TIME: Almanac 1990/1990 Time Magazine Compact Almanac, The (1991)(Time).iso/time/021389/02138900.045

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NATION, Page 26

COVER STORY: Playing for the Edge

Whether stalking turkeys or talking turkey, Jim Baker says,

"the trick is in getting them where you want them, on your

terms"

By MICHAEL KRAMER


    Those are armadillo tracks," says Jim Baker. "And that's a
coyote turd."

    "Where?"

    A stream of well-chewed Red Man tobacco -- a replacement for
his three-pack-a-day cigarette habit -- arcs expertly toward a
barely visible target about four feet away. "Right there," he says.
"Bull's-eye." It is the last day of 1988. In three weeks James
Addison Baker III will become America's next Secretary of State.

    Baker and a companion are turkey hunting on 1,366 acres of
Texas scrubland about 50 miles south of San Antonio, a wild, almost
barren part of the U.S. where it is easy to believe that due
process is still a bullet. "I call it the Rock Pile Ranch," says
Baker, "and that's about all that's on it. Nothing else but some
water wells and turkey feeders. Coming here is the closest I get
to therapy. I'm not really into material things, but land, well,
they're not making any more of it."

    "There, over there," says Baker. "That's a hen feather. It's
easy to tell hens from gobblers. The gobblers are blacker and have
beards. You need any toilet paper, let me know," he says, carefully
producing about a dozen neatly folded sheets. "I never come out
here without it. Amazing, isn't it, a real challenge."

    "Toilet paper."

    "No. The Middle East. You think we'll ever be able to get a
peace agreement over there?"

    "You see that?" says Baker, shifting again. "That's a hog
wallow. They love to get down and dirty in it. Beautiful here,
isn't it? I bet the contras would love it."

    A few more steps, and Baker sees "something promising." With
a shotgun cradled in his arm, he bends. Then very carefully, so as
not to destroy the evidence, Baker fondles what he confidently
identifies as "some very fresh" turkey droppings. "From this
morning," he says. "They've been this way not very long ago. Walk
quietly, and keep your eyes peeled. It's just like every other
game. You master it by creating an edge."

    Patience, says Baker. That's how you get a leg up hunting
turkeys. And that too, he likes to say, is how you become
successful at anything, in or out of politics.

    "You know how he kills turkeys?" Barney McHenry, one of Baker's
oldest friends, had said. "He pays good money to have someone load
his feeders with corn so he can lure them in. Then he shoots them
while they're standing on the ground eating. Some sport."

    "Wrong," says Baker. "The thing is getting them in. They're
smart as hell. Their eyesight and hearing are incredible, about ten
times better than a human's. The trick is in getting them where you
want them, on your terms. Then you control the situation, not them.
You have the options. Pull the trigger or don't. It doesn't matter
once you've got them where you want them. The important thing is
knowing that it's in your hands, that you can do whatever you
determine is in your interest to do. I don't know, though," he adds
after a few seconds.

    "You mean we might spook them or get to the feeders after
they're gone?"

    "No," says Baker, flashing a brief, fleeting smile. "I mean
Israel. Because there's now a dialogue with Arafat, there may be
many more options open in the future. But creating something
productive when Israel is divided internally is going to be real
tough. Who knows?

    "See those sardine cans?" says Baker suddenly. "The illegals
have been by. They come through here and at other spots on their
way in. If we don't get a handle on Third World debt, we'll be
overrun by Mexicans coming here to work. It's got to be one of our
main priorities . . . Bill Bradley and I disagree about how to deal
with the debt problem. He wants to force the banks to restructure
debt. I say that's probably unconstitutional, and even if it isn't,
the only way we can do things like that is through voluntary
negotiation. But Bradley and I are both convinced the way out
involves growth. Nicky (Brady, the Treasury Secretary) will get a
handle on it."

