HRC: State Secrets and the Rebirth of Hillary Clinton

by Jonathan Allen

  Hillary kept her distance but checked in on McAuliffe’s progress. At a March event for Vital Voices, she asked Mo Elleithee, a spokesman for her presidential campaign, how McAuliffe’s race was going. When Philippe Reines was questioned over whether Hillary had talked to McAuliffe about it directly, he replied that any such conversations would remain private—a tacit acknowledgment that she had kept tabs on the race even while remaining publicly uninvolved.

  Getting McAuliffe elected proved a tall order. Even in his home base, Washington’s refined northern Virginia suburbs, he was looked on as a carpetbagger, more Clintonian than Virginian. Capricia Marshall, who had by that time been nominated by the White House for the protocol job, showed up at McAuliffe’s election night party, representing Hillaryland. There was little to celebrate; McAuliffe had lost the primary.

  Since the final days of Bill’s presidency, Hillary had been the Clinton on the front lines of electoral politics, winning two Senate races and losing a presidential campaign. Under normal circumstances, she would have been right by McAuliffe’s side, raising money and campaigning for him. But her new job meant that she had to keep her distance from McAuliffe’s campaign and the rest of the electoral battlefield. Instead, she focused her attention on the international chessboard and Washington’s own peculiar executive branch politics.

  SIX

  First Among Equals

  Tim Geithner never stood a chance. Obama’s new treasury secretary came into office with the charge of saving America’s financial system—and a fresh $700 billion bailout from Congress to help him do it. He was Obama’s handpicked guy on the biggest issue facing the new president. But for all of Geithner’s influence, a very small symbol of Hillary’s clout—an ampersand—spoke to her status as the first among equals in the Obama cabinet.

  At the beginning of any new administration, jockeying for power is fierce among high-ranking officials in the White House, the cabinet, and the upper echelons of each of the departments. There are countless signals, big and small, of who has power and who doesn’t, from which officials get the most face time with the president to who wins early interagency turf battles. Aside from her formidable reputation, Hillary enjoyed the advantage of knowing the federal government inside and out. Between her stints as a staffer during the Watergate hearings, chairwoman of the federal Legal Services Corporation, first lady, and senator, she had acquired a lot of experience and insight into how the executive branch works. Many of her peers in the Obama cabinet had never served at a high level in the executive branch, having made their careers as governors, members of Congress, or academics. For those who had worked in an administration, they mostly had been at much lower levels. Almost all of them had more to learn than Hillary, both about their own agencies and about the ways and customs of the executive branch.

  Geithner was an exception. As a former undersecretary for international affairs at Treasury, he had served at a high level and knew his new building well. He was poised to be the big dog on China, through a series of talks called the Strategic Economic Dialogue. Under President George W. Bush and Treasury Secretary Hank Paulson, basic diplomatic matters had taken a backseat to the complex economic issues that made the world’s two biggest powers either partners or adversaries on a wide range of topics with global consequences. Geithner, who had studied China at Dartmouth and spoke Mandarin, was positioned well to take over as the lead American negotiator with America’s counterweight on the other side of the globe.

  But Hillary already had set her sights on Geithner’s turf. During the transition, she had talked extensively with Jim Steinberg and Bob Hormats, who later became an undersecretary for economic affairs, about the opportunities Asia presented for America to expand its influence. If Hillary could snatch a piece of the Strategic Economic Dialogue, she would give State new entrée into the most sensitive negotiations between any two countries in the world. Her decision to elbow her way into the dialogue pointed to Hillary’s larger strategy of turning State into the lead agency on all foreign policy matters, except where an active war necessitated the Pentagon having the primary role. Many agencies, from Treasury to Commerce, had business overseas, but Hillary, who made “economic statecraft” one of the pillars of her agenda, wanted her ambassadors to function as America’s CEOs, coordinating federal activities and branding the United States in whichever countries they served. In State’s first-ever Quadrennial Defense and Diplomacy Review, published later, Hillary’s view was laid out in plain language. “Today, given the wide array of U.S. agencies and actors and the corresponding need for coordination and leadership, it is essential that all ambassadors are both empowered and held accountable as CEOs,” the report read. “They must be responsible for directing and coordinating coherent, comprehensive bilateral engagement that harnesses the work of all U.S. government actors in-country.” In other words, foreign policy shouldn’t be conducted by other agencies.

  Geithner, the former head of the powerful New York Federal Reserve Bank, was hardly a pushover. But Hillary perceived that he had one hand tied behind his back because of the global economic crisis, and she used that to leverage her way into the discussion. “She knew that the Treasury Department, dealing with much more important things, was not in a position to fight over what, for most people, would seem like a smaller issue,” one Treasury official explained.

  By the time Geithner and Hillary discussed the China relationship face-to-face in February, their conversation was, according to a source familiar with Geithner’s thinking, not about whether to make the change. It was, instead, about how to make the powersharing arrangement work.

