Presidential Oral Histories

Sylvia Mathews Oral History

About this Interview

Job Title(s)
Deputy Chief of Staff for Policy; Deputy Director of the Office of Management and Budget

Sylvia Mathews (Burwell) discusses her long period of service in the Clinton White House. Her interview covers her political background and origins, the 1992 election, the debates over NAFTA ratification, the transition period after the 1992 election, her role in the formation of the National Economic Council (NEC), and her time on that council, government shutdowns, and the economic issues of the Clinton years. She then discusses her time in the Treasury Department, particularly focusing on welfare and entitlement reform, monetary policy, balanced budgets, and affirmative action. She also discusses her time in the Office of Management and Budget (OMB), which includes some discussion of the foreign policy of the later Clinton years. Some other topics featured in this interview include Vince Foster’s suicide (and her role in its investigation), the Waco and Ruby Ridge incidents, and the 2000 election.

Presidential Oral Histories |

Sylvia Mathews Oral History

Transcript

October 28, 2004

Riley

This is a Sylvia Mathews Oral History, part of the Clinton Presidential History Project. Let's identify ourselves so that the transcriber will have a name associated with a voice. I'm Russell Riley, Associate Professor here. I've been heading up the Clinton Presidential History Project.

Mathews

I'm Sylvia Mathews.

Young

I'm Jim Young, Director of the Presidential Oral History Program.

Beckenstein

I'm Alan Beckenstein, an economist and head of the Economics Area at Darden Graduate School of Business.

Morrisroe

Darby Morrisroe, chief researcher for the program and a graduate student in the Department of Politics.

Knott

I'm Stephen Knott, Associate Professor here at the University.

Riley

Let me start with a little bit of biography. Tell us how you first got interested in politics.

Mathews

In 1972, I probably started working on my first campaign, and it was Jay Rockefeller, in West Virginia. I still have my "Jay" button from that time. A little bit later, when I was in the sixth grade, we started a newspaper, Central World & Report, that actually was granted the first interview of the candidate, Rockefeller, when he comes back, and that's the year he wins.

I've always been interested in government and politics. My parents were both very civically engaged--not politically engaged--in the Lion's Club, the Rotary Club, the Elks Club, the Business and Professional Women's, the Jaycees, church women, all kinds of organizations. I grew up in a household where civic engagement was important. Then I went off and studied government, politics, philosophy, and economics.

During my time in college, I spent one summer as an LBJ [Lyndon Baines Johnson] intern. This was an intern program set up by President Johnson so that students who needed to make money over the summer could have the opportunity to work on the Hill. I worked for Congressman Nick Joe Rahall one summer. One summer I worked for Michael Dukakis as a Governor's aide in the State House in Massachusetts. That's part of what led to me taking time off from Oxford and working on the Dukakis-[Lloyd] Bentsen campaign in 1988 in Boston. There I worked in a part of the organization called "Research and Response" and worked for John Podesta. I worked on opposition research.

I studied the records of George Bush 41 as Vice President, President [Ronald] Reagan because we considered that a part of the Bush record, and Dan Quayle. I also did all of the fact checking for the debate preparation. So I've been through the process of debate prep for Presidential campaigns, both then and later in the Clinton years. That led to me going to Little Rock in 1992 after the Democratic Convention in New York. Gene Sperling called from Little Rock, saying, "I can hire one person. Can you come? You need to tell me in 48 hours." I asked for a leave of absence from McKinsey and Company, where I was then, and went to Little Rock. I was on the campaign and was part of the war room.

Riley

But not until after the convention, you said?

Mathews

Yes. I was a latecomer to the scene and to the whole game and how that's viewed in a campaign, in terms of, "You're not there during the painful part," although it's still pretty painful.

Riley

Had you supported Clinton before the convention or during the primary season?

Mathews

Yes, but not in any real active way. I was, at that point, 26 or 27, and was working at a management consulting firm. So my ability to support him in any number of ways was quite limited. I had just volunteered to the convention, took time off, and that sort of thing, but no real participation. I knew Gene Sperling and George Stephanopoulos, Tom Donilon, Larry Summers--all people who worked in '88. The initial connection was the '88 tie.

Riley

Was Podesta working with him at the time?

Mathews

Podesta was not in Little Rock. On the outside, he was helping and was an advisor, but he was not a formal part of the organization.

Riley

One question about your Oxford experience. Had Bill Clinton left any footprint in Oxford that you detected? Was he somebody who was known or discussed in Oxford during your time?

Mathews

No. And it turns out, because of the college I was in, the Oxford system of college--Bill Bradley was a much bigger figure. And that's because Bradley had gone to Wooster College, which was my college, and my economics tutor had trained Bill Bradley in economics.

Riley

So you go to Little Rock, and this is your second national campaign. Was there something distinctive about the environment that you discover when you get to Little Rock apart from what you had before?

Mathews

This is a place where I'll answer the question but pause and try and provide what I think is one of the more important points with regard to the campaign. One of the most important core points of the campaign was the focus on the economy, because that's something that you'll see through the entire eight years. And it was so much a part of how Clinton thinks about governing--the economics, the jobs, the people. For him, it's a continuum that doesn't split. And that's what I believe is one of his most unique skills. He thinks about the things together. He'll think about the person he's shaking hands with at the same time he's thinking, Do we do the steel trade decision? In his ability to think through in a continuum and not separate politics, people, and substance, he is very able.

So, "It's the economy, stupid!" was driven from the candidate. They are James Carville's words that everyone will always remember. I actually think it was a very important and symbolic thing. So from the campaign, "It's the economy, stupid--and don't forget healthcare." So that's one very important part of Little Rock in the campaign. The second part is that I believe that James, together with George, changed the way campaigning was done in this country.

If you look back, the concepts of war room and rapid response came of age in the '92 campaign. James has a military background. The discipline and spirit of a military operation is, I think, what made that work. I'll be specific. It's August, or maybe right after Labor Day, James instates the gold star. The gold star is what you remember getting when you read a book in the first grade. That's all it is. But you get that on the badge that lets you in and out of the building. A person wins one each week on Friday at the 7:00 P.M. meeting. There's a 7:00 A.M. meeting. And a 7:00 P.M. meeting every day of the campaign. The gold star became the symbol. That's all it was. But to my point about the military approach? The motivational approach? The leadership? I still have my badge. I got the first gold star.

At the same time, it was like the military. Once when we were working on something--I didn't have the answers, and James turned to me and said, "Sylvia, you are as slow as molasses. If you don't get movin' we're going to send you to Oklahoma to lick stamps." [laughter] So that's the upside and the downside, anecdotally, of this new approach. You'd never let a news cycle go.

And why that worked is that the leadership we had--a candidate who was so bright that he could move quickly, and people questioning decisions? No, no. The candidate was a part of that kind of quick decision making too. Then you had people who were hungry. Those combined to create a situation where the last day Gene Sperling and I were still faxing out responses to things on Election Day, until George finally came to me and said, "Cool it. It's done." At that point, we knew the exit polls enough to know. That was the sense of the campaign, I think the important and relevant parts.

As in any other campaign, there was fighting. REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT George and James were the energy and the drive. Mickey had incredible political experience, but that led often to conflict. And most of the campaign didn't see it on a daily basis. That's one thing that the leadership was very good at hiding from the vast majority of the campaign.

But when people needed to be separated in the fighting, Eli was the person who did that. I don't think that there's any reason anyone would know that. It was interesting what you said about me in the articles, and that you don't have articles. When I was 16, I lived in Japan for a summer and learned a Japanese proverb. "The nail that sticks up gets hammered." In no place is that more true, in my belief, than in Washington, D.C. And so I made a very conscious decision--

When I became Deputy Chief of Staff, Mike McCurry, then Press Secretary, says, "Great. This is fabulous. We're going to make you the new George Stephanopoulos. You're a woman. You're young. You are going to be the new Clinton spokesperson, and you know substance. So we're good to go. I'm going to make you a rock star." I said to Mike, "Thank you, but no." I made a conscious choice. Why do I mention this in the context of Eli Segal? Same guy. Same philosophy. I've never talked to Eli about it, but that's his philosophy and that's why you wouldn't know this particular point.

Another very important thing on the campaign: the NAFTA [North American Free Trade Agreement] decision-extremely important with regard to separating this President from a traditional Democratic path. I was part of that. That was one of the first things that I had to work on. It was incredibly painful because I had the environmental piece. I've got the Vice President's people, Katie [Kathleen] McGinty and those guys on the phone talking your ear off, "We've got to get environmental standards in." It was not clear how it was going to go.

This brings us to the question, "When is the first time you meet Clinton?" The first time I meet Clinton as a candidate--I've been working in Little Rock for a while--is the day we're making the NAFTA decision. He and Al Gore come back--because we have to make the decision in a policy forum. We have people representing union views, business views, economists in the room. We have environmentalists in the room presenting the case of what we think we should do. That's the first time I meet him.

It was an important decision because it was a break from the past of a traditional Democrat, and it was very much what he believed. This was his personal decision. The campaign came together with a recommendation that would be fair to say was split. And nobody could read exactly what the politics would be, one way or the other. So that is another very important point of the campaign.

Riley

Do you remember roughly how long you had been in Little Rock before this encounter?

Mathews

The days are all--there are no days off, nothing. You can look at the records and you'll find it. We do the announcement very quickly after we make the decision. It's a Saturday, I'm pretty sure.

Riley

It's easy enough to check. It's more a way of trying to organize my thinking about it.

Young

How early was the decision was made?

Mathews

I think it was before the debates, so that's pretty quickly, relative to the time I was there.

Young

When everybody came together in the meeting and a decision had to be made--could you say a word about what happened in that room?

Mathews

I was so exhausted.

Young

Was Clinton in charge?

Mathews

I'm going to be honest and say I was so exhausted--there was one point when I fell asleep in the meeting. I was sitting beside Clinton, so he couldn't see me, but Gore could because he was across the room. I do remember parts of the meeting. I didn't sleep through the whole meeting. For the record, this will be history. That's fine.

Presentations were made. I think Gene may have done part of the presentation. I think George and James talked about the politics. I seem to recall there was an opportunity for people to be heard. Clinton gave every opportunity--the Clinton way of going around the room. "How are you coming out? Why? Tell us. Do you really think this is going to make the difference? Give me the jobs numbers. Give me the rates."

Those kinds of questions about what you know in each area, going around the room. "Which unions? How are they going to split? What are they thinking? What are their biggest concerns? How will a side agreement--" which is what we were going to do "--work? Do you think that's really going to work?" There was a series of questioning and conversation, which is indicative of the Clinton administration in governing. What happened in governing happened here. Facts on the table, difficult questions, conversation back and forth, decision. I think that's generally in contrast to the way other Presidents handle that kind of decision making.

Riley

The decision was made then and there? Or did he go away?

Mathews

I think he took it out of the room. I can't remember for certain, but I do remember times when I was in the White House, either at the NEC [National Economic Council] or Deputy Chief of Staff, when you had to take the decision out of the room. You didn't want him to do it in the room because you had to carefully control its rollout. You'd done what you needed to do, everyone had said their piece. That was an important part of the NEC.

A very important part of the National Economic Council concept was the buy-in, and the buy-in in two different ways. If I need something--I'm a Cabinet Secretary and I'm Bob Reich--I go to the NEC and I can get it done. It's my means by which I get something done. That's one thing. But then it's also the means by which my voice is heard. And once my voice is heard, buy-in is there. You can keep people on the straight and narrow. Not through fear, which I think is sometimes the technique that White Houses use. "You'll be killed if we find out anything. And we don't care if we find out or not. If something leaks and it looks like it was you, good-bye."

It wasn't so much about fear as it was about, "OK, I had my day in court." You'd covered that in the room by having everybody say, but then to figure out how to roll out the President's decision--sometimes he would have questions he wouldn't want to ask in the bigger room, and that's rare. Clinton was very trusting, and would generally ask them.

Young

So this is a foretaste of his decision style?

Mathews

Yes. And his immense ability. You couldn't give Clinton too many facts, because he could process it all and put it all together. The only reason you were in danger was time. You had to discipline the time because this is a man who, when it came to the last set of negotiations in the Middle East, he knew the geography, he knew the patterns of settlements because he thinks about things in a continuum. [Yasser] Arafat can't cut a deal because this will be the conditions of it. And [Ariel] Sharon's got it. It wasn't Sharon at that time, but the thinking, and that's the way he is. His capacity for facts and for reading, and that sort of thing--he can read so quickly and retain. But that was a very important part to policy-making. You start to see that in the NAFTA debate in Little Rock. The meeting was at the Governor's mansion.

Young

Did you have to control the information so he didn't get bogged down in too many details then? Was that part of the job?

Mathews

Yes, when you get to the White House. That was a very important role John Podesta played, and your Staff Secretary plays, in making sure that you could send the man everything. You do have to control and be concise in what you're providing and leave opportunity for questions if he has them. Someone in the interview process will bring in some of the papers with his left-handed writing. I didn't because I was flying across the country. It's very difficult to read. But that's how you would get many, many more questions.

Young

This is your first experience of Clinton making a decision and processing facts and getting it?

Mathews

Yes, and of meeting him, period.

Young

And meeting him for the first time was in this decision's context. The reason for my question was we always think Presidents have learning curves, and you never know to what extent a decision style was already formed or to what extent it was changed. What you're suggesting is that there was a consistent decision style.

Mathews

There was.

Young

And it was already formed.

Mathews

It was. It would be very interesting to talk to people who were in law school with him. I would think that his style was probably formed very early.

Young

Yes. That was the real reason for my question.

Riley

I want to ask as a point of contrast--did you ever have an opportunity to watch Michael Dukakis in that campaign in a similar setting?

Mathews

No. I wasn't senior enough.

Riley

I thought that might have been the case, but I didn't want to miss the opportunity if you had been.

Mathews

The one thing was his unwillingness to respond. The contrast. We would not go negative. I'd done all this opposition research, and we never used it. And it was policy. There were a number of things that were not policy. Dan Quayle typed his bar exam, and at that time, the percentage of people who typed their bar exam was very unusual. Those weren't the kinds of things we were using in '88. We had all kinds of material, including questions about '41 and relationships.

We had all that but didn't use it. That was not what we were talking about. What we were talking about, specifically, was the record on education--the folks who tried to get rid of the Education Department--simple, easy message to understand. Big deal to most Americans. Dukakis didn't want to use any of that. So that's the only sense I have of him. I've since gotten to know him. I joined the campaign because I believed Michael Dukakis was about what governing was about. But he certainly was not what Presidential campaigning was about. He highlights, and I think, this year highlights, something very much in my mind.

Everything we hear today is me four years later, which is the time of reflection. So when you ask a question like that I see it in the current context, what I call the "king problem." I think we have the "king problem" in our country. I believe that the system we have is right. But I actually think it's a very interesting academic and historical question that we should all ask ourselves. In the current context, much of the appeal of our current President, which is very real, are "king qualities." Decisive, patriot, representing us and our values. Values-based messaging that appeals to our hearts. The "king quality" versus the Prime Minister or President quality. Dukakis didn't have any of the "king quality." Bill Clinton had a mix. Actually, I find it a fascinating question, and I've spent more time thinking on it recently. For a person like me, what is so appealing? Can we go through here, implementation and that sort of thing? And then you step back and realize that the "king quality" is very appealing and very real. Decisive guy.

Riley

George II, right? [laughter]

Mathews

Yes, in a sense.

Young

Let's hope he doesn't morph into George III.

[laughter]

Mathews

Well, let's say, sure, you can imagine that's my hope that he won't have that opportunity. I couldn't say enough about a man who was dedicated to public service. But a man who could not get the values-based messaging. Perfect example, your wife is raped. You say, "I'd kill the guy." That's what you say. But that gets to the rule of law in our country. What I do as a man to defend my wife is about me and my wife. But the rule of law in the country, which is "Why I'll be a better President." You could just say any answer that would have been better than the one we got. It also has to do with the "king quality" and values-based messaging.

Young

You mentioned that during the campaign in '92 that Carville brought a kind of military spirit or ethos into the campaign. Was that true, as well, in terms of a very strict chain of command?

Mathews

You pretty much knew how to get decisions made there, yes. And that's one thing that's still fuzzy. Campaigns and governing, especially in the White House, clarity of role and authority is not the strong suit here. And part of that, especially in the White House, is because it changes every time. It's not as if there are boxes on an org chart that work this way.

I was talking to the Bush people, and they were very surprised that John and I split policy when we were Deputies. That was part of the deal because neither Podesta nor I was going to take an operational job only. That was not something that would appeal to either of us. And we were close enough friends that he could say, "OK, I'll take national security. You take economic and domestic." I said, "OK. Fine." And he said, "You get to do trips, so you'll do foreign policy too." John would participate, of course, in our Social Security meetings. So we had it worked out. But that all gets created each time. So the question of was it better--I found it better in the Clinton-Gore campaign than the Dukakis-Bentsen campaign. But I don't know if that's because I was so much lower in the food chain the time before.

Riley

What else about the campaign?

Mathews

It was important to be in Little Rock.

Riley

I was wondering about that. Your earlier comment was that the rapid response was inseparable from the core part of the campaign, and yet they're in Little Rock.

Mathews

Totally, OK. There's a gentleman whose name needs to be in the historical record. When the Republican Convention was going on, I was just about ready to take a leave from my job and get Eric Berman. Eric Berman ran the team in Washington, D.C. It was Eric Berman, Stu--I can't remember Stu's last name. Meeghan Prunty [Edelstein], who became Bob Rubin's assistant for the new book he wrote. Meeghan was down in Little Rock. Was Eric in Little Rock? Eric ran the team of rapid response. Tom Janenda was another.

These were people in their 20s who would work 24/7. They were smart, analytical. Every single one of them was Harvard, Yale, whatever. They knew how to write, knew how to analyze, could come in and tell you, "OK, if we use this job statistic, you need to remember that I've checked it out and the denominator's changing, because people fall out of the workforce. So you're exposed if you use the number this way. It's a good one to use, just know how you're exposed." That level of analytical capability and speed.

We started that debate stuff. In the middle of the debate we had statement versus reality in the reporters' hands. That's the structure that we all still basically use today. Statement versus reality, fiction versus fact. You'd say what Bush said as the fiction, and then you'd state the fact. Those papers were in the reporters' hands before the debate was over, before they walked in the spin room.

Riley

And you were doing this at the time of the debate also?

Mathews

Yes, we did that, and honed it to a science. And transcripts. It started in '92, and then just gets better in '96. I was in charge of the rapid response room and then got sick and had to have surgery. I turned it over to someone but had set up the mechanism. I had hired the runners, because you've got to have people running paper back and forth. You've got your staff. You're the health team. You're the environment team. We're the domestic policy team.

The editor Bob Boorstin is over here, making sure that we have consistency. There's a person who says, "You checked the facts? You're sure? You have the cites?" Because then it got to the point where it was just so advanced--and then the fact versus reality. It would be footnoted and you'd attach the fact sheets behind it. The New York Times article where Bush had said "X," or [Robert] Dole had said "Y," or whatever it was at that time.

Beckenstein

I have one more campaign-related question. How much of the policy was set through the Progressive Policy Institute in DLC [Democratic Leadership Council] in what, I imagine, became "Mandate for Change," which was published just prior to taking office? That was a set of platforms and a plan, or so the book would have you believe. How much of that was said? Because Clinton was probably the key player in developing that agenda.

Mathews

I think "Putting People First" is really the place to turn to.

Beckenstein

That's better?

Mathews

"Putting People First" which was written by Sperling, Boorstin, and I think, Bruce [Reed]. So PPI had influence. You had PPI players Bruce Reed, Will Marshall. No, Marshall was not down there. Bruce Reed was a part of the team on the ground. Paul Weinstein--a name that many may not know, but was a part of the team on the ground, a PPI'er. John Kroger. These were the people who were there before any of us got there. Weinstein and Kroger. They were the two policy guys. But the question I think you're asking is about the influence of PPI on Clinton administration policy.

Beckenstein

Right.

Mathews

I would say that Clinton is such a strong driver--he knows what he thinks, and he's thought through these issues. I don't think that PPI was the platform. I think PPI made an important contribution in making it OK to be a Progressive Democrat. Some of it was the policy that went back and forth. But "Putting People First" gives you a sense of what Clinton was thinking and continued to think through the administration.

Beckenstein

But they published "Mandate for Change" in December of '92. I think that it has a January '93 publication date. So that had to be deliberate timing.

Mathews

I'm not even remembering the document, and that could be because it's been 12 years or whatever.

Beckenstein

It's really quite a good book.

Mathews

Yes.

Beckenstein

So the NAFTA decision, for example, was made real-time on the campaign. He didn't have a prior position on it?

Mathews

No. He was pro free trade, applying that to this very specific decision. Maybe PPI had influence, and it was a place where he could go and think with like-minded people, and did.

Riley

Were there other decisions like this that you can recall that he made during the course of the campaign that had important policy implications later?

Mathews

Yes, and one that will be an important thing, I think, over that time in history. That was our job creation figure. And what did we say? I apologize. I don't know the specific number. I think it was 8 million. Would that be right? Two hundred thousand a month.

Beckenstein

What's the context here?

Mathews

Job creation. We put out a job creation goal.

Beckenstein

In the first term?

Mathews

It had to have been the first term. Four years, 48 months, 48 times 200,000 would be 8 million.

Beckenstein

Right.

Mathews

So approximately 8 million. And that was our job creation goal. This was a very important decision. It put specificity to "Putting People First." "It's the economy, stupid." Boy, is that a dangerous thing! So we're in the middle of a very nascent recovery. Some would say a stalled recovery, a recovery that clearly has no job growth.

GDP [Gross Domestic Product] is erratic at best and slow at worst. President Bush keeps getting bad economic figures during this whole period. Every once in a while there would be one that would pop through. But it was not a great time in terms of that kind of stuff. So to put out this number and the decision to do it and to set a standard by which you would be judged was a very important thing. And you're doing it on the fly. We're working with economists across the country to determine if one expects 200,000 a month, what rate of growth, and do we believe that the traditional rates will hold? In other words, we basically assumed that you needed about 3 percent growth every quarter to produce 200,000. But you're taking a risk.

Beckenstein

Three percent annualized? Or quarterly? Because that would be too high.

Mathews

It'd be too high. It's annualized. Three percent a year would produce 200,000 a month if you had an annualized number of 3 percent. "Well, couldn't we do that? What does history show?" And huge analytics are going into putting out this number. But a very important decision, and something that we continued to focus on throughout, was job creation. That was one of the things that I would think was pretty important. You'll know the date. I can't remember it. But the point at which we broke through what was considered--what's the acronym? We called it the "Set Unemployment Rate." You could only get the unemployment rate to "X."

Beckenstein

NAIRU?

Mathews

NAIRU. That's exactly what I thought it was. But I couldn't remember what the acronym stands for.

Beckenstein

It's terrible. The Non-Accelerating Inflation Rate of Unemployment.

Mathews

No wonder I couldn't remember it. Thank you.

Beckenstein

Today we'd call it the "Natural Rate."

Mathews

Incredibly important economically--a breakthrough in that. It's a theme that runs throughout. That was a campaign decision. We put out that number and people who had been in politics said, "Thank you very much. Now you've got your ?no new taxes.' That's really smart."

Riley

But it's fascinating, from somebody sitting on the outside, that there's this enormous amount of energy poured into trying to get a precise number, because I'm sure the armchair observers will sit on the sideline and say, "The number just comes out of somebody's head. It's a round figure. It sounds nice. Nobody's ever going to hold them to it later." You're trying to win a campaign, and they would just produce it.

Mathews

That was one thing that I think was incredibly important. It gets covered by the woman who writes about the [Leon] Panetta and [Alice] Rivlin times--about the numbers and accuracy. That was also a change in this campaign. We had developed, because of that kind of analytics--you get on a phone with a reporter and explain that we based it on this kind of growth, annualized over this period of time, and how you translate that to job growth. Look at the historical pattern. By the time you've gone through all that with the reporter on how you got there, your legitimacy has moved.

This idea of strong, legitimate numbers? Never fudging the stuff? I sit and I look at these deficit numbers, and the budget numbers, and the like, not including the supplemental in your budget this year. And we had to include the Kosovo supps, which would mean smaller numbers of dollars. Or we would be crucified that we were not analytical and not accurate.

Young

Right.

Mathews

The amount of time in eight years that I spent on analytical accuracy--the number of speeches of Bill Clinton that I read--that's the level that they were checked at. That was the coin of the realm. This analytical accuracy. That started in the campaign. And that's why this fact checking was a theme that ran throughout.

We wouldn't put anything in the budget that you couldn't pay for. Could you question some of our pay assumptions? Were we going to be able to pass cutting X, Y, and Z? OK, fine. Not always rock-solid. But we wouldn't put it out there if we didn't pay for it. That's why there was a big debate over the balanced budget. Because we didn't really believe that you could just say that, just throw out some hocus-pocus. We believed that people like you, an economist here at the Business School at the University of Virginia, would look at it and go, "Not perfect, but I can believe it." In the sense of some of these numbers you wanted that kind of legitimacy. Whether we got it or not it was the aim.

Beckenstein

So what kind of role did the technical economist play in that process?

Mathews

In the process of deriving these numbers, they were the total drivers. They had a group of outside economists--Alan Blinder at Princeton, Larry Katz at Harvard, Alan Krueger at Princeton, Laura Tyson.

Beckenstein

So they had generated--?

Mathews

Oh yes. These numbers, all of this stuff. That's how I got to know Larry Summers in '88, because we were cutting an ad--I guess it was about the deficit. I was fact checking the ad and I wanted to understand how Social Security interrelated--this question of which deficit. I got Larry Summers on the phone in Martha's Vineyard, off the tennis courts. I was two years out of college. "I have Professor Summers on the phone!" [laughter]

Mathews

"I'm so sorry to bother you," I said. "But I need to make sure that these numbers are accurate."

Beckenstein

He was your professor at Harvard?

Mathews

I had not taken his courses, but I knew about him. I was a government major, but took many economics courses. So I knew who he was. To check the numbers we used outside economists because people like me are not economists, so you always used the real economists.

Beckenstein

This is interesting. It might get into your personal attributes and training and how it played a role, because you're using the term "analytics" in a way that I would emphasize with MBAs [Master of Business Administration].

Mathews

Not with economists.

Beckenstein

As opposed to what you do, Lael Brainard was trained. He was on the staff later. And it's generalist skills versus specialist skills. This requires, it seems, more rigorous generalist skills than specialist skills. How did you wear that? And what held sway? So you've got these super-duper specialists providing information, but the research in that area, to do something like that, particularly, in '92, '93, wasn't strong. As a technical economist, I wouldn't take that job, because I knew the evidence is really weak. But somebody's got to make a decision on it. How did you get the balance in putting that together?

Mathews

You had the strongest experts you could. And those experts were articulate and told you the risk. Why this was such a big deal and why you knew. You asked me, "Is there another policy thing he mentioned?" I mention this because of exactly what you said. It was a risk with Katz and all the labor economists. They'd say, "OK, if you force me to put this number together--but I would never naturally do this."

Beckenstein

Exactly.

Mathews

"And here are the assumptions I have to make." And so having your generalists, the people like me and Sperling and the Rubins and those people of the world who are not actual economists who have enough understanding of economics to know the risk you're putting yourself in, because your experts actually tell you, and your experts are clear. If you get experts who speak English--most economists aren't going to think politically. Most of them just aren't.

Beckenstein

Right.

Mathews

They're going to think, Gosh! You're going to put this number out there, and people are going to say you can't know that. But the question of the balance is, I think, a question you're asking. Experts and generalists and how decisions get made. And to be honest, in the end it's the generalists who are most likely making the decisions. That's the way it is and that's why you have these people in government with judgment. But the heavy reliance on experts--I think actually, that is something that was unique to us.

One of the things I did at the National Economic Council that I was pretty proud of is I organized a call of all the chief economists when we'd have an economic statistic coming out with us at the NEC. So you'd have Larry Katz at BLS [Bureau of Labor and Statistics], Ev [Everett] Ehrlich at the Department of Commerce. We'd get Alicia Munell at Treasury, Alan Blinder. Any time an economic statistic would get out, we'd get on the phone. I'd actually sit there and write the talking points on the phone with the economists and read them back.

Riley

You're framing the bigger picture, and they're providing within that context.

Mathews

Yes, and telling you when you're doing something. If you say, "This sounds fabulous. Super covenants--the manufacturing numbers are this, that, and the other." They'd say, "Well, you can't talk about your inflation." "Don't go there, because when you look at the core number, the underlying core is moving in this direction, and you really can't say that, even if this is this way. I'm afraid core is going to come out bad next time, so don't put yourself in that box. Here's why."

And so your question about the balance? It's about really clear communication and your experts having all kinds of access. Bill Clinton knows who Larry Katz is, an economist at the Labor Department. The President of the United States knows who the economist at the Labor Department is. That's important, that kind of level of knowledge.

Beckenstein

So that's what's different about this President, isn't it?

Mathews

Yes, absolutely, because I'm not sure that the current President would know all of his CEA [Council of Economic Advisors]. This President knew Lael even when Lael was--[Break in audio] We brought Lael over from Labor, and then from the Labor Department to the National Economic Council. We cherry-picked from Bob Reich.

Beckenstein

Was this decision of the job-creation numbers not Clinton-driven?

Mathews

He knew about that.

Young

But it was not quite like that then?

Mathews

No.

Beckenstein

OK.

Mathews

The transition? Got to keep moving--[laughter]

Riley

Yes, I was going to ask about the transition, but I'm out of breath already, Sylvia. There was a nascent transitional effort in existence before the election. Did you have any exposure to that?

Mathews

No.

Riley

Was there any importance to that at all?

Mathews

No. To say there wasn't any importance--I don't know.

Riley

Sure.

Mathews

But did I have any exposure? No. We were doing our work.

Riley

OK. So you're looking at Election Day, and not directly over the horizon. And yet you've already told us that there's a sense that if we become Governors, what we say in a campaign matters, and you don't want to just be out there promising everything.

Mathews

Yes, it scares me to death when a [John] Kerry talks about the importation of drugs from Canada. It scares me to death. You're really going to do that? And the same thing with both of the candidates. As I watched the debates, a couple of things both of them said, I just thought, Boy oh boy, I feel sorry for the people who will have to implement that for you.

[laughter] But it's a campaign.

So, the transition. A couple of over-arching, thematic, important things that I think about the transition?

Riley

Go ahead.

Mathews

Number one--been out of power for 12 years. You've got a group of people who know nothing. You're digging. Thank goodness for the Bo [W. Bowman] Cutters of the world who had served. Thank goodness for the Roger Altmans who had served. Then you had all these people like me and Gene Sperling. Bob Rubin had never really been that interested. You had all these people. And we just don't even know. What you have to pull together--

There were two parts of the transition. There was the economic team that was doing the policy making for Clinton, and that basically was an extension of the campaign. Then there was the economic team headed by [Franklin] Raines and Cutter and those guys, who were basically getting books like this together to explain to a Treasury Secretary what you do. "Oh gosh, I have 14 bureaus? Wow! The ATF [Bureau of Alcohol, Tobacco & Firearms] is with Treasury? Goodness!" That part of it. Having been out of power for so long was inhibiting.

If John Kerry gets elected, the difference is so night and day. Right now somebody's got to be in charge of looking for the land mines that the Bush administration set--e.g. gays in the military. That will not happen again. You've got to get out of the box. You know you're facing this stuff immediately. All the things that we now know--a supp.? People on the economics wouldn't have known what a supp. was. A supplemental appropriation for the war that's going to hit you in the face and be very politically divisive, and right before an Iraq election. There's so much more that you have to get it right with Congress day one. Not six months in. Day one. All of those things. We're just so much more knowledgeable about them when you're out for 12 years.

Riley

Sylvia, is it also the case that there was something of a discrediting effect for people who had significant experience with Jimmy Carter, because that was viewed as a failed Presidency? Mathews: I didn't sense it. But as I look back, I don't see any Georgians.

Riley

There weren't a lot of people--the two or three you mentioned--

Mathews

Bo Cutter, Roger Altman. Josh Gotbaum and Barbara Chow had worked in the Carter administration.

Riley

Summers had worked, but it was in the Reagan administration.

Knott

Warren Christopher.

Mathews

It's not as if it were pariah status that I knew about.

Riley

OK.

Mathews

Second large framing issue.

Young

Could I stop you? You say you didn't know anything. Of course we know how to take that and how not to take it. But it was also the fact that you were contrasting Kerry, for example. And it wouldn't be very different. But Kerry's had a long term in Washington. He probably knows a lot of the fine print of Washington. And Clinton in that sense didn't know?

Mathews

Clinton didn't know the fine print of Washington at all. All Clinton knew was how to be a Governor. This man had been an executive. He knew about Congress. I mean, did we get it right?

Young

Yes.

Mathews

In certain ways, we got it very right. In other ways, lots of lessons learned. Which is why I think next round, everybody would be much better. But what Clinton knew was how to be an executive. He knew how to put a budget together, how to select the Cabinet. He knew all of the things that it takes to actually run something.

It's an interesting question for our country. Are we going to now tend to elect Governors because they know how to run things? Senators have not had that experience, other than having an office that's slightly dysfunctional. They have to cover so many issues. It's just not a business model that I'd even want to--if somebody asked me to come in and fix the Senator's office? You'd be hard-pressed because of the limited resources. In a company you'd say, "OK, we're going to get rid of stuff and focus on what we're good at." And it's just not possible. So this question of whether or not you need Governors or executives, I think, is a very interesting, historical, future, and academic question for study that actually would be very interesting.

Young

Many years ago in this very room, former President [Gerald] Ford was sitting here when Linwood [Holton] was Governor. They were having an argument about what's the best training for a Chief Executive, for President. Linwood was taking your point of view. And Ford said, "These days, you've got to have legislative experience. You've got to know how the Congress works." So this is a very interesting old question for us to begin with.

Mathews

And it leads to another question, which I think is very important from a historical perspective--the role of the White House and the Cabinet. I think your management ability is related to how you run. Are you totally White House-run? Or Cabinet-run? And how do you think about these questions?

The second part of the transition that was very important was the question of the deficit numbers, which we didn't have until much later. They were much larger than we thought. That was a linchpin to your framing and how you were going to be thinking about your economic plan and budget going forward. You're on the outside and you don't have the right numbers--it was December, I think, before we got them. That was one thing that we were not going to do to anybody. It doesn't serve the country. We had the numbers already for those people.

It's just a question of who won then. That's what was hard. In the last days of the Clinton administration, I was the person in charge of managing resources for the Bush team and the Clinton team. I had to withdraw from decisions in the Clinton realm because the Bush transition people gave me their needs. I had to get their needs met by our staff at OMB [Office of Management and Budget] in order that they could do the planning.

I withdrew from Clinton decisions. And by the end, when we left, 80 percent of the work being done was directed by the Bush team. So this question of the deficit number and getting your economics right? That was driving a huge part of the transition. And the other thing is that you were setting up the NEC. So those would be the three big things about the transition that are relevant and important, from my perspective.

Riley

Had you dealt with the NEC question during the core of your service?

Mathews

Yes, we'd announced we'd do it.

Young

The announcement had occurred right around the time of the convention.

Mathews

We didn't spend time on how to design it or do anything. Clinton believed that if you have people who organize your national security policy, why wouldn't you do that for your economic policy? They're differing views. What EPA [Environmental Protection Agency] thinks we should do and what Bob Reich at Labor thinks we should do or what the Commerce Department thinks you should do--seems like everybody has different views. Wouldn't it be wise to have a body that ensures you're getting all of the voices? Let's get all the facts, the pros, the cons. Let's understand and then go forward.

Riley

Sylvia, what was specifically your portfolio during the transition?

Mathews

I actually was not going to work on the transition. I was going back to work at McKinsey. I leave Little Rock and I actually go to West Virginia to see my parents.

Riley

This is right after the campaign?

Mathews

Literally. I go to see my parents in West Virginia, and I get a call, because all of a sudden we need speakers. I go to the University of Pennsylvania and speak to a group from Wharton and Larry Summers' parents, who are economists. I'm mortified. [laughter]

Riley

You're getting him off the tennis court and now you're speaking to his parents?

Mathews

Yes, and so I'm speaking about the Clinton economic agenda to these people. They called and said, "Would you do this?" And I say, "Sure, I'll do it on my way to New York." And then, "Can you come to Washington?" Because it was decided that Gene would be in Little Rock, which was Gene's reference, because Clinton would be at Little Rock. I'd be in D.C. with the policy portion of the economic team with Bob Reich. Bob Reich and I sat very close to each other in a very small office on 13th Street. I helped Bob run the economic transition. But in the middle of the economic transition, because Rubin gets selected relatively early, that changes. He then becomes the person who's basically running the economic transition of the economic team.

I was the first person that Bob hired. He asked me to join him at the economic convention. I don't even remember what it was called because it's such a bad memory for me. The objective was to get people's voices and that sort of thing. But in that kind of transition time, trying to get it all right, and the papers produced--Gene says, "You've got to come back." We have people working night and day on the briefing books for everybody. The day of the convention I'm walking around in Little Rock, Arkansas. Rubin has been appointed and asked me to join him. Because then, Rubin is running the transition. Bob's transitioning out of his other stuff. So Reich and I are still sitting in Washington. I'm on the phone a lot with Rubin. Then we start forming the NEC.

Riley

This is in December?

Mathews

Around December 6, 7, and 8.

Riley

The announcement of Bob Reich's position occurs about the same time?

Mathews

I think so. I think we announced four or five of them at the same time. But I'm not positive about that. That is checkable, but I can't exactly remember.

Knott

It was such a bad memory because of the chaos involved--

Mathews

The chaos and the trauma. You've been through a campaign. The meetings are 7:00 to 7:00. You're going home at 2:00 and 3:00 every morning. Then you're back at 7:00 in the morning. There's no weekend. When I say the meetings are every day between 7:00 and 7:00, they're every day. You're exhausted. You're inviting people to hear from them, but they could tank your potential economic plans. Someone like you comes and says, "I just think it'd be the worst idea in the world to say X, Y, and Z." And that's exactly what we're getting ready to put in our budget. [laughter]

Then it becomes very hard. So figuring out what to use this for and how to use it was an incredibly difficult thing. Who's going to come as speakers? Meanwhile, everybody and their brother's jockeying for positions in the administration and thinks this will be a key, "If I get to come December 6th--" The phones are ringing off the hook and Mickey Kantor had to handle all that part. Mickey was in charge of this with Gene, being the day-to-day, make it happen kind of person--putting the briefing books together, getting the right people, looking at their talking points. Having people give you a sense of what they're going to say so that you can put panels together that are sensible because the media's going to be there.

It can't just be a normal conference that we'd all go to, "Seventy percent of the panels were good and it was really a great conference." No--100 percent of the panels have to be good. It's a whole different standard. So I think it's an important question about value added.

Knott

Would you counsel against handling some type of public event like that?

Mathews

I wouldn't. There would be those who'd counsel the other way. Yes. I believe, Get in there. I'd advise an incoming President right now to get in there and get a couple of good people in your most senior positions. That's the most important thing--good resources in your senior positions. Then the framing of the most important issues, which, for our President coming in, would be Korea meetings coming up that are very important, Iraq, and the supplemental budget. You've got to get those right. Then I'd have what I'd call the "landmine team," making sure that you're not going to be bitten by something or have something explode in your face. I wouldn't waste time.

If you want to get input from people, that could be an argument, and I think that's a very valuable thing. Set up a meeting and have six of the people go out to the microphone afterward and speak if you need to satisfy press needs. But I actually think you should buckle down and not feel like you need to satisfy the press with stuff. I'd satisfy them with other kinds of access. I'd let them talk to people about how we're going to redesign the Oval Office, the carpeting, and all that stuff. Feed the beast, but don't feel like you need to feed it and drive policy decisions.

Riley

Why did they do this again?

Mathews

I can't remember. But I think it was about getting input. We were out of the gate and we were going. We were already on, "It's the economy, stupid." And we had an economic conference within a month's time.

Riley

So you then joined Bob Rubin?

Mathews

Yes.

Riley

And at that point, you're beginning to lay the groundwork for the NEC?

Mathews

Right. So I get hired, Bo gets hired. And as he writes in his book--Rubin's book is accurate on all this stuff with regard to the sequencing and his questioning of Gene. He was questioning whether or not we should hire Gene. He was worried about some of the habits and that kind of stuff, and I say, "No." He quickly comes around. He does his checking and as he writes in the book, he quickly comes around. Gene comes on. Then we have to design the NEC. You're going to have two problems--two things going on at once. You've got the budget process gearing up.

