Detroit. Reagan had a suite on the sixty-ninth floor of the Renaissance
*Years later, I learned that Reagan always worried about being "overbriefed" by his advisers; in
the 1984 campaign, he blamed overbriefing for his poor performance against Mondale in the
first televised debate.
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Center Plaza Hotel, and on Tuesday of convention week he called Henry
Kissinger and me to his room and asked if we would feel out the former
president. He and Ford had been political rivals for years, but they had
buried the hatchet several weeks before, when Reagan had gone to visit
Ford in Palm Springs. Evidently the governor had broached the idea of a
joint ticket then; and while Ford had said no, he'd also made it clear to Reagan
that he wanted to help defeat Jimmy Carter. Reagan told us he had raised
the possibility of the vice presidency again with Ford earlier that day and
now he was pulling us in because we'd been among Ford's closest advisers
(Kissinger of course had been his secretary of state).
Ford was staying in a suite just one floor above Reagan's, and Henry and
I called and asked if we could stop by. We met with him and talked briefly
that night. The following afternoon we came back so Henry could present
a set of talking points about the vice presidency written by Reagan's counselor
Ed Meese and others in the Reagan camp. Because a former president
had never served as vice president, they were envisioning an expanded role
that would make the job attractive and appropriate for Ford. In their proposal,
Ford would be the head of the president's executive office, with
power over national security, the federal budget, and more. In effect, while
Reagan would be America's chief executive officer, Ford would be its chief
operating officer.
Personally I hoped Ford would accept; I felt the nation needed his skills.
But while he clearly felt the pull both of duty and of the limelight, Ford
was skeptical that a "super vice presidency" would actually work. For one
thing, it raised constitutional questions—the role was clearly beyond what
the Founders had envisioned. For another thing, he doubted that any president
could or should accept a dilution of power in carrying out his oath of
office. Also he was ambivalent about going back to Washington. "I've been
out of office four years, and I'm having a wonderful life in Palm Springs," he
said. Yet he really wanted to help unseat Carter, who he thought was a
weak president. There was lots of back-and-forth between the two camps,
and toward the end of the day Ford told us, "The answer now is still no, but
I'll consider it."
Rumors of a Reagan-Ford "dream ticket" meanwhile were sweeping the
convention floor. When Ford made a previously scheduled appearance on
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the CBS EveningNews, Walter Cronkite asked pointedly about the possibility
of a "co-presidency." Ford answered with his typical forthrightness. He
would never come back as a "figurehead vice president/' he said. "I have to
go there with the belief that I will play a meaningful role across the board
in the basic and the crucial and the important decisions."
Reportedly this infuriated Reagan, who was watching. He couldn't believe
Ford would discuss their private negotiation on national TV. But by
then I think both men were concluding that to redefine the vice president's
role was too important and complex a task to be accomplished on the fly.
Henry in full shuttle-diplomacy mode, was hoping to continue the discussions
Thursday but Reagan and Ford both knew that prolonging the uncertainty
would hurt Reagan's image. So Ford made his decision. He went
down to Reagan's suite around ten o'clock and told the governor he could
help the ticket more by campaigning as an ex-president on Reagan's behalf
than as his running mate. "He was a gentleman/' Reagan said afterward. "I
feel we're friends now." He quickly selected George H. W. Bush as his vice
presidential candidate and made the announcement that very night.
I didn't expect a role in the new administration and was not sure I
wanted one. Coming into the White House, Reagan had more talented and
experienced people than places to put them. That was either a problem or
an opportunity depending on what you did about it. Anderson, who'd been
named assistant to the president for domestic policy development, likes to
joke that he went to Reagan and Meese, who headed the transition, and
said, "We've got these incredible people, but if we don't use 'em pretty
soon, they'll attack us." Instead of dissolving the team that had helped him
win, Reagan instituted an advisory group called the Economic Policy Board.
George Shultz chaired it, and it included Milton Friedman, Arthur Burns,
Bill Simon, me, and several other prominent economists.
One of the first cabinet-level officers to be appointed was David Stockman,
the director of the budget. Reagan had campaigned on lowering taxes,
building up the military, and cutting down the size of government. The
strategy before the inauguration was to give Stockman a head start on the
budget, so tough cuts could be presented to incoming cabinet members as
a fait accompli. Stockman was a brilliant, hungry thirty-four-year-old congressman
from rural Michigan who relished being the point man for what
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came to be called the Reagan Revolution. In speeches Reagan had compared
downsizing the government to applying fatherly discipline: "You
know, we can lecture our children about extravagance until we run out of
breath. Or we can cure their extravagance by simply reducing their allowance."
In Stockman's version this philosophy had a fiercer name: it was
called "starving the beast."
I worked closely with Stockman during the transition as he fashioned a
budget that was tough as nails. And I was there the day shortly before the
inauguration when he presented it to Reagan. The president said, "Just tell
me, David. Do we treat everyone the same? You have to cut everybody
equally nastily." Stockman assured him he had, and Reagan gave his okay.
The Economic Policy Board found itself called into action more quickly
than anyone expected. The cornerstone of the Reagan tax cuts was a bill
that had been proposed by Congressman Jack Kemp and Senator William
Roth. It called for a dramatic three-year, 30 percent rollback of taxes on
both businesses and individuals, and was designed to jolt the economy out
of its slump, which was now entering its second year. I believed that if
spending was restrained as much as Reagan proposed, and as long as the
Federal Reserve continued to enforce strict control of the money supply,
the plan was credible, though it would be a hard sell. That was the consensus
of the rest of the economic board as well.
