Power Game (63 page)

White House strategists were worried that events were getting out of control. According to their daily tabulation of television news coverage, Central America was getting more airtime than the Reagan economic program. Haig was trampling all over the White House agenda. Political advisers Meese, Baker, Deaver, and Darman feared Haig might draw Reagan into repeating Carter’s ill-fated mistake in 1977 of fighting Congress prematurely on a secondary issue. Newspaper polls showed rising public anxiety about Central America. Baker, eager for ammunition that could persuade Reagan to call off Haig, secretly asked Reagan pollster Richard Wirthlin to do a rush poll of public reactions to Haig’s talk against Cuba. “Dick,” Baker told Wirthlin, “Al Haig is talking about throwing an embargo around Cuba. Let’s get a study in the field so we can have something to present to the president.”

“At the time, we were taking surveys week to week and we saw some slippage in Reagan’s popularity,” David Gergen recalled. “Our domestic stuff had dominated the news play in the first weeks, and Reagan’s polls went up. Then we got the Salvadoran news, and Reagan’s polls fell because it brought up the trigger-happy stuff [Democratic charges in 1980 that Reagan was trigger happy]. People got afraid of what Reagan would do. We were losing control of the agenda. We had a different game we wanted to play. Important as Central America was,
it diverted attention from our top priority, which was economic recovery, which we wanted to be the only priority. Haig didn’t understand that. We decided we had to cut off his story.”
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Wirthlin’s poll, conducted March 6–8, showed the public reacting negatively to Haig’s bellicose talk and opposed to embargos and military action against Cuba. One Reagan intimate told me Baker took the poll results to the president to persuade him that Haig’s tactics were hurting Reagan politically; the president got the message. According to one White House account, Baker telephoned Haig in late March and told him the president wanted him “to knock it off.” Haig complied, only to kick up new troubles with the White House over who should manage foreign-policy crises. Control of Reagan’s agenda continued to slip away, until the president was shot on March 30. The outpouring of public sympathy gave Reagan a boost in popularity. It also halted the drift in policy, for it gave Reagan a new platform to turn public attention back to his economic agenda. Reagan did that, after his hospital recovery, with a moving appearance before a joint session of Congress on April 28. Luck—bad luck turned to good fortune—as well as a superb political performance, rescued Reagan’s wayward game plan.

Reagan’s agenda was also kept on track—and given life—by David Stockman. No single figure, other than Reagan, was more important to Reagan’s early success than Stockman, the cocky, zealous, young budget director whose oversized glasses gave him an owlish look. Without Stockman, the supply-side superachiever, Reagan would have been unable to fashion his first budget proposals and make his stunning start. Reagan had a vision; Stockman had a strategy.

Stockman’s operation is a lesson in early game planning. No one else in the administration understood enough budget economics, enough of the operation of Congress, enough of the existing programs and policies to put a budget package together rapidly. None of the old Reagan crowd had the experience or the intellect to draft the Reagan blueprint, to convert Reagan’s glowing visions into concrete proposals. It took enormous energy, knowledge, and intellect to impose order on the contending Reaganite factions and the sprawling complexities of the federal budget. The president had neither the driving intelligence nor the inclination to impose such order; nor did others in his inner circle. The intellectual leadership was turned over to Stockman, and even he, as he later admitted, was way over his head.

Stockman got a jump on everyone else because he had his own agenda and his own legislative blueprint already prepared, and he
understood the real levers of power. Two terms as a Michigan congressman plus a network of key Republican and Democratic connections had taught Stockman how to play the power game. Through Jack Kemp, Stockman gained entrée to the Reagan circle as one of the drafters of the 1980 Republican economic platform. Because Stockman had once worked for John Anderson, he was tapped as Reagan’s sparring partner to rehearse for the presidential debates with Anderson, the independent candidate, and President Carter. Stockman’s impersonations impressed Reagan, and when it came time to form the Reagan cabinet, Kemp and Senator Paul Laxalt pushed Stockman for a top post. Stockman was offered the job of Energy secretary, but he knew enough about how power works in Washington to turn down a cabinet post and ask for another job, theoretically more junior. Stockman wanted to be budget director, or formally, director of the Office of Management and Budget (OMB) because he understood how he could make that more powerful than a cabinet position.

