Shake-Up At the White House

By Ed Magnuson.

Outside the White House last week, construction workers toiled in the chill weather to erect a reviewing booth and grandstand for the Inaugural parade, one of the first events of Ronald Reagan's second term. The laying of each plank and pipe was dictated by blueprints.

Inside the White House, something far more significant for the success or failure of the second Reagan Administration also was taking shape. The organization chart of key players and their new positions of power was being sketched. But there was no blueprint, no grand design. As if by whimsy, top officials were leaving Government, switching jobs or signaling their desire to depart. Each seemed free to pursue his own quest for personal fulfillment, whether by taking on new challenges, easing into less wearisome tasks or just taking a rest. The President amiably concurred in the wishes of his subordinates. It was a shake-up by the shakers themselves.

By far the most surprising change was a straight switch in jobs between James Baker III, 54, the President's smooth, politically savvy chief of staff, and Donald Regan, 66, the blustery, hard-driving Secretary of the Treasury. After four grueling years in the White House, Baker had yearned for what he called "a less fast track." With the huge budget deficit and an ambitious tax- reform proposal dominating the domestic agenda, he had decided that Treasury, while less of a pressure cooker, "is where the action will be." Regan, former president and chairman of Merrill Lynch, had long eyed Baker's job from his Treasury post and readily traded his prestigious title for a position of greater power. Contended one of Regan's Treasury Department aides: "He considers the Executive Branch to be like a corporation. Cabinet members are vice presidents, the President is the chairman of the board, the chief of staff is the chief operating officer."

The impending departure of Baker will complete a virtual clean sweep of the White House team that helped Reagan to an impressive record of success in his first four years, culminating in his landslide re-election. Many of the aides were Californians who had served him well in Sacramento when he was Governor more than a decade ago. Edwin Meese expects to be confirmed within a month as Attorney General. Deputy Chief of Staff Michael Deaver, the closest adviser on social and personal matters to both Reagan and the First Lady, is expected to take a Washington public relations job. Attorney General William French Smith and Interior Secretary William Clark are leaving Government service to return to California. Going to the Treasury Department with Baker is his top aide, Richard Darman, a native New Englander who has had a marked influence on domestic policy. Craig Fuller, who has been Cabinet secretary, will probably depart after assisting in the changeover.

, Taken together, the sudden flurry of shifts and departures creates unexpected leadership gaps only two months after Reagan declared that he saw no need "to break up a winning team." Ahead lies an uneasy transition period, during which new aides must learn the delicate busi ness of running the White House. Because the modern presidency has increasingly drawn power to the keepers of the Oval Office, and because Reagan leaves so much of the detail work to underlings, the changes and uncertainty among his advisers are no small matter to the nation.

The timing of the shake-up was unfortunate. The President's announcement of the Baker-Regan trade came on the very day that Secretary of State George Shultz was completing his meetings with Soviet Foreign Minister Andrei Gromyko, clearing the way for a broad resumption of arms-control talks, a breakthrough that stands as one of Reagan's few solid successes in foreign policy. The game of musical chairs partly upstaged the news from Geneva.

The changes came at a time when the new Administration badly needed a fast start on several domestic policy initiatives, most notably the immense and worrisome budget deficit. It is widely assumed that the President must move forcefully on the issue before the luster of the November election fades and his lameduck status takes hold. Yet he is already two weeks behind schedule in his budget preparations. Worse yet, his spending plan is not even close to his own goal of paring the deficit to $100 billion by the time his term ends in 1988, and he has let G.O.P. leaders in Congress take at least temporary charge of figuring out ways to close the gap. Last week, at his first televised press conference since the election, he indicated that he had an open mind about what he would do if Congress enacted an across-the-board freeze on spending, including cost of living raises for Social Security recipients, something he had seemed to reject during the campaign.

Even before the personnel shifts, there had been a curious sense of drift and lack of drive at the White House. Declared one former White House aide: "Since the election there has been no energy, no enthusiasm and no firm game plan." The staff changes would have been far less disruptive back in November, which is when Baker, Deaver and Nancy Reagan had urged the President to clean house. Instead of taking the initiative, however, Reagan characteristically let each aide act on his own.

