Air
Force Two touched down at the Greenbrier Valley
Airport in West Virginia on Feb. 6, 2003, carrying
Vice President Cheney to the annual retreat
of Republican House and Senate leaders. He had
come to sell them on the economic centerpiece
of President Bush's first term: a $674 billion
tax cut.
When
the president announced his economic package
the day after this Cabinet meeting in January
2003, Cheney had one more thing to add. Corbis
Cheney
had spent months making sure the package contained
everything he wanted. One thing was missing.
The
president had accepted Cheney's diagnosis that
the sluggish economy needed a jolt, overruling
senior economic advisers who forecast dangerous
budget deficits. But Bush rejected one of Cheney's
remedies: deep reductions in the capital gains
tax on investments.
The
vice president "was just hot on that," said
Cesar Conda, then Cheney's domestic policy adviser.
"It goes to show you: He wins and he loses,
and he lost on that one."
Not
for long.
As
the Republican lawmakers debated in a closed-door
session at the Greenbrier resort, the vice president
revived the argument, touting his idea as a
way to energize a stock market battered by scandals
such as Enron. House allies inserted Cheney's
cut into their package. But that came at the
expense of one of Bush's priorities: abolishing
the tax on stock dividends.
Cheney
has changed history more than once, earning
his reputation as the nation's most powerful
vice president. His impact has been on public
display in the arenas of foreign policy and
homeland security, and in a long-running battle
to broaden presidential authority. But he has
also been the unseen hand behind some of the
president's major domestic initiatives.
Scores
of interviews with advisers to the president
and vice president, as well as with other senior
officials throughout the government, offer a
backstage view of how the Bush White House operates.
The president is "the decider," as Bush puts
it, but the vice president often serves up his
menu of choices.
Cheney
led a group that winnowed the president's list
of potential Supreme Court nominees. Cheney
resolved a crisis in the space program after
the Columbia shuttle disaster. Cheney fashioned
a controversial truce between the legislative
and executive branches -- and averted resignations
at the top of the Justice Department and the
FBI -- over the right of law enforcement authorities
to investigate political corruption in Congress.
And
it was Cheney who served as the guardian of
conservative orthodoxy on budget and tax matters.
He shaped and pushed through Bush's tax cuts,
blunting the influence of Federal Reserve Chairman
Alan Greenspan, a longtime friend, and of Cabinet
rivals he had played a principal role in selecting.
He managed to overcome the president's "compassionate
conservative" resistance to multiple breaks
for the wealthy. He even orchestrated a decision
to let a GOP senator switch parties -- giving
control of the chamber to Democrats -- rather
than meet the senator's demand for billions
of dollars in new spending.
On
the home front, the vice president is well known
for leading a secretive task force on energy
policy. But in a town where politicians routinely
scurry for credit, Cheney more often kept his
role concealed, even from top Bush advisers.
"A
lot of it was a black box, and I think designedly
so," said former Bush speechwriter David Frum.
"It was like -- you know that experiment where
you pass a magnet under the table and you see
the iron filings on the top of the table move?
You know there's a magnet there because of what
you see happening, but you never see the magnet."
A
'More Effective Role'
When
Bush tapped Cheney to be his running mate seven
years ago, he chose a man who had put a great
deal of thought into how a vice president can
transform himself from a funeral-trotting figurehead
into a center of real power.
As
President Gerald R. Ford's chief of staff in
the 1970s, Cheney saw firsthand how White House
policies got shaped -- and how a vice president
such as Nelson Rockefeller could become so marginalized
as to be dumped from the ticket. Former Army
secretary John O. Marsh Jr. said Cheney knew
that he needed to control the process by which
the president makes choices to ride "the rushing
river of power" that winds through the West
Wing to the Oval Office.
"Dick's
major concern, one of them was, and I agree,
that there needs to be a greater and more effective
role for the vice president," Marsh, a longtime
Cheney friend, said in an interview. "He holds
the view, as do I, that the vice president should
be the chief of staff in effect, that everything
should run through his office."
