CHAPTER FIVE

White House Life

WORKING IN THE WHITE HOUSE sometimes felt surreal. With the exception of the Oval Office and a few other key spaces, such as the Vice President’s office and the Cabinet Room, much of the West Wing was cramped and shabby. Our NEC offices on the second floor were nondescript, lit with fluorescent lights and filled with ragtag office furniture that looked secondhand. But the people who met in the West Wing were the key officials of the U.S. government. I’d be having a normal discussion with some people around a conference table and it would strike me that this nice man, Warren Christopher, bore the title Secretary of State; that fellow whom I’d known for years, Lloyd Bentsen, was Secretary of the Treasury; and that bright, argumentative fellow over there was the Vice President. And what we were discussing didn’t affect just my company, but the fate of the country and the world. Every so often I’d stop and think to myself, My God, I’m sitting in the Oval Office having an argument with this guy I know, Bill Clinton, who is President of the United States.

After a few seconds, though, that slightly otherworldly sensation would pass and I’d return to the discussion as if these people didn’t have those titles. Even though the stakes were enormous and I cared greatly about the issues, I generally went to work and did my job, as I would have anyplace else. But then I’d pass by South African President Nelson Mandela in the hallway or see PLO Chairman Yasser Arafat shake hands with Israeli Prime Minister Yitzhak Rabin and be struck all over again. Then Gene Sperling would wander in with a decision memo and the spell would be broken.

In an environment where many tended to push themselves forward, my natural inclination was to stand back a bit. Erskine Bowles, who joined the White House as a deputy chief of staff in 1994 and tended to take an anthropological view, told me that what happened inside the Oval Office was sort of a rugby scrum to get up next to the President. Even in the smaller meeting in the chief of staff’s office that followed the large morning staff meeting in the Roosevelt Room, some people would cluster as close to the head of the table as possible. I always liked to be away from the center, whether in the Oval Office or the chief of staff’s office, where my regular seat became the foot of the table. That little bit of physical distance felt more comfortable to me, and let me read the room and comment from a perspective ever so slightly removed. I didn’t worry about being overlooked. No matter how far away you were sitting or standing, you could always just say, “Mr. President, I think this, that, or the other.”

This distance afforded a clearer view of Clinton’s relations with others inside and outside the administration. Evident to me from the first was Clinton’s unusual skill as a listener. He could relate to someone else’s point of view in a way that made that person feel not just heard but understood. Listening in that way was more flattering than ordinary flattery; here was the President of the United States, and he really cared about what you had to say. And this was not calculated or phony. Clinton was like Gus Levy with clients at Goldman Sachs, able to make people feel like the center of his world because they were the center of his world while he engaged with them. The President’s charm, like Gus’s, lay in the fact that he meant it. Moreover, Clinton processed what he heard. He would make comments referring to what someone had told him days or weeks before. And his views reflected his considered reactions.

This is part of what could captivate people about Bill Clinton but could also lead to a certain amount of misunderstanding. Clinton listened so sympathetically that people who were unaccustomed to him often took it as duplicitous when he later came out against their positions, as with Newt Gingrich in the crucial budget negotiations of 1995, when the Speaker mistook Clinton’s comprehension and engagement for assent. By that time, I had seen enough that I could tell where Clinton really was. Sitting in White House meetings over the years, I would say to myself or to someone next to me, “That person is going to think Clinton is leaning toward his position. But he’s going to get a big surprise, because Clinton doesn’t agree at all—that’s just how he listens.”

From his own staff, the President expected candor, and my approach was to tell him what was on my mind—though in some cases diplomatically. Clinton specifically told us during our Little Rock transition meeting, “If you all don’t tell me what you really think, I’m dead.”

That comment reminded me of what John Weinberg had once said to me at Goldman Sachs: as a CEO, you have a special place in the minds of your subordinates. People in your own organization have a natural tendency to pull their punches around you, to soften the bad news and try to tell you what they think you want to hear. Because you’re a bit of a king, you can easily get an unrealistic sense of the wisdom of your own views and your merits as a leader. (Walter Mondale once told me that when he was Vice President and then his party’s presidential nominee, everyone laughed uproariously at his jokes. Then he lost the election and realized he wasn’t so funny after all.) To keep a realistic sense of yourself and to make well-informed decisions, you have to go out of your way to make people feel comfortable disagreeing with you.

A President faces these problems in the extreme. But Clinton meant what he said in Little Rock and worked to draw out disagreement with his own views. And contrary to what I’ve heard and read about some administrations, the people around Clinton generally said what they thought. The instinct to pull punches was often present, but most of us resisted it most of the time—although some more than others.

People outside the administration were a different matter. From time to time, business leaders would meet with me and express strong criticism of one or more of the President’s positions—and on some issues (tort reform, for example) I agreed with them. But when the same people met with Clinton in the Roosevelt Room or in the dining room in the residence, they often either muted their opposition or even sounded supportive of those policies. Then, when I’d later tell Clinton that the business community disagreed with those positions, he’d respond, “Bob, what are you talking about? So-and-so was here last week, and he didn’t say that.” I always encouraged those who met with him to be frank, and he encouraged candor as well. But frequently that didn’t work.

