Global Intelligence Update
Red Alert
July 27, 1998
Deepening U.S. Presidential Crisis and its Potential Consequences
There is no issue on which we have been more consistently wrong than on the
ability of United States President Bill Clinton to weather the endless
barrage of charges and accusations that he has faced. In our forecast for
Second Quarter 1997 we wrote that: "It is our expectation that the current
controversy over campaign financing will solidify into a full-blown
challenge to the Clinton Presidency which will certainly threaten the
ability of Bill Clinton to act decisively in foreign affairs even if it
does not bring down his government."
(http://www.stratfor.com/services/gintel/estimate/quarter/2q1997.html)
In our Third Quarter 1997 forecast, we wrote that: "...we stand by our
prediction of Second Quarter 97, where we emphasized the growing domestic
political problems faced by President Clinton. Although he has fought a
brilliant defensive action, simultaneously delaying investigations while
making his pursuers appear to be the villains, his objective position has
continued to deteriorate. Supreme Court rulings combined with aggressive
Senate hearings will force him to the defensive during the Third Quarter."
(http://www.stratfor.com/services/gintel/estimate/quarter/3q1997.html)
Finally, in our Fourth Quarter 1997 forecast, we wrote that: "We continue
to predict political spasms in the United States arising from the Clinton
scandals. We also continue to be amazed by the ability of the President
to side-step charges that would have crippled most other Presidents.
Nevertheless, while having been wrong in our estimate on this for the third
quarter, we will maintain this prediction, albeit with trepidation, for the
fourth quarter. The crisis will break in the fourth quarter of 1997,
crippling the Clinton Presidency."
(http://www.stratfor.com/services/gintel/estimate/quarter/4q1997.htm)
Given this track record, it might appear foolish for us to revisit this
issue, but revisit it we shall, because it appears to us that Bill Clinton
is now finally starting to run out of room to maneuver. While it is still
not clear that his Presidency will end in resignation or impeachment, it
does appear to us that events are moving forward in such a way as to force
the President to devote the bulk of his remaining time in office to
defending himself. As a consequence, his ability to conduct foreign policy
will be hampered. The consequences of an American administration absorbed
in an internal legal and political crisis must now be factored into the
global equation.
* Evolution of Clinton Administration Scandals
Two events transpired this week to lead us to our conclusion. The first
was the decision by Special Prosecutor Ken Starr to subpoena the President
to appear before the Whitewater Grand Jury. The second event, of much
greater significance, was that the investigator assigned by Janet Reno to
determine whether she needed to appoint a Special Prosecutor to investigate
campaign finance violations has apparently issued a report recommending
such an appointment. He now joins the Director of the FBI in recommending
appointment. It is difficult to imagine how the Attorney General, faced
with the recommendation of both her own investigator and the FBI Director,
will be able to avoid appointing a new special prosecutor without
triggering impeachment hearings against herself. Even the redoubtable Ms.
Reno will now be forced to bend.
* "Whitewater" Scandal
There are essentially two sets of charges against the President. The first
set grows out of his involvement in a land deal in Arkansas called
Whitewater. Investigators of this case have not been able to demonstrate
any wrongdoing on the part of the President or his wife to date. It is
clear that they feel that this is the result of a cover-up arranged by
people close to the President. For example, Webster Hubbel, a former
senior Justice Department official has not testified against the President
in spite of conviction and a prison sentence on another charge.
Investigators assume that Hubbel has knowledge of wrongdoing in the
Whitewater case. They also assume that he failed to turn against the
President because of payments to him arranged by Presidential friend Vernon
Jordan. They have been unable to prove this.
Monica Lewinsky is of no interest in this matter, save that the same people
that investigators suspect were involved in silencing Hubbel appear to have
been involved in arranging a new position for Monica Lewinsky after she
left her internship at the White House. Thinking they have caught Lewinsky
in perjury during her Paula Jones testimony, they are threatening her with
prosecution in order to get her to testify that Vernon Jordan had
instructed her on her testimony in that case. If they manage that,
investigators will have Jordan on the ropes. With a gun pointed at Vernon
Jordan, they assume that the supreme realist will then turn against the
President in return for immunity, revealing how the cover-up of Whitewater
worked. At that point, everyone would abandon the President, and Starr
would have his victory.
