The Price of Loyalty

Ron Suskind

Paul O’Neill went to an average college, but worked very hard afterwards and made it far in
government and business.
He, Donald Rumsfeld and Dick Cheney worked together in the Nixon administration. At the
time, Rumsfeld actually held superior rank to Cheney and Cheney was working on his PhD.
O’Neill’s prowess as an economist along with his conservative values and background gained
him the admiration of Rumsfeld, Cheney, and George H.W. Bush. They all worked together at
various times before 2000.
As such, when George W. Bush needed a Secretary of the Treasury, his insiders recommended
O’Neill. At the time, O’Neill was the CEO of Alcoa. He resisted the invitation to serve in Bush’s
administration for economic (the government salary would be much lower, and O’Neill had a
wife and four kids to support) and personal (he knew the government job would entail more
work and his wife was against it) reasons, but in November of 2000, O’Neill accepted Bush’s
offer.
O’Neill got his job at Alcoa after the Ford administration (in which he was praised for his work
on budgets). He is credited with turning the failing company around.
George W. Bush entered office at a time when the country was split essentially 50/50 between
Democrats and Republicans: The Presidential vote had been basically 50/50 and had been
decided by controversial and unpopular means, the Republicans had only an eight-seat majority
in the House of Representatives (which has 435 total members), and the Senate was split 50/50.
However, instead of accommodating this by leading from the middle [as he had also promised to
do during his campaign], Bush led from the platform of the Right.
“O’Neill was a believer in the middle ground. Not in compromise, so much. Or horse trading. He
was never much on any of that. It was the fresh, unaffiliated idea that enlivened him. Across four
decades of search and study in and near government, he was sure he’d spotted a staid, stoic truth
beneath the heat lightning of political rhetoric: that on matters of policy there are answers—right
answers—that eventually assert their primacy over political posturing. These right answers fall
indiscriminately, here and there, long the left/right political axis, or create new territory not yet
charted. An idea’s first conceptual mold tends to form through plodding rigor, from a clear-eyed
examination of available evidence and an open-minded—and sometimes humbling—assessment
of opposing views. Fierce, frank dialogue commences; choices and consequences take shape.
And, if everyone is honest about what they all know—and about what they’ve learned in this
roiling process—an answer, the best remedy, emerges. Illusion will have its moment, but there is,
in fact, a discernible underlying reality. It may take a while, but in the end that reality becomes
visible and undeniable. In the end, it’s all about process, O’Neill believed. Trust process and the
ends take care of themselves.”
O’Neill was a pragmatist who rejected party dogma and who believed strongly in the importance
of balanced budgets.
Recent American economic history preceding the George W. Bush presidency:
-Supply-side economics (tax rates are dropped, encouraging higher productivity but risking
deficits) failed to deliver upon its overly optimistic promises under Reagan. [The economy did
grow and improve during the 1980’s, but this was due to a mix of factors.]
-George H.W. Bush had to break his election promise (“Read my lips: No new taxes.”) and raise
taxes during his term to cut the Federal deficit. O’Neill applauded Bush’s abandonment of

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rhetoric in favor of reason, but the move made Bush unpopular among much of the public and
may have been what cost him the 1992 election.
-Bill Clinton was a pioneer among Democrats in that he worked hard to balance the Federal
budget during his term. He was successful, and by the time he left office, the budget was in
surplus. Democrats and Republicans now both stand for balanced budgets.
-Clinton’s refusal to increase government spending actually turned leftist Democrats against him.
-During the 1990’s, the economy grew largely thanks to improvements in technology (mainly
computers) that increased productivity. Shrinking budget deficits also led to lower interest rates
in the later part of the decade [less demand for investment in the government via things like
Treasury Notes means interest rates can be lowered], which made credit more freely available
and increased American consumer spending and hence economic growth.
With O’Neill as Secretary of the Treasury and Colin Powell as Secretary of Defense, America’s
top Domestic- and Foreign policy posts were filled by pragmatic, experienced centrists. This
gave the outward indication that the Bush administration as a whole was to be of similar
character.
Paul O’Neill was a talented man with strong leadership qualities and interests in many areas:
-As head of Alcoa, America’s largest aluminum producer, O’Neill led U.S. aluminum companies
in a 1993 effort to fight Russian aluminum dumping. The Russians were selling aluminum at
below-cost prices across the world in an attempt to run competitors out of business. The U.S. and
Russian firms agreed to cut production and to shutter some factories to keep world aluminum
supplies (and hence prices) constant for several years in light of the glut.
-O’Neill also successfully made changes to Alcoa’s collective bargaining system to end disputes
with the United Steel Workers union.
-He gave a major speech in 1994 denouncing the Clinton universal healthcare plan as
unworkable, and he went on to explain why Alcoa’s employee healthcare plan would be a
superior national model if scaled up.
-In Alcoa’s 1997 annual report, O’Neill wrote about global warming and Alcoa’s part in
contributing to and fighting it.
-O’Neill simultaneously served as head of Alcoa and Chairman of the nonpartisan RAND
corporation during the late 1990’s.
Cheney was always very secretive, speaking little though it was clear his mind was very active,
and keeping his movements secret.
O’Neill and Bush first met in late 2001 at a D.C. hotel.
-During the meeting, O’Neill first laid out the many reasons he should not be Secretary of the
Treasury: He supported a large gas tax to fund development of alternative energies, he was very
concerned with global climate change, and he had a very opinioned, strong personality.
-At one point, Bush told his aide Andy Card to go get him and O’Neill cheeseburgers. O’Neill
had found in his experience that misuse of subordinates in a manner such as this typically
indicated poor character on the part of an executive.
-Bush was unwilling to consider ditching his proposed tax cuts, which would have amounted to
$1.6 trillion over 10 years. At the time, the size of the surplus was estimated at $5 trillion over
the same period. Bush was noncommittal to O’Neill’s plan to privatize Social Security. Both
wanted to simplify the tax code.
O’Neill was critical of Larry (Lawrence) Lindsey’s appointment to the posts of Director of the
National Economic Council and Assistant to the President on Economic Policy because he