Gene's very involved, making sure that in the first budget we have the Clinton initiatives, right? Bo actually has done it before because he's the guy who's from OMB. Bo and I have management consulting backgrounds. We're busy drawing circles with the cluster for the environment, the cluster for labor and education, to structure the NEC. I still even have the charts with my little McKinsey template. [laughter]

These are the days before you could do it all on computer. I have all of these notebook pages where we drew different clusters--how many staff--and then deciding. Meanwhile, Rubin's talking to [James] Baker and [Brent] Scowcroft, the greats who seem to have run things well in the executive branch. He's talking to them. We're stretching the NEC. It's an important part. You've got to keep going back and forth. And with Gene, and I'd been on the campaign too. So you knew the areas of interest.

You need to structure the staff around what are going to be the policy initiatives that need to be driven through the White House on the economic side. Then you're figuring out the staff. Bob's right about that whole back and forth on how he was going to quit because we weren't going to get enough staff. He does get more, and then we start hiring. And the hiring--what I think is important here is the personalities. A lot of brain power was going to come through the interview process. That's a threshold question. You've got to have brain power. That was the threshold to do this work.

You've got to be able to process a lot of stuff and think analytically in a generalist fashion. We did hire generalists because you didn't know exactly. And we didn't want to take away from the CEA. If we needed it, and if you wanted Labor economics, you were going to go to the Labor economist. So we specifically did not seek economists because we thought that was also part of getting the organization running well and playing well with others. Also having people have roles that were important that they knew. We hired generalists who got along with people and who respected other people, people who would listen to the departments.

Personality was a huge part of our hiring. People who could play in difficult circumstances, unknown decision-making, managing lots of needs and desires was a very important part. Then this idea I expressed before--the NEC's only going to work if people value it. So how do you make it an institution that is valuable to you, a Cabinet Secretary, or to you, a deputy in a department?

I think Bob covers these regular meetings. I won't spend a whole lot of time on when we're setting up for the NEC. We forget DoD [Department of Defense] and SBA [Small Business Administration], if you look at the first executive order. Les Aspin calls and says, "I think I need to be a part. The defense industry's a huge part of the economy, first of all. Second of all, if you all are talking about economics being part of national security, well then, let's talk about it." Then Erskine Bowles calls. "Small businesses create more jobs than any other--" This is how I got to know Erskine. Then I go and work for him when he's Chief of Staff. These two weren't going to be part of the core NEC, but they're a very important part.

S. Mathews 10/28/04 1

Mathews

Are we through with the transition?

Riley

I don't know. Alan, you had a question, I think, about the budget numbers. You talked about the importance of that, but we haven't really played out what transpired when those deficit numbers were released and what the implications were.

Young

Before the inauguration?

Mathews

Yes, we get them. I can't remember if they get into the press or not. And I think that they probably do, relatively quickly. They're much larger than we think. The core question for us is, "What do we think?" This President uses terrorism as the prism through which he views foreign policy. We used the deficit and job creation.

Your ability to have influence on job creation directly is a very limited thing. The deficit is something that if you think about how an administration can have effects on in the economy, the deficit is the place where you probably have the biggest lever. It was very much a prism. The question was, what was the number going to be? I think Rubin writes about this pretty specifically.

We're fighting in a meeting in Little Rock. We're having this big discussion. "Is 180 the right number? Is 200?" And that would be the deficit for that year. So much of it was about a conversation that you wouldn't know. Bob was very expert on the question of how the markets would react and the question of getting the markets to believe that you were going to take care of --our economic approach believes that when there's a deficit, there's a premium in the marketplace. Where were you going to get a situation where you could still do the kind of investments that you needed to keep the country strong but get that premium out so you could stimulate increased investment and therefore have productivity growth that would lead to job creation? Those are the basics.

And this is an important, broader point: We have a very clear economic strategy. It's about the importance of deficit control, number one, and its ramifications for economic growth and especially for the long term, when you consider the looming problems of Social Security and Medicare. If you're not going to take care of them directly, the best thing that you can do is do this indirectly, by putting the government in good fiscal health.

Number two: open markets. I shouldn't say "open markets." Fair trade, to use the actual approach. Being a part in the force of globalization in a positive way and trying to leverage it for the economic health and security of this nation. In other words, those jobs make more money for us. Then you've got to have step three of the economic strategy, which is investing in those things that make a country strong. Fine, let's open the markets, but our kids have got to be educated in order to take those jobs that make anywhere from 13 percent to 17 percent more than the jobs that are getting exported. The jobs that get created out of that and the environment, and technology. And there were core places that we believed in investment. That was our economic strategy.

We didn't communicate these things as well as we should have. Everyone around this table should be able to tell me that. And I bet most of you wouldn't have been able to do it. One of the things that I consider a failure is that we didn't communicate it. It's really hard to get it into sound bites. That's a place where I wish we could have done better. What were the strengths and weaknesses? Our ability to articulate our economic strategy in a way that people understood it was limited. As good a communicator as Clinton was, and we pretty much were too, as a team.

Young

You say you didn't do well on communicating, so I want to ask, "Communicating with whom?" Are you talking sound bites to the general public? Or are you talking about informed audiences? Business people? Business roundtable? Didn't they understand it? Or did you not communicate to them, either?

Mathews

No, I think we communicated in the earlier conversation we were having about John Snow. I think the business roundtable and the investment community got it. I think the American people felt it. That's what the job creation did. We had things working in our favor and Clinton could talk about it. When he was out on the stump talking about it, people would say, "That makes so much sense." But one of the things that I think is hardest, when I look back at the administration--we knew what our number one priority was--the economy. That is such a huge part of what the administration was about. But you don't have the same feeling. If you asked me about Ronald Reagan--make government smaller, build up defense, get rid of the "evil empire." Maybe those aren't the right three, but you can basically--

Beckenstein

Don't add supply-side economics.

Mathews

Supply-side economics--cut taxes would be the shorthand for supply-side economics.

Beckenstein

Right.

Mathews

And it's a problem I think the Democrats have. We actually believe that there is a reason for government. And we believe that there is a role for government. So you're doing a lot of things when you're there, and that waters down the big core things.

I think that was a part of our communication problem because we were always busy doing so many things. But to your point, we did communicate well with the markets and with the business community. I just believe that we did not aggressively post the administration, make people know. People should just say, "Boy oh boy, that was good economic policy." When asked the question about "How should future historians view the Clinton Presidency?" They should think, These people were pretty sensible. They knew that there was a limited amount that an executive branch could affect the economy, but they exercised it to its fullest extent.

 

Beckenstein: Did Clinton anticipate the new economy, or was he just the fortunate recipient of that event?

Mathews

What Clinton and the team anticipated were two things. Certainly, as I've said and keep saying, an executive branch doesn't make or break the economy. It can be steroids, or it can be the downer in terms of what it can do, but it isn't the sole driver. The business community and actually the workforce in this country are the real drivers of what makes us go. He believed that there was a crowding out--the deficit, the fiscal conservativeness.

He had not spent as much time, but it doesn't matter sometimes how much time he has or hasn't. With his intellectual capability, once he'd had the meeting with Rubin, he got it. Once we'd had those meetings--whether he got it before or not, I don't know. But the crowding out and that question was something that he could understand, repeat, explain, delve into and question. "How much do you think it moves the market?" That kind of stuff. That was number one that he knew with regard to this new economy.

The second thing that he did know--and this is a similarity between my current boss and the President--they actually believe in a world we can't see. These are two men who believe in a world that most of us can't see. Bill Gates was able to think about a world that none of us could see, and then worked to make it a reality. Bill Clinton, similarly. He wouldn't have told you exactly how technology was going to make a difference and change the way things worked, but he knew it. And it's similar in terms of even in foreign policy or other areas, or what he believes. Some of the domestic policy issues that he believes that you can go somewhere with. He may not be able to give you the logical 1-2-3 of exactly how it will happen, but he knows it can.

On the question of whether he knew that there was a new economy coming and whether he would have described it as a "new economy"? Maybe not.

Beckenstein

But he emphasized technology more than any previous President I know of.

Mathews

Exactly. And that's where it came from. And Al Gore was just fuel to that fire. The two of them together and just believing. That's a lot of what the Kyoto Treaty was about. Everybody saying, "The technology doesn't exist." Why did we sign on to it? You can imagine the conversations internally. "The technology doesn't exist to implement the Kyoto Treaty as currently negotiated." And Gore and Clinton said, "That's what American ingenuity is about. We've got to provide the stimulus to get our people thinking. Because if our people get thinking--I can't tell you what the solution is. But I know if we energize and provide the appropriate incentives, an American company or individual or an academic institution will find the answer." That was their view.

Beckenstein

Interesting. In [Bob] Woodward's book, Maestro, which is about [Alan] Greenspan, there's an excerpt--I have not read the whole book, but somebody gave me that excerpt because we used it in class. In it, Greenspan describes meeting early with, I believe, President-elect Clinton, very early. Woodward claims that Greenspan was the primary influence on getting Clinton to have resolve on moving toward a balanced budget. Is there any reality to that?

Mathews

In politics and in governing, like most things, victory has many fathers. My answer to that would be yes. And there are probably ten other people that I would put in that category too. And for a man like Clinton, those kinds of conversations mean something. This is not a guy who just talks and moves on. This is a guy who talks and thinks and will come back to it. And so my answer to that would be, "Sure." The balanced budget question--at that particular point, you really couldn't see exactly how to do it. We had a plan to get there, but it was going to take some time.

Beckenstein

The commitment to it, though, is a different growth path than one in which you fight inflation--

Mathews

And don't get there.

Beckenstein

Yes, and don't get there.

Mathews

No, no, no. The other thing you have to remember is that Clinton was a Governor. He balanced budgets. He's an executive who has balanced budgets. He had a terrible situation and he couldn't quite understand how it had gotten that bad. But it's not as if you've got a mind that's closed to the idea.

Riley

I think for those of us who are trying to understand the transition period, in the early phase of the government, there is an interesting mystery. And that is that during the course of the campaign, there's not an enormous degree of influence on deficits, and then, as you know, the early thrust of the Presidency is very much deficit related. What we are trying to do is to map the process of moving from Point A to Point B. You've repeatedly said that these numbers are crucial to understanding of phase, but I'm wondering--

Mathews

The truth is implementation. That's the connection. If one wants a healthy economy, one is about a healthy economy. Job growth for the American people. A high focus. We've talked about that. So how are you going to get it? OK, you got the job. How are you going to do it? It's great that you have a vision. A vision is for economic health in this nation. A nation where people are employed, they're paid, and they have healthcare. That's the vision you were buying. So how do you get there?

When you're campaigning, you're not always busy talking about step one, two, three--except when you're in the middle of an implementation situation that's gone awry. See Iraq. But then you need to talk about the specific steps you are going to take because that's how you distinguish. Once you're in the middle of a strategy, which is stabilize Iraq and draw down.

Is there any difference between Bush and Kerry right now? No. So you become the implementation. At that point though, the focus on the economy was really what you had been talking about. And then it came to game time. That's how I would explain that transition. Exactly how were you going to do it when it came to implementing? You needed the numbers to know what all it was going to take to play the game. What field were you playing on?

Riley

And that got to be substantially worse than anybody's expectations?

Mathews

Yes.

Riley

Let's move ahead then, unless there's anything else in the transition area?

Mathews

Let's go to the budget.

Riley

Let me ask a preliminary question. You walk into the White House--why don't you tell us about your experience?

Mathews

The first day in the White House Bob Rubin schedules meetings for Inauguration Day--typical Rubin fashion. I say, "Really?" You mean we're going to go to the inauguration and we're meeting?

Riley

Before you go dancing?

Mathews

Exactly. I say, "Bob, there are parties." [laughter] Inauguration, celebration, we won! But no. We had a meeting that day because there was a lot of work to be done. So you go to the inauguration. It is freezing cold, but so exciting and so hopeful. You just can't even believe it. We do have a meeting, but then at one point, we walk through the White House. I remember walking through, my first time in the White House, on Inauguration Day. There is about a 78-year-old African-American woman named Bernice sitting there, and it is a mess. It looks like computers have been pulled out and there are no hard drives. Papers everywhere. Shoved into little crannies, not clean.

I left work at 6:00 P.M. on January 19th because my office was going to be vacuumed and cleaned. I left a bottle of wine for my successor with a note. I hope that history can set parts of the record straight with regard to some of these issues. Because that's what happens. It's part of the game, and I get that. But I also think that the work that people do here is so valuable and important, to get facts on the table. So you walk in and there's Bernice, the 78-year-old woman, and she says, "Hello, I'm Bernice. I was a schoolteacher, and I'm a White House volunteer."

This is the only person in the White House answering the phones in our section. Bernice knows more than you do about how to run the White House. OK. We're there for just a few minutes, and Michael Froman, who is a White House fellow, and Roger Porter, who helped me with my senior thesis at Harvard--Roger, of course, was Domestic and Economic--at that time it was all combined. Bo Cutter and I met with Roger to understand and learn. Then Roger said, "I have one thing. You're going to think that I'm asking you for a favor, but I'm doing you a favor." Roger had been so kind and gracious helping me with my senior thesis in college and everything. And I said, "Sure."

He said, "I have a White House fellow, and it's very hard on White House fellows when the transition occurs, because usually they get treated like they were part of the other administration, and that's not really nice and helpful. My guy's great, so I want you to take him." And I said, "Does this slot count?" [laughter] So we take Michael Froman as our White House fellow. I meet with Michael, do an interview with him, and the guy looks bright. Great. And goodness gracious knows we need somebody who knows something. We walk in and there is a memo on bananas. And Michael has a memo. Because the business of governing goes on, and the President of the United States had to make a decision about banana trade issues.

Beckenstein

Is it the EU [European Union] bananas dispute?

Mathews

Yes. It was the first thing in the door. [laughter]

Beckenstein

Which has no job implications either--

Mathews

It's the craziest issue. It's not even about us in the United States, really and truly. Except for the fact that that's where things are corporately headquartered. So we get the memo and I get them, and he says, "Here's a memo for Bob Rubin, because we've got to get a memo to the President on the EU-banana trade dispute. We have to take position on X by Y date." Then you're off to the races.

You're in this place that's like a house, and you can't believe that you're really in the White House, with the gates and all those things that come with it. You really don't have the time to enjoy it. It was hard, because you'd end up doing it at nine or ten o'clock at night. Those were the days when you could still do tours. But when you did the tours it would reignite the sense of pride in what you were doing and the place where you were doing it.

On a day-to-day basis, you were just going--you know the TV show? People don't run around. It's a very open space and they all move really quickly. I've only watched it once or twice. It's not exactly like that. But there's a real sense of pride in the place, and that was my first time. Actually, that's not true. I'd gone to meet Roger Porter in the White House, and so I'd seen it one time before. But we weren't there.

Riley

Right. And there were people and furniture in the right place. You had an office in the White House, didn't you?

Mathews

I had a desk right outside Bob Rubin's office. When I was Deputy Chief of Staff, I had what was [Patrick] Buchanan's office many years ago. It's right beside the Roosevelt Room. Then I had basically a basketball court at OMB. It's beautiful. Unbelievable. The architecture and everything about it is just beautiful.

Young

Is that the Old Executive Office Building?

Mathews

So beautiful. Then I had an incredible office at Treasury. Treasury was doing historic restoration. They wanted to restore the four original colors that the offices were painted. And I have no idea, historically, why they used this red, this blue, this green, and this ivory color. They couldn't really find anybody to do the green. So I said, "Fine. Paint my office green," so that we could return to the historical. That was a part of the project. So I had this beautiful green office. I looked out my window and that's where the helicopter comes up and down, and the Marine One Unit.

Riley

I raise the issue not just for architectural purposes but the proximity to the President of this new institution in the White House, and this seems to be an important feature. Can you tell us a little bit about the early days of the NEC getting up and running? And tell us a bit about Bob Rubin and his role in this administration, his working relationship with the President. What is it that made these two people click in the way that they did? What were the singular traits that Rubin brought to this enterprise that most of the professionals studying this seemed to think were so critical for the success of the NEC?

Mathews

I think that part of the establishment of the NEC quickly was the convener of the budget process for the first budget. That role shifts and changes over the period of that eight years. Part of that has to do with where the players are. At that time, we were the convener. We were the people who were making sure that all the parts were going to fit together in the budget. And at that time, the NEC held the role of the initiatives. That was always true. And that actually is a very important thing as one thinks about the future.

The NEC is the place where the President's initiatives get housed and taken care of. The NEC ran the meetings. Bob would convene them. The meetings occurred in the Roosevelt Room. I think this is all in his book. Lloyd Bentsen would come in and present the tax portions. Leon Panetta and Alice Rivlin would come in and present the budget portions. And so meeting after meeting, after meeting--but the NEC, being the convening body, empowered it quickly. That was the means by which we got to the President and did things with the President. Panetta wasn't doing something that he didn't know about, and vice versa. It was creating already that sense of trust and access.

This evolves into the point about Bob Rubin. Bob didn't sit there and do some big pontification as the meetings began and basically summarize what Leon said. He didn't feel any need to do that at all. He'd just say, "Mr. President, what we want to try to do today is X and Y. Leon, Lloyd?" And so his style was one of empowering others around him. Bob had a weekly meeting with the President. Sometimes he would take me. If there was an issue that I had done some of the work on, or thought it might be easier for me to explain it, I would go to his war room with the President. He's a person who is not about showing what he knows. He's much more about getting the job done.

The other thing is that Bob is very conscious of what he doesn't know. When you look at how he hired--Gene and I knew the Clinton people and knew the Clinton agenda. Bob was a person who had experience in government. He surrounded himself with the things that he didn't have. He had lots of things that he brought, and he knew what he brought. But he also knew what he didn't bring. If you contrast Bob Rubin with Bernie Nussbaum--and this will be something that I'll probably want to hold for many years, or else do it in some way that's not hurtful or harmful.

Riley

OK.

Mathews

Both were extremely successful in their fields in New York City--the best. Bob came in and was very successful; Bernie was less successful. And a lot of that has to do with the knowing what you don't know, which Bob was very good about. Humble, not a showman in any way--no one would consider Bob Rubin the best dresser in the Clinton administration. Just from his appearance, his walking around the U. S. Treasury Department in his socks, to how he behaves in meetings, was a very important part of establishing a coordinating body.

Meanwhile, because of that, when Bob did speak and express a very clear and strong opinion, it empowered him further with President Clinton. And his relationship with Clinton--these two men come from very different perspectives. Bob eats a chopped salad for lunch. Just lettuce. Sometimes it's even iceberg lettuce, chopped with no dressing. [laughter] These are two very different people. The questions of faith. Clinton is a man of faith and religion. And how Clinton relates to people and the love of the popular culture. It is true that someone had to explain who Aretha Franklin was to Bob, and the Vice President once got him a Walt Disney book on Dumbo, because the Vice President had used a Dumbo reference and Bob didn't know what Dumbo was. [laughter]

Young

He didn't know who Aretha Franklin was?

Mathews

Yes. At one point, somebody was talking about having Jimmy Buffett at something, and he thought it was Warren Buffett's son. [laughter]

These are two people who are very different, but they had a great respect for each other. Not that these two guys are going fishing together, which Bob does. I don't know that the President does. Bob loves his fly fishing. But a real respect and also appreciation. And a part of that appreciation comes from the fact that Bob's the only other person who had been through what Clinton had been through. Bob was under a Grand Jury investigation for I don't know how many years with [Rudolph] Giuliani. So Bob really understood what Clinton was going through. He was the only person in the place who really knew what it was like to get up every day and wonder what's happening.

The guy who worked for Bob at Goldman Sachs was jailed. This was the whole Beatrice, "Your bunny has a good nose." The insider trading deal. That guy was one of Bob's prot?g?es. And Den of Thieves I think is the book that goes through all of that. So throughout the time, the growth of the relationship occurred. Mrs. [Hillary] Clinton had great faith and trust in Bob. The Clintons both very much felt that none of this was about Bob. Their close friend, Bob Reich, writes the book. They knew Bob Rubin. I can't imagine that Mrs. Clinton and the President had any care at all about Bob's book. They just wouldn't worry at all. And that's a reflection of the relationship.

And Bob's leadership of the NEC? If you look back at the records, it's very important to note: Bob was going to fail at Treasury Secretary. Look back at some of the articles that were written when he was appointed. The guy doesn't know Washington. How could you replace Lloyd Bentsen, the Finance Chair with such stature, with this guy from Wall Street? But his methodical--it's a very interesting contrast that Bob Rubin's book is called In an Uncertain World. He uses the word "uncertain" in the title. The current President is all about certainty.

As to who Bob is and to how he helped govern, the questions of uncertainty played very big. You can read that. His book is accurate with regard to how he thought. And that gives you a sense of how somebody would run an NEC and a Treasury Department. And all that is to say, never question about making decisions a man who was happy to make decisions.

Riley

Could you also say something then about the working relationships between the NEC and some of the other institutional actors who were involved in the process? We'll talk about the budget itself here in a minute. But in particular, for example, the council. There were a lot of people who were advocates for the Council of Economic Advisors. I'm talking about professional advocacy economists and so forth who were very nervous about creating another locus of economic activity that close to the President. And yet it seemed, at least from the outside, that the relationship tended to work fairly well. Is that a fair assessment, or was there tension there that maybe we haven't picked up on?

Mathews

I think that it did work. Was there some tension? Yes, but pretty minimal, and less than one would expect in the context. I think that it was because the NEC was focused on economic policy and the CEA was focused on the dry economic policy, and that was an important thing. The other thing gets back to who Rubin was. Rubin didn't want to be the face. So part of why the CEA did so well--if you went back and looked at the number of appearances when economic statistics came out, and that sort of thing, you'd never see Rubin. You'd always see Tyson. And so with regard to this competition and tension, no.

We all were quite happy to have Laura as an excellent spokesperson. Alan Blinder was an excellent spokesperson. Joe Stiglitz was, too. Joe sometimes got off the farm a little bit. But all were just incredible people who were very articulate about the economy, could speak about it in language that people understood. They were energized, too. Having an NEC also brought the CEA closer to the picture.

How many times do we think that the current head of the CEA has met with the current President? The current head of the CEA was always meeting with the President because she was part of what we called "the core NEC." Because you had a policymaking entity, you were bringing people to the table who might not or otherwise would have been at the table.

I have to say that I don't know. I think probably during Bush 41, Cabinet Secretaries, Treasury--If you look back historically, Treasury played much more of this strong role. But what you miss when you have that happen is Treasury is not going to be busy asking the EPA what they think of that policy there. [laughter] The imperial Treasury--having been there, I can say that. But just like the EPA? Please. We're analytical people here. We're the economists. We're an important part of any decision making.

Young

You had mentioned earlier that Clinton was thinking ideologically for an NEC, "Why don't we do it with that?" As things worked out, was it similar or not? You've mentioned nothing that smacks of the war between Defense and State that sometimes crops up in national security policy. Maybe that didn't happen. But I'm wondering if that was a convenient analogy to get the organization going, or whether Rubin was an honest broker, or an advocate or what? Because the NSC advisor, Scowcroft--they had played different roles also.

Mathews

I think he was an honest broker but was willing to express an opinion and drive things to closure. But much more of an honest broker. The other distinction I would make between the NEC and the NSC is the operational nature of the NSC. The NSC has actually become quite an operational entity.

Young

That's right.

Mathews

One has to think about, What do you want the role of the White House to be? The NSC has become partially operational because they've got to clear cables. And do you trust your Secretary of State and his team to clear those cables or not? What's the moral equivalent of clearing cables, on the economic side? A lot of the regulatory decisions would be the moral equivalent of clearing cables.

When it's Super 301 and that kind of stuff, it's big. But there are smaller trade issues that are getting handled by USTR [U.S. Trade Representative], and things happening in Commerce all the time. I think it's fair to say that the NEC is less operational. Should it become more operational? In my opinion, no. Because I actually believe you can leverage. This is again a question of management and how you leverage. You've got to pick good Cabinet Secretaries. You've got to give them the information so that they have an understanding of the critical path that you're on, and then trust them.

Young

Well, as you said earlier, just create a new organization and you have to make it valuable to others.

Mathews

Right.

Young

And that's not always the case with the NSC as it has matured over the years.

Riley

One place where this could potentially be very prominent is with Treasury.

Young

Yes.

Riley

You've mentioned that the imperial Treasury is accustomed to being in the driver's seat on a large part of the economic portfolio. And yet I'm not sure that we're detecting much tension between Treasury and the NEC during your early days. I wonder if you could talk about that, and about particularly Secretary Bentsen and his relationship with Rubin. Anything that you could say about Bentsen's role in this would be extremely helpful, because he can't speak for himself now. He's not available for an interview because of health concerns. We have to ask others to fill in the void for us.

Mathews

And Josh [Steiner] would be important to this stuff, and Roger Altman. They'd be the two players. Roger will be fair. If you told Roger, "Roger, you've got it. You've got to speak from Bentsen's voice for a period of the interview." [laughter] He can do that. But Josh certainly could. I don't know if Josh has been down?

Beckenstein

He hasn't, and I want to talk with you about that.

Mathews

So the Treasury-NEC potential tension. A lot of the potential tensions we're talking about didn't occur because of good choices. Leon Panetta knew the budget inside and out, and he knew the House of Representatives inside and out, and he knew the budget committees. Laura Tyson was an economist, and Alan Blinder, good--and Joe. All were economists who knew the economics world. They had worked with Larry and could speak with regard to economic issues. They balanced each other.

Sometimes they weren't working in their areas of expertise. But they had people in there--that's part of the CEA. Laura might not be an expert on X, but she had a person there who was an expert on X, and she was never afraid to do that. But Lloyd Bentsen was a tax guy. That tax purview--tax was a huge portion of your portfolio. But this is the man of all those people who knew tax like nobody else, a grand old man. And you knew the Senate. Then Bob Rubin in the business community. He understands the markets on Wall Street. When you look at the constellation that was put together, you can understand why there was less tension.

Everybody had their own place and their own area of expertise, their own place to be number one. Bob was not trying to be number one in particularly anything. He was letting them do their own thing. Lloyd Bentsen was the guy on the Hill. You're sending Panetta and Bentsen together, but they're going to different places because they're doing different things and they're selling to different people. So you're not creating a competitive situation.

The NEC never tried to speak on the dollar, wouldn't ever do that. That was not our place. That's the Treasury Secretary's purview. By keeping the things where Treasury considered itself premier, you reduced the level of tension. I respect Secretary Bentsen because I think that he understood the importance of other voices. He's a man who's regal in presentation but was not regal in this question of policymaking. He was willing. And coming from the Senate, he was used to having the moral equivalent of Ron Brown, Bob Reich, and whoever else was at the table. He was a Senator. He had to work through the caucus and the committee. So you had a situation where he didn't balk at what was happening.

Do I think Treasury staff balked some? Sure. Would I think there was tension more down in the ranks at CEA and at Treasury? Sure. I'll give you a very specific example of where there would be tension with the CEA. The NEC and OMB would read the Economic Report of the President, the ERP. They thought that was the worst thing ever. The CEA is part of your economic team. How can they express views that are counter to the President's? Does that mean you should change numbers? Absolutely positively not.

The experts know what they know. But to say that drives you to conclusion X or Y when it doesn't, if that's not where you are--so there would be rare occasions where there are these kinds of things that would come up. But if there was ever one occasion that would create a tension in the staff--I think it's a very important question, historically and academically. If I were back doing a Ph.D., I'd want to write a thesis on it.

So the question is how do you create the independence in the places that need independence in government, like the Bureau of Labor Statistics? Nobody would touch it. After the [Richard] Nixon history and all that--so no one at BLS. You'd be careful to call them. Even if you had a question, you wouldn't want anybody from the White House calling BLS. So you'd call the Labor Department and say, "We don't exactly understand what this means. Could somebody find out?"

At NIH [National Institutes of Health] right now, there's the question of the 48 Nobels. Should they be doing what they're doing or not? I don't know. In economics and science and that sort of thing, how do you maintain that independence? In the British system, you have career civil servants, and the layer of political is so much thinner than it is here. Your ability to influence that is limited because you don't have as many people. It's an important question and one that we were very focused on respecting. But there's an interesting historical and academic question of how do you preserve it. How much independence should there be?

Beckenstein

Was there a tension, specifically, with the Economic Report of the President? You raised that. Had there been some infighting? Or are you just using it as examples?

Mathews

Examples. We'd read it, and they just didn't like us reading it.

Beckenstein

The background conflict was Martin Feldstein with Reagan.

Mathews

Did they tape the interview?

Beckenstein

Back in the mid-'80s. He got an early trip back to Harvard because he wouldn't put in that deficits were not going to be unimportant. He refused to do that, so Reagan sent him back to Harvard early.

Mathews

But see, that to me is an important question. Is that a question of policy or a question of fact? That's exactly why I believe that this needs attention. That one is a question of fact in my mind. Let's do one that's easier. Do we think that there's a climate change issue? OK, there are scientists who say there isn't, that it is not an issue.

What does it take to make it an issue, a point of fact? How much does it take? That's an important question. And on an issue like that, if you asked me how we would have handled it? It would have been how you worded it. Deficits in the future can cause problems. That's why it's so important to control deficits. You'd let him say it, but you'd say something in addition to it that was a point of fact. So you're trying to control. I didn't realize that that's the Marty Feldstein thing, which is why I didn't want us to read it. I can't think of the example of us fighting with them over it. But they didn't even want us to read it.

Riley

Because it might very well be fine.

Mathews

That's right.

Beckenstein

But there should have been--all it was was a check to make sure they didn't step into the policy realm.

Mathews

Yes.

Riley

You've mentioned earlier the budget. I wonder if you wanted to march us through that first budget. Was that something that you felt like you wanted to talk about, or--

Mathews

Rubin covers it very well with regard to the historical record.

Riley

That's fine, unless you've got some points that you wanted to highlight.

Mathews

OK, let me highlight a couple of points. First of all, having a President who was a Governor and is intellectually interested meant the depth you went into was incredible. But it was also a very important thing, because it was like an investment. It was money in the bank because you spent so much time on so many issues in that first budget. Then when you go through it next year with Clinton, the recollection was there, so you didn't have to get up to speed on the different elements and parts of the Ag subsidies or how you're going to fund LIHEAP, the Low Income Housing Emergency Assistance Program [Low Income Home Energy Assistance Program], or any of those things. So it was an incredible investment of time.

Riley

We've heard the stories about the size of the meetings, and this is where the stories came out about the inefficient use of the President's time.

Mathews

Right. It's an interesting question. But to be honest with you, that investment then? I did the entire United States Government's budget in two and a half hours, except for the open issues. I think it was two and a half, three hours. Jack [Lew] had me do it when I was Deputy Director of OMB. Sat there in the room. "?And then at the Department of Agriculture we're doing this, that, and the other. The major initiatives are this. Funding will all be moved by this much" [making engine noises]. That was about $500 billion. Whew! [laughter]

So the question of efficient use? There were times when we could have used time more efficiently. This particular example was an investment that I think we benefited from over the long term.

Riley

It's important for us to know.

Mathews

But it was a painful, hard one. He was a Governor, so he understood the stuff much better than somebody else might because he'd worked in all the different pieces. This was a guy who understood Head Start funding and how it flows. He understood Labor Department unemployment funding. He understood DUI [Division of Unemployment Insurance] because he had to deal with it when it worked and when it didn't work in his own state. The knowledge there was a very helpful thing that made that process work.

The leaking? I think that Rubin goes over the whole Bentsen leak on TV and the markets move and all that stuff, which I think is actually very important, coming back to your deficit point. Bentsen basically says we're going to raise some taxes. But on TV before we decided how we were going to publicly roll that whole thing out--leads to markets moving, because the markets believed we were serious. That event reinforces what we thought and what we had decided in Little Rock in January.

When the whole thing is over, so we could come to closure--I think it's a Sunday. We've finished, and Clinton turns to me and says, "Sylvia, what are the people in Hinton, West Virginia, going to think of what we just did?" That's where I'm from. It's so symbolic of the point I made earlier, that this is a guy who thinks start to finish. We finished the whole budget and his immediate question is, "What's somebody like your best friend that you grew up with in Hinton going to think of what we just did?" Did we get it right? She's a working mom and has two kids, and is a physical therapist at the hospital.

This is a very important reflection of who he is and how he thinks about governing. It's not just about the policy. He's a great policy wonk. Everybody knows that. He always continues to take the thread back to individuals whose lives you're trying to positively affect.

The only other thing about the budget just leads us to the stimulus. This stimulus is a very important lesson for us very early on, and a very important policymaking lesson. In this process, we did not have the head of Legislative Affairs or any of your political people in these meetings. We had the economic team, but we didn't have--

Riley

These are the--

Mathews

The budget meetings.

Riley

The Roosevelt Room?

Mathews

Yes, the Roosevelt Room. Budget meetings that were also basically the stimulus meetings. George would be a part of those meetings sometimes, but we really did not have the kind of input that you need. It's all really great to have good ideas, but if they aren't going to be implemented, and you're not going to roll them out and away--that's a lot of what happened with the stimulus package.

If there's a question about how good an idea was substantively--it's not like it was a terrible idea substantively. But the way that we implemented it, I think, was problematic. And I think the lesson we learned as an NEC is that the NEC needed to include the other voices. We all were policy people. But you actually need the voices of your legislative and political people to help you think about how to make these things a reality. That was something that changed dramatically.

If you contrast our Social Security meetings in the last couple of years with those early meetings, that would be the place where you could see that incredible contrast and the importance of the contributions that your "political people" make. That's not to say they drive what your policy is. They drive how you can roll out, implement, and achieve your policy, and they are a very important and vital part. We were very fortunate that most of our political people or legislative people were highly substantive. Mike McCurry could have been a Chief of Staff at State as well as the spokesperson. He, like Tom Donilon, has a very heavy policy bent. Larry Stein had been the policy director. He was the legislative guy, but he'd been the policy director for the Senate side for years.

Young

Chuck Brain?

Mathews

Chuck Brain was another policy guy. There were many, many--we were fortunate that our political people were also policy people, so they were only reinforcing and helpful on the policy side, and importantly informing. That was a mistake, I believe, and one of the things that I--any of the stuff that I have ever read and--

Young

What was a mistake?

Mathews

Not including political people in the discussion.

Young

And the political people would include primarily--

Mathews

Your legislative person. And usually the counselors were more in that role.

Riley

I'm trying to recall what else--part of this is just an allocation of time question. I'm sure that Howard Paster would have been the Leg. Affairs person that first year. He must have had an awful lot on his plate.

Mathews

He did.

Young

He left.

Mathews

Poor Howard's trying to get everybody confirmed.

Riley

Exactly.

Mathews

We're all sitting in our own meeting, and Howard's trying to make it happen in terms of getting confirmations, in terms of all of those kinds of things. So part of it was an allocation of time. But I think part of it was a lack of realization of the importance of that. And this goes back to the fact that you'd been out for 12 years. You were doing this anyway because you had this NEC. You certainly had the people in the room who were the Hill. The one thing that saved us in general, though, was that the Bentsen team were all Hill people. The Panetta team was all Hill people. So you had a lot of it in the room.

Young

How is it that you come to say they weren't included?

Mathews

Because you didn't include the people when that's what their day-to-day job was.

Young

The line operations?

Mathews

Yes. The line operational people are going to have a better sense. Their finger is totally on the pulse of the Hill. At this point, the Panetta people have their fingers only on the pulse of the people in that circle of budget people.

Young

Yes. The vote, or it failed entirely. It was a service-class issue. The budget, am I correct, was at a straight party vote?

Mathews

Yes, with the Vice President.

Riley

Not straight, because some Democrats defected.

Mathews

No, it was not straight.

Riley

But no Republican votes.

Mathews

Democrats defected. Bob Kerrey defected.

Young

I'm sorry, there were no Republicans.

Mathews

No, but there were Democrat defectors.

Riley

Was the NEC at all involved in that? When the President asked you a question, "What would the people in Hinton think about this?" This is after you created a package that then is going to be sent someplace. What role does the NEC take in the process at that stage? Is it at that point that you turn the baby over to somebody else to deal with it?

Mathews

We were part of the sales when appropriate; we were pushing the package. There were people that Rubin would be better with than others.

Young

He'd go up to the Hill?

Mathews

Yes. So Rubin was a part of it. There were people that Sperling would be better with than others. The whole group was complementary. Who are you going to send to the black caucus out of the group that I just said? You'd send Gene with Alexis Herman--but you'd send Gene. He's the person who can tell them everything we've done on education, every issue like that. It was a highly complementary team.

Riley

You're also involved, once the horse-trading begins--

Mathews

The top people were.

Riley

On questions about the magnitude of alterations in the fundamental package? Or is that going to be someplace else?

Mathews

That's at the NEC meetings with the Treasury, the OMB, and the core NEC. Tyson would have been part of that team.

Riley

Were there any really hard questions to deal with that you can recall from that period?

Mathews

I just can't remember with this many years and that many transactions. The one thing that I think is pretty important in thinking about the budget and thinking through the process-- when you think about Clinton's accomplishments and the administration, getting the first one done, which was a package that included tax increases as well as cuts and that sort of thing, is a seminal event. To get off on that foot to do what we hoped would put us on a direction to take the deficit premium out--this continues to be an important thing, even post-impeachment.

When you think about what some of Clinton's biggest accomplishments were--look what we achieved in the budget negotiations. The other thing is a fundamental change in how you work with the United States Congress. Talk to Senator [Robert] Byrd sometime about how he feels about those negotiations.

The fact that the administration was at the table was so disturbing to them. But what it meant was that so many of the priorities--when I said we wanted to do a lot in government? You can go back and look at the things--whether it's national service, Section 8 housing, the riders on the Interior bill that kept [Thomas] Slade Gorton in Washington, D.C. during that last year, when he couldn't go back and campaign. It was actually one of the times I really felt bad because Senator [Trent] Lott wouldn't free him to negotiate. If Lott had freed him to negotiate, we could have cut the deals. Gorton's great. He could have cut the deals.

We put strategies together in May. Things change, but usually on most issues you can see the deal. We could have done it, but he wouldn't let him. It was a painful thing to watch. I couldn't understand it, because if Gorton had gotten back to Washington State, I think he probably would have beat [Maria] Cantwell. I'm not going to move our position, because we know where we've got to go. But the budget was so important throughout the time in terms of how we achieved an agenda of change, especially that third category. When I talked about deficits, open fair trade, and then the investments that count? The budget theme starts there but carries through to the end. Then it also gets tied up in things like your State of the Union, how you do rollouts. We'll come to that when we come to other parts of the talk.

Knott

To take you a little bit off the track, in those early months in the Clinton administration, there were a lot of reports in the press, and I think it's perhaps been confirmed later. This is regarding Chief of Staff [Mack] McLarty and the sense that there was a lack of discipline and a lack of clear minds of authority and so forth. I was wondering if you could comment on that. What was your perception of McLarty?

Mathews

Mack's biggest strength was that he created a culture in the White House that was not a backbiting, tearing-each-other-down culture. That's what he was very good at, and that's what he did. That's something that served us all eight years. Having started out on the right foot in terms of how people treat each other--there was no tolerance for the "I'm going to take you down, crawl right over you" approach to Washington, D.C.--was a very important contribution. I think it was actually harder for Mack.

The President is a man of voracious appetite--of knowledge, of things, of everything. He doesn't sleep a lot. He reads, thinks. He's just a big presence. Someone who's that close to you personally, as a friend--and also Mack's personality--made it harder to control that. Also, Mack didn't know all the players because of where he came from. I think those two elements led to less ability to control things than he might have had. And Leon just didn't care. It was going to be this way, and that's the way it was. "I really don't care who's been included or excluded. This is what we're doing." You walk down the hall and tell the President, "Make the decision. We're doing it now. We've got to do this." It was a different style. Also, at that time the healthcare stuff did play a role in terms of having a Leon Panetta in that place.

Young

Wasn't it also the case that Clinton made his Cabinet choices early, got an early start on NEC and economic policy? Much of the White House staffing, including the choice of Chief of Staff, came very late, did it not?

Mathews

I guess so. To be honest, I don't remember.

Young

The conventional advice nowadays is to appoint the Chief of Staff before you do anything else.

Mathews

Yes. I think the current President did that, which was a good thing. Erskine was much more of a manager. He was the guy who said, "I want an analysis of how the President spends his time. Let's get a handle on how we're using resources here. We've got a couple of resources here, and this is one of our most valuable ones." Erskine very quickly came to manage the White House.

Then the Monica Lewinsky stuff happens. That just took the wind out of Erskine's sails. He was personally so upset about it. But he still did what he knew how to do best, which was he knew how to delegate and create authority and responsibility. To be very specific: We find out about this. In the meeting the next day, he turns to John Podesta and says, "John, you're handling this problem. Go work with counsel. Go work with Leg Affairs. Do whatever you need. You're handling this problem and I want you to figure out what we need to do, how we need to advise the President."

