Carter was thinking along the same lines as the governor of Georgia when their paths first crossed at Agnes Scott College, just outside Atlanta. Nader had gone there to help students start a public-interest research group. The governor told Nader he had tried and failed to have the Georgia legislature enact a consumer protection law. Nader suggested that the consumer movement form groups at universities and felt that Carter was the only governor who actually went out of his way to support it. Their paths crossed again at a food industry convention in Atlanta during the early days of Carter’s presidential race. As Nader was sitting at the head table, he heard what became a famous Carter mantra: “I want a government that is as humane and competent and good as are the American people.” As the campaign intensified, Carter called Nader to seek his advice and to promise “to take my cues for regulatory appointments” from the consumer activist.69 And he did.
None of this was a surprise. As early as January 1976, Carter gave a speech to the Consumer Federation of America that I helped shape. Declaring: “I’m an engineer and a scientist and a businessman and a farmer more than I am a politician,” he promised if elected to streamline the cumbersome regulatory apparatus that stymied consumers: “I don’t want anybody this year to vote for me for President unless you want me as President to completely reorganize the Executive Branch of the nation’s government. And, if I’m elected President, I’m going to do it, primarily because the American people are sick of the bureaucratic confusion here in Washington.”70
The most celebrated encounter between Carter and Nader occurred after Carter was nominated, when he invited Nader to umpire a softball game between the traveling press corps and the Carter staff; Carter was the pitcher. Nader remembered that the biggest excitement came after the game, when a fire broke out at brother Billy’s gas station.71 The relationship was cemented when Nader ate black-eyed peas with Jimmy and Rosalynn, stayed overnight at the ranch house in Plains, and had his breakfast served the next morning by the Democratic presidential nominee. Carter accepted Nader’s invitation to address a thousand citizen leaders of consumer, environmental, labor, health, and elder groups, which Nader later remembered was jammed and a great success. Sharing the platform with Nader, he pledged to be the nation’s consumer champion: “Consumers will now have a voice in the Oval Office,” and “some of you in the audience will be going into the administration.”72 This was not just campaign bluster.
Nader was so close to Carter that he had his personal phone number, and at 2:30 p.m. on election day, when the exit polls showed Carter would win in a close race, Nader called: “Let me be the first to congratulate you!” He told Carter that he was reading his book, Why Not the Best? and said, “I’m going to hold you to it.” He said Carter replied, “‘I want you to,’ just like that.” After the election Carter invited Nader back to Plains, this time with James Fallows, a Nader acolyte who became Carter’s speechwriter (before his defection). They spoke for three hours, during which Nader tried to map out the hurdles the new president would face in Washington. He urged Carter to spend time at agencies and departments to infuse them with his consumer vision and to develop a strong constituency across the country. Nader observed Carter taking copious notes. For someone who could be cynical in the extreme about politicians after years of contentious public engagement, Nader noted, “I’ve never had anybody at the top level of politics do something like that.”73
Carter proved as good as his word in appointing consumer advocates to high regulatory positions, and many were either Nader’s Raiders or close allies of his movement: Harrison Wellford went to the Office of Management and Budget to take charge of Carter’s project to reorganize and streamline the government. Joan Claybrook was named administrator of Nader’s signature agency, the National Highway Traffic Safety Administration; Donald Kennedy was appointed as commissioner of the Food and Drug Administration; Henry Geller was assistant secretary of commerce and led the newly created National Telecommunications Administration; Susan King went to the Consumer Product Safety Commission; Eula Bingham became assistant secretary of Labor in charge of the Occupational Safety and Health Administration; Douglas Costle, administrator of the Environmental Protection Agency; and Michael Pertschuck was tapped as chairman of the Federal Trade Commission.