  Geithner himself, the source said, supported elevating Hillary in the talks with the Chinese. But Team Geithner was incensed. Treasury officials thought Hillary was bulldozing her way in. At the staff level, they had spent years building up this structure to engage with China, even before the Bush administration, and now that it was under way, State was going to steal part of it. Geithner’s inner circle grumbled about it, but there was little he could do. The view from Treasury: Obama didn’t care much for turf wars, and Hillary was trying to take advantage of the president’s desire to placate her.

  “It did upset some people at Treasury,” said a bemused senior State Department official who recalled Hillary’s approach. “We’re dealing with China here, and to have everything funneled—or to have the major dialogue with China focused only on finance and economics—was not considered a very strategic way of looking at things. That was one of the big changes she made. Paulson started this and it focused on economics, and then, from the get-go, she understood that this couldn’t just be about economics, it had to be about foreign policy. So then she had this sort of tug-of-war—that’s probably the wrong way—sort of a dialogue with Treasury and the White House. She insisted on it. She was not going to be denied.”

  Hillary spoke to Obama about it personally. “I’m working on a new concept to combine all these dialogues into one,” she said.

  “I’ve talked to Tim Geithner. He’s fine. So this is what I want to do.” Obama gave his blessing.

  The White House renamed the talks. The Strategic Economic Dialogue was recast as the “Strategic & Economic Dialogue,” changing the word strategic from a descriptor of the type of economic dialogue the United States had with China to a term that gave foreign policy strategy parity with, if not primacy over, the economic side of the talks. Treasury aides say it was a bitter early pill to swallow, but Geithner and Clinton enjoyed a good personal rapport, and it wasn’t worth a throwdown that the new treasury secretary was bound to lose.

  The move gave Hillary’s team bragging rights abroad and in at least one home. When the State Department’s plane arrived for the first Strategic & Economic Dialogue in China in 2010, Hillary’s aides wore fitted wool baseball caps with a gigantic white ampersand logo on the front. Kurt Campbell, the assistant secretary of state for the region and the husband of treasury undersecretary for international affairs Lael Brainard, had
distributed them as a reminder of State’s new prominence in America’s relationship with China. Reines, who like Hillary and Campbell loves an inside joke, could be seen wearing his ampersand hat in Washington years later.

  Geithner’s decision to acquiesce meant there would be no real blowback from Treasury, but years later aides still fumed privately about the episode. The quiet turf theft served as a marker for Washington insiders that Obama had Hillary’s back. “That was kind of an early sign to everyone in the administration that Hillary Clinton was not your average cabinet official and was going to get her way on a lot of things, and it was probably best to accommodate and play nice [rather] than to try to pick fights, because you were probably not going to win,” the Treasury official said. “There was this overriding sense that ‘yes, we’ve given her the job, but we want her to be happy in the job.’ ”

  Hillary’s star power gave her a leg up in the art of persuasion. The simple truth is that others are more likely to say yes to someone they admire, respect, or fear—and Hillary evoked all those feelings. And her moves inside the cabinet and within her own building demonstrated a rare skill in manipulating Washington’s levers of power. Taken together, they represented an aggressive push to empower the State Department. Sometimes, as in the case with Geithner, that meant seizing turf. In other instances, she leaned on the president to get her more money, created alliances with other power brokers in the White House Situation Room, and found creative ways to bolster the beleaguered corps within the State Department.

  Usually the people she dealt with, from low-level staff aides in her own building all the way up to the president of the United States, walked away with newfound respect for her. Often they found themselves liking her more with each interaction, even if they had been worked over. In that way, she proved herself to be the ultimate politician, a strategic power player whose hard work, command of politics and policy, and deft calculation produced more admiration than animosity. She was definitely someone other politicians wanted on their side.

  “I sort of describe it as ‘stages of Hillary,’ ” one member of Defense Secretary Robert Gates’s inner circle said. “You know, you first dread the prospect of working with her, then you sort of begrudgingly begin to respect her, then you outright respect her and her incredible work ethic. You know, she’s inexhaustible, she’s tough-minded, and then you come to actually start to like her, and you just can’t believe it but you actually like this person, and she’s charming and she’s funny and she’s interesting and she’s inquisitive and she’s engaging.”

  Like Geithner, new budget director Peter Orszag was no match for Hillary. A wonk with a rap mogul’s private life, Orszag had children by three different women and is now married to ABC television anchor Bianna Golodryga. The sleepy official name of his agency, the Office of Management and Budget (OMB), belies its power in the executive branch. Orszag held the key to every account at every federal agency; it is through OMB that the White House issues veto threats and federal regulations. He was considered a wunderkind in the Clinton administration, where he was a top economic aide in his early thirties.

  With his short black hair and thick glasses, Orszag bore more than a passing resemblance to Lewis Skolnick, the lead character Robert Carradine played in the 1984 film Revenge of the Nerds. When OMB’s staff held its annual variety show on the day of the public release of the budget in 2010, his minions serenaded him with a parody of the Rick James classic “Superfreak” retitled “Supergeek.” When he put a framed picture of his new girlfriend Golodryga in a prominent spot in his office, OMB staff privately joked that he was bringing geeky back. At least one aide recommended that he take down the glam shot of Golodryga in favor of something a little more staid. The picture stayed. He was a nerd with a big ego and a lot of power.

