How Reagan Decides

By George J. Church. Reported by Douglas Brew and John F. Stacks/Washington

Intense beliefs, eternal optimism and precious little adaptability

The tension was palpable in the Cabinet Room of the White House as David Stockman passed out photocopied sets of his revised 1984 budget figures. One page was missing. "The Xerox machine gagged on the numbers," he quipped. The machine had good reason. Stockman had put together the deepest cuts in social spending that the Administration could hope to coax out of Congress with the most optimistic assumptions it could make about economic growth and job creation, and the bottom line was still appalling: a fiscal 1984 deficit of about $155 billion.

This was a shortfall more than twice as large as any recorded by a previous Administration. Worse, the ocean of red ink flowed not from a free-spending Democrat but from the most conservative President in half a century, a politician who had made a near religion of fiscal austerity and balanced budgets.

A hush fell over the group as all eyes turned to Ronald Reagan. But the President said nothing, and his face betrayed no expression. After a moment or two, the silence became awkward. Officials rushed to break it by questioning Stockman about this obscure number or that.

And thus, without searching discussion, sharp debate or a reflection of frustration, Reagan made one of the most potentially fateful decisions of his presidency. Barring some reversal that no Reaganaut who knows the boss well dares to expect, the President on Jan. 17 will submit to Congress a budget with a deficit roughly as large as the one envisioned by Stockman. To most of the top advisers gathered in the Cabinet Room on that day last month, the implications of a deficit of such magnitude were chillingly obvious: continued economic uncertainty, bitter battles with Congress and possible repudiation of the Administration at the polls in 1984.

Yet there is one person who remains supremely confident: Ronald Reagan. In his mind the budget reflects his basic principles, and so it must turn out right. That is the approach he has taken with the major acts of his Administration--so much so that the budget decision, and the way in which it was reached, constitutes a kind of microcosm of the Reagan presidency as it approaches midterm. The decision illustrates not only the President's views but his temperament, his outlook and how he handles his job. It indicates, too, the strengths and weaknesses he will carry into the third and fourth years of his term and doubtless into a second term, if he chooses to run and is reelected. For the White House has changed Reagan less than any other occupant in recent memory.

Reagan went to Washington believing he had a mandate for the principles and priorities he had espoused for most of his adult life. At home, the source of most evil is swollen, all-intrusive Big Government. It must be cut down, by deregulation and slashes in social spending and, above a11, by reducing taxes. Abroad, the source of very nearly all evil is the aggressive and expanding Soviet Union, which must be faced down by a rapid buildup in the armed might of the U.S.

With that as a given, all budget decisions follow naturally. There can be no thought of cutting defense spending. As Reagan told TIME in an interview, "Defense cannot be looked at as a part of a budgetary solution. Defense must be looked at as to what needs to be done to ensure our national security." Nor can there be any trimming or delay of the 25%, three-year cut in income tax rates that he rammed through Congress in 1981. That reduction is too essential to the Reagan world view, in which taxes are bad and cutting them cannot be anything but good.

To many critics outside the White House, and not a few inside, these positions seem contradictory or at least susceptible to being pushed too far, too fast. Nancy Reagan, in an interview with TIME, defends her husband against the frequent charge that he decides many important matters on instinct alone. Says the First Lady: "Some decisions are on just pure instinct. [But] on a lot of the terribly substantive ones, the budget and so on, you cannot go just on instinct." She adds, however: "He has changed his mind and his positions on things; whether he is quick enough to do it or not, I don't know. I think . . . yes, I think he can be stubborn at times."

In Reagan's view, his stubbornness is fully justified, and that introduces the second indispensable element in his outlook: his eternal optimism. He believes that a policy founded on correct principles must succeed, and so the deficits can only be a passing embarrassment that should not distract his Administration from its long er-range goals. As he likes to tell his staff, "When you are up to your ass in alligators, you sometimes forget that we are here to drain the swamp."

Reagan simply does not believe the forecasts of his own economists that his tax and defense policies are building enormous deficits into the budget for fiscal 1984 and for many more years to come. He will report those forecasts to Congress only because by law he must. Reagan thinks that his tax cuts and slashes in social spending will shortly produce a boom that will fund lavish military spending and shrink the deficits too. Economic predictions, as he has told his staff quite correctly, are often wrong, "so why not take the optimistic view?" Says one aide: "He is absolutely convinced that there will be a big recovery and that the economic picture in 1984 will be very conducive to his re-election."

