by H. W. Brands
Jim Baker wasn’t ready to go as far as Regan. The chief of staff agreed that an obsession with the deficit could be counterproductive. “Downplay deficits and avoid specific deficit numbers,” he wrote in a memo of tactical guidance to the president. Yet Baker appreciated the revolutionary nature of Regan’s advice, and he realized that revolutions evoke resistance. Baker knew that the looming deficit terrified many Republicans and that Congress was going to act on the deficit whether the White House liked it or not. Baker still preferred spending cuts to tax increases, but he realized the cuts wouldn’t happen. “Both parties in Congress had simply lost their appetite for major spending cuts,” Baker recalled later. “So had a lot of cabinet officers.” The administration was forced to face political facts. “We could be proud of the budget cuts of 1981, but we would never again repeat that success.”
New taxes were the only option, Baker judged. He got Meese and Deaver to agree. He found another ally in Nancy Reagan. The First Lady was pained by the criticism of her husband as insensitive in demanding more cuts in social programs at a time of high unemployment and a growing defense budget, and she quietly added her voice to those in favor of new taxes.
Her husband remained stubborn. “I told our guys I couldn’t go for tax increases,” he wrote on January 22. “If I have to be criticized I’d rather be criticized for a deficit than for backing away from our economic program.”
Reagan thought he should appeal to the public again. He blamed the media for exaggerating and misinterpreting the recession. “The press has done a job on us, and the polls show its effect,” he observed. “The people are confused about the economic program. They’ve been told it has failed, and it’s just started.”
Baker declined to schedule a presidential speech, believing it would merely postpone the inevitable. Through the end of winter and into spring the economic numbers kept getting worse, and so did Reagan’s job ratings. In April, Gallup showed that only 43 percent of Americans approved of his handling of the presidency. Reagan again blamed the media. “It reflects the constant media drumbeat of biased reporting against what we’re trying to do,” he said.
At Baker’s urging, Reagan reluctantly consented to negotiations between the White House and Congress. The Senate sent five delegates, the House seven, and the administration five. The “Gang of Seventeen” met almost constantly for weeks. “We met at Blair House, in the family theater in the White House, in the Roosevelt Room, at the Vice President’s residence,” Don Regan recalled. The talks weren’t exactly secret, but neither did the participants want them publicized—hence the changing venues. Progress came slowly. “Innumerable sets of numbers were discussed, innumerable formulas were proposed, but no obvious compromise emerged,” Regan said. “We could not even agree on the size of the deficit.” At this point Regan was willing to grant the sincerity of all concerned. Yet the difference between the two sides seemed intractable. “The administration wanted to cut spending in domestic programs and control it more closely in defense programs; Congress wanted to increase revenues and slash defense spending so as to maintain high levels of domestic spending. We thought that Congress was running up the bills with no thought for the consequences; they thought that the administration was letting untold billions in revenue slip through its fingers as a result of its unprecedented tax cuts.”
Reagan grew impatient at the slow pace of the talks and again threatened to go to the people. He proposed to tell the country that the Democrats were putting party interest above the national interest. “There will be blood on the floor,” he vowed.
Baker thought blood would make matters worse, and he again put the president off. Reagan grew more frustrated. “The D’s are playing games,” he growled of Tip O’Neill’s crew. The Democrats were demanding that Reagan rescind the third year of the tax cuts. “Not in a million years!” Reagan swore.
Reagan called O’Neill and suggested a personal conversation. The House speaker agreed, and Reagan rode to the Capitol. The president had originally proposed $100 billion in spending cuts; O’Neill and the Democrats had countered with $35 billion. During the course of the Gang of Seventeen discussions, the administration had come down to $60 billion. The Democrats hadn’t budged. Reagan hoped to induce movement during his meeting with O’Neill. In three hours he got nowhere. He made a last offer—to split the difference between the administration’s $60 billion and the Democrats’ $35 billion. O’Neill again refused. Reagan gathered his papers and left.
