President Carter

by Stuart E. Eizenstat

  The New York City rescue plan was one of the Carter administration’s most important but least heralded accomplishments. The decision-making process worked brilliantly, and the results not only saved New York City, but possibly the entire municipal bond market just as the nation was emerging from the 1975 recession.

  It also saved the floundering career of a celebrated laureate of immigrant stock, a son of the Hudson River docks, once the youthful idol of teenaged bobby-soxers and an Oscar-winning actor. Frank Sinatra fished out a song from a 1977 Martin Scorsese movie, gave it his own passionate twist, and launched a new act of a triumphant career with what became one of his signature songs, “Theme from New York, New York,” signaling the city was back.

  “WHEN WE SEE THE COLOR OF YOUR MONEY, WE WILL CONSIDER SOME OF OUR OWN.”

  One month after Carter signed the New York City bill, I was shocked when John Riccardo, the CEO of Chrysler, came to see me with none other than Felix Rohatyn, this time in his private role as the auto company’s Lazard Frères adviser.30 I had met Riccardo several times in 1977 to hear his complaints about the cost of federal fuel-economy and auto-emissions regulations.31 Pummeled by the recession and by competition from small Japanese cars that were superior to Chrysler’s clunky models, he forecast a cash shortage of almost $2 billion over the next two years. Even after the shortfall had been whittled down to a projected $1.1 billion by the sale of loss-making subsidiaries, Riccardo begged for help. Rohatyn asserted that Chrysler could never raise that kind of money in the private market. On September 22, 1978, I organized an interagency meeting that revealed (unlike the New York rescue) a sharp division over whether we should help private companies at all. The economists argued that under our capitalist system, poor management should pay the price of its own bad decisions.32

  While we were trying to get our hands around their problem, Rohaytn called me in October with the news that Chrysler would require major federal help early in the New Year, and might not last through the spring. Riccardo met me again in December; he was clearly panicky and depressed, again complaining of the burden of federal regulations and seeking $1 billion of direct federal help over the next two years.33

  I immediately went to the president’s private study to share the grim news. He asked me to join him on his daily run around the South Lawn: “You need to stay in condition and get exercise.”34 While I appreciated the sentiments behind this gesture, I demurred so I could get to work on our newest domestic crisis.

  The UAW proposed that the government take an ownership stake in Chrysler because of its importance to the local and national economies, but we swiftly rejected this partial nationalization. Riccardo came to see me again in June 1979, backed by two Midwestern Senate Democrats, Don Riegle of Michigan and Tom Eagleton of Missouri. They brought a further tale of woe: Chrysler’s truck and van sales had collapsed, and losses were mounting.35 Riccardo returned yet again in August.36

  I convened numerous interagency meetings, but the administration’s indispensable player was the new Treasury secretary, G. William Miller. He had been the CEO of the Textron Corporation and then served as a mediocre chairman of the Federal Reserve, before replacing Blumenthal in the cabinet reshuffle. But putting the Chrysler deal together as Treasury secretary was his forte. At the central bank Miller had absorbed a principle enunciated by his predecessor, Arthur Burns, in facing down the presidents of failing banks: “We will see to it that your depositors and borrowers are protected—and we look forward to dealing with your successors.”37 If only more of banking’s crowned heads had rolled when the government resolved the financial crisis of 2008, the economic and especially the political history of the United States, with its angry populist turn, might have taken a different course.