The new chief of staff thus faces both a severe challenge and a rare opportunity as Don Regan moves to the White House, probably in five weeks. With the most influential aides gone, he can freely choose his own team. Never shy about exerting power, he did so last week even before it was formally his. Sitting in on a White House staff meeting, he left some Baker aides with the impression that if any of them had any other job opportunities, now was the time to act on them. If there had been any doubts about whether Regan would take charge, they were firmly dispelled.

Associates and acquaintances of Regan predict, as Washington Lobbyist Jack Albertine puts it, that "he will be one of the strongest chiefs of staff in history. The White House will be a tight ship." That may be overstated, but it is clear that the collegial style of staff organization, in which Baker had ultimately emerged first among equals, had been breaking down. Meese had been sidetracked by his confirmation troubles and the investigations of his personal business dealings with friends who later gained federal jobs. Baker was burning out, and Deaver felt pinched on his Government salary.

Regan, by contrast, has no shortage of energy and certainly no shortage of cash: he is worth an estimated $30 million. He will probably try to run a closely controlled operation, like the one set up by H.R. Haldeman in the Nixon White House. A lively storyteller who has an easy rapport with his fellow Irishman in the Oval Office, Regan is far less dour than Haldeman, but he may turn out to be as tough. His emotions boil close to the surface, and his explosions of temper keep aides on their toes--and a little cowed.

Regan's strong ego and aggressive style have been coupled at the Treasury Department with a loyalty to the President that borders on being sycophantic. Critics complain that Regan is a mere cheerleader, with no strong policy beliefs of his own. At the same time, he has shown an outsize concern with turf and prerogatives. Predicts one of his former colleagues: "He'll try to do it all himself. He can't stand sharing the limelight." That could mean that Regan will tend to keep other advisers away from the President. At worst, eager-to-please Regan could wind up telling the boss only what he thinks the President wants to hear.

Washington insiders have mixed feelings about a truly tight White House ship, depending upon their own interests there. Right now, says a presidential aide, "nobody knows who's in charge of what, and people like (Defense Secretary Caspar) Weinberger slip in the back door and get policy changed at odd hours without anybody realizing what's happened." A lobbyist agrees, but prefers things that way. Says he: "If Baker blocked you, you could go to Meese or Clark. No more. Regan will nail up the back door." A Washington-based business leader sees another key difference in the Baker and Regan styles. "Let's face it," he contends, "Baker and those guys are Machiavellian operators. They'd tell you one thing, but you had no idea what they were really doing. With Regan, it's all on the table. You know exactly where he stands and what he thinks."

In the intricate world of Washington politics, however, bluff often works better than bluster. Compromise is the highest art form in the capital, and it is by no means clear whether Regan has the knack. The new chief of staff is typically confident. "My job," he says, "will be to see to it that we get the best compromise possible for the President or else recommend that he reject it." A Baker aide predicts a new way of doing business but the same positive results. "Baker thrived on interaction with a lot of people," he says. "Regan will rely on structure and tap other people's political skills and instincts."

In the more formal Regan shop, news leaks may be fewer and public insights into the internal workings of the White House more limited. Regan once ordered two of his senior Treasury deputies to clear their press contacts through his trusted public affairs assistant, Ann McLaughlin. (McLaughlin, now Interior Department Under Secretary, is a leading candidate to become Regan's deputy at the White House.) While Regan can turn on his gruff charm and provide as lively an interview as anyone else in the Administration, he is seldom inclined to do so. In sharp contrast to Baker, whose mastery of keeping the news-hungry White House press corps satisfied is unsurpassed in Washington, Regan considers time spent responding to reporters' questions a waste at best. Outside the office, he is a walking blackout. Says one intimate: "It is a matter of pride with him that he has never invited press people to his house or to any parties."

Baker's switch to Treasury is much less risky and seems destined to have less impact on the Reagan presidency than Regan's move to the White House. The Texan arrives with scarcely any background in his new field--he was an Under Secretary of Commerce in the Ford Administration--but his confirmation ) hearings should prove a breeze. He relies heavily on his astute aide, Darman, who will be the second-ranking officer at Treasury. While deficit reduction remains the top priority on the agenda of both the Administration and Congress, Baker sees genuine historical opportunity in responding to the growing bipartisan calls for a new tax system. Says he: "I'll be in a good position over there to lead the charge on tax reform."

