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President Clinton's new chief of staff said Tuesday he has full authority to make whatever changes are necessary at the White House to advance administration priorities such as health-care and welfare reform.

Leon Panetta, the budget director named Monday to replace Mack McLarty, said he would work to give Clinton "room so he can be president and not have to worry about being manager at the White House."Panetta says he'll be settling into a job he calls the toughest in town by mid-July. At the same time, McLarty, among the last of the Arkansans Clinton brought to his inner circle, will take on his new role as counselor to his boyhood friend.

The two made the rounds of morning TV talk shows Tuesday to discuss the changes, which McLarty said "don't necessarily connote that something was wrong. It says the circumstances are different."

"The president and I had a very good discussion and I have a very good relationship with the first lady as well," Panetta said. "The first item of business was to make sure I have full authority to make changes that need to be made in the White House."

"The president really doesn't have time" to manage the White House, Panetta said, adding that it was too early to discuss any specific changes.

"What's happening is, we're now looking at a very large legislative agenda," Panetta, a former California congressman, said Monday night on CNN's "Larry King Live." "I have that kind of experience. I know the players. I know the are-na."

With McLarty sitting beside him, he added: "The feeling was, this is the best time that Mack become what he really is, which is a close adviser of the president."

The shifts are part of the biggest personnel shake-up of Clinton's presidency. David Gergen, brought in as counselor last year to aid a White House reeling from image problems, will become a special adviser at the State Department, which is having similar problems. Panetta's like-minded deputy at the Office of Management and Budget, Alice Rivlin, moves up to become the agency's first female director.

Rivlin, 63, joined the administration last year from the Brook-ings Institution, where she was a senior economist. She served for eight years as the first head of the Congressional Budget Office and long supported tough measures to reduce the budget.

McLarty had long been criticized in some quarters as a weak link in the White House operation - a poor administrator who was nice to a fault, resulting in undisciplined troops and mixed messages to Congress.

Clinton said Monday that his childhood friend had "run an open White House, treating others and their ideas with unfailing courtesy . . ." He praised McLarty's "decency, integrity and good will."

But his description of Panetta made clear what Clinton is after. He said his budget director had been "a pillar of strength" and a skillful manager of his 500 OMB employees in the past 18 months.

Panetta was chairman of the House Budget Committee before joining the administration. He is described as warm and funny, the kind of person who is always either making a joke or laughing at one.

But his resolute side was on display last year during the long, intense battle to shape Clinton's economic plan. A committed deficit-cutter, he eventually prevailed over political advisers who urged Clinton to invest in education and other areas rather than worry about deficit reduction.

One of the losers in that fight, consultant Paul Begala, said Monday that he could personally attest to Panetta's tenacity. "Ask anyone who has ever disagreed with him about deficit reduction if Leon is tough," Begala said. "He is tougher than day-old rigatoni."

Clinton presented the McLarty move as something his friend had initiated. But McLarty said later that wasn't quite accurate. "The discussions we had were a response to the need the president had expressed for more of my time and my counsel," he said on CNN.

McLarty said he suggested Panetta as his successor, leading to a meeting Saturday at Camp David among Clinton, Panetta and Vice President Al Gore. The deal was sealed Sunday.

Gergen himself brought up the idea of moving to State for what he has said would be his final months with the administration, McLarty said. The Republican Gergen "had some reticence" about being in a Democratic White House during mid-term elections, said the outgoing chief of staff.

Gergen, 52, a veteran of three Republican White House staffs, was brought into the White House in May 1993 to oversee media operations and polish Clinton's public image. He has said he plans to join the faculty of his alma mater, Duke University, at the end of the year. Gergen was editor at large of U.S. News & World Report, a lecturer and broadcast commentator before joining Clinton.

The president said his personnel moves would energize his team for the work ahead on trade, foreign policy, economic issues and health and welfare reform.

Republicans said the switches don't address the policy problems of the Clinton presidency. And a Bush administration veteran with a unique chief-of-staff history called McLarty a sacrificial lamb.

Sam Skinner was brought in as the soothing successor to the abrasive John Sununu. But he was soon ousted to make room for the savvier James Baker.

"When things aren't going well at the White House, the chief of staff ends up taking the bullet for the president," said Skinner. "It has nothing to do with reality, usually. I doubt very much that Mack McLarty is the problem."