  This was just the kind of challenge Miller loved. His message was direct and crisp: “This is going to take off and we’ve got to do something about it.”38 While he felt it was important to avoid a Chrysler bankruptcy when the economy was itself in bad shape, he found Chrysler’s demands “ridiculous” and proposed a federal government loan guarantee. Miller and Altman wrenched concessions from the UAW, the banks, and the company, and along with another financial wunderkind on my staff, twenty-seven-year-old Ralph Schlosstein, Altman drafted a Chrysler loan bill closely modeled on the New York City bill with the federal government as the lender of last resort.39 Carter insisted on stiff conditions. Before the first $500 million of a $1 billion loan guarantee was made, Chrysler’s unions had to agree to $1.5 billion in wage and benefit rollbacks; state and local governments had to put up a share of the loan package; and Chrysler’s banks had to relax their terms. As Altman colorfully announced: “When we see the color of your money, that’s when we will consider some of our own. But not until then; it’s up to you.”40

  We also insisted on one other condition: We would seal a Chrysler deal only with new management: On November 2, 1978, Chrysler’s board had picked a winner, Lee Iacocca, who had recently been fired as president of Ford Motors, where this marketing genius had helped revive the company’s fortunes with the sporty Mustang roadster, but had been spurned by the founding family. Although Riccardo continued to be our interlocutor, he would have to go. Just as the voters of New York had thrown out Beame and elected Koch, Iacocca became a turnaround expert of mythic proportions, aided by a bestselling autobiography with his own name as its title, establishing the cult of the CEO as hero.

  Congress passed the Chrysler bill with overwhelming bipartisan support on December 20, 1979, by a vote of 271–136 in the House, led by a dynamic young Detroit area congressman, James Blanchard (later governor of Michigan), and 62–38 in the Senate. A beaming President Carter signed the Chrysler loan guarantee act on January 7, 1980, in the cabinet room, surrounded by the appreciative Michigan delegation, and a deeply grateful (for the moment) Doug Fraser, president of the UAW, tens of thousands of whose good paying jobs were saved.41 It was the first time a government-led reorganization was done with major labor and management concessions. As I reflect, it is hard to think of a president with so many unheralded and indeed pathbreaking accomplishments who nevertheless got so little political credit for the kudos. Just as Mayor Koch turned against Carter after he saved New York City from bankruptcy, the UAW leadership endorsed Kennedy in the 1980 Democratic primaries, although the president had saved tens of thousands of their union jobs.

  PART V

  PEACE IN THE MIDDLE EAST

  17

  THE CLASH OF PEACE AND POLITICS

  Even at the height of the Cold War, Jimmy Carter made the Middle East peace process his top priority among all the foreign-policy issues confronting the United States. He did so in ways that exemplify the central dilemma of the Carter presidency. By taking on a challenge earlier presidents had feared to confront, he achieved the first peace treaty between Israel and any Arab state. It was an accomplishment of historic proportions, reached by Carter’s personal negotiations with Egypt, Israel’s most powerful foe in the Middle East, that neither country could have achieved on its own. It was a cold peace but ended the war between the two, creating the diplomatic foundation for Israel’s security and American policy in the Middle East for more than thirty years. Today Egypt works closely with Israel against their common foe: radical Islamic groups like Hamas, by sharing intelligence and closing the tunnels to Gaza that were used to smuggle arms to Hamas.

  But Carter achieved this by ignoring domestic political constraints, straining relations with a key base of his support, the American Jewish community. Tackling an intractable issue oblivious of its political costs, he stumbled in his initial approach, corrected his course, and with huge and often painful effort achieved lasting results. Except for Cuba, there is no other issue in American foreign policy where domestic politics intrudes more directly than the Middle East. Carter’s efforts caused significant schisms even among his advisers. On the one side stood Mondale, Ham Jordan, Bob Lipshutz, and I, seeking a less confrontational posture toward Israel and more sensi
tivity to domestic political concerns. On the other were Vance and Brzezinski, and usually the president himself, aggressively pushing forward a peace process in ways that often alienated Israel and American Jewish leaders.

  The United States has had a moral commitment to Israel’s survival since Harry Truman assisted in its birth in 1947 at the United Nations. This was underwritten by American public support, which sees Israel as an island of democracy in a sea of autocratic regimes, the Holy Land, and further reinforced by an American Jewish community determined that Jews surrounded by more than twenty hostile Arab countries would never again stand defenseless and without a refuge to escape another annihilating Holocaust.

