Carter Deregulates!

Despite the perception that presidents from the two different political parties approach things in opposite ways, there are instances of agreement. In a surprisingly consistent pattern, four Republican presidents and two Democrat presidents (Ford, Carter, Reagan, Bush, Clinton, and Bush) embraced the idea of deregulation. To be sure, they were not always uniform in applying this idea, sometimes deregulating one sector of the economy while adding new regulations to a different sector. But a steady trend of rhetoric and executive orders demonstrates that deregulation is part of the Zeitgeist - the spirit of the times.

In the case of Carter and Clinton, this shows that it is an oversimplification to assert that Democrats always restrain the freedom of the market and favor government intervention in the economy. Historians Karen O'Connor and Larry Sabato write that, after it became clear that excessive regulations - including wage and price controls under LBJ and Nixon - were harmful to the economy, enthusiasm for deregulation grew:

For some time, there were no changes in economic regulation despite these criticisms. In the mid-1970s, however, President Gerald R. Ford, seeing regulations as one cause of the high inflation that existed at the time, decided to make deregulation a major objective of his administration. Deregulation was also a high priority for Ford's successor, President Jimmy Carter, and legislation that deregulated airlines, railroads, motor carriers, and financial institutions was enacted during Carter's term as president. All successive presidents have maintained an active deregulatory agenda,

until the election of President Obama in 2008. The Obama administration marked a return to the approaches of Lyndon Johnson and Richard Nixon. LBJ's wage and price controls were cast as guidelines, and not as mandatory. Nixon's were cast as actual executive orders. In both cases, the controls failed doubly: first, they were difficult to enforce - LBJ's guidelines were toothless, and Nixon's were filled with loopholes which lawyers and accountants soon discovered; second, in those cases in which they were consistently applied, inflation only became worse.

To be sure, while deregulation almost always leads to an immediate drop in prices, it often has a transitional effect of temporarily creating chaos as various businesses adjust to find a new equilibrium point - a few consolidations, bankruptcies, and restructurings - before the full benefit of deregulation is enjoyed. Thus it is important to council patience, and not to promise that the complete advantage of deregulation will be felt soon. O'Connor and Sabato note that, long-term, deregulation wins the day,

though the effects of deregulation have been mixed, as illustrated by the airline, communication, and agricultural sectors.

American consumers noted a significant price decrease in air travel and telecommunications when those sectors were deregulated. The transitional effects, as noted, involved a shuffling of the companies in those industries. Old airlines were merged with others, or went bankrupt; new airlines emerged. The courts had to wade through the details of national telephone companies. But lower prices were the end result in both cases - so much so, that years later, when price increases took place, the "new, higher" prices were still lower than the original prices before deregulation, and only "higher" than the prices immediately after deregulation.

The occasional inconsistencies in the pattern of deregulation - a political necessity, even if an economic sin - led to certain ill effects. Carter and Clinton, while deregulating other sectors, burdened the financial sector with rules forcing lenders to write loans to customers whose ability to repay was suspect. By requiring the financial institutions to grant loans to substandard customers, Carter and Clinton paved the way for the real estate meltdown of 2008, when the economy had to absorb numerous defaults.

Standing at the historical source of the deregulation trend, President Ford wrote:

A third priority on my agenda for the first six months of 1975 was regulatory reform. And was that reform needed! Rules and regulations churned out by federal agencies were having a damaging effect on almost every aspect of American life. They were costing taxpayers an estimated $62.9 billion per year, an average of $300 per citizen. They were increasing the cost of doing business - a cost that's always passed along to consumers - and thus contributing to inflation. They were perpetuating huge bureaucracies - more than 60,000 people were employed by the federal government for the sole purpose of writing, reviewing, and enforcing regulations - to sift through pyramids of paperwork. (In 1974, Congress passed 404 new laws. They federal bureaucracy, however, produced 7,496 new rules and regulations, which accounted for some 45,000 pages of fine print in the Federal Register.) They were stifling American productivity, promoting inefficiency, eliminating competition and even invading personal privacy. Red tape surrounded and almost smothered us; we as a nation were about to suffocate.

