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Public Service Exemplars: "A Finer Spirit of Hope and Achievement": George P. Shultz

George Pratt Shultz was only one of two men to hold four different cabinet-level posts in one or more presidential administrations. (Elliot Richardson was the other man.) He was an integral player in the presidential administrations of Richard Nixon and Ronald Reagan. After his death at age 100 in 2021, Shultz was remembered as a serious public official and a vanishing breed in the Republican Party: A public figure who cared more about good governance than he did generating headlines or performing for a segment of the party’s base. Critics, in the meantime, charged that he acquiesced in the worst impulses of the Nixon and Reagan administrations. His apologists insisted that he was a lone beacon of expertise and integrity working inside corrupted institutions.

He was born in New York City on December 13, 1920, to Birl Earl Shultz and Margaret Lennox Pratt Shultz. An only child, George came of age in Englewood, New Jersey. His father was a conservative Republican who worked on Wall Street. The father instilled in his son a suspicion of government institutions and a dedication to free market principles.


Schultz attended the Englewood School of Boys before transferring to the Loomis Chaffee School, a private preparatory school in Windsor, Connecticut. After he graduated in 1938, Shultz enrolled in Princeton University. He graduated with honors in 1942, earning a bachelor’s degree in economics with a minor in public and international affairs. He wrote his senior thesis on the Tennessee Valley Authority’s agricultural program.


Like many young men of his generation, Shultz was affected by the Second World War. He enlisted in the United States Marine Corps, where he rose to the rank of captain in an artillery unit. He was assigned to the 81st Infantry Division in the Pacific Theater during the Battle of Peleliu in the fall of 1944. Shultz remained in uniform until the war’s end in 1945.


After the war, Shultz married Helena Maria O’Brien, a nurse he met while he was in Hawaii during the war. The couple eventually had five children. Helena died in 1995, and Shultz married a second time. His second wife, Charlotte Mailliard Swig, was a prominent philanthropist.


Following his military service, Shultz enrolled in the Massachusetts Institute of Technology (MIT), where he earned a Ph.D. in industrial economics in 1949. He taught economics at MIT from 1948 until 1957. He took a leave of absence in 1955 when Arthur F. Burns, who later served at the Federal Reserve in the Nixon years, hired him to serve on President Dwight D. Eisenhower’s Council of Economic Advisers as a senior staff economist. In 1957, Shultz moved to the University of Chicago’s graduate business school to serve as a professor of industrial relations. From 1962 until 1968, he was dean of the business school.


Shultz was influenced by some of the greatest economists and public policy analysts of his era. He was especially impressed by Arthur Burns’s commitment to providing dispassionate, politically neutral policy advice. Encountering prominent economists Milton Friedman and George Stigler, Shultz’s faith in the free market system, always a foundation of his professional life, was strengthened.


Even as he developed his policy expertise, Shultz cultivated contacts in Washington, D.C. He chaired a task force of the United States Employment Service in the Kennedy administration. Later, he directed a public task force on African American unemployment in the Johnson administration. As Shultz subsequently recalled, President Johnson provided the young economist with invaluable political advice. “George,” the president told him, “if you have a good idea, and it’s your idea, it’s not going to go very far. But if it becomes my idea, it just might go somewhere. Do I make myself clear?” He did. Shultz learned the lesson well.


A change of administration helped Shultz’s career. When Richard M. Nixon became president in 1969, he tapped the economist to serve as secretary of labor. Shultz remained the labor secretary for almost a year and a half. During Shultz’s tenure, the secretary was involved in some of the most momentous decisions of Nixon’s presidency. Arguably, Shultz’s most notable achievement on behalf of the administration was his defense of the revised Philadelphia Plan requiring government contractors to hire minority workers.


Nixon respected Shultz’s intellect and his ability to handle the Labor Department, but the president was irked at the secretary’s unwillingness to exploit the Democrats’ political weaknesses. In Nixon’s view, using federal agencies to attack political opponents was fair game. After White House counsel John W. Dean III pushed Shultz to “pursue a list of several hundred George McGovern staff members and campaign contributors” before the 1972 presidential election—McGovern was Nixon’s Democratic opponent—Shultz ignored the directive. Around the same time, Nixon urged Shultz to instruct the Internal Revenue Service (IRS) to target Democrats hostile to the administration. Shultz initially balked.