  Charged with putting together Obama’s first real budget in 2009 and early 2010, Orszag had a great deal of autonomy in articulating the president’s philosophy and policy through the thousands of pages of text and tables that constitute each year’s federal budget proposal from OMB. He held the rank of a member of the president’s cabinet, which technically made him a peer of Hillary and the rest of the top department heads. But his hold on the budget meant those peers had to beg him for cash.

  Hillary knew, coming into the job, that she would have to fight for every dollar that came her way—and that she had to be creative to maximize what she did get. After all, the United States was fully engaged in two wars, the domestic economy had collapsed, and Obama had been plunged into an ocean of red ink from which dry land might not be visible for a decade or more. Even under the best of budget circumstances, it’s hard to sell foreign aid funding to the American public. The basic question that members of Congress always hear from their constituents—and repeat to administration officials—is, why would the United States build a school in Baghdad when it could build one in Boston?

  For most agencies, the funding request process was pretty simple. The department’s staff spent months assembling a budget proposal and then in the fall submitted it to OMB. Ultimately, Congress had final decision-making power over the president’s budget request for all the agencies, but the final request was a forceful statement of White House priorities. By late November, OMB would deliver its judgment on each department’s initial request, often cutting back from an agency’s desired funding level. An appeals period followed between Thanksgiving and Christmas, when minor adjustments might be made to placate a secretary or an administrator. But by the end of the year, all Orszag and his aides had to do was dot the i’s and cross the t’s. In early February of the following year, the budget was sent to Congress.

  Few cabinet secretaries thought they could win a fight with OMB, mostly because the director was himself a cabinet-level aide to the president and because he typically had strong relationships with other senior advisers in the West Wing. That was certainly true of Orszag, at least at the start of the administration. Though Energy Secretary Stephen Chu and Commerce Secretary Gary Locke were known as frequent callers within the marble hallways of the Old Executive Office Building, the cavernous relic that houses OMB and other White House–run agencies, most didn’t waste much time appealing to Orszag.

  But Hillary Clinton had a lot more firepower in reserve than other Obama cabinet secretaries, as Orszag would come to find out. In late November or early December 2009, when OMB sent its first “passback” of State’s budget to Foggy Bottom, the bottom line was a small cut in funding, according to a State Department source familiar with the numbers. Hillary, who was looking for a double-digit percentage increase, pulled out her “secret weapon” in response. Deputy secretary of state Jack Lew, the old Clinton budget director, told Orszag his number was unacceptable.

  “Only a former budget director could get away with this,” said one State Department source, who admired Lew’s moxie. Orszag technically outranked Lew, but Lew’s experience and credibility at the highest levels of government exceeded that of most of the cabinet. Hillary had recruited him for such missions.

  Orszag and his bean counters made some minor concessions and came back with an upward revision that would have pleased most bureaucrats, taking Hillary from a cut to a small increase, maybe a little more than 1 percent. But from Hillary’s perspective, Orszag hadn’t gotten the message. It was time to go over his head. Now Lew went straight to Rahm Emanuel, one of many of Obama’s new aides who had gotten their big political break from the Clintons. We can’t live with this, Lew told Emanuel.

  Again, Orszag came back with another number—one that Hillary found still too paltry. “We’ll take it to the president,” Lew assured her.

  The budget request for the government’s security functions, which included the State Department’s funding, would ultimately be decided at a meeting of the National Security Council, where Orszag would have to argue against increasing Hillary’s bottom line in a room full of people who dealt with her regularly and had reason to cultivate her as an ally. By the time the b
udget made it to the top level, the other members of the National Security Council—the heads of security agencies—had been working together on a strategy for Afghanistan and Pakistan for a year, and the Defense Department supported more funding for State. Gates lobbied appropriators on Capitol Hill to boost Hillary’s budget, and he battled on her behalf within the administration. He once remarked to an aide that OMB was one constant from administration to administration: a Flat Earth society.

  Orszag, an invited guest at the NSC meeting, stood no chance of beating Hillary in that arena. “Yes, we made a budget request that was turned down from the OMB. Yes, she went to the president directly,” said a senior State official. “And yes, she got what she wanted.”

  In Hillary’s first full fiscal year, the White House’s budget request for State and aid programs grew by 10.6 percent to $56.6 billion. Hillary also won a provision, originally rejected by OMB, that protected money for embassies and consulates in war zones—Afghanistan, Pakistan, and Iraq, specifically—by funding them through a war-spending account. Congress wasn’t likely to mess around with the new president’s request to fund two wars started by his predecessor, though it did pare State’s ask after Republicans took power in the House. But the new secretary understood that her budget figure was a representation of her clout within the new administration, and it reflected the latitude she would have to pursue her agenda.

  She must also have understood that a roughly $50 billion budget for State and international aid programs didn’t exactly give her the keys to the federal treasury. More important, it didn’t make her the secretary of defense, who had almost $700 billion at his disposal. She wanted to be a player, not just a check-signer for do-gooder organizations in remote countries. That required forming strategic partnerships with other government agencies and private entities to amplify the State Department’s resources.