TWO MEN, TWO DECISIONS

By GEORGE J. CHURCH

Of all the myriad strategic decisions made in both presidential candidates' camps, two did more than any others to shape the race. Bob Dole's 15% tax cut turned out to be a turkey; voters never came to believe he could give them a break and balance the budget. Bill Clinton's signature on a Republican-drafted welfare-reform bill, over the anguished screams of party liberals, turned out to be so popular that the President bragged about it over and over to enthusiastic crowds in Florida last week.

But the decisions, and the story of how they were reached, are important for another reason: they throw a sharp, and sometimes surprising, light on how each candidate's mind works. For example: Which man holds endless meetings, listens to a wide variety of advisers, has a penchant for reviving discussion of ideas his counselors had thought were rejected, delays a final decision until the last possible moment and discloses so little of his own thoughts that key aides are unsure until the very end how he will come down? That description was written many times about Clinton during his first two years in office, but only portions of it tally with his welfare decision--whereas it fits perfectly Dole's ruminations on tax policy.

Another surprise is that neither decision seems to have been quite the betrayal of principle that critics have portrayed. Dole at worst showed a dismaying propensity to convince himself of what he wanted to believe: that he could conscientiously propose a big tax cut while preserving his hard-won reputation as a deficit hawk. Eventually he satisfied himself that he could cut federal spending enough to offset his tax cuts and balance the budget, even though he never managed to fill in all the numbers. His national campaign chairman, Donald Rumsfeld, scoffs that it is "absolutely ridiculous" to think Dole should "have to track every nickel down," though a skeptical public seems to demand just that.

Clinton did, to some extent, put personal ambition above party. He signed the welfare bill over the warnings of advisers that it not only would infuriate liberal backers but might hurt Democratic congressional candidates as well. And he certainly was eager not to give Dole any chance to cry that the President had violated his 1992 pledge to "end welfare as we know it." But at the climactic meeting in the White House, Vice President Gore observed that the political arguments cut both ways and were too difficult to gauge, so Clinton should "go with your gut." The clinching argument seems to have been that a badly broken welfare system had to be fixed and that the chance to do so might not come again, so the best course was to sign what everyone considered to be a seriously flawed bill and then try after re-election to remedy its defects. That argument was voiced by only a minority of aides at the meeting--but although they did not know it, they had a powerful offstage ally: Hillary Rodham Clinton had previously given her husband roughly the same advice in private.

In both cases, though, the final decisions came only after long and tortuous deliberations in public and private. On the next two pages, we offer an inside look at each fateful decision.

DOLE AND THE TAX CUT

The Republican candidate began overcoming his deep skepticism about cutting taxes well before he became the Republican candidate. Though Dole once grumbled that tax-cutting zealots would never take over the G.O.P., the 1994 congressional elections showed that they at least had to be appeased. As Senate majority leader, Dole embraced the tax reductions called for in Gingrich's Contract with America. But working up a fervor for sweeping tax cuts, rather than accepting them grudgingly, took longer. In April, with the primaries nearly over, Dole's campaign manager, Scott Reed, had an all day meeting with political and economic advisers to discuss a tax-slashing program. Several wanted to come out with one pronto, but Reed told them Dole was not ready.

The process of getting him ready started in earnest at a May 8 meeting that began at 8 p.m. in Dole's Senate office and continued for three hours over barbecued food sent in from a nearby restaurant. Six conservative economists and six Republican Senators, headed by Pete Domenici of New Mexico, had been invited to discuss two questions posed by Dole: how to speed up economic growth and how to raise stagnant wages. They agreed that deep tax cuts needed to be part of a multipronged program that would also stress deregulation, school choice, worker training and enough spending cuts to keep the country moving toward a balanced budget.

Dole seemed pleased. Says Utah Senator Bob Bennett, who participated: "That may have been the first time that Dole realized that it was not an either-or choice. Here were serious economists, not supply-side ideologues, saying yes, you can get greater growth in the economy by cutting taxes and you can remain a deficit hawk at the same time." Weeks later, though, Dole intimated to a vanquished rival from the primaries, publisher Steve Forbes, that he was still not altogether convinced. When they met in late May, Dole admitted being impressed by the excitement Forbes had aroused preaching a flat tax--which Dole had publicly called "snake oil." But, said Dole, to sell his own tax plan effectively he still needed to "internalize" it.

