Bad Counsel At The Economic Council?

The "Felix Flub" is only the latest misstep

Felix G. Rohatyn's decision to withdraw as a candidate for vice-chairman of the Federal Reserve was a blow to President Clinton. But Rohatyn's Feb. 12 exit was even more embarrassing for Laura D'Andrea Tyson, director of the National Economic Council. Tyson headed the team responsible for vetting Fed nominations. Yet she failed to anticipate the fierce Republican opposition that prompted the 67-year-old Lazard Freres & Co. banker to back out. Now, the Administration is back to square one in trying to fill the vacancy.

The Felix Flub is the latest in a string of missteps that has some in Washington wondering: What's wrong at the NEC? In 1993, Clinton established the council, with Robert E. Rubin as its director, in order to elevate economics in policymaking and ensure that the Administration speaks with one voice on complex economic issues. In its early days, the NEC racked up a string of highly visible successes--from shepherding the 1993 deficit-reduction package through Congress to persuading lawmakers to delink China's most-favored-nation trade status from its human rights record. "The NEC is one of the most important innovations of the Clinton Administration," says Commerce Secretary Ronald H. Brown.

Increasingly, though, the agency is failing to forge consensus. Take present Treasury Secretary Rubin's November trip to Argentina. Rubin planned to complain to President Carlos Menem about Argentina's failure to protect U.S. trademarks and patents. But the Treasury chief was stunned to learn on his arrival that U.S. Trade Representative Mickey Kantor had preempted his quiet diplomacy. In a letter to the Argentines that arrived ahead of Rubin, Kantor rebuked Argentina for lackluster enforcement of intellectual property rights. The NEC is supposed to prevent such confusion, but "the letter wasn't cleared," says Tyson. A Rubin aide says the timing was unfortunate. Kantor declined to comment on the letter.

"RARE EXCEPTIONS." Now, even some of the NEC's early accomplishments are starting to fray. U.S.-Japanese policy--once a Clintonite obsession--is in the doldrums. Expansion of the North American Free Trade Agreement to Chile and the rest of Latin America is stalled. Congress is once again threatening to revoke China's favored trade status.

And foreign policy agencies are no longer singing from the same hymnbook. Case in point: In December, the Commerce Dept. and the U.S. Trade Representative's Office clashed over competing plans to enforce trade pacts. All such disputes should be brokered and eliminated by the NEC. Under Rubin, Treasury has taken charge of Mexico policy, while the U.S. Trade Representative has gained the upper hand on Japan issues. "Agencies now push their own policies regularly without much coordination," says a former U.S. trade official.

Tyson insists that mixed signals on policy are "rare exceptions." And she says any slowdown in NEC initiatives is largely due to the Republicans' victories in the 1994 elections. "The environment has changed," she says. "We don't have the legislative capability we had in the first two years."

Tyson has a point. In the balanced-budget fight, the White House was forced to play defense and the NEC virtually disappeared from view while Chief of Staff Leon E. Panetta directed maneuvers. Behind the scenes, however, Tyson helped shape strategy.

With Rohatyn, though, the NEC has suffered a highly visible defeat. Tyson never saw that the GOP-run Senate Banking Committee would be hostile to a nominee with Rohatyn's advocacy of government activism and economic stimulus that might boost inflation.

Recently, Tyson has moved to strengthen the NEC's hand. She has instituted weekly meetings with Cabinet officers responsible for international economics. She also reorganized her aides to better manage the thinly staffed agency. On Capitol Hill, Senator Ernest F. Hollings (D-S.C.) and other Democrats hope to bolster the agency with legislation to write the NEC and its role into law. That way, the NEC won't die after Clinton's Presidency ends.

But survival isn't enough. Unless Tyson can end the flubs and return the council to its former stature, the NEC may live only as another Clinton-era monument to good intentions.

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