The contrast between President Gerald Ford and President Nixon was great - from wage and price controls to deregulation. Ford began to liberate American productivity from endless rules, a trend which would continue, despite occasional relapses into the regulatory mentality, for over thirty years.

The Right Type of Immigration

Immigration has been one of America's greatest strengths, and also one of its biggest problems. Legal immigrants bring creativity, energy, and a vision for the future. Illegal immigrants fail to pay their fair share of taxes, represent a drain on public services, and create a second underground economy which undermines the legal economy. The Wall Street Journal writes:

No country on earth is in the same league as the U.S. when it comes to the quantity of immigrants who have come here and the quality of their contributions. But lately, in our generally sour mood, Americans have been questioning the benefits of immigration. Many worry that today's immigrants differ from those of the past: less ambitious, less skilled, less willing and able to assimilate.

The negative stereotype is derived mainly from illegal immigrants. It is important to remember that the legal entrants into this country bring with them a desire to work and succeed within the nation; illegals desire to work around the system.

The conventional picture is of an unstoppable wave of unskilled, mostly Spanish-speaking workers — many illegal — coming across the Mexican border. People who see immigration this way fear that, instead of America assimilating the immigrants, the immigrants will assimilate us. But this picture is both out of date and factually wrong.

The problem is that we use the same word - 'immigrant' - to describe both the legal newcomers as well as those who have deliberately broken the law to enter the country. These two groups could hardly be more different, and yet are confused in popular culture. Legal immigrants actually help our economy, while illegal immigrants hurt it.

A report released this month by the Pew Research Center shows just how much the face of immigration has changed in the past few years. Since 2008, more newcomers to the U.S. have been Asian than Hispanic (in 2010, it was 36% of the total, versus 31%). Today's typical immigrant is not only more likely to speak English and have a college education, but also to have come to the U.S. legally, with a job already in place.

Immigrants have historically brought important skill sets to this nation. In areas like engineering and medicine, many of our economic successes have been initiated by legal immigrants.

A great deal of mythology has grown up around American immigration. Images of Irish and Italians forced by starvation to emigrate, Jews fleeing Russian persecution — this was all real, but just part of the story. Waves of educated and professional middle-class people also arrived — men like Albert Gallatin fleeing the radicalism of the French Revolution, disappointed liberals abandoning Europe after the failure of the revolutions of 1848, and of course the generations of educated exiles from the terrible totalitarianisms of the 20th century.

In particular, immigrants from Asia enter this country with a good education, with a strong work ethic, and with a desire to assimilate and support American culture and the American way of life. Legal immigrants from Asia are models for how legal immigration can work well and benefit the nation.

Immigration from Asia wasn't always this smooth, and for many years the federal government, often prodded by politicians from the West Coast, tried to keep Asians out. By 1870, Chinese workers accounted for 20% of California's labor force; the Chinese Exclusion Act of 1882 cut Chinese immigration from 39,500 that year to just 10 people in 1887.

With the Chinese excluded, thousands of Japanese, Koreans and Indians replaced them as cheap labor, but public opinion soon turned against these immigrants as well. In 1906 the San Francisco school board ordered the segregation of Japanese students in its public schools. The news sparked riots in Japan, and President Theodore Roosevelt scrambled to make what was called the "Gentleman's Agreement" by which the Japanese government agreed to stop immigration to the U.S. In 1917 India was added to the "Pacific-Barred Zone" from which no immigrants to the U.S. were allowed, and from 1924 until 1965 Asian immigration into the United States was essentially banned.

The ensuing 37 years of legal immigration are making an impact. In 1965, Asian-Americans accounted for less than 1% of the population; today they are almost at 6% and growing, with the biggest numbers from China, the Philippines and India, followed by Vietnam, Korea and Japan. (Almost one out of four Asian-Americans has roots in either mainland China or Taiwan.)

While illegal immigration represents a harm to the economy and to society, a healthy program of legal immigration is a benefit to the nation and to the economy.

