Who's In? Who's Out?

By GEORGE J. CHURCH

Reagan struggles to form a Cabinet able--and willing--to serve

Early in the evening, a yellow Ford pulled up to the southwest entrance of the White House. Transition boss Edwin Meese and Nevada Senator Paul Laxalt piled out and proceeded to the Situation Room in the basement. They were about to make their nightly call to Ronald Reagan at his Pacific Palisades home and now they felt it necessary to use the most tap-proof telephones in the nation to discuss the most top-secret political topic in town: Who would be members of his new Cabinet?

Meese, Laxalt, a few other aides and Reagan were about the only people in the country who knew for sure last week what was going on. Outside Reagan's home, reporters stood long vigils waiting vainly for scraps of information. When Reagan emerged from conferences with his lieutenants to attend a series of private dinners, he merely smiled away correspondents' questions. In Washington rumors and speculation buzzed louder every day, reproducing a touch of the he's-down, he's-up, he's-down-again hysteria of '30s fight broadcasters in Reagan's radio-announcing days.

Long lists of "all-but-certain" Cabinet members appeared daily in the nation's press, only to change with the next edition. Like Kremlinologists, Washington's mighty attempted to read vast significance into who was placed next to whom at dinners. Meese created a stir at one by sitting next to the wife of former NATO Commander Alexander Haig. But Haig, who was also present, would say nothing, and Meese kept repeating his favorite line: "Those who know aren't talking, and those who are talking don't know."

There was much more to the hubbub than deliberate mystification. Meese insisted that the selection process was proceeding on schedule, and at least the first appointments are expected to be announced this week, about the time incoming Presidents generally disclose their choices. But there were strong indications that the "Reaganauts," as the transition aides have taken to calling themselves, were having unexpected trouble making some of their boss's first choices stick. That was surprising enough for an Administration-to-be that boasts it will bring efficient business-management techniques to Government. But it was even more surprising because Reagan was known to have decided on his initial top choices at meetings with his California kitchen cabinet before Thanksgiving, providing ample time to notify and check out the chosen.

One problem that turned out to be severe was the danger that a nominee would have a conflict of interest--or the appearance of it--between his private affairs and his Government job. Reagan is the first President-elect to staff a full Cabinet under the 1978 Ethics in Government Act, which tightens financial reporting for top Government officers and sets up elaborate rules to guard against a clash between their federal and private lives. Says Meese: "A President-elect used to call up a prospective Cabinet member. He would consult with his wife, call back in 24 hours and the deed was done. Now he has to sit down with a lawyer from the transition team, his own lawyer, his accountant and a number of others."

The hurdle posed by conflict of interest hindered the selection process in another way: since the Reaganauts anticipated that some of the people they approached would turn them down because they did not want to expose their financial affairs or sell off lucrative assets, the aides had to be prepared with alternative choices. Says one: "We were like a coach fielding a team, constantly making sure that there were a lot of quality players on the bench as backup."

The problems of financial review knocked Clifford Hansen, former Wyoming Governor and Senator, out of the Cabinet. At midweek he seemed certain to be Secretary of the Interior; at week's end he suddenly removed himself from consideration. The key factor was that Hansen's wife and daughter have permits to graze cattle in Grand Teton National Park, which is run by the Interior Department. Said Hansen: "I presume we'd have to forgo using the permits, and that would put us out of business."

Conflict-of-interest difficulties also may have affected Reagan's choice for Secretary of the Treasury, a senior post whose occupant will be an especially close adviser. After the G.O.P. ultras and moderates had fought to a draw over who should occupy the chair, Reagan picked a man acceptable to both camps: Walter Wriston, 63, chairman of Manhattan's Citibank, second largest in the U.S. Wriston is one of the energetic creators of modern, expansionist, risk-taking banking, yet his views are unimpeachably conservative.

To become Treasury Secretary, Wriston would have had to sell $2.3 million worth of stock in the parent company of Citibank, which has claims against the assets that Iran wants to trade for return of the American hostages and which participates in Government-guaranteed loans to New York City and Chrysler Corp. At week's end, Wriston's aides said that he was not interested in the job.