Baker's wide political experience is welcomed by many business leaders, who figure that he will be a more effective promoter of financial legislation than Regan. "The President has appointed someone at Treasury who understands the political workings of our Government," says Donald Marron, chairman of Manhattan's Paine Webber brokerage firm. "This is the highest priority. Congress and the Administration need to form a consensus and move ahead on deficit reduction and tax reform." Business leaders expect Baker to get along well with Paul Volcker, chairman of the Federal Reserve, who was a favorite whipping boy of Regan's.

Not surprisingly, New Right conservatives were gleeful at the prospect of Baker's moving further away from the President's ear. Although he helped deliver one of the biggest tax cuts in history in l981 and led Reagan's successful fight to cut the budget that year as well, he later urged tax hikes to restore lost revenue, an advocacy that was anathema to the right. Baker has never been outspoken in support of the conservative agenda of stopping abortions, permitting prayer in schools and amending the Constitution to require a balanced budget. Conservatives see him as too much of a moderating influence on the President. Richard Viguerie, the leading fund raiser for the New Right, contends that Baker and Deaver "kept conservative ideas and conservative Senators out of the White House. Regan has got to be an improvement. Under Baker it was as bad as it could get." That does not mean that Regan is viewed by conservatives as one of their own; he is, in fact, seen as a representative of traditional Wall Street rather than of populist Main Street. Moreover, New Right activists have no clear idea how Regan feels about their social issues. They assume, though, that he is more likely than Baker to "let Reagan be Reagan."

Some of Baker's admirers suspected that his real aim in shifting to the Cabinet was to embellish a resume that would be more impressive in a future pursuit of elective office. Contended Republican Congressman Jim Leach of Iowa: "Overnight, this makes Jim Baker the most serious male candidate for Vice President in 1988." Scoffs Baker: "That's ridiculous. I have no ambitions for elective office. I've tried that." Indeed, he lost a race for Texas attorney general in 1978.

While Baker denies that he had been burned out in the demanding White House job, some of his associates there noticed that he seemed less able to focus sharply on details. Moreover, his enthusiasm seemed to be flagging. "The pressure within Baker to get out was increasing," said one of his colleagues. "He has been talking about how lonely it is at the top." Conceded another White House aide: "Maybe we need a shot in the arm, some new people."

The casual way in which Baker and Regan swapped says much about the President's loose hand on the White House throttle. Regan had eyed Baker's job almost from his arrival in the Administration, telling a Treasury aide three years ago, "The only job better than the one I've got now is Baker's." He raised the issue with Baker in a joking way more than a year ago, when the two men were commiserating about a common problem. "Baker, we ought to swap jobs," Regan quipped. "That would serve both of us right." Replied Baker: "You know, I think you've got an idea there." Neither pursued it at the time, but neither forgot it.

Regan turned serious on the subject a few days before last Christmas, when Baker visited his office. "I'm going to make you an offer you can't turn down," Regan said. "Let's trade places." Baker said he was receptive to the idea but would not push it; he insisted that Deaver be sounded out about whether he might be interested in the top White House staff job. Regan took the matter up with Deaver on Dec. 26, saying, "Look, Jim wants a new challenge and so do I. We want to know if you're taking yourself out of the running to be chief of staff." Deaver said he needed time to think about it. In fact, he had lost interest in staying on at the White House but wanted to decide whether the exchange would serve the President well. After more discussions with Baker and Regan, he concluded that it would.

Two weeks ago Deaver cleared the way by announcing his own imminent return to private life. Last Monday he took the switch proposal to the President. Observed Reagan: "It's fascinating. A fascinating idea." Reagan quickly called in Regan, then Baker. He told them that he needed to sleep on the proposal, but in fact he had already made up his mind. Said he to Deaver that day: "They both like the idea, and so do I." The President disclosed the well-kept secret personally on Tuesday morning, with Regan and Baker at his side, and found that he had given the evening news broadcasts a better story than his diplomatic team's success in Geneva. At his midweek press conference, the President said he did not think of Baker and Meese as leaving the inner circle. "They're just changing chairs at the Cabinet table," he said. "I don't care which side of the table they're talking from. I'll be listening."

Actually, Regan retains Cabinet status in the shift and gains a seat on the National Security Council as well. Baker keeps his right to sit in regularly with the NSC. But no matter how hard the President may be listening, Baker will lose some of his clout in the West Wing. Explains one aide familiar with the cliquishness of any Oval Office staff: "Once you're gone, you're gone."

