© 1996 Hedrick Smith Productions, Inc.

White House and Congress: Confrontation vs. Compromise

SMITH: Leon, you described in a caucus meeting that dramatic moment when Gingrich said to the President, " we thought we could break you?"

PANETTA: There was kind of a self admission that the strategy that they had designed around the budget had failed, that they basically had based their whole strategy on the fact that the President would break. They thought it would happen five months ago, six months ago. It didn't happen. They continued to believe that it was going to happen if they forced a shutdown and it didn't happen. When they had a second shutdown and engaged in negotiations, they thought it would happen and it didn't happen. Their strategy was tied to the President basically caving in and agreeing with the Republicans. And it didn't happen. He just basically said, our strategy failed.

SMITH: That was about the 4th or 5th of January, very late in the game?

PANETTA:Yeah. It was in one of the Oval Office sessions and he was sitting on the couch and it was just one of those moments that you remember for a long time because it was a culmination of what was I think becoming increasingly obvious to everybody that the strategy had failed. We all thought it had failed. The shutdown strategy was not working. We kept getting rumors that they kept hoping that, eventually the President would give in.

Refering to Shutdown in December 1995

PANETTA: What had Gingrich promised the President to do? Well, there was an agreement that if, in fact, we would move to a set of negotiations, in the Oval Office that they would move to do a continuing resolution.

SMITH: And reopen the government?

PANETTA: And reopen the government. What they asked was would I sit down with John Kasich and Pete Domenici to develop an agenda for what those talks would look like. In other words, a time frame.

SMITH: What did you think had happened? Did you think that Gingrich had simply welshed on it or did you really think that the freshmen had stopped him?

PANETTA: What happened was that evening they began to have their first meetings with the freshmen and with the members and the freshmen bolted at the idea of, in fact giving into a CR (continuing resolution.) What happened was we agreed on a letter that laid out what we thought would be the schedule and I was supposed to go back in the morning and again meet with Kasich and Domenici to kind of wrap up that viewpoint.

PANETTA: I went back there and Domenici was there, but Kasich was not there.

SMITH: I don't want to get lost in this -- Gingrich called the President?

PANETTA: Gingrich basically at that point asked to see me. I talked with him and he basically said, "I can't deliver on this."

SMITH: He said he could not deliver because of his freshmen?

PANETTA: Yeah, he said, "I just can't -- I can't do it." Is there a way for you to talk to them, can somebody talk to them, maybe open a line of communications here to try to talk with them because he said, "I honestly cannot deliver." And I mean Dole was angry about it, but the Speaker was basically again saying, "I cannot deliver."

Newt Gingrich & The Power of the Speaker

PANETTA: He essentially came into it rallying his troops, you know, saying we're going to do the contract, saying we're going to do the revolution, but I think in the end never really thought out what am I going to deliver on, what can I deliver on in reality considering I got a Senate to deal with, I got Bob Dole to deal with, moderates to deal with. I've got a Democratic President to deal with. What, in fact, can I deliver on that we can say we achieved. I don't think you spend enough time strategizing that. So, you know, while he could start the war -- while he's good at starting a war, I don't think he was able to strategize how in the end he was going to win the war or at least win some of the victories that would keep him in place. I mean, he likes to use military leadership as an example. I think what happened here is the example that -- that we often refer to as Bonaparte going into Russia. Bonaparte, you know, moved in quickly, but then bogged down, because he didn't look ahead at what he was going to face in terms of the winter and the troops that were there. And I think he ran into the same problems on Capitol Hill.

SMITH: People said that you had a seven year balanced budget scored by CBO, essentially Tom Daschle's budget, in your pocket for quite a while before you actually laid it on the table? Is that true? Why didn't you put it down sooner?

PANETTA: Well, that was another thing that I just -- I never quite understood what the hell they were doing in these talks, because I'm used to a process of negotiation, which means you sit down and it's back and forth, it's give and you lay a part of your proposal down. The other -- I mean, both side know you're not laying everything down, but you're in a process of negotiation, of give and take and you try to work your way towards some compromises. That's the way a negotiation works. I came in on that basis -- that I wasn't going to lay down my last offer first. That's crazy. And I wa snot there to basically engage in terms of surrender. I think the Republicans basically, because they thought the President was going to cave, came in with the attitude that this was not about negotiating, this was about basically working out the terms of surrender. And, so, they expected me to basically lay down a proposal that looked like the Republican proposal. I would -- I was never going to do that. And, so, what I was prepared to do was to lay down incremental steps that moved us towards a process of give and take, of negotiation, of compromise.

SMITH: And they didn't want to do that?

PANETTA: They didn't want to do that?