Although he pushed back where he could, he did not always succeed in curbing the administration’s worst impulses. President Nixon urged Shultz to investigate Lawrence O’Brien, the chairman of the Democratic National Committee, for alleged tax evasion and fraud. Shultz did as he was instructed. He found no evidence of improprieties.


Shultz’s action in the Nixon administration reflected his personality. On one hand, he was technically competent and bold in undertaking economic initiatives. In many ways, he was a first-class administrator. On the other hand, he was not a skilled political operative. Although he refused to indulge Nixon’s worst impulses, Shultz saw himself as a good soldier. He did not forcefully call out his president, or the administration, for issuing directives that were frequently unwise and sometimes illegal. This passivity in the face of illegal conduct would undermine Shultz's credibility again during the Contra affair in the Reagan administration during the 1980s.


Following his short stint at the Labor Department, Shultz became the first director of the Office of Management & Budget (OMB). In an administration notorious for politicizing virtually everything, Shultz’s appointment was heralded by some supporters as exactly the correct move. “Now there will be someone there besides the purely politically oriented and the paper‐movers,” one adviser opined. “It puts a substance man close to the president.”


It was difficult to be a man of substance, to say nothing of integrity, in the Nixon administration. Shultz constantly opposed political operatives who sought to use federal agencies for political purposes. When Nixon’s chief of staff, H. R. “Bob” Haldeman insisted that personnel at several agencies reduce funding for the Massachusetts Institute of Technology (MIT), which Nixon believed was home to political liberals, Shultz supported his subordinates when they threatened to resign in protest. On another occasion, Nixon’s men targeted suspected OMB leakers, and Shultz intervened to protect his staff.


In his position at OMB, Shultz was present at some of the monumental developments of the Nixon era. He was instrumental in helping the president revitalize the sagging economy and rising inflation through a series of reforms known as the “Nixon shock.” The reforms sounded the death knell for the Bretton Woods system. Created in the wake of World War II, the Bretton Woods system fixed the external values of foreign currencies in relation to the U.S. dollar. The value of the dollar was expressed in gold at $35 per ounce. The world had changed dramatically since the 1940s.


By the 1960s, a surplus of U.S. dollars existed owing to a combination of foreign assistance, military spending, and foreign investment. Consequently, the United States did not possess sufficient gold to cover the volume of dollars in global circulation as $35 per ounce. With the dollar overvalued, the president’s options for addressing economic concerns were limited. Nixon’s two immediate predecessors, John F. Kennedy and Lyndon B. Johnson, had shored up Bretton Woods through limitations, including foreign investment disincentives, foreign lending restrictions, and international monetary reform. Their efforts failed to arrest the nation’s economic woes.


Investors in foreign markets understood the overvaluation, believing that the United States government would have to devalue the dollar in the future. To avoid this possibility, some traders sold the American dollar, which caused a run on the currency. President Nixon resolved to address this situation during a meeting with his top economic advisers on August 13, 1971. The treasury secretary, John Connally, and George Shultz from OMB met with Nixon at Camp David and reached the conclusion that the country would have to abolish the gold standard.

Nixon announced his course of action during a televised speech two days later. He labeled his address the “Challenge of Peace.” Explaining his goals, the president told the American people that “We must create more and better jobs; we must stop the rise in the cost of living; we must protect the dollar from the attacks of international money speculators.” Following this opening preamble, Nixon announced a series of tax cuts and a 90-day freeze on prices and wages. He ordered the suspension of the U.S. dollar’s convertibility into goal as a means of reining in international speculators. To compel the nation’s trading partners to increase the value of their currencies as well as reduce trade barriers, Nixon ordered an additional 19 percent tariff on imports subject to duties.


It was a sea change in American economic policy, exactly the sort of bold maneuver that Nixon appreciated. In undertaking these historic reforms, the president could count on his OMB director to support the efforts. By March 1973, the G–10 counties agreed that six members of the European Community would tie their currencies together against the U.S. dollar, in essence supplanting the Bretton Woods fixed exchange rate system with a new system of floating exchange rates.


Other men might have fled the administration owing to Nixon’s mercurial nature and his advisers’ willingness to cut corners, but Shultz felt that he must use his best efforts to ensure continuity of policy. In 1972, he moved from OMB to become the secretary of the treasury. In the new role, Shultz was tasked with continuing John Connally’s legacy. The former treasury secretary had pursued the so-called “New Economic Plan" tied to the Nixon Shock, but it had not worked as well as Connally had hoped. Saddled with this unworkable plan, Shultz did his best to make it work. For example, he was far more successful in securing economic exchanges with the Soviet Union as Nixon pursued a policy of détente.


