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White House to economic advisers: Resign

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WASHINGTON (CNN) -- White House Chief of Staff Andy Card called up Treasury Secretary Paul O'Neill and White House chief economic adviser Larry Lindsey Thursday and gave them a message from the president: Turn in your resignations tomorrow.

That is what led to the abrupt resignation announcements by both men Friday morning, according to administration officials. They said once the president decided O'Neill and Lindsey must go, he tapped Card to make the fateful phone call.

"President Bush thought about what his economic team should look like after midterm elections and decided that changes had to be made," a senior administration official said.

Bush, a loyalist especially to those in his inner circle, is said to have been particularly frustrated by O'Neill's outspoken and vocal criticism of economic policy decisions promoted by the White House.

The president did not like that O'Neill was so "reticent about Mr. Bush's call for the need for a growth package, that O'Neill was dubious about the benefit the tax cut would have on the economy and had said so publicly," the official said, adding, "People didn't know where he [O'Neill] stood until you read it in the newspaper."

The departure of Lindsey was just "collateral damage" in the shakeup, the official said.

Bush issued a one-paragraph statement Friday, saying his economic team had worked hard to help "lead the nation out of recession and back into a period of growth."

"I appreciate Paul O'Neill's and Larry Lindsey's important contributions to making this happen," Bush said. "Both are highly talented and dedicated, and they have served my administration and our nation well. I thank them for their excellent service."

The resignations, which came within an hour of each other, coincided with the release of a report showing 6 percent unemployment in November, matching April's rate, the highest since August 1994.

Sen. Patrick Leahy, D-Vermont, said he doesn't want to see O'Neill used as a scapegoat for a White House "policy of squander."

"They have squandered the surpluses ... the public's trust in corporate accountability and in the markets, and the opportunities to use the surpluses to protect and strengthen Medicare and Social Security and homeland defense," Leahy said.

"Secretary O'Neill is not the problem, the administration's policies are," he said.

The moves will mean a more prominent public role for Commerce Secretary Don Evans, a childhood friend of Bush's.

As recently as a November 7 news conference, the president had expressed public support for his economic team.

"Listen, my economic team came in during very difficult times," he said. "My economic team developed a tax cut package, sold the tax cut package, is implementing the tax cut package. And for that, they deserve a lot of credit."

White House press secretary Ari Fleischer indicated the search is on for replacements but did not supply the names of any candidates being considered. He said those replacements would be experts on the economy and friendly to the markets. (Speculation on successors)

In a brief letter to President Bush, O'Neill said, in part, "It has been a privilege to serve the nation during these challenging times. I thank you for that opportunity."

There is no fixed date for O'Neill's departure, but it will occur "sometime in the next few weeks," a Treasury Department statement said Friday.

Michelle Davis, a department spokeswoman, said two years ago, before O'Neill was tapped by the president, he was planning on retiring and devoting "himself to improving health care and education in Pittsburgh."

"I'm sure he will return to those important projects," Davis said.

O'Neill, 67, was sworn in as the 72nd secretary of the treasury on January 20, 2001.

He joined the Office of Management and Budget in 1967, and was deputy director from 1974 to 1977, according to the Treasury Department Web site.

From 1987 to 1999, O'Neill was chairman and CEO of Alcoa. He retired as chairman at the end of 2000 to join Bush's Cabinet.

Lindsey, a former associate professor of economics at Harvard University, served as a Federal Reserve Board member from 1991 to 1997. He also was a special assistant to Bush's father from 1989 to 1991.

Lindsey was the architect of Bush's $1.3 trillion tax reduction plan written during his presidential campaign.

CNN Sr. White House Correspondent John King, White House Correspondent Suzanne Malveaux and Producer Megan Shattuck contributed to this report

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