The honor roll of American immigration is long. Names like Alexander Hamilton, Albert Einstein, Andrew Carnegie, Madeleine Albright and Sergey Brin speak for themselves.

To that list we can add names like Wernher von Braun, Henry Kissinger, and ESPN announcer Michael Ballack. It is clear that legal immigrants have done much to promote the United States. Illegal immigrants, however, ultimately represent an economic drain.

What Happened to Habeas Corpus?

On December 31, 2011, a historic and controversial peace of legislation was signed into law by President Obama. His administration had fine-tuned the wording of bill, which was primarily to fund the military. But one provision in the bill had nothing to do with sustaining our defense efforts. (This is a common maneuver: attaching unrelated riders to major bills, knowing that Congress will be so eager to pass them that they will overlook the distasteful amendments.) Historian Michael Savage writes that

Barack Obama signed into law legislation that spelled out his power as president of the United States to detain any U.S. citizen indefinitely on the grounds that he or she might be a "terrorist." The National Defense Authorization Act (NDAA), which the president had earlier promised to veto, represents the single most egregious rollback of American civil liberties in our nation's history. Obama made the move under cover of America's New Year's Eve Party, while most Americans were more concerned with having a good time than with losing their freedom.

No other president in U.S. history has sought or had such power. Note that this law does not merely apply to people in general, but to citizens. The legal tradition of habeas corpus demands that citizens cannot be jailed without being told which specific charges are being leveled against them; this tradition also implies the notion of a "speedy trial" and not "indefinite" detainment.

Obama insisted that the reason he signed the bill was to guarantee funding for the military, to support our troops. In the process, he deprived U.S. citizens of the very freedom for which our military is fighting. In fact, despite his insistence to the contrary, it was the president himself who had fought for the right of the Commander-in-Chief to detain American citizens. Obama was outed by radial leftist legislator Carl Levin, who explained what the president was up to on the floor of the Senate. Levin made it clear that the White House had pushed for the law to be applied indiscriminately to American citizens.

The president had directed his administration to insert these directives into the bill, and then explained that he was reluctantly signing them into law because they had been attached to an important piece of legislation: a sophisticated move indeed. How has the Obama administration interpreted the law since its passage?

The White House and the Justice Department have fought against bringing any cases involving indefinite detention of American citizens to trial for fear that the courts would overturn their right to abrogate citizens' constitutional guarantees of freedom from arbitrary arrest. In addition, the administration fought tooth and nail to insure that language barring the law from being applied to Americans was not included.

President Obama would prefer that this piece of legislation not be given much attention at all: it makes things easier for him if it is not well-known, or if the public doesn't think about it much. If any attention is given to it, he would certainly hope that it is perceived as a necessary, if regrettable, tool for national security. In fact, however, its wording is broad enough that it can justify any detentions ordered by the executive branch. It is less about national defense and more about increasing the discretionary power of the president.

Ending the Cold War

Before Western Europe and the United States could win the Cold War, they had to first believe and imagine that they could win it. For many years, the Iron Curtain had divided the free world from the communist world, and many people had come to see that situation as permanent. But it wasn't. Somebody had to wake them up. Somebody had to get people to see that things could be better, that we didn't have to accept communist tyranny over half of Europe. The Wall Street Journal reports that

on June 12, 1987, Ronald Reagan delivered a speech in Berlin. Standing in front of the Berlin Wall, with the Brandenburg Gate, the historic ceremonial entrance to the city, rising behind him, the president of the United States issued a challenge to the leader of the Soviet Union, Mikhail Gorbachev.

Although Reagan's speech posed the question rhetorically to Gorbachev, its effect was also to wake up Europeans, Americans, and others to the notion that the world did not have to endure Cold War misery indefinitely. We could end the Cold War, and even better, we could win it. Before Reagan's speech, says Yuri Yarim-Agaev, a former Soviet dissident interviewed by the Journal,

even the West accepted the division of Europe. "Imagine how hard this made our struggle. We almost had to admit that it was hopeless. Then Reagan says, 'Break the wall!' Why break this wall if these borders are valid? To us, it was more than a question of Berlin or even of Germany. It was a question of the legitimacy of the Soviet empire. Reagan challenged the empire. To us, that meant everything. After that speech, everything was in play."

