Trumping The President

FOR THE REPUBLICANS, IT WAS A rare instance of trumping the master. Bill Clinton, a wizard of political timing, has been one-upping GOP leaders for years by seizing their issues just as they ripened into public view, whether it was balancing the budget, welfare reform or the big-government-is-bad Zeitgeist of the '90s. Not this time. When it came to reforming the much-criticized Internal Revenue Service, the president's internal clock appears to have been badly off.

In recent months, as the administration dawdled over its own IRS-restructuring plans--which long predated the GOP's--the Republicans ran away with the issue. First the Senate Finance Committee held dramatic hearings in late September detailing IRS abuses of taxpayers. Those had scarcely ended when House Republicans like Majority Leader Dick Armey and Ways and Means chairman Bill Archer took to the road, thumping for tax reform. By the time Clinton belatedly backed Archer's IRS-reform bill last week, the headlines were all GOP, and the White House was portrayed as having caved in to Republican pressure.

In reality, the Clintonites probably came out ahead on the issue--if not in politics, then at least in substance. Treasury Secretary Robert Rubin, alarmed that some of Archer's more populist provisions would cause havoc in tax collections, managed to win many key concessions. He all but eviscerated a much-touted GOP plan to shift the burden of proof in tax disputes to the IRS. The Treasury Department considered that a dangerous overreaction and an invitation to widespread tax cheating (many tax experts agree). Rubin also insisted that a privately run IRS-oversight board created by the bill have no say over law enforcement (only ""strategic policy'') and that the president continue to appoint the IRS commissioner. ""Rubin knew he was going to compromise in the end,'' says one administration official. ""He figured he would drive a hard bargain.''

Unfortunately, the Treasury chief, while a tough negotiator, is not especially attentive to politics. And by then the headlines had left the Clintonites behind. At a White House strategy meeting three weeks ago, the president expressed his anxiety. ""I can see that they outflanked us on the hearings,'' Clinton said. ""But I want to make sure we don't get outflanked again.'' (His fear: a juicy issue in the upcoming 1998 elections and possibly a GOP payback for the brutally effective ""Medicare cuts'' ad he had used against the Republicans in the '96 campaign. Says one aide, ""Can't you just see it? "Clinton-Gore: Against the American Taxpayer'.'') The president sought to end the negotiations quickly and to deliver a headline-making counterproposal to Archer's plan. By last Sunday, Rubin finally agreed. ""Given the political atmosphere, it seemed that was the time to close the [negotiations],'' he told NEWSWEEK. A top Clinton aide puts it more bluntly: ""It was clear that we should throw up our hands and say, "no mas'.''

What the president didn't reckon on was a spoiler from his own party. On Monday, just as Rubin was about to declare himself satisfied, House Minority Leader Dick Gephardt jumped in and publicly backed the Archer plan. His fellow Democrats were defecting en masse, Gephardt explained; he wanted to settle, and he thought Rubin was dragging his feet. ""The guts of the issue had been decided on. I felt we were there,'' explains Gephardt, whose distance from the administration seems to grow as the 2000 campaign draws nearer. Unfortunately for Clinton, Gephardt's move made it seem as if the president's support of the bill the next day was mainly a response to a lack of Democratic support. ""It turned the whole story . . . from achieving a compromise to running after Gephardt,'' complains an administration official.

Politics aside, the bigger question is whether the final bill, which was approved by the House Ways and Means Committee on Wednesday, will do anything to change the IRS. Beyond some cosmetic moves, the agency hasn't done much to change its policies since the Senate hearings ended. Two weeks ago, a videoconference held by IRS management with 22,000 employees nationwide only led to more frustration for IRS workers who contend their internal complaints about abuses are routinely ignored. ""They were talking in circles,'' says one Dallas revenue officer.

Even watered down, the Archer bill will almost certainly help. Among its most significant, if little-noted, provisions are extraordinary new hire-and-fire powers given to the IRS commissioner, a political appointee who has traditionally been hamstrung by career IRS bureaucrats. Beyond that, the new oversight board, and closer congressional attention mandated by the bill, will force Treasury to watch the wayward agency more closely. ""After all this,'' says a senior official, ""I don't think any Treasury secretary will ever again be able to ignore the IRS.'' Judging from the headlines in recent weeks, no president will, either.