Another Dead Budget

The FY84 budget was FY83 with new wrapping: a claimed "freeze" in total outlays, which would be held to a 5 percent increase for inflation. Because the essence of budgeting is the unwrapping and inspection of packages, the decorative rhetoric of a freeze did not help. Defense and interest payments accounted for the entire spending increase, domestic spending would not grow at all, thereby losing by the amount of inflation. The budget included many structural policy changes as well, such as eliminating Legal Services, which had been rejected in 1982. If these were rejected, then the tax package, of course, could not be proposed.

Primed for a fight, House Democrats began 1983 by kicking Phil Gramm off the Budget Committee. Such punishments for opposing the party were extremely rare. But the Speaker now had a secure majority, and Gramm had reported private deliberations to Stockman. As one House, leader commented, "In any army he'd have been shot at sunrise."^[18] Gramm replied by resigning his seat; he then won a special election as a Republican and was put back on Budget by his new colleagues. In 1984 he was elected to the Senate, but that gets a bit ahead of our story.)

Still on the offensive for jobs, the Speaker declared that "I can't conceive of a freeze on domestic spending, to be perfectly truthful." Howard Baker was not willing to fight on the president's ground. "There is going to be a real donnybrook … a ferocious debate" about defense, he declared, and led a delegation to talk Cap Weinberger into changes before the budget was published.^[19] No luck. Robert Dole said food stamp cuts were out and some other programs might have to be increased. Representative Denny Smith (R-Oreg.) expressed the common response to Reagan's proposed freeze when he said that "in order to get a freeze, we have to be fair about it. The President's plan isn't going anywhere."^[20] Silvio Conte predicted that as Congress worked on the budget "there will be a hell of a shift from defense to social programs, no doubt about it."^[21] A Newsweek poll found 49 percent of the public preferring to cut defense spending, 25 percent preferring to cut domestic spending, and 12 percent preferring tax hikes in order to reduce the deficit.^[22]Business Week found that 85 percent of its sample of corporate executives agreed with the (admittedly rather leading) statement that "Republican senators were right when they told the president he must make substantial cuts in defense spending if the budget deficit is to be attacked."^[23]

In spite of presidential calls for bipartisanship, Time reported, "the only shred of bipartisan agreement is over Reagan's plan for a stand-by tax increase; almost everyone agrees it will not fly." Barber Conable and Robert Dole announced their opposition even before the State of the Union.^[24] With Dole, Conable, and Baker publicly opposed, the contingency tax died. Democrats wanted tax increases sooner and spending cuts much later, if at all. Russell Long joined Tip O'Neill in calling for repeal of both the third year of Kemp-Roth and indexing.

House leaders wanted to use their new majority to establish a strong Democratic position. Budgeters like Jones and Gephardt wanted to reach out to the members, including the leadership, and show how tough the problem was. Both sets of purposes were served by working through the Democratic caucus and by distributing a survey questionnaire titled "An Exercise in Hard Choices" to all Democratic representatives. A senior Budget Committee aide recalled:

The survey was a really good idea…. It had two purposes: to educate the members and to get them to internalize the facts of life; and it had more value than expected in detecting consensus. Not on Medicare, which is too complicated. But it was good on defense, where the consensus was heavily at 3 percent.

The Speaker, he added, "got into it. He liked taking it, trying to lower his score, like with golf. He took it a few times." But O'Neill, like Reagan, did not change preferences after the quizzes.

While the survey found areas of agreement, divisions remained. Diehard liberals, like the AFL-CIO, wanted lots of antirecession spending and a cap on the third year of the tax cut. Ways and Means Chairman Rostenkowski, however, believed that repeal or limitation of the third year would not get through Congress. It was bad politics, he believed, to stand up for an unpopular position without even a chance of winning. His committee told the Budget Committee it could do only $8 billion for FY84. Rosty had his own freeze proposal, suspending all tax law changes scheduled for after December 31, 1983. That would have nixed indexing and raised substantial dollars. His party leaders felt the Ways and Means chairman was undercutting their position on the third year of the tax cut.^[25] The disagreement foreshadowed the fact that even if the budget resolution mandated a big tax increase, Ways and Means would not produce it.

The same was true in the Senate, where Dole was not ready for another round. Soon enough, as a perverse fate would have it, Dole was engaged in a bitter battle to keep taxes from being lowered.