Grading Bush's Economic Team

ON PRESIDENT BUSH'S initial economic team, Larry Lindsey, the head of the White House's National Economic Council, famously didn't get along with Treasury Secretary Paul O'Neill. They needed a referee on policy disputes--deputy White House Chief of Staff Josh Bolten. The budget chief, Mitch Daniels, delighted in twitting Congress for its excessive spending. Glenn Hubbard knew his way around Washington and was the most assertive chairman of the Council of Economic Advisers since Alan Greenspan held the job in the mid-1970s. As Commerce Secretary and Bush's best friend, Don Evans played a quiet role. More than anything else, the first economic team produced ideas and proposals, all promoted aggressively.

Now consider Bush's current economic team. Treasury Secretary John Snow and Stephen Friedman, the White House economic coordinator, are allies. Unlike O'Neill, Snow is an effective salesman of Bush's policies. Bolten is now budget chief and concentrates on good relations with Congress. Gregory Mankiw, the new chairman of the Council of Economic Advisers, is publicity-shy after sparking a flap over the loss of American jobs overseas. Evans remains as Commerce secretary and plays a more prominent role as a public voice in Bush's reelection campaign. More than anything, this team produces consensus. Bold new ideas? Hardly a one.

If Bush is reelected in November, this team--followers, not playmakers--is expected to remain in place. They are ready to push Bush's radical but old ideas for reforming Social Security with private investment accounts and increasing savings through a new type of retirement account. They are committed to not raising taxes. Except for Evans, they are full-blown free traders. But not one of them has a favorite idea he is pushing aggressively, as Lindsey did with tax rate cuts in 2001 and Hubbard with cutting the tax on dividends in 2003.

But watch Josh Bolten. There are murmurings inside the Bush administration about a push next year for budget austerity to shrink the deficit. Bush has chafed at criticism from conservatives over his Medicare prescription drug benefit for the elderly and his signing of a bloated farm subsidy bill. Even Bush's Democratic opponent, Senator John Kerry, claims to be a fiscal conservative by comparison. So Bush is considering a course reversal. Both Snow and Mankiw, known as budget hawks before joining the Bush administration, can be helpful here. But Bolten is the key figure.

He has spent a year mastering the budget and shunning a major role on other economic issues. He is, an associate says, "still transitioning from behind-the-scenes staffer to a principal." Bolten is a trusted adviser to Bush, having left Goldman Sachs in 1999 to become policy director of Bush's first presidential campaign. And now he is coming out of his shell. Earlier, as a White House aide, Bolten rarely talked to reporters, though he knew many from the campaign. Now he's available to the press. In a second Bush term, Bolten is positioned to become a top economic spokesman for the administration, especially as champion of spending restraint. He, perhaps alone among Bush's economic advisers, will have an issue.

Congress is a problem. The economic team has little clout on Capitol Hill. And the Bush White House has a poor record of standing up to Republicans. When the House and Senate passed separate tax bills last year, the President and his aides preferred the Senate version, which called for a three-year phase-out of the tax on dividends. Chairman Bill Thomas (CA) of the House Ways and Means Committee, however, wanted to trim the tax rate on dividends and capital gains to 15 percent. When Thomas met with Snow and Friedman, he dominated the negotiations and blew their objections away. Persuading congressional Republicans, much less Democrats, to ratify deep spending cuts will require smart, disciplined leadership. That means Bolten.

Fiscal austerity is an old idea. Why are there no new ideas? There are two reasons, one understandable, the other worrisome. "It's a less creative period," says a senior administration official. "I'd rack that up to where we are in the cycle." That's the election cycle. Bush is running for reelection on a single economic issue: tax cuts that have successfully spurred economic growth and, finally, job creation. The president is playing up his plan for Social Security reform less than he did in 2000. He's distracted from domestic issues by his focus on the war on terrorism and the struggle for democracy in Iraq. Fine.