    It goes on like this for two days -- informed,
stream-of-consciousness musings on world affairs and turkey
behavior. This is Baker's second hunting tour of the week. The
first was in the company of his "pal," George Bush. "We only got
17 quail," says Baker. "Mostly on account of the dry weather. The
quail haven't been reproducing in their normal numbers. And of
course you have to factor in that the President-elect is, how shall
I put it, an erratic shot." "It was good for them to do so poorly,"
says Baker's wife Susan later. "They're on top of the world now.
It was good for their humility."

    At one of the turkey blinds he has fashioned of logs and brush,
Baker settles in to wait. He leans against a persimmon tree, and
with as little motion as possible he reads and turns the pages of
a State Department briefing book stamped SECRET. Methodically,
Baker underlines almost every sentence. "It's how I learn," he
explains. "That and taking almost verbatim notes when someone is
briefing me. `Proper preparation prevents poor performance': one
of my father's maxims. That's how you gain control. I'm on Africa
now," he says. "We'll pick up and move when I get to the Near
East."

    At dinner that evening, at a ranch nearby, Baker faces a snap
quiz. "What's the capital of Tanzania, Dad?" says one of his
stepsons.

    "Too easy," says Baker.

    "Name the members of the European Community."

    He ticks them off on his fingers.

    "What's our position on European integration in '92?"

    Baker hesitates. It is well known that the U.S. is not exactly
thrilled by the prospect of "E.C. '92," but a guest is present.
Slowly, with his official voice in gear, the Secretary-designate
rehearses the lines he will shortly repeat to the Senate during his
confirmation hearings. "We've got to make sure Europe is open to
all," he says. "If that means aggressively enforcing our own trade
laws, so be it. I hope it doesn't come to that. It's going to take
some skilled diplomacy to get the edge on that one. Tell you the
truth, I can't wait to get my hands on this stuff."

    But not ahead of schedule. Despite a net worth estimated at $4
million, Baker is notoriously frugal. When he went to Washington
to become Ronald Reagan's chief of staff, Baker and his wife lived
briefly in two rooms without a phone at a Christian Fellowship
house. His Foxhall Road residence wasn't ready, and the Bakers
wanted to save "about $7,000 in hotel bills." Now, at the ranch,
Baker says he is thinking of heading back to Washington a few hours
early. "O.K.," says Susan, "but remember we got those supersaver
fares, Jimmy. It'll cost extra." "Oh, right," says Baker. "Forget
it. I'll go back as planned."

    It is Jan. 27, and Baker is sitting in the seventh-floor
Secretary's office at the State Department watching Bush conduct
his first press conference as President. "Pull up your tie,
George," says Baker affectionately to the TV screen. "And be
careful with the F.M.L.N. question." But no one asks about the
peace proposal offered by the leftist guerrilla group in El
Salvador that calls itself the Farabundo Marti National Liberation
Front, so Baker responds to an imagined query. He has changed
course.

    When the guerrillas' plan to participate in national elections
first surfaced, the "Building," as the Foreign Service calls its
Washington headquarters, rejected the scheme out of hand. "Wrong
thing to do," said Baker, who immediately ordered a more welcoming
response. Telegraphing a willingness to consider the F.M.L.N.'s
proposal had a twofold purpose: first, to let U.S. Latin allies
know that the Bush Administration is taking a fresh look at Central
America. Second, to signal to congressional opponents of the Reagan
policy that Bush will consider any new option, no matter the
origin. "Getting the edge, in Central America especially," says
Baker, "requires a bipartisan approach, and that requires our
maintaining the moral high ground. Nothing is going to get
accomplished down south without Congress being on board."

    By this standard, "Baker is already a sure winner," says
Connecticut Senator Christopher Dodd, a persistent critic of
Reagan's Central America policy. "I was very impressed. That kind
of quick work shows that Baker's sweet bipartisan talk during his
confirmation hearings was more than rhetoric."