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seemed inexperienced and too partisan. Lindsey was close to Bush and worked in the White
House.
O’Neill was upset by a major economic meeting right after the election because only big
business representatives were present. Labor and environmental groups were absent.
[O’Neill was clearly a very strong-minded person.]
O’Neill and Alan Greenspan had been close associates for many years before the Bush
administration. O’Neill frequently consulted Greenspan for work advice. The two met around the
beginning of Bush’s term to plot an economic strategy. Both agreed that the economy was strong
but weakening. The government’s main focus had to be on maintaining productivity gains, which
had been the main fuel for the economic boom of the 1990’s. Computer makers and
manufacturers had seen huge increases in productivity because they could easily incorporate new
technological advances into their firms. But in the services and medical sectors, technology was
less easily adopted, meaning their productivity had remained almost flat. They could only
increase profits by increasing prices. Consumer confidence [the degree of optimism average
people have in the economy as expressed by their spending and saving habits] was dropping,
meaning fewer goods and services were being purchased. Lower sales meant inventories,
especially of cars and telecommunications hardware, were building up. Firms would likely
respond by firing segments of their workforces to keep costs down, which would further hurt the
economy.
O’Neill and Greenspan agreed that Social Security was heading for bankruptcy and needed a fix.
They agreed that the surplus should be used for this task, but were worried that the Democrats
and Republicans would deplete it all through irresponsible increases in government spending.
Both men were also ardently against deficit spending, and also foresaw the possibility that the
optimistic estimates of the Federal budget size might be wrong. As such, they wanted “triggers”
in the budget that would rescind the Bush tax cuts if the surplus evaporated and if continuing the
tax cuts meant deficit spending.
During their first work meeting, O’Neill and Linsey got into an argument. Linsey believed that
the U.S. economy was tanking and that massive tax cuts were needed to stop the decline. O’Neill
disagreed on both counts. O’Neill’s suspicions about Linsey’s partisan-based economic views
were confirmed by this exchange, and he began worrying that Linsey would become a bad
influence on the President, who had no experience with macroeconomics.
O’Neill and Greenspan held a meeting with Dick Cheney. They suggested to Cheney that smaller
tax cuts were in order and that fiscal policy (lowering interest rates to stimulate spending) could
better help the economy. During the meeting, Cheney talked about his new energy task force,
which had as a main goal the revitalization of the American nuclear industry. Cheney mentioned
he admired the French nuclear program [which is cost-effective and supplies 80% of France’s
energy].
O’Neill and Greenspan were men of principle; They disbelieved in deficits, always wanted to put
the long-term needs of the economy over short-term needs, and were willing to accept economic
realities and do whatever was needed to support economic growth and stability, regardless of
whether the politicians would find their course of action acceptable. Bush’s core advisors,
however, were men of loyalty; Above all, they functioned to protect and obey Bush, and many
had served with Geroge H.W. Bush previously.
In January 2001, O’Neill was quoted in the New York Times praising some of Bill Clinton’s
economic policies [both men were committed to balanced budgets] and criticizing the proposed