In short, if he holds true to his principles, everything will work out for the best, as it always has in Ronald Reagan's world. "He is an optimist. My God, is he an optimist!" exclaims a subordinate. Reagan's cheery outlook is so deeply rooted that it regularly cracks the critical doubts of his staff. Says one Cabinet officer, discussing the current economic bind: "I don't see how he can get out of it, but I wouldn't be surprised if he does."

This innate optimism has enabled Reagan to carry lightly the burdens of his office. The presidency has aged other men decades in years. Reagan's face is still rosy, and if he has more wrinkles, they are not particularly noticeable. For a man of 71, he is in remarkable physical condition. The most prominent change since Inauguration Day is not the scar left by a would-be assassin's bullet in March 1981 but the 1 1/2 in. of new muscle added to his chest by daily workouts with a weight machine in the White House family quarters. Says Presidential Assistant Richard Darman: "He is fantastically resilient."

Nancy insists that Reagan does worry, specifically now about the budget. Says the First Lady: "You sense a preoccupation. Sometimes he'll talk about it and sometimes he won't." To just about everybody else, though, the President seems as breezily affable as ever and in fact appears to be enjoying the job. "He is at peace with himself," says White House Chief of Staff James Baker.

For all of Reagan's sense of conservative mission, his ego appears oddly detached from his office: his career as a movie actor and Governor of California gave him enough of a sense of accomplishment that he did not need the presidency to consider himself a success. Accordingly, he shows no trace of the driven behavior that manifested itself in Richard Nixon's dark humors, Lyndon Johnson's frequent tirades and Jimmy Carter's agonizing self-doubt. Reagan feels no need to brood alone over decisions. Says Deputy Chief of Staff Michael Deaver: "I think it is interesting that he does not have a hideaway office like Nixon and Carter." The intensity of his conservative tenets frees him from worry over whether his decisions have been correct. Says one key aide: "I have never heard him say, 'I was wrong.' "

Bright optimism and deeply held beliefs are great strengths for a President. Reagan's engaging personality has been rewarded by phenomenal patience among the public; many people who are troubled by his policies genuinely want him to succeed. His conservative principles have given his Administration exceptional drive and consistency, whether you like its direction or not.

But at midterm, the troubles accompanying Reagan's virtues are increasingly apparent. Even his successes, most notably a far more rapid reduction in inflation than most economists would have thought possible two years ago (from 13.5% to 5.5%), are in a way dangerous because they reinforce one of the President's most distressing tendencies. He has a propensity to seize on one comforting truth and magnify it into the whole truth, blocking out all evidence of continuing or looming trouble. Says one former aide: "You have to be careful with him. If you had nine bad items to tell him and one good one, he would latch on to the tenth favorable item and discount the other nine. The blind spots are very troubling."

Currently, Reagan seems to be misreading both the prospects for the economy and the meaning of his 1980 mandate. Unquestionably, many of the Reagan voters two years ago were indeed expressing resentful anger against Big Government and a yearning for a firm foreign policy based on steady opposition to Soviet designs. But many others were simply voting for a change, for the efficient economic and foreign policy management they felt Jimmy Carter had failed to provide. And such efficiency requires an adaptability that Reagan has yet to prove he possesses.

The budget drama is a prize example, important in itself and as an illustration of Reagan's decision-making processes. It had a prologue about a year ago, when a number of advisers, worried about the deficits that already loomed menacingly, pressed the President to prepare a fiscal 1983 budget recommending a slowdown in military spending and sizable tax increases. They were rebuffed so completely that they are not about to challenge the boss's most cherished beliefs so directly again. A favorite saying around the White House is that one staff member or another "broke his pick" confronting Reagan with such unwelcome advice. One prominent pick breaker was Baker. At one point he so nettled Reagan by pressing for excise taxes and defense cuts that the President took off his glasses, glared at his aide and asked, "If that's what you believe, then what in the hell are you doing here?" Says one colleague: "Baker has thrown in the towel" on budget matters.

The shaken advisers decided on a different strategy for this year's budget go-around: they would lay out the figures on expected spending and revenues in all their starkness, add much economic advice about the dire consequences of huge deficits, and report numerous warnings from Reagan's own Republican followers about the rebellious mood in Congress. But they would not urge the President to do or not to do anything. Their hope was that Reagan would see the necessity for military-spending cuts or tax increases and bring those subjects up himself.

The strategy, so far, has failed resoundingly. When Legislative Aide Kenneth Duberstein reported at a budget meeting that even so fervent a congressional hawk as Trent Lott of Mississippi, the Republican House whip, is now calling for a slowdown in military spending, the President silently shook his head no. Reagan then interrupted the uncomfortable session to place a call to the astronauts aboard the Columbia space shuttle. As if glad for an escape, he told the astronauts, "Well, now, wait till I get my hat and I'll go with you."

