WASHINGTON (REUTERS) — President Bush is under pressure from conservative Republicans to take Stephen Friedman out of the running for White House economic adviser, but the former Goldman Sachs chief is still the top contender for the job, Republican sources said Tuesday.
Friedman’s critics, including some conservatives in Congress, are questioning his commitment to tax cuts and have urged Bush to find an alternative to replace ousted National Economic Council chairman Lawrence Lindsey, the president’s senior economic adviser.
“We are doing everything we can to quash this appointment,” said Stephen Moore, president of the Club for Growth, a lobby group that favors tax-cutting policies. “We’re not real high on him. He is a deficit-phobic.”
But Moore and other Republicans who favor “supply-side” policies, such as low taxes and deregulation, conceded they faced an uphill battle.
White House officials played down the importance of dissent from conservatives in their deliberations and attributed the delay in the appointment to vetting of his financial affairs.
“A lot of economic conservatives are unhappy with it. But Bush doesn’t seem to care,” one Republican source close to the administration said.
Friedman’s appointment appeared all but locked up over the weekend, and administration officials said he was still likely to get the nod. But one official cautioned: “Nothing has ever been final on that.”
White House spokesman Ari Fleischer declined to speculate on the appointment.
Friedman’s name surfaced as a frontrunner for a top White House job after Lindsey and Treasury Secretary Paul O’Neill were forced out in a major reshuffling of the administration’s economic team. Bush Monday said he would nominate CSX Corp. chairman John Snow to succeed O’Neill.
The White House expects the new Treasury secretary and Lindsey’s replacement to be tax-cutting advocates who, unlike O’Neill, will enthusiastically market the administration’s economic stimulus package to Congress and the American people.
The White House is crafting a package that is expected to total as much as $300 billion and include tax breaks for companies and individuals.
Republican sources said other senior Bush advisers may leave the administration in the coming weeks, including Health and Human Services Secretary Tommy Thompson, whose support of stem-cell research ran afoul of conservatives.
Sources have said Kenneth Dam, a deputy Treasury secretary who worked closely with O’Neill in both the corporate and political worlds, was also likely to depart soon.
Speculation also continued to bubble about whether Glenn Hubbard, the highly regarded head of the White House Council of Economic Advisers, would stay in his position, possibly move to the Treasury or leave the administration altogether.
While some sources said Hubbard, on leave from Columbia University, has recently talked to colleagues about a possible return to teaching. However, when asked Monday if he would be staying in his current job given recent changes in the team, he replied: “I am happy where I am.”
Although some Washington conservatives oppose Friedman, his selection has received a warm welcome on Wall Street, which has long wished to see one of its own tapped for an influential policy role within the Bush administration.
Friedman’s market experience is seen as compensating for Snow’s lack of Wall Street background, and traders are watching closely for signs he will be taken out of the equation.
Moore and other conservatives dislike Friedman’s association with centrist groups such as the Concord Coalition, which was founded to promote deficit-reduction policies.
“From a conservative point of view, the Concord association is not a big plus. They’re traditionally not sympathetic to tax relief,” said a Republican congressional aide.
Conservatives tried unsuccessfully earlier this year to get Bush to pick supply-siders for two open seats on the powerful Federal Reserve Board.
Instead, Bush chose Ben Bernanke, a moderate Republican, and Donald Kohn, who has no political party affiliation and who was strongly backed by Fed Chairman Alan Greenspan.
Greenspan shares cautious views about the long-term fiscal picture, which is the Concord Coalition’s focus. Because of this wariness, the Fed chief is viewed suspiciously by some conservatives, such as columnist Robert Novak. Novak in a recent column took issue with the prospect of a Friedman selection.
Friedman, a lawyer by training, is currently senior principal at Marsh & McLennan Capital, Inc. He is also a limited partner of Goldman and co-chaired the firm with former U.S. Treasury Secretary Robert Rubin in the early 1990s.
“He has got a terrific understanding of the economy, both from a micro and macro point of view,” said Daniel Yergin, who served with Friedman on the Brookings Institution Board of Trustees. “He also has a terrific understanding of financial markets and how they interact with the overall economy.”
Friedman’s association with Rubin, who is also a member of the Concord Coalition, is a sore spot for some conservatives.
Rubin, a Democrat, was President Clinton’s White House economic adviser and was then promoted to Treasury chief. Since leaving government, he has been a vocal critic of Bush’s last $1.35 trillion tax cut and is viewed as something of an icon among Democrats as well as many on Wall Street.
Those who know Friedman say that while he and Rubin enjoyed a strong rapport, there is no doubt their politics differ and that Friedman is a committed Republican. However, he is certainly more of a moderate than the man he would replace.
Much of Lindsey’s career as an academic and private political consultant was dedicated to advocacy of tax cuts and even in his former role as Fed governor, he frequently expounded on his views about supply-side policies.
On the other hand, the White House went to lengths over the weekend to put out the word that it was seeking people who would take the lead in selling an already partly formed agenda of economic stimulus, rather than those who would be writing that agenda themselves.