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Bush tax cuts. The Bush team reacted angrily to this in private and in public. [O’Neill clearly had
problems keeping his mouth shut]
It was around this time that George Bush gave O’Neill the nickname “Pablo”. In time, this would
become “The Big ‘O’”. Bush gave all of his cabinet members nicknames. O’Neill felt it was used
in a bullying manner.
On January 24th, 2001, O’Neill had his first private conference with Bush. O’Neill had prepared a
long list of major economic issues to discuss and had expected the meeting to be long and
intense. However, during the course of the entire conference, Bush asked almost no questions
and instead stared at O’Neill blankly. O’Neill had worked personally with Nixon, Ford, H.W.
Bush, and Clinton, and found W. Bush to be the least inquisitive and intelligent of all, and by a
wide margin.
In a public speech shortly thereafter, Alan Greenspan recommended that Congress put triggers
into the Bush tax cut legislation to negate the cuts in the event of an evaporation of the budget
surplus.
Linsey wrote O’Neill a memo questioning his loyalty to Bush. O’Neill was outraged and threw it
in the trash.
On January 30th, 2001, the first National Security Council (NSC) meeting took place in the White
House Situation Room. All of the principals were present, including O’Neill. The first topic of
discussion was Israel. Bush decided to end American engagement with the peace process that
Bill Clinton had been so involved with. Bush believed that Clinton’s interference had somehow
provoked the Palestinians into starting the Second Intifada. He wanted to let the Israelis use
serious force against the Palestinians to straighten the situation out. Powell objected to this
assessment and to the proposed course of action, but was overruled.
There was then a clearly scripted exchange between Condoleeza Rice and Bush in which the
subject of Iraq’s “destabilization” of the Middle East was introduced. George Tenet brought out
large reconnaissance photographs showing suspected biochemical weapons facilities, but he
made it clear that the CIA was unsure as to their true purposes. Tenet went further to reveal that
the CIA had virtually no reliable sources within Iraq, and that it could only guess about Iraq’s
WMD programs.
Powell’s take on the Iraq issue was that the Gulf War I sanctions were not working well: They
were too broad and thus hurt Iraqi civilians instead of targeting only the government and
military. He thus recommended retailoring the sanctions. He also pointed out that Saddam had $3
billion in unspent money from the U.N. Oil-for-food program, which violated the condition that
all profits from the program be spent on humanitarian needs.
The Iraqi military was regularly shooting at American planes patrolling the No-fly zones. Even
though there was a huge difference in technology, there always remained the real possibility that
a U.S. plane could be shot down. This constant threat to American aircraft also made it difficult
to collect aerial intelligence, further hurting U.S. efforts to determine the nature of Iraq’s WMD
program.
While Clinton had also wanted to get rid of Saddam, he was totally unwilling to use American
ground troops for that purpose and gave the task low priority. Bush was different and expressed a
much stronger commitment from the very beginning to topple Saddam. Bush wanted opinions on
sending American ground troops into northern and southern Iraq to cooperate with anti-Saddam
insurgents to bring him down.
At the end of the meeting, Bush gave his senior aides different missions for fighting Saddam:

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-Secretary of Defense Donald Rumsfeld was to develop plans for direct military action against
Iraq, to start work on reconstituting the Gulf War I coalition for the attack, and to investigate the
possibility of funding anti-Saddam insurgents.
-Secretary of State Colin Powell was to devise a new set of targeted Iraq sanctions to replace the
old ones.
-CIA Director George Tenet was to develop a plan for improving U.S. intelligence capabilities
inside Iraq.
-Secretary of the Treasury Paul O’Neill was to find ways to isolate Saddam economically.
O’Neill felt like the entire meeting had been heavily scripted, and could sense that there was
already an “in” and an “out” group. He and Powell were in the latter.
The discussion about Iraq had focused entirely on how to topple Saddam, but no attention was
given to why Saddam needed to be toppled. Why was Iraq to be treated as the most dangerous
regime in the Middle East? [Iran was a bigger sponsor of terrorism and had a more powerful
military and also a WMD program, Afghanistan was run by the Taliban and housed Osama bin
Laden and his al Qaeda network, which had already attacked American assets several times and
had sworn to do more damage, Syria had a dictatorship similar to Saddam’s] Why did Iraq need
to be attacked now, with such urgency? No justifications were given. The decision to attack
seemed to have already been made.
O’Neill received Donald Rumsfeld’s 2001/02 military budget requests. Rumsfeld wanted a large
overall increase in military funding [which Republicans had seen as deficient under the Clinton
administration], and he also sought to radically change military priorities and the structure of the
military itself: The U.S. military had to maintain its ability to fight large states in traditional
wars, but also needed to build a force capable of fighting rogue states which posed asymmetric
threats. A second, newer, leaner, smarter segment of the military had to be created and the older,
bigger military segment kept as well. Rumsfeld saw a world in which rogue states across the
world threatened America with asymmetric threats like state-sponsored terrorism and WMD
programs. Like a typical neoconservative, he felt that these rogue states could not be negotiated
with and would respond only to force or the threat of force, and he discounted the effectiveness
of soft-power tools like international alliances, economic interdependence, cultural ties, and
diplomacy to curtail the ambitions of rogue states and terrorists. Rumsfeld’s budget explicitly
stated that the U.S. military’s role was now to “deter and dissuade” rogue states.
At the second NSC meeting held on February 1st, 2001, Iraq was again the main issue.
-Powell talked about his ideas for new Iraq sanctions that would more effectively contain
Saddam’s power.
-Rumsfeld interrupted Powell and began talking about how great a pro-U.S. Iraq without Saddam
would be for American and regional interests. He said “it would change everything.” Rumsfeld
then jumped to a detailed discussion of how the U.S. would go about rebuilding Iraq after
Saddam’s overthrow. He then returned to the problem of finding a way to get rid of Saddam.
-Tenet said that a coup within Iraq was highly unlikely—there were simply no powerful
opponents of Saddam within Iraq’s military or government.
-Rumsfeld suggested arming internal Iraqi opponents of Saddam and then using American
airpower to support them while they attacked Saddam on the ground. [This strategy was used
less than a year later in Afghanistan to defeat the Taliban]
-Powell insisted that the U.S. had to be careful not to support a Saddam replacement that would
be just as bad as Saddam.
-There was no talk of using American ground troops.