The Reagan Californians did not understand the importance of the budget post. In those early, heady days, they were preoccupied with settling prominent cabinet positions such as State, Defense, Treasury, and Justice. Stockman had no real rivals for OMB, and he got the job easily. Edwin Meese obviously expected to be making policy through his cabinet councils and assumed that the budget would flow from his policy outline. Like many others, he did not understand the power of the technical expertise lodged in the budget bureau. “Meese had a funny attitude,” Stockman told me. “He thought that the Office of Management and Budget was where they did the technical auditing work to see if the motor pool had too many cars in it or something like that. They didn’t understand that
OMB is really the policy switchboard of the executive branch
[emphasis added].”
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Stockman was enormously ambitious for real power. Political instinct and knowledge of the power game told him that Reagan’s plans for sweeping changes in government and the tax system would inevitably make budget economics the heart of the Reagan program. The budget would drive policy, not vice versa. That would mean centralized authority for the budget director over cabinet members. Already, OMB had become the choke point for most cabinet officers. It reviewed and cut their budgets, approved their legislative proposals, the regulations they wanted to issue, and all their major policy testimony to Congress. In short, their policies had to clear through OMB. So long as Stockman had backing at the White House—and he was quick to forge a working alliance with Baker, Darman, and cabinet secretary Craig Fuller—he had wide power.

Moreover, Stockman understood that to move rapidly in those first weeks would require a body of experts available only in OMB. For the apparatus of OMB is the second most powerful staff in Washington, almost rivaling the top White House staff. Inevitably, President Reagan and his entourage had to lean on OMB for the substance of the budget. Meese’s White House domestic staff was far too small and too green in early 1981 to draft a budget or to keep pace with the trained civil servants at OMB. Its staff of six hundred included some of the very best career professionals in government, experts on every field.

“What Stockman did would not have been possible had OMB not had the kind of staff capability to turn out, within a thirty-day period, an enormous amount of collected historical wisdom on where you cut,” Stuart Eizenstat, Carter’s highly regarded domestic policy chief, remarked to me. “The fact is OMB enabled President Reagan to hit the ground running. It enabled him to get his package up to Congress very early, without delay, before opposition could form, both within the executive branch and in the Congress. That to me was the quintessential event in the entire administration—because had Reagan gotten off to a slow start on the budget cuts, had he permitted opposition to grow within the executive branch, and had opposition had a chance to form on Capitol Hill, you might have seen a very different situation with respect to the success of the budget cuts.”
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Stockman’s ace in the hole was the game plan he had developed and already market-tested in Congress. In March 1980, Stockman and Phil Gramm, then a radically conservative Democratic congressman from Texas, had drafted their own budget for fiscal year 1981, in what amounted to a dry run of the Reagan proposals.

The Gramm-Stockman budget gave Reagan’s practical political agenda a head start. Their bill embraced both Kemp’s ten-percent cut in individual income tax rates and a depreciation-based tax cut for business. The big budget cuts that Stockman would fashion for Reagan in 1981 were all there: multibillion-dollar cuts in the public service jobs program, food stamps, housing and energy subsidies to the poor, revenue sharing with state and local governments The Gramm-Stockman bill also capped Medicaid reimbursement to the states, restricted longer term unemployment benefits, eliminated student and minimum benefits from Social Security, and cut mass transit subsidies. The Gramm-Stockman bill did not pass, but it got 170 votes—140 Republicans and thirty Democrats—a very solid core for Reagan’s own budget coalition in 1981. That was a critical prelude for Reagan’s agenda.
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Most importantly, Stockman’s pretested budget gave Reagan a chance to move with incredible speed to impose retroactive cuts on
Carter’s 1981 budget and to revamp Carter’s 1982 budget. To Reagan’s top advisers, speed was crucial, but it was an abstraction; to Stockman, speed meant concrete timetables and proposals. To feed the political stampede, Stockman and Kemp had written an alarmist memo warning that the nation, then in mild recession, faced an “economic Dunkirk.” Once inside the Reagan team, Stockman spurred it on.

