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Consequently, Reagan's programs depend to a large extent on the style and philosophy of Baker and Darman. Baker, a cautious buttoned-down Texas lawyer who worked in the presidential campaigns of Gerald Ford and George Bush, is guided by a belief that politics is the art of the possible. Says he: "Some claim it's better to fight and lose than to give 10% and get 90%. Well, they're wrong. Dead wrong." Even partial victories, Baker correctly argues, enhance the President's prestige. New-Right Leader Howard Phillips, who has bristled at Baker's rising influence, sees it differently: "Baker's group calls the plays, and Reagan runs with the ball. Baker only understands negotiating and compromise. What he is doing is destroying Reagan's reputation for integrity and principle." In fact, however, the group has ensured the success of some of the conservatives' pet projects, like the balanced-budget amendment.
Darman, Baker's alter ego, has a high-voltage, Harvard-honed intellect and an aggressive personality to match. Even more than Baker, he is associated with the Republican Party's moderate wing, having once been a protege of Elliot Richardson's. Says one wary colleague: "Darman is the brightest guy in the White House. Philosophically, he is not where the President is."
The L.S.G. derives part of its power from its ability to react quickly. The group is kept lean and usually includes no more members than can fit around Baker's small mahogany conference table. At times the L.S.G. may alter a decision made by a Cabinet group in order to accommodate political pressures. When a resolution calling for a freeze on the production of nuclear weapons seemed likely to pass in the House, the L.S.G. convinced Reagan that contrary to the policy pressed by the State Department, he must embrace an alternative resolution that included the word freeze. Another tactic of Baker's group, one that particularly irks right-wing activists, is to place on the back burner programs they are not anxious to pursue for political or ideological reasons. Among them: dismantling the Department of Education and passing a constitutional amendment to ban abortion.
By far the most important policy initiative shaped by the L.S.G. has been the tax increase that the House is scheduled to vote on this week. Baker and Darman, along with other key members of their clique, have always been wary of supply-side dogma and worried about looming budget deficits. They felt that without the $98.6 billion three-year tax increase fashioned in the Senate last month by Republican Robert Dole, Reagan's economic program would be doomed and his political popularity jeopardized. In presenting this argument to Reagan, the Baker-Darman group excluded from the meetings those who opposed the Dole tax bill, including Presidential Assistant Richard Williamson and key congressional conservatives.
Having set Reagan on a course of increasing taxes, the L.S.G. has put itself in an extremely vulnerable position. Some right-wing Congressmen, in fact, have labeled the tax-increase measure "the Baker-Darman-Stockman exit bill." Particularly if it fails, conservative ideologues may be able to convince Reagan that the power of the Baker-Darman dynamo should be curtailed.
—By Walter Isaacson.
Reported by Douglas Brew/ Washington