Other problems arose to turn Cabinetmaking into a complicated jigsaw puzzle. Reagan clearly wanted to select experienced people, but hard-line conservatives like North Carolina's Jesse Helms opposed having too many "retreads" from the Nixon and Ford Administrations. An added complication was the fact that Reagan intends to govern largely through an executive committee, an "inner circle" of six or so senior Cabinet officers, plus, on appropriate occasions, the directors of the

CIA and Office of Management and Budget. The inner circle will meet with Reagan regularly to review the whole range of Government problems and will be charged with making sure that his orders are carried out. Thus the people filling these posts--basically the Secretaries of State, Defense and Treasury and the Attorney General--must be capable of giving advice on a broad variety of subjects.

The key piece to the inner puzzle turned out to be Caspar Weinberger, 63, who from the beginning was almost certain to enter the Cabinet. "Cap the Knife" Weinberger acquired his fearsome nickname as a budget slasher in 1968 when he was Reagan's finance director in California, and he embellished his reputation as Nixon's OMB director and Secretary of Health, Education and Welfare. Weinberger is a devoted advocate of the inner circle idea, having worked under a similar arrangement with Reagan in Sacramento.

The problem was where to put Weinberger, and the answer seemed to be in the Pentagon, primarily because Secretary of Defense was the hardest senior post to fill. Other candidates kept getting ruled out. Texas Senator John Tower campaigned for the job, but Reagan wanted him in stead to be chairman of the Armed Services Committee in the new Republican-controlled Senate. John Connally pushed to become either Secretary of State or Defense, but the Reaganauts balked at the outspoken and controversial Texan. Says one: "There are just too many problems with John, and he brings with him no political benefits."

That pretty much left Weinberger, although some complained that a budget slasher was a strange choice for a President who intends to mount a major military buildup. In Reagan's view, however, Weinberger may be just the man to make sure that generals and admirals spend their unexpected dollars wisely.

Weinberger's selection, which was still not final at week's end, opened the job of Secretary of State as a possibility for General Haig, 56. Haig's insistence that the U.S. must counter the Soviet military buildup and threatening moves in the Third World parallels the foreign policy views of Reagan. Haig also wins applause from Western Europeans for his stress on strengthening the NATO alliance. Says a top West German defense official: "The man is quite simply the best that Washington has ever sent us." Haig was considered for Secretary of Defense, but that post traditionally goes to a person with a civilian background.*

Although he was the leading candidate for State, Haig had his own problems. Conflict of interest was no apparent hazard: Haig is now president of United Technologies Corp., which does nearly 25% of its $9 billion business with the Government, but he has been in that job only a year and could cut his ties with little strain. The real trouble was that party factions on both the right and left found fault with Haig, who had been Richard Nixon's last White House Chief of Staff. Although Haig is often credited with having kept the Government functioning through the last agonies of the Nixon regime, liberals grumble that he protected his President too zealously against the revelations of Watergate. Some liberals and conservatives are dismayed by Haig's alleged involvement in wiretapping while in the Nixon White House, and other conservatives consider Haig to be an opportunist.

At week's end Washington was alive with reports that Haig would face a stiff confirmation fight in the Senate, and that the President-elect had still not definitely offered the general the job. There were few other serious candidates. Reagan might offer the post to Weinberger, but that would leave a vacancy at Defense, or to former Secretary of the Treasury

George P. Shultz, but he was thought to be too pro-Arab. The guessing game went on. Some other prospective appointments:

P: Secretary of the Treasury. Rightists had pushed Lewis Lehrman, 42, a little-known New York drugstore magnate, but moderates rejected him as being too much of an ideologue. Their candidate was Alan Greenspan, 54, a traditionalist who was Gerald Ford's chief economic adviser. Ultraconservatives fought him as a Ford rerun whose devotion to deep cuts in income tax rates was suspect. Doubts about Wriston's availability brought Greenspan back into the race, but he was far from alone. Reaganauts also talked about Charls Walker, 56, a tax expert, top Treasury official under Nixon and business lobbyist; Donald Regan, 61, head of Merrill Lynch, the giant investment firm; and Reginald Jones, 63, chairman of General Electric Co.