On May 8, 1974, Shultz left the treasury department after slightly less than two years. He headed into the private sector, accepting a position at Bechtel, a prominent engineering and construction company. He soon became president and a company director. He spent the remainder of the 1970s there. In 1982, he accepted President Ronald Reagan’s offer to serve as secretary of state.


The position of secretary of state has long been considered the premier office within the cabinet, a first among equals. Shultz was replacing Reagan’s first secretary of state, Alexander Haig, who had proved to be a poor fit for the job. As Shultz recalled, at the outset he believed that “the United States needed to reassert itself on the world stage at a time of global turmoil and after a long period of national self-doubt.” The Vietnam War, the Watergate scandal, and the Church Committee revelations about malfeasance among high-ranking American officials in positions of trust had left the nation reeling. Shultz believed that it was time to turn the page on past transgressions and ensure a return to American primacy on the global stage.


Shultz enjoyed mostly unfettered access to the president, a crucial component to bureaucratic power. He and Reagan frequently had lunch together or played a round of golf. No stranger to palace intrigue, Shultz recognized that he was competing with other administration officials for the president’s ear, notably the defense secretary, Caspar Weinberger, and Reagan’s national security adviser, William P. Clark.


To make matters worse, Reagan was largely bored by, and disconnected from, the details of policy. He was not a strong manager, which meant that his staff and cabinet officials could push him to accept various policies. If they did not contradict his core values, Reagan was satisfied to allow his advisers to work out the policy ahead of time and present it to him as a fair accompli. If the team members agreed on a policy, the president’s acquiescence did not present a problem. If the men disagreed, they were frustrated when they turned to the president for direction and found little guidance.


George Shultz played the long game when it came to wielding influence within the Reagan administration. He was close friends with Deputy White House Chief of Staff Michael Deaver, who in turn was friends with the president’s wife, Nancy. These relationships served Shultz well in the bureaucratic politics of the Reagan White House. Nancy referred to the secretary of state as “a big teddy bear,” a valuable member of the administration because “underneath was a tough negotiator with enormous energy.” Nancy Reagan’s trust in Shultz meant that he enjoyed Ronald Reagan’s complete confidence as well.


When he stepped into the position, Shultz inherited numerous global problems. Not surprisingly, the Middle East was a constant source of tension. The Palestinian Liberation Organization (PLO) had long claimed to be the sole legitimate representative for the Palestinian people. Since the mid-1970s, the PLO had been involved in numerous violent clashes, especially with Israel. PLO fighters often retreated into Lebanon during their seemingly endless wars against Israel. Around the time that Shultz arrived at the State Department, Reagan’s special Middle East envoy, Philip Habib appeared to have brokered a successful cease-fire between the warring factions. Alas, the cease fire did not prevent attacks in other locations.


After Shlomo Argov, the Israeli ambassador to Great Britain, was shot in London on June 3, 1982, Israel retaliated against the PLO by bombing targets in Lebanon. In addition, Israel attacked Syria, a key PLO ally, and bombed targets in Lebanon. Israeli’s defense minister, Ariel Sharon, ordered an invasion in Lebanon to attack the PLO’s military forces. As Lebanon descended into a civil war, American, French, and Italian troops as part of a multinational (MNF) force arrived to restore order. They stayed until the PLO departed under an agreement partially brokered by the United States.


On August 25, 1982, a contingent of United States Marines arrived in Beirut. The PLO left Lebanon afterward, allowing the MNF to depart as well. Secretary Shultz began hammering out a peace plan. Unlike his predecessor, Alexander Haig, Shultz welcomed President Reagan’s input. The resultant “Reagan Plan” urged autonomy for Palestinians in the West Bank and Gaza for five years and a freeze on building Israeli settlements in the captured territory, along with the PLO’s pledge to honor United Nations Resolution 242 (a call for Israel to return lands occupied during the June 1967 war), and negotiations for all unsettled questions.


Before the plan could be implemented, events obviated the agreement’s provisions. The new Lebanese president, Bashir Gemayel, a former Central Intelligence Agency (CIA) informant and pro-Israeli leader, was assassinated by Muslim zealots less than a month into his tenure. The bloodshed exacerbated tensions in Lebanon, and the Israelis ratcheted up the stakes by redeploying troops.


