During this time, the press started to report on spending mishaps, such as when the state's Economic Development director was reported to have budgeted $450 per month for office plants. Then, the newly created Energy Department shelled out $2,000 for a lakeside conference retreat. The Energy Department also rang up a $37.50 bill for corkscrews at a dinner party.
When news came that the Special Alternative Wood Energy Resources project – which was designed to train low-income Arkansans to chop wood and distribute it to the needy – had spent $62,000 to produce six woodchoppers and just three cords of wood, the public was outraged.
In the 1980 Democratic primary, Clinton had one opponent, 77-year-old turkey farmer from Kingsland, Arkansas, Monroe Schwarlose. Schwarlose had a long history of running unsuccessfully for office. Schwarlose ran against Clinton in the 1978 campaign for governor. An article in the Arkansas Gazette on May 31, 1978, said, “Schwarlose is not regarded as a serious candidate because of his age and because his platform consisted entirely of legalizing gambling and establishing a state lottery.” He campaigned on the car tag issue, and distributed a photograph of his own chopped wood pile, which he noted had not cost him a cent. On primary day, Schwarlose stunned the political experts and picked up 31 percent of the vote.
Clinton's opponent in the general election, Frank White, had also been given no chance of defeating the incumbent. On May 7, 1980, Frank White gained many votes. President Jimmy Carter notified Clinton that Fort Chaffee, in northwest Arkansas, was to be a stop-over point for almost 20,000 Cuban refugees who had sought asylum in the U.S. along with 100,000 others. Rumor had it that the Freedom Flotilla contained refugees who were criminals and mentally ill.
Clinton publicly supported Carter's decisions. “I know that everyone in this state sympathizes and identifies with them in their desire for freedom. I will do all I can to fulfill whatever responsibilities the president imposes upon Arkansas to facilitate the refugees resettlement in this country.”
President Carter did not commit funds, staff, or federal troops to assist the refugee resettlement, and Clinton was forced to make do with Arkansas’ meager resources. By late May, the camp's population had grown tremendously and tensions began to mount both inside and outside its walls. Residents rushed to gun shops to protect themselves.
On May 26, 1980, one day before the primary election, up to 300 refugees turned over barricades and escaped through an unguarded gate, dispersing through the county. The federal troops stationed there did nothing about it. Within days, state troopers and local police recaptured the refugees with no help at all from the federal officers.
On the night of June 1, Fort Chaffee exploded as the refugees rioted. The press called it “a war zone”. About 1,000 angry refugees charged the gate, and federal troops did nothing to stop them. About 200 refugees ran down Highway 22 in the direction of Barling, a small town near Fort Smith. At the end of the night, 62 people suffered injuries, including five refugees, who were shot.
Things settled down for a little bit until August when President Carter ordered the remaining 10,000 refugees to be sent to Fort Chaffee. Governor Clinton turned down the president's request but the White House overruled the governor. The people of Arkansas were angry.
Frank White had a slogan that would win him a spot in the governor's mansion: “Cubans and Car Tags.” White criticized Clinton for his automobile tax increase, for not standing up to President Carter during the Cuban refugee crisis, and for not recruiting enough companies or stimulating sufficient job growth. Arkansas Power and Light and Southwestern Bell both endorsed White. Frank White also attacked the Arkansas office that Clinton established in Washington, D.C. The Arkansas office staff provided information on federal developments and improved the state’s position for grants. White’s criticisms were ironic because he led the effort to establish a controversial state office in Brussels, Belgium.
On election night in 1980, the 34-year-old Clinton conceded to
White. Clinton lost the race by nearly 35,000 of the 840,000 votes cast. No Arkansas governor since 1954 had been defeated for a second term. This race was described as one of the most stunning upsets in Arkansas political history in Diane Blair’s book Arkansas Politics and Government. White became only the second Republican governor since Reconstruction, and Clinton became only the second 20th Century governor to be denied his bid for a second, sometimes called “courtesy,” two-year term.
Clinton later recalled that his loss to Frank White was the most painful experience he had ever gone through.