NO CONFIDENCE IN O'NEIL
washingtonpost.com
Mr. O'Neill's Gaffes
Thursday, August 1, 2002; Page A26
ON FOX News last Sunday, Treasury Secretary Paul O'Neill declared that, by the president's designation, he is the administration's chief spokesman on the economy. It is not a role at which he excels. In the very same program, Mr. O'Neill made comments that contributed to a fall of more than 5 percent in the value of Brazil's currency the next day and triggered a formal protest from Brazil's government. On Tuesday the White House, in the form of press spokesman Ari Fleischer, did its best to talk Brazil's currency up again. The chief economic spokesman had misspoken and needed to be counter-spoken.
This was Mr. O'Neill's second gaffe on Brazil in the space of five weeks. At the end of June, the treasury chief said he opposed fresh International Monetary Fund loans to Brazil because its problems were "political." This remark spooked the markets and raised questions about Mr. O'Neill's command of the issues he deals with. Just a few days earlier, the IMF had in fact lent money to Brazil in an attempt to bolster confidence; Mr. O'Neill was needlessly undoing that effort. What's more, the secretary's logic was odd. Countries with political problems -- in Brazil's case, an election campaign featuring strong left-wing candidates -- are often more deserving of IMF help than those with economic problems. The point of an IMF loan is to tide a country over during a temporary difficulty: An election campaign is likely to be more temporary than an unsustainable mountain of debt.
After that remark, the Treasury issued a regretful statement expressing confidence in Brazil's economic management. But the episode did not prevent Mr. O'Neill from jumping into more hot water last weekend. Referring to Argentina and Uruguay as well as Brazil, the secretary said the challenge for these governments is to make sure that financial assistance "doesn't just go out of the country to Swiss bank accounts." In Mr. O'Neill's defense, it's true that capital flight is a danger. But invoking that danger on television is not a smart way to bolster confidence in the region, and the subsequent fall in Brazil's currency was hardly surprising.
Mr. O'Neill is an accomplished man, and it's not clear why he strays off message. Perhaps he has an industrialist's disdain for the zigs and zags of financial markets, preferring to focus on what he calls the economic fundamentals. If so, this is worrying: Financial markets, annoyingly fickle though they are, can impact Mr. O'Neill's fundamentals fundamentally. Or perhaps Mr. O'Neill hasn't gotten used to the idea that, as Treasury secretary, his comments can move markets. "I'm constantly amazed that anybody cares what I do," he said the other day. If he's not careful he'll be out of a job, in which case his amazement will be ended. |