He turned to me and said, "You'll make sure that the State of the Union will go. It will go on time and it will be the best State of the Union we've had." Even in a time like that, Erskine was about, "Let's focus on the core issues. Let's create accountability and responsibility. Let's let people know who has that and get going. If you need my help, let me know. But otherwise, let's keep moving." That was Erskine's style.

Then John actually adopted much of the Erskine style. John was a bit of a composite. Because John had more of Leon's innate policy interest, Hill experience, and those out-qualities from Leon, management qualities in terms of "we're going to run the place." Different people, different responsibility. A little bit from Erskine. John had knowledge of everybody and everything because he'd been there for eight years.

Riley

At the point at which the budget package gets through, a decision has to be made about where you're going to invest your energies next. There were a number of things that could have come up. NAFTA was the thing that was grasped at the time, but healthcare was being done. And welfare reform had been, in some way, floating around in the background. Do you recall any conversations that you had about prioritization?

Mathews

Yes, I think we did have the conversations about it. A lot of it had to do with where you were ready. NAFTA was done. We had to get Lew Kaden to come down to set up some of these entities that we were setting up, the side negotiation things, and that kind of stuff. But basically, NAFTA was ready, so it became an implementation on legislative acts. Healthcare was not as far along with regard to that. As I recall, NAFTA was sequenced first. Healthcare came next. We didn't get China MFN [Most Favored Nation] status. There were a number of things that happened following the healthcare challenges that we faced. So why did NAFTA come first? Does Bob address it?

Riley

I'm sure he does.

Mathews

I think we talked about it when he was writing a book. But I'm not remembering well enough that I would feel comfortable making mine the historical record.

Riley

Do you want to say much about NAFTA at this point and tell us your end of the story?

Mathews

Once the decision was made, it was made. Then you have the implementation of the side agreements, which was a new thing. It'll be interesting to see, historically. I actually think that will be a seminal change. I believe, with globalization and that sort of thing, that we're going to have to think about things more in their entirety and whether you're doing it in side agreements. Even though business has great opposition to this, it's just going to evolve that way. This was the beginning--25 years from now, trade agreements are going to have these elements. That would be my guess. Getting those things right, trying it for the first time, first out of the gate. Very hard, very complicated.

The negotiations over NAFTA and the votes, the deal making, and that sort of thing--it's not a pretty picture of how Congress works. Could you change that? Could you have done something differently? I don't know how.

Riley

Was the NEC enlisted again?

Mathews

Mainly OMB was doing those deals, except the NEC is enlisted in terms of the people who know people. And relationships, that kind of stuff. Certainly Bob and Gene were enlisted more than anyone else. Our trade team was the core group working on it. There was a war room for NAFTA.

Riley

There was a war room set up for the budget?

Mathews

Yes. Roger Altman, David Lane.

Riley

You've got this sort of ad hoc organization that crops up in the middle of these existing clusters.

Mathews

It works because of the communication. It works because we all had team members on it. Everybody basically knew what was going on. You had to have the core people who had their eye on that ball every day, moving things along. They're asking people in the CEA for an analysis of X or Y. They're asking OMB for analysis of Z. They're asking the Treasury community, "Help me on the tax provisions--" They'd take Les Samuels, the tax guy, up to the Hill to the right people who had questions about it. It was a clearing house and coordinating function, and you maintained substantive functions.

That's what I think is so important about making all this work together. Keep the substantive operational functions with the people who have them, and keep the experts the experts. Don't try and transfer expertise, just bring them along. Have them do what they do in most cases. It wasn't hard at all. The President trusted Roger. Everybody knew and trusted Roger.

Look at who ran our war rooms. Steve Ricchetti, Roger Altman. Roger, of course, would be policy with politics. Ricchetti might be politics with policy. But they're all not one way or another. And the deputies--David Lane, who was from the NEC. So the NEC had--that was Bo's person. David was there feeding us, making sure that we knew everything. Gene, of course, would be there at times. And it's a room that's close enough. You'd just walk over, walk in, and talk to Roger. Because of physical proximity, you created a situation where information could flow.

Riley

I'm trying to remember who did the NAFTA war room? Was it also Roger?

Mathews

I can't remember.

Riley

It doesn't seem like it was.

Mathew

I'm thinking China MFN was Ricchetti, but I don't remember NAFTA.

Riley

Healthcare.

Young

Take a deep breath. [laughter]

Riley

The treatments that we have of this in the briefing book indicate that this was the major domestic policy piece that gets hived off into something that's barely insulated from you guys. Is that a correct assessment?

Mathews

I would just say it's not about being hived off from us. You could have set it with the DPC [Domestic Policy Council] and in my mind, it really wouldn't have mattered. But all the things that we just talked about--experts being experts, voices being heard, conversation of pros and cons presented clearly to the President. That's what you lost when you moved it.

Why did these war rooms work? Because there was somebody from Treasury in them. There was somebody from OMB. There was somebody from everybody. You got everything. You weren't leaving out pieces. When you leave out pieces, in my opinion, you don't do well substantively. Substance drives the politics, in most cases. You can have good substance and bad politics and fail. You can have a bad substance and you're going to fail, period. But the combination you want is good substance and good politics. And those usually can go hand-in-glove if you have appropriate contributions.

Knott

Why do you think that happened? Why was there such a difference in the way that you handled the budget matters as opposed to the healthcare plan?

Mathews

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I should be clear: David Cutler was actually half our staff and half Laura's staff. So he represented both of us--the NEC and the CEA. But he was not getting heard. That's because you didn't have principals meetings with Bob Rubin going toe-to-toe with Lloyd Bentsen if he disagrees. Or Ron Brown going toe-to-toe with Leon Panetta if he disagrees. That's a fair fight. Or Bob Reich: That's a fair fight. But that didn't exist. There would be these huge meetings where--I just think that there was a challenge to the listening that was going on. REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT .

Beckenstein

Really?

Mathews

Very similar.

Beckenstein

Is Magaziner on it?

Mathews

No--sans Ira.

Beckenstein

They learned that.

Mathews

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Riley

Is it the case that Magaziner overestimated his own level of professional expertise as an economist, or as a healthcare person in this instance? In your answer to Alan's questions earlier about how a President succeeds in using expert advice, usually it's the sort of iterative process where you're dealing with the hard-core economist at one stage. Then you take that and do a bit of translation, which then gets passed on to somebody else who is even further removed from the fundamental expertise. But you're relying at each stage on the advice you're getting from the former stages.

It seems to me that what you've just explained in the healthcare piece is you've got some of these same experts there. But when it starts working its way up the chain, there's a lack of appreciation for the information that they're getting. Or at least they're not dealing with the red lights in the same way that you might have if you've been in that position.

Mathews

What's hard about this is that this is the one thing on all the lists of things. If you ask me if I was involved with it, nada, just not at all. It's very hard to, at its gross level, at the macro level--I'm quite certain that the problem had to do with lockout and not listening. That's how I'd characterize why I believe we failed.

If you back up and look at CHIP [Children's Health Insurance Program] that was implemented, that's a pretty darn big deal. Then the only movement we had in resolving a very serious problem that's going to become, I believe, much more of an economic problem for the country--healthcare costs and how we're handling them as a nation. Working in a place where we had a 30 percent increase in our healthcare costs in one year? That came from a number of different reasons. But I think that's an important thing. So I would do it at the macro level. You had all these outside people asking experts. It's not Alain Enthoven and all those guys. They're smart people.

Young

What you might describe as an intelligence failure. That is, the relevant knowledge did not get to the players and issues did not get properly articulated. Is that it?

Mathews

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Young

Yes.

Mathews

And that's one we aren't going to let out for a long time. [laughter]

Riley

What does Ira eat for lunch? [laughter]

Mathews

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Beckenstein

A paradigm shift. Back in the Reagan era, one of the interesting tensions in the Reagan administration was the strange bedfellows and supply-siders with monitors, and that's sort of a famous one. Here I'm wondering--Magaziner is a poster boy for the old industrial policy model of how you approach the role of government in an economic policy. And Clinton has got a very different vision. Are the mind-sets so different that they really can't come together?

Mathews

REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXThis vision that Clinton held of the approach to the economy--we can think through the importance of technology. Whether you call it "new economy approach" or turning away from the old industrial approach to things. Why he supported NAFTA and that sort of thing--you have all these people around Clinton who were like what you just said.

Most Republicans, right now, if you posed the question, "OK, whose economic team do you want? Can we bring back the old team or this team? What do you want?" Even most Republicans would agree that this was a very progressive--whatever word you want to use. To your point, was it never reconcilable? It was never informed by this generalized approach that we used for everything. The steel fight, when we had the fight about whether or not we were going to take the steel decision. You had the people around the table who think the way you just described. And you have other voices, of course. And that's why all these decisions are hard. But it wasn't informed by it is the way I would put it to build on your point.

Young

And Reich had the same legacy?

Mathews

That's right.

Young

And yet he grew.

Mathews

Yes.

Young

We can approach that later.

Beckenstein

Because Magaziner didn't appear to.

Mathews

Yes. It's interesting because Ira's an innovative thinker. But I think you're right about his thoughts about it. And you know what? It's just such an example of Clinton a third way. Best of both. We've got to get healthcare to these people, but we've got to think about a way to use the market to do it. Best of both. People talk about Clinton in the third way and they joke. But it wasn't like that. He wasn't ignoring the old industrialists. He understood what it was like for people to lose their jobs because of NAFTA.

Beckenstein

Right.

Riley

How do you make that best? What do you do?

Beckenstein

That's a stale old bone.

Mathews

Right. The either/or.

Beckenstein

And it didn't sell politically.

Mathews

Another problem.

Beckenstein

I don't know if it's about the early transition in the first term when we get at the role of Gore. I can hold that until later. It depends on where you want to go.

Riley

I don't know. Is there anything you want to say about Gore during the first couple of years? My assumption is he was a participant in these budget meetings.

Mathews

Yes.

Riley

Was he an active participant?

Mathews

Gore was an active participant, and actually, also an active sales person. When you talk about the rollout and that sort of thing? If you brief Gore, it is all totally absorbed. Statistics, everything [makes sound like an engine--grrr] Gore was an incredibly powerful force to sell but also to think. And Clinton used him as a partner. He had lunch with the Vice President every week. And nobody set those agendas, that was all their conversations. Gore also was very good at pushing Clinton. He would push and push hard to make sure, "Are we rock-solid here? Is this really what we think?" That kind of thing when you're getting close. "Mr. President, that's going to assume X and Y. You're comfortable with that?"

He was very good at that. Also very good in briefings. We'd always ask the Vice President to come for the last half hour before a press briefing because Gore has an incredible sense of humor, and it's the wildest thing, because no one in the country--he's the guy who got Bob Rubin the Dumbo book. [laughter]

Mathews

Gore has a much better sense of humor than Clinton.

Beckenstein

Yes.

Mathews

Gore was coming in to bat clean-up, to get Clinton in the bright mood, because if there was something that was particularly hard, Clinton would ask, "You want to say this? You want to say that?" And the Vice President would joke, "Well, Mr. President, I think that's exactly what you should say." He was always very humorous and could bring levity to the situation while still getting to the core of the substance, so a partnership.

Gore understood the economic issues, too. That's why it was all very strange in the end. For those of us on the inside, it was all very odd--because he was good on it. I just think it's hard. I think it comes down to how Presidential campaigns are run. I don't know what we do about it as a nation because it's about sound bites, and this appeal. The complex ideas are not--I was so happy about the debates. At least that's the closest we got. So Gore was engaged, involved, and a player.

Riley

Was it the case that he also had a very well-defined policy portfolio that became his issue areas?

Mathews

Sure. NPR [National Performance Review], and certainly a number of foreign policy efforts that he himself led. It's very interesting that the current administration calls them the same thing, but it's doing them. The Mexico relationship that he led is actually a part of what we're doing with India now. The current administration in terms of different Cabinet department relationships, regularized meetings, that sort of thing. They aren't having [Richard] Cheney lead it, but it is a very similar model. He had those responsibilities as well, and then, of course, in the environment he was a very important part of the policy lead there, as well as in technology.

When it would come to budget time, you'd need to sit down and meet with the Vice President when I was at OMB. You either met with his Chief of Staff or him. Usually we met with his Chief of Staff, and you got the list and the considerations and the thoughts, and that sort of thing. And that was part of what I would consider Presidential initiatives. It was also a part of the negotiations. Because so many times the negotiations became so totally polarized and politicized that they were just not going to fund Al Gore's "X." But that's what it was about. It was just about the fact that if he picked something they liked, they wouldn't have funded it. That's the way the game gets played.

There are certain highly symbolic things, and there's precedent. People believe that the Peace Corps as a John F. Kennedy symbol is something that had been better--had been killed, in the sense of giving lift and weight. Of all these things, the biggest one for the Clinton administration is AmeriCorps, which is ironic, because when President Bush left the White House, the one thing he asked President Clinton was, "Preserve 1,000 Points of Light." That's all he asked. And we funded it every single year. But it's a part of this whole idea. It's the space where actually there was agreement. Different implementation, but agreement, and not different enough. So an interesting place.

Gore was involved and engaged in his policy issues, budget issues, and foreign policy issues--boy, oh boy! You know, the President's deciding to bomb Kosovo. The Vice President will most definitely be in the room helping with that decision.

Young

Across the board, or in Foreign Affairs? National Security Affairs?

Mathews

National Security and Economic Affairs.

Young

Yes. But across the board?

Mathews

National Security you'd have to--

Young

And in National Security or selectively?

Mathews

I'd want to defer to my colleagues who spent more time there. Most of my National Security time was spent in the last four years, and mainly in the last two years. I was on the Deputies Committee, because of the OMB. So I'd defer on that point.

Young

Yes.

Mathews

On Economic Affairs, his folks were always in our Social Security meetings.

Beckenstein

Question: Folklore. I've done a lot of work with the environmental community. A lot of environmental policy gets implemented by executive order, and there are certain rules that you might apply that have enormous implications, particularly for business. The folklore was that, in order to neutralize Gore's perceived extreme position on the environment, he was given the role of presenting the economic cost-benefit test. He was responsible in the meetings to present the business side--particularly the cost side, and the impact on business--and that made him the spokesperson, and he had to listen. I knew people from the corporate side who all had to visit Gore to present their case. Is there a truth to that? Or is it just folklore? Was it a crafty way?

Mathews

I don't recall it being that way. Gore was very involved in the economic stuff. Gore, together with Tyson, set up a CEA regular briefing on big issues. The in-box problem in the White House is a very great one. Gore had the idea, and it was a great one--as a way to kind of lift your chin up a little bit. That's the only thing that even sounds slightly familiar.

Gore and Laura worked to do a thing that happened, I think, at least once a month, or maybe every other week. Maybe two times a month. It was called the Council on Economic Advisors something or another. It would look at and investigate larger questions. That's where you'd look at a question that hadn't risen to the level of having a whole policy team on it--but important things to be looking to the future. That's the only thing that's even similar to what you just mentioned that I know about.

Riley

You've mentioned a couple of times here the foreign policy question. I'm wondering, because one of the other potential areas of conflict with the creation of the new NEC was the fact that there was an international relations component of the NEC. Can you tell us a little bit about the working relationship between NEC and the NSC [National Security Council] in the early period when you were there? You had some shared staff?

Mathews

We had shared staff, and it was challenging throughout. The big challenges around this question--let's just start with trade and the question of what's the right role for USTR and what's the right role for the White House and the policy councils in the context of trade. The NEC, NSC ended up taking over certain roles that were historically held at USTR. Some of it, not a lot of it. I think it would be fair to say that a little bit more of that was happening at the NEC, and that did cause some tension. The question that I think was written somewhere in the documents too--who did Japan policy? Bo Cutter of the NEC ran the meetings to do Japan policy.

Riley

Because the economic component was considered to be the preeminent?

Mathews

Yes. So the question of the role of the NEC and USTR--again, I think it comes down to operational versus policy making. That's how you ought to make those decisions. You certainly need somebody to negotiate every day and know the details and do that sort of thing. But how our negotiations with the Japanese, or our negotiations at Doha fit into the overall picture--the question of what the administration does in Doha--let's take how they end up settling the question of whether or not in 2006 India will still be able to produce and export generic drugs to Africa for HIV [Human Immunodeficiency Virus]-AIDS.

A reasonable size issue in the Doha Round, and it's been negotiated, but it hasn't been explicitly closed. An issue like that actually redounds back to, "What are we going to do about importing drugs from Canada?" And the domestic healthcare issue of pharmaceutical prices and costs? So to have USTR leading the effort around a question like that--the political ramifications were pretty great on those issues. Meanwhile, PhARMA [Pharmaceutical Research and Manufacturers of America] was breathing down your neck. They don't want WHO [World Health Organization] deciding yea or nay.

In the interests of the pharmaceutical industry, which is important with regard to both--there's a political issue and there's a substantive issue, which they will argue legitimately that they have to have be incented to create new products. Weighing all those kinds of things is a policy issue. Certainly freeing Bob Zoellick to go and do his thing and make decisions--you've got to give him freedom. If he's been in a meeting and understands that total context, you're going to be better set that he's going to get a decision that the President and the country can live with.

So then, the NEC-NSC tensions. The NSC treated the NEC like a poor step cousin for ages and ages. We didn't have a Secretariat. We didn't send out agendas. And to be honest, that's a place where a little bit of bureaucracy and a little bit of structure and process would serve the NEC well. Planned meetings with agendas that people get ahead of time. There's a leak problem, so sending out papers ahead of time is a bit of a problem, and you always had to struggle. Do you do it? Do you not do it? But agendas would be safe enough. Those kinds of processes that they had in place made the NEC a bit of a poor stepson, also because it was so much smaller. Sandy Berger has his own press person and his own speechwriters. The NSC is like an entity unto itself, which comes back to this operational point.

So there were tensions at times. The NSC staff never wanted to invite the NEC staff to things. And a lot of this was the staff. Who are these people? Economics aren't important. This is all about security, that kind of stuff. But things got better over time. Also when it comes to fighting those wars, you've got to have OMB in the room because it's not Sandy Berger who has to go up to the Hill and pitch the supplemental packages.

You've got to go up and try and get it done, and Sandy's always willing to help and make calls, but that's just not how the system works. So in that sense, the economic team became closely involved and integrated. Over time it becomes more and more. For instance, OFAC [Office of Foreign Assets Control] at Treasury. This question of controlling funds for terrorism is a Treasury-led effort. I think it got better over time. But it's about creating clarity--when is there an economic issue that's a part of the security matter? Who do you need at the table and what is the role--operational versus not? And the G-7? The Sherpa function? That sat with the NEC. The APEC [Asia-Pacific Economic Cooperation] Sherpa? That sat with NEC.

Riley

But those are fairly well defined as economic-type enterprises at the macro level. Those, I think, are probably less interesting from the outside. One of the issue areas that you'd mentioned on a couple of occasions earlier that might help refine a bit our understanding about the division of labor is China. During your time at NEC, there were some internal disagreements, right? About the question of the Most Favored Nation status or not--do you have anything to say about that?

Mathews

I'm not remembering. Yes, there were, and what were we going to do? It was such a misnomer. MFN--Most Favored Nation status. It was the status they had. When it became a public issue, it was like you were giving the Chinese something extra. But no, you were giving them what they already had. It was the selling of the issue, once we had decided. But there were disagreements about it. But as I'm recalling, it's not departmental. There wasn't someone. There's not the Department of Human Rights. There were all the players around the table, but it's not as if there was a core representative of--there were the people who believed that those issues needed to be weighed in a way that they weren't being weighed. I'm not remembering which players were on which side, but yes.

Riley

Well, you can see where I was going with that. I'm trying to find a case where there may have been--

Mathews

Tension.

Riley

Yes. Or if not tension, at least a difference of opinion about who ought to have the leadership role in this. China was one that we sort of--

Mathews

Actually the OFAC stuff was one. How far do you go to try and get the terrorists? We'd already started down the path. Some of the things that were being suggested that you would do to businesses--was it OFAC? There was one, and I'm trying to remember the issue where we were going to require businesses to do something related to national security. "You cannot do this to the business community in the United States." Rubin just went ballistic.

I'm trying to remember if it was this OFAC issue. But that is a specific case of how it works when you have a situation where it was all going to be well and good for national security, but could you really expect--it actually has to do with privacy in business. Is it information? What information would be shared and required? We thought that it would inhibit competitiveness of businesses if they had to share certain types of information. I can't remember exactly what it was. It may be in Bob's book.

Riley

At a minimum what you've done is you've given a potential researcher a lead into an area that might be fruitful. Steve, do you have anything?

Knott

I don't know what OFAC stands for.

Mathews

The Office of Foreign Assets Control. It implements the Trading with the Enemy Act.

If you want to go to Cuba tomorrow, that's where you've got to go for the license. It's also all the trading with the enemy--Libya, Iraq. Any of those that are under those constraints.

OFAC is the entity that we now use to track contributions to terrorism. Right now, if the University of Virginia gives money to any researcher, it's supposed to run that researcher's name and research through four databases. Why four? To check and make sure they don't have an affiliation with a terrorist organization. As a foundation, we have to run every grant, including matching gifts, because that's where you might have a mistake. You might write a check to your religious organization that might be funneling money back and it may be on the list. So you have to run that check. That's all done through the Office of Foreign Assets Control.

Beckenstein

I'm glad I don't do that. [laughter]

Riley

One place or institution that we haven't talked about also in relation to possible overlap has been the domestic policy shop. We haven't talked about Carol Rasco much, or Bruce Reed. Why?

Mathews

It's funny. I got a card from Carol last night, an e-mail. I haven't opened it. An odd coincidence. Why have we not talked about it? Because we had our own worlds. There was rarely overlap there. The health stuff was a place where there was overlap. But it didn't matter. We weren't working on it really. So it gets reassigned back into Carol and Bob.

Riley

Education?

Mathews

Yes, there was some with education and labor and that sort of thing. But we were more about education, labor, economics, training, workforce issues. They were more about the Department of Education.

Riley

Right. So there wasn't a great deal of--

Mathews

No. Yes. No Child Left Behind kinds of things.

Riley

So there wasn't a great deal of argument about what fell on either side of the fence then?

Mathews

No. And the other thing--we had a larger staff and shared some people. We shared Chris Jennings, the healthcare guy. We shared Chris, and David Cutler was here with CEA. So we did share people. We were right across the offices. We were seated very closely together. The only place for workforce issues, the environment stuff, was either at the Council of Environmental Quality--there was the whole "Get rid of it, keep it" back and forth. Can't exactly remember, but that's where most of the environmental policy was joint. Although we did energy stuff. We did the SPRO [Strategic Petroleum Reserve Office] and all that stuff with the NEC. And not just the SPRO, the funding for the car.

Young

PNGV [Partnership for a New Generation of Vehicles]?

Mathews

PNGV.

Beckenstein

The money for which came from the Commerce Department.

Mathews

Right. But was NEC-created.

Young

And was it?

Mathews

Ellen Seidman and Heather Ross. This was a policy that came from the White House and the Commerce Department, because the White House has no ability to pay for anything.

Beckenstein

So it's in technology?

Mathews

Absolutely, at the NEC.

Beckenstein

At the NEC?

Mathews

At the NEC, but you also had OSTP [Office of Science and Technology Policy]. But because we had a very active player--our player at the NEC was like Bud's and was highly energetic with the Vice President's staff. So sometimes I think OSTP got the--because of the Energizer Bunny quality of our guy, which was Tom Kalil. [makes motions with elbows-- laughter]

Riley

Tom will be here next month.

Mathews

When I was at OMB, Tom would drive me crazy with his ideas because we're friends. "I got a new one. I got a new one." [laughter] "You've got to read this about this and make sure that it's going to get in there," he'd say. "I don't want it to count against Presidential Initiatives, because it's not a Presidential Initiative. It actually falls into Commerce Department funding, and they should be arguing for it. I'm going to work with them so they will argue for it." Tom could have worn anybody out.

Beckenstein

There's a case study from the Kennedy School on PNGV and it's a classic study of what you were talking about earlier in terms of the Clinton approach and seeing the continuum. The Vice President played the key role.

Mathews

Yes.

Beckenstein

Business was interested because they didn't want the CAFE [Corporate Average Fuel Economy] standards lifted, which was worth what--27.5? And it was going to go up to whatever it was--30-something. Clinton tried to divorce that from the going after something that would really help on greenhouse gases, which would be a 3X change, which was technology. No matter what they did, business kept coming to the table because they wanted to say, "If you agree not to raise CAFE standards, then we'll listen on this." It was incredible.

Mathews

That was the first issue that I worked on when I went to Little Rock-- CAFE standards. Gene Sperling tells me, "I want you to work on CAFE standards. Debbie Dingell's going to call you." She was a lobbyist for the industry. I had no idea. CAFE standards? Seems to me it should be a local issue. What cafes are able to do and not do. [laughter]

That's where I started. I'm very clear about Corporate Average Fuel Economy and the difference in what category you want your vehicle in, which standard applies. I spent many, many hours with Katie McGinty and Debbie Dingell on the issue. At first I asked, "CAFE standards?" When someone uses an acronym you don't know--

Beckenstein

But the idea that government and the government labs would play a role was really the cutting edge of this technology view of growing the economy?

Mathews

Yes. And that's an important thing. Our labs and what they do now as we enter a new stage. That was something that Clinton and Gore both liked to think about. And we had already started shifting the labs. I think it'll be a very important thing for the future, especially with regard to bioterrorism. An unpleasant topic, but one that our labs are actually very well suited to handle in terms of their ability to handle secure kinds of things. When you think about who could do this well? Who has a skill set that's transferable to some of these problems and has learned to work across different bodies of government? Energy and DoD have often worked together in the labs. And if you just bring in HHS [Health and Human Services], could you get something working?

Riley

Was there anything else about your time at NEC that we ought to go ahead and get started on?

Mathews

I'm just looking at my notes.

Riley

I'm going to raise a question while you're doing that about the 1994 mid-term elections. I know that you would not have been out on the political trail then, but I wonder if you might tell us a bit about what it was like being in the White House at the time of the mid-terms in '94.

Mathews

You had a sense that things were bad, but not as bad as they turned out. And there was also a feeling you just hated that people who did what you believed was right were going to be so punished. Marjorie Margolies-Mezvinsky is like the poster child for--in our belief--the right vote for the economy, an economic strength for the nation, and what was right for the nation. For me, it was one of those times where you're frustrated. The substance is complex. For someone like Marjorie to be able to get out there and explain that vote and get credit for it in a good way just wasn't going to happen. In that sense, it was a frustrating time. I didn't expect the losses to be as great as they were. That may be because I wasn't as close to the politics at that time.

Riley

Was there a sense of disequilibrium within the White House after this happened? Were you knocked back on your heels?

Mathews

I think minimally. Especially when you're sitting in the economic team. Because you're going at it every day. And did it change how we went at it? You certainly had a Republican Congress, and that was going to change some things. But that was about implementation matters, not substantive changes. Was there a disequilibrium in the White House? I think people were very disappointed and felt the need to regroup and learn.

Young

But not despondent?

Mathews

I think there were some people who were, but the vast majority, no.

Young

Yes, but individually?

Mathews

This is not a despondent group of people, generally speaking. The group of people, whether it's Tom Kalil--Gene Sperling is not a despondent person. These are optimists. At the top we didn't have a guy who was despondent. You can only imagine, especially under very trying times. I can't recall the President being despondent. He's sitting doing physical therapy as I'm briefing him after he's hurt his leg. He's talking about how he's going to use it as an opportunity to eat more healthfully and that sort of thing because he can't really exercise.

This is not a man who's focused on the negative. This is a man whom Alfonse D'Amato asks if he can ride on Air Force One back from the Jackie Robinson dedication. This is in the middle of hearings with his wife. And the President says sure. This is a man you can put incredible weights on. Just keep piling it on and he'd just keep moving forward with his eye on the ball. And so I think his leadership actually was helpful here. I don't think you hear about that or feel that. When we come to the State of the Union during the Lewinsky time--it's one of his greatest character strengths to see the place to go to and to have the energy and the drive to keep pulling when you have a lot of weight, a lot of drag.

Riley

We often ask the people we talk with about the sources of that resilience. I'll come to that at the appropriate time.

Mathews

Sure.

Riley

Anything else then on moving beyond NEC? Rubin gets moved within a month or two after the election, if I remember. January?

Mathews

Of '95. Between '94 and '95. Yes.

Riley

Bentsen resigns in December. Did you see that coming?

Mathews

Yes, there was talk. Not sure when and that sort of thing. And there was talk that Bob would go.

Riley

Were you inclined to stay where you were, after, and were you disappointed after '94?

Mathews

Oh, no. I was fine. I switch jobs every two years, so you kind of learn it. I was fortunate to have new opportunities come along. I was ready for one. New opportunities help keep the energy level that you need to work those kinds of hours and to work with that intensity that consistently. So I was ready to make a move. Bob invited me to go, so I thought that was great.

There's an interesting thing about leaving the White House. "Oh my gosh, you're leaving the White House!" I didn't feel any of that, nor did I feel it the second time. I'm still in the gates, so I don't know that you could say I've left it. At one of my going-away parties, Bob Rubin said, "I've gone to three going-away parties for Sylvia and I still see her every day. I don't understand--" [laughter] So even though I'm saying I moved away, it was always still close.

Riley

Well, I raised the question about the proximity of your office earlier in that term.

Mathews

Well, the proximity. There's the joke in the White House about, "Do you want to be this close?" [makes a come closer motion with her finger] Or "Do you want to be this close?" [uses hand as telephone receiver]

[BREAK]

Riley

There was something mentioned over lunch that I wanted to begin with, because otherwise, we probably wouldn't pick it up in the sweep. That is you had said that you had managed to find yourself in a bit of trouble after the Vince Foster suicide.

Mathews

I think that "trouble" might be a strong word. I think "involved" and "engaged" in the investigations. And that occurred because the night of Vince Foster's death. Let me get to the macro point on this, which is it was like having a weight--the amount of time that people had to spend on this, the number of subpoenas. I think I've been subpoenaed at least 40 times for documents.

Young

On this alone?

Mathews

No. On all the matters, and not on "How did you make the policy to decide what courthouses we're going to build?" I'd say it was up around 40. Maybe not that many, but close, certainly, with regard to all these investigations. The destructive nature of those kinds of attacks and those kinds of investigations on ability to govern across the board, and the President's leadership through all of it. This is a place where he showed true leadership, because he could always separate it and come to work every day focused on the job at hand.

I became involved because the night that Vince Foster killed himself, the President was on Larry King Live. Gene Sperling and I briefed him on the economic issues as preparation, so we're staying in. Larry King is on late. We're watching it at the White House as the President's taping it upstairs. All of a sudden people come through. It becomes clear to me that Vince has died. Mack comes over. I'd say it's around 10:00 or so at night. I'm the most junior person around the place. It's Sperling, McLarty, other people that had been a part of the briefing.

I'm the most junior person. I wander back over to the Office of the Chief of Staff because I figure the phone's going to be ringing, and it was. It's the police, it's this, that, and the other. I'm just trying to keep the trains running and help Mack out a little bit because he's got no help. By this time it's thought that it's suicide. I'm there until 2:00 or 3:00 in the morning answering the phone.

Part of the way through the evening, I think about the trash. This is a suicide, and I wonder, What if there's a note? Nobody had a note. There was not clarity around a note. There seemed to not be a note on Vince's body, or anything like that. I'm friends with the cleaning ladies because I'm always there when they're there at night. I go to the cleaning ladies and say, "Can you help me find Vince's trash?" They bring me a large bag and it's all in little individual bags because they put the bag in the trash cans and then just take them out.

I get Vince's trash and figure out which is his. I take a piece of paper and label every item in the trash, except for the three creamers that are making a mess. They're half-empty. I throw those away.

I write it all down. I tie it in a knot. I put the note on top of it. And I put it in a locked Deputy Chief of Staff's office. And then I realize, If I were going to write a suicide note, and tore it up and didn't use it, I'd put it in the burn bag, instead of my trash can. For just the reason that someone like me would figure it out. I go to get the burn bag. At this time I also say to Bernie Nussbaum, "Have you locked Vince's office?" So this is what becomes so important because of the accusations about documents moving, and this, that, and the other. And I very clearly said to Bernie, "Lock the office." Bernie came back and said, "It's locked." The next morning I come to work and start typing up the notes from the evening before. I get three paragraphs in and then I get off to something else.

Riley

But you had handwritten notes before--

Mathews

No.

Riley

Or just your recollection?

Mathews

My recollection. Last night. Very important matter. Note to Self. And then, however many months later, those notes lead to me being subpoenaed, testifying before Alfonse D'Amato. Testifying before the FBI [Federal Bureau of Investigation], and, eventually, a grand jury appearance before Ken Starr's grand jury.

Riley

That's what I call trouble. [laughter]

Mathews

Trouble indicates that I did something wrong. That was the connotation that was disturbing to me. So I hire a lawyer.

Riley

That's what I call trouble. [laughter]

Mathews

Yes, I get to hire a lawyer. I go through this with the first interview, the second interview. My lawyer keeps saying, "We're not going to have any more. Don't worry. It's going to stop." It doesn't stop. I just have to keep making these appearances and preparing for the appearances. Then the Washington Times calls the night before I'm to appear in front of Mr. D'Amato. I'm appearing with, I think, Mark Gearan and the guy we had to get rid of because he misused the helicopter.

Knott

David Letterman?

Mathews

David Watkins.

Riley

He's in the administration.

Mathews

Yes. I think that's who I appeared with that day. There's a banner headline in the Washington Times. They call and say, "Miss Mathews, do you care to comment?" And I said, "Well, I can't comment because I'm testifying before the Senate tomorrow, and they've asked that my testimony be theirs." And they said, "Well, we're running a piece tomorrow." They basically told me what it was going to say. And sure enough, they didn't tell me that it was going to be a banner headline: "Clinton Aide Destroys Foster Document." And this was leaked by [Duncan Lauch] Faircloth who was part of the Committee.

Riley

You know this now?

Mathews

It was incredibly clear by the questioning. Clear as a bell. And because this Senator even read the stage directions of the questions that he was given. It'd be like reading, "Discuss the origins of your relationship with William and Hillary Clinton. (Pause for laughter)." [laughter]

That's how I was very clear on it. Actually, I think the reporter, in the end, told me who had done it. The reporter actually felt bad because he said, "I've got to go with it. I had a feeling this isn't right, but you can't help me." What it said was that I had destroyed documents from the burn bag and from the trash. And no such thing was true at all. So a whole article about how we were trying to hide things, and destruction of documents, and the record shows--we go through the hearing and I become a focal point and there's a little bit of a battle between the Democrats and the Republicans.

Senator D'Amato says, "If everyone had acted as responsibly as Ms. Mathews had that night, we would not be here. Look at the actions she took that night. A low-level aide who did this, that, and the other." Meanwhile, the Democrats were saying, "People were acting responsibly. Anybody could have told Ms. Mathews, ?No, we're not going to lock the door.' But as soon as she said, ?Action!' did anyone stand in her way of doing everything that she was trying to do?" So this was the whole back and forth. At the end D'Amato says, "It's a shame that the Washington Times ran that piece that's so untrue, because there will be no correction. It is what it is. But thank you for your work here at the Committee, and you're a good American." Then I had to go back and testify again.

The second time I had to testify, I had to testify with Bill Burton. The vast majority of that hearing was Bill describing how he learned and how his friend Vince killed himself. I don't know if you know that when you shoot yourself in the head you do not take the gun as you would take the gun as if you're holding it to shoot someone and turn it into your head.

That's not how you kill yourself. You actually hold the gun upside down and put your thumb in the trigger in order that you have the leverage to really do it. This was the testimony that I'm sitting beside. And Bill and Vince were very close friends. If you think about one of your oldest childhood friends that you are still friends with, and testifying on their death by suicide that way. That was the whole thing. So the experience was a rather negative one. That was the whole Vince Foster matter.

REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT I had to hire a second lawyer because my first lawyer had been hired by the Vice President, so I could no longer use him internally. He became counsel. I hire a second lawyer and do all my preparation. I come back to the White House and I see the Starr Report going to the Hill. They had not bothered to call and tell me I would not be appearing before the grand jury again the next day. After I had spent all the money to prepare with the lawyers. It was not the best of experiences.

I don't know what the purposes of these outlines are, but having all those dates and all those scandals, it's just not dominant to--yes, I think it's very important that we cover this part because it does tie the administration into knots. I never took any more notes after that experience-- files, notes, history, nothing. I wouldn't keep anything. And it shapes the way I do everything today. I'll leave my Miller Center board meeting book here tomorrow. I think it's relevant in terms of the pain and anxiety--the discouraging-people-to-serve element of it. And important for those reasons. But meanwhile back at the ranch you just kept moving, which is why I never finished the note. But even that part of the note caused me a lot of anxiety.

Riley

I'm going to ask you one question on this. The testimony about the record-keeping, of course, is something that's a commonplace in these interviews, and it's a motive force behind what we're doing here.

Young

One of them.

Riley

Is it the case that the lack of written documentation and memoranda has an adverse impact on the actual administration of the jobs? If I'm going to go to the grocery store, I don't go without a list of things. Something as mundane as that. Do you think this shift to a purely oral culture has the effect of adversely impacting your ability to actually do the job in the White House?

Mathews

To a certain extent. I don't think that it's impossible. I think the greater damage is to the learning that you do when you're there for eight years because you're operating based on the learning. If you don't have the notes and the things to look back at, in that sense, yes. In a four-year period, is it as relevant? Maybe not. I actually like good files to go back to and say, "Well, actually, here's what we did."

I had to get used to using e-mail in my new job because I would never use e-mail. Because everything in the White House is kept. And if you for any reason tell them not to keep it, that it's personal and you shouldn't keep it, it has to be read before it can be let go. This is following the Reagan era of Iran Contra. So I didn't use e-mail. That to me is the biggest inefficiency, because you're so afraid that all those will get subpoenaed. So much of the communication that could make things clearer or simpler or easier with e-mail I just never did. And I don't know if I would do now.

Riley

And you feel like your experience is fairly typical of your senior public colleagues?

Mathews

Yes. The only person who has all the documents and was basically never subpoenaed--it's the wildest thing, and he didn't have to testify--is Gene. Gene has all the documents, all of our memos. He has binders and binders. Two or three bookcases of the stuff. He has it all.

Riley

Still?

Mathews

Probably copies. I'm sure he filed everything through archives, as you're supposed to. But he probably kept copies, as you were able to. They gave you the rules of what you could copy and what you couldn't.

Riley

Do you have any idea why he would? There was a term, "Starr-grams" or something like that, that would come out of the Counsel's office. I got the impression that the sweeps were--

Mathews

They were. But somehow, Gene? It was one of those things in life where the person just walks along and somehow doesn't walk in the paint. [laughter] Because once you've walked in the paint, that's the problem--you're always on the list. And Gene kept missing the paint.

Riley

We look forward to having the chance to talk with him, assuming--

Mathews

Yes. But I think most people would say it was a common experience. Josh Steiner would describe a similar experience, I think.

Young

But you're saying it didn't cause any of the operations in the White House to crash?

Mathews

Not to crash, but it did make things harder. Because any time you had to put anything in writing, you had to put it in writing in a way that you were OK for it to be discoverable. And that's a hard way to operate in life.

Knott

Any reflections as to why you think around the Foster case alone the whole conspiracy industry blossomed.

Young

The scandal industry.

Knott

I'm asking you to sort of step outside, and I realize that you weren't in the center of this necessarily. But just your own observations as to why there was such animosity toward the Clintons among some Republicans.

Young

Very early.

Mathews

Yes. My belief is that certain parts of the leadership of the Republican Party and the conservative movement--and when I say "leadership," I mean the people who think years in advance. They aren't necessarily elected officials, but they're the people who think about an agenda over time. When they saw Bill Clinton, they saw the first guy they could not take on, on the issues. They were going to be hurt. This is a guy who was going to support the deficit? A guy who was fair trade? This was a guy who--uh-oh--might support welfare reform, cops on the street? Uh-oh!

I think part of the negative reaction to the Clintons was, "Well, if we can't beat them on the substance, then we're going to have to take them down personally." The President's reputation made that possibly a more attractive and easier thing to go against. And so the politics of personal destruction took on a new level because it was being forced, because it was so hard to do on the policy side and there was opportunity.

Riley

So from Whitewater on, Gennifer Flowers--

Mathews

From Whitewater on. Actually, from the travel office on.

Riley

The travel office on.

Mathews

Oh come on. You try and create a more efficient travel office? The power to hire and fire? It's just an amazing thing when you look at it. And when you look at what was found. And the millions of dollars spent. The politics of personal destruction--I don't know how the country gets away from it. I know everyone argues that it has always been that way. But what is different is that in this society it's so easy to feed it through talk radio, the internet, through direct communications. Targeted communications that have come with technology afford the opportunity to drive home your messages on either side and create information flows with no checks. The things together just fuel a fire.

