Insistent advice from Federal Reserve Board Chairman Alan Greenspan to President Clinton during the presidential transition and early in the new administration led Clinton to pursue lower deficits at the expense of the economic populism of his campaign, according to a new book.
The book, "The Agenda: Inside the Clinton White House" by Washington Post Assistant Managing Editor Bob Woodward, is an intimate look at how the new Democratic president and his stumbling, feuding team of advisers struggled to formulate and adopt an economic program during Clinton's first year in office.
It depicts a chaotic policymaking operation, crucial intercessions by Hillary Rodham Clinton and an active policy role played by four outside political advisers.
The four were given open access to the White House, which they used in part to criticize the economic team. They complained that Clinton's fall in popularity was a result of policies being promoted by the economic advisers -- or at least the way those policies were packaged for sale to the public. The two groups are described as virtually at war with each other.
The book describes Clinton temper tantrums, and it depicts him as frequently indecisive and reluctant to delegate. It portrays virtually every member of Clinton's inner circle, including Hillary Clinton, as critical of the president's management style.
On the vital economic front, Greenspan is described as a central player, albeit once removed from the inner circle. The book recounts what Woodward calls a crucial meeting between Clinton and Greenspan in Little Rock, Ark., in December 1992, the month before Clinton's inauguration.
During the 2 1/2-hour session, the Fed chairman told the president-elect that reducing the federal budget deficit was "essential" and that the economic recovery could fall on its face if policies credible to Wall Street, particularly to bond-traders, were not advanced. Greenspan, in later conversations with Treasury Secretary Lloyd Bentsen, put a number on what would be credible: cutting the deficit $140 billion or more by 1997.
By tradition and law, the Fed is an independent agency -- it sets monetary policy while the White House and Congress decide how much the government will spend, raise in taxes and borrow. It is customary for the president and the Fed chairman to hold periodic meetings. But in Woodward's recounting of their relationship, Greenspan, a Republican appointed by President Ronald Reagan and reappointed by President George Bush, comes across as a senior adviser, almost a teacher to Clinton. In what became a pattern, the Fed chairman made suggestions, Clinton acted on them, and Greenspan rewarded the action with approving words to Congress, or other public comments meant to signal his approval.
Greenspan outlined to Clinton an economic policy Woodward calls the "financial markets strategy," in which policy was constructed to send a message to Wall Street, which responded by driving down long-term interest rates that allowed Greenspan to keep short-term rates down as well. According to the theory, the economy would then improve, Clinton would have more to spend on favored domestic programs in later years and ultimately would be reelected.
But the theory, and the policy Clinton adopted, bore little resemblance to the economic program on which Clinton had campaigned. Clinton's "Putting People First" campaign banner stressed government "investment" in programs that would improve the lives of middle-class Americans such as job training, early education, government promotion of cutting-edge technology. A middle-class tax cut and health care for all Americans were additional sweeteners.
As events developed, Greenspan's economic scenario was not entirely accurate either. The bond market did react positively to Clinton's economic package initially, but then early this year nervousness about inflation began to push interest rates up again, and Greenspan's Fed raised its basic lending rate by 1.25 percent. Today long-term interest rates are nearly identical to what they were when Clinton took office. But the economy is stronger now than in January 1993 and has added 3 million jobs since then.
Woodward's 334-page book recounts the anguish and infighting produced by the transition from Clinton's winning campaign platform to a national economic policy. It attributes words and thoughts to participants in the debate, including both Clintons and virtually all of their top aides, without saying directly who provided these words to the author.
In an introduction Woodward writes that whenever he quotes someone, the quotation comes from "at least one participant, from memos, or from contemporaneous notes or diaries of a participant... ." It appears that Woodward has talked to all the principals in his narrative, including the Clintons and Greenspan. He writes that all his interviews were conducted on " 'deep background,' which means that I agreed not to identify these sources."
The Washington Post will publish four excerpts from "The Agenda" beginning Sunday. The book goes on sale next week.
Greenspan's advice to Clinton that a long-term deficit-reduction program was of paramount importance was backed not only by Bentsen, but also by Budget Director Leon E. Panetta and his deputy, Alice M. Rivlin, according to the book. The president's economic advisers, with his assent, quickly jettisoned the tax cut, delayed health care reform, and then added an energy tax and spending cuts.
Clinton's political team -- campaign advisers James Carville and Paul Begala, media adviser Mandy Grunwald and pollster Stan Greenberg -- are portrayed as horrified and disgusted with this effort to please the market. Carville is quoted as joking he used to want to die and come back in a second life as the pope or president, but now he just wanted to be the bond market because it seemed to run the world.
The four seem to have spent much of last year decrying what they saw as mismanagement at the White House and firing off memos arguing that the president and some of his aides had lost their souls to the deficit-cutters.
In one memorable scene depicted in the book, Grunwald told White House deputy economic adviser Gene Sperling -- who had helped formulate the campaign budget plan -- that his new emphasis on deficit-cutting was coming "dangerously close" to betraying the themes that had gotten Clinton elected. Later, Grunwald told others that Sperling's body had been snatched by Washington insiders and deficit hawks and that "hostile forces" were seizing control of Clinton's White House.
