Now remember, Clinton had said he was going to cut the deficit in half. I dont think thats a very good answer to your question, but I dont think I have a better one. I referred to the Bert Lance affair when I was serving the Clinton administration, and in that case the controller of the currency, who is an independent regulator, was charged with looking into it and delivered a report that ultimately proved to be Bert Lances downfall. The presumption of course at the beginning was that I knew what the substance of the investigation was, or what the actual issues were from an investigatory legal point of view, and that I had conveyed that to the White House, which was impossible by its turn, absolutely impossible, but in politics thats not often the important thing. I know the Congress and the Congress isnt going to buy it. I dont think its wholly right becauseand this may sound strange coming from mePresident Reagan I think will be seen very favorably by historians, mostly because hell be seen as the man who ended the Cold War, and Reagan didnt have to take the position of aggressive anti-Soviet behavior, but he did. The relationship between Clinton and Bentsen was quite unusual. Then of course, the Senate voted the next day and we only had 49 votes that we knew about and Senator Bob Kerrey was the undecided vote, the only one left. It was just an evolution of the prior role. I dont know this, but I suspect that was decided largely between the President and Mrs. Clinton. But the next day, Monday, I was on a plane to Waco, Texas. She inspired, continues to inspire, fierce loyalty and he doesnt. Certainly the appointment of someone with the stature of Rubin signaled that this was not going to be a junior level kind of a thing and it was not going to be headed by one of the usual powerful people, OMB [Office of Management and Budget] or Secretary of the Treasury. Hes chancellor of the Board of Education of New York, hes a good friend of mine, and I had dinner with him about a month ago and I said, Does it make any difference who the President is as far as youre concerned? The chief, the captain of that ship with Mickey Kantor, USTR [United States Trade Representative], and to some considerable extent Ron Brown, Secretary of Commerce, and Lloyd Bentsen played a big role in it. That was in recognition of that. That is foolish because history provides lessons on these matters. Lets divide concessions into two: actual changes in the bill, and then offering a Congressman something in another area to help make it easier for him to vote for this. Do you have any recollections of seeing anything different in him as a candidate at that point for that position? You know, she made comments like I could have stayed home and baked cookies but I decided to be a real person, which served to severely antagonize a lot of traditionalists. He is a trustee of MIT and serves on its Governance Committee. Oh, in the bill itself? He had a certain way of carrying himself and a certain sense of very carefully managing his own stature. I mean, it was just a morgue. It was a good-sized ballroom here in New York. But Clinton went for it, Clinton listened, Clinton deserves tremendous credit. Is he going to become President? It may have struck people on the outside as unusual, but not if youd been around. But I didnt know where the President was on NAFTA. But that was what one did as Deputy Secretary of the Treasury. It began to get organized at the end of 91. By the way, in any matter where the statute of limitations was about to expire, there was nothing specific about the Madison matter that was any different. If he predicted over the two years I worked for him, the fate of 25 pieces of legislation, he was right on all 25. In the 12 years between Clinton and Carter, there had been famous acrimony between the Fed and the White House and the Treasury. But its just a reality that in an economy of that size, spending changes arent going to have much effect on the economy; monetary changes can. I didnt think it was going to be that bad. Bob Rubin talked with great credibility about the bond market responding, and James Carville was so amusing for so long afterwards saying he wanted to come back in his next life and be the bond market because everybody paid such fealty to it. If I search my memory or some dusty file somewhere, I could probably come up with more names, but it was not a huge group. I know I didnt and I was very involved in trade policy as a whole because much of our trade policy involved Japan and I was very involved in that. I took it anyway. Might have been established by Washington. You dont want to start your Presidency off with a legislative defeat. Presidents should be presented with options that have been carefully developed, really carefully vetted, and those options should be written down in the usual way, and that wasnt the case here. Here we are in June 2003 and the election as we all know is November 04, so its 16 months or so before the election, 17 months, and right now of course, the campaign among the Democratic aspirants for the nomination is hot, full-bore, and has been for several months. The American political system has changed a lot. He was fully free to say no to that. I ran for president of the student body in the spring of my junior year, and he did the same in the spring of his junior year, which was one year following mine. Now streaming on: Powered by The Republicans quite shrewdly picked out some that didnt make sense and off the bat marshaled a very focused attack on it. Did you know him, you said you hadnt known him before then? In retrospect, the idea that he finished second is seen that he had