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Can The Omb's Boss Close The Budget Deal?


Government: FISCAL POLICY

CAN THE OMB'S BOSS CLOSE THE BUDGET DEAL?

Franklin Raines is an outsider--and that could help

Franklin D. Raines is, by his own admission, a mediocre golfer. The problem is his inability to swing the same way every time. "I'm always thinking, `Let's try it a little different this time,"' he admits. That insatiable need to find new ways to do things may keep Raines's handicap in the stratosphere, but it could serve him well in one of government's toughest jobs--director of the Office of Management & Budget.

A relative unknown in fiscal-policy circles, Raines quietly took the OMB helm in September. If President Clinton is reelected, Raines, a former lawyer, investment banker, and business executive, will find himself in the midst of Washington's ugliest political brawl--the battle to balance the budget. He won't have to figure out what programs to cut--Democrats and Republicans already know that. Instead, the new OMB chief will have to do what his celebrated predecessors--from David Stockman to Alice M. Rivlin--did not: close the deal.

To accomplish that, Raines will have to sell liberal Democrats on deep new cuts in domestic spending while persuading bitter GOP lawmakers to negotiate with a President they don't trust. At the same time, he'll have to find a way for Clinton to trim the growth of Medicare and perhaps Social Security, even after the President's months of attacking Republicans for threatening those very programs. And Raines figures he has only a year or two to pull off a deal before the budget gets caught in the next Presidential campaign. Some would say he was nuts to take on such a task, especially since he left a cushy job at mortgage giant Federal National Mortgage Assn. (Fannie Mae)--and took a $2 million pay cut for the privilege. Yet Raines savors the challenge: "I'm not saying it's easy, but it's doable."

One of seven children of a Seattle city laborer and a Boeing Co. maintenance worker, Raines has been bucking the odds all his life. From a working-class Seattle high school, where he was state debate champion and student body president, Raines made his way to Harvard College, became a Rhodes scholar, and graduated from Harvard Law.

But even for such a Clintonesque overachiever, the stakes have never been higher. If Raines succeeds, he'll be remembered as the guy who finally balanced the budget. If he fails, Clinton will be doomed to four more years of stalemate and partisan squabbling.

"PAST THE RULES." In some ways, Raines seems a strange choice. True, he toiled in the OMB and the White House during the Carter years. But that was nearly two decades ago. Since then, he has been busy building a gold-plated rolodex and a fortune. Raines developed powerful political connections during 11 years as a public finance expert at investment bank Lazard Freres & Co. before moving to Fannie Mae, where he focused on strategic planning. Along the way, Raines schmoozed his way onto some big corporate boards and did good works as a director of the Rockefeller and Robert Wood Johnson foundations. But he always planned on returning to government.

That return comes just as voters are clamoring for a balanced budget but are loath to accept the spending cuts required to get it. Worse, Raines, unfamiliar with both the current players and the arcana of the budget debate, is rusty at the Washington game. "He'll have a long learning curve," predicts a GOP budget veteran.

Still, being an outsider has its benefits. Raines is free of the political baggage that weighs down many others in this debate. "There are enough experts in the budget process," he says. "The much more important advantage is to be able to look past the rules and the process and not be constrained by them."

That has worked before for Raines, who was hired at Fannie Mae in part because he was an investment banker, not a mortgage lender. He launched an overhaul of the way loans were originated, targeting the reams of paper that accompany home loans. He was convinced that streamlining the process could cut costs by more than one-third and trim approval times from weeks to hours. It's too soon to know whether Raines's efforts will pay off, but his initiative helped jump-start automation in that insular industry. Says Mark Korell, group president of Norwest Mortgage Inc.: "Because he didn't have years of background, he came in with fresh perspectives."

RELENTLESS. That's also how Raines hopes to tackle the budget. Unlike many Democrats, he won't refight the war over when to reach balance. "We can and should argue about priorities," he says, "but let's put in the bank the widespread bipartisan agreement for a balanced budget by 2002."

Raines also is an incrementalist. Rather than presenting lawmakers with a single, comprehensive deal, he prefers piecing together a plan "issue by issue" in a way that insulates both Democrats and Republicans from voter criticism. "Everything is political," he notes. "Everything isn't partisan."

Fannie Mae CEO James A. Johnson, one of Washington's canniest operators, says that despite a quiet demeanor, the new OMB director can work Capitol Hill. "Frank's not a traditional political back-slapper," Johnson says, "but he's as good an advocate as I've ever met."

There is little doubt that Raines has the intelligence for the job. John Buckley, a colleague at Fannie Mae who now serves as Bob Dole's chief spokesman, says: "Frank is brilliant and tremendously creative." Raines calls himself a "proselytizer," and he can be relentless in driving home a point. But while he's a tough negotiator, he comes across as gracious and low-key. "He's got a very delicate touch with people," says W. Bowman Cutter, a former top aide to both Presidents Carter and Clinton.

Raines is well-connected within his party's left wing, but he himself is solidly in the New Democrat camp. He was recruited for the OMB job by Vice-President Al Gore and shares many of his views. "We shouldn't start with the notion that the government is better [than the market]," Raines says. And while he believes in income redistribution, he say that "the best redistribution is a job." Says Buckley: "Frank's dirty little secret is he's not that liberal."

While Raines is pleased that few news stories dwelled on the fact that he's OMB's first black director, he is immensely proud of it. It's important to him that other African Americans see a black man in a powerful government post. Of course, blacks have served in other Cabinet jobs. But Raines quotes a black visitor who dropped by his office the other day: "They finally believe that one of us is capable of handling the money."

With that recognition, however, comes the task of breaching a 15-year chasm of partisanship. Raines's fresh take is a welcome one. His success is anything but certain, but after years of fiscal gridlock, a fresh face and a willingness to try a new swing can't hurt.By Howard Gleckman in WashingtonReturn to top


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