Power Game (12 page)

Nonetheless, his tight money, anti-inflation policies aggravated some administration policymakers who wanted lower interest rates and easier money, to make the economy grow faster. They were also bent on pushing down the value of the dollar to make the prices of American exports more competitive abroad, to curb the soaring American trade deficit. For a while, Volcker joined forces in this effort with Jim Baker, who had taken over as Treasury secretary. However, within a few months Baker wanted to push the dollar down faster and further than Volcker, who was worried that a plunging dollar would shoot up the cost of imports and unravel six years of work fighting inflation.

Secretly, the administration decided to overpower Volcker. With two new Reagan appointments to the Federal Reserve Board, the administration gained a 4–3 majority for the first time in early 1986. In a risky power play, Treasury Secretary Baker privately encouraged the four Reagan appointees to push for lower interest rates.
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On February 24, the “Reagan Four” revolted against Volcker by voting to cut the discount rate, the interest rate the Fed charges member banks. Volcker opposed this step unless Germany and Japan took similar action, fearing that the American step would cause foreign investors to withdraw funds from the United States and sharply weaken the dollar. The vote challenged Volcker’s authority as the Fed boss. It also put the administration’s credibility and judgment on the line, because the whole affair became public, raising questions about why the administration was undercutting its respected Fed chairman.

Volcker fought back with a power play of his own, tapping the reservoir of trust he had built up over the years. He went secretly to Secretary Baker and declared, one high official disclosed to me, that “if this was going to be the basis on which things were going to proceed, he might have to resign.” That rang an alarm bell. Baker backtracked, recognizing Volcker’s importance as a symbol of the American government’s credibility to the financial markets. Baker had wanted to pressure Volcker, not to provoke him. By afternoon, Baker sent word to Wayne Angell, a new, swing vote on the Fed Board, to reverse his position. The vote turned 4–3 in Volcker’s favor. Ten days later, some other countries lowered their rates as Volcker had wanted. Then he changed his position, so that American interest rates could come down too.

“When push came to shove, the administration knew that if it undercut Volcker, it would disrupt the financial markets and set off inflationary fears that could indirectly hurt the economic recovery,” Robert Hormats, vice president of Goldman Sachs investment banking house, commented to me at the time. “It is Volcker’s credibility which has given the markets confidence about the future. Volcker has convinced the financial markets that he is committed to fighting inflation even while he juices up the money supply to help keep the economic recovery going. The administration can’t afford to shake that confidence.”
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An even more flattering—and fairly typical—appraisal of Volcker’s political skill came from Jack Albertine, former executive director of the American Business Conference, an organization of high-growth companies.

“Paul Volcker is the best bureaucratic player in Washington since J. Edgar Hoover,” Albertine told me. “He has forced two presidents to appoint him, despite their reluctance. Jimmy Carter did not want him but had to take him because the economy and his government were collapsing in 1979. And Reagan went with Volcker because he needed him, too. Just as presidents feared J. Edgar Hoover because he had information on everyone, presidents worry about Volcker. If he goes, the bond market collapses. Volcker is a very smart banker and a very smart financial analyst. But that’s not why he’s successful. He’s successful because he’s a master politician and people believe in him.”
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In August 1987, Reagan let Volcker retire after eight years as Fed Chairman, evidently fearful that Volcker’s anti-inflation beliefs could produce tight-money policies in 1988 and dampen the American economy, hurting Republican chances in the 1988 elections. Word of Volcker’s departure caused such worries in the financial community that the markets dropped quickly. Only by choosing a successor of great credibility with the financial markets—conservative economist Alan Greenspan, who had been chairman of the Council of Economic Advisers to President Ford—did Reagan avoid more serious backlash from Volcker’s retirement.

Likability, Light Touch, and Surfing

Take credibility a step further and we are into the politics of personality—important in ways that the public often does not see at work in Washington. Sheer likability, or even a lively sense of humor, can be important ingredients of power, sometimes tipping the balance on substantive issues. Being able to entertain a banquet of several hundred political and business bigwigs with one-liners and anecdotes, can be a more important source of influence for Texas-born Washington lawyer Bob Strauss than mastering budget economics.