The President devoted much of another budget meeting to insisting that the third stage of his income tax cuts, a 10% reduction taking effect July 1, could not be trimmed or delayed, and talked about moving it up to Jan. 1 in order to stimulate the economy. The idea horrified not only his economists (Martin Feldstein, his chief economic adviser, calculated it would add $14 billion to the fiscal 1983 deficit) but his political aides, who knew that it would be next to impossible to sell to Congress. Nonetheless, Reagan clung to the idea for almost a month. He finally abandoned it last week after Republican congressional leaders told him that he would have to fight hard to keep the 10% cut from being reduced or pushed back, much less speeded up. Reagan's obstinacy on other budget matters, however, bred frustration and animosity among aides who feared that the President was making a disastrous mistake. After one staff meeting, Baker and Presidential Counsellor Edwin Meese got into a shouting match over an absurdly irrelevant matter: whose staff had contributed more to the annual federal charity drive.

At the climactic budget session on Nov. 15, Stockman reported that the most that social spending could be reduced in fiscal 1984 was $26 billion, even assuming an $8 billion saving in Social Security. Whether Congress will take an ax to Social Security is doubtful, given the political perils involved. And lopping $18 billion from other social programs is highly questionable unless Reagan obliges with an accompanying cut in defense spending. In any case, Stockman said, that still left a $155 billion deficit, even projecting 4% economic growth in fiscal 1984, which is the most optimistic assumption anyone dares to make. The staff had hoped the figures would illustrate the impossibility of shaving the deficit significantly by social-spending reductions and economic growth alone. Instead, Reagan signified by his silence that he accepted the figures as a consensus on the most that could be cut, and that pretty much was that. Presidential advisers are now reduced to hoping that their painstaking presentations during the budget-making sessions softened up Reagan for an eventual compromise with Congress. But they concede that he is not prepared to compromise yet.

Will he ever be? For a successful man, Reagan is very passive, with little fire or curiosity. He rarely reaches outside the White House for answers or information. Says one adviser: "He loves it when you call him, but he never calls you. Nancy will call sometimes and then put him on the phone. Or she'll call up and ask me to call him." Reagan can be induced to change his mind, but it is a complex and tricky process. The key, by unanimous agreement of all who work for him, is to argue that a new position is as compatible with his fundamental beliefs as the one he is urged to abandon. Then Reagan can justify a switch as a mere tactical adjustment rather than a reversal of his conservative philosophy.

One former close aide asserts that when Reagan ponders a policy adjustment "he will not go far into it because he is not really looking to make a decision. He is looking for lines to repeat when the time comes to sell. He thinks of himself not so much as the person who decides but rather as the person who markets." Whether for this reason or simply because of the President's relaxed geniality, it is difficult, a current aide complains, to get Reagan to concentrate on the specifics of a problem. Says this adviser of his sessions with Reagan: "I have to prepare a script. Otherwise he will get me off the subject and turn what I have to say to mush. I have about six or seven minutes, and then he guides the conversation." Says Meese: "He is such an entertaining person that the conversation may drift off."

Other aides insist that the President likes to make decisions, but they agree that he does place great emphasis on the policy salesman's role--as indeed a President must, although it should hardly be his top priority. They claim, for example, that Reagan spends more time than any other modern President writing and editing his own remarks. A corollary to this stress on communication, notes Deaver, is that "you should never try to make him do something he doesn't believe in, because if you do that, we will fail. The greatest asset this Administration has is Ronald Reagan; if he can't communicate his positions, we are in real trouble. And if he doesn't believe in it, he can't communicate it."

Thus the necessity of making what one Cabinet member has christened "the Reagan argument": an insistence that what looks like a policy reversal nonetheless is consonant with his basic beliefs. If it is made adroitly enough, the President is capable of what looks to everyone else like astonishing reversals indeed. For all his hatred of taxes, the President last summer not only accepted but lobbied hard for the $99 billion, three-year package of revenue-raising measures put together by Republican Senator Robert Dole of Kansas. Reagan convinced himself, and told the country, that it was mostly a "tax reform" package (parts were, but they nonetheless raised taxes) and that accepting it was the only way to get Congress to agree to more cuts in social spending, an equally high Reagan priority. He followed up two weeks ago by endorsing a congressional proposal to raise the federal gasoline tax 5-c- per gal. and use the money for repair of the nation's highways, bridges and mass-transit systems, although he had said as recently as September that only a "palace coup" could get him to do so.