I don't know how we fix as a nation, although I think we are moving toward fixing it. Not having the independent counsel. And to be honest, I don't think that the Democrats have spent a ton of time dwelling on whether he [Bush '43] did coke in Camp David or not and the fact that he may or may not have had alcohol problems up until the age of 40. So by not focusing on that, I think you're moving in that direction. And I only hope--but the attacks on Kerry's war record don't give you an indication that you're going to get away from that.

Riley

We'll want to return to this when we get to the Lewinsky stuff because you're going to be in a more core position at that point. But why don't we go back to the Treasury experience now? We had you moving out of the White House, but we don't have you ensconced in Treasury yet.

Mathews

That's right.

Riley

Can you tell us a bit about the transition and what you did, and with preparation? Who you were working most closely with? The conversations that you had with the Secretary about what his goals were?

Mathews

We started to move to the Treasury. And at the same time we're moving to the Treasury, the Mexico stuff is heating up.

Riley

Right.

Mathews

So we end up in a situation where, as we're moving over to Treasury, you very quickly realize that there's this whole 40 percent of Federal law enforcement that Bob Rubin doesn't know a lot about, and none of us know about. There are all these bureaus. There are the economic issues, but the priority number one is the Mexico thing because it can be an incredibly destabilizing thing to the U.S. economy. So that becomes priority number one very quickly. Riley: Had that been on the radar?

Mathews

Mentioned, but it had not grown to the acute nature yet.

Young

You mean the currency crisis?

Mathews

Yes, the peso crisis.

Young

It wasn't forecasted?

Mathews

Not forecasted. I think conversations had occurred between Vincent and that sort of thing, but it was not a big deal until right around when he accepts the job. Then we keep Josh Steiner, who's Bentsen's chief of staff. We ask him to stay for a period of three months at a minimum. That was incredibly important to the transition and the learning. Here's the way things work. Here are your problem spots. Here are the people you probably need to change. Here are the key things you've got to focus on that are going to be coming down the pike and you need to know about.

For a while, you basically have two Chiefs of Staff--me and Josh. That actually worked quite well because of the pressure we were facing. So Mexico is unraveling. You've got to come up with a legislative solution. Before we can turn around, we're under investigation. Documents, subpoenas, meetings with the lawyers starting at 9:00 p.m. every night to figure out what document production we were going to do when. Subpoena after subpoena after subpoena.

Riley

This is on the Resolution Trust? Corporations?

Mathews

No, this is on Mexico. What did you know when? How did we get here? We just got there, so we don't actually know how we got there. We're having to learn and turn over as you're learning. And working at night, too, was the General Counsel, on what you turn over when.

The transition was not a normal transition because you were basically in crisis. We set up a small room within Treasury with members of different people on the economic team to be a part of the conversations on this because there were concerns about immigration. We had to have somebody from Justice. If this thing really fell apart, there were going to be some real immigration issues that you could potentially face, and border issues.

The Labor Department had concerns. You had to have everybody at the table talking about this stuff as you're trying to figure out how to negotiate the solution. Dole and [Newt] Gingrich say that they can do a deal, then come back and say they can't. Bob is sworn in the evening when we're having the meetings about it. The pictures are in his book. We're sworn in one night, and that's the topic of the conversation. The transition was a challenging one because you're under siege with investigation and trying to solve a huge problem and do something that's never been done before. It was not what I would consider a smooth and simple transition. But I think Bob covers that pretty well in his book.

Riley

Any specific recollections about the reversal on the Congressional point here, that since they said they would, and then they--

Mathews

They just came and said, "We can't do it. We thought we could do it. We don't have the votes. You're on your own. We'll try, basically, to prevent the Congress from coming at you, but we can't guarantee much of anything at this point."

Riley

OK. But try to keep them from coming at you because we expect that you're going to have to take an executive action.

Mathews

You're going to have to take some kind of executive action. We don't know exactly what you can or can't do. We expect you have to do something. Keep it as minimal as possible and we'll try and bend off.

Riley

Are you involved in meetings at this point with other people in the executive branch about how you go about crafting the proper executive response?

Mathews

It all had to come from Treasury. You're making a decision about what laws you can use. You're thinking about what different groups you can put the money together from because it's going to be a loan. You're going to figure out the repayment schedule. Certainly Ed [Knight] consulted quite a bit with Justice on the repayment, but the Fed was very involved. Because the New York Fed became the conduit for the oil money, which was something that had never been done. Everything was in the case of "never been done." So my lawyer's looking at statutes and precedent. Then you're trying to figure it out economically.

You're also trying to figure out the timing. When are these people really going to go down if you don't do it? The back and forth--we cut a hard deal, drove a hard bargain, and that was very hard on the Mexicans. We're trying to make decisions about how much pain can they take to save themselves, and what, in terms of sovereignty, would guarantee the flows. I can't imagine the U.S. saying, "This portion of IRS [Internal Revenue Service] money, when it comes to the IRS, is going to flow into your account. Great Britain? We'll just send it that way. Thanks for your help." When the French helped us out it was a very difficult time. Everything was new. And meanwhile, you're under investigation, in hearings.

At this point, we were trying to get Bob confirmed, which happens relatively quickly. But you're doing everything at once and he's got to do confirmation visits and answer questions about what he's going to do as Secretary of Treasury. Answer some Senator's question about, "I've got problems with the border, and customs agents have not been doing what they need to do in place X and Y." There were a lot of things going on, a lot of balls in the air.

Riley

And it's occurring at a historically important time because Congress has just switched controls for the first time in 40 years.

Mathews

Yes.

Riley

Those people are trying to figure out how they're going to behave on Capitol Hill.

Mathews

And how they're going to be in leadership positions and that sort of thing. Very challenging.

Riley

State is involved in this?

Mathews

State is involved. They're part of the working group. But the negotiations are directly with the Mexicans and Treasury. That's the way that the negotiations occurred. Guillermo Ortiz [Martinez] and his team would come up. The conversations would be with the Mexicans involved directly. Meanwhile, you've got all the other players that were going to be a part of the financing. There was the order of payment, if they do go for it--all those kinds of questions--getting agreements, because you couldn't talk about these things broadly. Some of the leaders of the organizations, the BIS [Bank for International Settlements]--I can't remember. I'd have to look at the book. Their leaders were making guarantees without talking to their whole teams because they couldn't.

We had to put the package together. People were tense and making the best commitments that they could. But just like the Congress, just like Dole and Gingrich, who told you that they could do the deal and then couldn't. We had a little back and forth. Bob captures that in the book. I read the book as it was being written. I haven't read it in its entirety again.

Riley

How was Rubin holding up through all this?

Mathews

Bob's a pretty calm individual. There were only one or two times when you could see Bob was nervous. But when Bob's nervous, it doesn't make you nervous. Sometimes there are people that you work for, and when they're nervous, it just spreads through the organization. You're saying, "Please calm down, because you're making everyone nervous." He's not at all that way.

 

And "nervous" is a strong word. He wasn't nervous. Bob knew that this was a big bet. It was a high-risk bet because the level of uncertainty was so high. So you could do all you wanted, but the level of certainty that this was going to stabilize the situation was a big unknown. You were trying to manage it as best you could. But he could do it. And he also had a capacity to work incredibly long hours.

Riley

Were you involved in any of the interactions with the White House at this time, specifically with the President? To get a sense about how he was being brought along on this?

Mathews

Yes, he was brought along on a daily basis, in Leon's office. It was Leon, I guess, at that time.

Riley

Yes.

Mathews

The President walks in while we're meeting with Leon and goes over things. The President had just walked down from the Oval Office. I think it was in the evening. By this time, I think, the poll had come out. Clinton said, "We have no alternative. I want to hear what you think are the best alternatives, but we have to do something. We cannot stand by. The economic and other risks that are going to come with it are not risks that we can take. Let's find the best solutions we can."

Leon says, "But they say that they can't do it, and this is really unpopular." Eighty percent of the people in the Wall Street Journal poll said, "Don't do this. It's a bad idea." And he said, "This isn't about a good idea or a bad idea. This is one of the true times that it's a question of leadership and stepping up to the plate. This isn't a question of what's popular or not. It's a question of what we have to do. So let's just buckle in and do it. But let's make sure that we do it in the best way we can and ask all the right questions."

So he was highly engaged. And Greenspan was highly engaged. I can remember we met with Greenspan in the Treasury in the Secretary's conference room on this issue. That was one of the first meetings after Bob had been appointed.

Beckenstein

Was Greenspan in favor?

Mathews

Yes. He agreed that we had to do something. The question was what role could he, or should he play? His role needed to be an inside role, not an external role.

Riley

Did he help run cover for people within the government?

Mathews

Yes, in terms of the legislature and that sort of thing. We certainly referenced the conversations, and he was happy to be a part of that. But in the end, Congress just wouldn't act.

Riley

Yes. That particular relationship is a bit of a mystery for those on the outside who don't follow these things closely. And maybe, Alan, people in your field know more about this. But it's not clear to us how, presumably, independent Fed has a close working relationship with the Treasury Secretary. Do you have any observations about that? I think we've probably done what we can do on the Mexico piece, but more generally.

Mathews

I think more generally it is a close relationship. The independence of the Fed is making its decisions on its own, but its decisions can be informed. Greenspan gets information from all of his Feds out there, the Kansas City folks and everybody else. We were also a source of information and a source of thinking. It's important for him to know how we are thinking about deficit reduction. What's the budget basically going to look at? What are the priorities that the administration is discussing?

What is Bob Rubin hearing from the market? What is Bob Rubin hearing from all of the corporate CEOs [Chief Executive Officers] that he meets with on a regular basis? And Greenspan sharing what his thoughts were about the productivity increases. Were they real? Were they overblown? What did he think was happening in the market? What did he see happening with growth and inflation and that sort of thing? I think they're very healthy conversations. It needs to be a good relationship.

Back to that earlier conversation about "What's independent? What's not?" You can't criticize the Fed. You can't and you shouldn't. That's sometimes hard. Greenspan would make a move and you'd think, What are you--? Clinton would feel perhaps that wasn't the best for working people. But always that was a place where the administration showed incredible discipline across the board. The Treasury Department staff meets with the Fed either every week, or every other week. That kind of information is pretty important.

Beckenstein

The Fed has to have the ability to make its own decisions, but it still needs the inside information. This is late '94, early '95 we're talking about?

Mathews

End of '94, early '95.

Beckenstein

Right. At that point in time, that's a year early, but Greenspan's clearly got this irrational exuberance thinking going on about whether the market's overreacting and how that affects monetary policy. I think it's '96 when he made his famous irrational exuberance speech, when he clearly was thinking, Now, who better to pick a brain of somebody about what's going on with the market than Bob Rubin?

Mathews

And Bob felt the same way.

Beckenstein

Oh, yes.

Mathews

In terms of the bubble, Bob just thought that everything had to be overvalued.

Beckenstein

Did they have explicit conversations about it that you know of?

Mathews

I think so. The other time that the Fed became incredibly important was the debt load. How things would be paid became very important. The Social Security checks--all the things that you were going to have to shut down--what would you do to stop payment? What was the default going to be? Then creating the tools that are accepted today. Tools that have been used over and over again to prevent default. They've been used by this administration. Nobody says a word. But the first time you're using them, you're figuring them out and they've never been used before. There's no precedent. You're using laws in ways that have never been used before to say that you have the authority to do these things.

Meanwhile, Bob Barr wants to impeach Bob Rubin as you're going along through this process. But having Greenspan there--because there were certain parts of the flows that the Fed is important and very relevant to, and you had to make sure. Did he think these things would actually work? Because parts of the flows were going to be affected. You needed to make sure that Greenspan--and also being a helpful sounding board to, "OK, if we do this, then this, then that."

Riley

We've got you in Treasury and you basically come through the crisis. I don't know if there's anything else more to say about Mexico?

Mathews

No, I think it's well covered.

Riley

OK. Can you tell us a bit about your portfolio at Treasury? What are your primary responsibilities and some of the big issues that come across your plate while you're there?

Mathews

At Treasury, some Chiefs of Staff are more special, more related to the Secretary and the Secretary's needs on a constant basis. My role turned into more of a management role, and part of that had to do with the team you had. You had Bob Rubin, Larry Summers, and me. So the management portions? That was something that I spent more time on. I never traveled with Rubin domestically. I would travel with him on foreign trips. Most Chiefs of Staff would tend to do that kind of thing. But we needed the trains running. It's a 140,000, 150,000-person department.

The bureaus are this incredible group. You had the situation with Frank Newman, before Larry. Bob and Frank didn't know each other. Frank wasn't always able to act as Bob would act because he didn't know him well enough, perhaps, to do that. Management keeps the trains running, figuring out what does and doesn't need to go to the Secretary.

I worked with Bob to prioritize so that we had lists of ones, twos, and threes. Ones were things that the Secretary was involved with on a consistent basis. Twos were things that the Secretary was involved in, probably on a monthly basis. Threes were a category of things that were important enough that anytime Bob wanted to, a three had either Larry's name beside it, or my name beside it, and he could call and say, "Where does this stand?" Once a year, it might come to him.

Doing that kind of prioritization--and then the things closest to the Secretary--much of it would come through my office. If we were doing a trip, we'd do the messaging around a trip. The Public Affairs Office, Legislative Affairs. The things that so directly affected him were things that would come to him, usually through my office. And the executive secretary, another function, and how all that flowed. We'd spend a lot of time.

The other thing was Law Enforcement. We didn't have any experience. I'd go to lunch with the head of ATF [Bureau of Alcohol, Tobacco & Firearms] and go to lunch with the head of Secret Service. I became very involved in those issues. When we had the Waco crisis, I became very involved. David Dreyer, one of our counselors to the Secretary, became very involved in a series of hearings that were going to be incredibly embarrassing to the administration. That was their objective.

It was also about enforcement of gun laws. That's what this was about. The ATF was the enforcer of gun laws. Gun laws had passed. So if you can't win that way, then let's take down the entity that's supposed to enforce them. And the best way to do that was go after them over Waco. Because wouldn't you be going after the FBI? They're the people that burnt the place. Sure, we started the raid at ATF. But the people who really ended up killing people and having a debacle at the end was the FBI.

But that's not what the hearings were about. The hearings were about the ATF. And it relates back to this substantive policy issue. These were the people who were enforcing gun laws. So let's disable them and then they won't be able to do it very well. Then we can get rid of these things because they'll fail. Issues like that when you have a problem like that I would handle. Together with Jeff Shafer I helped run our Mexico day-to-day war room. He was the Under Secretary at the time, when we had the Mexico--those are the types of responsibilities that I had.

Riley

Oklahoma City occurs fairly soon.

Mathews

We're in Asia at APEC. We're actually in India. We have about 13 people die. And meanwhile, it's an enforcement issue. Questions about how you deal. And then you have Oklahoma City. You have a plane that flies into the White House. You have a bunch of fence-jumpers. And you have somebody who tries to shoot people through the White House. This leads to a study that we have to do on security of the White House, which is run from Treasury. Then we have to make what is a very big decision that needs to be in the record--shutting Pennsylvania Avenue down--a huge deal.

First, there was analysis around these questions of protecting and terrorism, whether it's domestic or international. It was a very big decision and an incredibly unpopular decision. Look at the record and the criticism of all the people who say we didn't do anything about anything. The President does not want to do it. He says, "We can't shut down the house of the people. People need to have access. We don't care. I don't care." And only when you explain to the President, "Well, Mr. President, 500 American citizens could die because they're on a tour. It's not about you. It's nice that you're willing to take the risk, but it's not about that."

We saw what happened when they hit the Pentagon and the World Trade Center. Let's just say somebody blew up the President of the United States, the Vice President of the United States, the entire senior staff of the White House, 500 citizens, and kids' groups that were going through. What would that do to our country? We'd already seen a number of these incidents. We knew the statistics on what could happen. And so it was the safest thing and the best. It was one step that the Bush administration didn't have to do after 9/11 because they sure would have, and I'd recommend that they do it. That was a really big deal.

Riley

Did that float up from below in Treasury?

Mathews

It came from the study that we had. We had external people, and experts--Ron Noble, I think, ran the study.

Riley

And who sanctioned the study?

Mathews

The Treasury Department had a group of experts come. The Secret Service needed it most, because it's about it's about protection of the President. That's where it all stimulated. What steps should we be taking in order to ensure that we are appropriately protecting the President? Because everybody got all upset when the plane flew in.

Why didn't they shoot it down? Everybody wanted to know. They didn't shoot it down because you could have killed more people. The President wasn't there. There was going to be damage to the building or potential damage to civilians, and somebody smart enough on top of the building decided, "No, we're not shooting it down" in a split second. But this led to a lot of questions, problems, difficulties.

Knott

What percentage of your time would you say was devoted to these kinds of security issues? And how did you ramp up to become an expert in this particular area? Constant consultation with people in the Secret Service, ATF, and elsewhere?

Mathews

I became very close to the head of the Secret Service and the head of ATF, all the heads of the Secret Service that were there during our time. That continued over the period. Even though it was a part that reported to Podesta, when there were Secret Service problems, they would come in through me. You developed knowledge--I would never say "expertise"--by spending lots of time with them and understanding their issues, their problems, how their organizations work, the strengths and weaknesses in their organizations.

They always promote from within. So you have somebody who's the PR [Public Relations] person of the Secret Service who was a gun carrier. And are those the people more skilled? Sometimes people can do crossover. "What do I know about gun carrying?" It can be fair. And then their budgeting and stuff, getting them help to do what they needed to do. How much time did I spend on it? I spent quite a bit of time on law enforcement. At times, Larry would engage, too. A very specific example would be the shoot-to-kill orders. I'll come back to that.

I'd say I probably spent about 20 percent of my time on law enforcement issues. A specific example would be Treasury Department and law enforcement. What's important here is that you know that Treasury is part of the game. Ruby Ridge occurs. We get a series of these things happening. You've got Waco and then Ruby Ridge.

To refresh everyone's memory, a guy gets stopped. He has illegal weapons. There are going to be proceedings. He refuses to come, I think. There's a siege at his farmhouse with his sons, with guns, and the group is under siege. They won't surrender. And then an FBI agent shoots and kills his wife who is at the door, looking out. Because I think they think it's--this leads to the question, "When can you do a shoot to kill?" Who should be involved in the decision making process for shoot-to-kill orders?

Was that a necessary shoot to kill? You can always shoot to kill if you're in danger. But was anybody in danger of being shot at that point? So there was this question about when an order like that can be given, and who gave it. Should political people be involved with regard to this, so there's accountability and responsibility? The FBI and ATF had very different views. The ATF actually wanted more accountability and more signatures required before there were shoot-to-kill orders, other than those that are of standard order. Because they actually believed that if political people had to have some accountability and a name on the line, that it was going to actually make a difference in how people gave orders.

The other thing is they saw their colleagues being sued in civil suits and other suits. And they thought, Let's try and get this right. If somebody else has some reason we should or shouldn't, let's talk about it. You had a big fight. But you no longer have that balance. It's all in one place. Well, that's not true--it's not all in one place, because the FBI is still with Justice and the ATF is with Homeland Security. So I don't exactly know how it works now. But having balanced views on law enforcement--the tracking of bullets. This was another place where there was a huge fight. And this is a place where there was inefficiency. ATF does bullet tracking. FBI does bullet tracking. We have two different systems that don't talk to each other, and we pay for both. It's terrible.

Young

What do you mean, "bullet tracking?"

Mathews

We do a lot of our crime tracking through identification of bullets. A bullet has come out of a certain gun, and you can read--

Young

Ballistics?

Mathews

Yes.

Beckenstein

And they don't trade the information on each other's systems?

Mathews

The systems don't talk.

Beckenstein

That's ridiculous.

Mathews

Yes, it's bad. So I spent quite a bit of time in law enforcement. But then you have a crisis like the one in the Good Old Boys. We have a series of law enforcement officials in Tennessee that attend this weekend conference and do sexist and racist things. So you had to have an investigation. And as many FBI agents are there as ATF, or anything. But because ATF has been called "jack-booted thugs" by the Congress, that's where the investigation and all the media attention goes.

Knott

There were reports, of course, of tension between Clinton administration officials and the military. Was there a similar cultural clash perhaps between somebody like yourself and the people who had been in law enforcement for their entire careers, who made that a perhaps more conservative inclination? Did you ever detect anything like that?

Mathews

They considered me on their side. I was more of a champion for them. With regard to the questions of law enforcement, the tension occurred. ATF was completely restructured. You don't hear much bad about ATF these days, and that's because John Magaw, who moved from the head of the Secret Service to become head of ATF, restructured the whole place. He forced people to move around, and he was disliked by the ATF for the first two years.

First of all, he came from the Secret Service, and they're the "fancy-pants" group, not the country boys who really go after-- When you look at the statistics, about 60 percent of the people ATF agents face on a daily basis are hardened criminals that have been convicted of major crimes. Not nice people. These guys are out making it safer for us. But John went in there and changed everything. We gave him the support to do that. For him, pretty appreciative of that.

The Secret Service? The only time there would be tension, usually, it would come from Clinton not wanting to use certain safety measures. For example, he hated to have the plastic up in front of him when he would speak. He would almost never do it. You'd spend hours with the Service. Can we move the podium so that it's in a place that has some potential, partial covering to help you out? In a place like Copenhagen, Demark, in a square? How many windows and buildings? The Secret Service is in a nightmare. Can we just put up some plastic? It's clear. Most people won't see it. The cameras won't get it. But Clinton didn't want it. Those were the only times. But as a general matter, most Secret Service agents tend to be more conservative.

The other thing that we would do that probably drove the Secret Service crazy is the time stuff. These are guys that work on schedules. That was a little challenging at times. Then also, we had issues with the Uniformed Division of the Secret Service. This was the other kind of crisis. When you have law enforcement, you can have problems. That's why I spent so much time on it, because you were going to have problems.

Was it a Gay and Lesbian group or an AIDS group that came to the White House and then all the guys put on gloves? The uniformed division officers who were checking their bags as they're going through put on gloves. It was a disaster. Barney Frank's on the phone screaming at me. [laughter] And he should be. A lot of it was education. This is one of those things where these guys were afraid they were going to get AIDS. They don't know how you get AIDS. You think everybody does know, but some people don't know. You can imagine trying to clean up those kinds of things.

And meanwhile there are unions--the uniformed division is unionized. That was the other thing. Within that organization, like the Secret Service, you've got two basically different groups of people--the uniformed division and Secret Service. Those kinds of problems were a constant sort of thing just about protecting the President and having law enforcement that works. Meanwhile, we don't even get it in Customs. Border control, speed and commerce? In Treasury, you're on both sides of it. Keeping bad people out and making the commerce flow. And those two things generally work against each other. Customs is the body in charge. The only other thing that doesn't normally get covered that's really quite important is the IRS, with 90,000 people. Huge.

Beckenstein

And your reorganization--

Mathews

Under Charles Rossotti. That became Larry's problem.

Riley

She says with a grin. [laughter]

Mathews

Yes.

Beckenstein

It was '97 or so, wasn't it?

Mathews

Yes. They were trying to pass all these--and, again, you put somebody in a hood and have them testify against the government. Nobody likes taxes. And you just don't get the good solutions. Bob Rubin had to go up on the Hill and fight really, really hard to not have changes to the law that would have been detrimental to the long-term ability to manage and try and make some progress. Many organizations had failed IT [Information Technology] efforts in trying to transfer everything over. We had failed efforts at IRS; it's very hard to figure out how to implement well. You can file now by Internet.

But trying to make those transfers of technology in an organization that big, and that under funded? Everything at the IRS is done on the cheap because nobody wants to fund it. It's very hard to run an organization that you're trying to move to a better, high-performance organization on the cheap.

Beckenstein

They have a lot of revenue. [laughter]

Mathews

And boy, would they like to have some of it dedicated.

Beckenstein

Yes.

Knott

I might be taking you far astray here, but there were reports right after Oklahoma City and tremendous media attention on these domestic militia groups. And a kind of--hysteria is probably too strong a word--but just a sense that perhaps these groups are really determined to do some damage to the government. To what extent did you have to take these domestic militia groups seriously?

Mathews

Between the FBI and the ATF, you did have to take them seriously and understand. Because that's where the stuff was flowing from.

Knott

Yes.

Mathews

That's where these people who had been trained, and their beliefs and their websites and that sort of thing. Then you have the black church burnings. And are they a part of that, or not? Are they a group of people growing? How much damage could they cause? That was an effort that both ATF and FBI contributed to. Hysteria, I think, would be a strong word. Taking them more seriously than previously is an accurate portrayal. You thought you might have some problems out there. Especially in the context of gun laws being passed, which is something that gets these folks really going. Brady passes during this period, too.

Riley

Are there other components of your portfolio at Treasury that we haven't talked about? You said the law enforcement took about 25 percent of your time.

Mathews

You have the other bureaus, and while you're a Deputy Secretary, then just the day-to-day. All the press stuff is flowing through. It's the day-to-day operational that took the vast majority of time. But then you have the bureaus. For example, the head of the mint is going out and signing deals with companies to send coins here, there, or yon. You have those kinds of problems, which are not helpful. We had to redesign the money.

Riley

Yes. You got involved in redesigning our money?

Mathews

Yes.

Riley

Was that fun?

Mathews

Yes. Although, actually, I think the Bush administration may have taken on, finally, the [Andrew] Jackson that I wanted. The Jackson that I wanted had his hair outside the circle. [laughter] He looks very wild. You get all these pictures. Bob's not always interested in this kind of thing. The design questions and of course this is the Secret Service, because it's counterfeiting. So yes, I'm quite familiar, and if you pull a $20 out--

Knott

Here's a $20. It's a little worn, but--

Mathews

Only one papermaker in the country. It's Crane's out of Massachusetts. That's part of why our currency is hard to do. People who handle money spot counterfeit most of the time through one of two ways. Feel--because they're used to feeling the paper. And the second thing--I guess it's biological, related to babies. You often put baby pictures in front of babies' faces. Our eye tends to be able to recognize the face better than a drawing or a building. That's the other reason that U.S. money is so hard to counterfeit. And part of why we moved the face. This bill's a perfect example. See how worn it is?

Knott

Yes.

Mathews

It's worn on the side of the face, not on the direct portion of the face. So we moved the face over so that the men's wallets--it's mostly men's wallets, or their money clips--don't create a situation where you're creasing the most visible part of the face that you recognize. We expanded the circle.

Riley

Is that a counterfeit you're looking at?

Mathews

No, it's not.

Knott

Well, you had a little side operation. [laughter]

Mathews

I'm trying to find the watermark.

Beckenstein

But why is all that money the same size and the same color?

Mathews

Because we didn't really believe that we could change it. We added the watermark. So we cleaned up the bills.

Young

Yes, plastic money.

Mathews

We cleaned up the bills and we created space for a watermark. If you look at these little lines here, those are for the electronic readers. And there are any number of things that we did. You spend time changing the money. Then when you're going to change the money, to roll out the change in the money. The Bush administration has put some color in the bills. It was something we just thought we couldn't do. Changing the size or whatever is like a Constitutional crisis. [laughter]

If you think an amendment on gay marriage--you change our money, and then the whole color issue and size issue. And that was just more than people could bear. And the failure that you'd seen of coins? Dollar coins? We're not the British. Men do not carry coin purses here. It's just not on. So there were all these things that you had to study and learn about. Then you have to roll it out.

You want to get this stuff off the market. How do you inform enough people so that they go and get the right bills and that sort of thing? Because seigniorage, which is the benefit we have because so much of our money's out in circulation. There's an economic, monetary benefit. It's something that you want to keep. You always want to keep confidence in the bills. So yes, this would be another example of a thing that you can see. I spent a lot of time on it.

Running the United States government. This is part of the point about what's operational and what's not. Do you trust your people in your new departments to do things or not? Should they be out there getting stuff done? That's the Bureau of Engraving and Printing. Then, of course, there is the mint. During our time there, they improved those quarters.

Knott

The ones with states?

Mathews

They're expensive. Yes.

Beckenstein

You really want a states hot-button issue here. [laughter]

Mathews

But anyway, it was approved, so you have got to act on it and get it going. And meanwhile it's also the places that do all the flows, the bureaus that take care of the flows of the money as well. Customs was a big deal, too. So all that's going on. And just the day-to-day business--when the White House wanted something from Treasury, or when we were having arguments with the White House or that sort of thing? I'd been there.

Beckenstein

Right.

Mathews

We preserved Rubin's right to be in the morning meetings. Rubin kept that right the whole time, which is a very important thing.

Riley

Senior Staff?

Mathews

Yes, White House Senior Staff. Bob always attended those meetings.

Young

He always made them when he was in town.

Mathews

Yes.

Young

Did you go in his stead?

Mathews

No.

Beckenstein

What was the issue there? Why was that important?

Mathews

It was important staying in touch with the White House and knowing what was going on.

Beckenstein

But why, if you're the Treasury Secretary, do you need to do that?

Mathews

Because that's how you get things right. You want Cabinet members who are going to be powerful and doing things for you to have a feel. What's the buzz? What's going on? So they don't make mistakes.

Beckenstein

This is precedent setting, right? He was the only one who's ever done that?

Mathews

Yes.

Beckenstein

Isn't it saying, "I'm more than a Treasury Secretary"?

Mathews

In a sense, having been head of the NEC and "I'm more than Treasury Secretary"? No--I'm going to be a very good one, and be able to provide good counsel on a broad spectrum of things.

Beckenstein

Why wouldn't the Secretary of State be there then?

Mathews

In our Clinton White House, the economics were so much a core part of what we were doing. And the other thing--not to make National Security, because it was very important, and as always, in a second term, everybody says Bush will focus more on foreign policy. I don't how he could focus more, poor man, with the war and the terrorism. But I actually think more than that, Bob was special. He was a supra Secretary of Treasury.

Young

And I think the National Security Advisor is reluctant to connect through the Chief of Staff.

Mathews

Absolutely.

Young

So that wouldn't be a good venue for a Secretary of State.

Mathews

And so many of the issues that the Secretary of State doesn't--those issues don't get discussed in these meetings.

Young

No.

Riley

On a more mundane point, the proximity. You're right there.

Mathews

You just walk across.

Riley

You just walk over, which is a different issue.

Mathews

He really would walk.

Young

I think it was also the kind of relationship that you established in Treasury to NEC and Economic policy making, so it would have been, from my perspective, unusual to have the Secretary of the Treasury or somebody who didn't speak for him, was not part of the program, there.

Mathews

Although was it in the Podesta years that we finally implemented what Bob thought we should have all along, which was an executive committee meeting. So that was a Senior Staff meeting. We are talking about a meeting with about 30 people.

Beckenstein

But Summers didn't go when he replaced Rubin?

Mathews

No.

Beckenstein

That says a lot.

Mathews

But Summers did go to this meeting, which is the important meeting. Podesta finally did what Rubin wanted. Rubin felt that for an organization the size of the White House, you need an executive meeting every morning. That's where a lot of decisions are made. The Senior Staff meeting is sharing of information so you don't mess up. It's a form of management. But it's not where conversations and decisions get made. It's what I call a standup meeting. It doesn't matter if you don't have a seat because it didn't last that long, and you're about sharing information.

The other meeting you'd want a seat in. We called it the "Economic Meeting," because then you could pick who could be in it and who couldn't. The problem with having this management meeting kind of thing--it's like the Who's In, and Who's Out? Everybody gets all upset about who reports to whom. I'm an Assistant to the President, and that one is to the President. Why am I not in the meeting? But if you had an Economic Meeting, you had pretty clear definitions of who should be in that meeting. Larry was a part of that meeting when he was Secretary of the Treasury.

Beckenstein

NEC, Treasury?

Mathews

It was NEC, Treasury.

Beckenstein

CEA?

Mathews

CEA, Chief of Staff, OMB, the Deputy Chiefs of Staff, Counselor, Head of Leg Affairs, and sometimes you'd need your press secretary, depending on what you were doing. Sometimes you'd need other people for other things. Chris Jennings needed to come in and present on the health debate. Bruce Reed needed to come in. Bruce was actually a part of it too. Bruce Reed, Domestic Policy, was part of the Economic Policy meeting. And Sandy, the National Security Advisor, was a part of this meeting.

Riley

Do you have any reflections on the workings of the NEC after your departure? Did things continue to go pretty much as had been said much earlier? Were there important changes that you felt were helpful or that you disagreed with?

Mathews

Laura became more of a spokesperson than Bob had been when Tyson came over. She became more of an outside spokesperson, I think, than Bob had been. He was more of an inside player, and she was more of an outside player.

Riley

But that was a role that she was playing earlier?

Mathews

Right. She brought the role with her. There's a little bit of shifting. As people shift, they take things with them.

Riley

They played the same role in the institution, but they had a different title.

Young

Inside role, are you saying?

Riley

I'm saying in both instances that Rubin is playing the same role as perhaps the Senior Economic Advisor to the President.

Mathews

He was willing. He let it go. Laura was the person who would take the stuff and that sort of thing. He had his own stuff. Some might say it wasn't as--I don't know. This would be a question from the outside--impressions from the outside. I could probably respond to that. But from the inside, everything just kind of kept working.

Riley

OK.

Mathews

One way or another, things kept working. The thing that shifted by Gene's time-- because Jack and I had done the budget and I'd been around since that first meeting--how we did it back in '93 to being the Deputy Director. We just shifted and organized the meetings. OMB did all that. We made sure that NEC knew what was going on. We worked very closely with them. But they no longer had to run that stuff. We basically did the budget stuff.

The things they would be concerned about were twofold. One: Do we have the money for the Presidential initiatives, the new ideas, the thoughts and the big things? And two: Have we funded the things that they thought were most important? As long as you're communicating with NEC and DPC and CEQ [Council on Environmental Quality] on those matters, and the First Lady, the Vice President and the President--it was basically run by OMB. But that's because you had a rhythm and a knowledge.

Gene and I had worked together at this point since 1992, so it's not as if he's worried that anything's going to happen. I'm not going to protect a "gear-up." Programs for disadvantaged children to go to college? Like I'm not going to protect childcare. Like I'm not going to look out for those issues and if I have any questions point it out and say, "Here's what we're doing. Is that good? Or should we make some other trade-offs?"

Riley

I'm trying to think back through '95, and you had mentioned a couple of major events that would have been on the plate at Treasury. We get to the end of '95, the budget battles are in full bloom at that point probably, because you end up with the shutdowns.

Mathews

Yes.

Riley

Can you talk us through?

Mathews

Bob was just a part of the team trying to help. But much of the negotiation was being handled out of the White House. I'm trying to remember what tax bills we had at that point. But Bob would go and speak to the Democratic Caucus and that sort of thing, as we were trying to ensure that we had the support to back the vetoes. Because that was the most important thing--did you have the support to back the vetoes. It became a relevant tool. And I think from an historical perspective, that's actually an important thing, the Clinton administration use of veto. It was a tool we exercised. But you could only exercise it if you had enough support. But it was something that was a very important economic policy tool for us with regard to budget. And I guess '95 is MMEE [Medicare/Medicaid/Environment/Education].

Riley

Does it start that early?

Mathews

Is it '95 or '96? I apologize. I can't remember.

Young

And now, back just a bit, on vetoes. That was an important tool, you said. How were decisions made about that? And what was the preparatory work in Congress to try to stop something or at least to prevent something that you didn't want?

Mathews

There are a number of different steps. One has to do with OMB's SAPs [Statement of Administration Position]. That's the first signal that you send to clarify to the Congress where you're going to stand on an issue. And that's a broadly disseminated signal. Then the sort of nuances of that signal would tend to get communicated, depending on whether it was the Chief of Staff, the Director of OMB, the Secretary of Treasury, where it was appropriate for that communication to occur. If it was a tax bill, it would be Bob or Larry or--

Young

Yes. The language of the statement became very important.

Mathews

And the SAPs were all cleared by the right people. The SAPs were actual reflections. We would never at OMB put out an SAP on a tax matter without having the Secretary of the Treasury sign off. We're not going to threaten to veto it or anything like that. So that's the formal channel. The informal channel would be communication. And the decision making would occur most likely in the NEC context during the later years in this economic meeting that was in the office of the Chief of Staff. That's where those decisions would be made, with your Legislative Affairs person telling you, "Don't make that decision. Let me make a few calls to make sure we're good."

What happened was post-impeachment. It's fair to say that the working relationship with Congress improved. We worked in lockstep with them and were, therefore, able to achieve many things from a budget perspective that we might not have been able to. It was an odd outcome that I'm not exactly--

Young

How's that?

Mathews

I think that we had worked so closely with the Democrats during that period that we created a situation where this was the only way we were going to get anything done. We all knew that. They knew that. We just worked very closely with the Congress on these budget and veto issues. In other words, a lot of input as to whether or not we should veto something would be conversations on the Hill, at the same time we were having conversations in the White House.

Young

Does this include any Republicans?

Mathews

No, because the Democrats were sustaining the vetoes. By this time it had become--Actually, that's not true. I called Jim Dyer, I called Steve Cortese--the two Senior Staffers for the Republican appropriators--any number of times to say, "Hey, we're serious. Don't think that the SAP doesn't mean what it says. I want to warn you, because I'm not going to play. Does [Theodore] Stevens know we're serious? And does [Charles William] Young" --or whoever it was at the time-- "know we're serious?" In that sense you did have conversations with the Republicans on a pretty regular basis, especially in the appropriations world. You are talking to both sides all the time. They know.

Young

Sure.

Mathews

There's not a lot of surprises. Once they learned we weren't playing chicken, they knew. I think in the early stages, they felt that there was chicken. But we didn't play chicken. We weren't going to the edge unless we were willing to go over. Once you get that kind of a negotiating dynamic going, there's clarity.

Riley

We have at least walked up to the government shutdowns.

Mathews

Yes.

Riley

And I wonder if you have an account of that from your own perspective? My assumption is that you were essential, but I don't know.

Mathews

One of my only recollections about the shutdown is I never got any days off. It snowed. It stormed. There were blizzards. The government shut down. I was still at work.

Riley

So you were essential?

Mathews

I was essential. I don't know that I'd phrase it that way, but I was at work. And trying to figure out how long the government can be shut down. The whole Washington Monument argument--when you do shut down the Washington Monument, what does that mean? Who gets blamed for that? That was the big part of the game, the big part of the gamble. Who gets blamed for the shutdown?

Riley

Was there much worry in some of these issues?

Mathews

No. I think we were pretty clear that we could manage it, but it is this question of when I said our economic communications weren't so good. At times, they were very good. There wasn't as much doubt because you'd laid the groundwork. We'd been very clear about our messaging all along. Here is where we were going. Here is what we wanted. If these folks weren't going to do it, we didn't believe that was good enough, and here's why it's not good enough. There was clarity around that, which was very empowering to who was going to get blamed. And Gingrich didn't help himself with the fussing about the plane. It's a symbolic thing, but it didn't help him be able to argue, "I'm a team player trying to get something done here."

Riley

But even earlier than that, there were frequent mentions--I don't know whether Meet the Press was the right venue. But these various Republicans going off and saying, "We'll shut the government down rather than do this." They were basically laying very--

Mathews

Playing into our hands.

Riley

Exactly.

Mathews

Basically, the shutdowns were about getting people to the table.

Riley

Were you involved in White House meetings at this point?

Mathews

Yes.

Riley

Any recollections from those meetings?

Mathews

My sequencing is off because I can't remember which meetings were which. This is what year?

Riley

It's late '95.

Mathews

The first shutdown.

Riley

Yes, and then one in November and one in December, as I recall.

Mathews

And then in '96. Yes. Then you have the longest one from--then you go back to--

Riley

The longer one is over Christmas.

Mathews

Christmas holidays.

Riley

Yes, do you remember?

Mathews

I was there at Christmastime and going to some of those meetings, because sometimes Bob would be in New York over the Christmas holidays. I went to a number of those meetings and then got on the phone with Bob. Larry's there by that time.

Riley

You had mentioned earlier the debt-ceiling situation. I don't know whether you want to say anything more about that? And there were some creative and controversial decisions made about that time.

Mathews

Yes. It was challenging, difficult. The substance was a very challenging thing, and the movement of flows and that sort of thing. Knowing exactly when to tell people that we would default. You couldn't exactly tell because part of it had to do with how much money the U.S. government was taking in. Somebody might just be paying their taxes that day. And what checks were going out, and that kind of stuff. What were you going to do?

The idea of default and how you were going to manage the money was a whole new ball game. It was Mexico and you're in another period where you're figuring out these new mechanisms and money flows, and you had to get it right. I remember once Rubin and I were given the documents from the bureau that does all this. There was actually a mistake in the numbers. People were just under so much pressure. We were working 24/7, but there is a mistake in the numbers. You'd been off by days in knowing what you were doing.