But Stockman and Don Regan, the incoming treasury secretary, were
having doubts. They were leery of the growing federal deficit, already more
than $50 billion a year, and they began quietly telling the president he
ought to hold off on any tax cuts. Instead, they wanted him to try getting
Congress to cut spending first, then see whether the resulting savings would
allow for tax reductions.
Whenever this talk of postponement would get intense, George Shultz
would summon the economics advisory board to Washington. This happened
five or six times during Reagan's first year. We'd meet in the Roosevelt
Room from 9:00 a.m. to 11:00 a.m. and compare our assessments of
the economic outlook. Promptly at 11:00, the door would open, and in
would come Reagan. Our group reported directly to him. And we'd tell him,
"Under no circumstances should you delay the tax cut." He'd smile and
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joke; Shultz and Friedman and others were old friends of his. Regan and
Stockman, who were permitted to attend the meetings but were not allowed
to take seats at the conference table or to vote, would sit along the
wall and smolder. Presently the session would end and Reagan would leave,
fortified in his resolve to press for his tax cuts. Ultimately, of course, Congress
approved a version of his economic plan. But since Congress shied
away from the necessary restraints on spending, the deficit remained a huge
and growing problem.
I played a small role in another presidential decision that first year: not
to meddle with the Fed. Reagan was being urged to do so by many people
in both parties, including some of his top aides. With double-digit interest
rates now entering their third year, people wanted the Fed to expand money
supply growth. Not that Reagan could command the chairman of the Fed
to do this. But, the theory went, if he were to criticize the Fed publicly,
Volcker might feel obliged to ease up.
Whenever the question arose, I would tell the president, "Don't pressure
the Fed." For one thing, Volcker's policy seemed right—inflation did
seem to be slowly coming under control. For another thing, open disagreement
between the White House and the Fed could only shake investors'
confidence, slowing the recovery.
Volcker didn't make things easy for the new president. The two men
had never met, and a few weeks after taking office, Reagan wanted to get
acquainted. In order to avoid the appearance of summoning the Fed chairman
to the White House, he asked if he could come see Volcker at the
Fed—only to have Volcker send back word that such a visit would be "inappropriate."
I was perplexed: I did not see how a visit by the president could
compromise the Fed's independence.
Nevertheless, Reagan persisted, and finally Volcker allowed that he
would be willing to meet at the Treasury Department. The president's
opening line at their lunch in Don Regan's office became part of the Reagan
legend. He said mildly to Volcker, "I'm curious. People are asking why
we need a Fed at all." I am told Volcker's jaw dropped; he had to regroup
before coming back with a persuasive defense of the institution. This evidently
satisfied Reagan, who went back to being his amiable self. He had
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communicated that the Federal Reserve Act was subject to change. The
two men cooperated quietly from then on. Reagan gave Volcker the political
cover he needed; no matter how much people complained, the president
made it his practice never to criticize the Fed. And though Volcker
was a Democrat, when his term ended in 1983, Reagan reappointed him.
I
I
n late 1981, Reagan asked me to take the lead in dealing with a colossal
headache that had been building for years: Social Security was running
out of money. During the Nixon administration, when the program had
seemed flush with reserves, Congress had taken the fateful step of indexing
benefits to inflation. As inflation soared through the 1970s, so did the costof-
living increases in people's Social Security checks. The system was in
such financial straits that an added $200 billion was going to be needed as
early as 1983 to keep the program afloat. The long-term prospects looked
even worse.
Reagan had shied away from talking in any detail about Social Security
during his campaign—when the question came up, he'd pledged simply to
preserve the system. And no wonder. Social Security is truly the third rail
of American politics. There was nothing more explosive than Social Security
reform: everybody knew that no matter how you dressed it up, any solution
was in the end going to involve either raising taxes or cutting benefits
for a huge and powerful bloc of voters, or both.
Yet the problem was serious, and leaders in both parties understood
that something needed to be done—either that, or face the likelihood of
not being able to mail checks to thirty-six million senior citizens and disabled
Americans. We were getting down to the wire. Reagan's opening
gambit, in his first budget, was to propose a $2.3 billion reduction in Social
Security outlays. That raised such a storm of protest that he was forced to
back down. Three months later he came back harder, with a reform proposal
that would cut $46 billion in benefits over five years. But it was clear
that a bipartisan compromise was the only hope. Thus the Greenspan
Commission was born.
Most commissions, of course, don't do anything. But Jim Baker, the ar
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chitect of this one; believed passionately that government could be made
to work. The commission he built was a virtuoso demonstration of how to
get things done in Washington. It was a bipartisan group, with five members
chosen by the White House, five by the Senate majority leader, and
five by the Speaker of the House. Virtually every commissioner was an all-
star in his or her field. There were congressional heavy hitters like Bob
Dole, the chairman of the Senate Finance Committee; Pat Moynihan, the
brilliant maverick senator from New York; and Claude Pepper, the outspoken
eighty-one-year-old congressman from Florida who was a senior citizens'
icon. Lane Kirkland, the head of the AFL-CIO, was a member and
became a close friend; so was Alexander Trowbridge, the head of the National
Association of Manufacturers. House SpeakerTip O'Neill appointed
the top Democrat—Bob Ball, who had run the Social Security Administration
for LB J. And the president appointed me as chairman.
I won't go into the intricacies of demographics and finance we mastered,
or the policy debates and hearings that ate up more than a year. I ran the
commission in the spirit that Jim Baker had envisioned, aiming for an effective
bipartisan compromise. We took four key steps to make the whole thing