There was no coup, just a White House debate in which both sides used "the Reagan argument" with particular skill. Transportation Secretary Drew Lewis insisted that the 5-c- boost should be considered a "user fee," calculated to make those who drive on federally financed highways pay for their upkeep. The contention has some merit, but its real point was to avoid that awful word tax. Stockman countered by arguing that whatever it might be called, using a federal impost to finance repair work done by states and localities would violate Reagan's New Federalism concept. The President, however, recalled that as Governor of California he had agreed to an increase in the state gasoline tax that was rebated to localities. Said Reagan: "It didn't violate my basic principles then. Why should it now?"

Whether or not the decision was wise, the way in which it was reached illustrated a danger in Reagan's decision-making system: the President often gets a slightly skewed view of the world from his advisers, who present to him not the arguments they really believe but those that can be fitted into the Reagan cosmology. Stockman's true objection to the highway program had little to do with New Federalism; he believes that revenues from higher taxes (or "user fees") should be devoted to reducing the budget deficit rather than financing new spending. But he knew that argument would be ineffective with a President who was about to tell his Cabinet, "We have to recognize that in the short term we are going to be dealing with high deficits."

There are other reasons why Reagan frequently does not hear straight arguments from his aides. An avuncular figure, warm and generous to a fault, Reagan projects a peculiar quality of vulnerability. The White House staff and Cabinet members worry deeply when they have to tell the boss he is in trouble. One aide fretted for hours about the glum presentation that he was to make at one budget session. "I finally said the hell with it," he reports. "I decided if I couldn't tell it to him straight, I shouldn't be working here." Reagan was not visibly affected, but the aide still fears that he put his point too bluntly.

These problems, although they are pronounced in the Reagan Administration, are not unique to it: all able subordinates learn the trick of quoting the boss's own words back to him, and no President's advisers have ever relished bringing the chief bad news. But there is another difficulty that does seem somewhat peculiar to the Reagan White House: the President abhors conflict among his aides. Says Nancy: "He doesn't function well if there are tensions. He likes everybody to like one another and get along."

Reagan tolerates, and even encourages, dissent on policy so long as it is civilly voiced. But he hates to choose between views pushed hard by quarreling advisers. He prefers a consensus solution, which his aides do their best to provide.

On secondary matters the President will sometimes accept the consensus even if it goes against his grain. A prime example is the agenda of social issues--particularly banning abortion and compulsory busing and reinstituting prayer in public schools--that are all-important to his New Right followers. Reagan believes in that agenda too, and stressed it as a candidate. But he accepted the judgment of his legislative staff that pushing hard for such measures would complicate the passage of his economic program, which to Reagan has a higher priority. The most the President would do was to give North Carolina Senator Jesse Helms, the paladin of the New Right, a green light to bring up his social measures in the last session of Congress. Without active support from the White House, Helms failed dismally: not a word of the New Right agenda has been written into law.

The price of the stress on consensus, of course, is that by the time an issue reaches Reagan, conflicts have frequently been muffled or at least glossed over, and he does not hear forceful arguments on either side of the case. Most advisers nonetheless learn quickly to adjust to this system, and they are amply rewarded: Reagan hates to discipline anyone, and will rarely criticize aides even for sloppy staff work that gets him into political trouble. When he does reject an adviser's views, he usually tries to let the subordinate down as gently as possible. For example, when Secretary of State George Shultz urged him to attend Leonid Brezhnev's funeral in Moscow and talk to the new Soviet leader, Yuri Andropov, Reagan replied, "Gosh, is this the time to reach out on substance when they have their interregnum going on?" Comments Baker: "He makes clear that you don't lose with him just because you lose on a position."

Indeed, Reagan makes little effort even to learn exactly what it is that his advisers are up to. Says one subordinate: "I doubt that he has actually been in Baker's or Meese's office more than two or three times since he has been President. He does not know in any specific way what most of us do or how we do it." The President gets some of his information about how his own Government works from his mail and the newspapers; he regularly clips an item or passes on a letter relating some individual's difficulties with the federal authorities. Says one aide: "He doesn't ask how Aid to Families with Dependent Children works. He asks why this mother of three is having trouble getting aid. He is a marvelous caseworker."

If the Reagan system is relaxed, though, it is also in its way rigidly enforced. Alexander Haig, for one, never caught on to the President's style. Accustomed to the Army chain of command, Haig constantly pressed Reagan for decisions on matters where his views clashed with those of the White House staff. Says one observer: "That was outside the rules." It was no small part of the reason why Reagan accepted Haig's resignation as Secretary of State before it had been formally offered.

