Reviewed 12/20/2005

The Price of Loyalty, by Ron Suskind

George W. Bush, the White House, and the Education of Paul O'Neill
Ron Suskind
New York: Simon & Schuster, 2004




ISBN 0-7432-5545-3 348pp. HC $26.00

This is the saga of Alcoa CEO Paul O'Neill being lured back into government service by his own loyalty to the ideals it represented for him, and how those ideals are betrayed by the people he works for. Central to the story is his grasp of economics. Alan Greenspan1 is a friend from prior brushes with government, and the two know the American economy like Barry Bonds knows batting. They also share a concept of loyalty to oath and principle. For Bush and Cheney, by contrast, loyalty is owed to the person in charge, and being a team player is the ultimate virtue.

Almost immediately after O'Neill signs on, there are subtle signs of strain between the two lattices of loyalty. O'Neill, known as an independent thinker, even a maverick, praises the Clinton administration's fiscal discipline in an interview. Greenspan, too, takes independent positions on some economic points in congressional testimony. Soon the question begins to circulate: "Is the Treasury Secretary more in sync with his old friend the Fed chairman than with his new boss, the President?"

Here's a description that fleshes out O'Neill's position2 on deficits (pages 13-14, emphasis in original):

An array of mavericks and hard-nut pragmatists—such as O'Neill, Greenspan, former senators Sam Nunn of Georgia and Warren Rudman of New Hampshire, members of the centrist Concord Coalition, and most of the men around the first Bush—saw the broken pledge and its aftermath as vindication: Proof positive of how "right answers" can germinate and grow, even on a dry, partisan terrain. They said that by repealing a portion of Reagan's tax reductions, President Bush saved his predecessor's core principle and made it work effectively, much as Nixon—another hero of the policy pragmatists—is credited for smartly honing and targeting some of Johnson's liberal initiatives. More important, Bush started the government on a path of fiscal prudence. That meant not just talking about the virtues of a balanced budget but taking a courageous, rather-right-than-reelected stand, especially after the irresistible promise of supply-side economics—that tax cuts would create economic growth that would boost tax revenues and eventually shrink deficits—was shown to be hollow.

Because Bush acted against type by not defending the ideology of tax cuts, he gave Bill Clinton an opportunity (or "permission", Republicans like to say) to do the same with his mirror-image dilemma. Rather than carrying on as a so-called tax-and-spend Democrat, President Clinton became a fiscal hawk, often suffering the ire of the left. In the late nineties, the federal budgets came into balance and then showed surplus. Interest rates dropped and it became clear, year by year, that receding federal deficits were a prime reason. Income that once went to interest payments became found money in countless kitchens and corporate suites. Debt became cheap. The equities markets surged, lifted on the clasped hands of productivity gains from technological innovation and a historically low cost of capital. The economy grew an average of 3.8 percent a year between 1996 and 2000.

To be sure, some of this might have happened no matter who was in the White House. But, across a decade of often angry partisanship, an answer somehow took shape: Fiscal prudence works. A balanced budget means that the federal government won't be out borrowing billions and, thereby, driving up interest rates. What's more, long-term rates started to be reined downward toward short-term rates, which the Federal Reserve controls with the discount rate and federal funds rate that it charges banks.

The disparity in outlook does not just affect economics; it extends to foreign policy, as O'Neill finds in his first National Security Council meeting. Bush wants to pull back from the Israel-Palestine dispute. He hands out new assignments. Suskind reports on page 75, "Meeting adjourned. Ten days in, and it was all about Iraq." Soon O'Neill notices that his goals and experience in the areas of environment and education do not register with the President. Global warming is a particular concern, but in early meetings he cannot discern where Bush stands on the issue. Other cabinet members also have trouble sensing what direction Bush wants them to take. This becomes a problem for EPA Administrator Christine Todd Whitman within the first month, for she must have a position on reducing carbon dioxide emissions for a European meeting. She sounds Bush out and, based on what hints she can glean from his responses, promises administration action at the conference — only to be undercut within days by his formal policy statement.3

O'Neill soldiers on, fighting for fiscal responsibility (as does Greenspan) and attempting without success to set up "triggers" that will rein in spending if the projected $5.6 trillion surplus does not materialize. (It doesn't.) From his perspective, there are two factions. One is pragmatic, and looks toward pleasing the electorate with practical benefits; the other is ideological, and looks toward pleasing "the base" with political favors.4 Of the major players, he finds Whitman and Powell in the former faction along with himself and Greenspan. The other includes Bush, Cheney, Rumsfeld, and Ashcroft as well as those holding the overtly political appointed positions: Karl Rove, Karen Hughes, Andrew Card, Ari Fleischer. O'Neill not only has to contend with them but with most of the CEOs in the country, who — even after the spate of scandals like Enron, Global Crossing, Tyco, etc. — are having none of his proposed corporate-responsibility measures.5 Ultimately, his reality-based approach to policy simply becomes too troublesome for the other faction. Frustrated and disappointed at not having achieved as much as he hoped, he is forced out after two years.6 Cheney orders him to say he wants to return to private life7, but O'Neill refuses, avoiding that final ignominy. An Epilogue reports that he is well, still active in Washington as a private citizen, and working on some of the projects that he could not sell as a civil servant.

Suskind has written a gripping account of Paul O'Neill's two-year struggle as Treasury Secretary. It's well researched, has a mostly accurate index, and if it occasionally lays on the econ a bit too heavily, well, I figure that's just because econ was not my strongest subject in college. I detected no errors of fact. The stylistic oddities and even typographical errors are few and far between. (One puzzling omission is that Richard Clarke is never mentioned.) The Price of Loyalty paints a picture of the Bush administration's first term that dovetails well with other books I have read on the subject. There are many books on that administration. If you are interested in learning about it, this one belongs on your short list.

1 Actually, Greenspan seems to be the main reason O'Neill accepts the Treasury position. (See page 30.)
2 This stance puts O'Neill squarely in what a Bush aide, speaking to Ron Suskind, derisively called the "reality-based community". As the entire quote makes clear, the aide smugly put himself in the other community — the one that doesn't need to consider options or worry about consequences; it only needs to act. I wonder if this unidentified aide was the one who neglected to consult anyone at Treasury, thereby allowing a $700 billion error in Bush's first State of the Union address. (See page 109.)
3 Whitman comes off rather well in O'Neill's version of events, which covers in detail how Cheney pulled the rug out from under her.
4 It is this latter faction, apparently, that decides all high-level meetings will be scripted. (See page 147.)
5 At a conference in Amelia Island, Florida, one CEO even declares that he'd rather resign than be held responsible for knowing what went on in his company. O'Neill hides his contempt. Until later. (See pages 233-4.) Such measures, notably a requirement for the CEO to personally sign off on company audits, are now part of the Sarbanes-Oxley Act (sometimes known as SOX).
6 Whitman, too, makes her exit after two years. Powell (whose conflicts with Rumsfeld et. al. were most visible from outside the Beltway) hangs in for four, then resigns after helping Condoleeza Rice transition from National Security Advisor. Somewhat surprisingly, O'Neill does not place Rice in the other faction, but does begin to wonder about her. As for his old friend Cheney, O'Neill can only surmise that he's changed. (See page 125.)
7 This is the hypocritical way firings are done in Washington. They can be nasty. O'Neill had been a successful CEO, as well as a government staffer in previous administrations. He was immune. Not so John DiIulio, a professor from the University of Pennsylvania who managed Bush's Faith-Based Initiatives program. (See pages 322-3.) Remember that DiIulio went public with his criticism a year after he left the administration, and still they were able to scare him into saying his published comments were "groundless and baseless."
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