by Bob Spitz
At a lunch not long after the Cabinet meeting, Ronald Reagan ate sandwiches in the little anteroom across from his desk with the three men who would make the key administrative decisions and guide his daily affairs: Jim Baker, Ed Meese, and Mike Deaver. Instead of having an almighty chief of staff, as was customary, the president established an unusual division of power—the triumvirate, or “Troika,” as it became known familiarly. Baker, as chief, set the president’s schedule and ran the White House operation, including responsibilities with the legislature and the press; Meese, as counselor, functioned as the president’s principal adviser on the policy side and worked directly with the Cabinet; and Deaver dealt with things that pertained personally to the president, which included scheduling, travel, and security, but nothing that involved policy.
“Reagan’s genius was to make sure that Mike was at his side as facilitator, Ed was there philosophically, and Jim was pulling the strings,” says Ken Duberstein, the president’s point man in the House for legislative affairs. The plan was for the three of them to meet with President Reagan to review his schedule every morning at 9:00 and remain with him through the “Morning Summary” delivered by the national security adviser at 9:30. From that point on, one or more of them would be at the president’s side throughout the day, monitoring his activity via a little box that sat on each of their desks and binged every time he moved. “It was smooth from the start,” Ed Meese recalls. Each member of the Troika had his own niche, but they kept each other honest. “Really, they were always at loggerheads,” says Fred Fielding, “but they needed each other, which guarded against one of them taking out the other one.” Meese suspected Baker the pragmatist of trying to move Reagan to the center; Baker warily eyed Meese the conservative for his influence on the president; and both Meese and Baker recognized that Deaver, since moving to Washington, “got totally entranced by power,” which obscured his judgment.
Their chemistry was in much better shape than was the Old Executive Office Building. During the Carter administration the walls had been painted over with GSA green paint and needed stripping to the original wood. The carpets and desks were tortured with cigarette burns. Chairs were missing arms; upholstery was worn through. The White House was little better. It was a building that kids and animals had lived in and hadn’t been renovated in sixteen years. There was lead-pipe plumbing throughout. “The Roosevelt Room was a mess,” recalls Peter McCoy, Nancy Reagan’s chief of staff, who’d accompanied her on an early tour. “The Carters had Xerox machines in the hallway blowing black dust all over the walls.” Jody Powell, Carter’s press secretary, defended the former residents, saying, “It’s not like we left chicken bones behind the couch,” but the new occupants weren’t taking any chances. “This place needs everything,” Nancy Reagan exclaimed, hand over mouth. Ronald Reagan was offended by the shabby appearance of the place and instructed his staff to upgrade the White House, along with its extensive grounds. A makeover was ordered from top to bottom. The war cannons were restored to the Pennsylvania Avenue entrance, the anchors returned to the side that faced the White House. Nancy Reagan imported her Beverly Hills decorator, Ted Graber, to help refurbish the Central Hall, and he had the floors sanded and refinished, the mahogany doors stripped, and the parlor wallpapered. Historical antiques, under layers of dust, were rescued from storage. In the Oval Office, Reagan brought back the octagonal desk that John F. Kennedy had used, which was made out of the wood from a number of old battleships. A new rug with the presidential seal was installed. Two small plaques he’d received as governor—“The Buckaroo Stops Here” and “There’s No Limit to How Far a Person Can Go If They Don’t Care Who Gets the Credit”—got pride of place on a mantel. As far as personal etiquette went, he resolved never to be seen in the Oval Office in shirtsleeves, or without a jacket and tie.
Order . . . dignity . . . leadership—these were protocols he was determined to establish. They’d set the tone for the rest of his agenda. The White House staff began referring to him as the “O and W”—Oldest and Wisest—a measure of the respect earned by the example he set. The presidential proprieties were clearly articulated. “It was time to start implementing his policies,” Meese says. “Immediately. No time to spare.”