Stanford economist John Taylor was supposed to draft a plan by June, but that proved undoable. Meetings and memos continued all through that month and into July. Dole stopped by some of the meetings but would listen only 30 minutes or so and then leave. "We're talking and arguing back and forth, very academic," a participant in one meeting recalls, "and Dole is looking at his watch. 'You're a bunch of smart guys,' he said. 'Get something on paper.' And then he was on to the next issue." That was classic Dole: let others work out details and step in only during the final negotiations.

Those began on July 11, at a meeting of economic advisers, who by then included Forbes, over pizza at Dole campaign headquarters. Dole unexpectedly dropped in, stayed several hours and did the same the next day. Those sessions narrowed the choices to two. One was to repeal the 1990 and 1993 tax increases. Forbes pushed hard for this one, largely because it would strip away three tax brackets that had been added in those years and reduce the number of tax rates to only two. That would be a step toward Forbes' cherished flat tax.

But the 1990 and 1993 increases had hit only the upper 4% of taxpayers. Thus Sheila Burke, who was then Dole's chief of staff, judged a straight repeal "suicidal"; it would open the G.O.P. to charges that it was giving away money to the rich. Some advisers favored coupling repeal with a provision giving workers an income tax deduction equal to the Social Security taxes taken from their paychecks. That would have been a boon to the middle class and some of the working poor, since Social Security taxes are levied on the first wages of $62,700 a year, and have become a grievous burden on some low-income families.

Michigan Senator Spencer Abraham, however, protested that the idea was far too complicated. He was the most persistent and forceful advocate of the idea that finally won: a 15% across-the-board cut in income tax rates over six years. The idea was so simple that a button touting it could say simply 15%--whereas, Abraham scoffed, a button for the other plan would have to read AGI-FICA, and even that would need detailed explication.

While these wrangles were going on, Taylor and his fellow economists were working to insulate Dole from charges that he was making pie-in-the-sky promises. Many economists believe that the government would eventually get back 50% to 60% of the revenues initially lost through tax cuts, because faster economic growth would boost incomes subject to tax. To be conservative, though, Taylor reduced the figure presented to Dole to 27%.

Taylor was constantly checking with Domenici to make sure that he could find enough spending reductions to offset $500 billion to $600 billion in tax cuts and still balance the budget by 2002. At a meeting on July 13, Domenici said he could do it. He also warned that those cuts would be extremely difficult to make politically, but that did not seem to set off any alarm bells.

The climactic meeting was on Saturday, July 20, at campaign headquarters, with Senators Abraham, Bennett and Connie Mack of Florida present and many other counselors, like Rumsfeld, participating by speakerphone. Dole this time "moved from interested spectator to clear participant," says Bennett. He and Burke are convinced that Dole decided then on the 15% across-the-board cut. A big reason: the plan applied the same reduction to both the rich and the poor, so he could defend the move as fair.

In true Dole fashion, though, the candidate did not communicate any explicit decision, and so meetings, memos and all kinds of frenzied activity continued. As late as August 1, Dole asked aides to rerun the numbers on no fewer than eight different proposals. "We went over this ground months ago," complained a staff member. The final, official, out-loud decision was apparently communicated to Taylor, but he does not remember exactly when it came or what words Dole used. Aides were still working through the morning of Aug. 5 preparing press-briefing books for the public announcement that afternoon.

Dole has paid a heavy price for that coyness. It left him and his aides woefully unprepared for persistent questioning as to what spending he would cut to offset his tax cuts and balance the budget. Domenici's folks had suggested some specific spending cuts and the closing of some corporate-tax loopholes. Dole chose not to talk about those ideas, because he wanted to keep the spotlight on tax cuts rather than spending cuts and feared that loophole closing could be represented as a tax increase. Thus he was reduced to asking the public to trust him to find the necessary cuts and push them through Congress. Polls show voters increasingly unwilling to do so.

CLINTON AND WELFARE

The President has a well-deserved reputation on tough issues for trying to have it both ways--or three or four ways. And on welfare reform, his "I'm all for it, but..." approach had been getting results. Twice he had vetoed Republican bills as harsh and punitive; both times the Republican Congress responded by stripping out provisions the President found most objectionable. Finally, although Dole desired a third veto he could decry during the campaign, Republican members of Congress concluded they would be better off telling constituents they had actually got an important and popular reform written into law. They prevailed on party leaders to continue the federal guarantee of Medicaid assistance to the poor, thus dropping the last provision Clinton had said he could never accept. With that, Clinton also won the last concession he was going to get. Congress was about to pass a bill that would force him into the most significant decision not just of the campaign but of his first term. He could sign and reverse 61 years of social policy by converting an open-ended federal guarantee of assistance to the poor into a largely state-administered program with time limits on benefits designed to push most of the recipients into work. Or he could veto and continue a system most Americans have loudly insisted must be reformed.