Even Clinton, while intellectually acquiescing in the devastation of his investment programs, raged nonetheless at how it happened. While the book depicts him as highly intelligent and energetic, it recounts several Clinton temper tantrums, quoting senior aide George Stephanopoulos as calling them "the wave" -- overpowering, prolonged rages that shocked outsiders and often seemed far out of proportion to their cause.
In one scene late in the campaign, a low-level aide had told an audience that Clinton did not want local voters at an event. The president, discovering this, angrily said of the culprit, "I want him dead, dead. I want him horsewhipped." He sent aides to Little Rock to find and fire the young man. After he cooled down, Clinton relented.
In another scene, with the campaign en route to Chicago, Clinton discovered his staff had told Mayor Richard M. Daley the candidate had no time for a requested meeting with him. A furious Clinton asked, "Who the hell could make such a dumb ... mistake?" and ranted on and on.
White House counselor David R. Gergen, witnessing the Clinton temper for the first time, is said to have been so alarmed that he raised it with Stephanopoulos, the frequent recipient of Clinton's verbal abuse. Stephanopoulos brushed it off as part of Clinton's personality.
A recurring theme in the book is Clinton's inability to terminate debate and make a decision and his reluctance to delegate. Amid the internal debate over the budget, Clinton is portrayed as holding repeated, seemingly endless meetings at which issues rarely were decided, and during which he frequently changed his mind. Once the budget was passed -- by one vote in the House and a tie-breaking Senate vote by Vice President Gore -- Bentsen is said to have taken Clinton aside and warned him he was mismanaging the presidency by trying to make every small decision and refusing to delegate.
Bentsen believed Clinton had a superior, inquisitive mind and was capable of genuine vision, Woodward reports. He compared Clinton to Jimmy Carter -- displaying admirable energy and intellect but getting bogged down in the range of opinion and debate he demanded inside his government. Clinton "could not contain his own doubts," Bentsen told associates. "The lapses of discipline and restraint" kept him from acting methodically as a president should.
Some of those concerns appeared to grow out of a White House with little management structure, in which the four political aides had unusual status. Outside the normal avenues, they sent anguished, internal memos into the White House warning of the near-collapse of the Clinton presidency and demanding meetings with the president and senior advisers.
One of the memos, written in July as the White House headed into the crucial month leading up to the budget vote, warned apocalyptically that the "current course, advanced by our economic team and congressional leaders, threatens to sink your popularity further and weaken your presidency." The memo, referring to extensive polling and focus groups, recommended dropping the gasoline tax, paring back the deficit-reduction package, and repackaging and reselling an economic program so it was not about taxes but about getting the nation's economic house in order.
The memo prompted Hillary Clinton to go to White House Chief of Staff Thomas F. "Mack" McLarty and insist it was "panic time," with no plan to sell the program they were about to send to Congress, no strategy and no decisions made on key elements. Hours of debate, presided over by the president, ensued among the political team and policy advisers. One of the advisers, congressional liaison director Howard Paster, is described as being in a "slow burn" over the series of meetings and arguments from the outside consultants.
Paster thought "it was outrageous the outside consultants were providing the president with major policy option papers in confidential memos" many senior staffers never saw, according to the book. The consultants got "valuable inside information" and "conflicts abounded." The consultants were trying to remake policy to respond to polls, a risky course, Paster felt, according to Woodward's account.
At one crucial meeting last July attended by the president and the First Lady, Hillary Clinton chastised both the economic and political teams for not serving Clinton well, for lacking organization and planning, for creating a "dysfunctional" White House. She complained they had allowed Clinton to appear to be a "mechanic-in-chief," erased his "moral voice" and changed his economic program from a "values document" to a bunch of numbers. "I want to see a plan" for selling the program, she demanded.
Most saw Hillary Clinton's denunciations in that meeting, which were followed by a burst of anger from Clinton himself at his staff, as an indictment of McLarty, whom the book portrays as an ineffective, sometimes bumbling character with no feel for politics and a fundamental misunderstanding of congressional relations.
Hillary Clinton's July critique, Woodward writes, amounted to a "scalding indictment of McLarty. At crucial moments like this, Hillary was often de facto chief of staff."
She insisted on the creation, with her assistance, of a campaign-like war room to run the budget operation. At the end of the budget battle, Paster resigned, citing a desire to return to private life. Woodward attributes the resignation to McLarty's failure to manage the White House. "Everyone and anyone freelanced," Paster is quoted as saying, and his job had been made impossible.
The book describes tension between Gergen, the Republican brought in by McLarty -- on the advice of Sen. David L. Boren (D-Okla.) -- and many of Clinton's advisers, such as Stephanopoulos and the outside political consultants. Gergen concluded that the campaign team was captive of a mentality that needed someone to be against, and he was that someone.
Carville and Begala argued against Gergen incessantly and Stephanopoulos is described as finding him "almost intolerable. Whenever Clinton did something Republican, Gergen proclaimed that the president was standing up for principle. Whenever Clinton did something Democratic, it was caving."