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When Big Business Needs a Favor, George Bush Gets the Call

Ronald Reagan’s back-door man

George Bush

George Bush works in the White House Oval office in Washington, January 17th, 1991.

J. DAVID AKE/AFP/Getty

WASHINGTON D.C.

Cactus Jack Garner, who served for two terms as vice-president under Franklin Roosevelt, once compared his high office to a bucket of warm spit. (Actually, it is said, Garner compared it to a warm bucket of something else.) The vice-president, after all, does little but make banquet speeches, attend foreign funerals and wait upon the president’s heartbeat.

George Bush has faithfully executed all those duties, but he has also made much more of the job. In fact, Bush has converted that high office into a convenient back door for corporate lobbyists anxious to emasculate federal laws protecting public health, safety and the environment.

Bush is something more than a slender preppie who wears striped watchbands and speaks with a boyish enthusiasm. As former director of the Central Intelligence Agency, Bush participates in high-level policy debates and lunches each week with the president. Occasionally, when Ronald Reagan is away, Bush gets to play president, overseeing White House crisis meetings, like the recent ones on Lebanon. A president who delegates away his authority is a good deal if you’re a vice-president who doesn’t have any.

Within the administration, true-blue Reaganites regard Bush as dangerously moderate; in internal debates over such matters as civil-rights enforcement and aid to the handicapped, Bush has actually become known as a secret “good guy,” arguing against those who wanted to gut the federal commitment in those areas. In some instances, like the fight over equal opportunity for the disabled, he actually prevailed.

But Bush’s predominant identity as vice-president is that of a conservative businessman. Before he entered politics, he was a Texas oilman with his own company. In between political jobs (which have ranged from U.N. ambassador to envoy to China to director of the CIA), he served on various corporate boards, including a stint as director-consultant to Eli Lilly & Company, the drug makers (see box, page 13). As vice-president, he has served those interests well.

Under Bush, the vice-presidency has become a hidden court of last resort for special-interest groups that have lost their arguments in Congress, in the federal courts or at the regulatory agencies. They’ve discovered they can argue their cases before a more sympathetic judge. If all else fails, call George. Joan Z. Bernstein, a lawyer representing the pharmaceutical industry on water-pollution regulations, once suggested: “The lawyer who does not argue all the way to Vice President Bush may be subjecting himself to a malpractice charge….I, for one, have already put Vice President Bush’s number in my Rolodex.”

During the first days of his term, Reagan created and handed over to Bush the Presidential Task Force on Regulatory Relief. He empowered it, in conjunction with the Office of Management and Budget (OMB), to clear away costly red tape from the maze of federal regulations.

Last August, as election year approached, George Bush declared victory and folded his operation, claiming to have saved Americans $150 billion by eliminating wasteful rules and regulations. By then, though, an unpleasant odor had developed around the Reagan administration’s regulatory favors to business; it was obvious the White House wanted to get some distance from that subject before the reelection campaign.

In the abstract, what Bush and his staff were doing sounded innocent enough – merely extending less powerful regulatory-review machinery used by previous administrations. In practical detail, however, what Bush and his staff attempted does not look much like “reform,” as they called it, but old-fashioned political fixing. They created a mechanism whereby the private sector could secretly use its political clout to short-circuit lawful processes. In passing, he and his staff ran important errands for old friends, former clients or former employers who couldn’t manipulate things through the regular channels of government. Case by case, the vice-president’s office got involved in some mean and petty issues that directly affect people’s health and lives, from the dumping of toxic pollutants in lakes and rivers to government warnings concerning potentially harmful drugs. Even the conservative-oriented Fortune magazine seemed appalled: “In the end,” said the publication, “Reagan’s policy of deregulation may deserve the criticism being hurled at it – that it is not pro-reform at all, merely pro-business.”

Bush’s principal agent in this phase of the Reagan revolution was his general counsel, a cool, button-down Washington lawyer named C. Boyden Gray. His old clients included such industry heavies as the Business Roundtable, an organization made up of the chairmen of many major U.S. companies. Early on, Gray advertised his services in a speech before the U.S. Chamber of Commerce. “If you go to an agency first, don’t be too pessimistic if they can’t solve the problem there,” Gray told the business executives. “If they don’t, that’s what the task force is for.”