    Despite Baker's irritation with State's initial position -- and
in marked contrast to the flailing that has characterized the
Administration's various proposals for bailing out the nation's
savings and loans -- nothing about the change in Salvador policy
was undertaken hysterically. To a person, those who have worked
with Baker say he mistrusts solutions offered at the top of one's
voice, and has no faith in those who offer them. He listens
respectfully to all comers, as if each speaker is the age of
reason's local representative.

    Baker "runs a calm shop," says State Department counselor
Robert Zoellick. "There's no nonsense. You state your views and
support them, both as briefly and quietly as possible. Then you get
out." Zoellick, who could have been White House domestic-affairs
adviser, is one of a handful of Baker aides who turned down more
visible posts elsewhere in the Administration. "The reason for
that," says Margaret Tutwiler, who has been Baker's closest
assistant for more than ten years, "is that (Baker) is loyal down
as well as up. He seeks out strong-minded people and delegates
considerable authority. In the end, he decides without agonizing
and moves on. He doesn't postpone."

    Unless postponement is tactically useful. Since the U.S. began
discussions with the P.L.O. last December, Israel has heard little
from the Administration's highest reaches. The result has been
frantic maneuvering in Jerusalem, movement that may make the next
step toward negotiations easier. Rather than react to an American
agenda, Yitzhak Shamir's government is being forced to craft its
own. "Sometimes," says Baker, "a pro-active policy is best advanced
by doing nothing until the right time."

    Or by reacting intelligently. The U.S. shift in the Middle East
came only after Yasser Arafat finally accepted Israel's right to
exist. "Once you're confronted with something someone else has put
forward," says Baker, "the measure should be how you turn it to
your advantage."

    This goes to the heart of Baker's ideas for pursuing the
opportunities created by Mikhail Gorbachev's seemingly sincere
desire to reform the Soviet Union. Like Bush, Baker does not fear
a resurgent Moscow. "If they really reform their economic system,"
he says, "they'll be more secure at home and thus less inclined to
military adventurism abroad." Baker's only worry, it seems, is that
Gorbachev's days may be numbered. But as long as Gorbachev retains
control, Baker is determined to deal wherever he can.

    An example of that determination can be gleaned from Baker's
embryonic thinking about eliminating the allied embargo on "dual
use" (civilian or military) technology sales to Moscow, a ban the
allies imposed following the Soviet invasion of Afghanistan in
1979. Now that the Soviets are withdrawing, the Europeans are
urging an end to the restrictions. Baker is aware that the
proximate reason for the embargo will soon end, but rewarding the
Soviets for ceasing activities they never should have begun seems
less important to him than trading the embargo's end for further
moderations in Moscow's behavior. Linking U.S. actions to future
Soviet concessions is what the game is all about. "Give away
something unilaterally without a quid pro quo?" says Baker. "No,
sir."

    Baker, of course, is not operating with a completely free hand.
George Bush says he "loves the foreign policy aspects" of his job,
and Bush, obviously, is the boss. But the two men have a unique
relationship. "They are as close to being equals as any President
and a subordinate have ever been," says writer Victor Gold, who has
been close to both of them for two decades. Baker may not be Deputy
President or Prime Minister, but at the very least, he is first
among equals.

    To say that Bush and Baker go way back only begins to describe
their closeness. Bush brought Baker into politics and firmly
believes he would not have become President without him.
Nevertheless, the President speaks of Baker as his brother -- his
"younger brother," a diminution that signals a certain
competitiveness. "It's not unjustified for him to think of me as
his protege," says Baker. "But then you have to consider that I
took off a lot of time and lost a lot of income working for him in
the '80 campaign. That kind of squared the circle. And remember,
when I got the chief of staff job with Reagan, that wasn't (Bush's)
doing."

    Baker walked an interesting line during the Reagan years. His
first loyalty was to the President, but he saw that Bush was
included and had meaningful tasks to perform. "There was tension,
of course," says a Bush friend. "Baker ran Reagan's '84 campaign,
and Bush had to take direction from him. That was when Bush was
made to travel the low road, and it was obvious that he felt Baker
was looking out for Reagan first. That was only proper, of course,
but George didn't like it anyway."

