Congress Puzzles Over the ‘New’ Dick Darman : Budget Chief’s Softer Style May Be Part of Plan to Cut Deficit

The scene: a Senate hearing. At the witness table is Richard G. Darman, director of the Office of Management and Budget. Darman is asked a politically charged question: How long does President Bush’s “no new taxes” pledge apply? For how many years?

Darman hesitates. Then a mischievous expression crosses his face. “As a starting position, I would say we might as well assume forever,” he says, evoking chuckles from the senators and the hearing-room audience.

This is the new Dick Darman--congenial, witty, a darling of Congress.

It’s the same Dick Darman who used to be described in the press with such words as “abrasive” and “prickly,” the same Darman whose fabled arrogance and bad temper made powerful enemies all over Washington during his days as a top staff member in the Reagan White House.

The new Darman wins plaudits from the likes of new House Speaker Thomas Foley (D-Wash.), who described the 46-year-old budget director as having “unfailing good humor and an easy and pleasant manner.”

The new Darman, marveled a Treasury Department official, has “entranced” lawmakers all over Capitol Hill. “They’re hypnotized!” he said, adding that given Darman’s previous persona, “You would have expected by now that he would have done something to (expletive) people off. But he hasn’t.”

Why so kind and gentle? What is Dick Darman up to?

Darman’s grand design is the subject of much speculation among economic analysts and policy-makers, for it may hold the key to whether the federal government will finally be able to significantly reduce its stubbornly high budget deficit. Perhaps no Cabinet officer since Henry Kissinger has earned such a reputation for strategic wizardry and Machiavellian cunning as has Darman. And the deficit problem is so politically intractable that only a strategic wizard--or a Machiavelli--could solve it.

Scored Early Victory

“Darman is one of the few people in this town who is capable of thinking in terms of a longer time horizon than this month, this week, this battle,” said Carol Cox, president of the Committee for a Responsible Federal Budget, a bipartisan group that advocates deficit reduction. “So we all have a suspicion that he has a game plan. But I don’t think it’s at all clear what that is.”

Darman’s first big coup as budget director--the fiscal 1990 deficit-reduction agreement between the White House and the congressional leadership--moved toward implementation in May as the House and Senate worked out the terms of a formal budget resolution.

For Darman, who served as the principal Administration negotiator, the development was a source of considerable pride; the resolution was gaining approval at an unusually early stage in the annual budget process, despite the absence of an economic or political crisis.

Moreover, the pact provided some important political benefits for Darman’s boss, the President, because it enabled Bush to show the nation that he could reach an accommodation with Congress without violating his anti-tax promise.

But Darman and the congressional negotiators fell far short of accomplishing a more substantive goal--meaningful reduction in the long-term deficit. To comply with the legal requirement to lower the projected deficit below $100 billion for fiscal 1990, the negotiators used highly optimistic economic assumptions and claimed billions of dollars in savings from accounting gimmicks and one-time measures.

As a result, while the deficit problem has been finessed temporarily, crises are looming down the road--quite possibly smack in the middle of the coming election year.

According to congressional budget experts, the recent budget deal leaves the projected deficit above $120 billion in 1991--the year the Gramm-Rudman-Hollings law sets a deficit ceiling of $64 billion. No matter how the deficit is shrunk to reach that target--whether with spending cuts, tax increases or both--the resulting political pain will be gut-wrenching, analysts say; gimmicks won’t do the job.

Must Build Trust

Darman doesn’t dispute that analysis. But achieving a far-reaching pact on the deficit, he argues, first requires a more “manageable” step, like the one just taken. It requires kindness and gentleness, he contends; it requires a negotiating climate in which all parties feel that they can rely on each other to step forward, to share the credit--and the blame--for taking politically difficult measures.

“Politicians worry about downside political risks. Generally speaking, they are risk minimizers,” he said. “If that’s true--and I think it is--then it must be true that you will succeed only if you first build trust.

“It’s like wolves,” he continued. “They show each other their necks, and don’t bite.”