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The focus on attacking Iraq fit into the broader neoconservative world strategy as expressed by
the Rumsfeld budget. If the U.S. could prove Saddam had WMD’s and then destroyed his regime
in response, it would send a strong message to all of the other rogue states, which principally
threatened the U.S. with WMD’s. They would be deterred and dissuaded.
O’Neill realized that the administration was searching for a reason to attack Iraq. Any war
against that country would not follow a natural course of events, but would instead see the
sudden enactment of an American plan once a pretext for war was found.
O’Neill was again hurt by impolitic public remarks: During his first month in office, he gave an
interview in which he, the Treasury Secretary, said that the U.S. was no longer pursuing strong
dollar policies. When this comment was publicized, the dollar experienced the largest drop in
several years. O’Neill regretted the comment and was chastised by the Bush team.
As it became clearer that the Bush administration wanted to go to war against Iraq, an internal
conflict developed that pitted Colin Powell and the State Department against the Bush
neoconservatives. Rumsfeld was already making substantial plans for the war and its aftermath,
as evidenced by the “Foreign suitors for Iraqi oil contracts” paper, which outlined the
management of Iraq’s oil, postinvasion.
George W. Bush came into office unprepared and with little experience. As such, his advisors—
who were very experienced—ended up completely running the Executive Branch for at least the
first month of the presidency. This caused a lack of cohesiveness and central direction.
The principals held another meeting about Iraq:
-Secretary of Defense Rumsfeld mentioned that that shootdown of an American pilot over Iraq
could serve as a pretext for war.
-Undersecretary for Defense Paul Wolfowitz suggested arming Iraqi rebels to fight Saddam.
-Secretary of State Colin Powell countered Wolfowitz’s idea with the fact that arming the rebels
would be logistically difficult and that any Iraqi rebel militia would prove insufficient to bring
down Saddam’s regime.
Again, it seemed to O’Neill that the decision to invade Iraq had already been made.
Christine Todd Whitman was appointed EPA head at the start of Bush’s administration. She
couldn’t meet with Bush during the first month of his term, and had to only guess about what his
ideas concerning environmentalism were. During that same period, she gave a conference in
which she declared that global warming was real and going to cause problems in the future.
O’Neill, who was also a global warming advocate, recommended that Bush act as an honest
broker on the issue and bring together industry leaders and environmentalists to examine the
evidence on global warming and to develop a compromise plan to cut emissions while protecting
the economy as much as possible. This plan could serve as an alternative to the Kyoto Protocols,
and would show the world that America was doing something to fight the problem.
In Bush’s first State of the Union Address, he stated that only $2 trillion out of the $3.4 trillion
national debt was repayable over the next 10 years because much of the debt was in the form of
30-year Treasury Notes. Therefore, at least $1.4 trillion from the budget surplus could be
refunded to Americans as tax breaks. O’Neill and his economic team knew this to be untrue, and
that in fact, only $500 billion of the debt at most was nonrepayable during the 10-year period.
Bush had gotten the bad assessment from one of his ideologue economic advisors who wanted
tax cuts at all costs.
O’Neill met with Bush privately and tried to explain why triggers were needed in the budget to
prevent the planned tax cuts from leading to deficit spending.

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O’Neill and Bush passed through one Federal building unannounced and surprised a number of
low-level workers. Bush was very genial with them.
A group of Republican Senators sent Bush a letter asking him to clarify his views on
environmental policy. Whitman went to Bush to discuss this matter and found that he had already
made up his mind. The U.S. would not join the Kyoto Treaty because it excluded 80% of
countries—including China and India. Bush also reneged on a campaign promise when he
refused to classify CO2 as a pollutant. Doing such would have imposed regulatory costs on
producers that would have been pushed onto consumers. Cheney was the White House’s leading
energy policymaker, and he was the likely source of these decisions, not Bush.
Whitman and O’Neill kept in contact with one another and both puzzled over the climate policy.
Bush was inexperienced and had to delegate tasks to his advisors. This is what observers meant
when they described the Bush administration as being run “like a corporation.”
By March of 2001, plans were already being made to handle Iraqi postwar refugees, run war
crimes tribunals, etc. Bush had almost no real military experience, and these plans must have
come from his high-level advisors.
O’Neill realized that he, Whitman and Powell were moderates whom the core Bush team had
picked to create a false centrist public image for the administration. All three of them were
regularly overruled and ignored when it came to actual decision-making. [Definitely the case for
Powell just before and during the Iraq War]
In the legislature, two sides formed over the issue of tax cuts: A coalition of Democrats and
moderate Republicans wanted smaller tax cuts with triggers to ensure a balanced budget while
most Republicans wanted big tax cuts and no triggers. Importantly, it should be noted that all
sides wanted some tax cuts. Bush was, of course, opposed to the idea of triggers, but he led on
that he was open to compromise.
During a closed-door Congressional meeting over the tax cuts, O’Neill proposed a $125 billion
immediate stimulus package to help the economy, which was entering a recession. The tax cuts,
he pointed out, would not have any effect until 2002, and the economy needed help now. He
recalls that the room fell into quiet contemplation because no one had thought of the idea
previously.
O’Neill and Greenspan wanted to privatize Social Security, but they had a different exact plan in
mind than Bush’s. It would have cost $1 trillion over 10 years to cover the shortfall from the
transition.
Cheney had worked in government during the oil crises of the 1970’s and had worked as a
private oil executive, so he viewed himself as an expert on energy policy and disregarded the
opinions of others on the matter.
Cheney headed an oil task force. Representatives from big business and the oil companies were
always present at the proceedings and typically had detailed policy recommendations ready for
submission. Environmentalists were usually absent, and when they were present, they were so in
small numbers.
During an energy task force meeting, the possibility of an impending energy shortage crisis was
discussed. Bush said nothing. Whitman was not allowed to speak.
O’Neill again met Bush in private and went over the details of the Social Security privatization
plan he had developed with Greenspan. Under the plan, for $1 trillion over 10 years, all
Americans under 37 could get individual private accounts that would allow them to retire at 65
with $1 million apiece. Bush flatly rejected the plan because it was not the same as the one he
had pitched during his campaign.