Disagreeing with the President may also have been harder for people who joined the administration later. Some of us who had known him as governor of Arkansas remained comfortable approaching him in a certain way. But a President acquires an aura that can inhibit challenge, and some of those who signed on in later years seemed more affected by it. Midway through the second term, when I directly and strongly expressed disagreement with the President in a Cabinet Room meeting over his reservations about applying conditionality to debt relief in Africa, I caught a look of sharp surprise on the faces of some officials who had little contact with him.

One of Clinton’s characteristics that could be upsetting to people who weren’t used to him was his temper. Once when I was in the Oval Office, the President blew up at Roger Altman over a health care issue. A few minutes later, the two of them were talking as calmly as ever. People who worked in the White House soon learned that Clinton sometimes vented his frustration in an explosive way, but that those outbursts didn’t mean much. His anger was like a tropical storm. It blew up suddenly and then went away.

Despite working closely with Clinton for six and a half years, I never developed the kind of close personal relationship with him that others in the administration such as Mickey Kantor, Ron Brown, Vernon Jordan, and Erskine Bowles had. We had an easy, informal working relationship, but I was never somebody the President called late at night or palled around with on the golf course. This measure of personal distance never interfered with our working relationship and, in Judy’s view, might even have been helpful in some ways.

   

WORKING IN THE White House was preoccupying like nothing else I’d ever done before, in part because it was always with me. The issues I was dealing with were often on the nightly news and in the newspapers. While at Goldman Sachs, I hadn’t exactly left my cares at the office when I went home at the end of the day, but I hadn’t had to live with the ever-present public focus and spotlight of Washington.

And that spotlight has a strong tendency to be critical. On any issue, partisan opponents might be trying to make my job more difficult, in part through ad hominem attacks. On top of this, the media tended to be critical and emphasize conflict. Tony Lake, President Clinton’s first-term national security advisor, who had served in two prior administrations, told a group of us early in the first term to expect the press to write stories—whether well grounded or not—about who was up and who was down, which could create divisions among us. Tony said we had to keep working together and not to let those stories get to us.

But that was sometimes more easily said than done. Howard Paster, the administration’s highly effective first congressional liaison, made a very shrewd point after he was criticized in a few stories. Recalling Tony’s comment, I told Howard that such stories come and go and that he shouldn’t be concerned. But Howard, who had been a very successful lobbyist in Washington for many years, said that once the press views you in a certain way, that view tends to stick. Being human, none of us was able to put media criticism completely out of mind, but different people reacted to this media environment in different ways. Some became highly focused on how they were perceived and seemed largely driven by a focus on perception—which, ironically, seldom worked. Others were better at putting issues of perception into perspective and concentrating on their substantive and political objectives. I was generally fortunate in my press coverage at the NEC, which may have made it easier to absorb the criticism we did get.

Washington’s critical spotlight added to the stress of an inherently uncertain White House role. At Goldman Sachs, Citigroup, or any other company, you have a job and a role. Whatever your title may be, whether CEO or clerk/typist, you have an idea where you fit into the organization. Positions may have some fluidity, but they also have fairly clear definitions. For someone working in a senior position at the White House or one of the cabinet agencies, by contrast, it was never entirely clear what your role—or anybody else’s—was.

On a daily basis, this uncertainty could manifest itself in the question of what meetings you were going to be in. Struggles about who would be in the room were frequent and sometimes ferocious. I once called Sandy Berger, who succeeded Tony as national security advisor, about a meeting I hadn’t been invited to. Sandy, who sounded stressed, said it was fine for me to come. Then he sighed and said that he sometimes thought his main job was deciding who got into meetings.

The larger uncertainties related to what effect you would have in your job. An administration is a President-centered universe; your title didn’t define your influence on the President’s decisions—and that influence could change at any time. That ambiguous and unstable structure may help explain the constant, intense jockeying that seems endemic to most administrations (though ours probably had less than most). Everyone felt it, although people reacted in different ways. For me, an additional issue was whether people native to the political world would think that I “got it.” The President said to me shortly before his inauguration that the health care task force was going to operate under Hillary and Ira Magaziner. “You’re going to be the strongest person in the White House, and you’ve got to help me make this thing with Ira work,” Clinton said. And I thought to myself, You know, that’s a ridiculous thing to say. I don’t know about the White House; I don’t know about Washington; I don’t know how to do any of this stuff. I’m just hoping to be relevant and have an impact.

I was not a fan of efforts at formalized camaraderie within the administration. In the middle of our putting together the economic plan, the Clintons invited the entire cabinet and the most senior White House staff to Camp David for a weekend of bonding and discussion of strategy. The concept—which was the Vice President’s—might well have been good, but the event itself was pretty awful. Saturday night, after dinner, we sat around in a circle, and each of us was supposed to talk about something the others didn’t know about us. The President talked about having been overweight when he was in school and how everyone had made fun of him. When my turn came, I said I didn’t have anything I particularly wanted to share. By that point, Lloyd Bentsen had wisely gone home for the evening.

