In an Uncertain World

by Robert Rubin

  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 popul
ist 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.

  CHAPTER SIX

  Confidence and Credibility

  IN AUGUST 1994, LLOYD BENTSEN called to tell me that he was planning to resign as Treasury Secretary after the midterm election in November. “I haven’t told this to anybody else,” he said. Lloyd explained that he was telling me because he was afraid I might be thinking about leaving the administration as well. If I went to the President with my resignation first, it would make it harder for him to go. Lloyd said he was going to recommend that I take his place at Treasury.

  The only person I told about Lloyd’s call was Judy. She had mixed reactions. She was pleased that I might have the opportunity to do something I wanted to do. But she had been hoping that after two years in the administration, I might leave and rejoin her in New York full-time. She was also afraid that the job of Treasury Secretary would impose a new kind of formality on our lives. Judy wanted to know if I’d still be able to walk down Park Avenue in an old pair of khakis. I said that whatever happened, I had no intention of changing because I had the job of Treasury Secretary.

  Some weeks thereafter, the President asked me to come to his office. He told me what I already knew—that Lloyd was leaving and had suggested that I be named as his replacement. Clinton said something that indicated that he was inclined to take the recommendation—but not without some concern about my leaving the job I was in. He said he felt the National Economic Council had worked well in a White House that continued to face problems of process and organization. For that reason, he had mixed feelings about sending me elsewhere. “You’ll be over there, and I’ll still be stuck here in the White House,” he said somewhat ruefully.

  Shortly thereafter, Leon Panetta, who had only just succeeded Mack as chief of staff, had me over to his office. He said that if I moved to the Treasury, it would leave a problem at the White House, but that he thought the choice would be mine. I responded that I wasn’t so sure about that, since the President hadn’t yet offered me the job. I was encouraged that Leon thought it would be up to me, but I wasn’t going to say I wanted the job until I was certain it was being offered. Instead, I told Leon that I had to think about my own life and what I wanted to do next.

  The situation remained ambiguous for a long while. A number of people who knew Lloyd was leaving assumed that I would replace him. But weeks and then more weeks went by and for some reason nothing happened. I never found out if the delay was because Clinton was considering other candidates for the Treasury job, deciding what to do about the NEC after I moved, trying to figure out how to get me to stay where I was, or simply dealing with more pressing matters. The President may also have been avoiding an issue that he wasn’t eager to face. Eventually, Leon called to tell me that the President wanted me to take the job and that was that. Clinton himself never formally offered me the position. Erskine Bowles, Leon’s then deputy and later White House chief of staff himself, used to joke some years later that if things kept going well for me as Treasury Secretary, maybe one day the President would offer me the job.

  I did have a variety of concerns about becoming Treasury Secretary. I had learned in my two years at the White House that, while the substance of the issues was most important, presenting positions in a way that was clear and precise and would also resonate with the public was also critical. At the NEC, I’d noticed that those who were really skillful at framing issues often didn’t just have a gift for
communication. They were people such as George Stephanopoulos, Gene Sperling, and Sylvia Mathews, who also understood policy and were able to think several chess moves ahead, anticipating the likely reaction to a comment and the possible reactions to that reaction.

  One of my biggest worries in moving to Treasury was how to find that quality of advice about communications and political strategy away from the White House. To be fair to the NEC, I had said I wasn’t going to take anyone but Sylvia with me to Treasury. But that meant I would have to build an entirely new team. I was especially concerned about how I was going to function effectively without Gene, the person I relied on most heavily in those areas. As it turned out, Treasury had a number of people with strong political and communication skills combined with policy expertise. But I didn’t know that before I got there.

  When I discussed this problem with Leon, he suggested that I take along David Dreyer from the White House communications office because he was unusually bright and had an especially good feel for framing issues. With his beard, ponytail, diamond-stud earring, and American flag necktie (usually worn with a denim shirt), David was not your typical Treasury official. What’s more, he had a reputation as being one of the more liberal members of President Clinton’s political team. I once gave Alan Greenspan a good fright by introducing David—who was dressed even more outlandishly than usual that day—as a close adviser of mine. The chairman stared at David as if he were a visitor from another planet.