This all assumes that Monica Lewinsky had sex with the President, that
Vernon Jordan did in fact discuss her testimony, that he suborned perjury,
and that he did the same with Webster Hubbel, Susan McDougal and others.
Whatever one might suspect, there are a lot of "ifs" here. If even one
link cannot be proven, Ken Starr will fail. But with the testimony of the
Secret Service, the first link, Lewinsky, may just be ready to fall. The
President's subpoena may be designed to use the President to increase
pressure on Lewinsky.
* Campaign Finance Scandal
The other charges against the President are far more serious, for they
involve the exchange of favors on the part of the Administration and the
President in exchange for campaign contributions. This set of charges is
subdivided into two parts. First, there is the charge that foreign
financial interests, including the Chinese government, helped finance
President Clinton's 1996 campaign in the expectation of increased influence
within the Administration. The second set of charges is that American
corporations, seeking access to the international trade services of the
Commerce Department (the right to participate in trade junkets, special
help with export regulations, etc.), were required to make substantial
contributions to the reelection campaign by then-Commerce Secretary Ron
Brown.
These two subsets of charges are interlocking. For example, John Huang,
who appears to have been a conduit for money from China, served as a
Commerce Department official. In another example, Bernard Schwartz of
Loral, a major contributor to the Democrats, was given an extraordinary
license to export satellite technology to China.
If this charge were to be proven true, it would be one of the most serious
violations of law and ethics by any administration in the history of the
United States. The conduct of foreign policy is a constitutional
requirement of the Presidency, and the sale of foreign policy in a
systematic fundraising effort would be unprecedented. The key, again, is
"if." If this is true, if it can be proven, then it would be
unprecedented.
* New Special Prosecutor Likely
It is, of course, not certain that the charge is true or that it can be
proven. What does appear clear to us, however, is that a Special
Prosecutor other than Ken Starr will now investigate it. This is a
critical point. Unless Janet Reno has a political death-wish, or the
President has some special hold over her, she will appoint a Special
Prosecutor. The investigation cannot be given to Ken Starr. First, given
everything the Administration has said about him, they can't hand him the
task. Second, Starr would be insane to accept the new responsibility. The
new Special Prosecutor will be a creature of the Justice Department. In
addition, having painted Starr as a monster, the White House cannot do the
same with a second Special Prosecutor. Politically, it would simply not
work twice. Finally, we cannot imagine a second prosecutor being as
politically clumsy as Ken Starr has been.
In other words, guilty or not, President Clinton is now in deep trouble.
He will be facing a new prosecutor focusing on infinitely more serious
charges than Starr is dealing with. The new Special Prosecutor will be
protected against the White House's attack mechanism because he will be
Reno's appointee, and because attacking a second Special Prosecutor would
boomerang on the White House. Finally, there is a credible witness, John
Huang, who appears to be ready to testify.
One might add that, unlike Whitewater, where those who knew what had
happened were all close to the Clintons, this second scandal involves
people who have no personal connection or loyalty to them. They will be
measuring their own futures against the fact that Clinton will be out of
office in two years and will no longer able to benefit them. It will be
much harder holding things together with this crowd. Therefore, we are
entering an intense period of introspection and political crisis.
* U.S. Not Impacted Domestically by Political Scandals
It is important not to make too much of this. The United States, for
reasons that are not clear to us, seems to go through political nervous
breakdowns once a generation. There was Watergate in the early 1970s,
McCarthyism in the early 1950s, Tea Pot Dome in the early 1920s. Each was
different, but they shared in common the fact that the senior political
leadership in Washington was unable to function in a normal way for
substantial periods of time. Certainly, policy was affected, but the
affect on the nation was minimal in the long run.
Political crises do not define the United States. It is important to
remember that the United States is not France, Japan or Argentina.
Politics is not nearly as important in the United States as it is in other
countries, the capital is not as important, and the senior political
leaders don't have that much power. Paralyzing Washington does not have
the same effect as paralyzing Paris, Tokyo or Buenos Aires. Life goes on
very nicely. The American President is very visible but not very powerful.
