Power Game (11 page)

Five years later, Stockman embarrassed Reagan by telling how he had “cooked the books” to make Reagan’s budgets look as though they
would balance in 1984, and how little Reagan understood of the economic policies he was advocating. But even after Stockman’s first disloyal confessions in
The Atlantic
in late 1981, President Reagan did not fire him. Stockman was too indispensable: Knowledge was his power.

Credibility

Washington has many yardsticks for measuring power. Two of the most common are money and people: The more people an official “owns,” or commands in his bureaucratic empire, and the larger his budget, the more powerful he is supposed to be. By that measure, the Defense secretary would automatically be the most powerful member of the cabinet. But that fails to explain the changing fortunes of Caspar Weinberger, who was riding high in Reagan’s first year or two and then was relentlessly besieged in later years. In part Weinberger fell victim to the shifting public mood toward military spending and the scandalous costs of spare parts. More fundamentally, Congress lost faith in Weinberger’s credibility. And in the intangible chemistry of power, no quality matters more than trust.

Credibility—trust—is the most important key to survival and influence. It lies at the heart of political authority, for without credibility a political leader or a high government official cannot make a persuasive case to others. Loss of trust forced Richard Nixon from office; it fatally wounded Lyndon Johnson; it drove Gary Hart out of the 1988 presidential race. As Bryce Harlow, Eisenhower’s legislative aide, liked to say: “Integrity is power—I’d put integrity first.”
³

On a less exalted level, in an arena of constant controversy, the advocate who is too parochial, too partisan, or too political to be credible is not heard or heeded as time wears on. “This place depends very heavily on personal relationships and personal credibility—whether people trust and respect your analysis, your intellect, your fairness, and your word” is the way Senator Warren Rudman of New Hampshire put it.
⁴

Over the years, for example, presidential estimates on the economy have largely come to be discounted by both houses and parties in Congress, because they are so often politically biased in the president’s favor. Over time, such mistrust built up in Congress toward Weinberger, though Reagan relied on him, and even the Republican-led Senate voted 95–0 to impose Pentagon reforms that Weinberger opposed. Even more so, the late William Casey, as director of Central
Intelligence for six years, lost the trust of Congress and some colleagues in the administration—in a position where credibility is crucial.

From many, Casey got high marks for reviving CIA morale and for improving the quality of its intelligence analysis. Especially in the early years, Casey’s intelligence budgets grew significantly. But his penchant for aggressive covert military operations in Nicaragua, Angola, and elsewhere polarized Congress and fed running controversies with the Democratic-dominated House Intelligence Committee and with Senate Democrats such as Pat Moynihan of New York and moderate Senate Republicans such as Dave Durenburger of Minnesota. The congressional balance of support for the
contra
war in Nicaragua was always touch and go because of policy disagreements. But several key members of both houses blamed Casey personally for tipping the balance
against
the administration in 1984 and 1985 by showing arrogant disdain for Congress and by giving evasive, deceptive, and dishonest testimony to intelligence committees.

“Casey has a contempt for Congress,” Dave McCurdy, an influential, sometimes pvo-
contra
Democrat on the House Intelligence Committee, complained in 1985. “Casey’s contempt is not even disguised. He feels Congress is interfering in his activity. He says Congress can’t keep a secret [although] the intelligence committees have kept plenty of secrets. But then his own credibility is lacking with Congress. He either mumbles when he’s not telling the truth or he avoids answering questions.”
⁵

McCurdy vividly recalled one talk with Casey at CIA headquarters in 1983. “This is when he was telling us in committee that the
contra
aid was just for interdicting the arms flow from Nicaragua into El Salvador,” McCurdy told me. “So over breakfast, I asked him, ‘What’s our policy in Nicaragua?’ He said, ‘Whatever it takes.’ I said, ‘What does that mean—overthrowing the Sandinistas?’ And he said again, ‘Whatever it takes.’ So sometimes he slips and says what he really thinks. But after that, I knew I could not believe what he said in committee.”