James C. Miller III, who was executive director of Bush’s task force while he served as regulatory-affairs director at OMB, described their power with some relish: “You know, if you are the toughest kid on the block, most kids will not pick a fight with you.” A federal regulator who balked at revisions suggested by the task force or OMB would be taking a great risk, Miller told an interviewer, “meaning that the president of the United States might decide to remove such a person from office.” In that bullying spirit, Bush’s task force and OMB won a lot of arguments with reluctant bureaucrats, even when they were advancing industry claims that had already been rejected in public hearings or federal courts.

This is a very strange way to make laws and, in essence, is what’s been so wrong about George Bush’s private interventions in the regulatory process. The Reagan team did not, of course, invent the Washington fix, nor was theirs the first White House to complain about overzealous regulators in various agencies. But Reagan and Bush tried to institutionalize the back door as an accepted lawmaking apparatus.

They were, in effect, making laws in secret. Although the complicated rules on health, safety and other matters are called “regulations,” they have the full force of law – government commandments of thou shalt and thou shalt not – and Congress has prescribed a careful, lengthy and open process of hearings, revisions and more hearings before an agency can invoke them. If that process has a final step added on whereby the losers can appeal in secret to political agents, then the law becomes an object for barter.

Fortunately, George Bush turned out be a rather limp-wristed Mr. Fixit. Many of his “reform” initiatives were eventually thwarted by outraged public opinion or political scandal or legal challenges, even by honest bureaucrats who wouldn’t yield to White House pressure without a fight. Yet the vice-president may have made an inadvertent contribution to the process of government: Case by case, his operation makes a powerful argument against conducting public business in private.

***

ONE OF GEORGE BUSH’S FIRST PROCEDURAL shortcuts involved the toxic-chemical rules. In arguing against them, the vice-president conveniently lumped those rules together with the so-called midnight regulations – so-called because officials of the Carter administration had tried to sneak them through in the waning hours of their term. The real history of the toxic-chemical rules, however, was quite the opposite of hasty action. In reality, they took nearly a decade for federal regulators to produce. In 1972, when Congress enacted the Clean Water Act, it authorized the Environmental Protection Agency to regulate what is called the “pre-treatment” of industrial chemicals – mercury, lead, cadmium, chromium and many other toxins that major industries were dumping untreated into municipal sewer systems. Such substances can cause a variety of afflictions, including kidney damage, cancer, hearing loss and birth defects.

EPA worked on the complex provisions for four years but still hadn’t produced a final set of regulations by 1977, the year that Congress amended the law. Industry groups lobbied for concessions, but instead, the lawmakers ordered EPA to speed up its work. The agency finally produced the provisions in 1978, but they were immediately challenged in court by various industries, which won some points. These court-ordered changes were then incorporated into the EPA regulations, more hearings were held, and early in 1981, the final rule was at last about to go into effect. It would have required major industries to remove their toxic pollutants from waste water before it is dumped into public sewers. At George Bush’s behest, EPA suspended the new rule indefinitely – three days after it had gone into effect.

The cost to industry of this regulation was relatively modest, according to EPA’s 1978 estimate, but industry wanted another crack at diluting its requirements. Lobbyists from the auto, chemical, steel and oil industries papered the government with pleading letters and blitzed the new officials of the Reagan administration with personal visits. The man who got the job done for them was C. Boyden Gray.

On March 19th, 1981, Gray received a “Dear Boyden” letter from Edmund B. Frost, vice-president and general counsel for the Chemical Manufacturers Association, urging him to intervene. EPA, Frost wrote, was proposing that the pretreatment regulation not be treated as a “major” one – thus making it unavailable for review. Gray phoned Michele Corash, general counsel at EPA, and persuaded her to reconsider EPA’s position. She did. Gray claimed she was “horrified” when he pointed out her error. On March 25th, the task force targeted the regulation, and on April 2nd, EPA suspended it.