The next day he finally took his case to the people. He explained the concessions the administration had been willing to make, and he denounced the intransigence of the Democrats. With charts he asserted that the Democrats’ policies would lead to unsustainable spending and taxes. “The philosophical difference between us is that they want more and more spending and more and more taxes,” Reagan said. “I believe we should have less spending, less taxes, and more prosperity.” He pledged to continue working with “responsible members” of the Democratic Party to find a solution to the fiscal impasse. And he once again called on Americans to support him. “Make your voice heard. Let your representatives know that you support the kind of fair, effective approach I have outlined for you tonight. Let them know you stand behind our recovery program. You did it once, you can do it again.”
THIS TIME THE Reagan magic failed. The public declined to rally to the president. His approval numbers slipped further. He continued to deny that anything was wrong with his policies. “People are confused on the whole budget issue,” he said.
O’Neill and the Democrats read the polls and grew more determined to hold their ground. Baker urged Reagan to cut a deal before he lost the public entirely. Baker gathered Ed Meese and Mike Deaver, and the troika made a united pitch for a bargain that included higher taxes.
Reagan didn’t like the idea any more than he had from the start. But he realized he was out of options. “The president listened,” Baker recalled, “then took off his reading glasses and threw them down on the Oval Office desk. ‘All right, goddammit,’ he said. ‘I’m gonna do it, but it’s wrong.’ ” Decades later, Baker remembered the president’s vehemence. “I thought they were going to break,” he said of the flung spectacles.
What Reagan agreed to was increases in business and excise taxes, to yield the Treasury almost $100 billion over three years. The 1981 personal income tax cuts remained in place. Reagan wasn’t happy, but he understood that politics rarely made anyone really happy. “A compromise is never to anyone’s liking,” he observed. “It’s just the best you can get and contains enough of what you want to justify what you give up.”
Reagan hoped that by yielding on taxes, he would win on spending. “The tax increase is the price we have to pay to get the budget cuts.”
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THE QUESTION FOR any administration is not whether scandal will strike but when. The executive branch comprises many thousands of men and women, subject to the same temptations to sin and opportunities for error humans are always prone to. The closer the individuals are to the center of power, the greater the temptations and opportunities, and the sharper the scrutiny by the media and the public.
The first scandal of the Reagan administration was small beer as scandals go, but it nonetheless rocked Reagan’s inner circle. In September 1981, $1,000 was discovered in the office safe of Richard Allen. The national security adviser had shifted quarters in the West Wing, and the money was left behind. Allen explained to Reagan that a Japanese magazine that had interviewed Nancy Reagan had tried to pay her for the interview. Allen had intercepted the money to avert embarrassment to Nancy or to the magazine. His secretary put the money in his office safe, and he forgot about it until its recent discovery. Reagan accepted Allen’s explanation. But the FBI had to investigate, and the investigation leaked, embarrassing the president.
Reagan interpreted the leak politically. “I suspect bureaucratic sabotage,” he wrote. “Our administration and not Dick Allen is the target.” The FBI found not
hing against Allen, who wanted to keep his job.
But Reagan, usually a forgiving boss, decided to get rid of him. Reagan’s foreign policy team wasn’t working smoothly; Allen was often at odds with Al Haig or Caspar Weinberger or both. Reagan judged Allen the most expendable of the three. “The press is not going to let up if he’s in that job,” the president wrote.