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Cheney’s energy task force made its final report in early 2001. The recommendations were
heavily influence by the oil companies and by energy company Enron. In fact, Ken Lay had
personally spoken with the committee members several times. O’Neill and Whitman were the
only environmentalists on the 12-member panel. The two of them managed to get some of the
recommendations stricken from the final report, but overall were a weak influence. O’Neill
agreed with two key task force recommendations, 1) that a national energy grid be created to
replace the patchwork of state laws, allowing utilities companies to freely operate across state
lines, and 2) that safety standards for oil pipelines and powerlines be improved.
On May 2nd, a Social Security task force was created by Bush to examine different ways to
reform the program. The participants had been secretly screened to ensure that all were in favor
of privatization. O’Neill, like Bush, wanted privatization, but the former disliked the lack of
diverse views on the task force and felt that it undercut the body’s credibility.
O’Neill was annoyed by the heavily scripted nature of cabinet meetings: Each cabinet member
was given a short allotment of time to speak on a specific issue, and the order of speech was
predetermined and strictly upheld. Cabinet members rarely spoke to one another nor debated
issues or each other’s points during the meetings. Furthermore, Bush usually just listened in
silence and failed to ask questions.
During a May 2001 NSC meeting, many new Iraq War plans, including postinvasion plans, were
presented.
O’Neill’s efforts in the Department of the Treasury to financially isolate Saddam by persuading
Jordanian and Syrian banks not to do business with him had failed.
During intelligence briefings to Bush and the principals, George Tenet always pointed out the
uncertain nature of the CIA’s estimates of Iraq’s WMD and terrorist activities. Bush actually
expressed a large amount of interest on the subject of Iraq, and frequently questioned Tenet
during meetings about why intelligence capabilities were so bad, how they could be improved,
and what exactly the available intelligence meant [which contrasted with his normal behavior
during meetings pertaining to other affairs].
During O’Neill’s two years in office, he had access to the same highly secret CIA briefs that
Tenet had prepared for Cheney and Bush. O’Neill recalls that every one of the briefs was
carefully worded to express the uncertainties held about Iraq’s capabilities and intentions. Tenet
did not try to deceive the White House into invading Iraq.
In the end, Congress and the President agreed to a historic tax cut of $1.35 trillion over 10 years
[most of which went to the wealthy], and an immediate $85 billion tax rebate to stimulate the
economy against the recession. Insertion of the triggers provision into the tax cut bill was
rejected in the Senate 49-50 [Jesus…], leaving Greenspan and O’Neill to lament.
O’Neill had worked with Presidents Nixon, Ford, Reagan, H.W. Bush, and Clinton, and found all
of them to be highly inquisitive men who listened to and debated with their advisors, and who
thus made decisions in a systematic and ultimately understandable manner. After spending time
with them, an observer could understand how and why they made decisions. W. Bush, on the
other hand, was often inscrutable, and too often explained his decisions as stemming from gut
instincts, or as coming from a voter mandate. (“Because that’s what I was elected to do” was a
common refrain.)
For all his faults, Richard Nixon was a particularly intellectual President. Before cabinet
meetings on any particular issue, he would have experts create “Brandeis briefs” covering both
sides, which Nixon would read and memorize. During meetings, advisors representing both of
these sides would come in and intensely debate, with heavy involvement from Nixon.

