A Strong Push From Backstage

"Dick once told me that our president is a 'big-government conservative,' " said former senator Phil Gramm (R-Tex.), in a recollection disputed by Cheney's office. "Now, Dick keeps his opinions to himself whenever he disagrees with the administration, as he should. But I believe that Dick is a small-government conservative."

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'A Spine Quotient'

When Sen. James M. Jeffords (Vt.) threatened to bolt the GOP during negotiations over the president's 2001 tax package, senior Bush advisers and Republican senators were deeply split over whether to buy him off. It was a momentous decision -- a Jeffords defection would toss the Senate to Democratic control for the first time since 1994.

But in a contentious internal debate, the vice president forcefully argued that the administration should not capitulate by giving Jeffords the billions of dollars in special-education funding he sought, recalled O'Keefe, at the time deputy director of the Office of Management and Budget.

O'Keefe said Cheney argued that the White House should not sacrifice conservative principle in the face of Jeffords's threat by scaling back tax cuts dear to the GOP base in order to create an expensive new mandate. Gramm, who confirmed that account, said there would have been no end to such demands if the president had caved.

"The principle was 'Hell, we can't go around funding programs based on what some individual might do,' " said Gramm, who worked closely with Cheney during the negotiations.

By the end of the critical meeting, O'Keefe said, the divided group presented Cheney's view as the consensus recommendation to the president. Bush's $1.35 trillion tax cut passed, and Jeffords defected as promised.

Such stands by Cheney were not uncommon, said Bolten, the White House chief of staff. Cheney often stepped in if he sensed the administration was softening its commitment to Republican "first principles," Bolten said, and he was "a pretty vigorous voice for holding the line on spending and for holding the line on tax cuts." Longtime Cheney adviser Mary Matalin said the vice president brings a "spine quotient" to internal debates.

Cheney's power derives in part from meticulous preparation paired with a strong will to prevail. He knows what he wants, and as one rival put it, Cheney and his staff are "just ferocious negotiators."

The vice president regularly convenes a kitchen cabinet of diverse outside economic experts, often before the president is about to make a major decision. Members of the group describe a man who enjoys the nitty-gritty of economics, poring over charts of obscure data such as freight-car loadings and quizzing experts on the subtle ways the government can influence the economy.

"With the president it was much shorter. It's 'Marty, what do you think of where we stand today?' " said Martin Feldstein, a Harvard economics professor and the president and chief executive of the National Bureau of Economic Research. "It's also a less technical presentation."

R. Glenn Hubbard, Bush's former chairman of the Council of Economic Advisers, said of Cheney: "I'd have conversations with him that were at a level of detail that those with the president were not."

In the weeks following the attacks of Sept. 11, 2001, as the White House was putting together an economic recovery package, Cheney gathered his kitchen cabinet, frequently interrupting the experts as he furiously jotted notes on a stack of cards embossed with the vice presidential seal. What kind of tax cuts are needed? Cheney wanted to know. How big?

A few days later, Cheney was "on fire" when he met with the president, Cheney's chief of staff, I. Lewis "Scooter" Libby, later told Conda. Cheney had decided that the best way to shake business leaders out of their post-attack paralysis was to let them immediately write off the cost of new plants and equipment. After hearing him out, Bush made Cheney's idea a centerpiece of his plan.

In previous administrations, such initiatives typically have been generated by the Treasury Department or the White House economic team. But Cheney has made the vice president's office a hub of tax policy, enabled by the fact that "this president appears to want to have Treasury take the orders from the White House," said John H. Makin, an economist and an informal Cheney adviser.

All this put Cheney in a position to outflank some of Bush's top advisers, and even his old friend Greenspan, to shape the administration's signature tax package: the 2003 cuts that Cheney sold at the Greenbrier resort in West Virginia.

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'The President Made the Call'

As far as Greenspan knew, the vice president agreed with him on the danger of the tax package Bush was contemplating. The Federal Reserve chairman worried that the sheer size of the cuts would drown the federal budget in red ink.