One problem, though. The Chemical Manufacturers Association was one of Gray’s old clients when he was a private attorney with Wilmer, Cutler & Pickering, a high-powered Washington law firm. He listed CMA in his White House statement on financial disclosure, as required by the ethics-in-government law. When I asked him about this apparent conflict, he acknowledged his role in suspending the regulation but said he did not recall any letter from CMA. “I get hundreds of letters,” he explained. Gray recalled only that a lawyer from Covington & Burling, another politically connected law firm, had urged him to intervene. That letter, though, only got to Gray through an intermediary – the CMA’s general counsel, Edmund Frost, who had sent it along with his Dear Boyden letter.

Gray, who was designated the ethics-in-government officer for the vice-president’s staff, dismissed the connection with his former client. The only reason he listed CMA in his disclosure statement was out of an “abundance of caution.” He hadn’t worked for the chemical industry for several years, though he admitted he might still have been receiving fees in the year before he entered government. Besides, he added, CMA was no longer being represented by Wilmer, Cutler & Pickering. That was not completely true. Among the thousands of business pleadings sent to the vice-president’s Task Force on Regulatory Relief was a CMA complaint about EPA’s proposed air-pollution rule limiting emissions of benzene. The lawyer, who was from Gray’s old firm, suggested that the rule be killed.

The final ajudication of all this did not come until last fall. Following a lawsuit filed by the Natural Resources Defense Council, which charged that EPA’s abrupt suspension of the dumping rule was illegal and without any basis in fact, a federal appeals court ordered the agency to begin enforcing the regulation immediately.

***

AT THE OUTSET, VICE PRESIDENT BUSH LENT high visibility to the Reagan regulatory agenda, holding press conferences and speaking before business groups on the subject. He promised the American Textile Manufacturers Institute that his task force would take care of its complaints about Labor Department health regulations on factory noise and cotton dust. He assured the International Federation of Pharmaceutical Manufacturers Associations that the Food and Drug Administration would speed up its process for approving new drugs. “I think we’ve started to see this philosophical shift…the beginning of the end of the government’s adversary relationship with the private sector,” Bush declared. “Government shouldn’t be an adversary. It should be a partner.”

Beyond the platitudes, however, it is impossible to say precisely how many of these health-and-safety issues were decided by Bush personally and how many were done in his name by Gray or other White House staffers. Only they know, and their answers are somewhat contradictory.

Initially, Gray volunteered that his interventions were done at the vice-president’s instruction. “I don’t do anything usually without his prompting,” Gray said. “Some things I do on my own initiative, but usually he’s involved.” Later, Gray retreated when the discussion turned to such controversial actions as eliminating a required warning label on children’s aspirin or weakening safeguards for commercial underwater divers. The vice-president looked at the big picture, not at individual regulations, Gray insisted.

In any case, Bush’s name was often invoked by his underlings as a persuader. When the Department of Health and Human Services was not moving with sufficient speed to weaken safety rules for nursing homes and other matters, a task-force staffer asked Bush to call Secretary Richard Schweiker and demand a progress report within two weeks. Soon after, Schweiker wrote a “Dear George” letter in response: “I wanted to bring you up to date on the progress we at HHS are making in carrying out the President’s regulatory relief initiative.”

Though a number of such exchanges have been revealed through congressional investigations or lawsuits, most dealings are shrouded in secrecy. Officials at the task force and OMB are protected by the traditional confidentiality accorded to the president’s advisers, the cloak called “executive privilege.” In normal circumstances, it makes sense – a president could not function if all his private business were made public. But the principle collides with the public interest when these same advisers are empowered to rewrite laws in private negotiations.

Even with the protection of executive privilege, the White House regulatory overseers went to extraordinary lengths to leave no traces of their influence. In case after case, agencies were given oral instructions from Bush’s task force and OMB on what changes they wanted in various regulations – but they wouldn’t put those instructions in writing. One memorandum from EPA, discussing revisions in the rule on toxic chemicals, noted: “We have not received any formal written comments from OMB. They prefer to deal with us without written comments.” At the Labor Department, where the Occupational Health and Safety Administration (OSHA) was under pressure to weaken the standard on industrial noise, an OMB staffer gave OSHA officials a document describing the alternative approach wanted by the White House. “This is not from OMB,” the OMB official instructed them. “This is from OSHA’s notes of the meeting.”