I arrived in Washington knowing a good bit about how Wall Street worked, and some of what I knew was very useful. But I also had a strong appreciation for how much I didn’t know about the ways of Washington. My chief asset in navigating this unknown terrain was recognition of my shortcomings and a readiness to learn. I subsequently saw others pay a price for having a different attitude. Sometime during the transition, I took a walk down Pennsylvania Avenue with another new administration official who had never been in government before and was coming from the private sector. I was talking about how difficult and complex this new world was and about how much we outsiders had to learn about it. My future colleague said, “Bob, you and I know how to do things. We’ll do them the same way down here that we did them at home.” Applying the rules of business to politics was his formula for success. I told him that I didn’t think our life in Washington was going to work that way. As useful as our background was likely to be in certain respects, much in Washington was very different.

Steve Silverman, a staff member who worked in Cabinet Affairs, once said to me, “You know, some of us from the campaign were afraid that people like you, who came from big positions in the outside world, would be the big feet and that we’d be kicked aside.” He was pleased that the administration hadn’t turned out that way, but I would never have dreamed of thinking like that. I was an amateur coming into a world of professionals. People such as Gene Sperling and Sylvia Mathews were impressive to me because they knew so much more. In this new realm of government and politics, I was, in a way, their considerably older junior associate.

My modesty about my skills in this world was frequently reinforced. In May 1993, as we were struggling to get our economic plan through Congress, I appeared on The MacNeil/Lehrer NewsHour opposite Pete Domenici, the ranking Republican on the Senate Budget Committee. I spent considerable time preparing with Gene. My opening comment was that our deficit reduction plan was real and serious.

“Frankly, it is predominantly a tax plan,” Domenici replied.

I responded by talking about the “trust fund” we had proposed so that monies set aside for deficit reduction would go to deficit reduction.

“If the American people think there’s too much taxes and not enough spending cuts in the plan, please don’t think that calling the taxes a trust fund changes it,” Domenici said.

I responded that Leon Panetta and Alice Rivlin felt very strongly that the numbers in our plan were real.

Domenici responded that the defeat of our “tax plan” would be the best thing that could happen to the country.

I fired back with more specifics. The numbers produced by the nonpartisan Congressional Budget Office were close to those produced by OMB. Both agreed that the ratio of tax increases to spending cuts in our plan was approximately 1 to 1.

Domenici responded that our tax plan would hurt the economy.

I thought I’d done pretty well and was very pleased to say so to Gene after the broadcast. They had asked me various questions, and I had come back with good, detailed answers. Domenici had just kept repeating the shibboleth that our plan was a tax increase. Gene had a different take. He said that people who saw the program would think that “you seemed like a nice, smart man who wanted to raise their taxes.” Domenici’s performance demonstrated both how effective a simple message could be on television and how effectively our plan could be attacked. My response demonstrated the difficulty of crafting an effective, simple defense of our substantively complicated strategy.

Of course, part of the problem simply may have been me. Shortly after that episode, I spoke to Ricki Seidman, the deputy communications director, before I was scheduled to go on CNN’s Capital Gang. Ricki told me quite bluntly that I needed some help in dealing with the very particular medium of television. Maggie Williams, who was Hillary Clinton’s chief of staff, had said something similar a month or two earlier, so I decided to act. I got Leon Panetta, who was highly skilled at television, to substitute for me on CNN, and I made an appointment to see Michael Sheehan, a media coach who worked with President Clinton, among others.

I was skeptical about going to see Sheehan, because I knew I couldn’t be anything other than myself, on television or anyplace else. I told Sheehan that, and he responded that I should indeed be myself but that I should also try to understand a few basic points about the medium and how it works. For instance, you can attack a question, but you should never attack a questioner, since TV tends to make a personal challenge look more hostile than intended. You should boil down your points and avoid long, discursive answers. You had to be somewhat more animated than in normal conversation just to seem natural, because TV tends to deenergize you. And most important, you have to go in with a clear sense of what you want to accomplish and respond from that perspective.

Over time, I developed some additional pointers about television, sometimes from watching tapes of my appearances with Gene and Sylvia—and later at Treasury, with Assistant Secretary for Public Affairs Howard Schloss, David Dreyer, or Linda McLaughlin. For instance, Sheehan was absolutely right about the importance of being sufficiently energetic on television, but energy with an edge could make you seem strident—which was Judy’s comment after seeing me once on This Week with David Brinkley. And boiling complex ideas down into simple formulations could lead to a stronger statement than intended or than the subject matter warranted. I often dealt with that problem by adding a qualifying phrase—such as “at least it seems to me” or “the chances are very good that”—which reflected my approach to life anyway. I had no interest in becoming polished at television appearances—nor, I suspect, the capability to do that—but I did want to learn enough about the medium to be myself on TV and to get my points across at least somewhat more effectively. I also took Sheehan’s rule about not attacking the questioner a step further and decided never to make ad hominem comments in any public appearances, even when someone criticized me in a personal way. But that was a matter of how I felt public discourse should be conducted and had nothing to do with television as a medium.

