(FORTUNE Magazine) – WHY DOES White House legislative liaison Patrick Griffin keep a plastic punching bag emblazoned with Edvard Munch's The Scream next to his desk? Perhaps he shares the dark dreams of many Democrats: that Bill Clinton's bold legislative agenda will be swept away like some flotsam and jetsam in the political crosscurrents of Whitewater.

Officially, White House strategists say, No way. They point to recent congressional victories and near victories: the killing of the balanced-budget amendment and virtual completion of a budget for 1995 close to what Clinton sought. Also moving apace toward enactment are Clinton-backed bills to fight crime with more police, more prisons, and longer sentences; to establish national educational standards; to create a youth apprenticeship program; and to clear the way for interstate banking and the information superhighway. Says Griffin: ''We're just plowing ahead.'' But many more objective observers think that Whitewater is beginning to cloud prospects for Clinton's signature initiatives on GATT, job training, welfare reform, and most important, health care. Now that even loyal Democrats are backing GOP demands for congressional hearings, Clinton's agenda could be in trouble, with a capital T. ''I'm more concerned with the politics of Whitewater than the breaking of any laws,'' says presidential counselor David Gergen, who, ironically, advised Richard Nixon during Watergate. ''If the current focus on Whitewater were to continue, it could turn politics more rancid and complicate efforts to get reforms enacted.'' It didn't have to be that way. Back in December, when Clinton was riding high from his NAFTA victory, he might have put the budding scandal behind him by fully disclosing the details of the investment he and Hillary had made in 1978 with friends James and Susan McDougal in the Whitewater property development project in Arkansas, and its relationship to McDougal's failed S& L. Gergen, among others, had argued heartily for just that. Instead, the Clintons sided with their private attorneys and Bernard Nussbaum, then White House counsel, who warned that releasing incomplete documents would only raise more questions. But as any management expert could have predicted, stonewalling simply fed suspicions and demands for yet more information. ''The more walls you raise during a crisis, the less credible you become,'' says author and management consultant James Kouzes. ''Whitewater is a classic example of crisis mismanagement.'' The price: a special prosecutor, congressional hearings, and an army of budding Woodward-and-Bernste ins. Laments Gergen: ''Whitewater will be part of the news agenda for at least a year, maybe longer.'' How bad could it get? So far, only the most rabid Republicans are equating Whitewater with Watergate. After all, Watergate involved a systematic abuse of the Constitution by a sitting President. Whitewater is about an investment made 14 years before Clinton was elected President. Although the Clintons initially opposed calls for a special prosecutor, they now appear to be cooperating. Says Sam Dash, former chief counsel of the Senate Watergate Committee: ''It diminishes and demeans the meaning of Watergate to compare the two.''

NEVERTHELESS, Whitewater could yet do severe damage to the Clinton presidency. ''Whitewater is about the arrogance of power,'' says Iowa Congressman James Leach, the ranking Republican on the House Banking Committee. Leach has charged that money was diverted from McDougal's S&L to Whitewater and one of Clinton's gubernatorial campaigns and that the Administration engaged in a cover-up that ''flagrantly violated'' the independence of federal regulatory agencies. Clinton says he has absolutely no knowledge of either event. Worse yet: accusations by former Little Rock municipal judge David Hale -- dubbed ''a bunch of bull'' by Clinton -- that Clinton pressured Hale into making a fraudulent Small Business Administration-guarantee d loan to Susan McDougal, some of which ended up in Whitewater. Conspiracy to defraud -- or White House efforts to obstruct justice -- is a felony. London bookmakers are giving 8-to-1 odds that Clinton will resign. Even if such nightmare scenarios fade under the glare of inquiry by special prosecutor Robert Fiske, Whitewater seems sure to undermine Clinton's ability to drive the congressional agenda. Major Administration initiatives on health care and job training have lost some momentum in Congress. Laments one senior Democratic strategist: ''We just can't punch through the Whitewater din.'' Inside the senior ranks of the Administration, there is frustration, pain, and disarray. Eight top aides from the White House and four from Treasury have been subpoenaed, largely in connection with meetings on Whitewater that raised the possibility of cover-up. Among them: the President's right-hand man, George Stephanopoulos; the First Lady's chief of staff, Maggie Williams; communications director Mark Gearan; and Harold Ickes, who was hired to push health care reform. Others in the White House have been advised not to talk with subpoenaed staffers except in meetings. Worst of all, Whitewater undermines the President's credibility. As leadership guru Warren Bennis says, ''The question about Clinton has always been: Can we trust him? That's why Whitewater is so very hurtful.'' Add to that a legislative season shortened by the fall elections, a jam-packed agenda, a lame-duck majority leader in the Senate, a Ways and Means chairman who might soon be indicted, and Republicans who smell blood. No wonder congressional liaison Griffin needs a punching bag. Reading the tea leaves, Democratic congressional leaders are already moving to pare Clinton's agenda. House Majority Leader Richard Gephardt has urged the White House to postpone until 1995 a vote on the sweeping new trade arrangements embodied in the General Agreement on Tariffs and Trade (GATT). And insiders agree that action is unlikely this year on Clinton's ambitious proposals to provide up to two years of payments and training to workers laid off because of downsizing or defense cuts. FOR THE MOMENT, welfare reformers seem surprisingly buoyed by Clinton's Whitewater woes. Says one Democratic strategist: ''The more Clinton falls in the polls, the more he talks welfare reform.'' Because curbing welfare payments is popular with conservatives, he adds, Democratic Senator Patrick Moynihan ''calls welfare reform 'boob bait for the bubbas.' '' But talk is cheap, action tougher. From the right, Republicans oppose new spending and taxes. From the left, Democrats are bashing the President for not acknowledging that ''ending welfare as we know it'' requires a giant federal jobs program. Quips the strategist: ''The White House is in denial.'' The bigger risk, of course, is that Whitewater drowns health care reform. The plan was never going to sail through Congress. Framed in secrecy by Hillary Clinton and some 500 experts, it emerged a complex, costly, and bureaucratic monster that few could understand, let alone support. Big business, which the Clintons had counted on, rejected it. Even the elderly were skeptical. Now the plan's chief champions -- Bill and Hillary -- are under a credibility cloud. Ickes, the man who was supposed to ram it through, has been busy preparing for hearings before a grand jury. Clinton has raged that Whitewater is nothing more than a tool of health care opponents, a broadside that makes it harder for Republicans to compromise. And without them, there will be no health reform this year. The best that could happen to Clinton now is for Whitewater to act as a shrill wakeup call. Discussing Whitewater at a prime-time press conference, only his second since taking office, was a good first step, as was the release of more tax returns. But he and Hillary must move quickly to answer fully all outstanding questions. The President must fire anyone found involved in a Whitewater cover-up, then bolster his staff with untainted professionals who understand and respect the law -- and the ways of Washington. Finally, he ought to stop bashing Republicans and move quickly toward a bipartisan compromise on health care. It might not save him, but -- short of a rally-' round-the-flag military engagement -- it's his best chance for a comeback.