Monday, Jan. 30, 1995

STUCK IN THE MIDDLE

By MICHAEL DUFFY WASHINGTON

BILL CLINTON'S PRESIDENCY HAS been an exercise in crisis. His legislative victories have often come only after bloody, near-death struggles, and his numerous political setbacks are nightmarish and ongoing. He has experienced-- and somehow survived--more make-or-break moments in two years than most Presidents do in four. The repudiation in the polls last November was as thorough as any President has ever suffered at mid-term, leading to mordant jokes around Washington that Clinton has become the country's first half-term President. Though the White House released a 16-page list of accomplishments last week, the public gives him little or no credit for any of it. That baffles Clinton, who often notes privately, ``If you'd told me two years ago that I could have accomplished all these things and still be in trouble, I wouldn't have believed you.''

White House officials believed they had a big chance this week to reverse that trend: In his State of the Union speech Tuesday night, Clinton would try to explain what he stands for to voters who can't recall--and increasingly don't care. Barring a war or economic crisis, aides said, this would probably be Clinton's last time to give a purely presidential speech to the nation before the campaign season begins. ``There's no question that this State of the Union speech is the most important speech of this presidency,'' said Leon Panetta, Clinton's chief of staff last Friday.

But as Clinton worked on finishing touches late last week, another crisis loomed. His proposal to provide $40 billion in loan guarantees to the Mexican government ran into an unexpectedly hostile reception on Capitol Hill. His Democratic allies in the House, still smarting from their failure to stop nafta in 1993, pressed the President for concessions from Mexico City on more favorable labor practices and environmental regulations. House Republicans, though philosophically supportive of the Clinton plan, balked at providing the rest of the votes unless Clinton took a firmer public stand against the demands of the liberal Democrats. Clinton was forced to mount a hurried campaign for passage, and dispatched Treasury Secretary Robert Rubin to bring the rebellious Democrats in line.

That suited Newt Gingrich and the Republicans just fine: the Mexican crisis was now sure to hang over Clinton's head Tuesday night. With less than a week to go before the likely vote on the loan guarantees, only 33 of 204 House Democrats agreed to back him. And Latin financial markets were getting the jitters.

Clinton's hesitation on Mexico was surprising because his record on trade has been so consistent during his first two years. Clinton won high marks for taking on his party's labor-backed liberal wing in the nafta fight and gatt treaty fights. But as he has re-evaluated his position following the election, many Democratic officials with ties to the White House have noticed that the President has been shoring up his links to the left. While Clinton has made several thrusts to the center, Democratic Governors complain privately that the White House has given only lip service to Republican efforts to halt unfunded mandates to the states, lest such moves upset labor unions and environmental groups. The Administration has in recent days backed minority set-asides in a Supreme Court test case and placed a number of prominent liberals in key campaign positions. At a Jan. 7 campaign- strategy meeting on how best to attract middle-class voters, one participant admitted, ``there was some talk about reconnecting with our base.''

Some Democrats believe Clinton has been quietly buttressing his left wing to prevent a primary challenge and prepare for a likely three-way race in 1996. If Ross Perot or another strong independent entered the presidential contest, Clinton could win with as little as 34% of the vote.

Meanwhile, Clinton's legislative strategy is to complete a few agreements with the Republicans--on the line-item veto, on unfunded mandates, the myriad reforms on Congress and perhaps welfare reform. White House officials do not expect to reach agreement with the Republicans on campaign-finance reform, lobbying reform or the draconian cuts in the budget and taxes anticipated by Gingrich's Contract with America. Nor does the White House seem to care much about that. As one senior official puts it, ``You've got to be able to pick your fights. To a large extent, this President will be defined not by where he's been able to work with the g.o.p., but where he's drawing the line.''

White House officials have been disturbed in recent days to learn that Clinton's Oval Office speech in December, in which he unveiled $60 billion in proposed tax cuts, has had almost no impact on the public. Democratic pollster Celinda Lake discovered that, a month later, ``only a few people'' could recall it, and many of those who did saw it as a purely political ploy. During the campaign, Lake noted, ``the core principle was the middle class.'' Two years later, she adds, ``People are not clear about what his guiding principle is anymore.'' Now even the President's advisers concede that Clinton's ``character'' problem has less to do with Paula Jones or Whitewater than with the widely held perception that there is no issue on which he would not compromise.

As a result, after 24 months as President without a single veto, White House officials say Clinton can't wait to veto something. The White House would welcome fights over repeal of the gun control, education reforms or a rollback of Clinton's cherished national-service program.

When Clinton began plotting his recovery after the election, he went back and began reading old campaign speeches in an attempt to learn what got him elected in the first place. ``Those old speeches,'' says an aide, ``were like core documents.'' The essence of the lesson, White House officials say, is that government must change but not disappear. Much has been made of Clinton's numerous meetings with manageagement mavens, late-night-television self-help gurus and, last week, a big group of history professors and other academics. But in the private speech-preparation sessions, it was the old speeches that Clinton kept coming back to. As he said at his first bull session on Jan. 9, ``What got me to the White House, what I campaigned on, what I've been doing for the last two years, is an argument I want to sustain, and I want to sustain it with clarity.''

While Clinton polished his speech, his top aides were working on little besides the Mexican loan deal. Rubin, Panetta and Vice President Al Gore faced a hostile group of House Democrats Wednesday morning and realized that they had what one called ``a potential tragedy'' on their hands. Fearful that voters back home would resent the public underwriting of private loans to Mexico, lawmakers refused to make what Gore called ``a difficult vote but an easy decision.'' Hearing Gore's insistence that the Treasury might actually make money from the deal, a lawmaker shocked the White House group with his bluntness. ``Al,'' he said, ``look around you. Does it look like anyone is buying that shit?'' When officials returned to the White House, they began pulling out the stops.

Rubin called John Snow, CEO of CSX Corp. that evening, asking him to activate the Business Roundtable, a group of business leaders concerned with public policy. The next day that organization asked ceos of more than 200 companies to contact an accompanying list of freshmen Republicans and push for support. Rubin and other officials began telephoning reporters and editors with spin. No one disputed that the stakes are high. Treasury's Rubin argued that if the loan guarantees were defeated, financial markets would panic in Mexico and in other emerging countries. ``You have the prospect of very serious ramifications in Mexico,'' he told Time on Friday, ``and because of the role that Mexico has had as a prototype with respect to developing countries, the very real prospect of spillover into other countries.''

That, in the end, may be the most powerful argument the White House has. By late last week officials affected confidence in an eventual victory on the loan guarantees. Still, they said, Clinton would have to devote a portion of his crucial speech to the issue of assisting Mexico. The situation is consistent with his record. Once again, an exercise in crisis interrupts Clinton's attempts to define himself, trimming his political capital--and perhaps his longevity.

With reporting by James Carney/Washington

With reporting by JAMES CARNEY/WASHINGTON