    On balance, Baker did more for Bush than any White House
staffer has ever done for a Vice President -- but that was not
necessarily enough. Shortly before Baker left the White House for
the Treasury Department in 1985, he made certain that Bush was
present at the crucial 9 a.m. meetings with Reagan. When Donald
Regan replaced Baker, he figured that Bush's presence came with the
territory. "Nobody suggested that to Baker," says a White House
aide. "He just did it for his friend. But believe me, as soon as
it started, George's first reaction was to wonder why Jimmy hadn't
gotten him in there from the start."

    No matter its mutually beneficial nature, the Bush-Baker
relationship is complicated. But "not really competitive," says
Susan Baker. "Jimmy is only really in competition with himself."

    Bush and Baker first met in Houston more than 30 years ago.
They were a fairly successful tennis duo at the posh Houston
Country Club, and when Bush ran unsuccessfully for Congress,
Baker's first wife, Mary Stuart, was an around-the-clock volunteer.
Later, when Mary Stuart lay dying of cancer in 1970, George and
Barbara Bush spent hours at the hospital. Says Vic Gold: "There is
just no way to exaggerate the bond created during a crisis like
that."

    "To give me something to do after Mary Stuart's death," says
Baker, "George got me involved in his '70 Senate campaign." "Yeah,"
says the President, "but it was more selfishness than therapy. I
knew Jimmy would help tremendously."

    Later, in 1975, Bush persuaded President Ford to name Baker
Under Secretary of Commerce. It was then that Baker first learned
how to play the inside game. Ford was locked in a struggle for the
1976 Republican presidential nomination with Ronald Reagan. From
his perch at Commerce, Baker was trying to help with Southern
supporters by persuading the President to take a hard line against
textile imports from China. At the same time, Secretary of State
Henry Kissinger wanted nothing to upset the Chinese.

    Ford was scheduled to speak to a group of textile manufacturers
in San Francisco on March 26, 1976, and Baker talked him into
indicating his willingness to get tough on Chinese textiles.
Kissinger's deputies were aghast, and Baker suspected that the
Secretary of State would call Air Force One to have the offensive
language deleted from the President's speech. Baker arranged to be
notified if Kissinger tried such a ploy. When word came, Baker
called the plane too. Arguing again for the President's political
interests against China's hurt feelings, Baker had the lines
reinserted. "A few weeks later," Baker says, "when I met Henry for
the first time in a State Department receiving line, he greeted me
with one of those looks of his and said, `Ah, so you are Textile
Baker.' "

    Baker soon took over management of Ford's losing campaign and
brought the President within an eyelash of beating Jimmy Carter.
Four years later, the Reaganites tried to recruit Baker for the '80
campaign. But Bush was running, and Baker never hesitated to dance
with the man who brung him. Moreover, he ensured Bush's selection
as Reagan's Vice President, which wasn't easy. "What I'll admit to,
but George never will," said Baker in 1981, "is that the Veep thing
was always the fallback. It was always in my mind. That's why, at
every opportunity, I had him cool his rhetoric about Reagan."

    The key moment came in May of 1980. Bush was charging ahead
without a mathematical chance of overtaking Reagan. With the
candidate on the road, Baker virtually yanked him from the race by
confirming to reporters that the Bush effort in California was a
scam. Bush was furious and convened a senior staff meeting in
Houston. The candidate, like all candidates, could not have cared
less about the math. He wanted to continue. Baker had a different
concern. He knew Reagan would be "terminally ticked off" if Bush
pressed ahead into California, Reagan's home state.

    Gold notes something else about the Baker method. "Bush is not
manageable in the ordinary sense," says Gold. "You have to be
extremely tactful to get him to go along with something. He likes
his prerogatives. So down in Houston, Jimmy had a bunch of us there
who agreed with him about George's dropping out. He didn't need us
there, but spreading the burden was important for Jimmy's
continuing relationship with George."