Barney Frank, a shrewd, tough-minded liberal Democratic congressman from outside Boston, contends that success in the Washington power game parallels high school politics. Congress has to operate informally, according to Frank, with the kinds of networks and personality politics that work in high school, because Congress has no clear power hierarchy. Leaders lack the corporate executive’s power to give commands or to hire and fire.

“In some ways, being in Congress is more like being in high school than anything I’ve done since high school—I mean the way the structure
is,” Frank asserts. “Nobody in the House of Representatives can give any other member an order. The speaker is more influential than a new Republican from Texas, but he can’t order anybody to do anything. Nobody can fire anybody. So what that means is that you become influential by persuading people, being likable, and having other people respect you but not resent you. That’s why it’s like high school.”
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Morris Udall, the popular Arizona congressman, once tested Frank’s notion; he learned the names of all new House members. “I carried a little book of names and pictures, and kept it by my bedside,” Udall said. “You go up to a guy who’s been here a year and call him by name and say, ‘I understand you represent Schenectady,’ or whatever, and I’d point out something interesting about each person. It pays off. If there’s a vote going on and he comes in here and it’s my bill, and otherwise the forces are equidistant, pushing him either way, he’d give you the benefit of the doubt because he knows you.”
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Of course, it takes more than that. You have to be genuinely popular, and Udall is enormously well liked, especially among younger liberals to whom he is a folk hero. Udall’s personal popularity foiled an effort in 1984 by Frank and other liberals to stop subsidizing public power in some western states. Udall was sponsoring a bill that would continue the old subsidized rates; Barbara Boxer, a young California liberal working with Frank, wanted power from hydroelectric projects such as the Hoover Dam to be priced at market rates.

“Mo’s a public power guy, a westerner, and it was his committee handling the bill,” Frank recalled. “The environmentalists were with us; the old system was wasting water. It was bad economics. I talked to some guys on the floor. I said, ‘Look, on all the merits of the bill you should be with us.’ And they said, ‘But how can we vote against Mo?’ It was a fairly close vote but we lost. We were opposing Mo Udall, and we love Mo. We lost because of Mo—a good example of personality affecting politics.”

More broadly, where Carter failed at likability, it was one secret of Reagan’s success. After disclosures of the Reagan administration’s secret arms deals with Iran in 1986, majorities of people registered their mistrust of Reagan. He was deeply wounded as president. Other presidents might have been destroyed, but likability helped save Reagan. Voters might mock his claims of ignorance, but they had trouble seeing him as an impeachable villain on a par with Richard Nixon at Watergate.

On lesser problems, Reagan has been rescued at times by the mass
appeal of his “aw, shucks” smile, the jaunty little toss of his head, his disarming ability to laugh at himself. Bryce Harlow compared Reagan to his former boss, Dwight Eisenhower.

“Eisenhower liked people so people liked Eisenhower,” Harlow reminisced. “Eisenhower trusted people; therefore, they trusted Eisenhower. Eisenhower could fall flat on his
tokhus
out in public, do something very wrong or very stupid, make a big goof, and the American people would rush forward as one and grab him and pick him up and dust him off and say, ‘Don’t bother at all about that. We like Ike.’ And on he’d go. Reagan gets the same treatment. Because he is a man with no internal hangups whatever. He likes people. He likes a charwoman quite as much as a queen. The people react to that.”
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Reagan has been helped by a couple of other important intangibles; one is grasping power lightly. Bryce Harlow remarked to me that one vital secret for presidents and other top officials is to avoid appearing too hungry to wield power. Both the press and the public, he said, mistrust politicians who lust too obviously for power, as, he pointed out, was the case with Johnson and Nixon. Jimmy Carter, too, created problems by being so eager to exercise power that he became enmeshed in too many fights on too many fronts. Certainly Secretary of State Alexander Haig and White House Chief of Staff Donald Regan suffered from power hunger, as well.