WILLIAM CLARK MOVED over from the State Department to take Allen’s post. Reagan knew Clark from California, where he had served on the state supreme court. He also owned a ranch near Reagan’s and shared an outdoorsy sensibility. Clark’s quiet style promised fewer distractions from the substance of foreign policy, which remained focused on the Caribbean. “We are now at a watershed in U.S. foreign policy,” Clark told a meeting of the NSC in February 1982. “The greater Caribbean is to us what the Mediterranean is to Europe. It is our front yard—not our back yard, a metaphor which suggests an area of marginal concern.” American interest in the Caribbean dated to the nineteenth century; by World War II the region had become a secure part of the American sphere. “This is no longer the case entirely,” Clark said. “In the region today we are faced with a combination of threats.” Weak economies and fragile political institutions invited subversion by anti-American forces. “The chief instigators are Cuba and its patron, the Soviet Union.” Leftists in Nicaragua and Grenada aggravated the turmoil. “It is a formidable political, military, economic, propaganda apparatus facing us with new targets of opportunity being developed all the time.” Clark didn’t mind sounding alarmist. “The threat to the Caribbean is unprecedented in severity and proximity and complexity. By contrast, the Nazi threat in the 1930s and 1940s and the Castro threat in the 1960s were more limited in scope, with fewer resources being expended. The strategies were of a less sophisticated nature and were employed for a shorter period of time.”
Clark yielded the floor to William Casey, who detailed the activities of the Cubans in the region. Cuba was projecting its influence around the region in part as a way of employing the young men who formed a demographic bulge in the country’s population and couldn’t find work in Cuba’s floundering economy, Casey said. The Cuban troops were well armed and provisioned. “The Soviets gave Cuba some 66,000 tons of military equipment last year—more than $1 billion in arms including SA-6s, MIG-23s, T-62 tanks, MI-24 helicopters, etc. Cuba has a modern army with substantial reserves plus 200 MIG aircraft. It receives $8 million a day in aid in the form of cheap oil and a subsidized price for Cuba’s exports: nickel and sugar.” Castro had developed a strategy for destabilizing conservative and moderate governments in the region. “Cuba and Castro bring together the various guerrilla factions within the target countries and after they are unified Havana supplies them with arms, training, etc. in order to make the guerrillas more effective.”
The Sandinista government of Nicaragua was copying the Cuban model of subversion, Casey said. “Nicaragua continues to build up its military capabilities. MIGs are expected soon. Nicaragua’s build-up in military strength will intimidate its neighbors and tip the balance in El Salvador in favor of the guerrillas against the government forces because, quite frankly, people join what appears to be the winning side.”
Casey concluded that the United States found itself at an increasing disadvantage to Moscow and its Caribbean-basin allies. “The Soviets are in a no-lose situation,” the CIA chief said. “If we don’t act, we lose credibility and the Soviets gain an increasing number of allies within our own hemisphere. If we react strongly, the Soviets will be able to say the United States is no better than the Soviets are in Poland.”
Thomas Enders, the assistant secretary of state for inter-American affairs, reported that an interagency group had been working on the Caribbean basin. It had produced a detailed plan for countering Cuban and Soviet influence. Enders summarized the plan as consisting of three prongs. “First of all, we have to win on the ground in El Salvador and deal with the source of the arms problem in Nicaragua and Cuba,” Enders said. “Secondly, we need to obtain the support of the American people as well as the United States Congress. And thirdly, we need to mobilize support in the region—that is, the hemisphere.”
Mobilizing support, particularly among the American people, was Reagan’s specialty. Bill Clark had called this meeting to obtain a decision on a presidential speech on the Caribbean. Robert—“Bud”—McFarlane, Clark’s deputy, made the pitch to Reagan. “While we can propose solutions, we cannot carry out the solutions to these problems without the support of the American people,” he said. “The American public must understand the nature of the threat because for most Americans this hemisphere has always seemed to be a quiet, even a docile area, and extremely non-threatening.” The president’s communications skills were crucial in changing this impression—though not changing the impression too much. “It is essential that we do not come on as alarmists,” McFarlane said. “This morning, Mr. President, we have been alarmists.” But the president would know how to explain the threat more calmly. “This is a process that is going to take time. We must elevate the public awareness of what is going on, and that means three things: why the area is important, how it is threatened, and what we can do in economic, political and mili tary terms. And military would be the last of the terms, but all of these must be understood by the American people.”