Cheney and Greenspan met regularly, far more often than the Fed chief met with Bush, according to interviews and Greenspan's calendar. And when the president did meet with Greenspan, Cheney was nearly always in the room.

The vice president and the Fed chairman had formed a close bond when both served in the Ford administration. The Fed chief saw the vice president as a conduit to a president he did not know nearly as well, someone he could trust to fairly present his views to Bush.

So Greenspan sent Cheney a study by one of the central bank's senior economists showing that big deficits lead to higher long-term interest rates, according to a person with firsthand knowledge. Higher rates, Greenspan believed, would wipe out any short-term benefit from a tax cut.

In subsequent meetings with the Fed chief, Cheney never took issue with the study. What Greenspan did not know was that, behind the scenes, the vice president took steps to undermine an argument that could threaten the big tax cut he favored. Conda, the vice president's aide, said Cheney asked him to critique the study. Conda attached his own memo arguing that the Fed's analytical model was flawed. He said "it wasn't my job to know" what Cheney did with the paperwork, but noted that Greenspan's study did not gain traction inside the White House.

Aside from Greenspan, Cheney had faced down opposition from many of the administration's senior economic voices, including Daniels, Treasury Secretary Paul H. O'Neill and Commerce Secretary Donald L. Evans. They believed that the economy was recovering and that a deep tax cut wasn't needed. Daniels said he worried that it would undermine the GOP message of fiscal discipline.

Cheney, however, pressed his argument that the economy needed a jump-start. He wanted not only to reduce the tax on dividends but also to cut the capital gains tax and accelerate income tax breaks for top earners, according to Daniels, Conda, Hubbard and others. Conda said Cheney subscribed to the view of supply-side economists that when government cuts taxes the economy grows, generating additional tax revenue that largely offsets the losses from lower tax rates.

The standoff came to a head in late November 2002, during a meeting in the Roosevelt Room.

O'Neill continued to oppose the tax cut on grounds that the government was moving toward "fiscal crisis," irritating Cheney. "The vice president really got a sense of where O'Neill was coming from and surmised it was a problem," Conda said. The following month, Cheney would demand O'Neill's resignation.

Bush sided with Cheney on the dividends tax but thought it would be better to eliminate it altogether. The president was cooler on the capital gains tax, according to Conda and others. And having campaigned on a platform of compassionate conservatism, he expressed doubts about giving another income tax break to the wealthiest Americans, particularly because they would benefit the most from the elimination of the dividends tax, Hubbard said.

But by the time Bush publicly announced his tax package on Jan. 7, 2003, Cheney lost on only one major count. The president included no reduction in the tax on capital gains.

"There was a question of priorities and how to fit things in," said Karl Rove, Bush's chief political adviser. "And ultimately the president made the call."

It was then that Cheney doubled back at the Greenbrier retreat.

"We were deciding how to proceed," recalled Rep. Adam H. Putnam (Fla.), now the third-ranking Republican in the House. "Are we going to put all our eggs in the dividends basket, or are we going to move on capital gains? As I recall, he was a very strong advocate on both counts, but particularly capital gains in terms of its potential to unleash the economy."

In the end, the House decided against eliminating the dividends tax cut, as Bush had wanted, choosing only to reduce the rate to make room for a capital gains cut.

Bill Thomas, the California Republican who guided the final bill to passage as chairman of the House tax-writing committee, said he and Cheney go way back and "use each other in the best sense," with the two men deciding which one will make a proposal and which will speak up in its support.

In the case of the capital gains proposal, Cheney pitched it to the Greenbrier gathering. Thomas pitched it to the White House, and he credited the vice president with persuading Bush to go along. "That," Thomas said, "is why the administration changed its position."

The vote in the Senate was 51 to 50. Cheney, exercising his only formal power under the Constitution, cast the tie-breaking vote.

Staff researcher Julie Tate contributed to this report.