It's The Money, Stupid

It was a few weeks after Inauguration Day, and delirious Democrats were still celebrating. But not James Carville, Paul E. Begala, Mandy Grunwald, and Stanley B. Greenberg. The four Clinton campaign veterans sat in a Chicago hotel room, looking through a one-way mirror while voters in an adjoining room talked about their frustrations with the nation's health system.

When the focus group ended, the four were convinced that the cautious approach some Democrats were taking on health reform was off base. Voters knew plenty about the intricacies of the health system and wanted radical change. "That knocked my socks off," recalls Begala. "It led us to understand that the President was right in wanting to move more forcefully." Back in Washington, Greenberg conveyed the message directly to the Oval Office. And that helped persuade Bill Clinton to seek the most sweeping social reform since the New Deal.

"NETHERWORLD." Nearly a year later, the four still exert enormous clout at the White House. Like full-time White House staffers, each carries the special security pass that grants entry to 1600 Pennsylvania Ave. But none, by choice, is on the White House staff, where top aides earn $125,000. Instead, group members earn far more as consultants to the Democratic National Committee. This arrangement permits them to act as troubleshooters while working for other candidates, corporations, even foreign political parties. Never before have so many key political advisers plied their trade as free-lancers--freed from the restrictive conflict-of-interest rules that govern Administration appointees.

This dual role worries government-watchdog groups. The four "are operating in an ethical netherworld," contends Ellen S. Miller, director of the Center for Responsive Politics. "The fact that they have a close relationship with the White House while maintaining outside clients raises the specter of conflict of interest." Adds Charles Lewis, head of the Center for Public Integrity: "The DNC and its advisers have become an adjunct wing of government--with no accountability to government."

The doubts haven't stopped Carville, Begala, Grunwald, and Greenberg from becoming the hottest hired guns in politics. "Every Democrat running for high office next year will call one of these people," says Republican consultant Jay Severin III. "Hire someone with their track record, and you look more like a winner than you did the day before." But their popularity raises a tantalizing question: Are the Fab Four's services being sought because they're good or because they're close to Clinton? Says one Democratic activist: "People are buying a name and a connection."

One person who isn't complaining is Bill Clinton. He constantly enlists the inside-outsiders in his "permanent campaign." The four helped direct the fight for the President's economic plan, mopped up after early stumbles over Cabinet appointments, and provided brilliant image counseling for Hillary Rodham Clinton. More recently, they developed the marketing strategy for health reform, with its alluring emphasis on lifetime security. The four are "conceptual thinkers, each with a piece of the whole," says Samuel L. Popkin, a University of California-San Diego political scientist who worked on the campaign. "Stanley knows how to think about an issue, Paul knows how to talk about it, Mandy knows how to picture it. And James just nails it."

Obviously, each one of the four could have had top White House posts. Although Campaign Manager David C. Wilhelm was sent to head the DNC, most war-room commandos, such as George R. Stephanopoulos, went to the White House.

ROCKY RELATIONS. Critics feel that by staying outside, the four deprived Clinton of a heavyweight staff. Indeed, while Carville, Begala, Grunwald, and Greenberg ply their private interests, White House operations have been left in the hands of such relatively inexperienced aides as Chief of Staff Thomas F. "Mack" McLarty III, a former Arkansas utility executive, and Stephanopoulos and his fellow thirty-somethings. Even with the arrival of image counselor David R. Gergen, who has improved operations, few think the setup works well.

Subcontracting for political expertise is unusual. It was supposed to be a testament to Clinton's masterful political skills. But judging by the President's rocky relations with Congress, there's a downside to the arrangement. "Clinton has a weak staff, which gives the outsiders huge influence," says a Democratic pol. "By listening to them so much, he reinforces the perception that he's a totally political creature." Nonsense, replies McLarty. "Their work is a real plus. When you're in the White House, you lose touch with the real world. They add a fresh perspective."

Group members dismiss the notion that Clinton needs them 'round the clock. But they fret about possible conflicts. To insulate themselves, the quartet made a pact: No corporate lobbying and no deals with foreign governments. "We asked for information from the White House and DNC counsel about laws that governed us," says Grunwald. "We found out there were very few. So we decided to make our own rules." The Clintonites see no problem with self-policing. Says Wilhelm: "They come to me when there are questions. These are folks with good judgment."