In addition, the Lebanese militia killed 700 Palestinian refugees after the MNF forces left the country. The Israelis might have prevented the killings, but they turned a blind eye to the slaughter. Secretary Shultz and President Reagan were stunned by the senseless bloodshed. The entire episode illustrated the intractable nature of Middle Eastern diplomacy.


Worse was yet to come, at least from the American perspective. On Sunday morning, October 23, 1983, two truck bombs exploded outside the barracks in Beirut, killing 241 Americans, mostly U.S. Marines, as well as 58 French military personnel, six civilians, and the attackers in the trucks. It was a tragic conclusion to a tragic series of events. With the president’s approval, Shultz negotiated an agreement between Israel and Lebanon to withdraw some troops beginning in January 1985. By 1988, Shultz had negotiated an initial dialogue with the PLO.


The 1983 Beirut bombing was overshadowed, to some extent, by a crisis on the Caribbean island of Grenada that occurred at approximately the same time. The island nation had earned its independence from Great Britain in 1974. Five years later, Marxists seized control. Grenada’s new leader, Maurice Bishop, reached out to Cuban dictator Fidel Castro for assistance. Castro had long been a thorn in the side of American policymakers. After Cuban engineers constructed an airfield, American political and military leaders took note, fearing that the area might be used by Soviets seeking to supply the Communist government in Nicaragua.


To make matters worse, approximately 800 American students enrolled in St. George’s Medical School in Grenada were potentially at risk as Bishop’s government instituted a curfew with orders to shoot on sight. Foreign journalists were deported from the country. Both President Reagan and Secretary Shultz worried that the students might become hostages. A hostage crisis in Iran had helped to undermine Jimmy Carter’s administration, and Reagan vowed never to place his administration in an analogous situation.


A military coup in October 1983 forced Reagan to act. As Bishop fought with factions within his regime, a military junta proposed a power-sharing agreement. Bishop refused to negotiate. Consequently, the military officers deposed Bishop and place him under house arrest. He briefly escaped and attempted to bring order to the chaotic situation. Captured again, Bishop could not be allowed to live. A four-man firing squad of the People’s Revolutionary Army executed him. General Hudson Austin assumed control.


The Organization of Eastern Caribbean States appealed to the United States for assistance. The White House had been attempting to arrange for the American students to evacuate the island, but General Austin refused to grant permission for planes to land or ships to dock in Grenadian ports. As a result, Reagan ordered a military invasion. Secretary Shultz was fully on board.


Seven thousand United States Marines landed in Grenada on October 25, 1983, on a rescue mission. The operation was an unqualified success. American troops quickly overwhelmed Grenada’s militia and reached the students without incident. The U.S. government replaced General Austin’s government with a pro-American regime. Coming so soon after the Beirut debacle, Reagan was able to tout his administration’s military prowess when he desperately needed a good story to tell. Through it all, George Shultz was by his side.


Shultz also encouraged Reagan to engage with the Soviet Union. The Second World Superpower went through enormous changes during the Reagan years. Leonid Brezhnev, the elderly Cold War leader who assumed power in 1964, died in 1982. He was followed in rapid succession by a series of Old Guard Soviet leaders, each man ancient and in ill health. Yuri Andropov, former head of the Soviet secret police, the KGB, served as General Secretary of the Communist Party from November 1982 until his death in February 1984. Konstantin Chernenko held power for an even shorter period than Andropov. He succeeded Andropov in February 1984 and held the position until he died 13 months later, in March 1985.


The final Soviet leader, Mikhail Gorbachev ascended into the leadership as a new man. Gorbachev understood that the Soviet Union was in dire straits. The regime was suffering from innumerable ills, not the least of which was a potential economic collapse owing to decades of inefficient central planning. To stave off the government’s demise, Gorbachev instituted a series of reforms. He promoted glasnost, a policy of more open consultative government as well as a wider dissemination of information. With perestroika, he argued in favor of a greater awareness of economic markets and an end to central planning.