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John DiIulio, Director of the White House Faith-Based Initiative, resigned his post in August
2001 and was the first high-ranking insider to do so. DiIulio did so in large part because he was
dissatisfied with how the program [which was the cornerstone of Bush’s “compassionate
conservatism” philosophy and was supposed to function as a minority outreach program] became
a giveaway to rich evangelists and betrayed its original goals. DiIulio also complained that senior
policy officials in the White House were shockingly ignorant on many issues, were
noninquisitive, and were focused on how their policies would be portrayed in the media and how
much they would please the Republican base.
O’Neill fell out of disfavor inside of the image-obsessed Bush White House because of his
impolitic public remarks. This worsened in late 2001 when he made disparaging remarks about
the Argentine economic crisis, leading others in the White House to publicly denounce him.
O’Neill was on an official trip to Japan on 9/11. Upon learning of the disaster, O’Neill’s
functions were to assess the loss of personnel and their impact on the U.S. economy, to track the
terrorist funds, and to reassure the world financial markets. All civilian air flights were cancelled,
and he returned to the U.S. in the belly of a military cargo plane.
O’Neill grew up dirt poor.
September 12th NSC meeting:
-Rumsfeld talked about attacking Iraq in direct response for 9/11. He believed that, since the U.S.
was about to embark on a War on Terror, and since Iraq would inevitably be attacked in such a
crusade, why not just do it sooner rather than later?
-Powell disagreed and pointed out that there was no public support for attacking Iraq. Bush sided
with Powell.
September 13th NSC meeting:
-Should the American response to 9/11 just be an invasion of Afghanistan, or should the invasion
be the first step in a major, worldwide campaign against terrorism? In any case, it was already
decided that an attack on Afghanistan needed to take place.
-George Tenet presented detailed plans for attacking Afghanistan using Special Forces,
conventional forces, and anti-Taliban Afghans. O’Neill was impressed with the plans. Cofer
Black—head of the CIA’s counterterrorism center [and a man frequently mentioned in Tenet’s
memoir]—also spoke during the meeting.
-O’Neill took it upon himself to reopen the NYSE—which was only three blocks from Ground
Zero—as soon as possible. Critical computer systems had been destroyed by the WTC collapse.
O’Neill realized that reopening the NYSE was important for restoring a sense of normalcy and
boosting confidence in the economy, but he also knew that the reopening would have to proceed
without any technical problems, or it would be a public relations disaster. Bush agreed to assign
O’Neill the task. The NYSE reopened the Monday following 9/11.
Bush created a war cabinet—a subset of his normal cabinet tasked specifically for devising and
implementing an antiterrorist strategy. It included Cheney, Rice, Rumsfeld, Chairman of the Joint
Chiefs of Staff Henry Shelton, Ashcroft, Powell, O’Neill, and Tenet. They and their spouses all
met at Camp David the weekend after 9/11 for a big series of meetings that would plot out the
War on Terror.
-Tenet talked about beginning a worldwide war against terrorism and about using the Northern
Alliance against the Taliban.
-Shelton talked about the strategy the regular military could employ against the Taliban.
-All believed that the destruction of the Taliban regime could serve as a powerful example to
other rogue states.

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-Wolfowitz abruptly brought up Iraq and said that 9/11 should be used as an opportunity to attack
that country. He went even further to claim that Iraq might be an easier country to take over since
Saddam was, according to him, a weak and highly unpopular leader. Afghanistan, on the other
hand, was a very rugged country that might degenerate into a quagmire with U.S. troops forever
searching caves for terrorist leaders. Bush again refused to attack Iraq, but there was a feeling
that an Iraq invasion had become inevitable.
-On the first night of the retreat, the Bush team assembled for a relaxed evening in a cabin. John
Ashcroft played spirituals on the piano while Condoleeza Rice sang. She has a very nice singing
voice.
-O’Neill read a sweeping plan created by Tenet to stage a campaign of antiterrorist assassinations
and attacks all over the world. O’Neill had some reservations about it, and was particularly
concerned about the fact that it required Bush to partially give up control over the armed forces.
O’Neill knew from past observations that Bush would sign it without understanding its
implications.
During the September 17th NSC meeting, Bush formally gave the go-ahead for the invasion of
Afghanistan.
O’Neill was put in charge of a multiagency group assigned to tracking and freezing terrorist
finances. This was an extremely difficult task. The team first had to create new laws that made it
easier to freeze assets. Second, it had to find the monies.
On September 24th, Bush announced the first shot in the War on Terror: Assets from 24 different
entities (including supposed Islamic “charities”) were frozen.
The financial data trails of the 9/11 hijackers were easy to track inside the U.S., but almost
disappeared in the Middle East. Lax monitoring and reporting in that region made it difficult to
track anyone’s activities.
Linsey was already pushing for a $100 billion stimulus package to shore up the economy against
the effects of 9/11, but Greenspan and O’Neill felt the government needed to wait longer until
the scope of the damage was clearer.
O’Neill and his inter-agency Terrorist Finance Task Force busily worked out arrangements with
different countries to share financial data that might assist the tracking of terrorists.
The Saudi Arabian government was so besieged by extremists that it could only offer the U.S.
financial data in secret.
The war in Afghanistan began on October 7th. During that month, treaties were signed with 130
countries to share financial data for the purposes of tracking terrorists.
It became evident that most of the terrorist funds were originating in or passing through Saudi
Arabia, and that the Saudi government’s efforts to help were insufficient.
[The relationship between America and Saudi Arabia is described as being one of “extortive
symbiosis.”]
As an insider, O’Neill saw that the Saudis were paying off huge numbers of people inside of
D.C. to buy influence. Mainly, the Saudis want American military protection from both external
and internal threats.
O’Neill came to despise the Saudi leadership.
Nelson Mandella was a big supporter of Saudi Arabia because they gave his ANC $50 million
during the 90’s right after apartheid ended.
During November 2001, Ken Lay repeatedly called the White House and tried to contact Bush.
Lay wanted to save Enron through a federal buyout, or failing that, he at least wanted Bush or
Cheney to use their influence to keep Moody’s from downgrading the company’s credit rating so