It is a powerful thing to open people's minds to a new possibility - the possibility that they did not have to accept the Soviet Union as a communist bully threatening free people - the possibility that freedom could be brought back to those suffering under communist tyranny. A wake up call - getting people to see that a new thing is possible:

To come to, to snap out of it, to awaken. Ronald Reagan was hardly alone, of course. John Paul II, Margaret Thatcher, Lech Walesa and Vaclav Havel called for an end to the division of Europe. Yet when the president of the United States demanded the destruction of the Berlin Wall, Dieter and Yuri enabled me to see, he issued a summons of such power and clarity that many who heard him felt as if they had suddenly regained consciousness. The Berlin Wall address represented a call to awaken.

Ronald Reagn was not alone - a number of heroes not only bravely opposed communism, but awoke their fellow citizens to the possibility that Western Europe and America together could win the Cold War, which we did!

How Businesses Fix a Broken Economy

By the end of the 1960's, the U.S. economy was beginning to experience difficulties. By the early 1970's, there was serious problem. Cengage's history textbook describes it:

Lyndon Johnson, determined to stave off defeat in Indochina without cutting Great Society programs or raising taxes, had concealed the true costs of the war, even from his own economic advisers. Nixon inherited a deteriorating (although still favorable) balance of trade and rising rate of inflation. Between 1960 and 1965, consumer prices grew an average of only about 1 percent per year; by 1968, this figure exceeded 4 percent.

The problems had more than one cause. First, total government spending had increased annually. Second, entitlement spending and social welfare spending had increased both absolutely and as a percentage of the increasing federal budget (Great Society programs). Third, although LBJ had worked to avoid major tax increases (minor revenue increases did sneak in), there had been no significant tax cut since 1964. Finally, there was a private sector cause as well: the failure of some industries to implement the full efficiency of technology.

Although most of the damage to the economy came from the government, the private sector causes warranted attention as well, because they were perhaps more quickly and easily fixable. As technology had entered into various sectors, decreasing the need to for labor, industries had failed to respond with tighter staffing. Thus, as David Brooks writes about the situation in 1972:

Forty years ago, corporate America was bloated, sluggish and losing ground to competitors in Japan and beyond. But then something astonishing happened. Financiers, private equity firms and bare-knuckled corporate executives initiated a series of reforms and transformations.

While the economic history of the 1970's is alternately dominated by damage done by the federal government and attempts by the federal government to correct its mistakes, the non-governmental side gets less attention in history books. Cengage tells us that, on the government side, harm was done when

domestic programs favored by most congressional Democrats contributed to this economic distress. Increasing the minimum wage and vigorously enforcing safety and antipollution regulations

stifled economic growth, raised prices to consumers, sapped resources out of business, and discouraged any creativity in the private sector. Eventually, even Democrat President Jimmy Carter

cut spending for some social programs, sought to reduce capital-gains taxes to encourage investment, and began deregulating various industries, beginning with the financial and transportation sectors.

In these actions, Carter agreed substantially with his predecessor President Ford, and with his successor President Reagan. Tax cuts, spending cuts, and deregulation were the common-sense measures to help the economy. To this would be added a reduction in debt and deficit as concern grew about fiscal responsibility.

Thus far the standard economic history. What has not always been made so clear, however, is the role played by business in finally getting American out of the economic doldrums. The time had arrived to fully implement the cost-saving aspects of technology, as David Brooks explains:

The process was brutal and involved streamlining and layoffs. But, at the end of it, American businesses emerged leaner, quicker and more efficient.

Business could either turn themselves around, or in some cases be taken over by new ownership and management which would help them become efficient:

Over the past several decades, these firms have scoured America looking for underperforming companies. Then they acquire them and try to force them to get better.