To their credit, Reagan and Shultz recognized an opening for a renewed relationship with the Soviets. Reagan had built much of his political career on warning against Soviet hegemony in harsh, uncompromising terms. He occasionally denigrated the Soviets, as when he remarked in 1983 that the Soviet Union was “the focus of evil in the modern world.” Despite his sometimes-incendiary rhetoric, however, Reagan was not quite as rigid and inflexible as he initially appeared. During a speech at the National Press Club on November 18, 1981, for example, Reagan began advocating for an end to nuclear weapons. He offered a specific trade. If the Soviet Union removed its SS-20 missiles from Eastern Europe, the United States would refrain from sending analogous missiles to Western Europe.


If Reagan genuinely believed that the Soviets were evil and could not be trusted, his offer to reduce nuclear arms appeared inconsistent at best, naïve at worst. Fortunately, the president’s remarks produced the desired effect. Shortly before his death, General Secretary Brezhnev agreed to some of Reagan’s terms, and Strategic Arms Reductions Talks (START) kicked off in Geneva in June 1982.


The Strategic Defense Initiative, or SDI, which was nicknamed “Star Wars," was the hallmark of Reagan’s plan to move away from the Cold War policy of Mutually Assured Destruction (MAD) dating back to the Eisenhower administration in the 1950s. The concept involved constructing a shield to deflect missiles and rockets launched by America’s adversaries. Although the United States never came close to deploying SDI, it was clear that Reagan sought a new means of fighting the Cold War.


SDI proved to be a divisive concept, even among Reagan’s cabinet and advisers. At the start of Reagan’s second term in 1985, Shultz told the president that he worried about the division in the ranks over SDI as well as other security and arms issues. He suggested that he might retire. Reagan asked Shultz to stay on, assuring the secretary that the differences could be worked out.


Reagan’s second term was characterized by his developing relationship with Gorbachev as well as the Iran-Contra scandal. In the first instance, Gorbachev wrote a letter to Reagan proposing that the two leaders meet face-to-face. Reagan had been criticized for refusing to meet with Gorbachev’s predecessors, but with a new type of leader in place, a meeting might be productive. They met in Geneva on November 19 and 20, 1985. Although they faced many difficult issues and their goals were different, the two men established a rapport.


For his part, Secretary Shultz spent considerable time with Eduard Shevardnadze, the new Soviet foreign minister. They, too, established a rapport. Like Reagan, Shultz believed that the Soviet Union finally had installed leaders that could be reasoned with in good faith, which had not always been the case. Shultz pronounced the Geneva summit “a great success.” The resultant negotiations over the next few years proved to be one of the major achievements of the Reagan administration, as well as George Shultz’s tenure as secretary of state.


If American-Soviet relations were a high point, the Iran-Contra affair was the nadir. Ironically, both episodes originated from Reagan’s loathing of Communism. The impetus for negotiating with Gorbachev was Reagan’s belief that Communism could be contained and perhaps set on a course of ultimate extinction. Similarly, Reagan’s goals in the Iran-Contra scandal arose from his desire to arrest the spread of Communism in Central and South America.


A revolution in the Central American nation of Nicaragua resulted in the overthrow of a brutal dictator, Anastasio Somoza Debayle, and the installation of a Marxist regime headed by the Sandinista National Liberation Front (FSLN). Reagan was worried that the Sandinistas were puppets controlled by the Soviets acting as the marionettist. He was determined to support a rebel group, the Contras, who actively fought against the Sandinistas for control of the country. Members of Congress provided minimal funding, but they balked at appropriating the large sums requested by the administration.


Frustrated at every term, the Reagan administration began working outside the normal channels. High-ranking members of the National Security Council began searching for ways to assist the Contras—Reagan called them the “moral equivalent of the Founding Fathers”—without seeking congressional funding or authorization. They found an apparent solution in the Middle East.


The Middle Eastern states of Iraq and Iran were engaged in a bloody war for regional supremacy. Against this backdrop, a terrorist group backed by the Iranians, Hezbollah, held seven Americans hostage in Lebanon. Reagan was worried. He directed his advisers to develop a plan for securing the hostages’ release. Reagan had talked tough when he criticized the American hostages held in Iran during the Carter administration. His promise to deal forcefully with America’s enemies could come back to haunt him if the current hostage stalemate became a cause célèbre. Something had to be done, and soon, to resolve this situation.


National Security Adviser Robert McFarlane told the president that Iran had discreetly inquired whether it could purchase arms to assist in fighting Iraq. The problem was that a trade embargo existed against Iran owing to the Iran hostage crisis. McFarlane and CIA director William Casey realized that it was possible to use this situation to resolve two problems. An arms agreement with Iran—carefully hidden from Congress, of course—could secure the release of the hostages and improve relations with Lebanon. More to the point, the funds received from Iran could be channeled to the Contras to support their war against the Sandinistas.