Carter also made seventy-one-year-old Esther Peterson, from the labor movement and one of the nation’s most determined consumer champions, the nation’s first and only White House special assistant for consumer affairs—she was also one of the most endearing public figures I have ever met. Said Pertschuck: “Carter was the first and only president to make these appointments without having a business constituency that had made substantial campaign contributions that he had to pay attention to. So he was free to make them with regard to merit.” Moreover, he let them do their work and, in Nader’s words, “gave them elbow room.”74
BIG BUSINESS PUSHES BACK
Those appointments, powerful as they were, represented the high tide of the consumer movement in the U.S. government. It began receding when corporate America woke up to what was happening and struck back. Congress refused to enact Carter’s proposal for an independent Consumer Protection Agency, one of Nader’s public goals for years. It would have established a public consumer advocate in the administrative proceedings of any federal agency. While it would have no power to regulate, it could intervene, debate, and issue studies in the consumer interest and, in extreme cases, bring suit in federal court against an agency that improperly ignored the interests of consumers, and this is what frightened the business community. Their leaders launched a ferocious and effective counterattack that changed forever the way corporate America approached Washington.
This had been several years in the making. In 1971, reacting against the rise of Nader’s consumer movement, Lewis Powell, then the president of the American Bar Association and later a U.S. Supreme Court justice, wrote a prescient memorandum, arguing that the consumer movement was imposing enormous costs on American business through consumer, safety, and environmental legislation.75 Powell urged the chief executives of America’s largest corporations to become personally involved with pending legislation and rule making, and not just rely on junior people in their Washington offices. He laid out a detailed program, including the creation of business-oriented research institutions.
This was the genesis of the Business Roundtable, founded in 1972 and it is still influential now. The major business groups joined together in Washington to give the consumer movement, Nader, and Carter a bloody nose and show their strength when laws and regulations were made that affected their companies. Nader grudgingly recognized that “the idea that the CEOs were going down to directly lobby Congress was a master stroke.”76 At the same time he realized that the traditional countervailing force of organized labor had weakened, with its membership declining under an “aging, stagnant leadership, which was self-perpetuating.” And the power of business not only was enhanced by chief executives lobbying Congress, but by disbursing money through their PACs.
The effort to pass the Consumer Protection Bill is what soured Nader on Carter. A similar bill had passed both houses of Congress in 1975, but died when President Ford announced he would veto it. When it was reintroduced, Nader thought it would sail through the Democratic Congress once again, this time with a sympathetic White House. The business lobby had already taken dead aim on our tax reform bill when, as Nader put it, “The corporate jets started landing at National Airport and [their passengers] heading for the Hill. And what was a good bill came back as a Swiss cheese operation … a monster.” Now the business community set its sights on the Consumer Protection Bill. Nader believed the White House consumer advocates had nailed down 60 votes to stop any filibuster in the Senate. The bill was scheduled to come to a vote in the House in November 1977.
But White House congressional liaison Frank Moore, who felt the bill overreached and would alienate the business community and Carter’s Southern base, asked Speaker O’Neill a
t the last minute to delay a vote until early in the new year, without informing Esther Peterson. This gave the business community time to organize opposition in the members’ home districts, and when the vote came in February 1978, it was defeated 227 to 189. Nader accused the president of not expending enough political capital to garner the few additional votes that were needed. The legislative defeat was traumatic for him after so many consumer victories in the past few years, and Nader, who wanted all or nothing, turned against Carter.
For her part, Peterson was so outraged at Frank’s decision that she boarded a plane to her vacation home in Vermont and had to be reassured by the president that she would have more authority and staff to support consumer interests in all domestic-policy meetings.77 It was worth her while, because she and the president took dramatic action in the waning days of his administration. Feverishly working around the clock on the Iran hostage crisis, he agreed to meet Esther, who, for two frustrating years, had chaired an interagency group that failed to gain agreement to limit exports of products not approved for use in the United States. When he asked her why he should sign an executive order when everyone in the administration opposed it, she leaned over his presidential desk and said: “Mr. President, because it’s the right thing to do, and it’s consistent with your promotion of human rights abroad.” He did so less than a week before leaving office.78
The business community’s opposition to Carter’s consumer agenda was not enough to deny him lasting accomplishments through his regulatory appointees; on occupational health and safety, automobile airbags, limits on advertising aimed at children, transparency on funeral charges that bilk grieving families; and a National Consumer Bank to make loans for housing, food, clothing, retail, and insurance co-ops. The administration also accelerated the congressionally mandated fuel-efficiency standards the auto industry wanted to delay.