    After the pullout, and not for the first time, Bush grumbled,
"Yeah, Jimmy was right. Why is Jimmy always right?" Bush's pique
underscored a lesson Baker has never forgotten: a campaign manager
should say no to a candidate only so often. Unfortunately for
Baker, he has always been the only member of Bush's inner circle
capable of successfully standing up to the boss. (For the record,
the President demurs. "There are others who can," says Bush, "but
they don't.")

    In 1988 it was Baker who regularly needed to keep Bush on board
with the fall campaign's attack strategy. By all accounts, the key
to his success with Bush was a smooth manner. At every turn, Baker
played the high-priced corporate lawyer who subtly guides his
client to "choose" the option the lawyer intended from the start.
"Everything was couched in the most mild way so as to let Bush make
the final decisions," says one of the campaign's senior advisers.
"It was always `Hey, Bushie, the gang here thinks you ought to do
thus and such -- but only if it conforms to your own thinking.' "

    Even so, Baker didn't win them all. Besides selecting Dan
Quayle, which appears to have been a Bush solo, the candidate often
free-lanced by adopting a nonconfrontational technique. "Baker
would call him on the plane and get him to change some line or
another," says a Baker associate. "Bush would say, `O.K., Jimmy,
right,' and then go and do what he wanted to do anyway."

    Sometimes, when Baker tired of conveying the handlers' no yet
again, he flat-out rebelled. "Once, when Bush thought he could go
the kinder-gentler route exclusively, we asked Jimmy to read him
the riot act again," says Roger Ailes, Bush's media adviser. "That
was one of the few times I've ever seen him blow up. He said, `You
call him yourselves. You're not the ones who have to carry that
message and have him say, `If you're so smart, Jimmy, how come I'm
the one who's Vice President?' "

    One of the '88 campaign's most important operations -- the
debates with Dukakis -- reflects Baker's acumen. The first goal,
as usual, was getting the edge. Paul Brountas, a prominent Boston
attorney and the Dukakis campaign's chairman, was the Democrats'
lead debate negotiator. Brountas doesn't have a particularly large
ego, but complimenting him can be like throwing gasoline on a fire.
"Baker realized he could woo Brountas, and did so masterfully,"
says Thomas Donilon, then a Dukakis aide. "We were the kids, Baker
told Paul, while he and Brountas were megalawyers with a code of
honor that transcended the nastiness of mere politics. Paul ate it
up."

    Then Baker convinced Brountas that Bush was perfectly happy not
to have any debates at all -- which was never the G.O.P.'s real
position. "Once Paul bought that," says Donilon, "the concessions
flowed. Any chance we may have had to have Bush and Dukakis
actually question each other without a panel was gone." Recalling
how he snookered  Brountas, Baker smiles. "Let's just say that
whatever edge they thought they had, they convinced themselves they
didn't have it."

    Incredibly, Brountas still believes Baker is a straight
shooter. "Baker's absolutely the best I've ever seen at not making
enemies," says Robert Strauss, the Democratic elder, who is one of
Baker's closest personal friends. "It's not for nothing that he's
called `the Velvet Hammer.' " Of those Baker has crossed, few are
willing to say anything negative on the record. One who does is
Hugh Gregg, the former New Hampshire Governor who ran that state's
operation for Bush in 1980. "Jimmy is a consummate pragmatist and
a very tough pol," says Gregg. "But he'll stomp on anyone in his
way, even a friend. Probe a bit, and you'll find that he doesn't
really have much compassion for people."

    Baker is a scion of one of Houston's most famous families. His
great-grandfather and grandfather were prominent lawyers and
financiers. His father, called "the Warden" by Jimmy's friends,
was a strict disciplinarian. Baker recalls frequent whippings, and
his father often awakened him by throwing cold water in his face.
"Gets you up real fast," says the Secretary of State.

