the smiles we left behind
A blast from Labs past:
"Mr. President, the Business Round Table of the country's leading CEOs says the focus should be on boosting consumption demand. Their warehouses are full. They need a boost in demand to clear away inventories. I'm not sure that a tax cut that benefits mostly wealthy investors, many of whom will just push these gains into savings, will do much for demand."
Bush nodded. He was in a cul-de-sac. The ideology of ongoing tax cuts seemed to make less sense when certain economic realities were considered. Finally he spoke, haltingly: "The dividend tax cut could repair corporate balance sheets," he said, feeling his way, "and that's a kind of growth package, isn't it?" O'Neill was thinking that this is true only if you believe that companies will increase their spending on capital goods, even if demand remains sluggish, because their stock has risen. You also have to be certain the proposal would have that effect on the markets, a vey long string of imponderables.
Hubbard rushed to the President's aid. "Households who desire to save more can do so through higher stock prices."
Bolten attempted closure: "I think we have agreement on the components. Now, how big should the package be? How much extra should we allow for so we have something to give back in the legislative process?"
The President didn't seem quite ready to close: "Didn't we do the investment package already? What would you rather have? We went through this last year, are you telling me we did it wrong?" The "investment package" was what they often called the 2001 tax cut, which had investment incentives for small business and rate cuts for the high-end "investment class."
"There are headwinds," Hubbard said.
"Not additional headwinds," Bush countered. "They can say, 'They did it twice and it didn't work.' Why do we play our hand now, negotiate against ourselves? I want to stay with principle."
This seemed to be a cue to Rove. Trying to discuss the basics of fiscal policy had left the room in tatters. Karl moved to tactics. "We want to dictate the debate, Mr. President. Not to be too specific out of the box. That is a prescription for piling on; we have to have something to trade."
Daniels, still looking to redeem himself for his earlier deficit hawk comments, jumped to support Rove: "I suggest a $50 billion package - $50 billion a year - and that we go on the offensive, including accelerating the rate cuts, and expensing, and dividends."
The President seemed relieved, as though the key issues had been considered. "Thank you for all the briefing materials, this was good research. So when do we roll this out?"
"You are speaking in Chicago on December 10," Lindsey said.
Bush looked surprised. "That's news to me."
Rove leaned toward the President. "Sir, that's not scheduled yet, but it is important to move earlier rather than later. The Democrats are coming out with a plan."
Then Ari Fleischer, seeing that matters had moved safely from the whys to the hows, summoned an overall precept, one of the administration's guiding principles. "Perception lags reality," he said importantly.
O'Neill looked on astonished. Rove and Fleischer and the others rarely spoke this way around the centrist Treasury Secretary. Maybe this meant they didn't care anymore what he heard. Not a great sign.
"Democrats will say we don't care about the middle and bottom, but these class arguments work less and less," Fleischer added. "We should do the right package and roll out in early December."
Throughout the meeting, Hughes sat back, observing. She was now a consultant, traveling every few weeks from Austin to Washington, and not in on the White House's day-to-day workings. But she still carried clout, as the only one with equal weight to Rove's. She eased in: "Will the announcement of a package boost Christmas spending?"
"Yes, this could be important for consumer confidence," Hubbard said.
O'Neill shook his head. "The truth is nobody knows."
The President was absently watching the back-and-forth. He was thinking of something else.
"What are we doing on compassion?" Bush asked.
No one answered.
The President seemed to get agitated. "Well, you know...do you know what the unemployment rate is?" he said, raising his voice. "It is 5.7 percent! There are a lot of presidents who have had to confront much higher unemployment. This argument that the economy is bad does not resonate with voters. This is all posturing...that is why we did so well in the midterm elections..."
Rove laughed. It was coming together - it was as if the President had caught a strong wind, his sails now filled. Another massive tax cut proposal was ahead. "So, we should accelerate the rate cuts and not tax dividends twice?..." Rove said.
Then, it was just the two of them, talking to each other. Bush was emboldened. "I can figure this out! We did well in the elections because the economy isn't so bad. What are the optics of this? How specific do we need to be on this proposal?"
>> Paul O'Neill and Ron Suskind, The Price of Loyalty, pgs 302-05