What Do We Do Now? When the President Called Me Bad News About the Budget

Myers: The transition was the worst period of my entire association with the campaign and the presidency. Because here you are -- you've won. You don't get a second off. I was so used to losing campaigns at this point, that like, where's my vacation to the Bahamas? So I can remember very clearly on election night being out with all the campaign staff and a lot of the people that worked in the press office. And all of a sudden it's about two in the morning and they said, "Oh, my God, who's going to staff the phones starting at 8 o'clock tomorrow morning?" So we kind of drew lots for it, and I went in and five or six young assistants from the press office and we got like 1,000 phone calls that next day. You know, Japanese TV wants to know when they can interview the president-elect, and by the way, who's the secretary of state? It starts at 8 o'clock the morning after the election.

Stephanopoulos: What stands out now is that we didn't know what we didn't know at the time. We thought we could get away, sort of, with just carrying on the work of the campaign for another month or two. It turned out to be a tragic miscalculation -- tragic is too strong. It turned out to be a miscalculation because what we didn't realize deeply enough is that despite all this fiction about a transition, at least metaphorically, the day after the election this guy is president and will be treated as if he is in many, many respects. And we weren't ready for it.

And, you know, the single, biggest mistake we probably made was not appointing a White House chief of staff and at least a core staff that day so we could act as if, you know, we were ready.

In your book you describe the transition as "hell." And, "Already the incipient Clinton Administration has created a bureaucratic monster."

Reich: Oh, it was a bureaucratic monster. You know, you get a lot of campaign workers, most of them very competent people, but they all begin to dream about being in the White House, in the administration.

Most of them have never been in government before, right?

Reich: Most have never been in government, particularly when Democrats have been out of government. Whatever party it is, if you've been out of government for 12 years and you're suddenly in, there are an awful lot of people waiting in the queue. And if they've worked in the campaign they expect somehow they're going to be either in the White House or close to the White House.

Myers: And so, there was all this pressure on the president, obviously, to name the cabinet and start to put together the next government. And there are all these reporters camped out in Arkansas, every day doing nothing but trying to break a story that the president is going to tell them as soon as he makes a decision. .... There was the tremendous amount of uncertainty about our own jobs. Nobody told us the day after the election "Hey, you're, going to the White House," or "You're not." So, it just stunk. There was no two ways about it. Everybody was miserable. And it did take a long time.

Panetta: Well, the price that was paid for taking all of the time to focus on the cabinet selections was that they didn't take the time to focus on the staffing of the White House. And so suddenly January 20th comes, and this is the inauguration. The President of the United States is now taking office. And I think they suddenly found, you know, what are we going to do for staffing? So what they did was they turned to a lot of people from the campaign how to fill those spots, which is a natural instinct. Any time you run a race you always try to reward the people who have worked for you in the campaign.

But the problem is, as President of the United States, you're talking about positions that have huge responsibility in the White House, that demand some experience in Washington, that demand some experience with the constituencies that you're dealing with. And there were just an awful lot of people who didn't have that and I think that was part of the problem. They just never focused on staffing with experience, and they also did not focus on any kind of structure to ensure that there would be discipline within the White House operation itself.

Reich: Sure it was chaotic. The Democrats hadn't been in power for 12 years. Nobody knew what they were doing, but there was a great deal of excitement. Not only among the people who were coming down to form the administration or to help the president in the transition, but in the public at large. We tend to forget, I think, our jaded selves at the start of the 21st century, how excited we can be at the start of a new administration where there's a recession. There's a sense of a complete change.

I remember I had the kids with me. I'd drive up to the take-out part of a fast food restaurant, and I'd order something, and the person behind the glass would say, "Good luck to you, and good luck to President Clinton," with a big grin. Wherever I went, people were going like this, and excited about America at the point of what everybody considered to be a very fundamental change.

Reich: Just a few days after the election, I came back from class. I had been teaching. Got a telephone call, and the operator said, "One minute for the president-elect." Well, I had never even heard of him called the president-elect before. That was kind of a startling emotional reality. And then he got on the phone and said, "Bob, I need you down here. I need you to put together the economic team. I've got so much advice. Can you come down and just put everybody together so there's at least a group that helps me plan my first budget, helps me get started? And I'd like you right away."