Economic principles often make use of inequalities, and of the changes produced when inequalities are brought toward equilibrium levels:

in any industry there is an astonishing difference in the productivity levels of leading companies and the lagging companies.

One cure is to give the management of a lagging company an incentive to work toward better productivity. New owners can

acquire bad companies and often replace management, compel executives to own more stock in their own company and reform company operations.

This was the key to turning around certain sectors and getting them out of the rut of the 1970's. Even if the government does its part - cutting taxes, spending, regulations, debts, and deficits - the private sector must also do its part, maximizing efficiency and productivity. Individuals and companies which specialize in "turning around" unprofitable businesses are often the catalyst to improving productivity.

Most of the time they succeed. Research from around the world clearly confirms that companies that have been acquired by private equity firms are more productive than comparable firms.

Sometimes this process is painful. Companies which have supported offices long after technology has made them superfluous - imagine keeping a typewriter repairman on the payroll - must face the reality that they cannot afford to pay for unneeded services.

This process involves a great deal of churn and creative destruction. It does not, on net, lead to fewer jobs. A giant study by economists from the University of Chicago, Harvard, the University of Maryland and the Census Bureau found that when private equity firms acquire a company, jobs are lost in old operations. Jobs are created in new, promising operations. The overall effect on employment is modest.

Turnaround specialists often form what are called 'private equity firms' - companies formed by groups of investors who hope to make money by improving the efficiency of lagging companies. Once productivity - and thereby profitability - have been improved, these companies can be sold by the private equity firm to other investors.

Nor is it true that private equity firms generally pile up companies with debt, loot them and then send them to the graveyard. This does happen occasionally (the tax code encourages debt), but banks would not be lending money to private equity-owned companies, decade after decade, if those companies weren't generally prosperous and creditworthy.

The majority of companies bought by turnaround specialists are able to reenter the marketplace in a profitable and competitive condition. Any private equity firm which did not succeed in reviving lagging companies would soon cease to be funded. Turnaround specialists and private equity firms are sometimes mocked in the popular press as "vultures" because instilling efficiency requires self-discipline and hard work. Lagging companies often employ underutilized or excess numbers of workers, who simply don't have enough to keep them busy.

Private equity firms are not lovable, but they forced a renaissance that revived American capitalism.

When large sectors of the economy were headed for destruction in the 1970's, it was - in part - the turnaround specialists who saved them. The process was sometimes painful, but the alternative was the annihilation of selected industry groups, a blow from which the country could not have recovered.

Working with the Saudis

On Thursday, August 29, 1974, President Gerald Ford met with a Saudi diplomat. Also present at the meeting were Secretary of State Henry Kissinger and National Security Advisor Brent Scowcroft. On the agenda were all the usual items which have always ensured that the Mid-East is a place of permanent instability: oil prices, wars between Arab states, and wars between Arab states and non-Arab states. (There are other factors, too, which have created the structural impossibility of peace in that region.) Historian Barry Werth writes:

Joined by Kissinger and Scowcroft, Ford met in the late afternoon with Saudi Arabian foreign minister Omar Saqqaf. They exchanged vague pleasantries through an interpreter and posed for the press. Saqqaf - a function who during diplomatic meetings with King Faisal "sat so far down down along the hierarchy of other advisors that he would have to shout to get the king's attention," Kissinger recalled - above all hoped to deflect American anger over the energy crisis away from his desert monarchy.

At the beginning of the 1970's, the American economy had troubles with inflation. The oil crisis only made the situation worse. Although most of the oil coming out of the Middle East went to Europe, and not to America, its price still affected the world price, and therefore impacted the business climate in the United States.