    Following his father, Baker attended the Hill School and
Princeton. No one recalls him being a grind, and everyone remembers
a fair amount of hell raising. But Baker did manage a 150-page
Princeton history-department thesis glorifying the career of Ernest
Bevin, a British Labor Party Foreign Secretary who was as thick
with his boss, Clement Attlee, as Baker is with Bush. Of the many
attributes that intrigued Baker about Bevin, he most admired those
that others now see in him. Bevin was an "expert negotiator," wrote
Baker in 1952. "(He) never became lost in the idealistic. He was
always very practical." What Bevin always sought, said Baker, was
"concrete advantage."

    After Princeton, Baker married, served two years in the Marine
Corps and then went home to Texas for law school. His father
insisted that he join an undergraduate fraternity and Baker
complied. The hazing, which included carrying a dead fish around
his neck for a week, was humiliating for a father and former Marine
lieutenant. "It's absolutely incredible that he did that," says
Susan Baker. "I would have said, `See you later, Pop.' "

    Even Baker admits that he has not been "exactly the best
father" to his own children. The portrait that Jim and Susan Baker
paint is of a man obsessed with his job -- an "efficient
workaholic," as Baker describes himself. "The idea was to make your
mark," he says. "Don't indulge in a lot of introspection. Just get
on with it." Time with his family remains scarce. "I'd like more
giggle time with him," says Susan. "I'd give anything for a month
off with him. But that's not in the cards. And yes, that's a good
part of why I've become so involved in my own things." Susan Baker
is an advocate for the homeless and a partner in the crusade
against sexually explicit rock lyrics. She speaks often of the
power of prayer: the secret, she has said, "is to integrate prayer
into your life. It's not quote-unquote religious, and there's
nothing pious about it. It's more like, `Help, God, I'm having a
fit.'"

    Susan Baker is not the only one in the family who gets down.
"Jimmy gets depressed whenever he faces the prospect of having to
return to practicing law," says Phil Uzielli, Baker's closest
friend from his Princeton days. "He craves the action. He was down
for a brief moment this year before Bush throttled Dukakis in the
second debate. I remember him saying, `Right now, I don't care who
wins. I just want the thing to be over. I guess I may be going back
to the law after all.' "

    Reagan saved him from the law in 1980 by offering him a
position as "senior adviser" in his campaign. "What kind of a title
is that?" said Baker at the time. "It's nothing." But he took it,
and that was all the edge he needed. Into second-rate company,
Baker brought a first-rate mind. He quickly became integral to the
Reagan operation, and immediately after the election was named
White House chief of staff.

    Reagan's longtime pal Ed Meese still needed work, so a troika
was born. Baker, Meese and Michael Deaver were each granted equal
access to the President. Only gradually did Baker aggregate power
to himself. Along the way, though, he gained something less
desirable: deep mistrust from right-wing conservatives. They were
most enraged by Baker's efforts to increase revenues and cut
defense spending to pare the ballooning budget deficit. Reagan
didn't much care for Baker's view either. At one point, as the
fiscal 1983 budget was being crafted, Baker urged Reagan merely to
slow defense spending. In a pivotal confrontation, the President
removed his glasses and glowered at his aide. "If that's what you
believe," said Reagan, "then what the hell are you doing here?"

    An ideologue might have fled. A pragmatist and political junkie
could only hang in and seek a change in venue. Shortly after
Reagan's re-election in 1984, Treasury Secretary Don Regan
suggested that he and Baker swap jobs, a move that proved
disastrous for the White House but enhanced Baker's reputation.

    Reagan has called Regan's tenure as chief of staff a major
mistake, while Baker went on to three major triumphs. The
tax-reform act, the Plaza accord on the dollar, and the U.S.-Canada
trade agreement were all wily combinations of indirection and
hardball politics.

    Don Regan, while he was still Treasury Secretary in 1984,
formulated the Administration's initial tax-reform scheme,
"Treasury I," which Baker concluded had "absolutely no chance of
flying." After swapping jobs with Regan, Baker crafted his own
version, "Treasury II," incorporating numerous deals cut between
him and various members of Congress. Regan's White House staff
predicted its demise and told the President he should retreat.
"Regan's actual motive for that conclusion was jealousy," says
Lawrence F. O'Brien III, a Washington attorney in charge of
private-sector lobbying for the bill. "I think he saw Baker as
being able to do something that he couldn't, so he set out to
scuttle Treasury II."