It was commonplace that those for whom President Carter risked his political neck often failed to come to his aid when it mattered—and only realized later what they had lost. Nader told me years later, when this principled activist had had decades to consider the dangers of demanding utopia or nothing in the real world: “I would never have dreamed that I would tell you now that the Carter administration was our last chance. We never did know it. We had a different frame of reference.… Little did we know.”79
16
SAVING NEW YORK AND CHRYSLER
Two generations ago, New York resembled nothing so much as an exhausted heavyweight on the ropes, with the referee—the president of the United States—ready to stop the fight and let the city go bankrupt. For today’s ambitious young men and women drawn to the attractions of the city that never sleeps for jobs in its finance, media, and arts, as well as its after-hours social life, such a presidential thunderbolt seems impossible to comprehend.
While the city was floundering, Gerald Ford was engaged in a life-and-death struggle for the Republican nomination with Ronald Reagan. Bailing out New York City was not the way to capture the conservative Republican vote. Ford never uttered the words in huge capital letters in that celebrated New York Daily News headline: “Ford to City: Drop Dead.” But he did declare before the press in Washington that he would veto any federal bailout for New York. Instead he proposed legislation to help the city declare bankruptcy, asking why “working people around the U.S. should be forced to rescue those who bankrolled New York City’s [profligate] policies for so long—the large investors and big banks.”1 That speech, which inspired the Daily News headline, may have been one of the reasons he lost the presidency to Jimmy Carter.
Together with Ford’s decision to dump his moderate Republican vice president, former New York governor Nelson Rockefeller in 1976, for a new running mate, the hawkish Kansas senator Bob Dole, the stinging memory of the tabloid headline clearly helped Carter carry New York State in the general election, and helped establish our small-town candidate’s urban credentials with Democratic voters across the country. It would have taken much longer for the city to recover if Carter had not moved swiftly, even before his inauguration as president.
New York was and still is the nation’s largest city, but with limited taxing power on its own. Its liberal ambitions far outweighed its fiscal reach, and its problems had been accumulating for years. The city had been masking its deficits by accounting tricks, mainly by raiding the capital budget to meet operating costs. Finally, in 1975, when the city’s bankers lost all faith in the politicians and balked at again kicking the can into the following year by refusing to renew the municipal credit lines, New York began running out of cash. As the city’s lawyers went to the State Supreme Court with bankruptcy papers in hand, the bankers blinked and forked over money at the last minute.2 This only temporarily averted what would have been the largest municipal bankruptcy in history, with potentially severe repercussions not only for the city but for more than 200 banks around the country that held New York City bonds—and not just for them, either. The city’s mammoth municipal workforce would have been in limbo and its pensioners out of luck.