Locked in Cold War calculations, gun-shy after Vietnam, and with a "surrogate strategy" for securing Persian Gulf oil supplies that amounted to arming to the hilt repressive local regimes in Iran and Saudi Arabia, the United States could scarcely have been less prepared for the oil shock now playing havoc with the world economy. A little more than a week after Ford's swearing-in, Kissinger had briefed him on the struggle to regroup. "We have to find a way to break the cartel," Kissinger warned. "We can't do it with the cooperation of the other consumers. It is intolerable that countries of 40 million can blackmail 800 million people in the industrial world." As Kissinger outlined the joint program being discussed with the Europeans - consumer solidarity, including emergency sharing of reserves; conservation; development of alternative energy sources; and creation of a financial safety net - Ford immediately had signed on. "I'm not interested in issues," he said, "but in results."

In fact, the government in Iran was starting to loosen its hold on human rights. For the next several years, increasing civil freedoms would define that nation's path. But in August of 1974, that didn't change the economic factors which had President Ford's attention.

Now, as with the rest of the Middle East cauldron, Ford left the handling of the Saudis to his secretary of state, who sought assurances from Saqqaf that Faisal would not take a hard line by opposing separate negotiations between Israel and Egypt, and would help negotiate lowering the cost of Arab-produced oil. Kissinger warned that Western patience with the Saudis, who since the end of World War II had looked to the United States to defend them against stronger, often hostile neighbors, had worn thin.

There can be little doubt that the impressive foreign policy achievements of the Ford Administration were due largely to the work of Henry Kissinger.

Ford Restructures the White House - Twice

Upon becoming president in 1974, Gerald Ford knew that it would be important to make some changes, both substantively and symbolically. In substance, because part of Nixon's downfall grew out of his subordinates and out of the power structure of the White House staff. Symbolically, because President Ford needed to be visibly different than Nixon. Ford reviewed the previous organizational charts which had shaped the White House in previous presidencies. Historian Barry Werth writes:

Ford knew what he had to have to take over the presidency and it wasn't a Haldeman or Adams, tireless, abrasive guardians who had caused his predecessors so much trouble. Sherman Adams, the bantam former timber executive and New Hampshire governor who could reach decisions and "move papers" faster than anyone in Washington, and who got priestly satisfaction from slaving like a dragon to serve his country, was a force of nature ruling over the operations of the Eisenhower White House - a virtual "co-president" until, after admitting to taking gifts from shady New England businessmen, he was attacked by conservative Republicans and dropped by Eisenhower, who sent Nixon to tell Adams the president would welcome his resignation. Bob Haldeman, who famously said that he was "Nixon's SOB," looked and acted like a marine drill sergeant. Time called him "spikey and glaring ... the 'zero-defects man'" and like nearly everyone in Washington, Ford regarded the former California ad executive as an overcompensating outsider with a fetish for order.

Ford saw the dangers in having one individual, a chief of staff, working that closely with the president. This person could filter who did, and who did not, get to visit or influence the president. This person could end up wielding unintended amounts of power. Ford wanted a different system for his White House.

Ford wanted to see as many people as possible, hear a lot of opinions, he told Haig.

As an antidote to Nixon's imperial presidency, Ford wanted an open door. But he perhaps underestimated the volume of people, paper, and information that would come his way. Alexander Haig, who had been Nixon's chief of staff, and who had effectively carried out many presidential duties as Nixon became increasingly paralyzed by the Watergate scandal, understood that Ford would soon be buried under an avalanche of work if he did not have some type of executive assistant.

Haig - "with some amusement," he recalled - replied that he'd be happy to usher in as many visitors as Ford wanted. He thought Ford's opposition to a strong chief of staff "seemed to be more important to him than his own needs."

Haig's future was uncertain at this point. Having been chief of staff under Nixon, he remained at the White House initially to help with the transition. Ford wanted either no chief of staff at all, or who wanted one with a very limited role.

Seated at the Wilson desk, already buried under paperwork, Ford announced that he would be his own chief of staff, with a half dozen or so coequal advisors each meeting with him at different times during the day to report to him on separate areas of authority. He likened this office model to the spokes on a wheel. He would meet with Marsh to direct legislative affairs, Hartmann to talk about communications, Seidman to discuss the economy, and Kissinger for foreign policy. Haig's area of competence would be administering the White House.