It was funny. At McKinsey, you do spreadsheets and that sort of thing. When something didn't look right, we started talking about it and realized, and caught it. But all this is happening, and you're trying to figure out the substance of it. And then what's even harder is the messaging. How do you create the urgency to get this done without creating fear in the markets? And that was a very substantive point because you could end up driving the stock market, or other things could happen. At the same time you don't exactly know which solutions you're going to use if you come to that, and how you create the language to do it was very challenging. Then people want to impeach him.

Riley

And my guess is that Rubin's experience in the business community is an enormous advantage to him at this point because of his sense about what he could do with impunity and the extent to which he could go without stampeding the markets one way or the other.

Mathews

Right. His reputation, I think, afforded us the opportunity to get the message of, "Get this done, get this across," without using language that could have stirred things up further because of where he came from.

Riley

Right. He had, you just said--

Mathews

Was it Waco? Or was it this?

Riley

It was this. And I was going to ask you about that. Because there seems to be a marked change, at least in the press accounts in the briefing book about his standing--especially among Republicans. Somebody who I get the impression was considered a fairly substantial figure in the administration, going over to Treasury. I guess some of that deteriorates a little bit because of what happens in Mexico. Maybe I'm wrong about that. Maybe his standing's higher because everything came out well. But certainly, by the time you get beyond the debt-ceiling stuff, you get an awful lot of Republicans who are calling for his scalp or saying that he's somebody that you can't do business with, right?

Mathews

Because he won. This was an important part of winning the whole thing. The debt limit was an important part of winning. The shutdowns were part of it. The debt limit is where they thought they had us over a barrel. They were secure, and that's why they talked big. "Oh, we'll shut down the government over this." [said in a loud and pompous way] They talked big because they thought we'd have to fold. The deal would be, "No, you're not going to get MMEE, because you're going to get a debt limit instead. So do you want to default on the country? We're going to offer you a deal. So then it's going to be you who's defaulting on the country."

The Republicans got so mad at Bob at this particular point because they saw this issue, as they were strategizing, as the winning issue--the thing that would put us over a barrel. Because he could extend and we got money and we figured this out, he got it to the point where, no, that was not going to be the definitive and determining issue. Then they get into a role of being the shutdown people.

Riley

So it was a sequencing?

Mathews

Yes. It did have to do with sequencing, I'm pretty sure, in the end.

Young

But that was the ploy. His standing on Wall Street and in the financial community remained very high, didn't it?

Mathews

Yes. But it all had to do with when they thought this would happen. On January 22, Rubin states that Treasury has run out of financial options. So you've had two shutdowns, and they're paying the political price.

Young

Right.

Mathews

He got us through, and that was the key.

Riley

There was an October point at which there was a sense that the debt ceiling was going to get bumped into earlier?

Mathews

And we got an influx.

Riley

You got through that?

Mathews

We got an influx. What you had to do is get over your monthly Social Security payments. That's the thing that was going to kick you, because that's a huge drain on the system. Did the books show you were going to make it or not? Meanwhile, you've got quarterly tax stuff coming in from businesses. When you're down to this level, those fluctuations were making a difference. We thought we weren't going to make it. Then we figure out the tools to get us through, and the drawing on certain sources of funds and moving money around in order that we could get through. This is what makes them mad, because they're just saying, "Drat!" Then they have to face the shutdowns. That's why Rubin calls in [inaudible].

Beckenstein

So were the Republicans being blamed for the shutdowns, rather than the White House?

Mathews

I think so. We were nervous. We got some flak about it, but I think it was pretty much they were being blamed. And part of that was we had done a good job of defining. Because when you have something as simple as MMEE, all we're caring about here is Medicaid, Medicare, the Environment, and Education. That's all we want. Just do a reasonable job on that and we're going to sign this thing. Just keep repeating it. Then, when people are intransigent and shut the government down because they don't want to pay for our kids' education? That's what's happening here. You get a little bit into where you're able to define a little bit of that.

Beckenstein

Did the personalities define why that got to this kind of an impasse? Is it Republican hatred for Clinton? What's going on there?

Mathews

I think there was some of that.

Beckenstein

There's reelection coming in the fall.

Mathews

Yes. I think there was some of that. You need to deal him a blow. They were trying on the investigatory side. Still going full. Was it to do with personalities? I think a part of it was Gingrich trying to implement the contract. They'd just made a promise in '94--the contract. I think they were trying to do that. And I think that they thought they had a hand that they didn't have.

Beckenstein

And he was getting heat from his own people for not sticking to that contract? After he had pledged everybody?

Mathews

That's right. And you see that now--the disillusioned original contractors.

Beckenstein

Yes, big time.

Knott

There were some reports at the time that some White House aides supposedly feared that if the President was left alone in the room with Newt Gingrich, and possibly Bob Dole, that perhaps they might actually reach some accord and undermine this careful strategy that we just discussed. I wondered if you would comment on that.

Mathews

We thought that we would maximize the policy holes by having the team that was negotiating negotiate. If we were really trying to get the most we could on those four things, that was the way to do it.

Young

This is delicate, but it has some appeal. [laughter]

Mathews

It's different. This was negotiating the stuff. This wasn't getting the framework. And were we concerned that Clinton might not drive as hard of a deal? Yes. What he's good at is bringing the Middle East together, bringing the Irish peace problem together. You know what? You don't want anybody else in the room but Bill Clinton.

Knott

Yes.

Mathews

Don't put in any of our people, because they won't be able to see through and get it all together. When it comes to this kind of thing, it was probably better to have people who were going to drive the hardest bargain. The other thing you always had to remember is that the President was one step removed from the day-to-day with Democrats who were going to sustain your veto and be with you. So you had to know incredible levels of detail of what kept that coalition of Democrats together for your veto. That's something that was held by the Chief of Staff, OMB, and that sort of thing. That's the other thing that could end up tripping you a little bit. Because the President did not know every promise that had been made to keep our coalition together, and he did that intentionally.

Beckenstein

Was this the blue dogs? Or were they gone by then?

Mathews

It was across the board. It wasn't just the blue dogs, it was regular, uncolored Democrats, [laughter] those that would vote for a yellow dog, as long as it was a Democrat. We just saw everybody had interests in the game. You had to have enough preserved. At times, in this particular case, there weren't immigration issues. But in several of the other negotiations there were very vital, important immigration issues that were highly technical that kept coalitions together of the votes for a veto. And that would involve the Hispanic caucus, in a case like that.

Riley

You get on the other side of the government shutdowns and then we're headed into '96, an election year. Does that have any bearing on your activities in the position in the Treasury?

Mathews

No. You've got to decide what you're going to do about a Secretary of the Treasury with regard to campaigning. That's an important academic and historical question. To be honest, I think the academic community should get together and the think tanks should get together, just make the rules and put them out there and say, "This is what we can consider the standard operating procedure."

I was incredibly surprised to see Condi [Condoleezza] Rice in I don't know how many battleground states before this election. There are certain things that are illegal. The Attorney General, the Secretary of Defense, the Secretary of State--I think those are all actually in statute. But then how far you extend that out to your National Security Advisor and to other people? In terms of the election, we had to set up rules for what Bob would and wouldn't do with regard to this. Because you want to be very careful to not create a politicized Secretary of the Treasury. That's the last thing that you need.

That would be OK for Gene or Laura. They were going to carry more of that water. But you can imagine many Democratic Senators and Congressmen wanted to have Bob Rubin come and raise money for them, not any of the other players. So that was a part of it. But otherwise, you're kind of toodling along. Sure, you're going to have initiatives. You've got to get the initiatives out, get the stuff done. The election affects how you're going to be able to negotiate a budget versus whether you are or you aren't, those kinds of things. But in terms of our day-to-day work, probably the big thing that happens during this period of time is the balanced budget. That happens in the summer.

Riley

And welfare reform, right to work?

Mathews

Yes. Oops.

Beckenstein

Wait a minute. Balanced budget came in '98?

Mathews

Is it '98? The second round?

Beckenstein

I think so.

Mathews

Don't we make a declaration before the '96 election?

Beckenstein

That you're going to get there.

Mathews

Yes. The decision to announce that publicly.

Beckenstein

Not the achievement of it?

Mathews

Yes, yes.

Beckenstein

OK. Got it.

Mathews

So--welfare reform.

Riley

How does it present itself to you?

Mathews

Not that much. At this point, I'm at Treasury. Bob's going to go to the meetings. We talk about what his position will be. We meet with the economic team. We also meet with David Dreyer. Larry is a part of the meeting at this point. We decide where Bob will be, and Bob has personal, strong feelings. A lot of it was about analysis. What do we think the bill would do? That sort of thing. Bob attends the meeting. It's very contentious. As you know, people resigned over the issue.

The President decides to support welfare reform. How did I feel about that? I spent many years at OMB cleaning up the things we thought were wrong. And much of that, actually, had to do with immigrant populations, food stamps, and that kind of stuff--which were bad parts of the policy. Do I think it was a right thing? Yes. Do I think we may still see some bad ramifications and difficult economic times? Yes. But do I think that we should have done it? Absolutely. It was the right thing at the right time. Yes. We negotiated the best deal we could at that point.

Riley

There was an enormous degree of legislative productivity in '96 leading up to the election. I'm just sort of picking some of these out to see whether there might not have been a Treasury role. There was an April farm bill.

Mathews

No.

Riley

Would you have had involvement in that at all?

Mathews

We would have been deciding, "Oh my goodness, we're going to agree to this much in subsidies? That's really bad for the budget. Ugh! I can't believe we're going to do that. I guess this is the least we can get away with." I should be careful. There are parts of that that are relevant and important that you want to do. But how that fits into your overall budget is the important question here.

Riley

Safe Drinking Water Act in August.

Mathews

All of that stuff comes into play in NEC meetings that Bob would be doing over at the White House. This is where there are going to be two different kinds of Chiefs of Staff. The ones being with him by his side, all the time. Then, as you can see, I was more operational. Fires seemed to be happening at the Treasury Department. [laughter]

Riley

Minimum wage increase?

Mathews

Our team was very involved and engaged in that conversation, and that was something that we spent lots of time discussing internally. What are the numbers? Why should you raise the minimum wage? What does it mean economically? What should you raise it to? What does that mean in terms of jobs, which would be the major problem, perhaps, with raising it? So a big part of that conversation--that's an economic team biggie.

Riley

Reich is still around for that? I'm trying to recall.

Mathews

I think he's around for that one.

Riley

Any recollections of having to knock heads with Reich over this? Or on anything else? Maybe that's a better way to approach this, rather than issues. To get you to think a little bit more generally about some of the people who were serving in the key positions in other places.

Mathews

General agreement, question of amount. I don't remember a huge fight over that.

Riley

Any particular recollection of that relationship with Commerce and Ron Brown? This was still in April of '96, is that right?

Mathews

Yes. It was a big blow to everybody. HIPAA [Health Insurance Portability & Accountability Act of 1996] --I seem to recall our team was involved in that because of all health things. By this point, the health things being discussed are being discussed by the economic team. As I'm looking at this list, the budget and economic stuff, the one thing I can't remember are what years we had tax bills. Because even if these tax bills are small, they take forever. We didn't have any trade legislation that year. Tax and Trade are our committees. Those would be the things that would be most relevant. And I guess this is the year that we shut down Pennsylvania Avenue. Ninety-six? Ninety-five? I'm not sure.

Riley

It's not likely to show up on that.

Mathews

But that would have been a big thing coming from the Treasury Department. The decision to announce that you were going to balance the budget by X time was a very big deal, and something that there was much back and forth about. People were worried because to have pretty substantial numbers, you'd have to have numbers to back it up. You couldn't just say it. That created concerns. Could we do it? What would we say? And what were you going to do to get there? What was going to be your growth assumption? Because that would draw part of it.

What other savings assumptions would you make? And what does that mean for putting you in a box with regard to initiatives you want to do, or tax cuts that you want to do in an election year? Once you're locked into that, anything you would announce as part of your campaigning effort was going to have to fit in that box.

At that time people still thought in terms of PAYGO [Pay As You Go]. If you were going to propose a tax cut, you'd have to pay for it somehow. You were going to have to state how you were going to pay for it. That could be a very challenging thing. People were worried about getting themselves in a box. But in the end, they decided to go forward, and it was a wise thing to do. That wise thing could have been very different had the economy not done as well as it did.

Beckenstein

Was it expected that a surplus would be around?

Mathews

I can't remember which years they started coming on and when we knew.

Beckenstein

Around '99-2000 were surpluses?

Mathews

Ninety-nine to 2000.

Beckenstein

We're a little over 1 percent of GDP surpluses?

Mathews

It started growing at that point.

Beckenstein

Yes, which is contractionary fiscal policy. Well, it depends on how you measure. Let's see. It might not be full employment surpluses. That's the issue, which would be the better concept. So the idea of using the actual budget balance is not very good economic policy, but it's great politics.

Mathews

But for the question of paying down the debt--because you're getting rid of interest payments and therefore enabling the government to use those marginal dollars for interest payments to do other things that perhaps could stimulate the economy--

Beckenstein

Yes. I mean the short term, macro-economic effect of running surpluses is contractionary, it's into the economy unless the crowding up phenomenon is real.

Mathews

Right. Although the question of the long-term effects with regard to existing commitments to Social Security and Medicare, instead of adding additional interest commitments.

Beckenstein

Right.

Mathews

In terms of the long-term health of the fiscal situation, I think could generally be considered positive.

Beckenstein

Yes, but at the time, you've got Greenspan running, and I guess he wasn't very contractionary. He's got a neutral monetary policy.

Mathews

Neutral.

Beckenstein

Until mid-'99. I guess this was OK.

Mathews

Yes. He was not--

Beckenstein

Were people worried about what Greenspan might do, given that in '96, he had his irrational exuberance speech? Were they worried he might tighten because of the bubbles? And at the same time, that you'd be running contractionary fiscal policy?

Mathews

In '99?

Beckenstein

No, in '97, let's say. You've already made the commitment to balancing the budget.

Mathews

I'd have to look at the specific actions that were taken at the time because they were entering a new period. It all starts coming together.

Beckenstein

I guess the broader question is, was the use of fiscal policy conditioned by expectations about what Greenspan would do with monetary policy? Was Rubin coordinating with Greenspan?

Mathews

Everybody was always talking. So of course it was being considered. But the idea of balancing the budget and taking out the deficit premium was what we were trying to do. And we'd been on our way and started to see what we felt was a virtuous cycle. The government was not taking up space in the market, borrowing money. Therefore there was room for others to be there to make the investments that were increasing productivity.

Regarding the long-term stuff--a lot of this was being driven by the long-term question of how long are you going to have a situation where you can meet the Social Security payments? 2013 is the crossover point. And with the deficits that we were running at that time, that could come even sooner, depending on how much you would grow. So there were long-term concerns with regard to that fiscal policy. Of course we had hundreds of programs that we'd be happy to spend the money on. But we did not believe that was the healthiest thing for the economy.

Riley

The simple answer, if I hear you, is that you were not getting warning signals from Greenspan that you were heading off in the wrong direction by developing these sort of policies?

Mathews

No. As a matter of fact, Greenspan was supportive of our balanced budget policies.

Young

Which you'd expect him to be. But he is not supportive of the current Bush-Cheney tax cuts, and deficits either. And he's consistent.

Mathews

Although he was surprising. No.

Young

I thought he was making some statements to the contrary.

Mathews

He made statements to the contrary last year.

Young

He said that the tax cuts were good, particularly on capital, but he wished that they would be balanced and revenue-neutral, and be a balanced budget change so that the structural tax cuts are good, but not deliberately running into a deficit.

Mathews

It was really a support for the tax cuts. That was the problem during that period when the tax cuts were there.

Young

I guess a key to my concern was with the perception of a bubble and the possibility of a shock to the system. Greenspan worried about what to do about it.

Mathews

I think a question was get your fundamentals as strong as strong as you could because you can't control the bubble, right?

Beckenstein

It's a long-term policy, not a short-term?

Mathews

It's a long-term policy of strong fundamentals. That's what we'd always say. If you look back, and you'll find all the comments on one month of employment up, one month of employment down, or whatever it was. Inflation up, inflation down. Strong fundamentals. What you want are strong fundamentals, and those are the kinds of things that are viewed over periods of time. And that's for a healthy economy in the long term for the nation. You've got to keep your eye on that ball. With regard to that, that was what it was about. It's funny, because it contrasts with the stimulus.

Beckenstein

That's true.

Mathews

When we did it the other way, long-term fundamentals--let's get on the ball, keep our eyes on that, let's do that. That's when we would succeed more.

Beckenstein

But by '97 you've got a new economy in full gear?

Mathews

Yes.

Young

Let me break in with a general question. Can you think of an administration, excluding the current one if you don't want to talk about it, that represents the polar opposite or strong contrast with the way you went about analysis in using the figures and facts for policy decisions and policy goals?

Mathews

My history's not good enough. I'm taking a new stats course and everything, and my history's still not good enough.

Riley

Do you remember the Reagan--?

Mathews

Yes. I'd be concerned that I can't recall facts enough to argue the case. When you asked the question, that's what came to mind. But I couldn't recall enough facts to argue the case, so I didn't feel comfortable standing by it. See, I think the way that we operated--

Young

OK. So you're not a good judge of where you stand in history on this? But during the Reagan administration, at least on Capitol Hill, there was the concept, and it was fairly widely shared, that these numbers meant one thing.

Mathews

Bogus.

Young

Everything was dead on arrival.

Mathews

Yes.

Young

That was a political document, not an analytic document. I've heard this from many, many different people on the Hill--staffers.

Mathews

I think that's probably fair. When you look back at what happened, especially in the early days of the Reagan administration, the things that were sent to the Hill and where everything was in terms of before the President was shot. There was a lot of that. And it's also reflecting on 41, the numbers we got. The mid-session review did not reflect what we got. I think that we believe that there had been a lot of funny numbers, and numbers that were not that reliable before us. But I'm hard-pressed to recall the facts. It's my impression, and it's what I believe, but I'm not good at marshalling the facts that the Bush 41 and the Reagan years did not have the rigor on numbers that we were trying to do.

Young

The contrast I'm thinking about is the dedication, the people, the talent, and the way you did it. That, I think, was quite unusual. You have to go back far, I think, to get that one.

Mathews

Yes. But it was just the way things were and the group of people.

Riley

I think we're about to the point to get you back in the White House. Think if there's anything else related to Treasury that we've missed that you want to come back to.

[BREAK] [Young departs]

Riley

Is there anything else in the Treasury experience that we've omitted that we ought to cover before we get you back to the White House?

Mathews

No.

Riley

So the President becomes the first Democrat reelected in almost 60 years. Everybody's happy about that, right?

Mathews

We were pleased.

Riley

Were you thinking about moving on at that time? Or were you happily ensconced at Treasury, and felt like you were going to be there? Were you getting signals from the Secretary that he was considering moving on?

Mathews

He and I had started a conversation about me doing something with more direct-line responsibility at the Treasury. I was interested in moving from the jack-of-all-trades approach to things. And so, we'd started that conversation.

Then the conversation starts with regard to, "Who's going to be the new Chief of Staff?" I'm not exactly sure how I came to know Erskine. We'd worked together. I had worked closely with Bob. Those are the two leading candidates to be Chief of Staff. There's much back and forth, many conversations. Vernon Jordan's helping the President because he knows both of the players. Vernon asks, "Do you think that Bob will do it? Do you think Erskine will do it?" I'm part of those conversations, so I have a sense of who's going to be the next Chief of Staff if one of these two people will take the job.

Riley

And Rubin--

Mathews

They're both saying no. Neither one wants to take the job. The conversations continue and then it comes to a point where Erskine calls and says, "I've told the President I'll do it if I have my own two deputies. That's the deal. And you and John Podesta are the two people I want." I called Rubin, who was supportive, but also thought it might have been a nice thing had there been an opportunity to put his oar in the water with regard to staying at Treasury, because things are moving quickly at this point. By the time they've gotten Erskine to say yes, things are moving very quickly. So I call Bob and tell him. Then I think Erskine calls and talks to him too. We decide that I'll move. The whole deal is cut.

The next day, Erskine and John are announced. I think we had made the decision on the phone that Evelyn Lieberman, who was then Deputy Chief of Staff, was going to move over. It would be announced what I was doing and what she was doing at the same time, because that was best for Evelyn. We didn't do that with Harold Ickes. And that was perhaps not as good as I would like things to be. Harold's a friend. How all that rolled out was probably not as clean as it could be. But we held my name. So I was actually never a part of that sense, either for Evelyn, because we knew where Evelyn was going to go. Or with Harold, because John was announced. That seemed to be what was taking place at that time. So we hold off on announcing my switch. When we do announce my switch, and Helen Thomas asks Erskine, "Isn't she too young to do the job?" in the press briefing. In our conversations, John and I had divided the White House. He had talked to Erskine about how we would divide things. Then we were off to the races.

Riley

Would that have been your preferred move? You just said that you were talking about something with more line responsibilities in the department. Were you disappointed that you didn't have the chance to follow through on that here?

Mathews

Oh no. To be Deputy Chief of Staff to the President of the United States is a pretty big deal. It's an incredible opportunity to see so many things up close and understand and be a part of decision making on the great and important things. I was quite happy to make the change.

Beckenstein

What would the alternative have been at Treasury?

Mathews

Assistant Secretary most likely would have been the kind of thing that we would have discussed. That would have been an incredible opportunity, too. I was very fortunate. And to work with Erskine and John, with whom I had worked very closely in 1998--these were people I knew. If you're going to do it, do it in a setting--

Riley

All right. You come in and you've got a President looking at a second term. Was there much advance preparation that you were inheriting about a second term agenda?

Mathews

There were a number of things that had been announced. Announcing the balanced budget targets was going to guide much of what you could do. You had limited the amount of investments you were going to do in terms of spending. Things were announced as part of the inaugural speech that we're going to end up guiding things. For example, I didn't know anything about a race initiative when I took the job. No one actually knew what that was. It was basically announced in the inauguration.

There were some things that seemed to be on the agenda. And still, a heavy agenda on all kinds of things that we'd been working on. We knew there were trade things we wanted to try and get done. We wanted to continue on a path with education things, move those balls forward and continue on the path. But with regard to my knowledge of the clarity of the agenda and walking into a job and knowing that it was my responsibility to help make sure that X, Y, and Z happen, no.

Riley

Were you involved in the drafting of that inaugural address?

Mathews

No. That happened before I got there, because there was the transition time.

Riley

OK. The briefing book has an announcement on December 18, but it doesn't say exactly when you started, I guess.

Mathews

I think I moved over during the December time period. But that's trying to get Erskine and his office up and running. And we're sitting in the OEOB and trying to figure out how we're going to run the thing.

Riley

Did you have to have many conversations with others who had been in that position for you to have a sense about what that job amounted to?

Mathews

I talked to Evelyn, Mark Gearan, and Roy Neel. Talked to the people who had done the job previously to try and understand a little bit about that.

Riley

And what were you hearing from them about the kinds of things that you really needed to pay attention to?

Mathews

Well, that so much of it was going to be dependent on how Erskine wanted to run things. They couldn't tell me a whole lot that would be relevant because much of it would depend on how he wanted to run things in the White House.

Knott

And how well did you know Erskine Bowles at this point?

Mathews

Reasonably well, but not like I knew Rubin. An Erskine joke to Bob was, "If I had Sylvia Mathews writing notes to me, I'd be as smart as you are." [laughter] That was a joke he always told. He had been in lots and lots of meetings where we'd been together. But how well did I know him? I had a sense of him, but not nearly as well as I knew Rubin.

Knott

This may seem like an odd question, but how well did you know the President at this point? Did you feel that you had a certain comfort level with him?

Mathews

Sure.

Knott

Or that this was something that you had to establish?

Mathews

I felt that I had a comfort level with him. It's interesting that you asked about advice. The other person who gave me sound advice for this job was George Stephanopoulos. George gave me probably the best advice of anyone with regard to how to prepare for the job. And this is related to this relationship-with-the-President question.

George said, "First of all, you need to establish a couple of friends in the press and a couple of friends on the Hill." Those people need to stand beside you no matter what. No matter what they hear, they're going to be the people who are going to stand up and say, ?Good person. I stand behind him.' That's a very important thing to have. Hopefully, you'll never need it. But you should know that." The second thing that George recommended was that I needed to think about what relationship I wanted to have with the President and First Lady. And yes, we had a relationship. Did I know them well? No. I had a sense of them. They knew who I was and they had a sense of me.

One thing that was an interesting challenge is that I'm of a totally different generation. I'm in a room and in a place where there's such a dramatic age difference. And in certain ways, there's an experience difference. None of my brothers or boyfriends had been in Vietnam. Actually I have gone out with someone who can tell you about the torture. But I didn't live through the torture of that whole experience. A different generation. And what did all that mean? It didn't necessarily mean a whole lot. But in terms of the relationship we were going to have, I had no desire to be the Clintons' buddy. That was not on my agenda. I didn't think that would be particularly helpful in making me effective, and I already had the challenge of age that some might say was a challenge to begin with.

Riley

Did you feel that much before? We really haven't talked about that. In terms of the traditional old boy network in Washington, you've got two strikes against you. You're a woman and you're very young. Did you feel that in any way?

Mathews

I hadn't really felt it up until that point because Bob Rubin is just so completely blind to any of those kinds of things. He's blind to color and blind to gender. He's only about quality of work. He wouldn't care if you were two years old if you could just get it done. [laughter] I hadn't really felt that in my life at the White House. Now I'm the most senior woman in the White House.

There are certainly different styles. I think it's fair to say that generally speaking, men and women have different styles. But generally, with regard to management and operation and stuff like that--I'm now in a situation where at 7:15 in the morning I sit down at a table with Erskine Bowles, John Podesta, Paul Begala, Doug Sosnik, and Rahm Emanuel. This is a rough-and-tumble kind of group. Did I ever feel it? No. They would joke. I drink ice water and they would make jokes about--you had to just get in there and pitch. If you're trying to get your stuff done in 15 minutes, and so is Rahm Emanuel, you've just got to get in there.

I always used to say, and I do believe, that Title IX was one of the greatest things that ever happened to women. That's because those mornings I would always think about my coach. I was a forward, and I'm short for a forward. And my coach would always say, "Get position, Sylvia. It's not about your size. It's about your position. Get position." And that's what it felt like every morning. Get position, get your stuff, get what you've got to get done and get in there and pitch. But the age thing? Sometimes it just happened in funny ways. And the sooner you come to not care about it, like when you're getting ready to have luncheon with the Chancellor of Germany and somebody comes in and says to you, "The translator's seat is right there." [laughter] And you say, "Well, that's great. When I see her or him, I'll let him know."

Some of those little things tended to happen. But the sooner in life you embrace that--and that's one of the things that you sometimes saw in Washington that people would get all twitched if people weren't treating them one way or another. That's about them, not about you. But this question with regard to the relationship with the President and First Lady--no. The one thing it did mean is that I was always careful and conservative with regard to everything from my dress to-- In the eight years, I don't think that I ever drank and drove. I basically didn't drink for eight years, always knowing that I'd be judged with an incredibly high standard, and perhaps even higher because it would be based on my youth.

When you're that young you don't have the experience others have. You really have to do a little better listening because that's how you're going to get something you don't have. Those were the only things that happened. My age or anything else never stopped me. The President, in my going away from being Deputy Chief of Staff, said, "Sylvia and I have butted heads a number of times." I wouldn't stop or hesitate. When he asked or wanted something that I didn't think was right, it was my job.

Riley

I want to dial back just a second. You'd mentioned that you had this conversation with George Stephanopoulos about the relationship with the President. That's an interesting topic for him to be discussing with you, because if you read his accounts--I guess that this was occurring during a period of time when the personal relationship was sort of strained with the Clintons. Was that part of what you were talking with him about? What I'm trying to do is--

Mathews

He didn't reflect his struggles or anything like that. But what he was doing was trying to give me good, sound counsel about how to serve in the position best, based on what he had learned. It wasn't a conversation that said, "Well, let me tell you what happened to me, and use this as you will." It was much more the conclusions that he'd drawn. He very helpfully was saying, "OK. Here are the things you need in Washington that you probably haven't thought about." And he was absolutely dead-on right with these ideas of support systems and relationships that I wouldn't have thought about making and reaching out and doing.

He knew my tendency was going to be to stay away from the press. He knew all my tendencies would be very internally focused. He'd known me since 1988 and he knew I would be about doing the work. And so I wouldn't focus on my press coverage, my exposure to the Hill, on who knew the work I was doing, or anything like that. He nailed it. He knew me well enough and knew the situation well enough that he was able to give me very good, sound counsel. And then, with regard to this relationship issue, he just said, "This is a job. There are great people, wonderful people, but you need to think about what you want that relationship to be." Because so many people were their friends, too. That happens in the workplace a lot. And I think that it's a great thing that it does happen in the workplace. But it wasn't what was going to happen.

Beckenstein

When you went in the job, who became your mentor?

Mathews

I still depended on Bob. John was a peer, but had been my boss years before, and Erskine.

Beckenstein

What if you were having trouble, though, within the troika? You'd go to Bob?

Mathews

I would generally go to Bob. The other thing is that Josh Steiner--who by this time is long gone but understands the game, knows all the players, and is friends with him--was always a great sounding board for me because there was complete confidentiality. He was also helpful in thinking through things. And John Podesta's always been a friend as well.

Beckenstein

Any women with lots of seniority or experience somewhere that you could turn to?

Mathews

I'm the most senior woman at this point.

Beckenstein

I know. But say on the Hill, or a former colleague in the Cabinet? You had [Donna] Shalala--

Mathews

It's very interesting. Pamela Harriman brought a group of women together when she would come back to the U.S. This group of women was Harriman, [Madeleine] Albright, [Joan Edelman] Spero. It was an incredible group of women, and they would have lunch. This was before she passed. I was invited to join that group of women.

Beckenstein

Wow.

Mathews

They were all women who were looking out for you. It helped you just sitting and listening to them and their experiences and just realizing, "Oh, my gosh! It's so much easier." My experience was so dramatically different from, say, Ann Lewis' or Anne Wexler's experience. Other women who were around and who had been doing this for 25, 30 years--and what they faced. Because the women thing wasn't as much a big of deal. Although, when I did move on from Deputy Chief of Staff to OMB, it led to pulling a bunch of women.

There was this huge party, which leads to the article about the top ten list, which led to confirmation problems. So much for humor. I never would crack any jokes. The one time I cracked a joke, I got in trouble. [laughter] It gets in Al Kamen's column, and then I get asked in my Senate confirmation hearings about it. It was a joke.

But there was this huge party for about 250 political appointee women because I moved, Maria [Echaveste] moved, we pulled ten women. My job shift pulled ten women up in the organization. There was cheering and speeches and we went to the rodeo some place, and in that sense, that's when you felt like, "Wow, it does make a difference, and you're doing something different."

Those were the women who were around, for this question of women mentors. But none were day-to-day, right there in the trenches with you. Having said that, there were a group of us who depended on each other. Maria Echaveste, Minyon Moore, Lynn Cutler. There was a sense of camaraderie among the women in the White House, a "watch for each other" kind of mentality.

Beckenstein

But there weren't enough degrees of freedom if an issue came up to separate out whether it's a youth or a woman issue?

Mathews

Most of the time there weren't. It's not like you were cut slack. It is what it is.

Beckenstein

It's the ultimate meritocracy.

Mathews

Yes, if you were there playing in the ball game, I guess you got here because you could do it.

Beckenstein

Did you feel like Clinton was a meritocrat like Rubin?

Mathews

Yes.

Beckenstein

Did people think differently, post-Lewinsky, about those sorts of things?

Mathews

No. With regard to me and the relationship with Clinton, in terms of those kinds of issues--Mrs. Clinton's vehement support of me being around and everyone who knew me--Clinton once said, "Sylvia? I think sometimes you try not to look good because you don't want anybody to ever think anything but the fact that you got here on your brains and your work." [laughter]

Riley

That's a back-handed compliment.

Beckenstein

Yes. And how would you take that?

Mathews

But that was the general--As Lloyd Bentsen once said when he saw me at the White House Correspondents' dinner--we'd just been in a meeting, not an hour before. Literally, not an hour before. He said, "My goodness gracious, Sylvia, you sure do clean up nicely." [laughter]

All these comments tended to indicate that no one in the work environment was facing anything. As a matter of fact, I maybe needed to lift my game on a day-to-day basis. I wasn't focused on fashion for those eight years.

Beckenstein

Baggy sweatshirts worked.

Mathews

Whatever. You were just trying to live and get by. It wasn't what you were about or focused on. And because I also wasn't desirous of being an external player.

Beckenstein

Right.

Knott

How do you maintain your sanity in such a high-paced, stressful environment? I noticed one entry in our briefing book where you volunteered on a weekly basis to tutor a student in the District of Columbia. Was that, in part, to help you as well?

Mathews

Yes. His name was Archange Francois, "Frenchie." He was Haitian. Bob Rubin, who was supportive of this, said, "It's fine. You can take an hour. My only rule is that you have to be accessible, so I can come in or out." And many times, he would. Frenchie met Bob Rubin I don't know how many times. We're in the middle of math homework and Bob Rubin walks in and has a question. He says hello to Frenchie and we go through and do our business.

Beckenstein

Is that at the White House?

Mathews

At the White House or at Treasury. It was much better at Treasury because I had my own office. Bob would drop down in the office and say hello. And Frenchie got to meet Ted Kennedy in the lobby waiting on me. Bob said, "You're welcome to do this, but I do want you to think about it. If what you're interested in is helping low-income youth, I think it would probably serve the nation better if you spent an hour of your time thinking about policies that would make a difference and working to get those implemented. This tutoring is much more about you and helping an individual and what that makes you feel like than it is about long-term correction of the problem."

To your point, yes, you're right. It was about me. It was about the sanity that that kind of thing can provide. My friends and family provided sanity. And then, I did try to keep reasonably fit. I had an ergometer. I had weights.

Knott

So you're very disciplined in terms of your schedule and you're capable of sticking to it?

Mathews

Yes. The worst story I would tell on myself as a reflection of this is that I used to floss the upper teeth and lower teeth every other time to save time. [laughter]

Knott

Oh, God!

Mathews

It got to that. That's bad.

Riley

That's how busy it is in the White House.

Mathews

Yes.

Knott

And is it ever a concern? I'm sure it is. This is kind of an obvious question. But you're so busy going a thousand miles an hour, 24/7, that you don't have the time to step back. You mentioned earlier that the President should take one week in August when he or she is just looking ahead. Did you ever have opportunities like that during your time?

Mathews

I had a reputation for the work and that kind of intensity and discipline. I was the first person to take a vacation in the White House. Everybody said, "You're going to Jamaica for a week?" By this time, we had rolled out the budget. I said, "Yes! I made reservations, I've paid for the ticket. I'm going. People can call me." As a matter of fact, one of these jobs--it's funny because I don't know that I'd actually read the John-somebody article, because I wasn't in town. I mean I'd read it, but I wasn't in town when it appeared. One of my job switches occurred when I was on vacation.

I was very disciplined about vacation. When I go on vacation, don't call me unless it's a real issue. Most things can be taken care of completely by other people. Who are you kidding? We are all dispensable. So I would always take vacation. I was religious about taking vacation, to your point about trying to restore a little bit.

Knott

And there were plenty of folks who did not?

Mathews

That's true.

Knott

Part of the feeling was that if you take a vacation, you're not--

Mathews

It's being out of the loop, out of the mix, and out of the action. I was so happy when I moved to OMB. It was wonderful. People would say, "I can't believe you're taking a job where you're not going to see the President of the United States every day. Doesn't that concern you?" It was wonderful. I was so fortunate. You've got a place. You have this job. You all are running this thing. You know what you're trying to do. I didn't feel the need to be at this party or do this thing, or that. Some people really do have that feeling of, If I'm not there, I'm not in the loop.

 

Riley: You come in in January?

Mathews

Yes.

Riley

I'm trying to think about the kinds of issues that would have been on your plate that year. One thing, in particular, if I recall correctly--is this the time where you go through the Pillars exercise?

Mathews

We do that. We have an election in '96. We started in '97. The Pillars are done in August of '97. For '98 too.

Riley

What are the issues occupying your time during '97? You pick up the race initiative in June, but surely there were--

Mathews

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Riley

Did this become one of the biggest items on your agenda when you worked in the White House?

Mathews

Yes.

Riley

And how did it? You said you found out about this.

Mathews

Affirmative Action--I ended up doing the "Mend It, Don't End It"--an implementation of those rule makings for small business and everything else on how to do that. There were huge decisions to be made because actually this was one where the experts and the analytics became very important, and subcontracting numbers. How you record subcontractors. All this complicated stuff. I spent a lot of time on this. Meanwhile, you have to spend time on trips. Anytime the President's going anywhere, you've got to get it all together for a trip.

Riley

This is just on the race issue? Or on anything?

Mathews

Anything.

Riley

You're doing travel?

Mathews

Yes. John and I split the international travel. Any time the President does an international trip, it's either me or John. Then domestic travel--for a while I did two-thirds. You've got to make sure that everything down to the manifest is right. "Wait! Mayor so-and-so wants to ride in the car? Are we sure we want to do that? OK, who's going to get the briefing? Who's going to make sure? We got that covered? Go over this. Is that enough time for Clinton to do this? But then we're going to be late. We can't be late for that."

Riley

I want to park on the race and trace that through if we can. You said that you first learned about this in the inaugural address. To your knowledge, this wasn't something that had been floating around in channels for awhile, waiting for the President to pick up--

Mathews

He'd always been interested in issues of race. The question of an initiative was something that I think came out of the State of the Union: What are some core things we want to accomplish?

Riley

When you came over, did you have a conversation with him about what he wanted to see done?

Mathews

Not until it gets assigned to me. Once it gets assigned to me, I try and frame a conversation with him about a way we can approach it. We get this outside group of people here. Here's what we aim to do. What do you think about it?

Riley

Did Erskine make the assignment?

Mathews

Yes.

Riley

So he tells you that you're going to run with this?

Mathews

Yes.

Riley

Does he give you any paper at the time?

Mathews

Nothing.

Riley

OK. All you know is that there are two lines, maybe even one line in the inaugural address that the President is interested in this. And you have to manufacture this initiative?

Mathews

Yes.

Riley

How do you do this?

Mathews

We've got the "Mend It, Don't End It" kind of stuff that's already going. That's an important part of it. So what do we think are the core problems in race? Are we going to identify the problems? What are the spaces that we think that we can work through? It becomes an evolutionary process. People like Chris Edley are helpful--Maria, Minyon, all the people I mentioned.

I run processes within the White House to get the minorities in the room to have that conversation. "What could we do? What do you think?" Then start framing what we do, and getting input from the outside. Because it's going to be an important part of selling it and buying it. And if you're trying to move the nation toward racial reconciliation, you're going to have to have people out there helping to do that. So--a commission and that idea--I looked at the Kerner Commission.

The other thing I should say is this: I'm nearing the end of the concussion. Every once in a while, some of these things I just can't remember. I'm three months into it. I had a concussion at the end of July. I still have memory problems. I've had two concussions, and this one was much more severe. I forget things like the Kerner Commission, things that I know. Anyway, so I look at the Kerner Commission.

Riley

I had a similar experience, but much longer ago. So I've forgotten a lot more than you have.

Beckenstein

I wouldn't have noticed. [laughter]

Riley

Anyway, that's why this is tape recorded.

Mathews

It's good that it is, because the memory loss from the concussion is different from the other kinds of memory loss. You feel it differently.

Riley

Interesting. We'll talk about this later.

Mathews

So I looked at the Kerner Commission. Did we want to do something like that? No. That was too extensive. This is putting something together out of whole cloth. I'd probably do it differently now, with more maturity and experience than I did then. But we got a lot of people together. Wrote up the basic outlines, the framework of what we were going to do, and ran that by the President. Actually had bunches of people in the meeting. Everybody complained because they didn't want to have the people in the meeting. But you know what? Having the people participate who are going to have to answer to people in the White House was, I thought, very important.

So I had a large meeting, and it didn't just have the minorities. We had Elena Kagan, who's now the Dean of Harvard Law School, and people like that to talk about various issues with the President and go through what we thought we would do. Then we picked this group of people. He has to meet with them. He gives speeches on the issue. We create these tools for best practices.

In my first month in Seattle, the group that was started during the President's race initiative still met and had speakers come, and still does it annually. Many of the highest level of business people in the community come and talk about issues of race frankly and forthrightly. There were many things. The "best practices" are still things that people refer to and have supported since then with regard to programs that can promote reconciliation if communities are having difficulties or challenges. And of course Governor [Thomas] Kean was the chair.

Riley

Who made that decision?

Mathews

I did. I put together the list, and the President made the decision.

Riley

You put together the list, which included all of the members of the commission?

Mathews

Yes.

Riley

Were there any notable fights over positioning, either inclusion or exclusion?

