Reagan Cabinet Jude Wanniski Election Day, 1980

The appointment of A.W. Clausen of the Bank of America to succeed Robert McNamara as president of the World Bank was a significant victory for the Eastern Establishment, a blow to the populist conservatives.  It is an ominous sign of things to come.  McNamara doesn't leave until next June, but the EE (Council on Foreign Relations, Trilateral Commission, international banks) were so distressed at the thought of Reagan naming someone "unacceptable," that they cooked up the Clausen deal.  Reagan never knew what hit him.

The big problem is George Shultz, who already is acting as if he were President Elect.  Shultz has always been enamored of the international banks, a member of CFR.  Bechtel, his current employer, is practically the operating arm of the international banks, peddling "infrastructure" to the Third World on "easy terms." (Three weeks ago Richard Nixon told the press that it would be a Reagan mistake to put Shultz at State, because Shultz is too enamored of the "International bureaucrats," which is exactly correct.)

The Clausen deal was put together by Lloyd Cutler at the White House, and Shultz.  The Trilateralists hoked up the argument that the Europeans were pushing for a turn at the World Bank, and we'd better get with it now or the U.S. would lose the presidency. The Trilateralists picked Clausen because he wants the job and because he is on Reagan's advisory task force.  Jimmy Carter could thus ask Clausen to take the job, and present Reagan with a fait accompli — how could RR say no?

The last person we should want at the World Bank is one of the international bankers who have pushed Third World debt up to $300 billion.  The B of A is probably No. 1, with Citibank and Chase close behind, in debt exposure in the Third World. Clausen's objective will be to squeeze resources out of the Third World to pay off short-term debt.  He will also promote expansion of World Bank capital (squeezing the U.S. taxpayer) to finance more Third World debt, which is the agenda of the international bureaucrats.  Clausen, like Shultz, will resist any attempt to rebuild the international monetary system around a convertible currency. They simply must have inflation!

Shultz's influence on Reagan's inner circle is nothing short of incredible. He is so secure in his power that he could tell Leonard Silk of The New York Times that he, Arthur Burns, Alan Greenspan and William Simon now constitute the "first team." He has announced that his favorite economist is Milton Friedman, and that Reagan's favorite is also MF.  He says he believes Kissinger will be Secretary of State and Weinberger director of OMB.  Simon or Greenspan are favored for Treasury, with Simon openly campaigning for the job, claiming it as his own.  Simon told a group in NYC three weeks ago that the job of Treasury Secretary may be even more important than that of President in the next four years.  He no doubt envisions himself as "President" in this sense.

We should know the basic team by November 12, and there is a chance we would see some of the key players by this weekend.  The transition people will meet with Reagan on the 5th and supposedly the plan is to have the key people lined up by the weekend for another meeting with RR in California.  The schedule set is worrisome, giving RR no time to clear his head and rest, plus open himself to arguments against the plan devised by Shultz et al to build an administration around Nixon-Ford retreads.  The most promising note is that RR has insisted that his transition team submit at least three names for each top job.  This alone could slow the process down a bit and keep RR from being handed a Cabinet.  A major barrier to a team of fresh faces is the RR "kitchen cabinet" in California  (Justin Dart, Holmes Tuttle, et al), who want nothing but the best for Ron, which translates into a grab for credentials.  The Reagan inner circle, which now has the sought after prize of the Oval Office, is no doubt scared to death with the responsibility, and thereby reaches for "respectability" in names that will win establishment approval.  The fact that Shultz, Greenspan, Simon and Burns have miserable track records doesn't seem to matter.  Nor does it matter that these four horsemen did not join the Reagan campaign until he was a winner  (the folks who were on the earliest are the first to go:  Sears, Laffer, Kemp, Allen).

The problem is not that people the "supply-siders" want inside are going to be shut out by the Establishment.  It would be welcome news even if top positions were dealt to people so far not even mentioned as being in the running, people who had not been around the track already.  We can expect a few surprises of this sort, but I would be surprised if they were NOT members of the Business Roundtable, CFR or Trilateralists.

At stake are urgently needed monetary and fiscal initiatives. The Old Guard will block monetary reforms  (dollar-gold convertibility) and the initiative will be left with Congress, where it can go nowhere.  Reagan will, without a strong supply-sider in the Cabinet, be immersed in conservative Keynesian flummery of the kind that did in Maggie Thatcher.  He is already back in the Keynesian framework on the stump, having been isolated for so long from the classicists (talking about countercyclical fiscal policy, and such).  We really do have to be braced for a letdown in the Reagan administration, early on, not only winning some/losing some, but winning none.

This report, written at midday of Election Day, is as gloomy as the rainy weather here in New Jersey.  But I search for signs of encouragement and see none.  I hear of a few of RR's old friends who are indeed worried about "retreads," Simon at Treasury, Shultz at State.  And there is a younger contingent in the campaign that is pushing for change.  But as with the railroad job for A.W. Clausen, it must be assumed that Reagan is already captive of the establishment and it will take a shock to get him out.