Mr. Break-It: the not very reassuring past of Ira Magaziner, the brains behind the Health Care Task Force.
Magaziner, according to insiders, moved first. Shortly after the election, he went to Clinton and, in one of the transition's more audacious lunges for power, asked for authority over health care and labor. "It was a flat out power grab," says a person familiar with the transition. "And it was disingenuous. Representations were made to a variety of people that there would be collaboration, and when he made the grab, he did it for himself."
But Reich exploited his F.O.B. status more ruthlessly. "He went to Clinton," remembers one campaign insider, "and said 'Look, I'm a friend of Ira's and it hurts me to say this, but he's just too radical."' Reich's message dovetailed nicely with a number of reports that had been leaked into The Wall Street Journal and elsewhere tarring Magaziner as a central planner with an affinity for industrial policy. After Magaziner met with Clinton in Little Rock, he didn't hear from his soon-to-be boss for several weeks, time enough for Reich to Iago his erstwhile colleague. "Clinton and Reich were meeting a lot then," says another person familiar with the transition, "and he told the president that Ira's just a little bit far out for the center image that he's trying to create." When the dust settled, Reich was in the cabinet as secretary of Labor, and Magaziner had what sounds like a decidedly humbler tag--special assistant to the president.
For all appearances, Magaziner had been outmaneuvered in his first big-league dust-up. But he, not Reich, is the central figure on the Health Care Task Force, which is about to unveil a plan to reform one-seventh of the nation's economy. And since Magaziner is not tied to a single portfolio, once health care is safely in motion, he'll be free to apply his talents elsewhere. As the administration's reform guru-at-large, don't be surprised to see him in New York a year from now, fixing the U.N.
For anyone familiar with his career, Magaziner's unique position is enough to make you, well, concerned, and the profiles published in the drum roll preceding the Task Force's plan--with the exception of the one in Newsweek last month--have tended to gloss or ignore what is worrying. His history in the private sector and his previous forays in government reflect a passion for bold strategic thinking and public policy of New Deal-sized grandeur. But what is left in the wake of his reformist zeal? The 500-strong colloquy he's now orchestrating may be too sprawling to bear Magaziner's imprimatur distinctly, but browse the standout chapters of his life and you get the sinking sense that if health care reform is anything like his past projects, it will be hopelessly complex, or impossible to sell, or simply iii-advised. And while we're waiting in line for blood tests and barium shakes, Magaziner will be off... fixing the U.N.
Magaziner's mind is legendary. He can synthesize pie graphs, streamline bureaucratic waste, and parse economic indicators like a oneman mainframe. He's focused to the point of absent-mindedness: Legend has it that he once unwittingly traversed a tarpaulin stretched over a hotel pool on the way to a meeting. And he's apparently impervious to exhaustion--when he tells aides to produce something "by four," they have to ask "a.m. or p.m.?" Those who don't know him well describe him as humorless, aloof, and arrogant. His friends contend he's just extremely shy and awkward. "He's not the 'hail fellow well met' type," says an acquaintance. "But he's tremendously warm and loyal."
With a wiry shock of black and gray hair and a complexion like chalk, Magaziner made his reputation storming company compounds, rattling executives, and rustling documents until dramatic solutions emerged. He won rave reviews peddling advice and spreadsheeting for corporate bigfoots like Coming Glass and A.T. Cross. He helped rebuild the consumer electronics division at General Electric and persuaded Volvo to venture into the luxury auto market, a move which helped rescue the company from oblivion.
But some of Magaziner's solutions have been longer on drama than wisdom. When GE was a client, he convinced the company to develop a new rotary compressor (the pump that cools air in refrigerators) rather than buy the item from foreign manufacturers. The result was an expensive, defective debacle. GE ended up recalling a million of the compressors, a measure that resuited in a $450 million pretax charge on earnings. Among Magaziner's more famous clients is the now-defunct Wang Corporation, the soonto-be defunct Swedish economy, and two politically defunct candidates for president, Richard Gephardt and Michael Dukakis. A 1990 profile in Boston Business Journal opined that Magaziner's track record and phenomenal fees prove that in the consulting biz "it's not whether you win or lose but how much you pay the brain ."
"It's funny," Robert Reich once said, "his insights are rarely startling. More often they are of the 'Why didn't I see that?' variety." Indeed, Magaziner's career consists mostly of rearranging things that are already there. Ever since he organized a labor strike at summer camp as a teen, it's been the same: Point to the institution and he'll overhaul it.
