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Sixteen The Budget Process Collapses
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Packages and Formulas

If the budget process had failed to create an acceptable package, the budgeters would try to create a package outside that process. Foremost among them was Senator Dole, who was just as insistent about doing something as about not doing what the budget resolution prescribed. In early July he called for an "economic summit meeting" between Reagan and congressional leaders. The White House refused; David Gergen commented that Congress "would just use [such a summit] to beat the president over the head."[60] When that went nowhere, Dole worked to create a package within Finance.

Why Dole thought he could succeed where Domenici had failed remains a mystery. Perhaps he thought a more "balanced" package could


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win Reagan's support, and once Reagan was on board his party would have to go along. Reagan publicly opposed Dole's efforts, but the senator persisted. After one particularly strong presidential statement, Dole remarked that "there are a lot of ways to interpret 'no,'" and placed the president in the "undecided category."[61] Most likely Dole felt Reagan would support a more "balanced" package at the last moment, that, as a good politician, the president was driving a hard bargain and was willing to let others do the spadework. There was surely political advantage in publicly leading the forces of "responsible budgeting," a role that won Dole a great deal of favorable media coverage. If he could bridge the gap between Reagan and more traditional budget-balancing Republicans, he would do good (by his own lights) and possibly increase his political support in both camps. The White House political types might win over Reagan. It had happened before. The budget responsibility faction of Democrats—Jones, Panetta, Gephardt et al.—had allies, especially among freshmen and might be able to pressure the Speaker. If the pressure were great enough and if Dole's "solution" looked better than the budget resolution, perhaps the president would seize it. Responsibility would triumph.

Reagan, however, had his own definition of responsibility: keep taxes low and strengthen the nation's defenses. The Speaker's definition differed from Dole's or Reagan's: O'Neill's was to protect the legacy of his party, to use government's power to aid the economy's losers, and to help Democrats win the 1984 election. Because the public and the media believed Dole's (and Domenici's, and Chiles's) version of responsibility, the deficits gave O'Neill and Reagan a fine club with which to bash each other's heads, though neither would get so carried away as to abandon his primary purpose. From mid-1983 to mid-1985, therefore, Speaker O'Neill and President Reagan would continually frustrate the efforts of Dole and his colleagues to enforce budget "responsibility."

This is not to say that Congress wanted to spend wildly. Remembering the chaos of 1982, in 1983 appropriations leaders were willing to cut a few dollars if that would settle the disputes, enable everyone involved to make plans, and give themselves the good feelings that go with having passed a bill. In spite of some messy battles—abortion on the Treasury/Postal bill, for example—action generally was far more orderly than in previous years. Major Reagan policy initiatives such as abandoning Legal Services were, as usual, rejected. But so, after the early supplemental, were efforts of House leadership to increase social spending. The appropriations leaders put together, if barely, bills that everyone could live with, funded agencies and programs, and then let the fight for more spending take place on supplementals and through specific provisions added to short-term continuing resolutions.


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House and Senate appropriations leaders buffered the agency funding process from the chaos of the partisan budget wars. They could not have succeeded if Reagan had, as advertised, pursued a tough veto strategy. Stockman mocks his colleagues for proclaiming and then not following that course.[62] Yet, perhaps remembering the 1982 supplemental override and how defense had been held hostage in the CR, a senior White House official recalled that "they presented us with total spending under the limits and moved it around." And "you can't veto the defense bill," he added; "then you get zero…. We would have vetoed if we thought we could do anything … [but] what would we have accomplished? We would just have gotten it back in a CR. And, as we all knew, most of the excess spending is not in appropriations." Besides, another official recalled, it was not as if the whole administration were united behind that budget: "Even the cabinet members wouldn't support the veto."

Instead, the administration tried to cut deals with Republican leaders on Appropriations. A senior OMB official recalled that by 1983 the administration was working with Appropriations Republicans "with the goal of preventing them from making a deal with the Democrats. We would work with the Senate to get a standard, and then try to get the House senior Republicans to push that standard in the early salvoes with the Democrats." These Republicans opposed Reagan's cuts but were equally suspicious of program increases.[63]

The real conflict on Appropriations involved additions to or riders on continuing resolutions. At one point, when Appropriations members tried to invoke the War Powers Act on the first CR in regard to the American troops in Lebanon, the Speaker took the unprecedented step of referring the CR to the Foreign Affairs Committee for review and burial. As a result, in this first go-around, the Speaker ended up committed to a clean bill as a matter of principle and could not tack on some planned extra spending. The new CR passed the House 261 to 160 on September 28. The Senate, impressed by the House's example or perhaps convinced of plenty of remaining time in an odd-numbered year, also practiced restraint and actually passed the continuing resolution without trouble, and on time, by September 30.

The stalemate on appropriations showed that Congress was not in a spending mood. But the mild squeeze would not help much against deficits that now were greater then the total domestic discretionary budget. Significant spending cuts would have to come from entitlements or not at all. That brings us back to Senator Dole and his allies. "We will have to raise taxes," Dole declared, "but we will have to cut spending first."

During the summer, while Dole called for a process that might yield


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a package, other legislators looked for a formula around which people might rally. In the Senate, John Danforth (R-Mo.), David Boren (D-Okla.), and Malcolm Wallop (R-Wy.) filed a bill to reduce scheduled adjustments in both COLA benefit payments and the new tax indexing by 3 percent each year from 1985 to 1988. In the House, James Jones and Carroll A. Campbell, Jr. (R-S.C.) joined four Republicans and four Democrats in a similar bill, cutting COLAs and limiting tax bracket indexing by 2 percent each year. The 3 percent solution would bring in $116.7 billion over four years; the 2 percent formula, $77.6 billion. Both left AFDC and other programs for the poor untouched. Richard Cohen explained the attraction of these formulas:

Each quickly raises a large amount of money by relatively simple legislative actions. Each raises about half its deficit savings from tax increases and half from spending cuts. Each spreads the pain in small doses to most of the population, except for the very poor. And each requires concessions of important political principles by both Republicans and Democrats.[64]

These plans met the prevailing test of equity. But their attacks on the tax cut (Reagan's cherished principle) and social security (the Democrats'), though gradual, still meant more than an 8 percent tax hike and social security cut.

House Democrats already had taken one deficit-reduction measure, passing a $700 cap on the July tax cut, despite skepticism in their own ranks. Leon Panetta feared a "substantial political backlash."[65] A letter sent to O'Neill from seventy-nine Democrats declared that "taking such action without any accompanying cap on spending is flawed policy."[66] In spite of these doubts, the party gave the Speaker a 229 to 191 victory on June 23.

In the Senate, the six moderates who had spearheaded the drive for the eventual budget resolution also called for limiting the July tax cut. But Majority Leader Baker argued that the cap was a futile political gesture, sure to be vetoed, and convinced the moderates to support the cap's party-line defeat, 55 to 45.[67] The liberals therefore had to go back to the drawing board in search of a tax-hike package that would meet the budget resolution's $73 billion target.[68]

When Congress went home for its August recess, it was accompanied by a chorus of criticism. Persistent yet always sardonic, Dole observed that "no one is exactly marching on Washington asking us to raise revenues."[69] "We've met our fiscal enemy and it is us," declared Barber, Conable. "We're hypocrites if we pretend anything else."[70] The "us" of Conable's comment should not have been Congress alone; it also was the American people, who, nevertheless, complained to their representatives


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about the deficit. When the members returned to Washington in September, the stalemate continued at a heightened level of anxiety.


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Sixteen The Budget Process Collapses
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