  But the United States also has strategic and economic interests in the Arab world, which never accepted a Jewish state in its midst. During that Cold War era, America had a powerful interest in reducing Soviet influence in a geostrategic crossroads with huge reserves of crude oil. No American president has been able to avoid prickly relations with the Jewish state, not Carter or even Harry Truman, who in recognizing Israel’s independence overrode his revered secretary of state, George Marshall, who threatened to resign, but imposed an arms embargo on Israel during its war of independence. Dwight Eisenhower applied economic pressure to force Israel’s withdrawal from the Suez Canal during its 1956 adventure with Britain and France that attempted to topple the Egyptian demagogue Gamal Abdel Nasser, who closed the canal. In 1967, after Israel’s lightning victory over the Arab states more than doubled the size of the new nation, Lyndon Johnson negotiated a UN resolution demanding that Israel yield some of the fruits of victory in return for recognition of its right to exist as a sovereign state. The shorthand for this withdrawal policy was an exchange of “land for peace,” and only Carter succeeded in negotiating even part of this exchange for a full peace. From time to time Presidents Nixon, Ford, Reagan, and George H. W. Bush all threatened “reassessments” of U.S. policy or reductions in U.S. aid to retaliate against Israel’s expansionist policies or other actions, like taking out Syria’s nuclear reactor, to little effect. Carter never did.

  This is the story of how Anwar el-Sadat alone broke a century of enmity against the Jewish presence in Palestine over the opposition of his Arab allies and of many of his closest advisers. And it is also the story of how Menachem Begin overrode many of his oldest compatriots from the underground Irgun, which fought the British, often by violence, for Israel’s independence, as well as his own deep misgivings, to reach a historic accord with Egypt that meant a total military and civilian withdrawal from the Sinai, and granting the Palestinians “full autonomy” after a five-year transition period—which, tragically, was never implemented. Yet he was unable to overcome his ideological attachment to the West Bank, which he called by its biblical names, Judaea and Samaria, to implement the commitment.

  CARTER’S AMBITIONS

  When Jimmy Carter began to develop the policies on which he planned to run for president in 1976, I knew that while foreign policy could not win the election, it certainly could lose it. Americans rarely vote on international issues unless they feel their own or the country’s security is threatened, but they expect their presidents to know about the world and to be capable of projecting American power and working effectively with our allies. Carter was fully aware of this and had begun preparing himself by connecting with the foreign-policy establishment through the Trilateral Commission in 1975, composed of political, business, and academic leaders from Japan, Europe, and the United States, who offered him a place as a progressive Southern governor. This put him in touch with its cochairmen, Brzezinski, a brilliant Columbia University professor of international relations, whom Carter brought into the White House as his national security adviser, and David Rockefeller, a leader of the establishment and banker to oil interests at home and abroad. Even when he was still “Jimmy Who?” to the public and most of the press,1 Carter was eagerly participating in conferences with the grandees of the industrial nations as well as experts like Harvard Law School professor Jerome Cohen in fields as arcane as Chinese law.2

  In working with Carter as his principal campaign adviser on policy, I put special emphasis on Israel because of its political sensitivity and its importance to the Middle East, but also my own personal history. I wanted him to know that I had grown up in a home suffused with Jewish learning and culture, and devoted to Israel. My wife, Fran, learned Hebrew during a junior year in Israel, and my paternal grandfather and great-grandfather were buried there. I quickly learned I was pushing on an open door. He told me that since he was a young adult he had taught Bible classes, and support for a state for the Jewish people in their biblical homeland flowed directly from his Baptist upbringing.

  He had visited Israel in 1973 as Georgia’s governor, and confided to me his admiration of Israel’s desert agriculture and its vaunted military, as well as its Cold War importance as a pro-American democratic outpost in the Middle East. But the public campaign was an uphill battle. While I knew that a born-again Southern Baptist would be a hard sell to Jewish voters, the best I could get from him in December 1974, when he announced his run for the presidency, was a bland promise to preserve Israel’s “integrity.” Even that was a struggle among his political team, who argued against anything that might detract from his basic post-Watergate campaign theme of restoring trust in government.