Congressional mistrust of Casey reached a peak in early 1984 when Nicaraguan harbors were mined by Latin American commando teams trained and commanded by American CIA agents. Barry Goldwater, then Senate Intelligence Committee chairman, hotly protested that Casey had never informed his committee of plans for the harbor mining, though that was required by law. “I am pissed off,” Goldwater yelped. “Bill, this is no way to run a railroad, and I find myself in a hell of a quandry.… The President has asked us to back his foreign policy.
Bill, how can we back his foreign policy when we don’t know what the hell he is doing? Lebanon, yes, we all knew that he sent troops over there. But mine the harbors in Nicaragua? This is an act violating international law. It is an act of war. For the life of me, I don’t see how we are going to explain it.”
⁶

Eventually, Casey apologized to Goldwater. But privately, Goldwater fumed to other committee members that “Casey wouldn’t tell you if your coat was on fire.” Ultimately, the mining episode and Casey’s handling of it led to the cutoff of aid to the Nicaraguan
contras
in mid-1984. When nonlethal aid to the
contras
was renewed by Congress in 1985, the legislation passed only on condition that the CIA could not be the channel for the funding. Casey’s evasions had so undermined his credibility that some intelligence committees simply did not want to have to deal with him on
contra
aid.

Early on, the intelligence committees came to count on Casey’s deputy, Vice Admiral Bobby Inman, to level with them; Inman had a rock-solid reputation for integrity. He became known for a nervous habit of tugging at his socks when Casey was misleading congressional committees. Unable to look committee members in the eye at such moments, Inman would bend over and pull up his socks. Once, during a Senate intelligence hearing, Goldwater made fun of him.

“You’re a three-star admiral,” he chided Inman. “Can’t you afford socks that don’t fall down?”

“I can’t help it,” Inman replied. “It’s a nervous habit.”

The next time it happened, Goldwater picked up the clue, pressing Casey on the point at hand.

“Bill, can you be a bit more precise about that,” Goldwater asked. Casey added some more detail.

At other times, Democrats such as Joe Biden of Delaware and Patrick Leahy of Vermont said they had learned to watch Inman’s telltale habit for clues to the veracity of Casey’s testimony and would press Inman to say whether he agreed with what Casey was saying.
⁷

The mistrust in the Senate Intelligence Committee toward Casey was so imbedded that when Inman resigned in mid-1982, his successor, John McMahon, a career CIA official with a reputation for honesty, encountered deep suspicion of Casey among senators when he made his private courtesy calls on the Senate Intelligence Committee members before his confirmation hearing.

One Democratic Senator told McMahon he had only one question: “If Casey doesn’t tell us the truth, will you tell us the truth?”

It was an issue on many minds. “I’ll give you the same answer that
I’ve given to each of the other senators who asked me just one question, the same one as yours,” McMahon replied. “My answer is: Yes, I’ll tell you the truth.”

But mistrust finally caught up with another Casey deputy, William Gates, because some members of Congress suspected Casey and Gates of hiding the Iranian arms deal from Congress, despite Casey’s written promise to Goldwater not to play such games. President Reagan nominated Gates to succeed Casey, who was taken fatally ill in early 1987. So angered was the Senate Intelligence Committee by Casey’s evasions and Gates’s failure to block the Iranian-
contra
deals or inform Congress of them that the committee refused to confirm Gates as CIA director. Reagan had to pull back Gates’s name and get someone who had the trust of Congress, former FBI Director William Webster.

The most damning indictment of Casey came not from Congress but from within the Reagan administration, from Secretary of State George Shultz. Not only did Shultz accuse Casey of deception in dealing with other officials but of slanting intelligence to support policies that Casey favored, such as the Iranian arms deals.

“I hate to say it, but I believe that one of the reasons the president was given what I regard as wrong information about Iran and terrorism was that the agency or the people in the CIA were too involved in this [operation],” Shultz told Congress. “Long before this all emerged, I had come to have grave doubts about the objectivity and reliability of some of the intelligence I was getting.”
⁸

So devastating is that notion—of a CIA director slanting intelligence estimates to favor his pet policies—that Shultz and others advocated separating the function of intelligence estimates from covert operations and policy-making. For not only had Casey destroyed his own credibility in many circles of government, but he had so damaged the intelligence agency that he left others bent on reducing its power.