Mathews

No. The big fight was over who ran the thing.

Riley

Was there somebody else who wanted to run? Anybody else in the White House organization--

Mathews

Oh, the big fight on who we hired to run it. There were people taking steps back.

Riley

That's what I thought.

Mathews

You can imagine--OK, sure. I'm happy to. Let's go. What are we doing?

Riley

Where was Chris Edley at this time? Was he at OMB?

Mathews

No, he was back at Harvard. I hired him as a consultant. This is actually the point at which I introduce him and Maria Echaveste, who then become married. That council's in administration at this point.

Riley

A major accomplishment.

Mathews

Chris is an advisor, and I knew he needed to be an advisor. REDACTEDTEXT REDACTEDTEXT But he's very smart and very knowledgeable. We've got to have Chris. He's part of the ball game.

Riley

Were you on the road with the commission when it had its meetings?

Mathews

No. Judy Winston went, and she hired a team of people who worked really, really hard. It was an incredible team.

Riley

The President made at least a couple of appearances?

Mathews

Absolutely. Big speeches. This was always a challenge because the President had strong views. We ended up writing his speech, but then he wanted to talk through what he wanted to talk through. There were some of the accomplishments, like the starting of these groups. The listing of the "Best Practices," but focusing on the issue of race at that level of seniority in the White House is just like focusing on technology. It makes a difference. When people see that the President of the United States speaks to the matter, thinks it's important on a consistent basis, it makes a difference to the clear conversations about the issue.

Riley

But the execution of this created quite a bit of controversy.

Mathews

Rodney Slater created controversy with the meeting. Help me on the other kinds of--

Riley

I'm thinking that there were a number of critics, not expressly the Slater meeting, but more of there being questions of inclusiveness and exclusiveness here. For example, the decision to invite Abigail Thernstrom to address one of the meetings. The press accounts would have us believe this was taken as a response to the concerns that the--

Mathews

No. I had the opinion--

Riley

The participants.

Mathews

Once we selected a commission that wasn't going to have people who were opposed to our views of these issues, then you knew you were going to have to do that meeting. That meeting was long in the planning.

Riley

Right.

Mathews

To get those people--Ward Connerly, Abigail Thernstrom, Stephan Thernstrom? We had them all.

Riley

And you said that once you made the decision, those people weren't going to serve here?

Mathews

You had to have the meeting, and you had to have their voice.

Riley

Right. But can I go back and ask you about the decision to exclude those voices at this stage of the composition of the committee? You made a conscious decision not to do that. Can you tell us about why you made the decision that you didn't need to have those people on the commission?

Mathews

Because we didn't want the initiative to come about affirmative action, and when you put a Ward Connerly on, or an Abigail Thernstrom, it becomes about affirmative action, not reconciliation. We were not trying to use this initiative to--we'd already been working on "Mend It, Don't End It." When you make race about affirmative action, you actually take a step backwards. It's the prism thing again. Is terrorism the right prism? Is the deficit debt the right prism? Is affirmative action? It is not the right prism. Equity with regard to education might be a much better place to start. That was a big part of that decision.

Riley

Right. And it was designed as being the next generation thinking about the questions of race anyway. Affirmative action would have been--

Mathews

Highly Asian. Asian-Americans are a big part of it, Hispanics--it was moving beyond the traditional black-white of race issues, and affirmative action was what we were attempting to do.

Riley

What level of satisfaction did you have from this experience?

Mathews

Personally? Or professionally?

Riley

Both. Can you give it a grade in terms of what it accomplished?

Mathews

REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT

Riley

Through your subsequent experience, do you see that there might have been ways that you could have fixed it or improved it? And what might have you done to--

Mathews

Define what it is before you say it, and buy into what it is before you say it. What are you trying to achieve? And have the President be a part of that definition. To do that post was just not the way to go. And I still also believe that the person I would have hired--I think Judy did an outstanding job, and I would want that on the record for history. Because the President hasn't written his book on race. That was one of the things that was going to come out.

Riley

That's my next question.

Mathews

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Riley

Not many Rhodes scholars do. [laughter]

Mathews

And others may say it was even lower. But I think it was fair in terms of the contributions that made the focus on race and that kind of stuff. I believe a one-year campaign that put a fire under the issue--you have to be careful in politics and in governing.

You wouldn't necessarily want to affiliate with Snoop Doggy Dogg, but were there ways we could have done this in a campaign for one year that really energized the nation to understand that people are not yet colorblind? If you adopted a child and sent them to the school door and that child just happened to be African-American, they're going to get tracked, even today. That still happens, it happens across the board, and it's tragic. The reality of what really happens, a good conversation about that, and a one-year campaign that energized people, not about the bad. I'm a firm believer in spending one minute on the reality so you get it, but I'm not going to beat you over the head with it. Let's move onto the next three minutes of how to solve the problem. A ratio of problem-to-solution space. I would have run a campaign around that. You asked me what I would have done differently. I would have contained it, made it more a campaign. I would have started it differently. I still to this day can't tell you why it went in the State of the Union.

Riley

And it's an interesting contrast.

Mathews

Or inauguration, whichever one.

Riley

Based on what you had said earlier about your attention to the consequences of things like the job numbers in the '92 campaign, you were very, at that point--

Mathews

This didn't come to the economic team.

Riley

I'm saying that it makes an interesting contrast because in the prior instance, you were very concerned about the consequences for governing, of making an announcement in a campaign. What you're suggesting here--

Mathews

Much less--

Riley

--is a failure to think in those terms, even in a case where the President knows he's going to have to make good on it. That if something gets slipped into his State of the Union message without, to your knowledge, a great deal of thought about its execution and what this is going to mean in terms of staffing and the possibilities for success of the enterprise, right?

Mathews

Yes.

Riley

Finally, I did want to ask you about that, because it was my impression that the President had committed at some point to writing the final report himself. And I seem to have some vague memory that something like this was done, or having seen a reference to the fact that maybe the President had done some minor version of this. Can you help me on this?

Mathews

I don't know. He was supposed to do it afterwards, but I think his book overtook this,

and I just don't think it's going to happen. Chris was going to help him. That's still being set up. Riley: Originally it was designed to occur--

Mathews

As a response to the report that the commission gave us, his thoughts about the response and recommendations that they had given.

Riley

So you get through that. That takes a lot of time in '97. And by the time you get to the fall of '97, then we're to the Fourteen Pillars?

Mathews

Yes.

Riley

And were you intimately involved in the--was it fourteen?

Mathews

Twelve or fourteen.

Beckenstein

Fourteen.

Mathews

It was fourteen because we hadn't combined a couple. The Pillars Project I designed as preparation for the State of the Union and the budget process.

Beckenstein

For '98?

Mathews

Yes. And being a management consultant, which some people complained about, process and this sort of thing--I'm going to take a strategic approach to what is it we have to and want to accomplish in the rest of the administration. "Accomplish" had different definitions. Because actually bringing up an issue and failing could be an accomplishment with regard to moving your agenda forward. So we created 14 different policy areas. In that policy area, there was a template given so that this could be a document, a comparison--the whole point was the President and Vice President were going to take this on their vacations in August. They were going to come back and have a meeting with us and give us guidance that would be relevant for both the budget and the State of the Union.

Everybody's fighting. Sandy Berger thinks this is ridiculous. This is not any way to make policy. This is stupid management consultant stuff. So everybody's fighting the process. And you were supposed to write down, what's the policy issue? What is it you'd hope to achieve? What are the barriers and potential timing issues so that you could get a little bit of the sequencing in it? That's how the document was structured, and everybody had to have their stuff in and did it, and we produced the book.

Then we have this meeting with the President and the Vice President. For them, it was putting it all in one place. They gave you good guidance. They were good about saying, "You have too much emphasis on this, and not enough emphasis on that." It became a guiding thing that helped with both the budget and the State of the Union for that year. But I don't know that it was done. We didn't do it the second time. Hopefully, we're continuing to build off it. I'll probably want us to go back to it again in the next year and see how we were doing and what would change, and have people update and refresh. People don't have time to do those kinds of things.

But it did exist, and I hope that it guided what we did in that budget session, putting that budget together in that State of the Union. That year, I'm running the State of the Union, which comes together with your budget rollout. What announcements you do, what initiatives you do. It starts around Christmastime, when there's dead news time. You're letting things leak out at different points, giving things to reporters. Some of it will be in the State of the Union.

What are you keeping as your signature, things in the State of the Union? What are things that you want to preview before the State of the Union? Similarly with the budget. The State of the Union and the budget are viewed together. You're managing this whole process of making sure that the President's initiatives are ready. The State of the Union has all kinds of parts to it. It has the speech itself, which is led by the speechwriters. But then the national security piece--Sandy Berger has got to have his part in shaping, reading--the economic part. Bob Rubin, Secretary of the Treasury, he's got to read it too.

You're starting this process, and I'm managing it, working with Don Baer, our Director of Communications. When do you need what? Corralling Gene. "Gene, you've got to have this by then." Getting it moving, pushing it forward. You had to do everything. You have to decide who's going to be in the FLOTUS [First Lady of the United States] box. Because you're going to use those people to support.

What's the Cabinet Secretary--another place that reported to me--doing for the rollout? Are we going to send all the Cabinet Secretaries out on one message, or different messages? Are we going to cover half the country and do two days? Or are we going to do one? What are we doing with regard to communications? Let's see what new, innovative ideas you do with Internet technology. Are we going to do briefings that day with regional newspapers? There are a zillion and one pieces coming together to make this thing a reality and roll it out. And this was one of my responsibilities. In this particular year--

Riley

You hit a bump.

Mathews

We hit a bump.

Riley

I want to ask one or two more questions about the Pillars enterprise. You knew what the 14 categories were? Or did you start out by gathering all the information and then organizing in 14 Pillars because that seemed to be the best way to organize what you were taking out of the matter?

Mathews

I just put them down and made sure--I probably talked about them with John and Erskine and Gene to make sure that we covered everything. International trade--I can't remember how we did that one. But there were 14. And there's a book that has them, and has a little drawing of the Pillar.

Riley

We'll look for it then, when the records are ultimately released.

Mathews

It's one of the few places where it's all written down.

Riley

Were there any other questions that you guys had about '97 before we get onto '98?

Beckenstein

Were you involved in dealing with the Asian crisis starting in July?

Mathews

No. Just as it came into the White House.

Beckenstein

Treasury's dealing with it?

Mathews

Treasury was dealing with it. I'd hear reports on it in the meetings and wished Bob and the team well.

Riley

When did Bob leave, '98? How long did Summers have? Two years?

Mathews

Can't remember. Sorry.

Riley

OK. We get to '98. You're working on the State of the Union message, and then the Washington Post has this report that Matt Drudge has been circulating for a few days. Were you aware of what Drudge was up to at the time?

Mathews

No. The first I hear about it is the night before it's going to appear in the Post. I come back from a fundraiser at the Corcoran. I went with the President. I'm not sure why I needed to go. But for some reason, there was something about that fundraiser that one of us needed to go. I told John I would go. John had political, so that would generally fall into his bailiwick. I'm not exactly sure what it was or why, but I went. You change in your office, put on a black tie. You walk across the street and get there five minutes before it starts. I come back, and it's about 9:00 or 9:30 and John's still there. I walk into his office and he said, "We have a problem." And he explained to me what was going to appear in the paper the next day. That's the first I hear of it.

Riley

Do you remember your immediate reactions?

Mathews

Do you think this is real? Do we have a real problem?

Riley

And he thinks yes?

Mathews

He doesn't know.

Riley

Oh.

Mathews

We obviously have a short-term problem. The question is: Is there a long-term problem? He couldn't tell.

Riley

You indicated earlier that you had a meeting with the President?

Mathews

That's the next morning.

Riley

You come back in the office the next morning and this has been on the front page of the Post.

Mathews

Right.

Riley

Can you track us through what happens that day?

Mathews

Just ask the President and Ken Starr. I think this is the beginning of the Starr Report. It probably has the best record because it has both Erskine and John's testimony on this. What happened was they had Erskine and John's testimony, so they didn't get mine. I think their record will probably stand on that.

Riley

Do you have any specific recollections that you want to add about that day? We're mostly interested in what it was like to be in the White House at this time. How this is affecting people's abilities to get their jobs done?

Mathews

Obviously, people are concerned and want to know what's what. They're also defending the President. Erskine that day just says, "John, will you work on this problem? Try to keep it steady state and not make it bigger than it is. Define what we're trying to do." The big deal question is: Is the President going to talk about it in the State of the Union or not? That's not really the issue. You take a few words out and you plug that in, if that's what you're going to do, keeping everybody's eye on the real ball.

The President practiced the State of the Union earlier than he ever practiced it. We finished the State of the Union earlier than we'd ever finished it. We were so far ahead of the game that we actually printed the State of the Union that we handed out in the session on legal paper so you'd have fewer page turns, because you can hear them. Double-sided, long page turns. The evening news had quotes from the speech. One of the first times we've been able to get approved quotes out. [laughter]

We had had press conferences, press briefings in the places where all the people sitting in the First Lady's box were. So we were driving news coverage there. That was not the first year that we did. I did a live Internet interview, the post-State of the Union. First time we'd done Internet. Web-based interviews. All that was the best performance that we'd had with regard to a State of the Union. Being ahead of the game, being calm. Going through it. And that was so much driven by him. He was just focused on the business at hand, and not on these other matters.

Riley

Was there serious attention given to the possibility of having him address this in that first State of the Union?

Mathews

I don't think it would be serious. But everybody was asking, "Is he going to say something? Is he going to kill the story?" Use this as an opportunity to kill the story--that's what some might have argued.

Riley

I want to ask you a speculative question. there have been some observers--mostly press observers--who have said that if the President had come out that first week and admitted to what he ultimately admitted to and basically asked for forgiveness, that this would have short-circuited a lot of what happened over a period of a subsequent year or so. Does that resonate with you, given what you know about Washington politics? In retrospect, would that have been a good idea?

Mathews

I think so. In most situations that I've been in in Washington, D.C., the best thing to do is as quickly as possible get it out. It's like food poisoning. [laughter]

Riley

John is taking this part of the portfolio, the damage control for Lewinsky. Is everything else is on your plate?

Mathews

Oh no. We continued with our existing roles. But the Africa trip becomes my trip, which happens in--are we in '98 now?

Riley

Yes, we're in '98.

Knott

That sounds right.

Riley

I thought it was earlier than that, actually.

Mathews

Is it '97?

Riley

Because one of the Africa trips--isn't that where he--

Mathews

No. We know about Lewinsky when we're in Africa.

[Pause in tape, participants flipping through pages to locate answer]

Riley

Over in Ireland.

Mathews

Maybe it is '97.

Riley

What I remember is the pictures of it.

Mathews

OK. I think it's that year. The drums.

Riley

Hidden with the drums. And I thought that was related to the suit of the judge.

Mathews

Paula Jones. In terms of big things, you're spending your time on the day-to-day in the White House. There's something going wrong. If someone's parked a car and has slit their wrists outside the White House gate--those kinds of things, literally. All the day-to-day events and things that keep a Presidency going. And "Save Social Security First." How many meetings did we have to get that right? The importance of that issue.

All those things are going on, but the Africa trip was a huge thing with regard to my time. It was the first time a President had been to that many countries. We did something we never did on another trip. We took an entire plane of people, an entire delegation. Then you have everybody in the country wanting to be on that delegation. [laughter]

Riley

And you were responsible for saying yes and no?

Mathews

Absolutely. "Mrs. Clinton and the President, I'm really sorry. You'll have to talk to Sylvia Mathews about that." [laughter]

Riley

Who gave you hard times about not being on the plane?

Mathews

I won't mention those names, but some people gave me very hard times. It was an incredible trip. The question of what you're going to do in Rwanda with regard to the genocide, how you're going to respond to that. The fact that you're going to go to Rwanda. Secret Service doesn't want you to go to Rwanda--very bad idea, still very dangerous. We end up doing an event at the airport because Clinton very much wants to do it.

The back and forth to get the trip ready. All the briefings, the policy stuff, the politics, in terms of the people who are coming. You're going to Gor?e Island? Are you going to apologize for slavery? You're going to a place where, even if you use every telephone line in all of Uganda, the White House press corps can't file. How are you going to resolve the issues like that? You have a press corps like you've never had. It's not the White House press corps. Walter Isaacson, head of Time, is on the trip. Maureen Dowd is on the trip. Not your White House reporters. Johnny Apple is on the trip.

It's one of the biggest things we've ever done. We made the decisions to get to the Sahara to see the micro-credit site that we need to see. It's going to take 15 of this kind of helicopters. What's that going to look like from a cost perspective? Is there any other way to do it? And managing down to that level of detail. So you have a substantive trip that's about this country's commitment to the continent of Africa. The trip promotes the African Growth and Opportunity Act. We want to have an economic element that's supportive of our economic element, supporting the race initiative, because while it's not a black-and-white issue, certainly that is part of the root of the issue.

There were places with corruption and different kinds of leaders. Are you going to go to those countries? What are you going to say and how do you pick that? There are a lot of national security issues, press issues, and politics issues. Who's going to get to go and who doesn't? Is Reverend [Jesse] Jackson on the trip? What does that mean, if you have him on the trip, in terms of a personality and a figure?

Beckenstein

Did he go?

Mathews

Yes he did. But, you can imagine. Then the delegation plane has to have an emergency landing in Ghana. The guy I sent on the plane is on the phone with me. He's saying, "We've got a problem, Sylvia. We had to land. There's a mechanical difficulty on the flight. I've got Members of Congress, Bob Johnson, the Head of BET [Black Entertainment Television], Reverend Jackson.

Beckenstein

Welcome to Ghana.

Mathews

So those kinds of things are the kinds of things that you spend your time on.

Riley

And you're negotiating with a huge number of departments in the government at this point?

Mathews

Goodness gracious. And of course, they all want to go.

Riley

Sure.

Mathews

I guess [Mike] Espy wasn't there at that time. But who gets to go? Does Alexis get to go? Do we need a Secretary of Labor on the trip? There were all of those kinds of questions. The race initiative people, do any of them get to go? Down to people like Cheryl Mills, who at that time is a very senior person in White House Counsel. We assign her to do advance for one of the legs so she would be part of the trip. You have to consider those kinds of things in the morale of an internal organization when it's the first of these trips. It had never happened before to this magnitude.

Riley

How would you grade that entire episode?

Mathews

That one, I'd give myself an A.

Riley

I thought I would hear that. What part, or what parts, of the trip did you think, Boy, we really hit a home run with this one?

 

Mathews: Gor?e Island. The Gate of No Return.

Knott

Where is that?

Mathews

Senegal. It's where the slaves launched from. And the photos of the President and the Gate. [Nelson] Mandela and Clinton on Robin Island at the prison. Uganda actually was a home run, because we only had a couple of pencils, in terms of the reporters. But to this day it will still send chills when I think about hearing--it was like this for many people. Being in the same room with these people and hearing them tell what happened.

And what it was like in Rwanda. Between the Tutsi, and the Hutus and the machetes--in Uganda we did schools. That was a fabulous event because it was all these little girls. You can still probably remember that picture of Clinton walking with these little girls in pink dresses, holding their hands, just swinging? The trip, in terms of the photo images, showed substantive images about an Africa of hope. Not an Africa of destitute, poor, dying people, but a place where there have been hard times. There's recognition of the challenges, but a hopeful place.

Riley

I'd guess that, given everything that's going on in Washington at the time, that there must have been something restorative in the President's psychology about being out?

Mathews

Oh, there was. March 23, an 11-day trip to six African nations. First time a President has visited the region in more than 20 years. The first time a President had done that many countries ever.

Riley

So this is?

Mathews

In '98.

Riley

This is two months after the Washington Post first reports. My question was more about observations. This occurs at a very difficult time for the President. I'd guess these trips must have had great impact on him in terms of his own psychology?

Mathews

I think it was a special trip for him because he realized the importance. This is one of the times when it makes such a difference because you're President of the United States. The fact that you had that many people in Ghana--500,000 people about to cave in on us--a lot of that may be related to him and his personality. [laughter]

So much of the messaging coming out about it was about the fact that we, the United States, that big country, was really focused on the continent, was hopeful, and wanted to be partners in different ways. That was something he appreciated and felt. And the other thing is that he felt the crowds. We would fly into another country and the streets would be lined with hundreds and thousands of people on your way from the airport in. The 500,000 people in Ghana was one of the most amazing things I've ever seen.

Riley

Wow.

Mathews

Part of the tribal stuff still exists. So you're sitting on stage with a number of gentlemen in tribal outfits that involve lots of feathers and skins, and that sort of thing in some of the hottest weather I've ever seen. The Secret Service were soaked through. I felt so bad for those guys. People are passing out. We're tossing water bottles because we have water. It's the only time we've ever seen the press corps be totally empathetic. They're saying, "Oh my God. Take our water." [laughter]

They're focused on trying to help these people. And then all these people press forward. It's the only time I saw the Secret Service ever get nervous. I rarely would go when he was doing a rope line because there was no need to. Often Bruce Lindsey would go, which was great. Bruce was always fabulous. So I went. But I could tell that it was not looking so good. People were getting a little tense because the crowd was moving forward.

It's hot, people pass out. You could tell the Service was getting nervous because the metal barricades were coming down. Tons of people were pushing in and the Service is trying to push them back up and keep the President in. He's working the crowd in a very small space. [laughter] It was a smaller space than he might have wanted, but it was fine.

Riley

Why don't we stop here for today? We're going to start at 8:30 tomorrow morning, and we'll run until 11:30.

Mathews

Is there a different approach we need to take? Or are there things that we're not getting that you all feel that we need to get?

Knott

I think it's going very well. I don't have any suggestions to make.

Beckenstein

There are just a couple of economic crises I would like to have gone into more.

Riley

I'd be happy to go back to those tomorrow.

Beckenstein

And I think the next phase is going to allow us to see the continuum of the Clinton Presidency because of the evolution of your role, and Lou's role at OMB. So I think that'll be a nice leverage point to draw some things together.

Mathews

We shouldn't leave out the regulatory part of OMB, which was a very important part of the last year.

Riley

The first thing that I'll do when we start off in the morning is ask you if, upon reflection, there are some things that you feel like we ought to get out of the way.

[BREAK]

October 29, 2004

Riley

One of the first things that we typically do at the beginning of the second day is ask whether there was anything that you felt we'd forgotten to deal with yesterday. We'll go back and pick up those loose ends.

Mathews

The only thing up to this point in terms of the Deputy Chief of Staff--you have to go back and align the timing. But Save Social Security First was a very important part of the administration, following this theme that starts with the prism of deficit reduction. You know you're going to have a surplus. What do you do with it? There were many, many meetings. There was a core group that was basically the economic team.

I can't actually remember which role I was in most of those meetings. You'll have to go back and align. But it's an important point from the perspective of the history of making the decision about what you're going to do with the surplus. Are you going to spend it? And there are the questions of the "lock box" and questions of the Congress voting on legislation, in terms of how to count those things. Actually at that time they all said, "No, you can't spend any Social Security money. We're going to pass laws and do that." It's all going toward--the deficit number we have is net of Social Security input.

There's the question of the deficit and the history of deficit spending for a Democrat or a Republican in the Congress at that time, and Ross Perot getting us off to the races. In terms of thinking about thematic things that change over time? Right now it's not even on the radar screen. It was an important decision. What do you do with it? How do you do it? Then once you start doing it, we were in a virtuous sort of period, a spiral that led to more and more money. We were paying down the debt. Once you got into that, there becomes the question of, "What happens if there's no government debt?" Because it is one of the safest investments that you could make.

All of a sudden we started creating new worlds. Once you see the numbers for '98, you start to know that you are going to have surplus. You're going to have it in '99, and you're going to have it in 2000. And you're starting to pay down the debt. At the rate you're going, you can do the modeling and see that there would come a point in time where, are you going to continue issuance of certain government debt in terms of fixed incomes?

Beckenstein

I always characterize that as a silly conjecture because we had a huge amount of debt still. The idea that nothing was going to happen? Why did we need to look that far forward when the demographics and Social Security were going to be difficult down the line? I never really understood that.

Mathews

This is hard because I don't remember the numbers and I don't have anything in front of me. It actually would have happened before 2013, the cross-over point.

Riley

Given the models that you're using in terms of growth.

Mathews

Given the models and the numbers that we were working on.

Beckenstein

We can debate that, but--

Mathews

It could happen.

Beckenstein

But the issue is what you guys were thinking.

Mathews

You can debate it. But you know you ought to plan if you're going to win Iraq fast. And you ought to plan if the economy can be healthy enough that you wouldn't be able to issue government debt, because it is an entity that has been a part of our economic system for an incredibly long time. So the question of planning when you are in the executive branch for things that there may not be a high percentage of but could dramatically change the way something works or doesn't work is a responsibility, even when you're in the moment of being "in-box driven," when what you're concerned about is the vote in Congress about what you're going to do, how we're going to deal with the surplus in this year.

To not think about those questions, to not think about the 2013 crossover point for Social Security, in and out--to not think about this potential is irresponsible. You're right. Was there an incredibly high likelihood? Possibly not. But to not at least have spent the time as you're busy taking the decision, if what you're going to do with all surplus is pay down--in my mind, that's irresponsible policy making.

Beckenstein

If you did the annuity planning on Social Security, there wasn't any chance we were leaving enough money aside for that?

Mathews

When you say, "the annuity planning"?

Beckenstein

If you had the projections, like an insurance company. If you did the annuity planning, and set up the proper funds to pay for future obligations and Social Security, we still weren't putting enough money away to take care of that in a way an insurance company would be.

[Jim Young returns]

Mathews

But the question is issuance of debt, right? That's the question when you talk--

Beckenstein

But they're related.

Mathews

But when you talk about the issuance of 30-year debt, at the time that you're going to be moving along from the point of 20, you're right. You'd start to reissue. So 2013, let's just say we had a great year economically. And you end up just making it. In 2014, you might choose to pay your Social Security. But we didn't know. We actually don't know right now. Is the way you're going to pay Social Security in 2014 through issuance of debt? Is that what you're going to do? Or are you going to realign benefits? Are you going to raise taxes? Any number of alternatives could result in a world where you wouldn't reissue your debt. The question that you had to at least start putting on the radar screen was thinking in a new world where, what if you weren't issuing 30-year Treasury securities?

Beckenstein

We're not anymore.

Mathews

Right. What happens if you weren't issuing tens? What happens if you're not issuing fives? So we didn't. Once you'd started thinking you're not going to issue the 30-years--but thinking about your debt issuance and at least having a thought about where everybody goes if they want to secure investment.

So I agree with you. The question of the likelihood is a very tough thing. But having said that, we were trying to be responsible about the other thing; you didn't exactly know what would happen in the marketplace when you took the 30-year off. You couldn't predict these things. We couldn't predict what would happen with our inflation bonds that we put out on the market and whether those would be successful tools.

Beckenstein

The TIPS [Treasury Inflation-Protected Securities]?

Mathews

At the time TIPS first came, they weren't taken up that quickly.

Beckenstein

Right.

Mathews

TIPS have become more successful over time. So all these questions around bond issuance, debt issuance, I agree with you. There are questions of likelihood and that sort of thing. But it's like planning for bioterrorism. Is it going to happen tomorrow? Goodness gracious, I hope not. And if you ask me to bet my money, I'd say, "No, not tomorrow." But I don't want a country where smallpox is going to spread on the six planes I'm going to be on between now and whenever.

It's similar with debts. Contagion. Debt issuance and that sort of thing, you've got to think about it, and people don't. That's one of the biggest dangers. On the economic half of the team you've always had your drawing. Everybody focuses on national security and the national security drawing that shows high risk, low risk, bad results, and not-so-bad results. And so we think about our national security policy. We've always thought about nuclear weapons and nuclear deterrents that way, but we don't tend to think about long-term things in economics. Is nonissuance of government debt a nuclear weapon? No. But on the spectrum of likelihood--that's why we thought about it.

Young

Who raised the issues?

Mathews

Treasury.

Beckenstein

Was Treasury under Summers? Or was it still Rubin?

Mathews

We were starting under Rubin. But of course it became more of a reality under Larry because as I recall, it was the 30-year that went under Larry. I may have my timing wrong, but I think we stopped issuing the 30 under Larry.

Riley

I want to pose a related question about the consideration of tax cuts in these conversations. There are a number of things that you can do with the money at this stage. And of course the big concern early on was that the Republicans would take it and use it as an excuse for massive tax cuts.

Mathews

That's right.

Riley

Do you have any recollections about the internal discussions about the dynamics of tax cuts and whether you were just going to say, "No, we can't do any tax cuts." Or "Are we going to do a little bit as an inoculation against a larger problem?"

Mathews

That was the conversation--whether or not you're going to do some to inoculate, to give your Democrats a place to go with regard to the vote that they were going to have to take. And why I even brought up this idea of we have all this debt, so why not start to take care of it? Isn't it important to take care of, especially to your point, when you're going to face a slew of potential debt in terms of your existing commitments on the books, your liabilities? We did have to think it through, and that was part of the solution. I guess in the end we did put together a package that did have some tax cuts. I'm pretty sure.

Riley

Can you tell us a little bit about the internal positioning of various people in the administration on this point? Were there those you could identify who were consistently arguing, "No, we've got to be more aggressive on the tax-cutting end. So could you help us?"

Mathews

No. The reason you can't identify is because we were all trying to get to the right solution space. People weren't hardened in their positions. There was a general sense that probably what was right was a mix--debt reduction, some tax relief, and some spending related to it.

If you asked what was right--but again, what I said yesterday with regard to the question, "OK, that's really nice that that's right, but is that viable?" In the world, can you achieve what's most viable?" And that's what that leads to. The Congress is pushing so hard for this separation between the Social Security money and the regular money. And we can't understand it in the sense that for years, it's always been this way. Like the phone call I described to Larry Summers in 1988 to make sure I understood the deficit. Either net of Social Security input, or not. It had always been that way.

All of a sudden, the Congress sees this as its panacea. It sees it as a third-rail issue, Social Security. Both Republicans and Democrats, I think, saw it as an opportunity to say, "We're protecting Social Security." We're not going to take the hard question of what you do about benefits. What do you do about taxes in the long term to pay for it? But this is at least a step we can take. You say, "We're not going to touch those monies." And the truth is, is if you don't touch those monies, indirectly, it's the same thing as what we were doing.

If you do debt payments down, you've created, hopefully, a little better space. When you come to that point, if you had to issue debt again, you weren't issuing it, and your interest payments weren't going to be as high. You're getting pushed hard by that and what that does to your numbers. Once that's going to be the law and the way Congress is going to view it, then the amount of money you have to do anything with becomes very small. Because the majority--it may have been all--of the surplus was Social Security-based. Even if it wasn't all of it, it was close enough so that you weren't going to have a lot of money left over.

Riley

Do you recall whether the President was, at least internally, with the staff laying down markers about where he wanted to be positioned on this? Did he say at the outset, "We've got to have some tax relief to go with this"? Or was most of this staff-driven?

Mathews

As I recall, he understood that to make it politically viable you would need tax relief. But at this point, what happens six or seven years in? Everybody around the table had been there for six, seven years. You had no new players except Larry Stein. Maybe Chuck [Brain] was around then. But most of the players had been there, so there were daily conversations between the Office of the Chief of Staff and the President, keeping them posted.

There were memos telling him about NEC meetings every once in a while. That's how you'd get his input. He was engaged in trying to find the right substantive mix, knowing that you were going to do another budget soon. You're also going to be in a budget negotiation. But also what is politically viable that he could understand and see--his awareness, understanding, and appreciation of members of our own party's pressures with regard to these issues was very real and acute.

When you're taking the issues, framing them for him, there are only so many moving pieces. And they're the same moving pieces basically that you've been working with since year one and that meeting in January. You've got deficit, taxes, and spending. And they're the same three moving pieces. The dimensions of the politics haven't changed that much. The Democratic party is defined still, at this point, by spending, and the Republican party is defined by tax cuts. How do you make that work in a context of a surplus world?

Riley

I'm trying to recall when Bob Rubin went up. Do you remember?

Mathews

I think Bob is there for Save Social Security First. The announcement, I think in the '98 State of the Union, is that --

Riley

I think you're probably right.

Beckenstein

Larry was in two years, right?

Riley

Within two years.

Mathews

In the spring of '98, I think, is when Bob leaves--

Beckenstein

That's about right.

Riley

I wanted to raise a more general question about--

Mathews

The other thing that historically--the deal had been cut long before. Larry was going to be Treasury Secretary and five people knew it. It was a definitive decision that the President and Vice President were both part of, and a very small group of people knew. It was all part of a deal, and I'm trying to remember what drove the deal. Was it the second administration? I can't remember what was the driving thing--Larry leaving? Or was there a Fed seat or--something led to your having to know what was going to happen.

Riley

Another option for Larry?

Mathews

I can't remember if it was another option for Larry or Bob staying. The deal is cut under these terms, that Larry will be Secretary of Treasury if Bob chooses to leave. So Larry signed up for a situation of unknown--

Beckenstein

This goes way back. But the folklore was that Gore blocked Larry having a more significant role in the very beginning, in the first administration, allegedly due to the famous Summers memorandum and other things. Is there much substance to that?

Mathews

The memo was a problem. Gene and I have been on the inside, and we both know Larry well--Gene even more than I do. So the memo is coming up. I actually didn't know about the memo during the whole campaign. I hadn't known about it, but it becomes very important in the environmental community, his pressuring Gore with regard to this issue. Now the question of what job Larry Summers got? If you look at the job he got? He was a head of OASIA, Office of the Assistant Secretary for International Affairs.

Beckenstein

Isn't he a Deputy Secretary at that point? [laughter]

Mathews

The Office of the Assistant Secretary for International Affairs. OASIA. That was a huge job under any circumstances. So while the memo came up and was a problem, in the end it didn't block him from getting the job he was going to get.

Young

Well, he might have been CEA head or even NEC head, right?

Mathews

No.

Young

He wouldn't have been the process guy for NEC?

Mathews

No. He's not the process guy for NEC. The head of the CEA in terms of balancing the team? He probably wouldn't have been the right person to balance the team that way. When you look back and see Panetta, Tyson, Rubin and Bentsen, it's an incredible balancing in many different ways. I remember the conversations around CEA. You're right. Larry was considered. But was that going to happen? I don't think it was going to happen there. It would not have been the place where Larry could have been most effective. That would have been a bad job. I don't think at that point I was thinking, That would be a bad job for my friend Larry, to be head of CEA. [laughter] That was certainly not what I was thinking. But now, with hindsight, I would definitely say that.

Beckenstein

Definitely.

Mathews

He wouldn't have been Treasury Secretary. And who knows if he would have been President of Harvard had he gone the CEA route? He might have because CEA would have flipped him back into an academic probably more quickly. But CEA would not necessarily have flipped him up in an administration context.

Young

So essentially, the path probably wasn't affected?

Mathews

It could have been, but no.

Young

The ultimate path wasn't affected by the memorandum.

Mathews

No, but it was a problem. But your point of was it a problem? Yes. OK. Now we can jump in. Sorry. It's just the Social Security First. And again, the debt and the deficit. It's something that's a huge deal when you think about a President's most important fiscal lever. What are his fiscal levers? Taxes? Spending? And this, the result of it.

There's also the promotion of fair trade and that sort of thing. If you're closing your markets, that's another place, economically, that you can end up having great effect. Then it's about the full strategy. What do most people think is one of the biggest solutions to outsourcing? Having just been from a corporate board meeting, they say, "It's different. Outsourcing is when we don't do it ourselves." [laughter] It's very funny that we have all come to misuse the word from a traditional perspective of a business.

Young

True.

Mathews

The off-shoring. Education investment. One of the things you record is a $1 billion package for Federal spending, even though it's only 10 percent of the total. When you start leading with the Federal, pushing that hard, you start sending a signal.

Beckenstein

I'd like to get into some questions on the fast track issue. But that could wait if you want to move into OMB first.

Mathews

Should we do fast track?

Riley

If you wish, go ahead.

Mathews

Let's do it.

Beckenstein

All right. So the question is, "What was the White House view of the politics of fast track?"

Mathews

You know what? It actually was the substance of fast track. We wanted it, we needed it. And the question is how do you get it? I think until the very end we thought we'd get it. Beckenstein: But given that it was readily given to Bush later, did the White House see this as Republicans making some kind of special case out of Clinton, or were they really resistant on policy grounds about the idea?

Mathews

I think it was about Clinton and not giving Clinton authority. We had put together the coalition, but Republicans did not--it was so easy the next time. Right now, Tom Delay has to break a few knees to keep it 100 percent and to get the votes passed for the President, and he does that time and time again. It wasn't as if he had to get them all, because we did have Democrats supporting it. This isn't one where you had to have 100 percent of your party, which you didn't.

Beckenstein

You had the NAFTA coalition, which was largely with Republicans.

Mathews

We had Republicans. We had the business community. But they didn't do it with rigor or effort because you see how easy it is later. How could it have been so easy later? It's not like the numbers were that different.

Beckenstein

Was the President frustrated by this?

Mathews

I guess. Because here we are--Democrats pushing for fair trade. We're in a new place. Everybody's talking about partisanship and people being straight party line. We're going against the base of our party and huge funding elements of our party. We're trying to do what's right here. And can we get a little bit of help? It's not even like there's an agreement out there. I mean it's not as if there's a huge controversial one. You know--Chile, Jordan, Africa Growth and Opportunity Act.

Are we talking about a NAFTA? No-o-o-o! It's not like there was a big NAFTA looming. So it was a frustrating experience. It was one that took everybody. Everybody's making the calls. Did you have relationships with X? Do you have relationships with Y? Sylvia, you're from West Virginia with Rockefeller. It was an "all hands on deck" effort, and we didn't get it.

Beckenstein

Within the administration, were there people who really didn't want the President to do this, given the traditional base?

Mathews

No. The only question I can't remember at this time is the sequencing. You got fast track, and you've got two or three other issues at this point, too.

Riley

Do you remember where you were to give us a sense of--

Mathews

Which job I was in?

Riley

Yes.

Mathews

No, I'm sorry. It's an amazing thing because I'm in the same meetings. And my life changes in terms of responsibility. But the White House interaction and the big core White House issues? It doesn't really change a lot.

Riley

No, but I think that's important evidence, too. We talked a bit about this with respect to Rubin--that there were changes of titles. And in some respects, the informal roles that he's providing in the administration don't really change that much. It seems to me that there's a lot of that going on.

Mathews

Yes. When you look at the core group that started in 1993, the people who were around the table at the end, literally, were eight-year people. Jack Lew started a month in. Gene, me, Larry Summers, Podesta--it was a group of people who had been there so long and so together that there was a rhythm.

That's not to say there weren't problems. One thing to record for history on the "Who took the Social Security?" thing. You know who was going to run it? Gene or Larry? This gets back to the old Treasury thing and the NEC. In the end, it stayed with NEC. Certainly Larry had this role of "co" whatever. But place is a lot of something. The meetings were at the NEC, in Gene's office, at the White House. And Larry had responsibilities for producing parts. But still, that was a conflict.

Young

But as I understand it, getting back to Russell's question, is that for all the personnel changes and the musical chairs, there was a core of continuity on the policy side?

Mathews

Incredible.

Young

Throughout. That's very important because when you see all these shifts--

Mathews

And it wasn't just with us.

Young

And the outward appearance as well; there's a change here.

Mathews

No.

Young

There wasn't all that much of a change.

Mathews

When I was sitting at Treasury, I wasn't negotiating with the Congress. But with regard to my ability to understand President Clinton's views on X, Y, or Z, there was incredible continuity and the ability to play. I'd been on the APEC trip--Bob didn't go. This was when we were at Treasury, maybe? Or maybe it was when we were still at the NEC. But this is the Philippines. The Fed comes out and moves rates, does something. I'm the person who walks in and briefs the President on the Fed.

Young

When was this?

Mathews

It's APEC Philippines. That's how you would know the date.

Riley

I don't think it's going to be in there.

Young

It's not.

Mathews

But because of the roles that you played at different times? I was on that trip helping on the business side. Basically, Bob had loaned me to Erskine because he was Deputy Chief of Staff and it was his trip. It was a complicated trip with a lot of business elements and deals. Podesta was doing parts of the deals, and I was doing other parts. I was the person there. Bob just called and said, "Fed moved today. Here's why. Here's what we think is happening. You need to go and tell the President. Warren Christopher's briefing on the Chinese." The point being that you've done so many things.

Even if I were at OMB and something happened and I needed to take that role, or Gene or any of us--Larry? I wouldn't have been worried if at some point Larry Summers had to carry an OMB piece of whatever--except if it had to do with the Treasury budget. Then I wouldn't want Larry to do it. [laughter]

Riley

I think that's striking though, because one of the things that we encounter when we're trying to get an understanding of the administration is that a fairly large number of people are engaged in musical chairs. If somebody asked me Sylvia's position in the administration? [laughter] Well, this, and this, and this, and this. Chris Jennings is an example of somebody who had a very straightforward portfolio but was in a number of different positions.