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that a different company would purchase Enron. O’Neill spoke with Lay and realized that he was
making illegal and unethical requests. As such, O’Neill suggested to Bush that they go public at
once with the fact that Lay had been trying to contact the White House leadership to avoid
scandalous appearances. Bush agreed.
In late 2001, the press started talking about how O’Neill wouldn’t survive much longer thanks to
his outspokenness and disagreements with the Bush team.
He met with Greenspan and the two agreed that, in the wake of the Enron scandal, new laws
needed to be drafted holding CEO’s and chairmen legally accountable for ensuring proper
company accounting.
During a testimony before the Senate, Senator Robert Byrd entered into an argument with
O’Neill over a policy issue. On a tangent, Byrd insultingly implied that O’Neill had grown up
rich. O’Neill was offended since precisely the opposite was true, and he derisively brought up
Byrd’s past membership in the KKK. It was a significant incident that hurt O’Neill’s standing.
Around the same time, a problem arose as foreign companies were dumping steel onto the world
markets, depressing prices and hurting American producers. Representatives from U.S. steel
companies met with O’Neill to discuss the problem. He wanted the companies to respond by
temporarily halting production to make badly needed upgrades, especially regarding
antipollution features, stopping production of overpriced steel, and permanently shuttering
outdated facilities. The company reps disagreed that the proposed measures would lead them out
of the crisis. O’Neill became angry and shouted that their claims of being unable to make the
proposed changes were “Bullshit.” He then told them to “Go to hell” and stormed out of the
room.
O’Neill opposed steel tariffs to protect U.S. producers since doing such would violate
international trade agreements, could be used against America in later rounds of international
trade negotiations, and would not help the American steel industry to improve its efficiency in
the long-run.
O’Neill later met with U.S. big business leaders and presented Greenspan’s idea for holding
corporate leaders responsible for accounting practices. It was reasoned that, if top executives
were held criminally responsible for irregularities and theft, there would be a strong incentive for
them to be honest about company finances and crack down on internal wrongdoing, precluding
the possibility of a future Enron-like meltdown. The heads were extremely resistant to the idea.
They began contacting Bush secretly at this point, demanding that he rein in O’Neill.
O’Neill also saw that, in 2001, Bush had a historic opportunity to solve the problem of corporate
irresponsibility: The Enron scandal was barely over, so many people were amenable to reforms,
and Bush, as a President with very strong ties to big business, would be capable of effecting the
reforms thanks to his background. [“Only Nixon could go to China.”]
In March of 2002, Bush issued several important decisions:
-A 30% steel tariff was imposed to protect U.S. steel from foreign dumping.
-A post-9/11 economic stimulus plan was released. It was 1/3 the size of Lindsey’s plan.
-A corporate accountability plan was enacted. It had several points, including: 1) CEO’s went
from having 45 days to only 2 days to report personal sales of company stocks, 2) CEO’s had to
sign company financial statements, and 3) CEO’s could have their bonuses taken away by the
government if they broke business laws during the same period.
Greenspan and O’Neill were upset that the Bush plan didn’t include stiffer penalties for
wrongdoing, including penalties for negligence (failure to investigate potential company
problems).

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O’Neill then went on a highly publicized tour of Africa with Bono to investigate ways the
Developed World could help with the continent’s problems. O’Neill had been especially
concerned with Africa and wanted to send more U.S. aid.
Sub-Saharan Africa’s main problem is a lack of potable water. The U.S. could best help the
continent for the least money by building wells in areas with need. It was calculated that the
entire populations of Ghana and Uganda could be supplied with clean drinking water if $25
million were spent apiece to dig wells. In Uganda, O’Neill met with the President and found that
the country had been given a previous estimate of $2 billion by a U.S. company to construct a
national water system that was far more advanced than necessary. The President of Uganda had
no idea of this and had believed his nation’s water shortages to be unsolvable.
O’Neill was deeply moved by his experiences during the Africa trip, and began making promises
about U.S. aid. The accompanying press entourage made these promises public. The White
House became upset at O’Neill’s impertinence and undue independence. They didn’t like him
building up expectations that were unlikely to be met.
O’Neill says Condoleeza Rice was, unlike other Bush cabinet members, a balanced and largely
neutral professional. [Too bad she just “went with the flow” and didn’t use her judgment to block
the highly partisan efforts of people like Rumsfeld and Cheney.]
When O’Neill returned to the U.S. in mid-2002, he spoke with Secretary of State Colin Powell.
Powell warned that O’Neill had gotten America into a bad position since, if it reneged on
O’Neill’s promises to build wells in Uganda and Ghana, the country would look untrustworthy.
But if the wells were built, all African countries would want them and would get angry with
America if not given the same. [Machiavelli’s take on why it is better to be feared than loved.]
O’Neill believed that U.S. aid to Africa would be in our strategic interest since it would promote
a positive image of our country.
It was around this same time that the Bush team began publicly agitating for an Iraq invasion.
Bush demanded that Congress raise the statutory debt ceiling (the maximum amount of national
debt the country may hold at any given time) by $750 billion. The Democrats jumped all over the
proposal to attack Bush. [9/11 unity didn’t last long]
During a meeting in June 2002, Bush confronted O’Neill as soon as he entered the room. Bush
said in a hostile voice: “You’re getting a reputation as a real ‘truth-teller.’” O’Neill said nothing
back and said there was a moment of silence as lower-ranking staffers filling to room looked at
him and then tried to go back to work.
By August, it was clear that O’Neill’s suggestions for African aid were dead in the water. This
upset him.
O’Neill suggested that Bush hold a big series of seminars to craft a broad economic policy.
President Ford had done this to great effect. Bush accepted the idea and held the meetings at
Waco. O’Neill was disappointed because instead of drawing experts representing all interests and
views as Ford had done, Bush only invited lackeys and business friends.
O’Neill’s role was just to give a single short speech at the meetings. He was deeply insulted by
this since he believed that he, as Treasury Secretary, should have been in charge of the entire
series of meetings. O’Neill seriously considered skipping the meetings altogether, but decided
against that since such an action would have been a political declaration of war against the Bush
team.
O’Neill attended the meetings and was disgusted by what he saw: There was no real debate over
tax levels, social programs, or other aspects of economic policy. All of the participants had been

