BMO Nesbitt Burns’ chief economist, Sherry Cooper, says that the result of today’s surprise resignations from U.S. President Bush’s economic team should mean fresh ideas for U.S. policymakers.

Both Treasury Secretary, Paul O’Neill, and Larry Lindsey, the Assistant for Economic Affairs, resigned this morning. Although both terminations were expected, the timing was faster than many predicted. “O’Neill has long been seen as an ineffectual spokesperson for the Bush economic agenda with little or no financial or Wall Street experience. His outspokenness has repeatedly roiled financial markets and offended Wall Street,” says Cooper. “He also has few friends on Capitol Hill.”

“Larry Lindsey too has been accused of being an inadequate communicator and unimpressive idea generator,” she notes. and, she suggests that the 76-year-old Alan Greenspan, chairman of the U.S. Federal Reserve Board for the past 15 years, won’t be far behind.

As for replacements, Cooper says, “The names that have been bandied about for any of these positions are John Taylor, monetarist Treasury Under Secretary, Dallas Fed President Robert McTeer, and Harvard’s Martin Feldstein (advisor to Bush on the campaign trail). No doubt, others will be considered as well.”

Whomever takes these positions, Cooper predicts “some bold new economic initiatives in the New Year. Central among them will be an end to the double taxation of dividends. But a full reform of the U.S. tax system is also under consideration, along with the permanent elimination of the estate tax, higher maximum contribution limits for 401K plans, and tax cuts for families. The Bush Administration may also tacitly back further away from the strong-dollar policy.”

http://www.bmonb.com/Economics/bottomline/common/line_b.asp?issue=20021206