by Tim Shorrock
Bill Clinton began his presidency on extremely poor footing with the Pentagon. The fact that he had avoided the draft and opposed the Vietnam War during the 1960s was bad enough for the generals who ran the armed services. Even worse was his attempt in his first year of office to lift the ban on gays serving openly in the military and the perceived arrogance of his young, liberal staff, who had a tendency to boss people around in the agencies they managed from the White House. Uniformed officers didn’t even like the way Clinton saluted, and viewed his proposals to slash military and intelligence spending as dangerous and naive. “I had the feeling the White House wanted the Department of Defense to cease to be part of the United States government,” a high-ranking Pentagon official told the New York Times in 1996. “We had terrible relations with the White House. They did not understand national defense.”21
Making war was not high on Bill Clinton’s agenda—or the country’s, for that matter—when he took power after defeating the senior Bush in the 1992 election. The country was just beginning to emerge from the bipolar world and mind-set of the Cold War. The Soviet Union had ceased to exist, and China and the newly independent countries of Eastern Europe had embraced capitalism with surprising fervor. In the early 1990s, President George H. W. Bush had tried to create a new “world order” in the aftermath of the Soviet Union’s collapse and America’s awesome military victory in the first Gulf War. By this time, the defense and intelligence budgets, which began to be slashed in 1990, had reached a post–Cold War low. At the CIA, the cuts resulted in a 30 percent decline in funding for the Directorate of Operations, which ran the agency’s clandestine services, and an overall personnel reduction of about 20 percent.22 “From the Berlin Wall falling and the Soviet Union collapsing, by around 1992 or so the budgets really started to plummet,” recalls Jacques Gansler, a former Pentagon acquisition official. “It was called the Peace Dividend.” Defense procurement was cut by $60 billion and total acquisition by $100 billion. As a result, Gansler told me, “there were significant cuts across the board in government employment, and intelligence was certainly one of the areas that suffered significantly.”23
With fears of nuclear and even conventional war fading, many Americans questioned the need for a huge military. Moreover, Clinton, the first baby-boomer and the first antiwar activist to become president, had little initial interest in intelligence. Early on, he dropped the practice of having a CIA official personally deliver the president’s traditional morning security briefing. James Woolsey, his first CIA director, saw Clinton so little that, when a deranged man crashed a small plane onto the White House lawn in 1995, tongues wagged in Washington that it was Woolsey, trying to see his commander-in-chief.
It wasn’t that Clinton didn’t believe in the use of American power, or downgraded the issue of national security. The invasion of Haiti in 1994, the use of airpower in 1999 to drive the Serbs out of Kosovo, and the tightening of economic sanctions on Iraq in the last years of his administration made that clear. He, and many of his contemporaries in government, simply believed that the nexus of American power had shifted away from weapons and spying systems to technology and international trade. The shift in priorities was symbolized by Clinton’s creation of the National Economic Council, chaired by the treasury secretary, as an equal to the National Security Council. The idea was to use American financial power to build high-technology industries that would replace the fading textile, garment, and steel industries and harness the government to make it happen. “It’s the economy, stupid,” was not only a Clinton campaign slogan, it was national policy.
The signature issue of Clinton’s first term was his Reinventing Government initiative run by Vice President Al Gore. It was designed to reduce the size of government and create government agencies that, in Gore’s words, would “work better and cost less.”24 Starting in 1993, Gore initiated National Performance Reviews throughout the government to determine what services various agencies provided and whether or not they could be done more efficiently in the private sector. He simultaneously ordered federal government managers to reduce total federal employment by 100, 000. The Clinton administration ended up transforming many agencies and subagencies into businesses, and handing out more strategic work to private companies than any administration in history. By the end of its term in 2001, the administration had cut 386, 000 jobs from the federal payroll and the government was spending 44 percent more on contractors than it had in 1993.25
The Gore initiative really picked up steam after the 1994 midterm elections, when the Republicans captured Congress and took power in the House for the first time in forty-three years. Flush with his success at the polls, House Speaker Newt Gingrich immediately started calling for deeper cuts in the federal workforce and a radical program of privatization. Clinton’s response was to come up with a compromise that met the Republicans halfway while still keeping his promise of making government more “responsive” to the public. Out of this coalescence of interests came the outsourcing of defense and intelligence functions that would reach its peak, or nadir, during the administration of George W. Bush.