In
Bush, Cheney found the perfect partner. The
president's willingness to delegate left plenty
of room for his more detail-oriented vice president.
"My
impression is that the president thinks that
the Reagan style of leadership is best -- guiding
the ship of state from high up on the mast,"
said former White House lawyer Bradford A. Berenson.
"It seems to me that the vice president is more
willing to get down in the wheelhouse below
the decks."
When
the space shuttle Columbia disintegrated over
Texas on Feb. 1, 2003, for example, Bush was
consumed with concern for the families of the
seven dead astronauts. That left Cheney to make
the first critical decisions about the future
of manned spaceflight.
Even
as the vice president and others were grappling
with the invasion of Iraq, Cheney crafted a
solution to the most pressing problem facing
the space program, said former NASA administrator
Sean O'Keefe, a Cheney protege.
With
its shuttle fleet grounded, the space agency
had no way to resupply the crew aboard the international
space station, including two Americans. Russia
was demanding $100 million to take up the slack.
But Congress had barred space-related payments
to Moscow unless the administration could certify
that the Russians were not transferring banned
technology to Iran for nuclear, biological or
chemical weapons. Getting the law changed would
take time, and could "open up a can of worms"
with no guarantee that the result would be to
the administration's liking, O'Keefe said.
The
vice president's solution, he said, was to get
around the law by cutting the deal as a barter.
The Russians wouldn't charge the United States
for the costs of flying to the space station,
and in return, the Americans wouldn't charge
the Russians for their share of some operating
and equipment costs.
The
vice president then took the lead in persuading
the State Department to go along with the plan,
which never came to public attention. "He helped
frame how to do this without a major diplomatic
dust-up," O'Keefe said.
Last
year, Cheney was behind another unprecedented
and controversial deal that inserted the White
House into an ongoing criminal probe.
When
the FBI seized files from the office of Rep.
William J. Jefferson (D-La.) as part of a bribery
investigation, House Republican leaders erupted.
With a number of their own members under investigation
for other matters, they charged that the search
violated the Constitution. They demanded the
return of the files.
Cheney
quickly gravitated toward the House's position,
aides said, but Attorney General Alberto R.
Gonzales; his top deputy, Paul J. McNulty; and
FBI Director Robert S. Mueller III threatened
to resign if forced to hand over evidence they
believed had been properly collected under a
warrant.
White
House Chief of Staff Joshua B. Bolten called
a meeting on May 25, 2006, to resolve the political
and legal crisis. The president's lawyers and
congressional liaison were in the room, and
so was Cheney. Once again, it was the vice president
who came up with a solution, according to a
participant. Cheney's plan met his goal of keeping
the files from federal investigators. The files
would be placed under seal for 45 days. Within
hours of the meeting, Bush made Cheney's recommendation
official. As often happens in government, delay
was decisive. Jefferson was indicted earlier
this month on 16 counts of bribery, racketeering,
fraud, money laundering and obstruction of justice.
But nearly half of the files remain off-limits,
tied up in legal disputes.
Taking
Options 'Off the Table'
Cheney's
influence is manifested not just in crisis but
also through his extraordinary involvement in
the daily machinery of the White House.
The
vice president chairs a budget review board,
a panel the Bush administration created to set
spending priorities and serve as arbiter when
Cabinet members appeal decisions by White House
budget officials. The White House has portrayed
the board as a device to keep Bush from wasting
time on petty disagreements, but previous administrations
have seldom seen Cabinet-level disputes in that
light. Cheney's leadership of the panel gives
him direct and indirect power over the federal
budget -- and over those who must live within
it. [Read then-OMB Director Joshua Bolten's
memo about the review board.]
Mitchell
E. Daniels Jr., who served as Bush's budget
director from 2001 to 2003 and is now governor
of Indiana, said that during his tenure the
number of times a Cabinet official made a direct
budget appeal to Bush "was zero," which aides
from previous administrations found "stunning,"
he added.