The Need for Bipartisanship & Compromise

PANETTA: Let me tell you what I -- what I basically said when we began these discussions is -- I laid out what I said is the key to whether or not we can get an agreement. I think I put about ten items on a board. And I basically said, look, these are the issues that you have to confront in these negotiations, things like medicare and medicaid, discretionary spending, welfare reform, about ten items. And I said, to get an agreement, both sides have to be able to claim some wins. And both sides have to be willing to say we split on some other things. That's the way you do things if you really want to put a package together. So, I basically went down the list and I said, look, you know, on -- on balanced budget, seven years, we're moving to you. on CBO we're moving to you. On medicare, you got to move to us. And I went down the list. And, so, what I came down was -- I said, you win on three, we win on three, we split the difference on the others. That's the way you're going to get a deal.

SMITH: What does Armey say to that? What does Gingrich say to that?

PANETTA: They say we put too much into -- we've put too much into winning these issues. They started talking about we got to have entitlement reforms. I said, entitlement reforms, who are we kidding. You got 200 billion in tax cuts that you want to pass out. Don't give me the line in entitlement reforms.

PANETTA: Dole was not the problem.

SMITH: Did he ever say anything in response to these entreaties of yours?

PANETTA: I think -- Bob Dole is a guy who understands the legislative process and knows what it takes to make it happen. So, I -- you know, the Senate has never been the problem. The House -- the House Republicans were the problem.

Clinton: Learning the Presidency and Relations with Congress

PANETTA: It's been a learning process. I mean, for any President who comes into this town, you know, he came from a small state. He had worked with the legislature in his state and just developed, you know, that kind of idea about he would work the legislative process there obviously as Governor -- much more power and much more control over the legislature, greater ability to influence the public in terms of putting pressure on the legislation because -- by virtue, of the Governor's position.

PANETTA: I mean, the President has this -- this sense that given enough time he can convince anybody about the logic of his position, anybody. And that, you know, whatever it is, whatever hang-up it is that he's -- he's absolutely certain that he can change their minds in some way. And I think particularly when it came to Southern members, because there was obviously some kind of -- of deeper relationship there because -- coming from the South -- that he thought for sure there were members that would not bolt on him, that they were members that he could work with.

PANETTA: I think the -- you know, the first shock came on the stimulus package,because I think there was a sense that the stimulus package would be a way to try to address current needs in the economy. And I think that was kind of the first shock that -- uh -- that the Congress wasn't willing to go along with it.

PANETTA: Well, I think -- I mean, I think the -- the President's concern after the first two years, despite, you know, I think a very good record, is that he did not want to be trapped into being a prime minister and that so often it was -- you know, you got so wrapped up in the -- in the issues that were up there and working the issues and working what was going on and having to deal with the leadership up there that sometimes he felt he -- he basically had -- had not kind of protected the power base of the Presidency. And I think he learned that. And I think he -- he is much better at balancing how you operate as President in relationship to the Congress, that it is important sometimes to say to the American people, look I've made my proposal, this is what I believe. It's up to the Congress to now respond. Ronald Reagan was very good at that. And I think, you know, the country understood the difference between President as President and a President as someone who gets lost in the -- the Congressional give and take.

Presidency: Power and Myth

SMITH: Do you think he was shocked that this was a weaker office, the Presidency was a weaker office?

PANETTA: I think what, what was tough for him to get a handle on was how there really is-- these different centers of power in this town.

PANETTA: I think there was a sense that a new Democratic President, Democratic agenda, Democratic Congress -- uh -- that there was a real opportunity here to just move an agenda through and that it would be, you know, I think an easier process of getting it down, because there was a feeling that we were riding a wave and that it would happen that way. I mean, a lot of us I think cautioned that, you know, it wasn't that simple. You're dealing with a lot of different egos. You're dealing with a lot of people who have their own power base, Democrats as well as Republicans, but principally Democrats who are Chairmen. You had to deal with all of that. You had to be, you know, sensitive to that in order to make this work. And it's quite -- it's a learning process. And I think the President, you know, as he worked with that began to learn that it wasn't just, you know, the legislature in Arkansas, it was very different. And that you had to work with the different power bases that were up there.

PANETTA: You aren't just dealing with a power center at all, you're dealing with a whole series of different power centers and personalities and egos and turfs and jurisdictions and people who have their own political ax to grind one way or another. And you've got to be sensitive to all of that and somehow you've got to work with it and then eventually bring it together. It is -- it's a tremendous challenge. It isn't easy.

Newt Gingrich & The Power of the Speaker

SMITH: How do you size up Newt Gingrich.... as a leader in terms of his ability to move the House and then to bargain and negotiate?

PANETTA: I think the Speaker is -- is someone who's very good at rallying a force together. He knows how to basically get members worked up about an issue -- uh -- to kind of pull them into take control of the mob, if you will, kind of approach. And he knows what it takes to kind of give them the spirit of revolution, if you will...while -- you know, as a -- as a minority leader and someone who virtually was willing to bring down the House in order to gain power -- you could essentially spend your time tearing an institution down, but not having the responsibility of delivering it. It's much easier to do that.
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© 1996 Hedrick Smith Productions, Inc.