If you believe Bob Woodward of the Washington Post, it wasn't until Jan. 7, 1993, just 13 days before his inauguration, that Bill Clinton found out who really calls the shots.
In his new book, "The Agenda," Woodward describes the January strategy meeting in Little Rock where the President-elect is advised that a credible deficit-reduction plan is required in order to placate the bond market.
"Clinton's face turned red with anger and disbelief. 'You mean to tell me that the success of the program and my reelection hinges on the Federal Reserve and a bunch of ------- bond traders?' he responded in a half-whisper."
This is a fair sample of the book's thesis, namely that Clinton was an idealistic candidate bursting with plans to rebuild the economy with a public-investment strategy until Greenspan & Co. told him the facts of life.
There are two important issues here--Clinton's political character and the constrictions imposed on any President by Wall Street. Are we truly the prisoners of bond traders and the Fed?
Against Woodward's kindly portrait of Clinton's belated education in the realities of economic power less than a month before he sat down in the Oval Office, there is a sourer truth.
From his very first economic plans as outlined in early 1992, Clinton was waving a white flag at Wall Street, striving to impart the message that he was a "new Democrat" and wouldn't rock the boat. His aides carefully floated the story that Paul Volcker, Wall Street's idol, might be Treasury secretary. At the time, an adoring press panted with enthusiasm for Clinton's "detailed" economic proposals, but anyone who bothered to read the paltry manifestoes found only the vaguest pledges for public investment, to be balanced by cuts elsewhere in the budget.
The man allegedly thunderstruck at that January meeting had already appointed as his main economic advisers a bond czar, Robert Rubin from Goldman Sachs, and a junk-bond trader, Roger Altman.
Woodward has Clinton red-faced and thunderstruck all over again in April, 1993, this time supposedly because it had somehow escaped the attention of this "hands-on" master of detail that in 1990, Congress had agreed to cap domestic spending until 1996. Hence his plans for public investment would mostly have to be scrapped. Once again, we have the idealist bushwhacked.
If Clinton was so startled and distraught by the caps, it's hard to explain something unmentioned by Woodward. Clinton extended the caps to the end of the century and even made them more restrictive. Unless a new President insists on fundamental change, there can't be any serious public-investment strategy till the year 2000.
The hero of Woodward's book is really Alan Greenspan, reverently portrayed as unrivaled in his knowledge of financial markets. This arouses hilarity in many, including Dean Baker of the leftish Economic Policy Institute, who reminds me that this is the man whose erroneous economic forecasts became a national joke in the Bush era and who, last February, sent the financial markets into a panic with a quarter-percent rise in interest rates, purporting to head off inflationary expectations.
Is every President doomed to be shackled by the Fed and the bond market or by spending caps set by a Congress with deficit-aversion mania?
A President has to have a clearly articulated economic agenda. Bill Clinton entered the White House with scant idea what to do, already bleating that the deficits were bigger than expected.
He accepted the proposition that if you worry the bond markets by talk of stimulus or expansion, then interest rates will shoot up. On Wall Street's orders, he became a deficit buster. Long-term interest rates went down. But now they're up again and long bonds are off from last year's peak by 30%, back where they were when Bush was in office.
Clinton threw in his lot with the bond market, has nothing to show for it, hasn't got an investment program and is locked on a path of deficit reduction in a sluggish economy with no prospect of long-term improvement.
Moral: Formulate a good plan and stick to it, regardless of what bankers and bond traders say. Judgment: Clinton hates to offend the powerful, whether bankers or the insurance industry. Now we have no program of economic recovery and no health reform, with Clinton waging merciless war, in the guise of welfare "reform," against the powerless and the poor.