By contrast with Casey, much of the power of Paul Volcker, during his two terms as chairman of the Federal Reserve Board, derived from his personal credibility—with Congress and with the financial markets. By casting himself as the number-one economic policymaker fighting inflation, one who was unwilling to bow to politics, Volcker enlarged his power and influence. Not only his position as chairman of the Federal Reserve Board, also known as the “Fed,” but also widespread trust in Volcker’s integrity won him repeated selection as Washington’s “second most powerful official” behind the president, in annual reader polls by
US News & World Report
.

Volcker is a towering six-foot seven-and-one-half-inch, 245-pound economist and government banker with a good enough sense of humor to show up at a masquerade party dressed as the “jolly green giant” and with a keen enough conscience to quip that he fits H. L. Mencken’s description of bankers as people who have the “haunting fear that someone, somewhere may be happy.” He has habitually operated so secretively in the hidden pathways of international finance that a Japanese foreign minister once nicknamed him Ninja, or “the invisible warrior.” He would emerge periodically from the Fed’s shroud of secrecy to draw a huge crowd at congressional hearings, drawn by respect for Volcker’s views. He made his appearances in rumpled pin-striped suits, smoking cheap Antonio y Cleopatra cigars, blowing clouds of smoke, dropping ashes on his lapels and issuing intricate pronouncements on the economy and the monetary policy he was pursuing. Somehow, Volcker managed both to flatter the members of Congress by listening to them and getting them to accept him as an oracle.

John Kennedy was the first president to tap Volcker’s talents; he lured Volcker to the Treasury Department as an economist. Every president since then has given Volcker some important economic appointment. With inflation running at fifteen percent, Jimmy Carter summoned Volcker, then president of the New York Federal Reserve Bank, to make him the Fed chairman. Carter chose Volcker, a conservative Democrat, because he was the favorite of Wall Street, the business community, and the international financial markets—groups which had lost faith in Carter’s economic policies. Volcker warned Carter that to beat down inflation, he, Volcker, would have to tighten the money supply, a policy which could hurt Carter politically as interest rates rose. Carter gave Volcker the job anyway.

In October 1979 and then again in February 1980, Volcker persuaded the Fed’s open market committee to hold down the growth of the money supply. The economy contracted, shooting interest rates up even higher. In August 1980, Volcker tried to ease off but it was too late to help Carter before the election. With Reagan in the White House and inflation rising again, Volcker clamped down even harder on the money supply in 1981. As the prime interest rate soared over twenty percent and thousands of farmers and small businessmen went under for lack of credit, hostility toward Volcker became so great that he was given Secret Service protection. By February 1982,
The Tennessee Professional Builder
, a construction trade magazine, turned its cover into a wanted poster for Volcker and the six other Fed board members. The magazine charged the Fed with “premeditated and
coldblooded murder of millions of small businesses.” It was Volcker’s willingness to brook all this ill feeling, in order to cure the economy’s woes, that won him wide credibility later on. But in the short run, he was castigated.

As the economy plunged into its worst recession since the 1930s, Donald Regan, then Treasury secretary, repeatedly lashed out at Volcker’s tight-money policy. While many businessmen endorsed Volcker’s painful medicine, Senate Majority Leader Howard Baker and House Majority Leader Jim Wright talked of limiting the Fed’s power. But Volcker, seemingly unflappable, charged that the administration shared as much blame as the Fed for the skidding economy: Reagan’s tax cuts had run the deficit up above $100 billion, and
that
was keeping interest rates sky-high. Volcker refused to ease up on credit until August 1982, acting only after a major tax increase was enacted to combat the deficit. Then he shrewdly eased off restraints so that the country’s economic recovery was well under way before his four-year term ran out, in August 1983.

By then, Volcker’s credibility was running high. Inflation was heading down from twelve percent toward five percent and Volcker, Villain of Recession, had become Volcker, Conqueror of Inflation. Secretary Regan and administration conservatives still wanted to get rid of Volcker, but with a good-news economy and the financial markets singing Volcker’s praises, President Reagan kept him on for four more years. Subsequently, Volcker’s prestige vaulted to the point where he had much more clout and credibility with Congress on economic policy than the president did. In 1985, Volcker said the federal deficit had to be cut by $50 billion, setting the mark for Congress. The financial markets came to see him as their bulwark against a resurgence of inflation and the voice of sound economics amidst the erratic, often conflicting gyrations of administration policymakers. Volcker was “a giant among pygmies,” as one high Reagan aide put it.