Indeed, particularly these days, there are few domestic issues that are of
significance and in the control of the Washington elite. This is something
that the rest of the world finds extremely difficult to understand about
the United States. It is one of the reasons that permits the United States
the luxury of periodic breakdowns.
* U.S. Foreign Policy Threatened by Political Scandals
The one exception to the U.S.'s immunity to the repercussions of political
scandal is foreign policy, which is the constitutional responsibility of
the President and which cannot be transferred. A parallel, if not
identical situation, was faced during the Watergate crisis. President
Nixon, completely absorbed by the political battle, allowed control over
foreign policy to devolve to Henry Kissinger, who was, by then, Secretary
of State. By analogy then, we should expect foreign policy to devolve to
Madeleine Albright. There are, of course, massive differences between the
two situations.
First, Kissinger had a national standing, carefully honed by him, that
Albright simply doesn't have. Indeed, no one in the Clinton Administration
has developed a persona in foreign affairs as preeminent and authoritative
as Kissinger's. The three candidates, Albright, Sandy Berger, and William
Cohen, are all essentially unknown to the general public. None can speak
for the country as Kissinger could in 1973. Second, the United States is
not locked in a near-war struggle with the Soviet Union. There is no
central power against which to strategize. This makes the problem harder,
rather than easier.
Kissinger could implement a coherent strategic plan without presidential
oversight because the core issues were well defined and coherent, if
dangerous. Today's issues are less well defined and quite incoherent, if
less dangerous. This increases the difficulties of management. Finally,
Kissinger was as strategist. There is no one in the Clinton Administration
that has revealed a strategic sensibility. This administration does not
lurch from crisis to crisis. It floats above the various crises, seeming
only randomly to intervene. While there is a case to be made for a purely
tactical foreign policy, maintaining its legitimacy in a democracy cannot
devolve to a functionary. It demands presidential validation.
Thus, there is no Kissinger available to serve as presidential surrogate.
But there are potential crises. The most important crisis faced during
the Watergate years was the Arab-Israeli war of October 1973. The Arab
decision to attack had little to do with Watergate, but the evolution of
the crisis, particularly the confrontation with the Soviets toward the end,
did have to do with Soviet perception of Nixon's weakness. There is no
Soviet Union today, but there are certainly secondary powers prepared to
take advantage of perceived weakness on the part of the President. Iraq,
Iran and North Korea immediately come to mind, with India and Serbia not
far behind. But more important, weak Presidents sometimes undertake
foreign adventures to compensate for domestic weakness and to exercise
power in the one area in which they remain paramount. Thus, in two senses,
a prolonged domestic crisis can lead to international instability.
* Damage to U.S. Asia Policy
The deepest problem will come in China and throughout Asia. The campaign
finance probe focuses on the role of China, and particularly of government
and army officials, in passing money to the United States. This will
inevitably strain U.S.-Chinese relations, along with U.S.-Indonesian
relations. It may also have domestic Chinese political implications. We
note, for example, that the Chinese government last week ordered the
People's Liberation Army to get out of commerce and focus on military
affairs. While undoubtedly deriving from domestic concerns, we wonder the
extent to which anticipation of American legal processes contributed to the
decision. Whatever the consequences within internal Chinese politics, it
is still clear that the campaign finance investigation will increase anti-
Asian feeling in the United States at the same time that the Asian
financial system will be undergoing its most severe tests.
Thus, if we are correct in our forecast (and one should never underestimate
Bill Clinton, as we have learned) then the coming months seem to indicate
not only a domestic political crisis, but one with substantial
international effects. The ability of the United States to deal with Asia
will decline because of the political consequences of the crisis. In
addition, secondary powers might perceive opportunities for their own
adventures while the United States is preoccupied. Indeed, Clinton might
perceive such opportunities as well. Most important, with the world's only
superpower self-absorbed, the probability of even great drift in the
international system is increasing. The rest of the world should not
expect leadership from the United States in the next few months, or even
for the remainder of the Clinton Presidency.
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