    To turn the President around and keep the heat on Congress,
Baker pulled out all the stops. Corporate chairmen friendly with
the President were enlisted to bend his ear. And, as he had before,
Baker skillfully used Nancy Reagan to influence her husband. He
reminded her of past presidential statements consistent with the
tax bill, and she, in turn, threw the President's own words back
in his face. The tax-reform act that was finally passed in 1986 had
Baker's fingerprints all over it -- but his hand was well hidden.

    The September 1985 Plaza agreement, which led to the dollar's
orderly decline, required an even defter touch and near total
secrecy. When Baker took over Treasury, Reagan was still saying
that "a strong dollar means a strong America." As with some other
Reagan bromides, this one was outdated and dangerous. The nation's
overvalued currency was strangling American exports, boosting the
trade deficit and encouraging cries for protectionism. The
dollar-devaluation strategy was necessary because Baker had got
nowhere with Reagan on the budget deficit. "I had to use the tools
actually available," recalls Baker, "and that meant monetary
policy."

    The world -- and most of the Reagan Administration -- became
aware of Baker's scheme only when he convened the conference of
finance ministers at the Plaza Hotel in New York. Reagan knew of
the meeting in advance, of course, but was apprised of the full
scope of Baker's plan only two days beforehand. Devaluation "was
sold to the President as necessary to stem the protectionist tide
in Congress," says a Baker intimate. "It was sold to Don Regan as
being consistent with an earlier call he had made for an
international conference to discuss exchange rates. To this day,
I don't think Don understood what we were about to do. (Then
Federal Reserve Chairman Paul) Volcker was managed because we had
carefully split his board. Paul had no alternative but to go
along."

    The finance ministers too were roundly manipulated. "At first,"
says one of those subjected to Baker's machinations, "he split us
just like he split the Fed. He began by using the U.S. and Japan
against West Germany. Then he combined those three to bring along
the whole Group of Five (including Britain and France). He bluffed
us constantly and regularly threatened to pack up and go home. He
was particularly adept at never rebutting those who insisted on
dismissing what we were doing as irrelevant. Thus the supply-siders
were never able to counter him. It all seemed so mellow."

    Most experts thought it did not work. The dollar fell without
creating a recession, but America's trade deficit has barely
declined. "Come on," argues Baker, whose tolerance for criticism
is not his strongest suit. "Can you imagine where we'd be today on
the trade deficit if the Plaza process hadn't begun?"

    The real legacy of the exchange-rate intervention Baker began
is the process itself, a model for the kind of international
cooperation the U.S. must replicate if it hopes to retain its
leading role in a multipolar world. "The start in building a
multilateral system," says Richard Darman, "is a story line that
can continue for decades if it is properly nurtured."

    Countless problems could derail Baker at State. Third World
debt, coming to terms with Marxism in Central America, Europe's
desire to rush headlong into detente with Moscow, the flips that
will be required to get Japan and the NATO nations to share more
of the West's military and financial burdens -- these are only four
"small" items on Baker's plate. But above all is the matter of
America's role as U.S. hegemony comes to an end. Constraints on
spending at home will limit American ability to project influence
abroad at a time when U.S. dependence on the international economy
has never been greater.

    Baker is uncomfortable with what he and Bush call the "vision
thing." When he was chief of staff, Baker once said he didn't need
to have a vision "because the guy down the hall (Reagan) has one.
I'm more interested in the game than in philosophy." With the new
guy in the Oval Office equally at sea, the matter may fall to Baker
by default.