When they learned of the plan, Defense Secretary Caspar Weinberger and Secretary Shultz objected. Shultz understood that the president and his White House advisers had deliberately left the State Department out of the loop. Shultz and his advisers knew nothing of the scheme at the outset. A covert operation that circumvented the will of Congress and ignored numerous federal laws was ill-advised, at best, and illegal at worst. President Reagan might be impeached if the affair came to light.


Recalling the Watergate imbroglio from a decade earlier, Shultz wanted no part of the operation. Although he had denounced the Marxist Sandinistas in harsh terms, Shultz understood that the administration should not launch a rogue operation designed to mislead Congress and the American people. He confronted Reagan with his objections and offered to resign. The two men generally agreed on policy goals, even if they had occasionally differed on the steps necessary to achieve those goals. The arms-for-hostages plan and the effort to divert funds to the Contras threatened to derail their working relationship and drive Shultz from the administration. The president understood the seriousness of his secretary of state’s objections. He asked Shultz to stay on. Always the loyal soldier, Shultz acquiesced. He could not overcome his misgivings, however, and with good cause. When it became public knowledge, the Iran-Contra affair was the worst scandal of the Reagan administration and represented a serious lapse in the president’s judgment.


The scheme unrivaled during the fall of 1986. On October 5 of that year, the Sandinistas shot down a C-123 cargo plane carrying weapons bound for the contras over Nicaragua. Three flight crew members died in the crash, but the lone survivor, Eugene Hasenfus, confessed that he was working on behalf of the CIA. A month later, a Lebanese newspaper Al-Shiraa, reported on the arms deal between the United States and Iran. The Reagan administration claimed that it never brokered arms for hostages, but the detailed report proved that such claims were false.

By the time that the Al-Shiraa story appeared, the administration had sold 1,500 missiles to Iran, netting $30 million. Only $12 million could be accounted for, which appeared odd. Of course, the facts later revealed that the remaining funds had been diverted to the Contras.


In retrospect, the entire scheme was staggeringly ill-conceived. Three of the seven hostages in Lebanon had been released when the story broke, but Hezbollah later replaced them with three new hostages. The contras had become the darlings of the Reagan administration, but they were little better than thugs. They were fighting a brutal Marxist regime, but they were brutal themselves. No one, it seemed, had clean hands.


Ronald Reagan, so often venerated as the Teflon president because nothing stuck to him, faced a considerable loss of face. He was between the proverbial rock and a hard place. If he claimed to know nothing of the arms-for-hostages plan, he played into the hands of detractors who had chided him as a hands-off, disinterested, not-too-bright figurehead who sat at the head of an out-of-control administration devoted to protecting the interests of wealthy donors and brutal foreign dictators who cared little for the American system of democracy. If he admitted that he had been heavily involved throughout the entire scheme, he was circumventing the will of Congress, bypassing American law, and lying to the citizenry. He might face impeachment charges.


Reagan initially insisted that his administration had not negotiated with Iran, but the facts indicated otherwise. He was forced to admit that his initial comments had been wrong. During a 13-minute speech televised from the Oval Office on March 4, 1987, Reagan earnestly confessed that mistakes were made. A few months ago, I told the American people that I did not trade arms for hostages,” he said. “My heart and my best intentions still tell me that is true, but the facts and evidence tell me it is not.”


As a result of the administration’s actions, investigations by the administration, Congress, and an independent counsel, Lawrence Walsh, ensued. Walsh charged 14 people, including National Security Adviser John Poindexter (McFarlane’s successor) and Oliver North, a lieutenant colonel in the United States Marine Corps as well as a member of the National Security Council, with a variety of crimes.


Robert McFarlane was fortunate. He faced only four counts of withholding information from Congress, a misdemeanor. The court sentenced him to two years’ probation and a $20,000 fine. Oliver North was charged with 12 counts of conspiracy and making false statements. He was convicted at trial, but the case was dismissed on appeal. The government charged Poindexter with seven felonies. He went to trial on five charges and was convicted on four. Sentenced to two years in prison, Poindexter did not serve time because his convictions were vacated. Four CIA officers and five government contractors also faced charges ranging from conspiracy to perjury to fraud. At the conclusion of the legal proceedings, only a private contractor, Thomas Clines, went to prison.