These little games, of course, gave the executive officials involved a grant of deniability. If a new proposal were to blow up into public outrage or were challenged in court, there would be no written evidence of its origins. A very strange way to make laws.

James J. Tozzi, formerly OMB’s deputy administrator for regulation, was more candid than his old colleagues in explaining why the White House regulators preferred not to put their directives on paper. “If you put something in writing and it gets all over town,” Tozzi explained, “you spend a huge amount of time answering questions. ‘Why did you take this position?’ You get questions from the press, from Congress, from all sorts of people. Not putting it in writing is a means of trying to get a point across subtly and protecting all the players.”

***

JUDGING FROM THE TASK FORCE’S OWN claims, the biggest beneficiary of the vice-president’s efforts was the auto industry, followed perhaps by chemicals and steel. Because of their deep sales slump, the auto manufacturers received special consideration – a package of thirty-four changed or cancelled regulations on safety and air pollution that was supposed to have saved them $1.3 billion in capital. The biggest single item, killing the requirement for air bags in cars, has already been reversed by a federal judge.

Another concession that had been preceded by intensive lobbying from the auto companies was a negotiated dismissal of an antitrust decree prohibiting the auto makers from collaborating on the design of air-pollution devices for new cars. The story begins in 1969, when the Justice Department charged that the major companies were conspiring to block the introduction of new technology to reduce pollution. In a pretrial settlement, the auto makers agreed to an injunction that ordered them to conduct their own research and take independent positions when testifying before Congress or regulatory agencies. Environmentalists believe the so-called smog decree was the crucial development in the progress on air pollution during the Seventies, forcing the auto makers to search out important new ideas for controlling auto emissions. When the decree came up for renewal, the Justice Department, supported by EPA, asked the court to extend it another ten years.

Ford, General Motors, Chrysler and other members of the Motor Vehicle Manufacturers Association lobbied to reverse that. The Clean Air Act itself was coming up for renewal by Congress, and many environmental and safety regulations would be targeted for revision; a reversal, therefore, would allow the companies to lobby for weakened laws with a united front for the first time in more than a decade.

Boyden Gray was among those contacted, though he claims that he did nothing on the matter except pass it on to others. The issue could have proved embarrassing to Gray, because it was his old law firm and his mentor, lawyer Lloyd Cutler, who were representing the auto manufacturers. “I never dealt with the antitrust case either here or at the law firm,” Gray said. And he never talked with his old associates at Wilmer, Cutler, he added, except on some legislative issues.

Instead, Gray said, he turned the material over to James C. Miller III, executive director of the task force. Miller called the agencies and negotiated the changes; the Justice Department withdrew its plea in federal court, and the smog decree died.

Everyone seems to agree that it was Miller, not Gray, who crafted the package of deregulation actions for the auto industry. But Miller had his own connection with the industry he was helping out. For two years prior to entering the Reagan White House, Miller was a consultant to General Motors on labor and regulatory matters, earning $75,000 for his services. Later, when Miller became chairman of the Federal Trade Commission, he voluntarily removed himself for a two-year period from auto cases involving GM to avoid the appearance of a conflict of interest. Miller’s work for his old client at the White House did not create such an appearance – perhaps because few people knew what he was doing.

Mike Walsh, who headed EPA’s auto-regulation section, has been critical of GM’s influence on the final package. “We had developed a set of proposals that provided substantial relief to the industry without gutting the program while still keeping health protection more or less intact,” Walsh told Jonathan Lash, one of the authors of the upcoming book A Season of Spoils. “Miller and his staff made it clear that the industry, especially GM, wanted much more. GM got what it wanted.”

According to an expert on regulatory matters, Robert Crandall of the Brookings Institution, the Bush task force “made it look like they were just putting in the fix for their friends.”

