, the White House changed tack and said the president would propose a package of tax cuts to assure a growing economy, notably in 2004 when Bush is sure to seek reelection. Among other things, this gave the White House and congressional Republicans a positive agenda to tout.