John Marsh was a former Virginia Congressman who would later be Secretary of the Army. Robert Hartmann was a speechwriter and White House Counsellor. Lewis William Seidman was Ford's economic advisor. Henry Kissinger was the Secretary of State.

Haig rejected the spokes-on-the-wheel system as clueless, naive. "Only a supreme optimist," he wrote, "could have believed that such an arrangement would work in a town in which ambition is mother's milk and every symbol of power from job title to parking space is the subject of fierce intrigue." He also thought Ford's resistance to a powerful chief of staff concerned Hartmann, who'd commandeered the small anteroom to the Oval Office where Rosemary Woods, Nixon's faithful secretary, had been stationed until the day before. Ford depended too heavily on Hartmann, owed him too much, and was too loyal to get rid of him, yet no strong chief of staff could tolerate having him bivouacked next to the president, popping his head in whenever he wanted.

Whether or not one embraces Haig's skepticism about Hartmann, it was telling that at this early date - Saturday, August 10 - Hartmann had already occupied a key office space in the White House. In any case, Haig would soon depart, declining Ford's offer to be chief of staff, because Haig would only take the job if it had clear and significant authority. Ford was still bent on essentially being his own chief of staff, and the office would exist to help the president with those duties, rather than to do those duties for him. Haig stayed on for the transition, and was officially re-assigned from chief of staff to NATO commander around Wednesday, September 4. He would be replaced by Donald Rumsfeld, who was also skeptical of Ford's organizational vision. Barry Werth writes:

A half hour after Haig left the Oval Office, Ford met alone with Rumsfeld, back briefly from Brussels, to tell him that Haig would be leaving. Ford needed Rumsfeld to smooth Haig's appointment with the NATO countries, but his real interest was in having him replace Haig in the West Wing, not as omnipotent chief of staff but as someone to coordinate White House operations and organize Ford's schedule. Rumsfeld, who could see that the sniping and disarray had only worsened in the two weeks since he'd left, bluntly resisted. "I didn't want to do it," he said later. "I'd just left Washington. I'd been here ten years. I was disappointed that the recommendations of the transition team weren't followed. The administration was having trouble just staying current. I knew what a meat grinder it was. I knew it was programmed to fail."

Like Haig, Rumsfeld saw Ford entering a swamp of office politics, as well as simply more work than one man could do. Rumsfeld writes:

Ford did want to distance himself from what was seen as the imperial presidency of Richard Nixon, but instead of changing personnel, he attempted to change the White House's management structure. Ford attributed the misjudgments in Watergate to having everything filtered to the President through his chief of staff, Bob Haldeman. My view was different. I believed the problems that plagued Nixon's administration were not caused by how decisions were made but by the decisions themselves. The chief of staff system was reasonably efficient and had been developed in the Eisenhower administration, which did not come to the same unfortunate end as Nixon's. To change the perception of an insular White House and a rigid "Berlin Wall," Ford settled on what he called the "spokes-of-the-wheel" approach. To this day, I shudder at the phrase. The idea was that a large number of his staff and cabinet - the spokes - would report directly to him - the hub - instead of having a chief of staff coordinate the process.

Rumsfeld was in the White House to see and experience the inevitable logjam which Haig had predicted.

However laudable the intent, the spokes-of-the-wheel approach was an unworkable way of managing the modern White House. Ford enjoyed interaction and give-and-take with a wide and varied group of people, and that was helpful, but this organization approach essentially allowed any senior staff or cabinet official to walk into the Oval Office at any time to discuss any subject. Many would end up leaving such a meeting with what they sincerely believed to be presidential authorization but without the necessary coordination with other White House staff or cabinet members who had responsibilities in the matters discussed with the President. An open door policy could work for a member of Congress, or even for a vice president whose staff is small, but a president has too many demands on his time to listen to every staff member's suggestions, wade through every disagreement, and then ensure that the relevant personnel are involved, or at least informed.

