The latest backstage episode roiling W. Michael Blumenthal's career as secretary of the treasury culminated when he sent the administration's new anti-inflation plan to President Carter in a sealed envelope, with severly limited distribution of copies.
So limited was that distribution that Robert S. Strauss, the president's chief anti-inflation jawboner, was excluded. It was no accident. Intending to protect himself from insinuations of Treasury leaks. Blumenthal instead escalated the recriminations surrounding the war against inflation.
That war is impossible enough without complications from a secretary of the teasury locked in combat with most of the president's men. Those complications reflect the tragedy of Mike Blumenthal. The millionaire corporation executive with the doctorate in economics has the desire, brains and ability to be a great secretary. But from the start he has been hobbled by soured personal relations with his colleagues.
It began in the summer, 1977 when Bert Lance's good old Georgia friends in the White House felt Blumenthal was firing at the embattled budget director's lifeboat. Since then, the White House staff and Blumenthal have been at odds on nearly every economic issue - including inflation.
Blumenthal resented being left in the dark last April when Strauss was named chief anti-inflation fighter. Other administration officials contend he was tardy in perceiving the inflationary surge. Blumenthal is dubious whether jawboning business and labor by Strauss and Barry Bosworth, director of the Council on Wage and Price Stability, really confronts inflation.
These tensions surfaced when proposed wage-price guideposts were described in the Sept. 8 Wall Street Journal. White House fingers immediately were pointed at the Treasury. Among Treasury officials, there were suspicions the White House was doing the leaking and then blaming Blumenthal for it.
Thus, self-protection was a motive a few days later when Blumenthal sent the guidelines plan in a sealed envelope to the president. Copies went to Vice President Mondale, chief economic adviser Charles Schultze, White House policy chief Stuart Eizenstat - and nobody else.
Incredibly, Strauss received no copy. Nor did Bosworth or Secretary of Labor Ray Marshall - the plan's two principal authors. Similarly excluded were all other Cabinet members. Blumenthal's letter to the president explained he wished to prevent further leaks - a wish labeled disingenuous by critics who claim the Treasury is the source of those leaks.
While at first symphathizing with Blumenthal's desire for security, Eizenstat later informed him that there simply had to be wider distribution. Additional copies were made for Strauss and others. But the reaction by officials excluded from Blumenthal's original distribution was deepened hostility. Schultze, perhaps the best-liked man within the administration, gently advised Blumenthal he should not treat his colleagues that way.
Inflation is not the only source of dispute. Administration officials complain Blumenthal did not press hard enough in supporting the energy bill. With good reason, Blumenthal feels Carter would have been spared humiliation on tax legislation had he followed the Treasury's advice. While rejecting the complaint of bankers that Blumenthal in 1977 "talked down the dollar," his colleagues feel he was late in recognizing the dollar crisis.
The difference on the dollar was pointed up shortly after the "sealed envelope" episode. Breakfasting with newsmen Sept. 18, BLumemthal was asked whether he thinks the dollar is undervalued in foreign money markets; he replied by saying he will not discuss currency transactions. That shocked other Carter officials, who considered it close to "talking down the dollar." Before the same breakfast group Sept. 19, Strauss also was asked whether he considers the dollar undervalued. His reply: "Yes".
But such differences ought to be easily bridged. Blumenthal's problem is that his flinty manner antagonizes colleagues as it does congressional tax-writing committees and business executives who should be his allies. "Mike had a hard life," an admiring Treasury associate told us," and he comes over in a hard manner that offends a lot of people."
The upshot is recurrent rumors that Blumenthal will be gone from the Treasury before the next snowfall. But it is clear the president has no intent to fire him, and friends say Blumenthal intends to stick it out. If so, it becomes imperative for the administration to utilize his intellect and character. Facing confrontation with inflation that dwarfs Mideast diplomacy in degree of difficulty, Carter needs his secretary of the treasury disentangled from backstage power struggles.