Young

In other words, the titles don't give you the right clue as to the functions or roles people were performing.

Beckenstein

There are dual roles, aren't there?

Mathews

Yes.

Beckenstein

So you have a specific role? Dual role or triple?

Mathews

You take on your core responsibility, but you might have something that's related to your experience.

Beckenstein

We might be jumping the gun here, but going back to where you started yesterday, which was Clinton's view, seeing things as a continuum. The team had to have this continuum framework as well. And therefore you could trust it, couldn't you?

Mathews

Yes. You basically knew what you were doing because of that. You could answer a lot of questions because if you think about something from start to finish--a lot of times, not always--you could answer a lot of questions that way. Or at least give yourself the area you should be thinking about with regard to a policy mend.

Young

I wondered if there was something about OMB you mentioned, or whether we're going to go to the big picture?

Riley

No. We haven't even gotten to OMB, which is what I was about to do.

Beckenstein

We should do OMB.

Young

Let's not forget the big picture, that's all.

Riley

All right. The first thing I wanted to do was to see--because we had gotten into '98 with your Deputy Chief of Staff position. We'd talked a little bit about the original elements of the Lewinsky business, and we had talked about the Africa trip, which was a big item. But I'm wondering if there was anything else in your time as Deputy Chief that we ought to park on before we get beyond that. You were nominated in May of that year, so we're not talking about much time. The Africa trip was in March.

Mathews

Not a lot of time. What happens is Frank goes to Fannie Mae. Jack is moving up. I'll admit I was frustrated in the Deputy Chief of Staff job.

Riley

Why was that?

Mathews

Highly transactional. I probably was frustrated by the race initiative. I kept thinking, Can we get clarity? Can we decide what we're doing? Can we do it?

Riley

You're doing a lot of logistical work?

Mathews

Yes. I was doing lots of those kinds of things. It was certainly a wonderful experience. You get to travel with the President and that sort of thing. But because your portfolio's so disparate and wide, you're very much a catcher's mitt kind of person, making sure it's all working for everybody.

The job as Deputy Chief of Staffer, as I saw it, was really twofold. One: to make sure the President is getting the level of quality and substance in the areas related to you to do what he needs to do well. Two: for those people in your bailiwick--it's not like reporting structures, but they're in your watching world--to help those people have the tools they need to succeed. Sometimes that's access to the President, sometimes that's backing against a Cabinet member. Sometimes that's access to someone else within the White House. That's your job.

I was frustrated with some of the players. "Boy, oh boy, I'm tired," [laughter] and starting to have those thoughts again, which you tend to have.

Riley

Well, you've been talking about looking for a position with some line responsibilities.

Mathews

Which is what I had thought that maybe I should reexamine that and move out to a department and get to do straight substance again. That was one of the criticisms for me as Deputy Chief of Staff. Would I be a political enough player? In the end, having worked on campaigns and everything, I think it turned out OK. I'm plenty political if I have to be. But if I had my druthers, I'd always go towards the substance end of things.

Riley

Can I press you on one other question? Is it fair to say that the Lewinsky business also contributed to your sense of frustration with the White House?

Mathews

No. There were players who really were frustrated. It was what it was. I did not feel bad speaking publicly. You had to make your choice. You had to make peace with yourself. It's like anything else in life. I had made peace with the fact that there's clearly a problem here. But how did that relate to why I was there? I was there because I felt this guy was leading the country in the direction that I felt we ought to go, and had incredibly strong leadership to do it. He knows I disagreed with those actions very much. There's no question about that. So you make your decisions. You have to be willing to be at peace because you're going to be asked by everybody, whether it's at the dinner table or in groups of 500 when you're speaking. No matter if you're speaking about straight economic issues, that question will always be asked. TV appearances, anything you're going to do, you're always going to be asked that question. I was at peace, and that was not a problem.

Was I saddened by it? Yes. At that point, I'd traveled a lot with Mrs. Clinton and Chelsea [Clinton]. I'd gotten to know Chelsea. I was saddened from that perspective. I wish it hadn't happened because I believe professionally we probably could have achieved more. This whole second administration thing and what people do and don't? Because man! [claps hands] After it happened, as I said, we worked with the Congress hand in glove.

We became much more powerful because we used the veto in a heightened way. The Clinton administration had previously used the veto. We used veto and veto threat in an even more powerful way. Because those Democrats had been there for us and we were going to be there for them. Once you aligned and started moving in lockstep, you realized the power that you had even when you didn't hold the Congress. Because you held the executive branch. If you were willing to look them in the eye and say, "We'll do it, and we'll hold the veto. You go check the votes and see what you get." Once you could say that, once you developed that relationship, you were on firm footing.

Riley

I raised the question for fairly obvious reasons. You've already shown that you were the senior-most woman in the White House at the time. The timing of your departure, at least from the outside, is rather striking. There didn't appear to be a lot of movement--this may be a misreading on my part--out of the White House during that year. So it was important for me to pose the question to get a sense about what your frame of mind was in this.

Mathews

Yes. It's important for the historical record. Actually, when I moved to OMB, Bob had not left. Now I'm remembering very clearly. That's when he makes the point about, "I still see her every day in a meeting." The other thing about the move to OMB, which most people didn't understand, is as far as the United States Congress and the executive branch goes, I had the same status as Larry Summers, Jamie Gorelick, and Strobe Talbott.

You know how they rank the jobs if you were going to translate it to stars on your shoulder? If you were military? They can translate them back and forth. It was a job where I was A) going to be Senate-confirmed at the age of whatever I was then, and B) I had just taken a job where I was going to be Larry's peer. That's why you appear on panels with Phil Gramm, Larry Summers. I was returning to substance. That was the best job of all the jobs I had. You could influence change. My ability to personally influence change was far greater in the last job. I was part of everything through the other stuff. Doing the President's Africa trip was great.

When the head of the Appalachian Regional Commission, the number one career civil servant, arrives in Hinton, West Virginia, to see my mother last week and says, "We remember what Sylvia did." Or last night, an e-mail I got was about the work I did for funding for juvenile diabetes. Those are the small ones. Then you go to the big ones. Were there snowmobiles in our National Parks for awhile? No. I negotiated that with Ryder.

It was just thing after thing after thing--human papilloma virus and the warnings around condoms. This morning there was an ad about the birth control pills that are better for women to use. It's an ad on TV and the warning. There were riders to not allow that warning about what does and doesn't prevent HIV-AIDS, what does and doesn't prevent pregnancy--crazy riders. There were the small things, then big things. So OMB was a much better job, in honesty, than the job I had.

Most people think if you're that close to the President, that's the greatest job in the world. If you meet Chancellor [Helmut] Kohl, that's the greatest job in the world. If you're standing beside Nelson Mandela on Robin Island, that's the best job in the world. But after a year and a half of those kinds of things? Those things are actually more about you than they are about change. And at that point, I had six years of experience to try and line up and push against the change, and understood Clinton's thoughts about it, too.

Riley

That position had opened up because of a departure?

Mathews

Frank moves to Fannie Mae. Jack gets promoted. And at first, I didn't think about it. But you know what? As I said, when we talked about conflict with John Podesta? Sure, John and I would fight about things every once in a while. I've worked with John on opposition research. You can imagine in a campaign that kind of stuff. But most of the time, John was looking out for me. It was Podesta's idea that I go do this, a very insightful idea that I'm not sure I would have thought of.

Knott

I have one more question about the Deputy Chief of Staff. I know we've already moved into OMB, but we didn't ask you to give us your assessment of Erskine Bowles. You could contrast him perhaps with Mack McLarty, who you saw when you were at the NEC.

Mathews

Ah, Erskine--effective manager, very much about taking the information and managing, that sort of thing. The best anecdotal example is getting in and immediately analyzing the schedule of the President's time because it was such a valuable resource. That's an example of the way Erskine operated as an efficient and effective manager.

The second element that I would describe for Erskine is a sense of the importance of people, what their roles should be, and how you motivate them. He wrote handwritten notes. If you did a good job on something in the White House, you had a handwritten note from Erskine Bowles, who, by the way, misspells my first name to this day. [laughter] I have so many notes that say S-I-L-V-I-A.

Young

It's the difference between North Carolina and West Virginia.

Mathews

Exactly.

Riley

We haven't interviewed him yet. I'll ask him about that.

Mathews

I don't know that I ever told him, because it didn't really matter. He was a manager who wrote the notes. He once actually picked up the phone at SBA one night when he was there, and he gets some woman who's complaining to him about, "Do you know how long these applications are to fill out for an SBA loan? I could spend my entire life--" The next morning, he actually asked somebody. So the applications go from a very long document to a very short document. And that's the kind of person he was.

Erskine actually had all the minority folks in the White House come and meet. He had the people who write all the letters for the President come to his office and meet. He ran a White House in contrast to, perhaps--you don't know what happens now, and you only know what you hear. But we were about including our career staff in those events at the White House. Either at OMB, or the people who do a lot of the correspondence and that kind of function, archiving and that kind of stuff and making sure they were invited to the parties on the lawn or the President's birthday party. He was very conscious. Sometimes people who are highly effective and efficient become people who create fear because of standards and pressure and that sort of thing. He was not that way because he had the other side to him.

Riley

Erskine had been planning to leave?

Mathews

Forever.

Riley

Early in '98 and--

Mathews

Forever. No one ever thought that my move to OMB would be seen as a sign that a woman in the White House didn't like what was going on with Lewinsky, because it was all within the White House. From internal, no one actually thought of what you just said. The one thing that did get out as a rumor is that I was sick and tired of dealing with Rahm Emanuel and a couple of the men. That I didn't want to have to deal with this anymore. That did get out. And the Wall Street Journal piece started on that, which I had to squelch. But it wasn't about the Lewinsky thing; it was actually just about their behavior as people.

Riley

And you wouldn't have been the first person to have--

Mathews

No. I would not have been the first person. [laughter]

Mathews

The story didn't appear. Is that enough on Erskine?

Knott

That's great.

Riley

What about your portfolio? My guess is when you move over to OMB, the formal portfolio is pretty well established. But you've already indicated that informally you're in the loop?

Mathews

Yes, but that's also in my OMB role. People questioned whether Jack Lew would be a manager who delegated. Jack was the staff person, so did he hold it all in the office? Jack treated me as a complete and total partner. There were also delegated parts, including covert operations. OMB is part of a team. I don't think this is anything that's classified. I have to be careful. But OMB is part of the signature chain for certain types of covert operations so that you actually have signatures on a piece of paper that this has been approved.

That became my responsibility. It generally was the Deputy's responsibility. You have to wait to be confirmed for any or all of this. We can talk about that. But as the Deputy, you're basically functioning as the number two. You're their day-to-day management contact for the PADs, Program Associated Directors, the most senior political appointees in OMB--that sort of thing. Jack would tend to be the outside face on the Hill. But when he couldn't do that, I would. This only came out of the Clinton administration years, only the Rubin years. That means that Bob was there until March of 1999.

He was definitely there until March of '99, because in February, the budget rollout? Ever since Bob got to Treasury when it was Alice Rivlin, when it was Jack Lew, he would always have the Deputy Director of OMB testify with him on the budget--an interesting thing. Actually, when you think about it, it's all reinforcing of how we were one team and thought about things together.

Bob was testifying before the finance committees mainly, right? It's all the finance committees and some of the budget committees, because they wanted to hear about the finance elements--tax and that sort of thing. Bob would have the Deputy Director of OMB, because he wanted us to be ready in testimony, instead of having to do written answers on all the budget questions. There's no reason for Treasury to be able to answer any number of the budget questions and assumptions. So I testified with Bob. And then the other parts of OMB.

During part of my time--this is a very important thing, historically, that really stinks. We couldn't get our Deputy Director for Management confirmed. It was Sally Katzen, who's not a controversial individual. You probably have never heard of her. As a matter of fact, the Bush administration consulted her on what has now become public, which is how we have the teams in case something terrible happens to the government. I was a member of this team and Sally was a member of the team. Sally and I were the chiefs of staff of the teams that--God forbid, something happened to the government--were to run a government.

You did all this training; that's now become public. I can say that much about it because they're classified programs. We couldn't get Sally confirmed--months and months and months. It had to do with the fact that her husband was being considered for a judgeship. She got all tangled up in that and whether we could move her or not. Wouldn't move, wouldn't move. During that entire period, I'm the Deputy Director of Management as well as Deputy Director of OMB, which means I have to do the monthly meetings with all the deputies of all the departments and all the management functions, which at this point, has to do with performance management and all the charts we have them fill out. They don't want to fill them out. You're dealing with basic management functions that come from OMB to the departments as well.

As Deputy Director I did a lot of the dealing with OIRA [Office of Information and Regulatory Affairs] and the regs. When it became a big enough problem, I'd send it to Jack. But a lot of the day-to-day communication occurring with OIRA was with me. In the last year, Sally Katzen, the head of OIRA, leaves. We had to have Sally start to do part of her old job, which was OIRA, the body doing all the regulatory. Sally and I put together the sequencing. The sequencing of all these regs in the last year is a very important because it comes down to how many pages can be printed in the Federal Register at a given time. You have to sequence the regs because they vary in length, and you want to make sure that you're doing it on a print schedule that's going to work for the Register. [laughter]

You also have to consult with counsel about which ones you think will be more at risk of being overturned, based on the sequencing of the closeness, and proximity to the end of the administration. Then you make the substantive decision of, "Well, that one's at a little bit of risk, but it's so important to us we don't even want to put that one at a little bit of risk."

So you have this sequencing. Then you have to drive the departments, based on this schedule that you've created. You're at EPA and you're at the Labor Department, and you're kind of trundling along on your path. You've set out your path of how you're going to do your regs. But you don't know the big picture. So you've got to get the big picture. Then we have to communicate and say, "Here's the time frame that shows our expectations for you." Then the regs come in and it's never easy. They're all complicated, not simple issues. Not all of them, but many are. So that was another role that was played throughout the time. The other role is the negotiating, internally and externally.

Young

The budget?

Mathews

In order to put the budget together internally, there are negotiations occurring with the policy counsels to do the Presidential initiatives, the Vice President's agenda, the First Lady's agenda, with regard to substantive issues and the budget, what's being funded and what's not.

Riley

You're getting those communicated to you directly from their offices?

Mathews

Yes. Ron Klain would sit down and go over the Vice President's needs when he was there. Then David Byer spent a lot of time with me on those needs in the technology area. Meanwhile, Katie McGinty, the policy counsel, CEQ, Gene and all his needs. And of course because I'd been at the NEC, Tom Kalil and everybody felt they had a direct door.

I'd say, "Gene, get it prioritized." But meanwhile it doesn't matter. You're trying, though. So these are the negotiations to put the budget together. Then over 300 letters from Congress, at least--Republicans, Democrats. People who have voted against you on every single thing will send you the letter. "Dear Director Lew." "Dear Ms. Mathews, I'm hopeful that you'll consider the importance of the Army Corps and its funding, especially in the State of Nevada." There were hundreds of letters. This becomes very important, because as I said, the Congress has become so important to you with regard to achieving things. There's this huge tracking system. Are we responding to them? Who has the master list of Congressional issues? You can try and maximize.

It's a big winner. If it's something you've gotten six letters from Congress on, it's a priority of the Vice President's and is a priority of the Commerce Department, you say, "Thank you. That's great." But you can imagine there are hundreds and hundreds. Then there's the negotiating with the Cabinet Secretaries. Jack and I would usually divide it. Cabinet Secretaries are mad and angry.

Beckenstein

Which did you do?

Mathews

It varied year to year and time to time. I'd do a lot of Treasury negotiating. I had Veterans Affairs, which was always extremely hard because of the highly political nature of Veterans Affairs. It was during our time that we extended benefits to another category of veterans, and veterans' cemeteries. The funding issues around veterans are just--and it's not just political. It's, "These people fought and served our country. You want to treat them right." It's such an odd thing that current military--their health systems versus the veterans systems? Actually one of the only site visits I ever did was a veterans' hospital in Florida.

We'd split back and forth in terms of what problems we were having with whom. That was a part of your role, to get on the phone with Herschel [Gober] and Secretary--I can see him, mustache. I've actually run into him recently, and his wife. Secretary Brown. Is it Brown?

Riley

For?

Mathews

V.A. Anyway, Herschel Gober, his Deputy, would work with him. You'd try and get as much of it done. Andrew Cuomo calling to yell about Section 8. [laughter] And the monies for this, that, and the other. That's negotiating you're doing, too, part of the responsibility. Then there's the negotiating on the Hill, the presentation of the budget. You've got to present it to the President. The last year Jack had me do it.

What was always hard for us was we got into this unique negotiation mode. The timetable of doing budgets is the August-September timeframe. Your analysts and the OMB team work with the departments to do what they have to do. They put together large books that range anywhere from 60 to 250 pages in each of the areas, and you have as many meetings as there are areas. You end up at between 15 and 20 of these meetings. The meetings are three-hour sessions. You have to read the books and do that.

We'd always end up being in negotiations of the last budget. First of all, they don't have a baseline to do it from, so you've made it incredibly hard. They don't have the next year's budget. That's usually how you start to work on your budget for the next year, at least knowing what you're going to spend in the coming year. They don't have a baseline. That's one problem. The second problem is when you're negotiating, there's a time issue. You're up on the Hill all day. You come back to OMB and your poor PADs and teams are sitting there. You're getting back at ten or eleven o'clock at night usually. Or you're waiting to be called to the Hill. That was one element of it over which we had absolutely no control. And boy, they would use it. They'd call you on the spur of the moment. "Hello, we're ready. Can you be there today at 6:00?" A.M., P.M., doesn't matter. You have to come back and you need more information from your teams to continue negotiating.

Your teams are preparing the budget information, but they're also staying up half the night preparing the information you need to further negotiate and record all of these negotiations, because you've got to record the deals when you start to bring things to closure. Because then we negotiated that either we or the Democrats would get to read the documents. You make sure you're not getting taken for a ride in those documents. Those processes are all ongoing. I'm in those meetings. We're negotiating. And that's why Jack and I would have to divide up the stuff because no one person could learn everything you needed to learn.

The other thing that I was very involved in was our strategic approach to negotiations. In May, Jack and I set out the strategic framework that we'd use through August, and then it turned out through December.

Riley

A couple of follow-ups, then. Let me go back to the regulation area. By the time you came in, was there a conscious decision? Or was there a conscious attention to the fact that the way that you're going to govern the last two years is heavily driven by regulation as opposed to legislation? Are you thinking, We've got a couple of years here. We've got an opposition Congress. We're going to leave our imprint on the government. It's going to have to be done by executive order or by regulation in a way that we can't get through Capitol Hill.

 

Mathews: It was a balance because of the strength of the budget negotiations. You're actually passing legislation because you have to have a budget every year. You're very focused--at least from an OMB perspective. You're very focused on both tools, not one or the other.

But the point that you're making about the question of regulation? Yes. There were reports of midnight regulations. There was not anything "midnight" about it. This was months of planning. It's not like we decided to jam through regulations at the end. To your point, yes. There were many important things we believed needed to be done. One prime example is the OSHA Ergonomics, which was of course blocked. The new President came in and it never happened. Then we had a negotiated deal on it. There were a couple places where you negotiated the deal, and if Gore won, you were all set. If Bush won, you lost.

Young

You said that regulations or things being done by executive order were at play in the negotiations of the budget?

Mathews

Absolutely. The last round.

Young

So what you do, and what Reagan tried to do.

Mathews

Ergonomics was the prime example. It was a real critical path issue. Mexico City was always an issue--the ban on international funding to organizations that even participate in abortion activity. Mexico City has a ban on giving money to an organization like Planned Parenthood because part of their organization might do it. The argument is the fungibility of money.

We believe that's bad policy. We're happy to have it restricted and not used for those purposes. But trying to make organizations set up two separate organizations is inefficient and ineffective, especially in the field of international assistance where the capacity is not as great as it should be, period. So that was another critical path issue every single year in the negotiations. But in this year, it was dependent on who would win.

Riley

We'll probably want to press you a bit further on some of the broader areas that you brought up. One was about your confirmation. Were there any difficulties with your confirmation? You want to tell us anything about what you had to go through in order to get confirmed?

Mathews

You get slowed down and it takes a while. But it didn't take too, too long. It wasn't bad. I think there were a couple of holds that get put on me that aren't related to me. You know what happened to Katzen, the Deputy Director--holds not related to her. I moved relatively quickly.

Of course I was fortunate. Senator Byrd and Senator Rockefeller were going to introduce me. I know both of my Senators--that's very helpful. I was helped by Pete Domenici. I met with him; he was very gracious. Felt I was like his daughter. Signed on to be helpful. And that helped. The staff is generally more where the rub is. But we were doing the politicking on the Hill. Friends were contacting this Senator and that Senator on the Republican side. In the end, I go as part of the batch group. The one little hiccup is that I end up being questioned about that top ten list as part of my confirmation process. This joke that I'd made about the top ten reasons, "It's better at OMB than the White House." I don't even remember what it was. You all have it in here.

Riley

No. The women?

Mathews

Yes. At the women's party. I get questioned about it. I get written questions. The other thing is my written questions were extensive, and that takes a while to get done.

Riley

I've got it, Sylvia.

Mathews

I've got my celebration.

Riley

It's right up there.

Mathews

Yes. There's no grassy knoll at OMB. And I was referring to Sid Blumenthal. This is the right wing conspiracy. I was making fun of us all. So I get questioned about these things in a serious manner. "What do you mean by testifying that in OMB you're not covered live by CNN [Cable News Network]?" And I say, "Well, when I testify in front of Mr. Starr when I go to the Grand Jury, there are a lot of cameras when you walk out. During budget time, there are cameras at OMB, but it's not usually live. Maybe it should be for the budget." [laughter]

You're asked to explain. You can't always ask, "Skippy--is that peanut butter?" "No, that's the nickname for John Podesta." And it came because in the '88 campaign, you know, the "Little Evil Twin of George Bush," so we referred to John, because he has a brother, as "John is the Evil Twin." I was asked to explain these as part of my confirmation hearing.

Young

That has all the earmarks of staff--totally staff questions.

Mathews

My hearing is fine. I'm a little nervous. And my hearing is a little bit about my youth.

Riley

Your youthfulness or your youth? They're questioning about your childhood?

Mathews

My youthfulness.

Riley

You're too young.

Mathews

I'm too young. Having said that, the Chair of the committee who is then Senator [Fred] Thompson, Chair Thompson. He discusses his time and the executive branch and Watergate. And how he was young, too, and had great responsibility as a young man. The importance of standing up for what you believe in, even when pressed by those who are older. Even when pressed by Senators. Even when pressed by anyone. It started as, "Can you handle the job?" There were questions around that. But then it ended with basically you could tell we were going to move and he would vote in support. And a bit of advice from Senator Thompson, so it was fine.

One thing I'd say about the confirmation process is that what's important for history is what you have to produce. Do you have tax records for your entire life? Can you state any time you have been late for your taxes in your entire life? Do you have every foreign trip you've taken in your entire life? The amount of information, the articles, the stuff required to get exactly right-it's a pretty high bar for our public servants, and one that we have to really think about. What's the core of what you want to know before someone gets confirmed by the United States Senate? What are the key questions? And what's the best way to get that information? Because right now, it's grown into a process that's quite onerous.

Beckenstein

Were you able to produce all that information?

Mathews

Yes. But part of that was an advantage of the age.

Beckenstein

Being young. [laughter] That's why I could never get confirmed. [laughter]

Mathews

One of the questions says, "Your jobs for the past 20 years." Or, "Your jobs for the past however many years." I actually had to ask the Committee if they wanted my summer jobs in college because that's where we were going back to, because of my age. "Do you need to know that I worked at the Harvard Business School Library checking out books? I'm happy to write it down, but--"

Thinking through that, one of these questions that I think is an important question from a Miller Center perspective is: Getting good people to serve in the executive branch--what are the hurdles?

Riley

I think the fact that you were able to answer that your employment was at the Harvard Business School rather than the Harvard Law School, probably was the key in your getting the job.

Mathews

It did help.

Riley

Since you raised the issue earlier, let me go ahead and pose this question. You'd indicated that there was a kind of covert operations component to your position. And there was the Khobar Towers bombing within a couple of months, I guess, after you were confirmed. Then there was a cruise missile response by the President.

Mathews

Not Khobar Towers--the Cole in Tanzania and Kenya. I can't remember which job I was in when the Cole happened.

Knott

Cole was late 2000 in the middle of the Presidential election.

Mathews

Yes. Tanzania and Kenya happened during my time at OMB.

Riley

Right. And based on what you had indicated earlier, did you have then some part in the response to this?

Mathews

Yes. And let's make sure there's clarity separating out three different things. I briefly mentioned covert operations that had to do with how you run the government when a disaster strikes. And that's completely different. There's clearing when the agency, or a part of our national security system, is doing an operation that is in the black of a certain magnitude--either with money or danger. The third area, which is where I feel where your question is about, is

how do we handle terrorism in the United States, and did I play a role? The answer to that is yes. For those particular things, you had to figure out the funding issues. There are a number of things that branch out of the particular examples that you gave. But let's just focus on Tanzania and Kenya. Who were you going to pay? What were you going to do? This leads to an incredible program around Embassy security, which General Imar Crowell runs. He comes back with recommendations to the Secretary of State.

Then those recommendations come to OMB. But because no one had to do with finance or the money side of it, there are recommendations that are very expensive. You have to get down to the brass tacks of figuring out what is the marginal risk you reduce by the marginal dollars spent? And what is the level of security that we feel is appropriate? For example, the report suggested that you move the entire French Embassy. Then it becomes a question not just of money, but if you move the embassy in Paris out to the Parisian suburbs, are we going to be effective, considering what embassies' purposes are? Those are questions that have to be weighed.

Jack and I worked very closely on the packages we would put together with regard to that. Separately, Dick Clarke had been putting together packages for us, and we had been funding supplemental packages for the entire time that I was at OMB. At one point, we do an entirely large package. In terms of Clarke's recollection, part of why, I think, Dick does not speak as negatively as he might-- is we never did as much as Dick wanted, but we did move packages through.

Josh Gotbaum becomes our point person for putting together these packages on terrorism. During this entire time period, Clarke really was vehement on these issues. So I take at least a half a day, and maybe two-thirds of a day, and I'm briefed by all the intelligence agencies on the problem. By the "problem," I'll say the threat of terrorism and the rise of Al Qaeda. Briefed on it, I get an understanding. This affects how we think about our funding for the agency. It affects how we work with them with regard to the question of where they put the dollars. Questions that are now public with regard to, "Do we have translators of the information when you get it?"

All of that starts to affect how you're working. At the same time, we put packages together on the Hill. Josh works very closely with Dick, puts the package together, and gets it bound. Then you have to argue them on the Hill. What was very challenging at that time was whether it was cyber security or straight out? That's a form of terrorism too, whether it was in the bio, what you'd consider normal, like the bombing or cyber kinds of stuff? There wasn't a real receptivity to funding on these issues.

I can remember right now the Commerce State Justice, CSJ, money that we wanted for Commerce, specifically on cyber terrorism and information, and just couldn't get it with Judd Gregg. Couldn't get him to move at all. So the answer is yes. I became pretty involved in those issues. It was a different time, and a different context. We were having trouble moving small packages.

Riley

Anybody have any follow-ups on that?

Young

You have the two major events that were mentioned that were pre-9/11.

Riley

The embassy. Dramatic events.

Young

Tanzania and the Cole-but the Cole came too late, didn't it?

Mathews

Yes, but you ended up having to pay for the repair.

Young

So that changed attitudes on the Hill?

Mathews

We had to, on the Cole--how you were going to repair and replace our facility that had been so damaged, and what were we going to do about that? Meanwhile--and Dick reports in the book, so I don't feel that I'm--I want to be very careful about classified information, which is actually why I would not go on the show. Ted Koppel called and they did a show about "Government Outside of Government," and I just wouldn't go on for concerns about classified matters. I want to be very careful. But Dick reports this in the book.

We put together a package to reinforce the place where the President would go in the White House. We were updating that place that the Bush administration has a picture of on the day after 9/11. There's Vice President Cheney sitting in a room that is highly classified. It's no longer classified, because it's been seen. And Dick reports, "We put together the package." It was a rather expensive package, relatively speaking, to update that facility to make it ready for the threats that we faced now.

Dick writes that the package then was not funded. When you're working on those kinds of amounts of money, nobody wants to spend it on this kind of thing. But we argued and put it in, and it was in the budget. Of course it had to be in the black, your unknown--the funds that are just black. In other words, a single line captures all of this. So it was put in the black lines.

Riley

Steve probably knows this, I don't. But do all those black item budget things go through you at OMB?

Mathews

Yes, in this sense. When there are large expenditures and they're not going to be for HUMINT [Human Intelligence] because Human Intelligence is going to be --we're paying you to go in and do your thing. Those aren't your big items. It's not like we review it line by line. I think our analysts pretty much did. There were certain analysts who had the clearance for that. But what tended to come at the larger level is there were some very large decisions one makes with regard to more Signal Intelligence, SIGINT. Those sorts of things you do know about. You do have conversations with George Tenet--

Riley

Sure.

Mathews

"Boy oh boy, what do you think in there?" "Really? You think so?" Those conversations did occur.

Knott

So there would be people at OMB who actually know the specific details?

Mathews

Yes. I'm not sure down to how many people we have who are agents. Not at that level, but certainly that's a block. This probably pays for about this much. It's a very small group and we're now getting into the space where it's all code clearance. All this is far beyond regular clearances, and it's compartmentalized. You end up in situations where we know a part of the information, and you know a part.

Riley

Did you have any role whatsoever in the administration response or the management of the impeachment proceedings?

Mathews

No. I had my holiday party the day of the impeachment. I had an annual holiday party for eight years. On the question of how do you preserve your life--someone asked me yesterday. I always had my holiday party no matter what--even if I left work at 4:00 that Saturday. It was a large open house. There was actually a White House dinner that night too--a black tie dinner. One of the holiday parties at the White House. So John and Larry come through in black tie. A reporter shows up. "I heard you were having a party, and it's such a hard day. I just wanted to come." This was a reporter from one of the major news organizations who had written really bad articles about us, too. But I was not involved in the proceedings at all.

Riley

And that reached over on the Senate side also?

Mathews

Yes. One thing on the OMB role I just need to put out there if we want to go further is the war with the Kosovo. I was part of the deputies committee, and would be a part of the almost daily meetings. What we're going to do, what if we had this huge influx of refugees? There were all the questions around that. I always left the meetings when it came to targeting, because I didn't believe that there was any--we all agreed. OMB would not be a part of the targeting. And the only reason you then become part of the targeting is you've got to pay the Chinese for that little accident. So I wasn't in the meeting when it happened, when the decisions were made. But I became a part of figuring out what we're going to do.

The only time I cut off a vacation during my entire time in the White House was when I ended a vacation one day early. It was the last year. I was called and told that I'd be leading the negotiations with the Israelis on the money side of the peace process. I came back a day early to prepare for the first meeting with the Israeli team on what they wanted--the money.

Young

What did that involve?

Mathews

It involved a series of meetings with the Israelis. Mainly the defense side of the Israeli government because that's where the majority of the money was going to go. Negotiating on what their needs were, what their desires were, and where we thought the U.S. government would be able to go if there was a deal. At the same time, we at least--it's kind of the bottom issue. We started spending a little bit of time on what a Palestinian package would look like, too. I became the person that the Embassy would call every day on whether or not we were going to move the package. We'd come close to closure. I think we knew where we would settle. We had a sense of where the negotiation would end if we put forth the package. But the package was dependent upon the agreement, which never came to pass.

Young

You said, "with the Israelis," but you also mentioned the Palestinian--

Mathews

We weren't negotiating with them. They weren't anywhere around. You go to the NSC and ask the most knowledgeable people at the NSC and the State Department. "If one were going to spend money, what kind of magnitude? How would you do it?" You're working with much less information.

With the Israelis, we're talking weapon systems. Part of the negotiating team was Mara Rudman, who was the Deputy National Security Advisor. I can't remember the woman's name at DoD. It was actually a team of women, which was a little challenging, at first, for the Israelis. In terms of the leadership, we had some staff who were men. But the person from DoD--because for the question of technology transfer and that sort of thing you need that level of expertise. With regard to tech transfer, I wanted the person who had negotiated all the deals for the past seven years in the room to determine when they were asking for a system that might be code for something that I wasn't going to know. [laughter]

Riley

Go ahead.

Beckenstein

I'm curious about the evolution, of the role of the OMB director and the Deputy within the White House team. Certainly before Clinton, it wasn't thought to be a big inside player position. How did it evolve and was there a specific move by Jack Lew and yourself that it evolved? Were you more insiders because of where you'd been before? What happened during the sweep of things down at OMB?

Mathews

I think it would be fair to say that we were because of our history. If you look at Alice Rivlin versus me with regard to who's inside the White House, that's a pure function of time in the space and the places that I had been. When Rubin is coming--even for something as simple as the White House budget, well, I've done it from the other end. When the White House is coming to ask us for their money, what are we going to put in, and that sort of thing? I know it from the other end.

One's ability to have knowledge increased once you sat in a number of different places. Jack and I had been there for eight years. I think that we were fortunate to be more insiders because of our time. The second thing is there was a forced inside nature because Jack and I were doing negotiations that were an incredibly important part of our economic policy. At this point, it's the fiscal policy of spending.

You want us to be getting that right, because we're the means by which you're trying to achieve a number of the President's initiatives at this point. Because that piece of legislation was the one you knew would move. I think that also brought us in the circumstance of the context of the work we were doing as well as where we had been.

Beckenstein

Was there a promise made when Lew took over that he play a little less technocratic role and be more of an inside player than before?

Mathews

No.

Beckenstein

Or you just expected that?

Mathews

I think OMB during our time and even during Frank's time--was less technocratic. Even during Leon's time it was less technocratic because you start with Leon, who's such an inside player on the Hill. Leon's bringing more than OMB to the table, so he was included, in a way, from early on. I think we might have started at a higher level than perhaps some other OMBs, and that actually is an interesting thing that you raise it because it's something that you hear from the career people now. They never had it like they had it with us.

The President of the United States knows the names of several career OMB people because we were so engaged and involved. I met a gal at the airport last week who did the LIHEAP decisions. Those become very important decisions at particular times whether you get it right or not, and you run out of money. And the Congress is very concerned about it. And was it a career civil servant who was at that point junior but was a part of that and interacted at very senior levels. But political people over in the White House would pick up the phone only to get information. Not to do anything, but just, "Can you explain?" There was the flow of information by that time, and that was not true when we arrived. The way that people viewed career people--

Young

This was in '93?

Mathews

Yes. The view of career people, the fear factor, and by the end, the role that they were able to play. So OMB--it wasn't just us at the senior leadership. The whole thing got itself wedged into lots of parts of how everything was happening. OMB had become a place where people throughout the White House were comfortable going--not just the "no budget" people.

Beckenstein

So it wasn't a sea change with Lew and you in there?

Mathews

I think it was evolution.

Beckenstein

And it evolved over the eight years?

Mathews

Yes.

[BREAK]

Riley

Sylvia, was there anything that you want to begin with here, either in the way of loose ends or thinking about the general retrospective?

Mathews

Something I started a long time ago--we did so many things. Recording many of the smaller things, actually, is an important thing to the history of this Presidency. The expansion of the Earned Income Tax Credit. One that I think is incredible is family medical leave. The idea that if you were a working mom you could be fired if you took time off seems foreign to us now, but that was only 12 years ago. If you talked to women who had children before, and the pressures they faced if they were professional women--and now? I think there were some very large things like that that need to be considered as one considers the record.

Even the small things like how people were treated in the North Carolina floods, and how FEMA [Federal Emergency Management Agency] worked. FEMA was a broken organization. It's symbolic of the fact that government shouldn't do everything. But there are certain functions that government needs to help with. In an emergency situation, that's when you expect your government to help. FEMA was not an entity that helped before that. James Lee Witt really changed what FEMA does and how it works.

There are many things like that that are about a basic way of governing. Improving the approaches and making things work the best you can for different folks. That's an important thing that doesn't get covered in the timelines and stuff like that. Because you don't capture the little things, but when one puts together the history of the Clinton Presidency, those things will be important. I think that you can look back and be critical. If you ask me how I would advise a Kerry Presidency, I'm not really sure. But you can look back and say, "You know what? We shouldn't have done all those little things."

We would have been more successful in terms of maintaining power had we just focused on three things. Then Al Gore could have just said, "We tried to do these three things. We did these three things. We were done." Boom, boom, boom. Instead of the broad range of things that diversified attention both in terms of senior management in the organizations and also with the people. Most people can't state the three things. But, boy, those people in the North Carolina flood? They'll tell you. Or any person who's received the Earned Income Tax Credit--it's changed their ability to buy a washer or a car or just the basics of life--will tell you how it affected their lives.

So did we do it right or not? I guess I fundamentally believe we did, because what is government there for? It's not about continuation of your power. Did we do it right for a continuation of power? Probably not.

Young

But how can you get anything done, unless you pay attention to the power?

Mathews

That's right. But it's a means-end thing. You've got to pick the right place. Does the end justify the means? And where do you put yourself on that spectrum? It's a question you ask with regard to were you willing to say and use numbers in a campaign that you didn't think that you could stand behind? How much should you be focusing on reelection versus the actual doing?

Young

I'm just questioning whether it's realistic to think of the Clinton administration as one that had the option to do just two or three things. Or for that matter, the Carter administration. Or for that matter, the Kennedy administration. Democratic administrations tend to have activists and larger agendas than Republican administrations. That's why I'm trying to press you on this point.

Mathews

You could implement it in a way--especially with the use of technology. First of all, we have voracious appetites. Because we believe government has a role. And you can argue one way or another, so you're right. You're going to have this problem much more with the Democratic administration than with a Republican administration.

I do believe that what you could do--this is heresy to most people--is create a little more Cabinet government and therefore do better targeted messaging so that your President doesn't necessarily do all the events with all the groups in the organizations. The disability community feels very pleased that they're getting what they want, because they're seeing the Secretary of HHS and the head of OMB. And the three key issues they care most about are this, that, and the other. And that's more important than a mention in the State of the Union. So you try and create, and the Director of OMB does an interview in the trade publication for the disability community. You drive your substance and messaging at two different levels. That's what I do.

Young

To the President for some things?

Mathews

Yes.

Young

But you don't neglect the other--

Mathews

Yes. Because then everybody in this room is able to say, "Oh, yes, Bill Clinton. His basic economic strategy was one, two, three." If I heard it one more time, I was just going to--His base of national security? Bill Clinton, what was he about? Promoting a strong economy that incorporated everyone, a national security for the future, investments in technology, environment, and education to build a strong nation. If everybody could say that, we would have been able to continue our programmatic approach.

Riley

You're measuring this against the results of 2000, right? You're saying if we had been able to do this then there would have been a lasting continuation of our legacy. What didn't happen is you didn't have a Presidential candidate in 2000 who was inclined to run on the record, whether the specifics or the generalities going through, if I read this correctly. This was someone who was very forward-looking. And there is a fairly widely documented level of--"tension" may be too strong a word. But disagreement within Democrats about how that 2000 message should have been developed and sold.

That's a roundabout way of posing the question to you. How do you evaluate the Democratic effort in 2000? And can you tell us, from your own perspective, what it looked like as a longtime Clinton person trying to press the Gore people to do things that maybe you felt like they weren't doing well?

Young

If you had been able to focus. In other words, would the problem with Gore focus the President more, and do more of the Cabinet-gathering? If you had done that, would it have made any difference with respect to the battle for the succession?

Mathews

There are a number of things. With the concussion, I want to make sure. First, it's not just about the election in 2000. It's actually about the substance. Let me articulate a very specific example of why it's broader than about whether we won or not in 2000. The fact that somebody sitting in Michigan who doesn't have a job, who is worried about their healthcare, thinks that the Republican party will do a better job for them. If you present it to them, supply-side economics, they'd say no. If you said, "If I give tax cuts to rich people, that's going to help me?" They'd say no. I want to condition it on the fact that there are people that believe in a different economic approach. But these are not people who buy into that economic approach.

The fact that when I read the New York Times and interviews of people like that, they don't automatically say, "Well, goodness gracious, if I want my healthcare, if I want these things, then I'm voting this way." That failure, to me, is more egregious than the election, because it means that we are not communicating the substance of our progressive agenda.

The way you framed that question isn't exactly aligned. That actually is pretty important to me. It wasn't just about losing in 2000. It's actually much more about my plane ride beside an educated doctor who does research around the world in technology, who works in a hospital in Charleston, West Virginia. He told me that the reason we even did any deficit reduction was because of that toe-sucking fellow.