Two weeks after the 1994 election, Vice President Gore sent a memo to all government departments ordering them to justify every program under their jurisdiction or risk either termination or privatization of those services.26 Within a month, he had negotiated deep cuts, totaling nearly $20 billion, in the Departments of Energy, Transportation, and Housing. When Gingrich introduced a bill making privatization mandatory in most agencies, Clinton and Gore denounced it as a rigid piece of legislation that would limit competition and government flexibility.
After two years of negotiations, the administration and the Republican congressional leadership agreed on a bill that required agencies to annually publish a list of jobs that are not “inherently governmental” and put them up for bid. The compromise elated conservatives, who had been waiting for such legislation for decades. When Clinton spelled out the details in his 1996 budget, the Heritage Foundation hailed it as the “boldest privatization agenda put forth by any American president to date,” and the Reason Foundation called it “the highlight of the year for privatization.”27
It was an amazing feat: even as Gingrich and his Republican colleagues were hammering Clinton for having an affair with a White House intern and over his foreign policies in Haiti and North Korea, they were working closely with him on privatization. In 1995, Joshua Wolf Shenk, a reporter for the liberal Washington Monthly, caught the zeitgeist in an article that described outsourcing as a virtual joint venture between Gingrich and Clinton. “Privatization—involving the private sector in public services, or selling state assets outright—is hot,” he wrote. “In particular, contracting out—hiring a business or non-profit to do the public’s work at taxpayer expense—is the vogue, bipartisan answer to all sort of governmental problems. The Internal Revenue Service wants private firms to hound those in debt to the government; the Bureau of Prisons wants private firms to lock up prisoners of the state; the Central Intelligence Agency want private firms to, well, ‘gather intelligence.’”28
That would come, in time. But overall, the number of government agencies that were privatized during the Clinton administration is astounding. One of the first government services to be sold to private interests was the vast computer network known as the Internet, which had started initially as a defense project linking government research institutes in different states. In 1993, the Clinton administration turned over the registration of domain names—the addresses that are used for e-mail and Web sites—to a private company called Network Solutions (perhaps this was what Gore meant in 2000 when he claimed to be the “inventor” of the Internet). A few years later, when the company’s government-sanctioned monopoly became controversial, management of the Web was handed over to an international consortium called the Internet Corporation for Assigned Names and Numbers, or ICANN.
Five years after the Internet sale, the Clinton administration privatized the U.S. Enri
chment Corporation, which processed uranium into fuel for nuclear power plants, and then sold the shares to private investors in an initial public offering that brought in $1.9 billion. That was the biggest sale of a government agency since the Reagan administration unloaded Conrail; at the time, the corporation had operations in fourteen countries, large enrichment plants in Kentucky and Ohio, and held a 40 percent share of the world market for processed uranium (the Washington Post called USEP “a major player in the country’s national security and a linchpin of global nuclear proliferation”).29 Also in 1998, the Department of Energy sold the Elk Hills Naval Petroleum Reserve to Occidental Oil & Gas Corporation for $3.65 billion. The reserve was the nation’s eleventh largest oilfield, and had served since the early 1900s as an emergency supply for the U.S. Navy’s oil-fired ships.