YANKED PASS. Still, there are doubts. For starters, the fact that group members have White House passes troubles some--especially because a few Friends of Bill have been controversial. New York attorney Harold C. Ickes had his pass yanked after he was hired by companies to lobby against expanding a tax break for investment in Puerto Rico. New York lawyer Susan P. Thomases, a Hillary chum, surrendered her pass after McLarty raised questions about her corporate clients.

By past standards, Carville, Begala, Grunwald, and Greenberg merit passing grades for handling potential conflicts. Pollsters have traditionally worked part-time for Presidents, and Greenberg--unlike Carter guru Patrick Caddell and Reagan pollster Richard Wirthlin--has refrained from rapid expansion

fueled by corporate work. Carville and Begala advise just a handful of campaigns, though that's likely to change in 1994. Grunwald's firm is growing fast but still concentrates on politics. "The President," insists Carville, "is happy for our success." Still, it's obvious that group members are struggling to juggle their business and political interests.

THE RED-HOT CHILI PEPPERS. The team of Carville & Begala is not found together often these days. Begala spends hours at the White House polishing Clinton speeches. He also travels with the President to major events. "We get along," Begala says. "I try to make him laugh and keep him focused."

Carville seems intent on grasping the fleeting brass ring of celebrity. "I've never made any money in my life. If I don't make it now, I'm never going to," he says. Carville and his fianc e, Mary Matalin, who was a top aide in George Bush's 1992 campaign, are going a long way toward that goal by writing a book on the campaign. Co-publishers Random House Inc. and Simon & Schuster Inc. paid them a $925,000 advance for their tale, due in the bookstores this spring. With the writing done, Carville is often on the road, earning up to $15,000 for pep talks on the art of winning politics. "I'm big on the hot-air circuit," he shrugs. "I'm a ham."

In his guise as the Ragin' Cajun, Carville is a defender of the downtrodden. But now, his typical audience is a business group, which Carville describes as "150 rich white guys who quote Rush Limbaugh to me." Past clients include the American Hospital Assn., the National Restaurant Assn., and McGraw-Hill, publisher of BUSINESS WEEK. Isn't he taking corporate cash? Carville concedes "most of these companies are not riddled with Democrats," but denies that he's peddling access. "Reports of my influence are exaggerated."

That didn't stop the restaurateurs from making a pitch to him. Last April, the group invited Carville to speak. At the time, the White House was proposing further limits on the deductability of business meals. Upset members buttonholed Carville. Says spokeswoman Wendy Webster: "They hoped he would bring back a message to the President." Carville portrays himself as an entertainer, but not everyone agrees. Carville & Co. "are very powerful people," says one Democratic activist. "What do they think people are buying?"

Except for lectures, Carville & Begala don't accept business clients. "When I advise the President that a tax on beer is a bad idea, he doesn't have to worry that I work for Budweiser," says Begala. Carville claims the policy "has cost us $10 million." The bids come from companies, bond houses, interest groups, even foreign governments.

As for C&B's political candidates, Begala insists that "we can't do anything to help clients at the White House." As evidence, he cites the six-week stretch he served as a White House temp during the budget fight. "When New Jersey, Georgia, and Pennsylvania [states where C&B has clients] came up, I left the room." Moreover, Carville adds, by aiding endangered Democrats such as New Jersey Governor James J. Florio, the pair is also helping Clinton.

C&B won't represent foreign governments in the U.S. But they see dollar signs in campaigns abroad. The duo recently handled the reelection bid of Greek Prime Minister Constantine Mitsotakis--badly, as it turned out. Mitsotakis was trounced by Socialist Andreas Papandreou, and C&B left Greece shaken by the death threats they received.

DRIVING MISS MANDY. Of all the inside-outsiders, Grunwald has the most complicated task--juggling White House demands and her media firm. Business is booming for Grunwald, Eskew & Donilon, which makes ads for state and congressional candidates. Recent business clients include cable giant Tele-Communications Inc. GED made ads for local cable operators battling TV stations over programming rights. Meanwhile, Grunwald has become a key player in selling health reform and the North American Free Trade Agreement.