Take Brown University, the site of his first and perhaps most successful redesign. In 1969, Magaziner, then a junior, and a friend named Elliot Maxwell decided that the school's curriculum put excessive emphasis on grades and was over-larded with requirements. They drafted what was called the Maxwell/Magaziner Report and after a year of debate, the school's faculty adopted it with virtually no modifications.
What's still known around campus as the "New Curriculum" has proven to be wildly popular with students, and over the years, attempts to alter it even slightly have been repulsed with rallies and even death threats. In part that's because the plan made classes smaller and experimenting with new disciplines easier. But it's also because the Maxwell/Magaziner reforms, in their broad outlines, are what you'd expect if the guys from Wayne s World designed a university. They eliminated virtually every requirement, from language to mathematics, reduced the number of credits needed to graduate, and best of all, wiped out the D grade and allowed Fs to be stricken from transcripts. This system has naturally spawned grotesque grade inflation. Since Cs are essentially the school's failing mark, Bs can be had for little more than showing up.
Rethinking college curricula was all the rage back in 1969 (Robert Reich, in fact, was tinkering with Dartmouth's at the time), but today Brown students tell the story of the school's adoption of the Maxwell/Magaziner plan as if they were recounting the story of Exodus. Magaziner, cast as co-Moses, foments an uprising, holds massive rallies, and overwhelms an incredulous faculty.
That's partially true. But the biblical account airbrushes important details, some of which presage Magaziner's methods in future missions. This movement, like others he was to lead, did have some campus support but it was very much a top-down effort. "It was never any great grassroots cause," says Gerry Hausman, a classmate and friend of Magaziner's at Brown and later at Oxford. "If you had taken a poll in May of '68, I guarantee you would have found that reforming the curriculum was not among the top three issues in people's minds."
And though this reform got most of its credibility with faculty from the Maxwell/Magaziner report, teachers were also persuaded by something more primal: fear. The faculty found itself voting on the issue shortly after the student take-over at Columbia and while anti-Vietnam brushfires were starting at colleges around the country. The sense, according to Brown English professor David Hirsh, was that if they passed this plan, more violent explosions could be avoided. "We met inside this building and there were students outside the building with loudspeakers," says Hirsh, who supported the reforms. "Many of us were intimidated."
Essential also were a few key allies in the administration's upper echelons. And this is the last ingredient of a recipe that Magaziner would reuse in the future: Dig into a problem, imagine a way to fix it, hole up with others to write an exhaustive report on it, win powerful folks to the cause, and warn darkly of repercussions if the plan isn't adopted. It's not a coincidence that this, roughly, has been the tact taken by the Health Care Task Force.
Brown continues to draw in top students and thrive. But with the nation-wide ascendence of distribution requirements and core curricula, the school's system is starting to look thin and dated. Magaziner assumed that all students would be just like him and would put their freedom to responsible use. No doubt many do, but among . Ivy-bound high schoolers and in colleges across the country, Brown is informally known as the i four year vacation school. And it's hard to see: how Magaziner, who is still proud of his work at Brown, can square the whatever-you-like spirit of the New Curriculum with what has recently been among his principal obsessions: the lack of ' standards in U.S. schools. He makes a good point when he argues that in the American system, "We don't have any quality control, we don't have a clue what we're getting for all that money that we're spending." But you can't help thinking that those sound like words you'd expect from the parent of a Brown student, finding out how the school's grading system actually works.
After Brown, Magaziner studied at Oxford on a Rhodes scholarship. He created his own course of independent study, never took a degree, and spent a lot of time organizing anti-Vietnam War rallies with, among other people, Vanessa Redgrave. In 1971, he resurfaced in Brockton, Massachusetts, the grizzled, decaying Boston suburb which was then a foundering shoe factory town best known as the home of Rocky Marciano. He arrived with a group of eight Brown graduates and devised a full frontal assault on the city's economy. They set up a tenants union, a land trust, ran a food co-op, and organized consumer rallies, all the time holding down day jobs and publishing a muckraking weekly newspaper, The Brockton Examiner.
