A visit to Treasury Secretary James A. Baker III in the tastefully redecorated office that has served this nation's chief financial officer since 1910 reveals a man already comfortable with his new responsibilities.
In his career as a Texas lawyer and banker, as a junior Commerce Department official, and as a political adviser who wound up as Ronald Reagan's chief of staff the past four years, Baker earned a reputation as a "quick study."
He's proved the point again in mastering not only the jargon but much of the substance of domestic and international economics within a few weeks. On top of that, he's had to make basic decisions on what kind of tax-reform package he can sell on Capitol Hill for a president who's now made achievement of a top-to-bottom revision of the tax laws a No. 1 political priority.
Baker doesn't object to the term "pragmatic" to describe his approach, although he knows that some consider that a pejorative term. "I believe in making things work," he said. "I think the success of the president depends on his having a record of successes, not losses.
"I'm a Texas Republican, which makes me pretty damn conservative . . . and I've been bashed around a little by the far side of our party, but when you come from Texas and you're a Republican, you're pretty darn conservative. I ran for office down there statewide as attorney general, and anybody that wanted to really see where I was on issues should take a look at that race."
Applying Baker's "pragmatic" measure of success to tax reform, he starts from the premise that revision of the code represents good politics and good economics and, if passed, will contribute greatly to the present economic expansion. But he also knows that every lobbyist in town has his gun sights trained on tax reform, and that it will be a tough fight to get it all through. Some goals, it is clear, will have to be sacrificed, but a strong fight will be made for the bulk of the proposal.
One has to speculate on the precise changes Baker plans to make in the original Treasury reform proposal completed just before he and Donald Regan switched jobs. But just as the 1981 tax laws were overgenerous in providing accelerated depreciation allowances and investment tax credits for business, it's evident that business lobbies have been successful in selling the idea that Don Regan's reform proposal went too far.
Thus, the Baker Treasury team is looking at each element in the proposal to see what impact it might have on capital formation, incentives to invest, and especially the creation of small businesses. And in relation to the growing impact of triple-digit trade deficits on the economy, Baker -- as he told the House and Ways Committee -- feels Congress should avoid changes that would make American industry even less competitive than it is now.
Baker's political instincts tell him that progress is being made on tackling the budget deficit -- even though bickering continues between the administration and Congress on how big a cut should be made in the defense budget. "I'm talking about getting some serious deficit reduction accomplished this year," he told me.
Most observers agree that some compromise on the budget will be achieved, particularly if the president yields ground on the Pentagon budget. But whether or not an honest count will add up the savings (as the administration hoped) to $50 billion in the current fiscal year remains to be seen.
Baker will get another test in his new role -- and of his negotiating skills -- in a few days when he goes to Paris for pre-summit discussions of international issues with other finance ministers at the Organization for Economic Cooperation and Development.
Baker's analysis of the U.S. economy (which he is prepared to elaborate to the Europeans and Japanese in Paris) is that economic recovery is moving along well. The expansion can continue "apace" despite "the rather anemic first-quarter flash, which I tend to discount," he contends. Europeans are considerably less sure about that.
As pragmatists, Baker and Deputy Secretary Richard Darman have already conveyed to their European partners a willingness to be a touch more flexible on international economic affairs. But that doesn't mean that the Treasury is getting ready to accommodate the European belief that a new study of the international monetary system should be launched in an effort to knock the dollar off its high perch.
My sense of this after talking to both Baker and Darman is that their flexibility is a nuance that affects form more than substance. But even that is a welcome diplomatic difference for America's trading partners who, from time to time the past four years, have been angered by what they term an arrogant American approach.