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carefully pre-screened, and the White House had scripted all public comments by the various
participants in advance. No diversity of views was present.
By September 2002, O’Neill knew the budget deficit would be at least $150 billion because of
the tax cuts. Lindsey refused to budge.
O’Neill had access to high-level intelligence reports and realized that there was serious doubt
about whether or not Saddam had WMD’s.
The same day (August 26th, 2002) Dick Cheney gave his infamous and landmark VFW speech
about Iraq’s possession of WMD’s, the White House legal staff completed a report that found
Saddam’s violations of the Gulf War peace terms to be severe enough to legally justify his
overthrow by Americans.
The budget process is the only place in government for true examination of priorities and
government efficacy. Limited funds are actually good since different sides are forced to fight, to
think about their values and whether those values are finding proper programmatic expression,
and to justify the existence of their programs and spending. The most useless government
operations are exposed and cut through this process.
The Bush team dogmatically believed that tax cuts were always good, even if they put the budget
into deficit.
On September 4th, 2002, O’Neill addressed Bush on economic issues:
-The economy was doing better than expected, and tax cuts were not needed to stimulate it.
-The future Iraq War expenditures would make the deficit worse.
-Tax cuts are not a bad idea, they just are inappropriate at this particular time.
-Deficits would cripple the government in the long run if current trends held.
-O’Neill implied he would quit if Bush approved the tax cuts anyway.
O’Neill offered to resign before taking a late-2002 trip to Afghanistan with Bush. Bush refused
the offer.
Cheney, Lindsey, and O’Neill had a meeting. The first two were discussing a plan to cut
corporate taxes, which O’Neill disapproved of given the current budget situation. Cheney
retorted: “Reagan showed deficits don’t matter.”
[In fairness, the U.S. corporate tax rate is the highest in the Developed World by a wide margin,
but the effective tax rate is low since there are a lot of loopholes in the U.S. corporate tax code.
Everyone would save a lot of time and money by simplifying the code and lowering the tax rate,
and the government could get the same in tax revenues.]
November 26th, 2002 White House economic meeting:
-Especially large number of principals present. Cheney participating via telepresence.
-A prominent item was the proposed elimination of double-taxation of corporate dividends. Bush
wanted it, O’Neill opposed it. Supply-side economic projections were used to forecast only a
small decrease in government revenues in the long run.
-Bush repeatedly showed hostility towards Lindsey during the meeting.
-Uncharacteristically, Bush encouraged debate among his advisors and unscripted answers.
-The second economic package had originally included a proposal to reduce double taxation of
businesses by 50%. Any more would have hurt government revenues too steeply. Rove
interjected: “Stick to principle: If double taxation is wrong, get rid of 100% of it.” This had a
powerful effect on Bush. Rove knew how to manipulate him.
-O’Neill suggested an alternative of allowing businesses to expense capital purchases on their
taxes. This would encourage investment in new capital that would expand the economy more

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gradually. An elimination of double taxation would flush the private sector with money suddenly,
perhaps causing a bubble later on.
-Eliminating the dividend tax most helps stock shareholders. Wealthy people who own large
amounts of stock would therefore gain the most. Purchasing stocks would become more
profitable, so the stock market would surge in value and corporate balance sheets would
improve.
-Supply was already high: Warehouses were full. The best plan would have been to find a way to
increase demand (mass consumer spending). Tax cuts for the rich help to create more jobs and
produce more goods and services, but tax cuts for the middle class help increase consumption.
-Rove and Fleischer then interjected and began discussing the political ramifications of the plan.
O’Neill was disgusted.
-Rove prodded Bush to accept no double-taxation and accelerated rate cuts on the basis of
principle.
-The impending Iraq War had U.S. consumers scared. Economic activity was down as a result.
-The cost of this package was optimistically estimated at $600 billion over ten years, assuming
the supply-side logic of offset decreases in government revenues thanks to higher business
productivity.
On December 5th, 2002, Dick Cheney called O’Neill and told him that the President wanted him
to quit. O’Neill was offered the ability to choose the date and reason for his resignation. It was
suggested that he claim “personal reasons” for his departure. O’Neill agreed to quit and accepted
that Bush had the right to fire him at will. But O’Neill refused to lie about the reasons for his
quitting since everyone who knew him would realize it was a lie and since everyone who didn’t
know him would assume that he was running away at a tough moment for the U.S. economy. He
would announce his resignation the next day, but the order would not become effective until
January 1st so O’Neill could help with the transition. After a long silence, Cheney said: “OK.”
O’Neill declined to meet Bush before leaving his post.
Larry Lindsey was also fired.

“A noticeable, pregnant pause…”

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