Stockman was named budget director on December 11, 1980, and impatiently dismissed Meese’s preliminary budget work as inadequate. (Stockman confessed he was stunned by the “low level of fiscal literacy” of Reagan, Bush, Meese, and others.) Five days later, he told Baker that time was already running out because Reagan would have to put his stamp on the 1982 budget by the first week of February, two weeks after inauguration. “Let me game it out for you,” Stockman advised. “By January 7, we need to have a rough idea what the plan looks like: budget, tax, and some other issues.… We’ve got to get Meese committed to it. We’ve got to get Reagan committed to it.”
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Fixing the Action Sequence

Ideally, a president’s legislative agenda must be plotted like a military campaign. For all the seeming unanimity in Reagan’s top echelon, the commander and his key lieutenants could not agree on what to assault first: tax cuts or budget cuts. The action sequence was crucial to Reagan’s political success. Reagan and his California advisers leaned toward starting with tax cuts. Stockman, appalled by the worsening economy, tried to stun them into starting with massive budget cuts. Since September, he told them at a meeting in early January, the likely deficit for Carter’s departing 1981 budget had shot up from $20 billion to $58 billion, and by 1984, it would take $75 billion in cuts (later $130 billion) to produce the balanced budget Reagan had promised. Reagan missed Stockman’s message; he suspected political sabotage.
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Baker and Wirthlin raised warning flags about the dangers of promising too much. They pushed for a combination of budget and tax cuts, with Baker arguing that it would be politically easier to take budget cuts ahead of tax cuts; Wirthlin, an economist by trade, worried that a tax cut first would widen the deficit. Both disputed, as impossibly optimistic, estimates by Stockman and Martin Anderson, Meese’s aide, that Reagan policies would bring a five-percent economic growth rate.

Their warnings were on the mark but brushed aside by Reagan, who liked the sunny optimism of five-percent growth.

“All right, we’ve heard this argument,” he said, looking around the
table. “Does anyone else feel strongly about it?” No one else spoke up. “Well,” the president-elect concluded, “we’re going to go for tax cuts, first and foremost.”
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As often happens with presidents, that decision did not stick. Pressures were building on Wall Street for postponing the tax cut for six months and for attacking the deficit first. Those sentiments were echoed by leading Senate Republicans such as Budget Committee Chairman Pete Domenici, Finance Committee Chairman Robert Dole, and Majority Leader Howard Baker. The legislative calendar, especially an early vote to increase the national debt, seemed to dictate budget cuts first. Because the White House needed the Senate leaders to put Reagan’s proposals on the legislative calendar, their voices had weight at the White House. They reinforced Stockman’s arguments and a consensus formed at the White House.

“A plan to permanently reduce the size of the federal budget must be launched within two or three weeks of the Inauguration and must be the
lead element
[emphasis added] in the total economic package,” Wirthlin wrote in the initial action plan for Reagan. “Professional economic opinion and Wall Street sentiment could run against a major tax cut in the absence of real spending restraint.” Moreover, Wirthlin told Reagan, opinion polling showed that the public “much preferred” cutting federal spending to cutting taxes. There is “strong” fear, he added, that tax cuts without “significant” budget cuts “will accelerate the rate of inflation.”
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Ramming the Stockman budget cuts through the cabinet caused grumbling but was relatively easy because none of the new cabinet officers knew his department’s programs well enough to defend them against Stockman, and only the Pentagon was exempt from Reagan’s guillotine. The cabinet’s period of innocence was an ideal moment for Stockman to strike, forcing cabinet secretaries to swallow $40 billion in cuts that Reagan sanctioned for his game plan.

Selling such a package to the nation and to the Washington community takes place on several levels. As a pair of supersalesmen, Reagan and Stockman were irresistible, working in tandem. On television and addressing joint sessions of Congress, Reagan gave the broad sweep and created an air of economic crisis that impelled fast action. Stockman, the wunderkind numbers cruncher, was the vital persuader of senators, congressmen, staff aides, and journalists who fancied themselves as budget specialists. He bedazzled both allies and adversaries with the razzle-dazzle of budget arithmetic. He gave rationales for Reagan’s visions and protected Reagan and his agenda from the flak of technical
arguments. Like a child prodigy chess champion playing fifty matches at once, Stockman answered every query, parried every countermove, checked every challenge. Congress was mesmerized. Even Speaker Tip O’Neill spoke in wonder of the economic whiz kid, a farm boy not yet nine years out of Michigan State University with a slide rule for a brain.