Another rule of mine was to talk about policy, not about politics. I wanted to engage substantively, not as a political pundit, and in most cases I wasn’t qualified to make political forecasts anyway. So if someone asked me about the administration’s chances of getting renewed funding for the IMF, I’d say we would ultimately be successful because the merits were on our side and then I’d set out our case. If that sometimes made me a less interesting guest, so be it. I avoided the most combative talk shows—which focused largely on conflict and predictions. In general, I found that, like most else in life, you got better at TV by thinking about what you were doing and preparing. I didn’t rehearse answers since that seemed artificial and would undercut the responsiveness and engagement with questioning that is the whole point of television interviews. Instead, I got ready by trying to frame my views in ways that would work on television. I often found that this preparation was valuable in other ways. Thinking about how to express points succinctly often forced me to face contrary views and vulnerabilities in my positions, which sometimes led me to think them through more clearly or even to modify them. A commonplace in Washington is that a lot of policy is made through the speechwriting process. In the same way, I found that my policy thinking was sometimes affected as I prepared for television interviews.

I learned a great deal that first year about dealing with the print media as well. When I first visited newspaper editorial boards, Gene would come with me. We would sit there together, and I would answer a question. Then Gene would amend my answer—saying that what I had actually meant was slightly different from what I’d just said. In retrospect, this may have seemed slightly bizarre to the journalists in attendance. But it did help me learn how to respond to questions with an awareness of how my answers might create problems for me later.

Gene also taught me how a telling detail could turn into a useful symbol. He once mentioned to a reporter who was writing about the NEC that I often gave up my scheduled time with the President when I didn’t have any pressing issue. That didn’t seem like a big deal to me; on other occasions, I didn’t insist on being present at briefings Gene would give Clinton in preparation for meetings and interviews. Gene was the appropriate person, and the President deserved to have as few people in the room as possible. I didn’t feel cut out of the picture. To the contrary, I felt that the President’s decision to have someone from the NEC brief him reflected well on the value of the NEC. But Gene’s giving-up-time-with-the-President anecdote had salience because it cut against the familiar clichés about people jockeying for power and “face time” in the White House. As the story got repeated in other profiles, it helped to get across what the NEC was trying to accomplish in terms of creating a fair and open process.

I realized from the start that the NEC effort would surely go astray if I took advantage of my position or my access to the President to try to promote what I believed personally. So I always bent over backward to be fair to those with opposing points of view. Even when I was alone in the Oval Office telling the President what I thought, I would go out of my way to say that while I thought X, Bob Reich thought Y, and Laura Tyson thought Z. Sometimes, when I had my regularly scheduled time with Clinton, I would ask people who disagreed with me to come along to the meeting to present their views themselves. People in Washington often assume that effectiveness in a presidential administration depends on maximizing your access and exercising your power. But I found that by not seizing all the face time I could, I was more effective. By cultivating a sense of teamwork and fair dealing, I persuaded colleagues to work within the NEC process—and also, in the end, I think, enhanced my standing with the President.

This kind of teamwork contributed greatly to the development of policy and to internal support for our policies, as shown by the 1993 economic plan. Another memorable illustration was the way we handled trade negotiations with Japan. The members of our economic team had a variety of views—though all were basically committed to trade liberalization. At one end of the spectrum were those who thought that Japan would never open its markets to American competition without extreme pressure. At the other end were the more doctrinaire free traders who felt that our trade deficit with Japan was more a function of our own problems, including our low savings rate, and that, in any case, we benefited from the imports. For my part, I believed that the second-largest economy in the world having significant trade impediments was a major problem for the global trading system, and I supported strong efforts to pry open the Japanese markets. But the point is that in our process, everybody had a fair and full say. Not only did that lead to better decisions because all views were considered, but the participants also bought into those decisions, despite their reservations, because they felt fully invested in the decision-making process. That meant that, despite internal differences, the administration spoke with a single voice in taking a tough stance when the trade issues came to a head at the G-7 Tokyo summit in 1993. One cabinet member reported back a conversation with the Japanese ambassador. In previous administrations, the ambassador said, Japanese officials could visit with administration officials and identify differences among them, which was then helpful in defending Japan’s trade policies. He was amazed that under Clinton, no cracks appeared; every member of the administration hewed seamlessly to the decision that had been made.

Of course, every rule has exceptions. In a few areas, I thought the free play of internal debate wouldn’t be constructive. Occasionally, someone in the administration would suggest discussing dollar policy or Federal Reserve Board decisions on interest rates. I was able to persuade the others that these two issues should be exceptions to our NEC process. If the outside world knew that our strong-dollar policy or support for the independence of the Federal Reserve Board was subject to internal debate, confidence could be shaken and the markets seriously affected. If others had expressed strong concerns, perhaps some kind of quiet process would have been needed, but that didn’t happen.