As the final decision loomed, Clinton was deluged with advice and sought out more, both by phone and in person. In liberal mythology all the policy arguments were for a veto and the only arguments for signing were crassly political. In fact, however, Clinton's advisers were deeply split on both politics and policy.

Liberals, including most of the Democratic congressional leadership and such allies as Marian Wright Edelman, head of the Children's Defense Fund, did argue that signing would risk throwing children onto the street if their parents could not find jobs before their welfare benefits ran out. But such White House aides as George Stephanopoulos and Harold Ickes also developed a political case for a veto: the President would prove he was a man of principle, dedicated to helping the poor. Ickes further argued that signing would hurt Democratic congressional candidates, mostly by enabling Republicans to portray themselves as far less extremist than their opponents contended. The Republicans could claim they had managed to produce a popular reform that even a Democratic President could accept.

Those who urged Clinton to sign the bill, most of them conservative and New Democrats, did have their political arguments, notably that vetoing would undercut all Clinton's efforts to present himself as a champion of traditional social values, prominently including work. Dick Morris, at the time Clinton's chief political guru, contended that by putting his signature on the bill, Clinton would solidify a clear electoral majority by attracting relatively young suburban families who were the core of the swing vote in the country and who viewed work as a value far outweighing, say, school uniforms.

But the advocates of signing had strong policy arguments too: the welfare system really did trap people in a cycle of idleness and dependence, just as Clinton had said; something had to be done to lure or push them into productive work; the bill at hand was the best and possibly last chance the President would get to reform it. Yes, it contained very objectionable features: a sharp cut in food stamps and a ban on many social services to legal immigrants. But the President could in conscience sign the bill while decrying those features and pledging to work to revise them. This was the substance of Hillary's advice.

By the rainy morning of July 31, Clinton could not put off his decision any longer: a conference committee of the House and Senate had shaped a bill that was about to pass and land on the President's desk within hours. So he summoned 12 or so decision makers--including Gore, five Cabinet Secretaries and five advisers--to a self-consciously historic meeting in the Cabinet Room of the White House. Some thought the meeting was a bit of "Kabuki theater" staged by a President who had pretty well made up his mind; others are convinced Clinton was really undecided.

The meeting began with an explanation of provisions of the bill by a White House budget aide. Secretary of Health and Human Services Donna Shalala interrupted with disparaging comments, Clinton with factual questions. The President then went around the room. Shalala bitterly attacked the bill; Housing Secretary Henry Cisneros, Labor Secretary Robert Reich and Treasury Secretary Robert Rubin also counseled a veto. Commerce Secretary Mickey Kantor, however, said, "I'm for [the bill] on the politics and on the merits." He remarked that as a legal-services attorney in the 1970s, he had found the welfare system to be fundamentally broken and in need of repair.

Eventually Clinton turned to policy adviser Bruce Reed and said, "So, Bruce, make the case for the bill." Reed had been arguing since 1992 that disposing of failed programs, even if they were Democratic programs, was necessary to bring voters back to the party. At the meeting, he developed a strong policy case: the bill really would move people from welfare to work; it contained enough child-care and health-care money and enough provisions that would force deadbeat dads to support their children. And those who thought that a veto would eventually produce a better bill might well be fooling themselves.

After 2 1/2 hours, the meeting broke up with no formal decision. Clinton, Gore and chief of staff Leon Panetta went into the Oval Office; a bit later Reed and John Hilley, the President's top lobbyist to Congress, were summoned. Clinton asked a few more questions. Then he said, "Let's do it," and, rising from his chair, declared, "I want to sign it." Gore patted his shoulder and said, "I know that was tough."

The verdict of history on Clinton's decision will take years: How many welfare recipients actually do find jobs; how many really do starve in the streets? But there is no question about his political judgment. His decision has proved so popular that in Florida last week, Clinton ignored his criticisms of the welfare bill and instead simply boasted that he had begun the process of putting welfare recipients to productive work.

What voters think of Dole's tax decision is equally clear. After one rally, the candidate and his entourage passed around signs that had been altered from 15% to read dole 15% behind--which polls indicate is if anything an understatement. The verdict of history? Unless something changes almost miraculously before Nov. 5, there is not going to be any.

--Reported by Jeffrey H. Birnbaum and Michael Duffy/Washington and John F. Dickerson with Dole

With reporting by JEFFREY H. BIRNBAUM AND MICHAEL DUFFY/ WASHINGTON AND JOHN F. DICKERSON WITH DOLE