There were other, lesser leadership shifts last week as the Administration seemed to stumble into the dawn of its last term. Energy Secretary Donald Hodel, a brainy, amiable top aide to former Interior Secretary James Watt, will return to head the Interior Department, taking over for the California- bound Clark. Hodel, in turn, will be replaced at Energy by John S. Herrington, who earned respect as director of personnel at the White House. His departure creates yet another vacancy for Regan to fill in his new job. The Education Department will be headed by William Bennett, chairman of the National Endowment for the Humanities, filling the opening created by the postelection resignation of T.H. Bell.

Both Herrington and Hodel have been instructed to study ways in which the functions of their departments might be dispersed to other agencies or combined in some fashion. While neither the Energy nor Education departments, which have strong advocates on Capitol Hill and constituencies outside of Government, seemed in imminent danger of being dismantled, it was clear that Reagan had not totally abandoned his long-held desire to get rid of them. More confusion was created by a Cabinet-meeting discussion at which it was decided to consider the possibility of creating an entirely new Department of Trade and Industry. As currently envisioned, the new bureaucracy would combine some duties of the Commerce Department and the Office of the U.S. Trade Representative, which is now part of the White House.

< Another question raised by the latest round of changes was whether Hodel's return to Interior would revive the tensions between the Administration and environmentalists that Clark had done so much to ease. As an aide to Watt, Hodel had been an ardent champion of more oil and coal exploration and other commercial development of federal lands. While an official of a federal power authority in the Pacific Northwest, he denounced the environmental movement as having "fallen into the hands of a small, arrogant faction dedicated to bringing our society to a halt." Although he patiently listened to conservationists make their pitches to his Energy Department, he also helped kill a proposal by the Environmental Protection Agency under William Ruckelshaus to take some action against acid rain, rather than just study the problem. Complains Ben Beach, a spokesman for the Wilderness Society: "He's got Watt's philosophy and Clark's likable personality--a dangerous combination."

Still, it is Regan's emergence that seems certain to keep Washington astir with fresh uncertainties, intrigues and potential clashes. While Treasury Secretary, Regan seemed to relish a good brawl. He butted heads with Volcker and with Martin Feldstein, former chairman of the Council of Economic Advisers. After seriously considering efforts to kill the council, the President decided last week against such a drastic move. It is clear, however, that Regan will not take kindly to any economic advice that runs counter to his own beliefs. He had, for example, disputed Budget Director David Stockman's gloomy economic estimates. Stockman, already long wounded by his confession to the Atlantic Monthly in 1981 that federal budget figures are a meaningless numbers game, had been expected to leave after this year's spending battles are resolved, and he will almost certainly go now that Regan is in a position to boss him around. While the recent vacancies at the White House conceivably could give United Nations Ambassador Jeane Kirkpatrick a shot at becoming Reagan's in-house foreign policy adviser, insiders doubt that such a strong personality could coexist with Regan. Predicts one White House aide: "If somebody like Kirkpatrick is brought in here and tries to carve out an empire of her own, she'll find herself in the ultimate tong war." Regan has already hinted privately that he would fight any Kirkpatrick move into a White House job.

Regan's arrival in the West Wing could tip the balance in the longest- running and most important intramural rivalry of Reagan's presidency, that between Shultz and Weinberger. The two have differed over arms control, the appropriate uses of force, relations with NATO allies and policy on the Middle East. Regan has been one of the few Cabinet members to challenge the Pentagon boss publicly on defense spending, insisting that the military must take part in the deficit-reduction drive. Perhaps even more significant, Shultz and Regan are personal friends and their two wives enjoy socializing together. The Shultzes stayed at the Regans' Mount Vernon home when the Secretary of State first replaced Alexander Haig. While Regan insists that he would not try to persuade the President to cut his defense requests, the Pentagon budget is certain to become a political football once the deficit debate heats up in Congress. And Weinberger could have a tougher time picking up yardage with a Shultz ally calling the plays. Says a former Reagan aide: "Cap may find it more difficult to get through the Southwest Gate of the White House."

The personnel shifts and personality clashes within an Administration do more than titillate Washington insiders. For good or ill, the success or failure of an Administration often turns on the working relationships of the people within it. Throughout his political life, Ronald Reagan has been surrounded by an inner circle of aides of proven talents and unquestioned loyalty. As he embarks on his second term, the old crew is dispersed and the course uncertain.

With reporting by Laurence I. Barrett and David Beckwith/Washington