Riley

Dick Morris.

Mathews

Yes. [laughter] That's another substantive point that just sends me wild when I say, "We didn't get this right." Somebody should know better than that. This man is highly educated. This man went fact after fact after fact. Then even when I said, "Sir, I was in the room. Let me help you. Unless you want to call me a direct liar, then--" It was a fellow West Virginian. "Hope you don't want to do that." Still could not move him. So it's the substantive failures. And second, there were two more questions in there. One, did I think Gore and the team did the campaign right? Was that a little bit of the core of the question?

Riley

Sure.

Mathews

I guess I should say--this was one of the things that I had circled to go ahead and mention, so that it should be a part of the record. Gore asked me to run all this policy in Tennessee, and I said no.

Riley

Because?

Mathews

I physically couldn't at that point. After working in the campaign like that for that many years, I physically didn't feel that I could give it what it took. I said no. But that was a problem. His staff came to me and asked about it. I said no. How it was structured was worrisome to me. There are outside advisors. One woman who's wonderful, I can see her plain as day. She was with Gore for a long time.

Riley

Donna Brazile?

Mathews

No. Elaine--

Riley

Kamarck?

Mathews

Elaine Kamarck. Elaine's wonderful. I like Elaine a lot. She's really bright. But my energy level would have required a structure where it was clear I was going to be in charge. That's not about power. That's not about anything. In a campaign like this, you really needed to have clear lines of authority and responsibility. It's always a little messy in the campaign. It's always going to be that way, and I accept that. But this was more messy. So I said no to his staff. Then the Vice President himself asked me, and I said no. Do I think they did it right or wrong? I feel hard-pressed to criticize, because if I had thought I could do it any better, I'd have gone down there and done it.

You could have chosen to distance yourself from the President in terms of his moral behavior, but not in terms of his economic record. And figuring out how to do that? I don't think there were people who were able to do that. Part of the problem was that all the people who would best enable you to do that were in the administration. It's a problem. It's a failure that I didn't go, that Gene didn't go, that none of us went.

Look at the Bush campaign. To their credit, Tim Adams, chief of staff at the Department of Treasury, has been at the Bush campaign for a year and a half running policy and planning. Tim comes from Texas. He's close to this President. He knows substance, and he knows policy. He was considered to be Deputy Chief of Staff. I think they ended up not giving him the job because they knew they wanted him to do this. He sacrificed and did campaign work instead of government work, which he was much more interested in personally. I look back and wonder, well, maybe we should have thought about that a little differently. Then to your question, would it have made a difference?

Young

I want to press you on that point again. Are you saying that talent and touch with economic accomplishments and policies of the administration were made unavailable to Gore?

Mathews

No. They were completely available. But having one of the team there on a day-to-day basis could have made some difference. Jack Lew, me, Sperling, Summers.

Young

Why wouldn't Gore find a way to tap you without asking you to do something that you just couldn't do, didn't want to do? Why was there this disconnect?

Mathews

I think there wasn't a realization. I suggested other names of good people who ended up going down to Tennessee. I don't think anyone realized--and also because they weren't taking that tack. Once you'd made the decision that you were separating yourself from Clinton, having his closest advisors there was not--I think the Clintons would see me as a complete loyalist, but I'm not a Clinton person. I didn't come from Arkansas. I wasn't in New Hampshire.

I don't actually even know that Gore viewed me as that much of a Clinton person. I listened to him and played fair across the board. They'd see me as a Rubin person before they'd see me as a Clinton person. So I don't even think I was a part of not necessarily bringing on Clinton people. To your point, had they decided that they were going to run on the Clinton record, you would have wanted one of us there.

Riley

But there was the prior decision, "We're our own people and we're not going to run on the record."

Mathews

I can't remember which question. Would it have made a difference? First I'll say that we won the popular vote and we may have won the electoral college. We'll never know. The question of whether the guy lost or not? The Supreme Court deciding who our President is? They made an incredible mistake, in my opinion. They should have said total Florida recount, day one, not Dade County. Then we'd know as a nation. That's what was right, substantively.

Now we'll never know. We have the President, and he's our President, and we all should stand behind that. But this question of would Gore have won? He did win the popular vote. So I don't know that he messed it up that badly. To be fair to Vice President Gore, I don't think that we're all fair to the man. I don't believe anybody's very fair to Al Gore. The fact that once a Supreme Court made a decision, knowing that so many things--votes were thrown out, and that sort of thing? There was no more anything. There was, "Shut it down; we're going to support the new President."

The guy didn't run this time. Let's think about what would be happening right now if Al Gore were the candidate versus John Kerry. The hurdle right now is do you think Kerry can do the job? That's the real hurdle. Do you think you would have that hurdle with Gore four years later? You may have and you may not have. But I don't think the Vice President is actually given his due in terms of what he went through and what he did do right. We all just focus so heavily on the mistakes in that campaign. There was the class warfare question--I can't remember where it was coming from. But I would--

Young

It wasn't mine? That's a Bushism. [laughter]

Riley

I don't think it was mine.

Mathews

Well, no. This was the question of whether they were running the campaign looking backward in old Democratic ways or new Democratic ways. Gore is a future-looking guy.

Riley

I'm happy for you to use that interpretation of the question, because it's an important issue. Mine was more a question about the extent to which they were going to run on the Clinton record, because I think the conventional wisdom is that there was a distancing of Gore.

Mathews

Yes.

Riley

My own position, frankly, has always been the same as yours. That it seems to me that it would have been the simplest thing in the world for them to have said, "Everything you like about this President, I was intimately involved with. And everything you dislike about this President, I didn't have anything to do with." But that didn't happen.

Young

So that the public teaching of the campaign by the person who was most closely involved in the Clinton administration never took place. It's a cause of great regret, I'm sure. And you've expressed it, that we didn't communicate the message enough. If you have a candidate teaching the people, "This is what they did for you. I was a part of that." That's what should be continued. That whole element of--

Mathews

The power of the incumbency was not leveraged. The current President certainly is doing that very wisely.

Young

Yes.

Riley

Let me pose a "but experiment" here as another way of getting at this issue. Let's suppose the Constitutional amendment didn't exist and Bill Clinton could have run for a third term. [laughter] A) Do you think he would have succeeded? And B) would he have been a better spokesman for the message you're talking about than Al Gore was?

Mathews

Yes. If you had Bill Clinton against George Bush, right now? I think he'd win. I think when people are weighing the things that were negative about Clinton against the current context--would people believe that Bill Clinton could get a coalition together and get the U.N. in there and get us out? Get the friends together? Get the people together? Get us out of there? I think the answer to that question is yes.

Would people believe that this guy was somebody who's going to be focusing on the U.S. economy and you and your job and your life? Business people say that John Kerry's going to undo the WTO [World Trade Organization], which is craziness. But nobody would say that about Bill Clinton, no business person. That's the way some business people are. You'd still have the tort reform part, the business that says no and that sort of thing. And that thought experiment? Whew! Would he do it? Of course. He'd go for another four years.

Riley

I wonder if part of what you're identifying isn't an imbedded problem in the idea of a New Democrat? You were talking about the guy you were sitting on the plane with. Some of this is a function of a President who's running partly on an inherited party label, but also a party label that he's tried with a large part of his career to reshape and reform. How do you respond to that?

Mathews

I think if I were actually in college right now and wanted to go on and do a Ph.D., there would be two topics that I'd want to do. One of them would be the question of the development of a third party, or a realignment.

And is that what we need in the country right now? The problem with a realignment is that I can't figure out how it goes. There is a party that is more economically conservative than the Democrats, less economically conservative than the Republicans. More socially conservative than the Democrats, but socially more liberal than the Republicans. It's a party that probably covers many, many more people in our country. Even in rural America. Even in the red states. This question you're raising about, "So is it really hard to establish what a New Democrat is?" Yes. I think it's very hard. What does that mean? Recently after the Republican convention you had the same thing. The Republicans are going to face it, too. They are driving people out of their party, whether it's stem cells--a Constitutional amendment is the problem here. I think if they took the position on gay marriage, most Republicans would say, even the liberal ones, "I'm going."

But when you're altering the Constitution over an issue like that? Maybe they haven't hit the critical point we have, but they're going to get there. I don't know how you resolve it, but I think it's a very important question. This does get back to the class warfare. That was just not a part of what we would do. Clinton didn't do it the warfare way. He did it in the positive way.

It wasn't about the divide. It was about, "We're going to bring you here." Not, "These people are here, and these people are here." That's a very different approach, and an approach that doesn't offend business as much.

Young

Did you cover the question yesterday of media and news media treatment?

Riley

Not really.

Young

I'd like to ask a general question about your reflections when you look back on this. About how you felt you were treated, reported--this administration, or parts of it--and how you were evaluated in the news media.

Mathews

The question becomes a relative question.

Young

True.

Mathews

Because if everybody's being treated badly, you live with that. You might. Or how you think about it is both an absolute and a relative. So why don't I start on the absolute question?

Young

Yes.

Mathews

Substantively? I feel we were treated fairly. The politics of personal destruction and that sort of thing? I think the media played an incredible role, and that's because the media is no longer an independent entity because of economics. When you have to win in the news cycle, and the news cycle isn't a daily newspaper, you've got to do something. You've got to put something on there, and you have to do things that appeal. The news media, at times, is only one step away from reality TV.

I believe the coverage of our substance was fair, and the criticisms of our substance, having fought with reporters on the phone. Having David Sanger put on the front page that we were idiots because Rafsanjani was in India when Rubin was in India--you win some, you lose some. On balance, I thought it was fair. This is a Clinton absolute. The focus on these personal matters--how relevant are they? I'm fine saying character is part of what you want in a President. I understand that. But the way in which this was done, and the amount of focus on it I don't believe was appropriate or correct in relative terms.

Young

But wasn't the press reporting on this? And the editorializing led by the people in whose interest it was to promote personal destruction? You mentioned earlier it couldn't get Clinton on the substance.

Mathews

I'm not sure that the press was led by that effort. I think the press was more led by selling, by the economics. If I thought about the forces? I think economics would have been a greater force for the New York Times or the Washington Post than a conservative elite concentrating on power for the long term.

Young

I should have said, fed rather than led. Never mind.

Mathews

Fed I would agree with. Then there's the question of relative treatment. And President Bush 41, in the last six months of his Presidency I believe got a raw deal with regard to substance. How raw? And didn't it make a difference in the election? Probably not. And did they make mistakes that led to that treatment? Yes. But did the coverage of Bush on substance become a little unfair? I think they were a little more down on him than they should have been in the last six months of a Bush Presidency.

As I said, I don't think it made a difference. I think it was fed by the way they didn't focus on the economy, didn't talk about those things. They did many things to exacerbate what started to be a problem, which was a love fest with this guy who's a New Democrat who talked about the economy in a relatively conservative way. I think that fed things.

And then let's turn to 43. I don't understand the substantive coverage. I just don't understand the lack of questioning in the media. And I say I don't understand it--well I do understand it when the NAACP [National Association for the Advancement of Colored People] can't even be critical of the President or they're going to lose their IRS tax status? They shouldn't be talking about who to vote for. I'm clear. But that was not what was stated, at least in the articles that I've read. I say I don't understand it. But maybe I do understand it. I do believe that this President hasn't been treated as fairly as he might with regard to questioning on substance. And that's because of the context we're in post-9/11.

Young

To what extent do you think that traces back to--speaking relatively or comparatively-- between Clinton and Bush today? To what extent does that relate to what we referred to as the kind of spin and the management that comes out of the White House?

Mathews

They are much, much more controlled. They do not share anything and have been able to do it. I believe that their process approach would have failed in anything but a 9/11 context. They will tell you it's better that we will never admit a mistake. Karl Rove will--you'll be gone, and they will not let the President admit a mistake.

They will not give access to those who have not done them right. They have rules of the game. And they believe that those rules get them more than the cost of those rules. I believe they're right in the current context, in a 9/11 context where people are concerned. Where patriotism, where we have real security, that sort of thing? I think the tide may be turning with regard to things like, "Fine, you're the one who invented the reporters, which was a great idea for getting them to buy into war and understanding what military people do." But now you've got a situation where the new spy guy says, "Here are my pictures with you, and stickers on stuff." [laughter] Because you did not create open channels of communication and explain your faults?

You buy a lot with a reporter if you say, "OK, so we're saying, ?Save Social Security First,' but we've got to do this tax thing. And the tax thing's got to be part of the package." Explaining--they never did any of that. That works well when you're riding high, but when times are rough, it's back to George Stephanopoulos' point. "Have those relationships, because when times are rough in Washington, D.C., you need them."

Riley

I wonder if some of this isn't buttressed by the fact that they've got their own avenues of communication. I guess what I'm doing is questioning just a little bit your assumptions about this being entirely post-9/11. Part of the reason that they're able to do this is because they've got Rush Limbaugh and the Washington Times. They've got Fox News to present their package to the American people. They want to reach the people who are listening to these packages. Do you agree with them?

Mathews

Yes. I agree that everything has been exacerbated by more targeted communication and doing things with your own people. Studies have shown that for many, many years, in over 85 percent of all counties in the United States, if you looked at Democrats or Republicans or conservatives and liberals, the split was maybe 45-55 percent, tops. It was much closer to 52-48 percent. So you mixed with people who had different views. Now those numbers are about 40-60 percent one way or another. They're either 60 percent or more liberals or Democrats. So you don't mix with your people.

When you add that to the fact of this situation with regard to the news and what you listen to? Do you watch Fox, or do you watch Rush Limbaugh and those kinds of tools? I think you exacerbate this, not hearing from other people, reinforcing your views. That's part of the problem. I think it's very real. Al Franken just went on in Seattle. It's exactly what we had talked about at lunch yesterday with Jon Stewart and the Daily Show, him yelling and fussing about the fact that all you're doing is screaming at each other. Repeating your side's voice; it's not really a debate. It's not really an airing of issues. But I think it's what's happening and it's how people get their information.

Knott

I had a question about an event that occurred at the end of the administration in President Clinton's Presidency. And those were the parties. I know you had no involvement in that at all, but you talked at great length yesterday about the careful staffing and planning and consideration of future consequences that went into the economic program for eight years. Do you have any reflections, any observations as to what happened at the end there? There seemed to be an almost chaotic process of pushing a series of pardons through.

Mathews

First, I'm not sure why it became so important. This has to do with the media and the press and that sort of thing. If the President isn't elected, my money says he'll be doing some pardons. And if he pardons "Scooter" [I. Lewis] Libby [laughter], do I think that should be how this President's judged? No. I think there are many more important issues to judge.

One question I have about the whole thing is I don't understand why it became that way. Was it because of a context of what had gone before? There was nothing with Whitewater. It was something that happened years and years ago. It's no different than figuring out George Bush's Zapata Oil Deal--that he failed on every business, going back and investigating every one of his business deals. The bottom line is I have trouble understanding why it became such a big thing. But you'd tell me it's the context of Whitewater. So I say, "Is that really right, if you stop and analyze it?" Let's talk about the process. History has the perspective to stop and take a look at these things, think about them in a better way, and maybe judge the other way. But I do think it can happen.

And second, the process? There was a process. The Justice Department was involved. Eric Holder was involved. He did the Deputy. I'm not familiar enough to know. But Cheryl Mills was General Counsel, or was it Beth [Nolan] at that point? I think it was Cheryl. They had the lists. So there was a process. But I don't know exactly what happened. If you ask me if they were good decisions or bad decisions, I don't know enough about the facts to know.

Young

What are the most important keys to understanding the Clinton Presidency as you look back? And this is another opportunity--you've had many here and you've done very well to guide thinking about this for future students and anybody who reads this. Help them understand things about the Clinton Presidency that they might miss in the documents and miss in the press coverage. To help people understand what it was really like and what its strengths and weaknesses were.

Mathews

I think coming back to a concept that we opened, which is the string of continuity and how he got from the people to the substance. That's something that's defining that you might not understand. Why I think it's important from a historical perspective is that I believe that President Reagan had a similar level of understanding of people. I haven't studied him in depth, so I may be wrong. But I actually believe that he could see with the clarity that Clinton could see and that he had an understanding of people. And therefore, some of the things he would say so appealed to me. I was very young at the time. I can look back and read those things.

If the policies back those up, that would be what Clinton had that he didn't have--the unique, intellectual and policy capability to make that understanding a powerful force for change and improvement. Then you go to President Nixon. I haven't studied Nixon. I think Nixon actually had the intellectual horsepower of a Clinton. I don't know. But I'd say there were a couple of guys along the way.

And Carter--I would actually put Carter in the intellectual category, not in the people category. Where everybody else would say, "The guy from Plains." No. He was a man of incredible discipline. He judges people, whereas Clinton isn't a man who sits in judgment on anybody. He just won't. He knows he has his faults. He accepts that he has his faults. And he knows you've got them too. We've all got to live with them and do the best we can.

I would put Carter in that intellectual category because he didn't understand that element, similar to Reagan. Reagan was divorced. I'm sure that didn't please the man. His relationships with his children? I believe that didn't please the man. And where was George Bush 41 in the relative scheme? You know what? I'd put him at OK, good on both, but not great. He didn't have a spike. Do we need Presidents with spikes, one way or another? And is good or OK enough? I don't know.

The strength of Clinton, I believe, is his understanding of people, his intellectual capability and the related energy that he has. And the things are all subsets of that. This is a man who is energized by people. My money says he's going to get better. His heart's going to get better now. As long as he doesn't overdo these two trips, 100,000 people in Philadelphia are going to make that man better.

Riley

Just for the record, for somebody who may be reading this 50 years from now, he had surgery on his heart a couple of months ago.

Mathews

So those were the Clinton strengths. And the intellectual capability? I don't think you can even imagine sitting in a room where Warren Christopher, Bob Rubin, Larry Summers, John Podesta--some very bright people have contributed to answers. And to have somebody take it to another level, see something that others missed, ask a question that we hadn't thought of--to have someone be able to take so many different pieces and parts and relate them. And that Clinton was so able to do. At the same time he's able to turn and ask the question that he asked after the budget, "How do the people in Hinton feel?"

Young

You used the word "energized." We've had some Reagan people who've also compared their man to Clinton and in much the same way that you did, except some made this distinction that Reagan could energize a crowd--anybody. But Clinton could not only do that--he was energized, received energy from the crowd.

Mathews

It creates a circular thing. It's part of why he energized people. You feel it when you're with him. And what's unique about Clinton--Gore could do it for you in a room like this. Gore couldn't do it in a room of 100,000 people. I don't know what makes the difference. Reagan could do it in a room of 100,000 people.

Young

Right. And you had mentioned earlier that another thing about Clinton that was important too--the way he governed and could see a world that we couldn't see. George Bush called that "the vision thing," by way of saying, "I don't have it." I think it's possible that that's another aspect that Clinton may have shared to some degree with Reagan?

Mathews

Absolutely. Reagan's vision about a post-Cold War world. That was Ronald Reagan's bridge to the 21st century. Clinton's bridge is a strong, healthy economy for this country that is using technology, that is a leader in the world, that supports free trade, which will bring the other countries along. He knows that in the end that's what's going to help Africa and the other places in the developing world. He's very cognizant of that. And in a world where new dangers have come, the terrorism and those kinds of things that we can manage in a new context, through the use of technology and the strengths of our fundamental values.

What Ronald Reagan and Bill Clinton have in common is they so believe in the values of our founders. And in certain ways, in terms of that optimism and hope, we're going to lead. So the vision is a very important part of Clinton's strength.

Young

Was that aspect recognized by most people who worked with him?

Mathews

Yes.

Young

It was a motivating factor, too?

Mathews

Absolutely. I think most people would agree on his strengths and weaknesses. Most of the Clinton people may say them in different ways. But you'll hear a very similar core.

Riley

Can you talk about the weaknesses?

Mathews

It's interesting, because one of his weaknesses is related to the strength. I guess the biggest weakness that I'd say that this President had--others may not say it, and it will be very interesting in the interviews because this will probably come from my perspective and who I am. He would be very clear on this point. Actually, at my going-away party he spoke very specifically about discipline. His comment was, "I just don't even know how she could be Greek, a person as disciplined as this." Podesta, he's passionate, the ups, the downs, he's screaming, he's yelling. At times, the total lack of discipline. "But you just don't ever see that, so how can you be Mediterranean at all?" [laughter]

It's logical and predictable that I'd say "discipline." It was actually a strength, too, because it helped him understand people. I want to be careful about it. But when I look back, that's the one thing. If there had been an ounce or two more--it's the one thing that when I watch the current President, it helps me understand why missing a little bit of this makes a difference.

Young

And what was the injury done? Or what was not done? What was the consequence of the President's indiscipline?

Mathews

The most important consequence would be that I believe, with a little more discipline, we could have been a little bit more effective. When you're a Democrat and you're doing all these things--if you'd pulled off one more FEMA kind of change, if you pulled off one more EITC [Earned Income Tax Credit]. We're talking hundreds of thousands of people over a period of time. The first thing has to do with effectiveness, and the second thing has to do with his personal reputation, which I do care about because I think he was and is a great leader. I believe that it affected how people thought about him across the board.

REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT REDACTEDTEXT You could have done better with regard to those things, and argued them as avidly. People would argue it's the way he is. He's late for meetings, and he doesn't have discipline around those issues. And is that fair? But he did have incredible discipline. This is a man who, when he had to, could stay up to do the hard work.

I laugh using that phrase because the phrase was used in the debates. This was not a man who had any fear of learning every single detail in order that he could do the job better. He'd shake the last hundred hands because that was important to someone. In certain times, his level of discipline was just unbelievable. So I say it was a weakness, but only at certain times, in certain places, and certain ways. I think we accomplished many things in the context of that. Could we have accomplished more? Possibly.

Young

Did he have a lot of reserves?

Mathews

Yes. Those reserves come from a number of things. Number one, his reserves come from his faith. He is a man of faith and believes that there is a God that is much greater than us all. The humility that comes with some people's faith was very present and was an important thing. That's energy for him, in terms of his faith. Second, his reserves come from his interactions with people. They fill up the glass, and that gives him the reserves.

The last thing is his personal upbringing created reserves because it made him tempered. What he saw his mother have to do, how he saw his mother's life evolve, and what she did for him to make him as successful as he was. That understanding and that respect created a reserve of A) what he had been through; but B) Golly geez, what my mom had been through to get me where I am. I think those are all elements of what created a reserve that he could always draw from in very dark times. Most people would not have behaved as he behaved under that kind of incredible scrutiny, pressure, to your professional life and personal life. And the things most valuable to you, which to him are his wife and his child.

Riley

And there were terrible events, if you look back at the sequencing. We talked about Vince Foster's death.

Mathews

Vince dies. Her father dies. His mother dies. Their best friend, the wife was at the State Department, and I can see her as plain as day. He dies. Tully died during the campaign of a heart attack. Paul Tully has a heart attack in his room in Little Rock, Arkansas. It started then, and there was just death after death after death of the people who were closest to them. People don't really realize the sequence of almost every six months, Ron Brown's tragic death. Who thinks that you die on a military plane? I sure don't. I've flown on them, and thought I was the safest flying ever. Ron was such an important part from the DNC [Democratic National Committee] perspective of the election.

Riley

You had an opportunity to watch, I guess, although we haven't talked about it very much. I guess you had an opportunity to see Mrs. Clinton a fair amount during your time. I wonder if you could talk a little bit, not about the healthcare situation, but more generally about her role in the administration. And if you could also give us your assessment of her strengths and weaknesses in particular as they related to the President. What she provided him that he didn't get from other people in the administration in terms of support?

Mathews

I think that with regard to Mrs. Clinton, I should focus on the part that's not public. I don't think people realize that Mrs. Clinton's the person that, when I was Deputy Chief of Staff and somebody had had a miscarriage or somebody's mom had cancer, or somebody's kid had some problem, Mrs. Clinton is who I called. She'd make all those calls, even if they weren't people she was close to, even if they were people that she might disagree with on issues. It didn't matter. She'd pick up and call. And she very much understood that management and morale of the White House were very important things to the successes and the things that we were trying to achieve. She was engaged and involved in that. Most people don't see that side of her. As a matter of fact, from a public perspective, you saw a very different side of Mrs. Clinton.

To the question of what did she give him that others didn't--I don't know. I'm not married. But I do believe that every marriage is unique. Only the two people in that marriage know its good and its bad, its true ups and downs in their entirety. I hate to speculate. But the one thing I will say is I believe those two people are soul mates in the sense that they believe that no one understands them like the other one understands them. And no one appreciates them, warts and all, like the other one appreciates them. And that they don't know anyone else who has the passion for change, and to use their talents in that way that they share with each other. I think that's what she gives him that all these people around that give him energy don't.

Riley

You mentioned in this regard that she was always very attentive and concerned about the morale in the White House. And I want to flip that around and ask you, did you feel that the President was attentive to that kind of issue? And related to that question, was he somebody that was good with positive reinforcement? Did he have a temper you saw--was he somebody who moved people by encouragement or somebody who moved people by fear?

Mathews

What was the first part? I had a thought on the first part.

Riley

It's a question about morale and whether he was attentive to the morale of people around him.

Mathews

He's incredibly attentive to the morale of the individual, but it is an institution, the White House. He was less attentive to what I would call "the morale of the institution," but he was always attentive to the individual. My family was having difficulties at one point. My Christmas present from the President was a gold pin that had the face of a lion etched on it, and the note said, "To give you courage." He was very attuned to the individual. But the other question? On the question of temper? No. And it's very interesting because, when Bob Woodward's book comes out, everybody's in some foreign country. So Bob Rubin's left to do the defense.

We're in the White House and that Woodward book comes out. We're going through, and I said, "You know what this is like?" What we came up with was like a frame in a movie that gives you no perspective on the whole context. Clinton is as far from a man who manages through fear as I've ever met. Just so far. Woodward was capturing--do I question Bob Woodward? No. I don't question Bob Woodward's accuracy at all. But was he capturing a moment? Have you ever lost your temper? Have you? Let's just go around the room. [laughter]

Have you ever behaved in a way at one particular moment? Do you want to be judged by that one moment? He's not a guy who would at all. And even when frustrated, the frustrations were things that you could understand. They were never irrational. You're asking a man to go hours and hours and hours without food, without drink, without anything, thinking hard, performing? And he says, "Well, why isn't it this way? And why don't you have this information?" Is that anger in there? Having been in corporate settings and worked at McKinsey? Please. [laughter]

I've been treated a lot worse. He never treated us badly. That's just something that's so foreign to me in this temper question. It's just foreign to the experience. Do people get cranky when they're--if we had to sit here for another eight hours? If I'm yammering on about something and you wanted your question answered, you're going to cut me off.

 

Riley: Well, let's not personalize this, shall we? [laughter]

Knott

You've given a portrayal of a President and specific examples that would seem to indicate that this was a President who often tried to do what he thought was best for the country and at times put himself at odds with his own party on the trade and welfare reform, perhaps even balanced budget.

Mathews

Mexico.

Knott

Mexico. Maybe even guns.

Mathews

The loan. For the record, can we use the word "loan," not "bailout"?

Knott

The loan? I think it's a compelling portrayal, and yet there's still this lingering perception out there in some quarters of a kind of poll-driven Presidency, a President who had a real desire to please everyone. I'd like you to comment on that.

Young

That he moves with the wind?

Knott

Exactly.

Young

A man without an anchor over there. Without a consistent--you're aware of that.

Mathews

This is not the President who did a steel decision. Look at the facts. I understand, sure we polled. But you don't poll the core of what you believe. The steel decision probably would have won reelection for Al Gore. And do you think we didn't know that?

Knott

What was the steel decision again?

Mathews

Steel tariffs. This was a decision that would affect Pennsylvania, West Virginia, and Ohio. And it was an anti-fair trade action that the unions pushed very heavily for, and beyond the unions, a broader group of working Americans believed that the United States needed to take action against what they felt was unfair dumping from the likes of Russia and a number of other countries that have smaller mills that were doing production at a far lower price. And that there needed to be investigations and we needed to slow the imports while there were investigations in order that we understand whether trade laws were being broken. I think that would be a reasonably fair description of it.

Beckenstein

Yes. And the decision wasn't done until Bush, right?

Mathews

We made the decision. Talk about a controversial conversation in the White House? Huge fights.

Beckenstein

What was implemented then?

Mathews

We didn't.

Beckenstein

You didn't? You chose not to.

Mathews

We did not. We chose specifically.

Beckenstein

It went on under Bush?

Mathews

We specifically chose not to, and so to answer your question about the polling--sure, there was polling.

Knott

Triangulation.

Mathews

Triangulation? I don't even actually know what "triangulation" means. We were New Democrats.

Knott

Yes.

Mathews

Welfare reform is what we believed in, and if you think that's triangulation, well OK, fine, but I'm not sure what the word means. We were Progressive Democrats. When you look at the core decisions, time and time again--take fair trade through. That's a core kind of thing. Take the economy through, our approach to national security. And I'm sure there's some poll on whether school uniforms are a good idea. But does that have to do with the fact that you believed that there should be standards in schools? And that we should implement what was done here at the University of Virginia under President Ford? Bush 41? No. It doesn't affect that. What happened, I believe, is that people focus on why. You ask why do people have that? I believe that this is people focusing on the edge. It's just like the one freeze frame instead of "Let's get to the core of the issues."

Knott

If you were having a discussion on welfare reform or even perhaps school uniforms, to what extent would polling even enter into the discussion? Would there be a pollster in the room who would say--

Mathews

Most of the time, the polling was done on rollout. How are you going to roll it out? What are you going to say? To be fair, some polling was more than that. But you know what? We didn't poll whether we were doing "Save Social Security First." Did we poll how to say it? Does that phrase work? Does anybody understand what those words mean? Does it imply what you're trying to do? Sure. But Mark Penn was not in the room in any--not one--of our discussions around Social Security.

Clinton is such an intellectual guy he would talk about polls because he understood them so well. It also relates to his understanding of people. Right now, if you had Clinton in the room, he'd have a view on what's happening in polling in this country. He'd say, "Well, the darker numbers are moving in the electoral college in these five states, and this is happening because of this, that, and the other. But if you look at the gun issue, which moved in this state--you have to consider the new voters, but don't consider them in this state. And cell phone users? Everybody says it's young people, but think about these people that are using them." It would be an incredible explanation that would be highly detailed, based on fact and an understanding of people. He was always willing to talk about it. And I think that exacerbated the problem, too.

I'm sure President Bush knows his polls, but not like that. President Bush, I assume, knows on a daily basis what's happening in the battleground states. And I would think that he would and that's good. But he would not be like Clinton, sitting down, talking through, "Well, let's go to the cross-tab here. Did you look at this? This looked odd to me last night when I was on page 565." You just say "OK." [laughter] His understanding of it was much more sophisticated, and I think that exacerbated some of that.

Riley

But some of that is actually a piece of this indiscipline question, right? At some point you have to be disciplined enough not to talk to people or to assume that maybe I don't need to know what the fiftieth cross-tab is on this?

Young

I don't think the price paid for this procession was very high, do you?

Knott

I don't know.

Mathews

I don't know.

Young

I think there were bigger fish--

Mathews

I think it's when you add it all together. But I also think that it's just what history has to do. Let history judge this Presidency on its entirety.

Riley

Right.

Mathews

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Young

We used the word "historian," we didn't say "let history judge," because history is historians.

Mathews

Right.

Young

People who use the past.

Mathews

Yes. The historians will judge. But I think it's very important that the historians focus on "Let's clear the brush of the media and on all the other things."

Riley

Let me give you an opportunity to do that right now. One of the problems that exist in studies of Presidents past is that economic performance is ephemeral. Except for crisis situations like the Great Depression, most of the time, if you look back and you're trying to get a sense about lasting accomplishments in an administration, frankly there's just not a lot of attention paid to what the economic performance level was at a given time. I'm wondering if, from your perspective, you can help us identify some areas that you think are particularly important for us or future generations to pay attention to as both accomplishments and as lasting legacies. Do you have any notions about that?

Mathews

I'd argue the point slightly about the economics, and here's why. Even though we're Democrats and believe in government, we want peoples' lives improved through market mechanisms more. That's what we believe. We'd ten times rather have the market work to improve peoples' lives than the other.

The lasting effect of how many people had jobs, and the lasting effect of how many peoples' incomes shifted started only in the second part of the administration--the income shift of those in the lower quartile. The bottom two quartiles started to move a little bit in the last three years. I'd argue that maybe people aren't thinking about the right thing, unless you believe that government should do everything. So thinking about the economy in terms of the things that government's trying to do and promoting an economy that tries to do that is an important thing.

Riley

Don't misread my question. Part of what I was suggesting is that there's a kind of inherent bias in people who write histories that economic performance tends not to be something that weighs very heavily when we're looking back at what Presidents did that has some lasting implications. I'm not saying it's not important for the people who are alive at that particular interval. It just tends to be not the kind of thing that historians look at as the basis of their judgment about somebody. And I wonder if this bias is not going to have a negative impact, ultimately, on how historians will look at Clinton.

Mathews

My point is, historians should reexamine their measure. If you're a historian and you want to think about what's important to people, then think about it in its entirety. So the economic success, which we've talked about, to me is a very important part of the Clinton Presidency. The security of the nation, in terms of where relations went and that sort of thing, is a pretty important thing.

Slobodan Milosevic was, if we're honest, perhaps the most egregious one, and we need to think about Rwanda. But Milosevic was one of the most egregious destroyers of human rights, actively pursuing genocide in an extended period of time in a region of the world that hadn't resulted in world wars. So the actions taken through alliances created an approach to an alliance system that worked and improved from Bosnia to Kosovo, to be very specific. It actually has to do with security forces.

I'd name one very specific thing. In Bosnia, we did not get Bosnian security forces trained quickly enough, an important part of stability in these very complicated regions. We used one of the outside organizations and brought in the players to help do a better job. And Kosovo was stabilized actually much more quickly because you had trained Kosovo forces for the security. Security's important, then the big picture. During this time, this is both a security issue and an economic issue.

We started focusing on what we called BEMs--Big Emerging Markets. Big Emerging Markets and Big Emerging Markets. Those have actually become--if you go and look at a Goldman Sachs report? They do reports on the top five now. And so the idea that there are these large players that affect us both from a market space and from a national security space: India, China, Brazil, Nigeria. And the idea of thinking about your foreign policy through a new future lens of the players that are rising--

We started the relationship with India in terms of opening up with a very important player from a national security perspective as well as a market perspective. I'll be fair to this administration. President Bush took that ball and ran. But we'd started those things and put us on that path for a vision of the new world of national security. When one thinks about national security questions that we were facing at that time, it's the regional conflicts of the Kosovos and that sort of thing.

And how are you going to put it in place? There's no "X." There's no memo about a Cold War bilateral balance of deterrence. What we were putting in place was the world where rising players--and how we're starting to think about that. We didn't have the paradigm yet. But you were starting to develop the paradigm in how you did Bosnia-Kosovo with regard to these regional conflicts that were going to become more of a source of national security issues than the other. Then we had started to work on the terrorism problem.

Young

Yes.

Mathews

But not to the extent, certainly, as it's mentioned here.

Young

On the coalitions for international security, of course, the Bush 41 administration did that for the Gulf War.

Mathews

Absolutely.

Young

And there's a certain matter of continuity there. But I want to get back to the question of what historians pay attention to and don't. Part of the purpose of this project is to reform the way that people view the past because they get better information. The view from the inside and from the principals--the accessibility of that view to future historians--is diminishing because not as much goes into the records as used to. So I wouldn't predict that whoever goes under the name of historian will learn to pay a bit more attention [laughter] to the economics and to the performance and to these larger questions than the narrow presidentialists do to performance in office and ratings.

Mathews

It's an interesting question. In terms of who historians answer to, just as who does government answer to? Who does philanthropy answer to? Business is the easiest place to know who they answer to. It's the market and the shareholders. And that works; it's the clearest thing. But who do historians answer to? And I guess, as I think about it, historians are going to have to answer to the marketplace in a sense, because if people are going to stop doing Ph.D.s, if the information is not going to be used--that's why historians do it. You do it to educate and to hopefully improve over time--either to have a better understanding or even improve our learning. It's an interesting question. With all the new stuff now, many of the new things, and how people get their information, it does present a challenge for the field.

Young

You're right. Well, the answer is, of course, they respond to God. [laughter]

Mathews

It takes a while to know if you're right or wrong. And it's kind of an extreme step. Young: But it's not just the market. They also should respond to those they educate. And the difficulty is, what is a criterion for understanding one's past in a way that allows you to connect with it rather than see it as something dead? That's one of the things that I hope these oral histories will help with, because I think they have great educational value, and it's not filtered very much through the biases, points of view, framework of analysis that the professional historian has. We try to play the role of what people are going to be asking. Rather than get you to confirm or deny what we ourselves might think or write in a book.

Mathews

Well, so economics? The whole question of what are people going to write about? We talked about the thematic things around Clinton, then the substantive things--economics, national security, then a category that I would call "improving the health of the nation." And there, if you look at the package of changes that occurred on the environmental front, one thing that isn't mentioned in any of the documents that I think is really important are the monuments.

When somebody goes today and visits Yellowstone? Boy oh boy, they remember who did that. And it's an incredibly important thing to us as a country and as a nation. Grand Staircase, Escalante--there are a whole series of monuments that were done during this period. And that's a very specific example of a series of environmental issues, whether it was movement on Kyoto and recognition of climate change, even in a way that hasn't moved forward as we might have liked, or the car that we talked about yesterday, the PNGV.

All of that together has created a world where hybrid cars--there's a hybrid SUV [Sports Utility Vehicle] coming out. And that was a world and an attitude about technology and the environment going hand in glove. It was a new approach, too--this is not about killing jobs. That dichotomy has always been created. And to be fair, it exists.

There's an inherent tension between having things cost more to protect our environment and what that means to our economy. But it was actual things done, and an approach that I think will be remembered as a transition time, when you look at President Bush and at President Reagan. When we look at where we're going to be 20 years from now on this issue, this will be a point, a curve. It's not like anything happens like this in government. That's just not the way the world usually works.

Although 9/11 will create that, possibly, in terms of how we view the prism of national security. Welfare reform, I think, is something that, over time, is going to be something that is focused on. I actually think it's going to be part of how we think about the individual and individual accountability and the shift that we have from pension programs to mobile retirement, mobile healthcare. It's all part of a very important change with regard to how we view social programs and social assistance as a country in this century.

That's going to be an important symbolic thing. And then crime. We just take it for granted that this is a President who's a Democrat who changed this dynamic of who you think's good on crime. Or should have changed it, but hasn't--to the point earlier about where I don't think we did a good enough job communicating.

Crime rates, how they fell? One of the things that we didn't talk about is there was an incredible program out of ATF when I was still at Treasury which was about youth gun sales. In the city of Boston alone, the number of youth gun deaths were taken from about 24 a year to zero for about three years--those kinds of things. The cops on the street, the implementation of the "broken windows" theory that came out of an academic institution but then became implemented through leadership in the Federal government, and a couple of core mayors--some of whom are Republicans--buying in and changing a dynamic. And how we think about what kinds of things prevent crime in our nation.

Those are some of the really big ones. I actually think that this Presidency will be remembered for this wild list of the other things. Whether you put family medical leave with the big ones or the little ones, there's going to be this long list of things that affected many, many, peoples' lives but didn't rise to the level of a war. The approach to public housing, Hope 6. Tearing down those awful, huge, public projects in everywhere from Chicago to Seattle. That's not how we do public housing anymore. And that's not something anybody in this room ever spends a minute on.

But you know what? If you're a poor person and you live in one of those places, and the amount of violence and crime has gone down because you've broken those things down? Huge. There's a whole list that you're going to see over time that needs to be looked at and investigated.

Riley

Sylvia, we're very grateful. I've hinted yesterday, we're never able fully to exhaust all the topics that we could. But we usually do a pretty good job of exhausting the people that participate in the interview. [laughter]

Young

Speak for yourself, Russell.

Riley

This will be of enormous value to people who are grappling with these issues 15 or 20 years from now, and on further. As Jim indicated, part of the very nature of the project is to try to give some shape to how people think about these questions. You've given them a lot to think about, and I think in a very productive way.

Young

How people think about it, and what people will learn from it 20 years down the pike. So another Sylvia Mathews might conceivably learn something from that.

Knott

She might still be there.

Young

From Mathews the First.

Knott

There are many Caribbean islands loafings.

Mathews

I actually did ask President Clinton if I could be the Ambassador to the Caribbean. [laughter] I did. I asked for the job. It came open. He said, "I wouldn't let you take that job. You wouldn't like that job. You aren't going to do anything down there. I know they have some important issues, and you'd do a great job on them. But no, you've got to be here." [laughter]

Riley

A little paternalistic.

Mathews

Yes.