News Release

December 6, 2002

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Cato Expert Alan Reynolds Issues Statement on Top-Level Bush Administration Resignations

WASHINGTON -- On the heels of the resignations of Treasury Secretary Paul O’Neill and White House Economic Adviser Larry Lindsey, Cato Institute Senior Fellow Alan Reynolds issued the following statement:

"The White House requested the resignation of Treasury Secretary Paul O'Neill and National Economic director Larry Lindsey to facilitate the launch of significant tax policy changes in the coming year.

"Secretary O'Neill had an unwelcome propensity to go public with his disagreements with the White House. He was publicly skeptical of vital efforts to ease the double taxation of dividends, for example. He instead favored 'targeted' tax breaks -- picking winners. His comments on tax simplification rarely progressed beyond simplifying the tax code's five definitions of child. Secretary O'Neill seemed to view rosy forecasts as an alternative to better policies, and he myopically confined any concerns about economic performance to the extremely short-term. In late November, he told the Financial Times that the only reason the White House was interested in new policies was that 'there's a concern that the first two quarters are not going to be up to a three percent standard and so he [the President] asked us to pull together ideas for his consideration.' These were bad ideas being badly communicated.

"Larry Lindsey is an economist of great skill who sometimes stumbled politically. Suggesting that a $200 billion war with Iraq would be good for U.S. business, for example, was as impolitic as it was implausible. Lindsey was also a major architect of the 2001 tax cut strategy, which put priority on cutting the lowest tax rate first and the highest tax rates much later. That advice has become an uncomfortable legacy because a top goal of 2003 is to undo last year's mistake, by taking the most damaging tax rates down sooner rather than later."