   

THE CLINTON ADMINISTRATION is widely viewed as having gotten off to a rocky start. Throughout the first year, the press focused heavily on flare-ups over the $200 haircut, the Travel Office firings, Whitewater, and so on. These incidents may well have reflected a shortfall in White House organization and discipline, but the coverage and the impression of chaos seemed to me greatly overstated.

For chaos was certainly not what I experienced. To the contrary, in the early months of the administration, I saw people working together in an effective, productive way. I used to make that point, and others would look at me as if I’d been spending time on another planet. Clearly, the White House was perceived as less than effectively organized in dealing with communications, media, and political relations—despite very good senior people. But most of that wasn’t really part of my world. I now think that Clinton’s tardiness, his taste for open-ended discussions, and a few other stylistic hallmarks of his first year created a powerful impression at odds with the reality I knew. What I didn’t grasp at the time but have come to appreciate in retrospect is how powerful an influence this kind of style and symbolism can have on how an administration is seen. But however many meetings ran late, work on the vast majority of the substantive economic issues was both organized and effective—and led to major legislative accomplishments. What might have looked messy to outsiders was actually a process of deliberate and open discussion, of smart, committed people engaging in debate as a way of getting to the best decision.

Some people said that the President shouldn’t be involved in a lengthy discussion of whether the Coast Guard should have a little more or a little less in the budget. My view is that the President’s hands-on involvement in drawing up his first budget in the fifteen or so presidential meetings between January 22 and February 12 contributed enormously to making all of the very difficult decisions necessary to produce a $500 billion deficit reduction plan in such a brief time. What’s more, from then on Bill Clinton possessed a detailed, practical understanding of how the budget process works, and of a vast number of programs in the budget, that provided him with strong grounding for eight years of annual budget making. Another advantage was that Leon and the rest of us knew in considerable detail what the President’s views on various programs were. Many of the important decisions that Clinton made in his first six weeks were issues that remained settled business within the administration for eight years. Moreover, Clinton wanted to be deeply and personally involved in the budget, and I’m not sure anyone could have prevented that.

Mack McLarty, Clinton’s boyhood friend who became his first chief of staff, took a lot of criticism for our early troubles. Again, my view is somewhat at variance with the conventional wisdom. The press tended to apply a Washington template that judged the chief of staff’s effectiveness on the basis of the President’s approval rating and the appearance of order—or the lack of it. But it seemed to me that the key issue was whether the head of an organization created an environment that produced substantive results (although appearances can affect the ability to achieve results, especially in Washington). In substantive terms, I viewed Mack as successful. Mack wasn’t a type like John Sununu, President Bush’s chief of staff, who I gather would lay down the law for others to follow. Mack would never try to dominate. Instead he focused on developing an atmosphere in which people could work together effectively, which was what Clinton wanted, rather than spending time and energy on infighting. Mack achieved something that Washington didn’t quite know how to deal with: the creation of an environment with a good measure of mutual support and respect, in which for the most part people functioned well together.

My own position in the first year was entirely contingent on Mack’s attitude. Another kind of chief of staff could have seen my authority as a threat and taken charge himself, crowding me out. Instead, Mack made room for the NEC process. A reporter once made an observation that I didn’t understand at the time but was absolutely right—the NEC could not have worked unless Mack had let it work.

As the first-year difficulties mounted, Mack came to feel that the White House needed to take a more strategic approach, a view I shared. Mack suggested to the President bringing in David Gergen, who had worked in four previous administrations, as a high-level adviser with authority over the communications office. I thought that made sense; David brought a strong and experienced strategic perspective. He was very thoughtful about questions such as: How should the President use his time? How much exposure should a President have? How should he present himself? We didn’t have people with the experience to think about those issues in quite the same way David did. But because he was a Republican and had worked for Richard Nixon and Ronald Reagan, Gergen was never really accepted by some who worked in the Clinton White House.

Bringing in Gergen was seen as a demotion for George Stephanopoulos, who was reassigned from his position as director of communications. George is immensely talented and wonderfully persuasive, but this situation was beyond even his powers. He told me that for a while he tried to explain to reporters that his new role still involved constant proximity to the President. But the assumption that he was being brushed aside in the shake-up was so powerful that after a while George realized that he couldn’t counter it and could only wait until the wave passed. That has been my experience as well. During a media storm, you have to put aside the idea of a balanced presentation of both sides. But you should still try to get your version of events included in a story, even if only in the twenty-second paragraph, because at some point, those efforts might start to have some effect. And that’s what happened here. Once the hullabaloo over Gergen’s arrival died down, reporters realized that George was still central to what was happening and revisited the issue with more balance than in the initial stories.

As much as Gergen helped, he wasn’t in a position to address the larger organizational problems around the White House. Toward the end of 1993, Mack decided to try to prioritize more effectively, with what came to be known as the “legacy project.” As part of drawing up the President’s second budget in the fall of 1993, Mack asked various members of the administration what they would like to see as Clinton’s major accomplishments, looking back from a notional perspective of either 1996 or 2006. This effort didn’t have any immediate consequence, but it’s interesting to look back at it now, both for my perceptions that first year and as a yardstick to measure the Clinton legacy.