First things first: the economy. As Ronald Reagan would soon tell the nation, “The country is in the worst economic mess since the Great Depression.” All things considered, it was hardly an exaggeration. In the past two years, back-to-back inflation, inflamed by the rising cost of fuel and food, was at the highest rate since World War II. As the president was fond of pointing out, “a quarter, a dime, and a penny—thirty-six cents—what the 1960 dollar is worth today.” More than seven million Americans were unemployed. The prime bank rate on loans to business reached 21.5 percent. And the Dow Jones Industrial Average had declined in eight of the ten trading sessions since Reagan took office—not a good omen.
“We’ve got to get control of the budget,” Reagan implored only minutes into the first cabinet meeting. “It’s out of control.” The deficit for fiscal 1981 was headed for a record $60 billion. The president was determined to pull the American economy back from the brink. He ordered a federal hiring freeze and tried to cater to businesses by suspending pending regulations such as the requirement that automakers install airbags in cars, energy performance standards in new buildings, and noise standards in the workplace. Otherwise, he had faith, he said, in the resilience of the marketplace, relying on it to “let the people flourish.” But the nuts and bolts of recovery were beyond his analytic grasp, so he left the strategy for it in the hands of the young prodigy David Stockman, the thirty-four-year-old former Michigan congressman who was in charge of the Office of Management and Budget.
Stockman, another devout believer in the free-market economy, had a diagnosis for recovery, but it was controversial—and not entirely sound. His antidote was based on supply-side economics, a philosophy that contradicted long-held Keynesian doctrine that government spending could provide a “fiscal stimulus,” pumping up demand for goods and services and triggering a virtuous circle. Supply-siders flatly disagreed. They claimed that increasing supply rather than demand served to curtail inflation, and the only way to do it was by slashing taxes and reducing government spending to allow the private sector the means to produce a rapid increase in the supply of goods and services. To quote one of its principal architects, Jude Wanniski, “A tax cut not only increases demand, but increases the incentive to produce. . . . With lower taxes, it is more attractive to invest and more attractive to work; demand is increased, but so is supply.” Tax reduction, he argued, would quickly stimulate a vigorous economic expansion by bringing in a flood of new revenues.
But most mainstream economists expressed grave doubts. From Keynesian John Kenneth Galbraith to conservative Martin Feldstein, president of the National Bureau of Economic Research, the criticism was forceful. Nevertheless, Ronald Reagan adopted supply-side doctrine as the basis of his Program for Economic Recovery and proposed implementing it in a sober prime-time speech broadcast on February 18, 1981. His strategy would focus on several priorities: a massive reduction of taxes and discretionary spending, regulatory relief, the elimination of wasteful or outmoded government programs, a balanced budget by 1984, and increased defense spending.
The overall scope of the program was extraordinary. The president embraced a bill introduced by Republican congressmen Jack Kemp and William Roth that called for reductions of 10 percent in personal income taxes in each of the years 1981, 1982, and 1983. “This tax program is not designed to simply reduce the burden of tax on the people,” Reagan told his Cabinet during a meeting on February 10. “It’s designed to get the damn country moving again.” To pay for it and to slow the growth of spending, Congress was directed to trim the federal budget by $41 billion, which would be accomplished by reducing federal employees’ benefits; grants for education and social services, including the food-stamp program, the child-nutrition pro
grams, the free-school-lunch program, unemployment insurance, college-education benefits, and welfare benefits; aid to the arts, humanities, and sciences; and the elimination of public-service jobs. Eighty-three federal programs were gutted, for starters. Stockman was still scrounging to make further cuts that would be necessary to hit the $41 billion mark. Only military spending earned a significant raise, a $28 billion increase for 1981 alone,* the largest in peacetime history.
The administration might have promoted it as the Program for Economic Recovery, but it was forever after referred to as Reaganomics. It mandated a sweeping restructuring of the U.S. government and the way it interacted with all Americans. No matter how one did the math, the numbers never quite added up. The goals were ambitious but unrealistic, as the outcome soon proved. The budget reductions were riddled with special revisions that provided for tax relief to the oil industry, savings-and-loan associations, and corporations in general. The military spending hike—and hike and hike—offset any cutbacks to social programs. And the 10 percent Kemp-Roth tax breaks were cut in half to ward off an estimated shortfall in revenues. All told, analysts projected, the administration would incur an $82 million shortfall in 1982, which would probably double by 1984. Orwell’s depressing forecast of the future might arrive right on schedule.