***

THE RATIONALE FOR REAGAN’S ATTACK ON federal regulation was its escalating cost to the economy, not just business but consumers, too, and the assumption was that many of these new rules were based on flimsy scientific and economic analysis, advanced by federal bureaucrats only interested in increasing their own power. In some instances, that was undoubtedly true. Among the hundreds of federal rules targeted by Bush’s task force, some probably deserved to be killed or modified.

The pattern in case after case, however, is the opposite: White House officials ignored the established scientific evidence and invented their own. They even brushed aside well-documented studies which showed that new regulations would save Americans many more dollars than they would cost. One reason Bush’s operation lost so many disputes, even with subordinates in the regulatory agencies, is that they were advancing half-baked claims, mixing politics and science in an unstable brew.

The most flagrant example was the task force’s decision to rescind the federal rule requiring a gradual phase-down of leaded gasoline. By 1981, there was no longer any scientific debate over the harmful effects of lead emissions. In fact, government studies had found that eliminating lead would save billions of dollars more than it cost – through increased productivity and reduced medical costs.

EPA officials delivered that evidence to Bush’s office and the OMB analysts, but they were listening to other voices – DuPont, Atlantic Richfield and trade associations for both large and small refiners. The argument went like this: Lead pollution was already declining because of the growing number of new cars equipped with catalytic converters that used only lead-free gasoline. The regulation, first adopted in 1976 under another Republican president, was unnecessary. “Market forces” would eventually solve the problem without government action. EPA experts argued otherwise: The trend toward lead-free cars was slowing down by 1980, and junking the regulation would allow refiners to double the amount of lead in leaded gasoline. It would take market forces a decade to reach the same reduced level of lead pollution already attained by regulation in 1981.

Bush, nevertheless, targeted the regulation for revision and possible repeal. But this “reform” was subsequently derailed by two unforeseen events: a political scandal and more scientific evidence. Late in 1981, EPA administrator Anne Gorsuch held a meeting in her office, arranged by a Republican senator, with a small refiner from New Mexico who was worried about violating the lead rule. The refiner wanted an official waiver from compliance, but Gorsuch assured the businessman that wasn’t necessary. “She noted that EPA’s lead phase-down regulations would probably be revised and perhaps even abolished during the course of the upcoming rule-making, in accordance with Vice President Bush’s expressed intentions,” according to sworn testimony taken later by the EPA inspector general.

Was the EPA administrator advising the company to ignore the law? After the meeting, according to another witness, Gorsuch spoke privately with one of the participants “and explained to him that she couldn’t actually tell us to go out and break the law, but she hoped that we had gotten the message.”

When this transaction was uncovered by House investigators in 1982, Reagan’s EPA was embarrassed by its first smell of scandal. At the same moment, public outrage was fueled by new studies confirming what EPA scientists had always known about lead poisoning. One new study by the government’s Centers for Disease Control concluded that the lead regulation would produce public benefits of $1 billion to $5 billion a year, compared with the estimated industry costs of $100 million.

EPA officials, including the much maligned Gorsuch, now had the upper hand in the argument. The congressional elections of ’82 were approaching, and the Reagan administration was accused on many fronts of favoring business at public expense. EPA published a revised rule, despite White House resistance, that actually tightened the lead standard. Gray and others now take credit for a regulation they actually tried to prevent.

There were many other instances, large and small, when White House experts tried to sell unscientific or economic arguments that simply wouldn’t stand up under close scrutiny. When OSHA was drafting its cotton-dust standard for the textile industry, Christopher DeMuth, Miller’s successor as task-force director, revived an old industry proposal that textile workers should wear respirators as protection against brown-lung disease, a far cheaper solution than compelling factories to install engineering devices to control cotton dust. To support his position, DeMuth cited a new industry-sponsored study that, he claimed, confirmed that respirators were the plausible solution. Trouble is, the professor who’d conducted the study said his report suggested no such thing.

In another instance, DeMuth advanced the proposition that radioactive waste does not require the ultracautious disposal techniques envisioned by federal regulators. The spent fuel didn’t need to be buried so deep or sealed so rigorously, DeMuth argued, because government records of its whereabouts would always be available to future generations. He was literally shouted down by Gorsuch, who was backed up by experts from EPA, the Nuclear Regulatory Commission and the Department of Energy.