In addition to health care, which we took as a given, my memo listed five “legacies”: (1) an effective human capital program of high-quality education and training; (2) progress on the problems of the inner city; (3) deficit reduction; (4) an expansion of global trade; and (5) implementation of a rational approach to regulation. Revisiting that list, which reflected my own ambitions for the administration, I’d argue that we accomplished a great deal. Deficit reduction was enormously successful, due to our policy choices and the growth those policies helped promote. Trade liberalization was powerfully advanced by passing NAFTA, strengthening the General Agreement on Tariffs and Trade (GATT), and laying the groundwork for China’s accession to the World Trade Organization, and we were active more generally on international economic matters, including crisis response and prevention.

On the other issues, the picture is more mixed. The strong economy made a real difference for inner cities, and our policies, including the expansion of the Earned Income Tax Credit (EITC) and increased funding for Head Start, helped reduce poverty. (In the view of many, welfare reform had a significant impact as well, although I had serious reservations about this legislation.) But the fundamental problem of an urban underclass cut off from the mainstream of American society remains, and we still lack a federal effort commensurate with the problem. In terms of “strengthening human capital,” we substantially increased spending on education and worker training. But our public education system still falls far short of what is needed. I think we took the right approach to rationalizing regulation—from reducing export controls and simplifying loan applications for small businesses to banking reform and resisting calls to regulate the Internet. And on a related issue of great importance, we unfortunately did not address the excesses in the tort arena that are such an abuse of our legal system and so adversely affect our economic well-being. I concluded my memo with some observations based on my not-quite-a-year in Washington. “Our political system is too cumbersome to deal effectively with decision making on the complex problems of the modern world,” I wrote. “This problem may be irresolvable, but over the very long run, could overwhelm everything else.”

This last statement didn’t mean that the more top-down business model of business management could or should apply to government. To the contrary, I’ve developed a deep respect for the differences between the public and private sectors. In business, the single, overriding purpose is to make a profit. Government, on the other hand, deals with a vast number of legitimate and often potentially competing objectives—for example, energy production versus environmental protection, or safety regulations versus productivity. This complexity of goals brings a corresponding complexity of process. Our constitutional system of checks and balances has multiple decision centers—Congress, the Executive Branch (with all its own internal complications), the courts, and state and local governments. Often the relationship among these participants is one of conflict, and, with respect to some issues, the balance of power is ambiguous. Moreover, many participants face electoral accountability. And finally, all important decisions—and even many less important ones—are made with an awareness of how they will be presented in the media.

In the corporate world, power is far more centralized. Unless trouble develops, a CEO almost always has a relatively good relationship with his company’s board of directors, even as it performs its oversight function. Media scrutiny is far less of a factor, except, again, when problems occur. A successful CEO is far freer to say whatever he wants about politics, his colleagues, or his competitors, at least within reasonable limits. This simpler model might sometimes look appealing for the public sector. But in reality an immense complexity is inherent in the circumstances of a modern, democratic government. Making government more businesslike can improve efficiency—in both processes and operations—but the inherent complexity would remain.

   

WHEN I THINK ABOUT what I wish we had accomplished in our administration and didn’t, broad-based health care reform ranks very high. Our country’s health care system remains an inefficient mixture of market and nonmarket forces that leaves large numbers of people inadequately covered and at the same time consumes a much larger portion of GDP than competitor nations spend. At the start of our administration, I shared the conventional view that the prospects for health care reform looked good. The campaign had built a mandate for reform and there was widespread public and congressional support for it.

My own involvement was limited, but I came away from our failed effort at comprehensive health care reform with several observations. Most fundamentally, the sheer magnitude of the endeavor—a major policy shift in an area encompassing 14 percent of GDP—made health reform extremely difficult to pass. The larger and more complicated the public policy undertaking, the more special interests there are that may take umbrage and organize against it.

In this case, massive forces arrayed against this effort, many with a vested interest in the status quo, and spent tens of millions of dollars to defeat the President’s efforts. One example of this was a huge multimillion-dollar national advertising campaign against the plan that proponents lacked the resources to counter. And these ads weren’t constrained by the truth. I turned on the TV late one night in my room at the Jefferson and saw one of the “Harry and Louise” ads. That isn’t what our proposal says, I said to myself. But these ads were highly effective.

The politics were also very complicated, and I thought Lloyd Bentsen, who had been the savvy chairman of the Senate Finance Committee before becoming Treasury Secretary, made a lot of sense when he said that the President’s deficit reduction plan and health care reform were simply too much for our political system to process at one time. Also, over time, my colleagues working on health care told me that the initial Republican support they had expected slipped away. Watching members in both parties who had publicly espoused support for health care reform “to and fro”—rather than work with each other and compromise to reach a conclusion acceptable to the majority—was a crash course in the realities of politics. The lesson I took from that was that the politics is as important as the policy, because if the politics doesn’t work, the policy—no matter whether the decisions are sensible or not—won’t be implemented.

Undoubtedly, there were other factors militating against the success of health care reform. For example, some argue that the program itself was too complicated or just substantively wrong. My own view—though I was not expert in this area—was that the underlying, market-oriented approach of the bill made sense in many respects, but various of the specific provisions were open to question.

