The Decline of Mike Blumenthal

A major loser in the tense maneuvering leading to the President's new anti-inflation policy was his Treasury Secretary, W. Michael Blumenthal. TIME's Washington bureau chief Robert Ajemian writes:

Mike Blumenthal was finishing his regular weekly breakfast in the Federal Reserve Board dining room with Chairman G. William Miller when the phone call came: the President urgently wanted to see him at the White House Only four hours remained until Jimmy Carter was to deliver his televised speech on inflation, and as Blumenthal was driven across town, he wondered if the President had any additional changes in mind. For months Blumenthal, the Administration's bridge to the business community and chief inflation fighter had advocated a tougher program to hold down prices and wages. So he had been shocked only one week earlier when Carter had told him he wanted to appoint Robert Strauss--no friend of Blumenthal's--to head the drive. With heavy urging, the Secretary had talked Carter out of the move. He told the President that the Strauss appointment would undermine his own authority and surely weaken the Administration program. Carter went along.

Now, however, the President had gone back to the plan Blumenthal hated. He had decided, Carter told his Treasury Secretary, that Strauss was the right man to bend business and labor. Blumenthal was stunned and furious. He spent the next hour or so at the White House in a state of frenzy, flipping between the offices of Vice President Walter Mondale and Presidential Aide Stuart Eizenstat, who was still writing the President's speech. Said one White House aide who watched Blumenthal: "He was climbing the walls." Blumenthal was trying desperately to alter the decision and then, realizing it was irreversible, attempting to shore up his own position by making additions to Eizenstat's drafts. He finally persuaded Eizenstat to insert a new paragraph in the President's speech declaring that Strauss would become a member of the steering committee of the Economic Policy Group, of which Blumenthal is chairman. The reference was merely face-saving, for it was clear that Strauss would become a major force in the President's economic policies.

Almost from the time Carter picked him for Treasury, Blumenthal seemed uneasy in his job. The White House senior staffers and Strauss himself viewed him as a brilliant, brittle man with an enormous ego, too jealous of his own territory and difficult to deal with. For his part, Blumenthal considered the President's aides inexperienced and in some cases destructive. When he began to hear stories that he had contributed to Bert Lance's downfall, the Secretary went straight to the President and complained. By then, Blumenthal had decided the only way to endure was to put more emphasis on his personal ties to Carter, and during the past six months he seemed to be succeeding.

Nonetheless, Mondale and Carter's "Magnolia Mafia," as his staff is being called by critics, continued to believe Blumenthal was incapable of winning over a skeptical business community to Administration policy. Three weeks ago they recommended that Blumenthal be replaced by Strauss as the head of the anti-inflation drive. This time Carter took the advice, regardless of the consequences. When one of his staff warned him that Blumenthal might not accept the decision, Carter replied: "I'm set for that." White House staffers were, in fact, hoping that Blumenthal would resign. "Let him," remarked one high aide who had tangled with the Secretary. "We'll be better off."

Although all sides were talking teamwork late last week, Blumenthal still faces an uncertain future in the Administration. His brilliance must now compete not only with a disapproving White House staff but with the unsubtle Strauss, a man with whom he has been at odds. Some insiders thought that the Secretary was, in fact, twisting slowly in the wind.

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