Daniels
said he chalked that track record up to "the
respect people had for the vice president."
Cabinet members, he said, recognized that if
the board didn't agree with them, "then the
president wasn't likely to, either."
It
is well known that Cheney is usually the last
to speak to the president before Bush makes
a decision. Less so is his role, to a degree
unmatched by his predecessors, in steering debate
by weighing in at the lower-level meetings where
proposals are born and die.
Cheney,
Bolten said, is a vocal participant at a weekly
luncheon meeting of Bush's economic team, which
gathers without the president. As the most senior
official in the room, Cheney receives great
deference from Bush's advisers.
Wise
officials vet their proposals in advance. White
House budget director Rob Portman, for instance,
sought Cheney's counsel as he was putting together
the budget for the upcoming year, using him
as a "sounding board" on issues as varied as
defense spending and tax reform.
"He
never, ever has said to me, 'Do this.' Never.
Which is interesting, because that might be
the perception of how he operates," Portman
said. "But it is 'What do you think of this?'
Well, he's the vice president of the United
States -- and obviously I'm interested in his
point of view."
Perhaps
more important than Cheney's influence in pushing
policies is his power to stop them before they
reach the Oval Office.
When
Edward P. Lazear, chairman of the White House
Council of Economic Advisers, broached the idea
of limiting the popular mortgage tax deduction,
he said he quickly dropped it after Cheney told
him it would never fly with Congress. "He's
a big timesaver for us in that he takes off
the table a lot of things he knows aren't going
to go anywhere," Lazear said.
Lazear,
who is otherwise known as a fierce advocate
for his views, said that he may argue a point
with Cheney "for 10 minutes or so" but that
in the end he is always convinced. "I can't
think of a time when I have thought I was right
and the vice president was wrong."
But
Cheney is careful to choose which issues deserve
his attention, preferring not to dissipate his
influence. "Dick Cheney learned early on to
say no to things that were peripheral to his
primary interests or assignments," said his
longtime friend David Gribbin.
Current
and former White House officials say that the
vice president has largely steered clear of
hot-button issues such as stem cell research
and Bush's "faith-based" initiative to funnel
more federal money to religious groups. He is
also savvy enough, they say, to retreat when
the president expresses strong personal views.
Cheney
sided with conservatives who wanted to urge
the Supreme Court to reverse a landmark ruling
that permitted affirmative action. But, former
officials said, he did not press the case when
the president, who as governor of Texas had
run a state university system, made it clear
that he intended to take a more limited and
nuanced legal position.
Word
of a Cheney loss seldom leaks, a trait that
has further endeared him to Bush -- and that
has served to exaggerate his influence. Former
Cheney and Bush aides described several domestic
policy defeats that never reached public notice.
Cheney
shared conservative trepidations about the president's
signature education initiative, the No Child
Left Behind Act, which gave the federal government
more control over K-12 education. He has griped
privately to confidants, such as economist and
CNBC host Lawrence Kudlow, about the administration's
failure to control spending. And in robust internal
White House discussions, he raised concerns
about the cost of the administration's decision
to expand Medicare to include a new multibillion-dollar
drug entitlement, but bowed to the political
reality that the president had to fulfill a
campaign promise.
"At
least in my area, he didn't have a 100 percent
batting average," said Conda, the former domestic
policy adviser.
In
each case, however, Cheney was a loyal soldier,
instrumental in helping to sell the president's
policies on the Hill and to the Republican base.
"Dick
once told me that our president is a 'big-government
conservative,'" said former senator Phil Gramm
(R-Tex.), in a recollection disputed by Cheney's
office. "Now, Dick keeps his opinions to himself
whenever he disagrees with the administration,
as he should. But I believe that Dick is a small-government
conservative."
'A
Spine Quotient'
When
Sen. James M. Jeffords (Vt.) threatened to bolt
the GOP during negotiations over the president's
2001 tax package, senior Bush advisers and Republican
senators were deeply split over whether to buy
him off. It was a momentous decision -- a Jeffords
defection would toss the Senate to Democratic
control for the first time since 1994.