One factor I did feel able to judge was the internal White House process, and that to me seemed flawed. The President, having decided on the broad parameters of the policy, set up a project run by the First Lady and Ira Magaziner, an extremely bright, very intense management consultant who had known the President since their student days. But giving the Health Care Task Force a hundred-day deadline to submit legislation was probably unrealistic. More significantly, health care cuts across much of the domestic side of the government, and significant participants inside the administration—including the members of the economic team, even though most agreed with the general approach—didn’t think, at least until nearer the end, that this process aired their views in a way that seriously affected decision making. Consequently, people whose internal backing was crucial too often felt somewhat disaffected, and cooperation was less than it could have been. At one point, for instance, Lloyd Bentsen said he couldn’t produce cost estimates because he didn’t feel adequately informed. Also, important arguments and criticisms weren’t exposed in the way that would have occurred in an NEC-type decision-making process.

And, of course, the health reform process had the additional complication of having the First Lady in charge. In Little Rock, during the transition, the President-elect asked me what I thought about having Hillary head his health care task force. I told him I liked the idea—she was smart and effective and clearly knew the subject well. As I had gotten to know Hillary during the transition, I even had the naive idea—perhaps augmented by a feeling of rapport with her that I never lost—that she could be involved some way in running the White House. What I didn’t understand at that stage was how being the President’s wife would complicate her role. Nor, apparently, did the President, with all of his political savvy. People tend to pull their punches and to be less forthcoming in dealing with a President’s family member. What’s more, the assumption that a close relative of the President has a back channel in daily life would always render such a process suspect to some degree.

One irony is that Hillary, contrary to some impressions, was amenable to challenge and debate. At some point, for instance, a number of us came to believe that a more limited and less costly benefits package would be preferable for fiscal and economic reasons. Although this was a very central issue and Hillary believed a more comprehensive benefits package was worth the cost, she was receptive to airing the issue fully. Someone suggested that knowledgeable proponents of each side present their views in a debate for the President. She agreed, and a candid and vigorous debate in front of several dozen people in the Roosevelt Room ensued. Unfortunately, details of that debate leaked and appeared on the front page of The New York Times the next day. Leaks, and the damage they can do to internal communication and the ability of an administration to implement a political strategy, are a frustrating reality of Washington life, and it is almost impossible ever to know—as opposed to suspect—who a leaker is.

Health care not only competed, politically and internally within the administration, with the economic plan in the first half of the administration’s first year—usually considered the most propitious time to accomplish large purposes—it then competed with NAFTA in the second half of 1993. After the economic plan passed in the summer of that year, the President had to decide whether to give precedence to health care reform or NAFTA. Fighting on both fronts would spread our political operations too thin, creating a greater risk that both would fail. The President convened a small meeting in early September that Mack McLarty and I organized in the White House residence. Warren Christopher, Lloyd Bentsen, and I all spoke in favor of putting NAFTA first, arguing that this was our only real chance because, as the midterm election drew nearer, the odds of passing such a controversial trade bill would diminish. Hillary and Ira spoke in favor of putting health care first, both to maintain momentum and because the election posed a problem for health care as well. In hindsight, I think both sides were right. The President decided to proceed with NAFTA first, but also to continue some political effort on health care until NAFTA passed and health care could get the highest priority. That seemed to me both a good decision and an example of good White House process. Of course, that was easy to say when the decision came out the way I wanted.

Although our broad effort at health care reform was not successful, the administration was later able to pass important smaller pieces of legislation—including an expansion of health care coverage for children and portability of health insurance for people changing jobs. I also think that many of the insights, much of the analysis, and some of the specific proposals developed by the health care reform project will be useful in future reform efforts, and I believe at some point circumstances will force the political system to make major change.

   

MY SON JAMIE’S marriage to Gretchen Craft in 1994 was wonderful for them, but also a respite for Judy and me. They had met while both were students at Yale Law School and now were going to be married in Gretchen’s hometown of Kansas City, Missouri. Many of our friends flew in from New York City and elsewhere for a lively weekend of parties. Gretchen’s parents, Jack and Karen Craft, and her sister, Elizabeth, have become not only relations but friends. Jack is deeply engaged with Republican Party politics—both Republican senators from Missouri were at the wedding—but I think he has adjusted to his daughter’s apostasy. Jack is also an enthusiastic (and quite skilled) fly fisherman, and on our various trips we’ve managed to discuss both politics and fly selection without difficulty.

A particularly memorable event at the wedding that weekend, at least for Judy and me, took place at the rehearsal dinner. Shortly before our irreverent younger son, Philip, was supposed to give a toast, Judy saw him scribbling on a napkin. She asked what he was doing and was horrified to hear that he was just then composing his remarks. When he got up to speak, Judy was in a state of anxious anticipation. He started by saying that his remarks were going to be about cynicism and I thought she would collapse. But Philip’s turned out to be the best toast of the evening: a very thoughtful and moving commentary about how Jamie and Gretchen’s relationship was the antithesis of cynicism. And so another potential pothole in life was safely avoided.