“Reagan is not a power-hungry guy,” suggested Lee Atwater, who helped run Reagan’s 1984 campaign and later became campaign manager for Vice President Bush. “Nixon was power hungry. Johnson was power hungry. Carter was power hungry. Look at the guys who were run out of town by the media—the guys who were obsessed with power. Reagan stays detached. He’s got a Zen approach to power: He doesn’t care about power for power’s sake alone. Eisenhower is the only other person who had the same detached way of holding power.”
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Finally, power depends on illusion, on theater, on the appearance of floating above the battle. One of Reagan’s trademarks has been staying out of petty battles. Like Tom Sawyer letting others whitewash Aunt Polly’s back fence, Reagan’s technique is to let others do battle and serve as his lightning rods—Secretary of State Shultz, Interior Secretary James Watt, congressional leaders, even Lieutenant Colonel Oliver North and Rear Admiral John Poindexter. Reagan holds himself aloof, waiting for the few big battles that he cares about and stands a strong chance of winning.

“Standing above the fray has its virtues,” Maryland’s Senator Charles McC. Mathias, Jr., observed near the end of his twenty-six
years in Congress. “Number one, you don’t wear out your welcome. And number two, you can judge what’s happening in the arena and make sure that you come out with the winners. In the final stages, you can arrange yourself so that you’re going to be on the winning side. Winning is very, very important. People love winners.”
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Reagan has been extremely skillful at appearing more of a winner than he actually has been. Year after year, Reagan submitted budgets that Congress rejected out of hand. By standing back, without fighting hard for his own budgets, Reagan let slip from view what amounted to major defeats. He waited until Congress produced its own budget and then blamed Congress for not meeting his targets. By that time, voters had forgotten that Reagan’s budget had died with barely a supporting vote; the same with tax reform. He launched the idea, then stood back ready to blame others if it failed. He waded in at crucial junctures, but only after congressional leaders had done the back-breaking work of preparing majorities. By holding back, Reagan husbanded his power and kept his image of success. His game style will be a model for future presidents.

Indeed, until the Iran-
contra
scandal broke at the end of 1986, Reagan’s presidency was an object lesson in cultivating the impression of power. Reagan is among the most skillful of chief executives at knowing how to cut his losses and move deftly to what has become an inevitable outcome and then claiming it as
his
victory. In 1982, for example, Reagan had opposed a tax increase, but both houses and both parties in Congress forced a tax increase on him. Ultimately, he embraced it and took credit for it, holding a victory celebration in the Rose Garden. In 1985, Reagan resisted sanctions against South Africa, but rather than being overriden if he vetoed a congressional sanctions bill, he instituted his own milder sanctions. In the Philippine policy switch, Reagan bowed to pressure and then baldly proclaimed victory for a new policy of opposing dictators of both right and left, as if he had intended that all along.

In short, power depends heavily on the illusion of power. Presidents—past, present, and future—have less power than the country images, but the successful ones convey the impression of power and get reputations as strong presidents by playing down their problems and trumpeting their few clear victories.

Fred Dutton, a White House adviser to President Kennedy and a keen student of politics ever since, made the point to me that there is far less purpose and grand design to what goes on inside the White
House than most people assume. That lesson from Kennedy’s time is still valid today, and will be in the future.

“Washington isn’t all that thought out,” Dutton remarked. “So much of it is improvisation. Too much rationality and planning can be attributed to it. Much of it is trying something, taking a pratfall, and then looking either bad or good when you do. The really shrewd players have their eyes out for the big chance. There are always a lot of cerebral people writing lots of memos to presidents or senators:
Do This, Do That
. But the constant activist cannot bring high drama to events. The constant activist loses perspective. I’ve got to give Reagan credit for having certain values to guide him. But like the others, he seizes opportunities. And look at the things he lets go by. You’ve got to do that. You’ve got to float above events.”
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