Haig's successor, George Shultz, has been more adroit and more successful. He also has somewhat more latitude than Reagan's domestic advisers. In foreign policy the President has fewer intense and long-cherished beliefs, and he delves less deeply into the details of decisions. He usually is content to receive a series of one-page "minimemos" summarizing foreign and defense problems and options, even on so complicated a subject as the basing mode for the MX missile. National Security Adviser William Clark sends Reagan a foreign policy paper of ten pages or more only about once a month.

In foreign as in domestic policy, Reagan can be persuaded to change his mind on major issues only if advisers convince him that he really is not doing so. The beliefs that he does have on foreign affairs are very deeply rooted indeed. The strongest is the intense anti-Sovietism that apparently took hold after World War II, when Reagan headed the Screen Actors Guild during a bitter dispute over Communist influence in the movies. Reagan was clearly influenced by the cold war atmosphere. In one of his first presidential press conferences, Reagan said of Soviet leaders, "They reserve unto themselves the right to commit any crime, to lie, to cheat." Although he no longer voices that thought publicly, aides say it is a consistent belief.

There are, of course, different ways of being anti-Soviet. Shultz successfully worked around Reagan's preconceptions to get the President to lift U.S. sanctions against the pipeline that is to carry Siberian natural gas to Western Europe. Shultz was convinced that the sanctions were infuriating European allies and would not stop the pipeline, but that is not what he emphasized to Reagan. Instead, Shultz quietly negotiated an agreement under which the Europeans would study coordinated restrictions on trade with the Soviets, and told Reagan that this would be a more effective way of curbing East-West deals that might strengthen the U.S.S.R. militarily. In fact the agreement is so tenuous that it does not commit the Europeans to any specific acts, but Reagan bought it anyway.

On some other foreign policy issues, Reagan's inability to admit that he has changed course has stirred trouble. The President was a vehement champion of Taiwan before taking office, but he appreciates the strategic necessity of close U.S. relations with the Chinese Communists, who share his distrust of the Soviets. Characteristically, Reagan has tried to have it both ways. He signed a communique last August calling for a gradual reduction in U.S. arms sales to Taiwan leading to a "final resolution," presumably a cutoff. American right-wingers howled that he was betraying Taiwan. Stung, Reagan insisted athat "there has been no retreat by I me, no change whatsoever. We will S continue to arm Taiwan"--although |the language of the communique E plainly suggested the opposite. The i ploy has not worked. Reagan's words 5 have annoyed the Communist Chinese without mollifying the American right.

The deepest worry in all this for the American public is that the Reagan Administration is losing touch with reality. No one can reasonably demand that the President abandon the beliefs he has argued all his political life. But a successful President must adapt his strongest convictions to changing circumstances, and he cannot let the optimism that is a major virtue blind him to disagreeable facts. Overseas, not every policy is well founded just because it is anti-Soviet; at home, the greatest threat to American prosperity seems to be the stratospheric budget deficits that are aggravated by Reagan's policies. And failure to restore prosperity threatens, among other things, to prevent the re-election of Reagan, or the election of a Republican successor, in 1984.

That is an argument that impresses Reagan not at all. Says Nancy: "You will never get anywhere with him if you say, 'This will help you [politically].' You might as well forget it." Reagan insists that he has instructed his advisers never to consider the vote-getting potential of a decision, and his aides unanimously confirm it. That testimony sounds too self-serving to be swallowed whole, and there have been actions that contradict it, notably Reagan's lifting of the embargo on U.S. grain sales to the Soviets. But it comes from too many sources to be discounted. At the very least, that stand is a refreshing change from having every issue judged by the Nixon Administration's immortal criterion: How will it play in Peoria?

There is, however, a danger in the President's approach that should be appreciated even by those who share his principles. Those conservative principles now have by far their most effective spokesman ever in Reagan, whose theatrics have been brilliant. But his grasp on the substance of his responsibilities is much less secure, and he threatens to push his principles to an extreme. A military buildup faster than the country can afford, combined with tax cuts so deep they produce staggering deficits, could lead to total economic stagnation. This, in turn, could discredit the whole conservative agenda. If that happens, Ronald Reagan risks having his current term eventually regarded as an aberrational interlude in American politics, rather than the start of a significant change in the direction of Government.

--By George J. Church. Reported by Douglas Brew and John F. Stacks/Washington

With reporting by Douglas Brew and John F. Stacks/Washington

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