But
in a contentious internal debate, the vice president
forcefully argued that the administration should
not capitulate by giving Jeffords the billions
of dollars in special-education funding he sought,
recalled O'Keefe, at the time deputy director
of the Office of Management and Budget.
O'Keefe
said Cheney argued that the White House should
not sacrifice conservative principle in the
face of Jeffords's threat by scaling back tax
cuts dear to the GOP base in order to create
an expensive new mandate. Gramm, who confirmed
that account, said there would have been no
end to such demands if the president had caved.
"The
principle was 'Hell, we can't go around funding
programs based on what some individual might
do,'" said Gramm, who worked closely with Cheney
during the negotiations.
By
the end of the critical meeting, O'Keefe said,
the divided group presented Cheney's view as
the consensus recommendation to the president.
Bush's $1.35 trillion tax cut passed, and Jeffords
defected as promised.
Such
stands by Cheney were not uncommon, said Bolten,
the White House chief of staff. Cheney often
stepped in if he sensed the administration was
softening its commitment to Republican "first
principles," Bolten said, and he was "a pretty
vigorous voice for holding the line on spending
and for holding the line on tax cuts." Longtime
Cheney adviser Mary Matalin said the vice president
brings a "spine quotient" to internal debates.
Cheney's
power derives in part from meticulous preparation
paired with a strong will to prevail. He knows
what he wants, and as one rival put it, Cheney
and his staff are "just ferocious negotiators."
The
vice president regularly convenes a kitchen
cabinet of diverse outside economic experts,
often before the president is about to make
a major decision. Members of the group describe
a man who enjoys the nitty-gritty of economics,
poring over charts of obscure data such as freight-car
loadings and quizzing experts on the subtle
ways the government can influence the economy.
"With
the president it was much shorter. It's 'Marty,
what do you think of where we stand today?'"
said Martin Feldstein, a Harvard economics professor
and the president and chief executive of the
National Bureau of Economic Research. "It's
also a less technical presentation."
R.
Glenn Hubbard, Bush's former chairman of the
Council of Economic Advisers, said of Cheney:
"I'd have conversations with him that were at
a level of detail that those with the president
were not."
In
the weeks following the attacks of Sept. 11,
2001, as the White House was putting together
an economic recovery package, Cheney gathered
his kitchen cabinet, frequently interrupting
the experts as he furiously jotted notes on
a stack of cards embossed with the vice presidential
seal. What kind of tax cuts are needed? Cheney
wanted to know. How big?
A
few days later, Cheney was "on fire" when he
met with the president, Cheney's chief of staff,
I. Lewis "Scooter" Libby, later told Conda.
Cheney had decided that the best way to shake
business leaders out of their post-attack paralysis
was to let them immediately write off the cost
of new plants and equipment. After hearing him
out, Bush made Cheney's idea a centerpiece of
his plan.
In
previous administrations, such initiatives typically
have been generated by the Treasury Department
or the White House economic team. But Cheney
has made the vice president's office a hub of
tax policy, enabled by the fact that "this president
appears to want to have Treasury take the orders
from the White House," said John H. Makin, an
economist and an informal Cheney adviser.
All
this put Cheney in a position to outflank some
of Bush's top advisers, and even his old friend
Greenspan, to shape the administration's signature
tax package: the 2003 cuts that Cheney sold
at the Greenbrier resort in West Virginia.
'The
President Made the Call'
As
far as Greenspan knew, the vice president agreed
with him on the danger of the tax package Bush
was contemplating. The Federal Reserve chairman
worried that the sheer size of the cuts would
drown the federal budget in red ink.
Cheney
and Greenspan met regularly, far more often
than the Fed chief met with Bush, according
to interviews and Greenspan's calendar. And
when the president did meet with Greenspan,
Cheney was nearly always in the room.
The
vice president and the Fed chairman had formed
a close bond when both served in the Ford administration.