What got the group truly exercised, judging by several Examiner issues from 1972, was development. One hobby horse was fighting construction of a low- and middle-income apartment building, which, the paper argued, would ruin the town's largest park. (The housing was built, the park is fine.) The Examiner took a hard stand against a proposal to build a Bob's Big Boy.
Luddite tendencies aside, the group did have some positive effects and enjoyed community support, but Magaziner seemed to lose interest in the project, and he and his friends neglected to train anyone to continue the work they had started. "I saw there was going to be a deplorable vacuum behind when they left," says George Papas, a Brockton community activist at the time. "And I asked them to make sure that they trained people. But they didn't, and the food co-op and the tenants union just withered away when they left."
By early 1973 Magaziner had left Brockton. "We were young and naive," he would later say of this utopian project. Magaziner was in his mid-twenties at the time and would shortly ditch the sandal-and-cloves crowd for the wing-tipped halls of the Boston Consulting Group. Though he spent the next decade and a half advising the Fortune 500 and a number of countries, when critics charge Magaziner with favoring the heavy arm of government over free enterprise, the Brockton project is part of the reason.
The rest of the reason is the Greenhouse Compact, drafted back in 1982 at the request of a former Rhode Island governor, Joseph J. Garrahy. It was an expansive, multitentacled program designed to grow (or greenhouse) certain industries in the state. Magaziner has been unabashed in calling the plan "industrial policy," and he made no secret of intending it to serve as a model for what could be done at the national level.
By then Magaziner was married with children and had set up Telesis, his own consulting outfit in Providence, Rhode Island. He put the firm's resources at the state's disposal for free. True to form, he put together a working group, came up with a densely written 1,100 page document-the executive summary alone runs 50 pages--and began to court the state's elites. His plan was to use local universities to identify which industries should be nurtured and which should be lured into the state with tax incentives and aid packages.
By the time the plan was unveiled, virtually everyone was on board: labor unions, church leaders, state legislators, bankers, the chamber of commerce, even the state's biggest newspaper. The only hold-out, ironically, was the entire economics department at Brown--and, as it turned out, 80 percent of the state's population.
The plan required the state to raise $250 million, which Magaziner insisted on packaging as a one time tax surcharge and putting to a state referendum. But just days before the vote, the two leading Democrats in the state legislature named themselves to the ostensibly non-partisan com| mission which was to oversee Greenhouse dispersals. The venture capital fund suddenly looked like a pork barrel. Rhode Islanders, who know that, felon for felon, they've got the most corrupt state government in the country, saw what was coming and torpedoed Greenhouse. "We understood that these guys couldn't run the government efficiently," says Dan Shedd, president of Taylor Box, a manufacturing company in Warren, Rhode Island. "So how could they possibly direct an economy?"
Magaziner, who had put manic energy into devising the plan and selling it to leaders, had forgotten to sufficiently pitch it to taxpayers. As importantly, he had failed to insulate Greenhouse from the snake pit of Rhode Island politics. "One of the arguments used against Ira," says a transition insider, "was what happened in Rhode Island. People took it as evidence of a lack of political sophistication, that he didn't have a good enough sense of the hurly-burly." Not coincidentally, Magaziner has been the Health Care Task Force's ideas coordinator and traffic cop, "but James Carville is hovering nearby and Stephanopolous, [White House press liaison Bob] Boorstin, and Hillary are in charge of the public face."
Whether Greenhouse could have protected the state from the recession is still a matter of debate. There were strong hints that bio-tech and high-tech firms would be big winners, but some of what turned out to be the state's cash cows--like Hasbro, the toy company--would not have seen any Greenhouse funds, and the jewelry industry, which was identified as part of the problem, is still one of the state's largest employers. The perennial rap against industrial policy--that elites are no better, and might be a lot worse, at picking winners than the market-is still the rap against Greenhouse and, indeed, against Magaziner himself. He was, after all, an early and ardent fan of the ultimate high-tech boondoggle, cold fusion. Before scientists discredited the findings of two University of Utah scientists who claimed in 1989 to have created a new source of energy in a glass of water, Magaziner was testifying before Congress that the government should immediately sink $25 million into cold fusion research. (At the time, Magaziner was on a $20,000 a month retainer from the state of Utah.)
Train in vain
Magaziner sold Telesis for $6 million in 1988, and has since retired to front other civic projects and plump for one of his, and now the Clinton administration's, favorite themes: increasing productivity by creating a more highly trained work force. In a speech to the Economic Strategy Institute last May, he argued that the country should establish a national system of "performance based assessments" whereby children would earn merit badges by demonstrating competence in a series of skills, leading, ultimately, to a "certificate of initial mastery."