Ronald Reagan remained obstinately rosy about making ends meet, convinced that the program would eventually work as planned. But as journalist Lou Cannon pointed out, “the way that Reaganomics worked was by mirrors.” Or as George Bush, now a supporter (in public, at least), had said: it was “voodoo economics.”
And the policy reflected poorly on the president, who spent much of the so-called Reagan Revolution dodging a succession of financial landmines. As astronomical budget deficits piled up year after year, tax increases became necessary. Stock and bond prices took a significant hit. Too many concessions had to be made to keep the economy above water. As David Stockman later reassessed the situation, “We were not headed toward a brave new world, as I had thought in February. . . . Where we were headed was toward a fiscal catastrophe.”
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Nancy Reagan, a not-so-innocent bystander, became a victim of the backlash. She wasn’t used to being subject to criticism; she had managed to sidestep the spotlight as the governor’s wife. As the First Lady, however, and in a time of economic duress, she very soon came under fire.
“Virtually everything I did during that first year was misunderstood and ridiculed,” she recalled.
As early as the inaugural, Americans perceived—rightly or wrongly—that Nancy Reagan was an imperious character. While average Americans struggled to get by, she surrounded herself with her millionaire Los Angeles friends who arrived in Washington in private planes and limousines like potentates at the court of Louis XIV. Much was made of her visits to the New York showrooms of top fashion couturiers like Bill Blass, James Galanos, and Adolfo, where she tried on $25,000 beaded gowns and $1,000 cocktail dresses that skimmed her size-four figure. She was photographed in a $25,000 Maximilian mink coat, wearing $480,000 diamond earrings. It was no secret that her Beverly Hills hairdresser, Julius Bengtsson, traveled everywhere with her, and on Air Force One, at the taxpayers’ expense. Her personal manicurist arrived once a week from Los Angeles to touch up her nails. One of the hottest-selling postcards in Washington, D.C., was a depiction of the First Lady wearing an ermine cape and crown jewels above the caption “Queen Nancy.”
“We had a huge image problem on our hands,” says Sheila Tate, who arrived late during the transition as Nancy Reagan’s press officer.
No matter what the intentions of the president’s wife, they were often construed as self-indulgences. There was scorn when she announced the redecoration of the White House residence for $822,640 and a national uproar at her purchase of 220 place settings of gilt-edged Lenox china at $1,000 per place setting, despite her insistence that the cost would be covered entirely by private contributions. On the same day the government set new nutritional guidelines declaring that, to rein in the cost of school lunches, ketchup would henceforth be considered a vegetable, the White House announced that Nancy Reagan had spent $209,500 for another set of new china, this one for the residence, each piece hand-painted and monogrammed with her initials. The press began referring to the whole mess as “Chinagate.”
Her reaction to the criticism of these extravagances was tone deaf and defensive. She seemed to have no understanding that the country was mired in a recession, or of the straits most of the public was in. She lacked her husband’s skill with people. And she was awkward and condescending toward the press, which showed her no mercy. “She was a target for reporters,” says Peter McCoy, her chief of staff. “Everyone had it in for her; they just beat her up.” Even social friends, like Dan Rather and Tom Brokaw, came down hard on her for indiscretions, perceived or otherwise. Comedians routinely made her the punch lines of their jokes. The situation confounded the First Lady, who was easily bruised. “There are times when I look out the window and, if it’s raining, I think, ‘It must be my fault,’” she complained.