Panetta: My real first experience with him was when he interviewed me for becoming director of the Office of Management and Budget, and I remember going down to Arkansas and being led upstairs. And I think it was like a dining room/living room combination in the Governor's Mansion. And as I learned later, he was late, and came in, and immediately dove into budget issues. He wanted me to talk about the budget, the budget process, how he would get his budget through. He talked about deficits. And it was clear to me that this was someone who was extremely bright and able to kind of grab the nuances that oftentimes a lot of congressmen can't grab in terms of the budget process. So I guess first impressions were: extremely bright, a good listener, and seemed very committed to trying to get something done.

Rubin: The governor invited me down to speak with him, and it basically was an interview, although it wasn't labeled as such. I spent about two hours with him. It was a very interesting experience because we talked almost not at all about economic issues, and instead, it was a broad-ranging discussion about all kinds of things. And I realized afterwards, that what the president-elect was trying to figure out was not where I was on economic issues -- I think he probably knew that at that point -- but, rather, what I would be like to have in an administration and how effectively I would work with other people. Because he was enormously focused on the notion that for his administration to be effective in the economic arena, people had to work together as a team, as opposed to having the kind of internal warfare that has so often characterized past administrations.

Panetta: Well, like a lot of things I think, in kind of going back over the Clinton administration, there's the good and there's the bad. And I think that was true even for the transition. I think the president, to his credit, took an awful lot of time selecting his cabinet, because he wanted to get some very good people as part of his cabinet team. So the whole concentration was on the cabinet selections, and a process that I think was supposed to take, originally, hopefully, about a month, started to drag into January.

And it was because the president really was focusing on trying to make sure that he had good people, that it reflected a cross-section of the United States, that they were people that he could work with, felt comfortable with, respected. And I think to his credit, his cabinet selections were outstanding, even though he ran into a few bumps at the beginning. The reality is -- at least from my perspective as director of the Office of Management and Budget -- I have never seen that good a team come together and really work as a team supporting the president.

Reich: Well, we knew the deficit was large. In fact, years before [Reagan budget chief] David Stockman had referred to '$200 billion-a-year deficits as far as the eye could see." And during the campaign, the president did talk about the importance of reducing the deficit, but it had been of second order priority to investing in education, in job skills, in health care, and a lot of other things that the country needed to do. But, obviously, when the president is on the cusp of actually governing the country, he's got to know how bad that deficit projection really is, how much damage has been done, what he's inherited in terms of an economic mess.

And so I headed over to the Treasury Department to talk to officials over there, officials in the Bush administration, and try to get the best estimate I possibly could as to how bad the numbers really looked, how bad that deficit was going to be the next year and likely to be in years to come.

And you found out it was going to be worse than you had been told, and on December 7th I think it was, you go to tell the president the news. What's his reaction?

Reich: The president was not happy when he heard that the projected deficit was much larger than we had assumed, larger than we had been told, larger than the Bush administration had told the public. He knew that it meant that we couldn't do everything that he wanted to do, everything that he had promised the public. Now, he was both upset, but he was also -- I remember this very vividly, and I was surprised at the time because he was also kind of excited. He said, "Gee, that's a great challenge. We're going to really, really have to work on that." And I remember sitting there thinking, "Now, wait a minute. This is going to set a lot of our plans back. Certainly this is going to put a major crimp in all of this public investment.

Rubin: By the time we got toward the end of the transition, the Bush administration had come out with new deficit forecasts and they were much higher than anybody expected.

So, clearly, that was creating whole new pressures. On January 7th of 1993, during the transition, we had a six-and-a-half hour meeting in Little Rock, the incoming economic team with the president, the vice president, and Hillary. And one of the political advisors said to me just before the meeting that our recommendation of very strong deficit reduction was going to require the president to defer a lot of things that he cared deeply about, and that you couldn't possibly expect the president-elect to make that decision at that time.

So we began the meeting and we made our basic presentation. And about half an hour, 45 minutes into it, he stopped the meeting and he said, "Look -- the threshold issue is the deficit. Until we deal with that, we can't get the economy back on track and we can't do the things that we want to do. So that has to be our threshold issue, and then, within that context, we have to do as much else as we can, that we want to do. But we can't get the rest of it done until we address the deficit."

And it was that basic decision that framed the rest of the development of the budget and the carrying forward of the economic strategy from that point forward.