Grunwald has a talent vital to Clinton: She can translate the most convoluted wonkisms into terms Joe Sixpack can understand. "On health reform, Mandy spent hours refining the language, fine-tuning the names of things, so people would get it," says White House Communications Director Mark D. Gearan.

Of the Fab Four, Grunwald is the most plugged in to the zeitgeist. She convinced Clinton to appear on MTV and Arsenio. "Mandy's immersed in popular culture," says partner Carter Eskew. "A lot of people in our business think in words. She thinks in pictures."

Grunwald's firm has become a magnet for politicians--so much so that some contests pose potential problems for Clinton. For instance, GED is committed to handle Alabama educator Paul R. Hubbert's expected primary challenge to Governor Jim Folsom Jr. next year. The DNC has a policy of never backing challengers in primaries, but Grunwald says Hubbert is a long-time Eskew client who shouldn't be cut off. Confesses Wilhelm: "It is a little awkward."

Other GED clients have differences with Clinton. The White House fears that when Pennsylvania Senator Harris Wofford runs for reelection next year, he may trumpet his opposition to NAFTA. In New Jersey, Senator Frank Lautenberg may boast of his vote against Clinton's tax-heavy budget. Would Grunwald produce such ads? "I don't consider that a problem," she says. Still, she adds: "I don't think it's good politics to spend a lot of time attacking this President--ask what's-his-name in Texas." The reference is to ousted Senator Bob Krueger, whose Clinton-bashing campaign flopped despite help from--guess who?--Carville & Begala.

Although Grunwald insists that DNC work is a small part of her business, it's lucrative. The party pays her $15,000 a month. In addition, the DNC compensates her firm at the standard rate--around 15%--for its media purchases. In May and June, she got more than $113,000 in DNC consulting fees, according to the Federal Election Commission.

Grunwald also handles media for the DNC's national health-care blitz. The campaign has an ad budget of $3 million, most of it raised from the pesky corporations the inside-outsiders say they try to avoid. GED also has a fat contract to make ads for USA*NAFTA, the business coalition lobbying for passage of the trade pact with Mexico. Media budget: $5 million. A half-dozen firms were asked to compete, but everyone expected Grunwald to walk off with the deal.

Some competitors think that's fine. "To the victor go the spoils," says one GOP adman. Others disagree, noting that Grunwald was among the Clinton pols who urged delaying the trade pact for fear it would clash with health reform. "Everyone knows she's against NAFTA," grouses a Democratic consultant.

Is Grunwald selling something she doesn't believe in? "I have absolutely no personal views on NAFTA," she replies. "My job is to make sure my client has his views accurately described. I understand the President's views. And I understand why Senator Wofford and others oppose it."

BEARER OF THE SCROLLS. To meet pollster Stan Greenberg is to meet a truly happy man. Ever since his college activist days, Greenberg has only wanted to work for reformist Democrats. When he met Clinton, who inhales polls like Big Macs, the two clicked instantly. Now, Greenberg zips in and out of the White House with his latest readings of the President's job performance. "Clinton is remaking the country," the pollster says approvingly. "I organized my DNC contract so I can spend all my time working for him."

Actually, Greenberg Research still polls for long-standing clients: Senators Jeff Bingaman (N.M.) and Joseph Lieberman (Conn.), plus Michigan Representatives Bob Carr and David Bonior. Working for Bonior is another jarring bit of inside-outism, since he's leading anti-NAFTA forces. Greenberg says an associate is handling Bonior. Nor is he concerned about the free work he does for the African National Congress.

Despite his firm's demands, Greenberg meets White House aides nearly every day and gives Clinton a weekly briefing on his standing with voters. "Stan's the one who has to go in and say 'Mr. President, you're dropping like a hot rock,'" says Begala.

Although their circumstances differ, Clinton's inside-outsiders insist they are trying to keep their private pursuits from entangling with Clinton's. "Judge them by what their counterparts did in the past, and you see a higher standard," says party activist Mark Siegel.

Perhaps. But given their boss's vow to rid Washington of influence-peddling, even some CBGG admirers wonder whether they shouldn't take an extra step. "They should disclose their clients and their fees," says a top Democratic consultant. "That's a commonsense way to avoid potential problems in the '90s." At that, Republicans merely grin wickedly and whisper that old Watergate refrain: "Follow the money."