One casualty of the White House reorganization was the first attempt at economic policy. Inflation was becoming a serious problem - though not yet as bad as it would be under the Carter administration - and Ford knew that he had to take action. Under the slogan "Whip Inflation Now," a series of voluntary initiatives was assembled, and label pins and buttons with the "W.I.N." motif distributed to the public. President Ford gave a major national speech on the plan. Sadly, the effort went nowhere. Rumsfeld recalls:

The response to the speech was not what Ford hoped. Wearing a pin to defeat inflation became a national punch line. Ford was disappointed by the negative reaction to his speech both in Congress and in the country. I felt sorry for him, but it was a self-inflicted wound and still another sign that the spokes-of-the-wheel approach the President had selected at the outset was not working.

President Ford realized that change was in order. Rather than cling stubbornly to his original idea, he was willing to see that there could be a better solution.

The President now conceded that his spoke-of-the-wheel approach was not working and would not work. The Hartmann faction was unfriendly with the Haig faction, and others in the White House seemed caught in between. Only a few weeks after informing the country that Nixon's White House chief of staff, Al Haig, would stay on indefinitely, Ford would have to do something he never liked to do - change his mind.

One of the reasons behind Ford's move to abandon the chief of staff system was to distance himself from Nixon's image. If Ford were to move toward a chief of staff system, he'd have to do it in a way which still signaled that he was different than Nixon. Rumsfeld writes:

The President said that while he could not be seen as abandoning outright his very public decision to reject the Nixon-Haldeman staffing system in favor of his spokes-of-the-wheel approach, he agreed that he would move toward a proper staff system gradually. His solution was, at the outset, to call whoever replaced Haig the "chief coordinator." I was not impressed with that idea, because it would signal to others in the White House that the new chief of staff was not actually in charge of the staff. But I understood Ford's reasoning.

Rumsfeld became chief of staff - even if the actual job title was varied - and began nudging Ford's system back toward the Eisenhower model. Rumsfeld's assistant chief of staff was Dick Cheney, who recalls that

one obstacle to bringing order to the White House in the early months was President Ford's preferred model of White House organization, a design he described as the "spokes of the wheel" model, which was based on the way he had structured his congressional and committee staffs. The ideas was to have eight or nine senior advisors each reporting directly to him, without any one having authority over the rest. It was a collegial style of doing business that had served him sell for twenty-five years on the Hill as a representative from Michigan, and he assumed it would work in the White House. There was also a widespread belief that Watergate had been caused in part by Bob Haldeman's domination of the White House staff, and Ford saw "spokes of the wheel" as a healthy break from the past. The problem was that it soon became clear it didn't work. It took a while, but the president finally agreed that he needed someone on the staff who could wield real authority, a conclusion that all his successors have ratified.

The wisdom of Eisenhower's system became clear. This organizational pattern, with a chief of staff, was the best way to run the White House. According to historian Barry Werth, this organizational structure had a history prior to the White House:

Eisenhower had employed it as supreme allied commander in Europe during World War II and first brought it to the White House in 1953. Having a single, dominant aide used to acting in the president's name enabled Ike to play golf in the afternoon, and Nixon, his marginalized, oft-maligned vice president, had admired its effectiveness. ("Nixon was world errand boy," Chief of Staff Sherman Adams explained. "I worked in the kitchen.")

Although Ike may have excelled at delegation, the chief of staff system could also work for a more "hands-on" president like Ford. President Ford found that he could reshape his organizational chart away from "the spokes of the wheel" and toward the chief of staff model without having to distance himself from important daily White House operations. Dick Cheney took over as chief of staff when Rumsfeld left that post to be Ford's Secretary of Defense. Cheney writes:

In the last days of the Ford administration, among the gifts given me by my staff was a bicycle wheel with all the spokes destroyed except one, and it came with a plaque: "The 'spokes of the wheel,' a rare form of management artistry as devised by Gerald Ford and modified by Dick Cheney." When the Carter people came in, I passed it along to my successor, Hamilton Jordan.

During Ford's short but crucial presidency, the question of how best to organize the White House was explored thoroughly, and the definitive answer was found - no president since, of either party, has tampered with the system.