At the outset, one might have assumed the loose-lipped performance was attributable to a business executive's inflated sense of privilege--a man accustomed to saying exactly what he thinks and expecting everyone to genuflect to his superior wisdom. The President introduced O'Neill as "a steady voice" who would calm the nerves of people and markets, but in the early going O'Neill sent international financial markets spinning (in the wrong direction) when he said, "We are not pursuing, as is often said, a policy of a strong dollar. In my opinion, a strong dollar is the result of a strong economy." Speculators jumped--the dollar reeled, the euro soared. The Treasury Secretary had to swallow his remarks and reassure markets that the Clinton Administration's strong-dollar policy remains unchanged. After elaborating his strong objections to financial bailouts by the IMF, O'Neill was compelled to retreat again and endorse the vast new bailouts the IMF provided Turkey and Argentina.

The criticism rankled the Secretary. "I made a mistake of assuming it was all right to talk about the intellectual fabric around that subject [currency values]," he grumped. "It's apparent it's not possible to do that, so I'm not going to try anymore." On the contrary, O'Neill has continued his efforts to educate us on complex subjects and clearly enjoys the role of "intellectual" provocateur. After expressing a string of off-the-wall propositions, he asked an interviewer: "Is that radical enough?" In fact, his ideas are not so much radical as retrograde, resembling Vice President Cheney's views on energy and the environment. O'Neill is exhuming golden oldies from the Daddy Warbucks era of Republican ideology.

His disquisition on corporate taxation, for example, revives the mythical proposition--business doesn't pay the taxes, consumers do--that was very popular among business conservatives more than a generation ago (it originated in the early twentieth century, when the income tax was introduced). Now and then, a conservative economist with an ivory tower grasp of the subject will revive the same theory and set corporate hearts aflutter, until their accountants explain the real-world facts. Aside from modest dividends, corporations do not distribute their profits to shareholders but retain the money in-house to use for financing new investments (preferable to borrowing the funds from banks or financial markets). Thus, if corporate earnings were not taxed at the source, business profits would accumulate each year as tax-free income (maybe what O'Neill has in mind).

The government, in exchange for repealing the corporate rate, might conceivably compel companies to distribute all their profits to the shareholders, but no one in business wants that. Alternatively, in theory, the profits might be attributed to the individual shareholders for tax purposes, so they would have to pay the taxes on the income. But that's an accounting nightmare for both taxpayers and the government, since the stock market's daily churning continuously changes the ownership of shares and would slice up any tax obligations into small, moving fractions. The more fundamental fallacy in O'Neill's reasoning is that the bulk of privately owned corporate shares are already exempt from taxation because they are held in some form of tax-sheltered status--pension funds, personal IRAs, tax-exempt foundations. The owners don't pay anything on their income from equities. As a practical matter, the corporate tax is the only nick the government gets to take on business profits--and it's already weakened.

The reason corporations lobby so fiercely to reduce the corporate tax rate and gut the code with crippling loopholes is simple--they know it's their money, not the consumers'. They intend to hang on to as much of it as possible; so far they've been quite successful. In the 1960s corporate taxes yielded 35 percent of total federal income-tax collection, but that proportion shrank steadily as more and more business tax breaks were enacted. Reagan's splurge of tax-cutting in 1981 achieved the nadir: Corporate tax revenue fell to 10 percent of the whole. Some of those losses were recovered by the tax reform legislation of 1986, which closed many loopholes, and corporate tax payments swelled further when profits surged in the early 1990s, rising to 21 percent by 1995. But the corporations have since figured out how to have it both ways--rising profits and falling tax obligations. The corporate share of tax revenue actually declined during the recent economic boom, back down to 17 percent in 2000.

As chief executive at Alcoa, O'Neill was not the worst of the looters, but he did better than average at beating the tax collectors. In 1996 Alcoa enjoyed profits of $399 million and paid nothing. In fact, it collected a rebate of $17.6 million from the Feds--a tax rate of -4.4 percent derived from accounting ploys not available to mere mortals. For the three-year period from 1996 to 1998, Alcoa paid an effective tax rate of only 15.9 percent on $1.7 billion in profits--less than half the statutory rate of 35 percent and right in line with what ordinary working stiffs pay on their incomes. The man himself, meanwhile, earned $59 million in his last year at Alcoa, enjoying fabulous stock options that are one of the devices Alcoa uses to reduce its taxes. So why all the whining? It's not the money, it's an "intellectual" thing.

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