The president wasn’t amused. He resented the treatment his wife was getting—“a bum rap,” he called it—though he misread it as “a backhanded way of getting at” him. “Dammit,” he fumed, reminiscing about the situation, “you want to pick on someone, pick on me, not her.” The constant sniping at Nancy was beyond his ken. Nancy, in his eyes, could do no wrong. As his personal secretary, Helene von Damm, explained, “Ronald Reagan didn’t even seem to see the same person the rest of us saw.” The staff, according to von Damm, regarded Nancy as “demanding” and “aloof.” Mike Deaver agreed, acknowledging that “she is tougher on people than her husband is,” thus enlarging her image “as the Invisible Hand, manipulating, ruthless in dealing not only with her husband’s adversaries but with friends who let him down.” The president, for all his aversion to conflict, defended her as best he could.
For the most part, Nancy kept him in the dark about the grief she was taking. He was busy enough dealing with the budget and missile defense and upheaval in Latin America and the Middle East. He was struggling to push through a bill currently stalled in the House that proposed enabling the U.S. to sell AWACS—airborne warning and control systems for military airplanes—to Saudi Arabia. Each night, when he returned to the residence, exhausted by the day’s events, Nancy had dinner waiting on little TV trays so they could sit serenely on the couch, dressed in pj’s, and watch their favorite shows, rather than bombarding him with personal complaints. Those she directed at Mike Deaver, whom she called at least a dozen times a day. Deaver absorbed the First Lady’s emotional distress and helped to soften the blows. There was also a special phone line installed in the residence that didn’t go through the White House switchboard, so Nancy could make late-night calls to confidants Betsy Bloomingdale or Jerry Zipkin, who listened patiently to her and offered soothing advice.
She gave them an earful about her persistent friction with the press and waded into administration gossip. In the Troika, Jim Baker and Mike Deaver had paired off against Ed Meese. They didn’t want him out; they just wanted to make sure he wasn’t in the main flow. It was no secret who Nancy Reagan’s favorites were in that fight. And as for Al Haig, she considered him “Ronnie’s biggest mistake,” a half-cocked bomb thrower and a “power-hungry” despot.
There were others with the same opinion of Haig, but none who carried as much clout.
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Haig’s tenure in the Reagan administration had gotten off to a fairly rocky start. In an effort to consolidate his power, he’d squared off against the White House Troika, complaining to the president in a desk-pounding harangue as early as March 19, 1981, that Baker, Meese, Deaver, and even George Bush were encroaching on his turf. In his view, they were variously “the beasts” or “second-rate hambones,” nothing more than the president’s toadies. And his attitude tow
ard the president carried the same patronizing whiff. “Al would come back from a White House meeting and be so dismissive of Reagan,” recalls Bud McFarlane, who at the time served as Haig’s national security counselor. Haig had exhibited similar contempt for his former boss, Gerald Ford, whom he considered unintelligent, according to Dick Allen. “And he considered Reagan even less smart than Ford.”
It was one thing to feel that way in private, and quite another to express it within earshot of the staff. But Haig wasn’t much of a diplomat in that regard. He’d returned from a Cabinet meeting on missile defense and stomped around the office complaining that the president hadn’t understood a word about America’s intermediate nuclear weapons in Europe. In late March 1981, when he learned that Vice President Bush was tagged to head a Foreign Crisis Management commission, Haig was convinced that Bush along with others in the administration were trying to usurp his authority. He stormed into the Oval Office and threatened to resign, again. “He was very upset and angry,” Ronald Reagan recalled. “He pounded the table and seemed ready to explode.”
Haig’s rants convinced the president that his secretary of state was “utterly paranoid.” There had been six or seven resignation threats in the first two months, all signed and ready to submit. Sensing an opportunity to undermine their adversary, Deaver and Baker leaked news of the spate of resignation threats to the press. The New York Times was eager to engage. “So the single voice the Reagan administration intended to speak to the world has been saying nothing more urgent than ‘I quit,’” the paper editorialized. The Gainesville Sun put it much more starkly, saying, “The man is dangerous. Somebody better pay attention, because Haig is going to get a lot of people killed—a lot of people—for no good purpose at all.”