The last two sales alone brought in twice as much revenue as the Reagan administration earned from privatization deals in its entire eight years in office. The Clinton administration also auctioned off parts of the government-owned broadcast spectrum, for $8 billion; outsourced the management of over one hundred air traffic control towers administered by the Federal Aviation Administration; and backed the privatization of four of the nation’s five Power Marketing Administrations, which sell electricity generated by 129 federal hydropower facilities (that action was blocked by Congress). In his memoir, Clinton took pains to give his Reinventing Government (or “Rego,” as he called it) programs a liberal spin. “All the Rego changes were developed according to a simple credo: protect people, not bureaucracy; promote results, not rules; get action, not rhetoric,” he wrote. “Al Gore’s highly successful initiative confounded our adversaries, elated our allies, and escaped the notice of the public because it was neither sensational nor controversial.”30
Starting in 1997, Clinton’s administration began focusing its privatization energies on the military and intelligence communities. But he had to be careful: by this time, Clinton had alienated much of those communities by backing Congress in its defunding of the black budget—cuts that were fought every step of the way by Jim Woolsey, his CIA director. Clinton and Woolsey were not only on different pages politically, they worked at complete opposite ends of the street when it came to the budget. That was largely Clinton’s fault, however, because his staff apparently had no clue, when Woolsey was hired, that he was as close to the high-tech spying industry as any CIA director in history.
Woolsey had been around the national security establishment since 1969, when he began working as a systems analyst at the Pentagon. One of his first jobs there, according to an early profile of him in the New York Times, was studying “supersecret spy satellite programs inside a Pentagon vault.”31 For the next fifteen years, Woolsey made his way up the policy chain, serving as an undersecretary of the Navy and an arms control negotiator for two administrations. Along the way, he had become good friends with Richard Perle, his future comrade-in-arms in the campaign to topple Saddam Hussein. Perle at the time was an anti-Soviet hard-liner working on the staff of Senator Henry M. “Scoop” Jackson. Perle later brought Woolsey onto the staff of the Senate Armed Services Committee as its general counsel.
Over time, Woolsey became a hard-liner on foreign policy and maintained close ties with neocons who’d gotten their start opposing détente and arms control during the Ford administration (among his early contacts were Dick Cheney and Donald Rumsfeld, who served with Woolsey on the secret Armageddon Project). Once he turned rightward, he never looked back: during the Iran-contra affair in 1987, Woolsey represented Michael Ledeen, the man who brought Oliver North, a Marine colonel on the White House staff and Reagan’s National Security Council, into contact with Manucher Ghorbanifar, the Iranian arms dealer who acted as a middleman between the government of Iran and the Reagan administration (Ledeen had developed those contacts through his relationship with extreme rightists in Italy’s intelligence service).32 But Woolsey’s true interests lay in intelligence and the satellite imagery he had learned so much about as an arms control negotiator, a job that required close contacts with the CIA and its secret photoreconnaissance units. Long before he was appointed director of the CIA by President Clinton, Woolsey had found a home in the Intelligence-Industrial Complex.
In the early 1980s, as a corporate lawyer, Woolsey was recruited to the board of directors of Titan Corporation, a firm represented by his law firm that is now an intelligence subsidiary of L-3 Communications. Titan had many classified contracts in defense electronics and missile programs that Woolsey knew so much about as an arms negotiator. It was founded by J. Sidney Webb, the retired vice chairman of TRW, and Gene W. Ray, once the top strategic planner in the Air Force, who had developed computer programs that could simulate the outcomes of nuclear wars. By 1987, Titan had assembled a science and management team that BusinessWeek called “the envy of the defense establishment.” Seventy-one percent of its $4 million in revenues that year were from federal contracts.33
In 1991, Woolsey was elected to the board of Martin Marietta, one of the nation’s largest rocket manufacturers and a major contractor for the NRO (it merged with Lockheed in 1996), and a year later to the board of British Aerospace, which was just beginning its rise to the top ranks of the U.S. defense industry (it’s now known as BAE Systems). His experience in the industry clearly shaped his views toward intelligence. In its 1993 profile written when Woolsey was nominated to be CIA director, the New York Times noted that “though American intelligence organizations have already begun to focus more on the spread of weapons and regional tensions after the cold war, Mr. Woolsey is likely to go further by directing that more reconnaissance satellites, electronic interception capabilities and human intelligence sources be focused” on the “arc of unstable and heavily armed nations” running from the Middle East to Northeast Asia.34 Clearly, Woolsey had strong grounds to oppose cutting the intelligence budget.