Reagan was never impeached, although he might have been. He was the president and therefore bore ultimate responsibility for the actions of his advisers. Yet members of Congress evinced little appetite for going after a popular president who still appealed to a large swath of the American people. Moreover, many citizens remembered the divisiveness of the Watergate hearings and President Richard Nixon’s complicity in the Watergate scandal of the 1970s. The notion of instituting impeachment proceedings a dozen years later appealed only to Reagan’s most diehard critics.


For his part, George Shultz emerged from the scandal with his reputation intact. The standard narrative was that Shultz balked at the arms-for-hostages scheme when he learned about it. His threat to resign from the administration forced Reagan to keep Shultz in the dark, thereby absolving the secretary of state for all the malfeasance that followed. As with this earlier service in the Nixon administration Shultz was far removed from the nefarious activities of his colleagues. He was, in a sense, a heroic figure because he refused to go along to get along.


A minority view is that Shultz knew or should have known what was happening, and he did nothing. Rather than a hero, he was a kind of “yes man” who kept his objections to himself after voicing his initial skepticism of the plan. He was willing to close his eyes to the malfeasance all around him or he knew most of the facts and tacitly agreed with the administration’s position. Either narrative could be true. Shultz was known to speak the truth to power, but he was also known to acquiesce when a wiser course of action would be to insist on reforms that would prevent rogue operations from engulfing the administration in criminality.



Shultz retired from government service when the Reagan administration ended in January 1989, but he remained vitally interested in public affairs. He served on various private boards of directors and informally advised many political leaders, including President George W. Bush, on public policy. Shultz became a grand old man of the Republican establishment, although he was not afraid to embrace issues that were not typically Republican policies. For example, he became a vocal proponent of instituting a revenue-neural carbon tax as a means of combating climate change. He also criticized America’s war on drugs, pronouncing the nation’s policies as failures. Breaking with many Republicans, he denounced the continuing embargo against Cuba as “ridiculous” in a post-Cold War world.


Late in life, Shultz became involved in one final scandal. From 2011 until 2015, he served on the board of directors of an exciting new company, Theranos, a health technology company that promised to revolutionize blood testing. Shultz was so enthralled with the company’s dynamic young founder, Elizabeth Holmes, that he recruited several reputable former cabinet secretaries to join the board, including former Secretary of State Henry Kissinger, former Defense Secretary William Perry, and former United States Senator Sam Nunn of Georgia. Their presence on the board provided a much-needed imprimatur of legitimacy, allowing Holmes to recruit investors for her fledgling venture.


Shultz’s grandson, Tyler, joined Theranos in 2013 after graduating from Stanford University. He became suspicious of the company’s claims and voiced his concerns to Holmes and Shultz. As he had done so often in his professional career, Shultz did not want to hear that his colleagues were engaged in mischief. He urged Tyler to keep his objections to himself. The former secretary sided with the company long past the point of prudence. He continually pressured his grandson to keep quiet, but to no avail.


For his part, Tyler Shultz contacted a reporter who investigated the claims and eventually wrote a withering critique in The Wall Street Journal. When Tyler visited his grandfather at home to discuss the matter, he was shocked to find a group of Theranos lawyers there. They urged him to sign a supplemental nondisclosure agreement, but Tyler refused. He eventually faced lawsuits that required him to rack up enormous legal bills.


After investigations revealed that the company’s claims were inaccurate and that Holmes had defrauded investors, Shultz changed his tune. By that time, he and the original board of directors had been sidelined. In a statement he issued to the media in 2019, the year after Theranos had been closed and its leadership was facing numerous civil and criminal complaints, Shultz acknowledged that he had been wrong, and his grandson was right. He praised Tyler for “his responsibility to the truth and patient safety, even when he felt personally threatened and believed that I had placed allegiance to the company over allegiance to higher values and our family.” Shultz admitted that “Tyler navigated a very complex situation in ways that made me proud.”


George Shultz died at his home in Stanford, California, on February 6, 2021. He was 100 years old. President Joe Biden recalled the former cabinet secretary as “a gentleman of honor and ideas, dedicated to public service and respectful debate, even into his 100th year on Earth. That's why multiple presidents, of both political parties, sought his counsel. I regret that, as president, I will not be able to benefit from his wisdom, as have so many of my predecessors.”



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