I then returned to Washington and a world of potholes. On election day in 1994, Democrats lost control of both houses of Congress for the first time in forty years. Not a single Republican incumbent lost a race for congressman, senator, or governor. No independent observer had predicted such a stark result, nor had anyone in the White House. A shell-shocked feeling pervaded the West Wing. I was surprised but not so emotionally engaged to have that kind of reaction myself—my life was economic policy and trying to make the NEC work. Also, I didn’t begin to foresee the full consequences of a Republican-controlled Congress.

But I was keenly interested in the arguments about why this had happened and what the administration should do. The day after the election, some of the political people got together in the office of Mark Gearan, the communications director. I wondered if I would be welcome—I wasn’t really qualified to comment the way people such as political director Rahm Emanuel, chief speechwriter Michael Waldman, or others were. But someone invited me, so I went.

The essential debate in that meeting, and for some time after the election, was whether to take a more populist or a more centrist tack. Shortly after the election—following a meeting on health care conducted by a new joint process of the Domestic Policy Council and the National Economic Council—I had a discussion with Bob Reich and Hillary about all of this. Bob said the election had shown that the Democratic base wasn’t motivated and we needed to move in a much more populist direction. My view was that some of the policies and much of the language that Bob called populism was unwise economically. I respected—and had learned from—Bob’s insights on the importance of education and training and addressing inequality, but I felt strongly that the language he and some of the political advisers were eager to use, terms such as “corporate welfare,” could adversely affect the business confidence requisite for economic growth. Nor did I think populism would be effective politically. Hillary agreed, telling Reich, “Bob, the polls and political intelligence we have say that the people we need to reach don’t respond well to that kind of populist approach.” She was very pragmatic—she didn’t think the approach would work and said so.

But if Reich’s interpretation was wrong, what was our problem? My own view of the 1994 debacle emphasized five factors. First, by the time of the election, the economy’s strength and the contribution made by Clinton’s decisions were not yet clear. The second was the mischaracterization of our deficit reduction as a tax increase on the middle class, which proved extremely hard to shake. Related to that was a third factor: the misimpression, fueled by the health care plan, which itself was misleadingly described by opponents, that Clinton was an old-style, biggovernment liberal. Fourth was the effect in some elections of Clinton’s advocacy of gun control legislation. A fifth and final factor was a series of issues and episodes, mostly minor but blown out of proportion by the press, manipulated by political adversaries, and, as a contributing factor, sometimes mishandled in some respects by the White House.

Preeminent among these was Whitewater, a numbingly complicated story about a money-losing real estate investment the Clintons had made in Arkansas in the 1980s. For years after The New York Times broke the story during the 1992 campaign, investigations by the press and congressional committees cast a shadow over the administration. These inquiries damaged lives and careers and provided an endless supply of ammunition to the President’s opponents. But after the expenditure of tens of millions of dollars, the conclusion most sensible people reached—as did, ultimately, the independent counsel—was that the original Whitewater charges against the Clintons had been unsubstantiated. Many felt that the way the White House dealt with the issue made matters worse, although I could understand the Clintons’ frustration.

My two years in the White House were a deep immersion course in politics and the workings of Washington. Early in the administration, Clinton said to me that his gays-in-the-military position was really going to hurt Democrats in the South for many years to come.

“Mr. President, that can’t be,” I replied. “I mean, that’s what happened today, and they don’t like it. Tomorrow you’re on to the next thing.”

And Clinton responded, “No, this is going to affect how people look at us for a long, long time.”

That’s a good illustration of how a decision can have political consequences far beyond what most people could anticipate, and of how someone with political sensitivity can see possible effects that others miss. Bob Strauss once said to me that either you have political feel or you don’t. I think that I had some when I began in Washington and that it developed over my time there—though it was never near the President’s level or that of some others in the White House.

When I suggested to the President—in various meetings when the 1994 election came up—that health care or gun control had been involved in the debacle, he would remind me of the tax increase or our failure to get our economic message out effectively. I never heard his more considered diagnosis of what went wrong. In the immediate aftermath of the election, he seemed off stride in a way I hadn’t seen before. Around that time, I watched him prepare for a press conference. George and others were throwing him questions in the small dining room off the Oval Office. Usually a master of such situations, he wasn’t knocking back the warm-up pitches. He seemed down and a little disoriented.

I identified with Clinton based on a feeling that dated back to troubled times in arbitrage or in fixed-income trading at Goldman Sachs. What had worked to make money had stopped working, just as Clinton’s political strategy had stopped working, and for a time my Goldman colleagues and I felt we had lost our grounding. It was a sense of bad news compounding, of unanticipated losses on top of unanticipated losses with no end in sight and no clear sense of a strategy for going forward. That feeling eventually gave way to a sense that we were getting a grip on our problems. But as I prepared to move to a new job at the Treasury, Clinton hadn’t regained his footing. He hadn’t figured out how to operate in this new political environment. And the rest of us hadn’t either.