P:Attorney General. For a change, no dispute: William French Smith, 63, led the field. His appointment would continue an old and not entirely hallowed Bobby Kennedy-John Mitchell tradition of the Government's chief lawyer being a close confidant of the President. Smith has been Reagan's personal lawyer since | the mid-'60s, guides many of s Reagan's investments, and is chief chef in the Presidentelect's kitchen cabinet of unofficial advisers.

Smith told TIME last week that he feels the "post-Watergate rules" that sharply limit contact between the Justice Department and the White House are too restrictive. "Unfortunately, the whole Watergate experience placed so much emphasis on that aspect that it's tended to infect normal ties and relationships," said Reagan's longtime friend. "Rigidity was built up by necessity, but I would hope for an easier relationship. For example, I go back to J.F.K. and R.F.K."

P:CIA Director. William J. Casey, 67, Reagan's blunt-spoken campaign manager, is the clear front runner and almost certain to be appointed--if a Haig dropout does not cause him to be considered for Secretary of State. During World War II, Casey was a crafty and inventive chief of OSS intelligence operations in Europe. As Nixon's Securities and Exchange Commission chairman, he was accused of complicity in some scandals; though the charges never stuck, they may be revived in confirmation hearings. Although a dedicated conservative, Casey is flexible enough to win praise from liberal Democrats, including Historian Arthur M. Schlesinger Jr.: "He'd be a good CIA chief. He's not a frenetic hard-liner."

P: OMB Director. The leading candidate is Michigan Congressman David Stock man, 34. Stockman's zeal disturbs some of his colleagues: New York Congressman Barber Conable, a leading Republican tax and budget expert, says that he has "a very precise mind" but considers him "difficult and inflexible . . . very rigid." But Stockman's appointment would please the New Right. New York Congressman Jack Kemp, the leading apostle of deep tax cuts, has been pushing hard for the young Congressman.

P: Secretary of Health and Human Ser vices. Pennsylvania's Senator Richard S. Schweiker, 54, is a Reagan surprise choice -- again. Just before the 1976 Republican Convention, Reagan stunned the Republican Party by naming Schweiker, then something of a liberal, as his prospective running mate. The maneuver made Schweiker an instant convert to strict conservatism, although it failed to win the nomination for Reagan. Schweiker's G.O.P. Senate colleagues regard him with reservations. Says one: "He's Mr. Aver age in ability, but he's tenacious and might make a very good Cabinet officer if he has a strong back-up staff." Reagan thinks so highly of Schweiker that he might well enter the inner Cabinet.

Some of Reagan's other apparent choices would be totally new to the national scene. Drew Lewis, 49, a Pennsylvania businessman who was Reagan's personal envoy to the Republican Nation al Committee during the campaign, is being touted for Secretary of Transportation; Manuel Lujan Jr., 52, a little-known New Mexico Republican Congressman, is being discussed for Secretary of the Interior; Raymond Donovan, 50, an even lesser-known New Jersey contractor with a reputation for getting along with blue-collar unionists, is being tapped to become Secretary of Labor.

Considered as a group, Reagan's Cabinet selections are dominated by solid conservatives who are respected more for their accomplishments than their ideologies. The President-elect seems to be trying to assemble a team that would please, if not delight, both the party's moderates and its right-wingers. But the struggle to find the right mix -- and men who could accept the jobs -- was the first patch of trouble that the Californian has encountered since his surge to win the election. Ronald Reagan got a whiff last week of what life in Washington will be like.

-- By George J. Church. Reported by Walter Isaacson/Washington and Evan Thomas/with Reagan

* The only professional military man ever to have served as either Secretary of Defense or Secretary of State was General George C. Marshall, the World War II Army Chief of Staff who later held both Cabinet posts.

With reporting by Walter Isaacson; Evan Thomas

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