The city had lost about one-fifth of its economy during the previous seven years,3 and between 1970 and 1978 it lost 600,000 residents, many of them middle class. Woeful mismanagement, white flight to the suburbs, and a declining tax base were exacerbated by the 1975 recession. One million people were on welfare, and the municipal debt load totaled more than $11 billion—about $1,500 for every man, woman, and child in the city. Mayor Abe Beame, a former high school accounting teacher turned clubhouse politician, proposed cutting 38,000 city jobs and denying some 300,000 municipal workers a planned 6 percent raise. In protest, sanitation workers walked out; highway workers blocked traffic on key routes; police officers blocked the Brooklyn Bridge and let air out of the tires of some of the waiting cars. New York’s labor leaders had a history of tactical ingenuity. Four years earlier, Victor Gotbaum, leader of the powerful municipal workers’ union, had paralyzed the city by the simple expedient of leaving 27 of its 29 drawbridges open, and when the city’s financial woes became public and Beame sought concessions, Gotbaum led a protest of 10,000 workers against Citibank, calling it New York’s “Number 1 enemy.”4
So in April 1975, Governor Hugh Carey of New York State provided short-term funds on the condition that the city turn over control of its finances to the New York Municipal Assistance Corporation (Big MAC, as it became known), an oversight body created by the state legislature and headed by Felix Rohatyn, a partner in the famous financial firm of Lazard Frères. Rohatyn, a refugee from the Nazi occupation of France, was a brilliant and creative financier, and a dedicated public servant who dropped everything to help the city that had brought him to prominence. Short and wiry, with a scrub of hair and glasses but a commanding presence despite his relatively diminutive stature, Rohaytn became in effect the city’s banker, rolling over the city’s ballooning short-term debt while officials struggled to rein in spending.5
But even with his credibility and the support of the state, MAC’s initial bond offering of July 10, 1975, flopped, and the underwriters had to buy in most of the bonds. The next month the wages of the city’s workers were frozen, touching off strikes. In September the state legislature created the Emergency Financial Control Board, appointed to take control of the city’s budget and develop a three-year plan to balance it. As things were collapsing, Ford reluctantly signed a bill in December 1975 for a one-time, short-term loan to the city that had to be repaid within a year—like throwing a life preserver to a drowning passenger as the Titanic was going down.
“URBAN POLICY FOR THE REMAINDER OF THE TWENTIETH CENTURY”
Seizing an opening during his run for the presidency, Carter delivered a speech in New York City on April 1, 1976, that I coordinated as the campaign’s policy director. Titled “Urban Policy for the Remainder of the Twentieth Century,” it laid out a comprehensive urban policy for the federal government to work with the nation’s cities.6 Clearly addressing Ford’s dismissal of New York, but cautious
about singling out the city by name, Carter declared: “Our cities have needed help and the Republicans have turned their backs. Our cities needed financial assistance and the Republicans have given them crumbs. Our cities needed attention and the Republicans have given them neglect.” As the race narrowed, Carter took off the gloves in the final televised debate against Ford and said that a “mayor of a city like New York” needed to know that America’s cities would be partners with the federal government.
Once elected, the new president came to understand that a partnership would not be an easy arrangement. Mayor Beame called the president-elect and asked for immediate help to avert bankruptcy. Carter called me, and I told him we should be represented by Orin Kramer, a twenty-seven-year-old New Yorker who was my staff specialist in banking and finance. Tall, lanky, swaggering, and provocative in the manner of his hometown, he sported a cigar and knew his way around municipal politics—perhaps too well. New York City politics are a world unto themselves, byzantine and loud, with in-your-face characters, strong union bosses, and an unforgiving press corps. Kramer had worked for a commission investigating a scandal at nursing homes controlled by a Brooklyn rabbi who was close to Stanley Steingut, the speaker of the New York Assembly and one of the most powerful Democrats in the state.
When Carter told Beame he was sending Kramer, the mayor was aghast. Kramer had testified that Steingut had tried to stop the investigation, and the Brooklyn pols complained that Carter was sending the man who “did in Stanley.” Beame called back and said he thought Kramer was pretty young and inexperienced. But with my backing, Carter said the appointment had already been announced, and he stood firm. When Kramer arrived at Gracie Mansion, the mayor’s official residence, they met in a basement office. Kramer felt he knew “214 facts about New York’s financial situation,” while Beame, who had previously been the city’s comptroller and was elected on the slogan “He knows the buck,” had to ask his deputy mayor: “How much debt do we have? Is it $6 billion or $9 billion?” It was neither.7
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