triumphed. One of the many stunning things about it is the fact that none of those Republicans paid a price of any kind for that. Second of all, I am not a classic liberal, so Ive thought for 20 or 25 years that classic 60s liberalism was the wrong way to go. You never saw, one time, Bob Rubin do that, not one time, after he left. She herself has expressed regret over them. He did quite well. Were you consulting with the President occasionally after you left Washington and came back to New York? In the initial phases it was really broad strategy because we didnt yet know. Was there a perceivable influence from your perspective on having Perot in the campaign, making the deficit an issue from his vantage point? We can come back and pick up on each of these strains and try to get you to flesh out the skeleton if we can. Yes. I stay in touch with him. Some of the things on the wish list made a lot of sense, but some of them didnt. Youve already mentioned the people who were attending that particular meeting. So the question naturally arises, was it his economics? In fact, it was six months before. Well, when we actually re-did Putting People First, we went to Little Rock and worked on it for a few days. I hadnt been parachuted in from some distant spot without any such relations. I put the President on the phone with her and of course, she cast the decisive vote. If you go to Monticello, to his actual tombstone, then you know that he drafted his own epitaph: Governor of Virginia, founder of the University of Virginia, and author of the Declaration of Independence. Mexican trucking, citrus, tomatoes, Im not joking. First of all, one has to put it into broad context, including that a number of the more established would-be candidates, if I can put it that way, chose not to run, led by Cuomo, but there were others. There was quite a discussion that day about long-term interest rates, as I said the credit markets rather than the Fed. There were no violations of ethical guidelines, there was certainly no legal violation, and that proved to be pretty meaningless in the context of the uproar. Remember, youre playing for four years, youre not playing for one year. So not long after arriving in the new offices, which were over there on Vermont Avenue, I remember that, I went over to the Treasury and met with Secretary [Nicholas] Brady and the Deputy Secretary, very nice manname escapes me at the momentand began to debrief the senior members of the department. Im an economist in the Brookings Institution in Washington. For example, a year later, the fall following my graduation, I attended the University of Chicago, which was perhaps more than any other university, except the University of Wisconsin, the center of SDS [Students for a Democratic Society] activity. And then, of course, the political people in the White House: George Stephanopoulos of course, and others in the White House. I was just in awe of people like that. The basic point was Ill focus on it, Ill get it moving. He remained in those positions until Lehman was sold. Under the normal circumstances, like Clintons, they have considerable difficulties in an adverse political environment to get anything done, and that is the more normal historical situation. But there was a discontinuity between the campaign and the administration, In this respect exactly right. Yes, here in New York. Im not an economist, so maybe Im making a bad assumption here, but was there a discussion at this time about when you could start feeling some benefits from this pain that you were asking the President to accept at a fairly early stage in his Presidency? Not the first time he met with another head of state, but I think his first summit outside this country. So the fact that if we were sitting here in 2053, that a President 54 years ago balanced the budget wouldnt mean a heck of a lot to us, right? But there was the issue of the Clintons association with it and the fact that Madison Guaranty had made loans to the actual Whitewater Development Company, and the question of whether those loans had been made under pressure from the Clintons and in fact whether [James] McDougal, who ran it, had defrauded the depositors in cahoots with the Clintons. I began to see on pickup trucks around Charlottesville, very soon after Clinton became President, Impeach Bill Clinton and I dont thinkI remember Impeach Earl Warren signs, Im that old. I think as a general matter the perception, which has become the accepted wisdom, of those dueling camps, is much overstated. But lets talk for a moment about the end of 1991. Just promotes disunity and so forth. So you can imagine sitting next to Mrs. Clinton at dinner. I never heard of them. So in the early period, Id have to go back and look at when the President laid the legislation forward, but I want to say it was first of March or something like that. We wanted Japan to commit to rebalance the current account between the two countries, including committing itself to some pro-growth steps at home, and we wanted a specific agreement on autos and certain other things. It wasnt going to be a war between the United States and the Soviet Union. Had there always been a sense on your part that your likely posting in the administration would be in Treasury or. Arthur Burns was the chairman of the Fed. The President relied on Bentsen and Altman to take on some of his Administrations toughest tasks. We began to have fundraisers toward the end of 91. I think we had a sandwich or something and I took off and went back to the airport. No, I did not. No. For a variety of reasons, I dont think he had the pure luxury of just saying, Lets do NAFTA a year from now.