  As the campaign evolved, I knew Carter needed to take more specific positions on the Middle East, and I concentrated on helping draft a speech in June 1976 to be delivered in New Jersey, because it would be crucial to Jews in key northeastern states, as well as Florida and California. He accepted virtually everything I put into the draft, except a phrase describing Israel as an “ally,” lest it be taken as an American military commitment. As he reviewed my draft, he paused over several passages and plaintively asked, “Do I really need to say all that?!” I replied that he did, and he agreed to a text in which he expressed many of his private thoughts about the biblical basis for a Jewish homeland, as well as its great accomplishments as a productive state and an open society. And he turned away from the balance-of-power politics played by Henry Kissinger by publicly pledging that the “American people would never sacrifice the security or survival of Israel for barrels of oil.”3

  Much of what he said in the heat of the campaign, he deeply believed and pursued in office—from his pledge to act against the Arab trade boycott of Israel (Congress enacted a law during Carter’s first year in office) to his commitment to promote direct Arab-Israeli negotiations (redeemed at Camp David). Unlike any other previous candidate, he cautiously opened his hand to the Palestinians by declaring that their problems had “a humanitarian core which has been neglected too long.”

  Other pledges had to be modified by events, but the principal thrust of the Carter speeches found its way into the Democratic Party platform, which pledged “consistent support of Israel, including sufficient military and economic assistance to maintain Israel’s deterrent strength in the region.” He only took exception to the platform’s call to move the U.S. Embassy from Tel Aviv to Jerusalem, believing the status of Jerusalem should be decided in negotiations. These reassurances to influential Jewish groups continued through the campaign. In the November election, this Baptist peanut farmer from rural Georgia received 70 percent of the Jewish vote.4

  In the early weeks following the election, before he named his foreign-policy team, I served as Carter’s principal aide during his transition meetings at home in Plains. He held his first meetings on the Middle East separately in December of 1976, with two Jewish Democratic senators, Abraham Ribicoff of Connecticut and Richard Stone of Florida. Ribicoff urged the president-elect to launch a major Middle East peace effort because Egypt was “shattered economically” and needed peace. He also suggested a role in any negotiations for Henry Kissinger on the ground that the Arabs trusted him. Carter politely said he would not rule out Kissinger, but I knew that Carter had no intention of using a man he had publicly criticized for h
is secret diplomacy, however brilliantly he had operated.

  But Carter did an about-face in assuring Ribicoff that he would not call another Geneva conference on the Middle East, when in fact it became an early centerpiece of his policy. Stone urged Carter not to formulate Middle East policy until he met with Prime Minister Yitzhak Rabin, who was seeking reelection as the Labor candidate in Israel’s forthcoming elections—advice he would have done well to follow.5 A month later Stone complained to me about arms sales to Arab nations;6 he might also have been encouraged by Carter’s campaign warnings against matching Soviet arms deliveries to Arab states because, as the candidate declared: “I do not believe arms sales buy lasting friends.” In fact Carter had to eat those words and sell fighter jets to Saudi Arabia and Egypt to bolster his diplomacy.

  That does not mean that vote-catching campaign promises are worthless and promptly forgotten after the election; but in the Oval Office competing interests come into play. Our campaign was no different. During an election, opportunities for sustained engagement on policy positions are limited. Candidates on the road are mostly cut off from their policy staff at home base, which for us was Atlanta. In addition, presidential campaigns have to concentrate on organizing supporters, coordinating with the media, and, of course, raising money. The role of policy wonks like me is decidedly secondary; making policy in a balanced and considered manner is almost impossible in such political frenzy. Once a president is elected, unanticipated events also can affect the priorities and even change the direction implied by campaign declarations.