In 1990, he offered more specifics in a study he chaired for the National Center on Education and the Economy (NCEE), which persuasively argued for the need to increase the skills level of the American worker. The report recommended a system of federally sponsored employment and training boards to oversee a new system of school-to-work programs and skills certificates.
Most of the NCEE report was extremely trenchant, but it ended with a Magazineresque flourish, urging that every business, large and small, be required to spend 1 percent of payroll on training. "All companies, organizations and institutions, regardless of size or type of business... would be required to participate." An across-the-board rule has some merit: If smaller businesses are exempt, they can swipe skilled workers, which, in fact, is what happens in Germany now. But the no-exceptions approach is riddled with problems. It requires a network of watchdogs, since managers who want to duck the expense can easily cook the books to fake compliance. Sweden's system, touted as a useful model in The Silent War, a book Magaziner co-authored in 1989, is spared any additional bureaucracy because unions are powerful enough (95 percent of the workforce are union members) to police skills programs themselves.
Magaziner's mandatory training idea, which you'll find in Putting People First, is also regressive: A big firm's outlay to train 50 workers is far more cost-effective than a smaller firm's outlay to train five. Other countries that have tried mandatory systems found that small companies opt out by the thousands and pay a tax rather than pony up for schooling they don't need. "In France, small firms punt rather than spend money on unnecessary training," says Laurie Bassi, associate professor of economics and public policy at Georgetown University. "They give the money to a general pool, which only ends up redistributing funds from small to large firms ."
"Mandatory training," says Dan Hammermesh, a professor of economics at Michigan State, "is a wing and a prayer. It's just the hope that if we shake people up, the dust will fly and when it settles the results will be more desirable ."
The 1 percent training requirement, Greenhouse, the "certificate of initial mastery," and even, to some extent, the Brockton project are all vintage Magaziner: right-hearted, impressive in scale, but tinged with heavy-handedness and impracticalities. Too often his schemes sacrifice pragmatism to ambition. Because, for instance, Greenhouse was intended as a pilot program for a national industrial policy, it gave bizarre emphasis to Rhode Island's "balance of trade": Goods traded with other states would be favored over firms selling within Rhode Island. The idea was that if Greenhouse could improve a state's export ratio, then the concept could be sold to the whole country as sound national policy. This, of course, is a vast disanalogy. Rhode Island can't use tariffs, doesn't control the amount of its currency and sends 12 percent of its workforce across state lines. And selling products in state is as good for the economy as selling them to Nebraska.
Though it has doomed past projects, Magaziner's love of the vast may be precisely what is necessary for a morass like national health care. But already there have been mutterings that when Magaziner takes the health care plan public he's in for the sort of surprise Rhode Islanders handed him. Not all the details have been vetted with Clinton's mandarins for political viability. Shalala is rumored to be a detractor and more leg-work may be necessary to win over others. "I wouldn't say that Bentsen is completely signed on;' says an official at the Treasury Department. "There may be a subsidy arrangement for small business and individuals who need government help.There may be taxes on benefit values above a threshold. If so, Treasury needs to be in on the design."
In the long term, what Magaziner's presence in the White House will mean is not yet clear. The uncharitable will think that he'll nudge the Clinton administration to adventures in what Bush called "social engineering." The charitable will say that Magaziner's instincts are in the best tradition of FDR's impulse to try something. No doubt there's something to both notions, but Magaziner's intellectual pedigree, youth (he's now 45), and faith in the sheer wattage of his brain recall another place and time: the roundtable of Kennedy's best and brightest. Indeed, if the health care crisis in this country is, as some have predicted, the next Vietnam, Magaziner seems fated to be its McNamara. Both men were touted early on as brilliant thinkers, both enjoyed lucrative stints in the corporate world, both slid into public life as proteges of a new, young president, and both were unleashed on the day's most Byzantine problem.
An administration of big ideas needs a big ideas man, but you can't help noticing that if Magaziner is a social experimenter his petri dish just got a lot bigger. First it was Brown University, then it was Brockton, Massachusetts, then it was the state of Rhode Island. Now, finally, it is all of us.
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|Date:||May 1, 1993|
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