The Fed chief saw the vice president as a conduit
to a president he did not know nearly as well,
someone he could trust to fairly present his
views to Bush.
So
Greenspan sent Cheney a study by one of the
central bank's senior economists showing that
big deficits lead to higher long-term interest
rates, according to a person with firsthand
knowledge. Higher rates, Greenspan believed,
would wipe out any short-term benefit from a
tax cut.
In
subsequent meetings with the Fed chief, Cheney
never took issue with the study. What Greenspan
did not know was that, behind the scenes, the
vice president took steps to undermine an argument
that could threaten the big tax cut he favored.
Conda, the vice president's aide, said Cheney
asked him to critique the study. Conda attached
his own memo arguing that the Fed's analytical
model was flawed. He said "it wasn't my job
to know" what Cheney did with the paperwork,
but noted that Greenspan's study did not gain
traction inside the White House.
Aside
from Greenspan, Cheney had faced down opposition
from many of the administration's senior economic
voices, including Daniels, Treasury Secretary
Paul H. O'Neill and Commerce Secretary Donald
L. Evans. They believed that the economy was
recovering and that a deep tax cut wasn't needed.
Daniels said he worried that it would undermine
the GOP message of fiscal discipline.
Cheney,
however, pressed his argument that the economy
needed a jump-start. He wanted not only to reduce
the tax on dividends but also to cut the capital
gains tax and accelerate income tax breaks for
top earners, according to Daniels, Conda, Hubbard
and others. Conda said Cheney subscribed to
the view of supply-side economists that when
government cuts taxes the economy grows, generating
additional tax revenue that largely offsets
the losses from lower tax rates.
The
standoff came to a head in late November 2002,
during a meeting in the Roosevelt Room.
O'Neill
continued to oppose the tax cut on grounds that
the government was moving toward "fiscal crisis,"
irritating Cheney. "The vice president really
got a sense of where O'Neill was coming from
and surmised it was a problem," Conda said.
The following month, Cheney would demand O'Neill's
resignation.
Bush
sided with Cheney on the dividends tax but thought
it would be better to eliminate it altogether.
The president was cooler on the capital gains
tax, according to Conda and others. And having
campaigned on a platform of compassionate conservatism,
he expressed doubts about giving another income
tax break to the wealthiest Americans, particularly
because they would benefit the most from the
elimination of the dividends tax, Hubbard said.
But
by the time Bush publicly announced his tax
package on Jan. 7, 2003, Cheney lost on only
one major count. The president included no reduction
in the tax on capital gains. [Read the legislation:
As first introduced in the House | As passed
by Congress.]
"There
was a question of priorities and how to fit
things in," said Karl Rove, Bush's chief political
adviser. "And ultimately the president made
the call."
It
was then that Cheney doubled back at the Greenbrier
retreat.
"We
were deciding how to proceed," recalled Rep.
Adam H. Putnam (Fla.), now the third-ranking
Republican in the House. "Are we going to put
all our eggs in the dividends basket, or are
we going to move on capital gains? As I recall,
he was a very strong advocate on both counts,
but particularly capital gains in terms of its
potential to unleash the economy."
In
the end, the House decided against eliminating
the dividends tax cut, as Bush had wanted, choosing
instead to just reduce the rate to make room
for a capital gains cut.
Bill
Thomas, the California Republican who guided
the final bill to passage as chairman of the
House tax-writing committee, said he and Cheney
go way back and "use each other in the best
sense," with the two men deciding which one
will make a proposal and which will speak up
in its support.
In
the case of the capital gains proposal, Cheney
pitched it to the Greenbrier gathering. Thomas
pitched it to the White House, and he credited
the vice president with persuading Bush to go
along. "That," Thomas said, "is why the administration
changed its position."
The
vote in the Senate was 51 to 50. Cheney, exercising
his only formal power under the Constitution,
cast the tie-breaking vote.
Staff
researcher Julie Tate contributed to this report.
[Series continues on next page.]