But President Clinton and his aides didn’t have a clue about Woolsey’s background. According to the late David Halberstam, who chronicled the Clinton administration’s national security policies in his book War in a Time of Peace, Woolsey was “added to the [Clinton] team at the last minute as a necessary concession to the Reagan Democrats,” and “was always a bad fit.”35 Clinton, in his autobiography, says he first met Woolsey at a 1991 conference organized by Samuel “Sandy” Berger, Clinton’s old friend from the George McGovern presidential campaign of 1972. Berger, who later served as Clinton’s second national security adviser, organized a meeting for the future president with a group of Democrats and independents who had, according to Clinton, “more robust views on national security and defense than our party typically projected.” (Woolsey and Berger now work together at the private equity fund Paladin Capital Group, which invests in homeland security companies.) Clinton offered Woolsey the CIA post after one interview, and, as mentioned earlier, rarely saw him after he was confirmed.
Accounts of Woolsey’s two years at the CIA portray him as an arrogant intellectual who browbeat intelligence critics in Congress but was outmaneuvered because of his lack of presidential support. “Many of Woolsey’s friends and supporters blame his troubles on what they see as his argumentative and sometimes abrasive personal style,” R. Jeffrey Smith, a reporter at the Washington Post, wrote in 1994. “An ambitious, driven litigator, Woolsey is frequently said to be unable or unwilling to strike a compromise.”36 But part of the problem was that Woolsey strongly disagreed with Clinton’s desire to cut technical intelligence spending and wanted to continue a rebuilding program that Robert Gates, his predecessor as CIA director, had started under the first President Bush.
The CIA’s official history of Woolsey’s tenure at the agency, titled “Uncompromising Defender,” underscores that point, saying that Woolsey “identified more with sustaining elements of continuity in intelligence between the Bush and Clinton administrations than with calls for reining it in or changing its direction, and over time his lack of political allies or support led to his fighting incre
asingly lonely battles and eventually departing.”37 The CIA history dryly notes that Woolsey “did not enjoy a relationship of trust and mutual confidence with the president he served, Bill Clinton, who chose him as his DCI on the recommendation of foreign policy advisers. Their lack of a prior relationship did not foreordain distance between them, but unfortunately no bond developed in the 23 months that Woolsey served as DCI.”
In any case, Woolsey didn’t seem much interested in the CIA’s core competency, human intelligence. According to Melissa Boyle Mahle, a former CIA operative who wrote a memoir of her years at the agency called Denial and Deception, Woolsey reduced the number of large overseas CIA stations by more than 60 percent, and cut the number of deployed case officers working overseas by more than 30 percent. Much of this was in response to Al Gore’s National Performance Review of the Intelligence Community, which concluded that the IC’s biggest problem was its failure to work together as a team, and “called upon the community to find ways to share resources, be more efficient and effective, and reduce overhead.”38
In contrast, Woolsey was ferocious in defending the IC’s technical budget. He fought vigorously to increase spending on expensive high-technology programs—precisely the vehicles that were funding the great leaps being made at the time by Titan, Martin Marietta, and other companies he advised before going to the CIA (as required, Woolsey resigned all of his board seats upon taking over as DCI). Woolsey, according to the CIA, also “pressed for progress” in developing unmanned aerial vehicles for reconnaissance as part of a broader plan to demonstrate the utility of UAVs to the U.S. military. During his tenure at the CIA, the Pentagon created the Defense Airborne Reconnaissance Office to pursue the idea.
“In effect,” the CIA history says, “the NRO could now concentrate on space systems, and airborne programs enjoyed separate status and support” within the Department of Defense (as a footnote, the CIA adds that “Woolsey loved the science and technology aspects of defense and intelligence matters”). The UAVs developed under Woolsey’s watch were the predecessors of the Predator, which has been used extensively by the U.S. military and the CIA in the wars in Afghanistan and Iraq. Its primary manufacturers are Northrop Grumman and General Atomics of San Diego.