Consider what happened--or, rather, what didn’t happen--during the recent budget negotiations. When congressional Democrats agreed to accept White House economic projections that they had previously criticized as too rosy, Darman and his colleagues didn’t leak the news to the press or gloat publicly; doing so would have made it more difficult for the Democrats to concede the issue. Likewise, the Democrats didn’t gloat when Darman made concessions--to cut defense spending, for example.

In other words, the wolves didn’t bite. “Once there was that sense of trust between the players, you did get the feeling you were going to get someplace,” said House Budget Committee Chairman Leon E. Panetta (D-Calif.).

But, Panetta added, trust will go only so far where the deficit is concerned. “Ultimately,” he said, “you really do have to deliver” by taking bold political risks. “That test remains for him (Darman)--just as it remains, frankly, for the leadership of the Congress and the President himself.”

Among Washington’s many Darman-watchers, there are multiple theories about what the OMB director really, secretly, is planning.

Waiting for Crisis

One is that Darman is biding his time to maneuver the political system toward the step he knows is required to achieve serious deficit-reduction--a tax increase.

According to this line of speculation, Darman is waiting for the right crisis to pave the way for Bush to yield gracefully. One possibility is the legislative stalemate that is almost sure to occur late this summer when Congress confronts the requirement to raise the legal limit on the national debt. Many lawmakers probably will find it difficult to vote for a higher debt limit--even though it is required to keep the government functioning--unless a credible deficit-reduction agreement is in place.

Another theory--contradictory to the first--is that Darman knows Bush can’t possibly break the promise that served as the centerpiece of his campaign, at least not any time this year or even next. So Darman plans to finesse the deficit problem as best he can by conducting negotiations that continue to produce incremental results, in the hopes that he soon will be in a different job, one with better prospects of long-range success.

“I have heard a number of people suggest, not jokingly, that Darman probably expects that Nick Brady will tire of things in 18 months or so, and he’ll get to be Treasury secretary,” said a well-connected former Reagan Administration official. “So he doesn’t want to rock the boat. And he is fundamentally not rocking the boat. He is playing a very sophisticated game of go-along-to-get-along. He is going to look great. The only thing is, he has done absolutely nothing to solve the long-range (budget) problem.”

A third theory is that Darman, despite his legendary ability to see four or five moves ahead of his opponents, realizes that it is pointless to have a fixed plan and will grasp opportunities when they arise. That’s the theory favored by one member of Congress who has watched him at close quarters. “Dick Darman is a day-to-day guy,” the lawmaker said.

Proved His Point

Darman is amused at these notions--but not very. “Let’s see, what are the theories again? One is secret taxer, one is secret aspirant, one is secret ignoramus,” he said. “My reaction is, none of the above.”

Whatever course Darman chooses, he can already lay claim to success in one important respect: After years of serving in the shadow of James A. Baker III in the Reagan White House and Treasury Department, Darman is showing that he can perform as a principal in his own right.

The Harvard-educated Darman held posts in several Cabinet departments during the Nixon and Ford administrations, and Baker, under whom he had served at the Commerce Department, brought him to the White House as a top lieutenant in 1981. Darman was widely viewed during the Reagan years as a policy whiz and political mastermind whose poor “people skills” meant that he could only function with a smooth, personable front man like Baker to handle many of the direct contacts on Capitol Hill.

Darman played important roles in some major negotiations, notably the 1983 rescue of the Social Security system and the 1986 overhaul of the tax code. But his contempt for people he deemed to have lesser intellects frequently landed him in trouble, and so did his ample ego. His flashes of rage at being described in the press as a “Baker aide” became a standing joke among reporters and Reagan Administration colleagues.

Can Be Humble

But Darman seems to have mellowed--maybe matured is a better word--during a 19-month hiatus he took from government in 1987-88 to work at Shearson Lehman Hutton Inc. as an investment banker. He has said his wife, Kathleen Emmet, a Harvard classmate and author, deserves much of the credit for improving his disposition. And now, nobody is accusing Darman of lacking the diplomatic skills required of a Cabinet officer.

At congressional hearings, he uses his subtle, self-deprecating humor to good effect, and can be downright humble at times--even to the point of mocking his own prior reputation for high-handedness.