JIM BAKER DIDN’T want Reagan to give anything like the speech Clark and McFarlane sought. Baker doubted that conditions were as dire as Casey portrayed them, and he feared that a Caribbean adventure would derail the administration’s domestic agenda. Moreover, he didn’t want Reagan getting out front on any half-baked initiative. “The speech alone won’t solve the problem, won’t give us the consensus, and may risk a revival of our Vietnam problem,” Baker told the NSC. “The president should and can address the economic situation at an appropriate time, but a speech that deals with the security problem will add to our serious domestic political problem. We must go to the Congress first. We cannot put the president out in front until we have an answer and until we have a strategy under way.”
Ed Meese sided with Baker. The Caribbean Basin Initiative, as Clark was calling the recommended program, made sense as an economic assistance package, Meese allowed. “The CBI is one of the best initiatives that we have in this administration. Let’s press on this.” But to entangle it with military and security issues was unwise. “Let’s not mix in El Salvador with the CBI because that will kill it. If we try to do both economic and security at the same time, we will lose both.”
Don Regan joined the skeptics. “First we must ask ourselves, who is this speech for?” he said. “Is it for Havana and Moscow, or is it for Duluth? With our internal economic problems, it would be very difficult to get people’s attention on a region outside the United States. Furthermore, by raising the question of security you are upping the ante by dwelling on the threat.”
William Casey fought back. “Unless you alert the country, you won’t get the support from the Congress or the country on the Caribbean Basin Initiative,” the CIA chief said. “You must go and outline the whole problem as it is.”
“How?” Baker demanded.
“We must spell out the CBI,” Casey said. “The CBI itself cannot be justified without a sense of threat.”
“We must do what we need to do,” Baker granted. But the president didn’t have to be the one to do it. “Don’t put the president up front until public opinion and the Congress begin to understand the problem better than they do now.”
REAGAN LISTENED DURING the first ninety minutes of the meeting, content to let Clark, McFarlane, and Casey battle Baker, Meese, and Regan. On another subject his silence might have signaled lack of interest. But Central America stirred his anticommunist passions, and he followed the arguments closely. He now engaged. He said he appreciated the need to organize and focus America’s efforts in the Caribbean basin. “If the president fails to mobilize those efforts, how much further behind will we be?” he mused aloud. Yet he didn’t w
ant to frighten anyone. His critics were already calling him a warmonger. “Many people believe we will be in a war soon.” He preferred not to add to this impression. “If I do make a speech, how do I avoid an I-told-you-so reaction among the public?” But he couldn’t remain silent. “If we look further down the road, I would not want history to record that there was a time when we could have headed off this hemisphere becoming an extension of the Warsaw Pact. Lenin may then turn out to have been right when he said that someday the Western Hemisphere would be ripe fruit after Europe.”
Reagan agreed that the American people needed to be reminded that the Caribbean was America’s southern border. “What a bastion of strength it would be if North and South America had bonds like those between the U.S. and Canada. No Kremlin would want to take on that.” He reflected again on the difficulty of dealing forthrightly with the danger without provoking the antiwar left. “How do we frame a speech that keeps the protesters out of the snow?” He elaborated on Baker’s Vietnam analogy. “We never explained Vietnam, did we? Eisenhower told Kennedy that more troops would be needed. We tried to fight a war pretending there was none.”
As to the Caribbean speech, it required further thinking. “We need concepts of what the speech would say. Shouldn’t we say that there is too much misinformation, that we did not discover El Salvador in this administration, that we are trying to address the economic problems of El Salvador, that we want to be a friend, that the CBI is our way of helping countries to achieve self-sustaining growth, that we will continue our close friendship with Canada and Mexico, that in the end we are all Americans? Can we do a speech without making it sound like war? We are seeking to offer the advantages of our economic system to others. We have had good neighbor policies before. None of them succeeded. We forget our size and our strength. We tried to impose our way. We should go to the Caribbean and say we are all neighbors. Let’s hear your ideas and together bring about the things you are interested in.”