    In a little-noticed 1986 speech to the Chicago Economic Club,
Baker began articulating a new view, an offering that recognized
the primacy of economic policy in the late 20th century. "Our
leadership has taken a form different from that of recent
historical experience," he said. "The recent model has been one of
national dominance in an international economic system -- as
represented by the United States in the aftermath of World War II
or by Britain in the latter half of the 19th century. Our new
leadership is more in the manner of an architect and builder,
patiently and tenaciously pursuing a vision of economic growth and
prosperity, trying to persuade others what may be accomplished
while contributing our fair share."

    The loaded word, of course, was "persuade," a recognition that
the days of dictation are over. But simply having a coherent world
view or merely recognizing a new reality is obviously insufficient.
The hard part is getting from here to there. "And that is why Baker
is so well suited to the era," says Pete Peterson, an investment
banker who served as Richard Nixon's Secretary of Commerce. "Jim
plays the cards he's been dealt as well as anyone. In the '90s his
hand will consist of very different cards from those of his
predecessors."

    If Baker succeeds -- if, with American primacy intact, he can
manage the transition to a new era -- he may be ready for the next
step. "He's got the ace of diamonds of jobs now," says Preston
Moore, a Baker cousin and close friend. "The ace of spades is still
out there to get. One thing's for certain: Jimmy Baker won't
voluntarily go back to drafting wills if he's still got his wits
about him."

    NBC's Andrea Mitchell corners Baker in the Capitol Rotunda
shortly before George Bush is to be sworn in as President. She
wonders if Baker might himself someday be taking the oath from the
Chief Justice. Baker's smile is tight and forced. "Absolutely not,"
he says.

    "I remember one time not long ago when a group of us were
sitting around and someone said again that Jimmy is the one who
should be President, not George," says Phil Uzielli. "He loved it,
and he let the talk go on a bit before shutting it down. If George
weren't set on running, said Jimmy, well, that would be a different
thing. But someday, maybe."

    Someday almost assuredly. "Jimmy has a tremendous ambition and
drive to reach the top," says Susan Baker. "But the presidency is
the last thing in his mind right now. We don't spend a lot of time
strategizing about it. Right now, he's got to be the best Secretary
of State he can. The rest may come from that later."

    How exactly? Baker's friends have considered probably every
route. Most dismiss a return to Texas and another run for elective
office. (Baker lost a 1978 race for Texas attorney general.) "That
might get him the political base he needs," says Baker's son Jamie.
"But it's risky. There's no reason he couldn't leave State near the
end of Bush's tenure and work it from the outside."

    Then there is the "Dump Quayle" strategy. "If Jerry Ford could
dump Nelson Rockefeller," says a Baker friend, "why couldn't Bush
dump Quayle?" Bush could, of course, but then there would be the
residence problem. With both candidates from Texas, a Bush-Baker
ticket might be required by the Constitution to forfeit that
state's electoral votes. "And besides that," says Robert Strauss,
"folks would probably find the whole thing too cute."

    In fact, the Bush campaign made a similar determination last
year when Robert Teeter explored the possibility of Bush's claiming
Maine as his residence to run with Baker in 1988. Both Bush and
Baker were reportedly intrigued, but the too-cute reasoning
prevailed. And Bush has told TIME he won't change residences now
that he is in the White House.

    Which leaves 1996. "That could work," says Strauss. "Look,
obviously being President is on his mind. He's that smart and that
shrewd and that ambitious. He knows there's really only one job in
Washington worth having."

    "I think he first knew for sure that he could handle the job
when he was at Treasury," says Jamie Baker. "Before that, he had
very successfully dealt with all manner of politicians at home.
Then he prevailed in a complex negotiation with some very savvy
foreigners in a field he knew not too much about. To relate it to
basketball, I think that's when Dad, in his own mind, realized for
certain that he could play above the rim."

    Jiggling his key ring, Baker is beside himself. "Dammit," he
says. "Now get this down exactly as I say it. I am not interested
in being President. I don't want to be President. For God's sake,
in 1996 I will be 66 years old."

    "That's right," says Jamie. "He's got the arithmetic right.
He'll be 66 in eight years -- three years younger than Ronald
Reagan was when he became President."