Everyone, of course, denies that political calculation and connections become intertwined with straight-and-narrow arguments over costs or public health. But contradictory evidence has turned up in a number of cases. In one internal argument over worker health standards, OSHA secretary Thorne G. Auchter blatantly invoked political motivation in discussions with White House regulatory overseers.

“Labor has not yet been given a cudgel with which to beat this administration,” Auchter warned the task force in a private briefing book prepared for the secretary of labor. “Failure to act on this matter will provide one. Recent articles point to the Democratic party’s efforts to rebuild its ties to the labor movement by painting this administration as antiworker. Let us not ignore political reality.”

An EPA official who revised the rules on radioactive-waste dumps sent an unpublished draft to the White House for approval. A few days later, the EPA staffer got a call from a General Electric executive eager to comment on the new proposal. Only EPA hadn’t asked for public comments yet or distributed the draft to anyone. Apparently, someone at OMB had shared the document with certain privileged corporate interests before it was made public.

Certainly, some of the people asking for favors thought their political connections would be helpful. A California oilman who’d served in the Reagan-Bush campaign in 1980 personally thanked the vice-president for his office’s help on the EPA lead standard. And a druggist, one among scores who complained about a proposal for patient warnings on ten drugs with potentially harmful side effects, wrote the vice-president: “I am the druggist from Alaska…and National Committeeman for Alaska who arranged for your press conference in Anchorage in 1978….I also cast the Alaskan delegation vote for you at the 1980 national convention after the delegation chairman refused to do so.”

The letter was written on GOP National Committee stationery, but Bush hardly needed that reminder – druggists and drug makers and some doctors were all lobbying against the patient warnings. It was among those drug-safety regulations that the Reagan administration abandoned.

Perhaps the most persuasive evidence of special influence lies, ironically, in those decisions in which the task force reversed itself and decided to support a regulation it had originally opposed. In several important cases, the explanation was no secret – the complaining industry had reversed its position first. After fighting the cotton-dust standard for years, for example, major textile companies switched positions in midfight. They were already installing the expensive equipment to clean up their mills; they wanted competitors to do the same. Bush refereed the final arguments and concluded that the regulation should go forward.

Another reversal involved major chemical firms, which had been resisting a new OSHA health standard requiring them to inform workers about the hazardous chemicals they were handling. This is one of the major causes of industrial injury, and organized labor had campaigned for years for a strong federal regulation, only to see the Bush task force target it. Then the chemical companies changed their minds. Labor groups were winning new safety regulations at the state and local level-rules that were tougher than the federal law. The industry reps came back to the White House with a different plea – to adopt the federal regulations in order to preempt state and local laws. Thus, the Reagan administration had to choose between its cherished goal of New Federalism and its desire to give the chemical industry a softer law on worker safety. Try to guess the outcome.

***

IN THE END, AS MANY OF THESE CASES SUGGEST, George Bush’s “regulatory relief campaign may have lost as much as it won for its clients. As scandals developed in various agencies, career civil servants were emboldened to stand their ground and resist. As Congress watched its laws being undermined by secret dealings, it stiffened its resistance to new legislation that might weaken them further. And as a result, the regulatory-reform legislation intended to create a permanent review apparatus in the White House has been stymied.

The fundamental problem, however, remains. The federal government does, undoubtedly, need some new mechanism to review and coordinate the flow of regulations emanating from various agencies, and right now, the White House is the only place. It may be wrong to do these things under the cover of “executive privilege,” but it is not necessarily illegal. The fact that no environmental group or labor union went to court to challenge the shadow powers of the task force and OMB indicates that, despite their outrage, they were afraid they might lose. They preferred instead to challenge individual regulations afterward, and they often won.

In the long run, Congress will have to set new rules. If the White House insists on serving as the last arena for regulatory battles, then presidential advisers will have to surrender some of their prerogatives of secrecy. They will have to make public whom they see and why. They will have to report their positions on regulatory issues so that everyone can scrutinize them. Right now, the legal distinctions may be muddy, but the principle is clear: Lawmaking should be done in full public view, not in private among a few old friends.

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