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Budget Diary, Part 1

February 4, 1985 : The president's budget contains more of the same—a 6 percent increase in defense above inflation and deep domestic cuts but not including social security COLAs.[1]

February 5 : People widely regard the budget as politically unfeasible. CBO says administration estimates—based on lower interest rates and improved economic conditions, supposedly reducing the deficit to $100 billion by fiscal 1990—are $86 billion too low.[2]

March 14 : Senate Budget passes a budget resolution that would reduce CBO's projected deficit by $50 to $60 billion in FY86, thus lowering it to 2 percent of GNP in FY89. Defense would have no real increase in FY86 and 3 percent in FY87 and FY88; the COLA for social security would be canceled for one year. President Reagan is unhappy about defense.[3]

April 4 : The president endorses a compromise with Republicans on Senate Budget. Defense would get 3 percent real increases each year. Social security COLAs would be 2 percent less than inflation, with a minimum of 2 percent, for each of the next three years (thus 2 percent if CPI up 3 percent; 3 percent if CPI up 5 percent). The resolution eliminates, or rather assumes elimination, of Amtrak, the Job Corps, UDAG, revenue sharing, and other programs. It's "tough medicine for


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a tough time," says Senator Domenici. Stockman, Dole, and Barry Gold-water all admit that passing this package on the floor will be difficult.[4]

April 15–19 : Skepticism abounds as the budget resolution nears the floor. Senator Thad Cochran (R-Miss.) expects Democrats to "create as many unpopular votes for Republicans as possible, to make us look cruel and heartless"; Senator Ernest F. Hollings (D-S.C.) merely predicts "a mess."[5]

Later in April : At dinner in the Appleton, Wisconsin, Elks Club, Senator Bob Kasten (R-Wis.) hears much the "same as other legislators: reduce the deficit but don't cut programs."[6] Representative Robert I. Matsui (D-Calif.) reports that at twenty-four meetings with interest groups in his district he heard much about protecting spending programs but little about their cost. "The deficit would only come up at my prompting. That portends very poorly for the state of the budget process if other members heard what I did."[7]

April 24 : In order to gather support for the Senate Republican resolution, President Reagan goes to the nation on television. Key phrases are "endless appetites to spend … big spenders in Congress … out of your pocket." Public response is sparse and divided.[8]

April 25–26 : After it becomes clear that the president's public appeal didn't win sufficient Republican support, Minority Leader Byrd drops his objections and asks for an immediate vote. After conferring with his colleagues, Dole has the Senate adjourn.[9]

May Day : The Senate conditionally approved the Republican budget—and then began voting to undo it, starting with restoration of all COLAs (based on a motion by Senator Dole, 65 to 34). Senator Domenici still claims there might be a majority for a one-year COLA freeze. Why? He doesn't say.[10]

May 2 : The Senate votes to hold defense to an inflation adjustment in FY86, 3 percent real growth in FY87–88.

May 3 : The Senate vote to slow down defense increases, called a watershed by its advocates, is deemed an "irresponsible act" by President Reagan.[11]

May 10 : After two weeks of negotiations, the Senate approves a FY86 budget resolution that would freeze not only COLAs but also defense spending and, to top it off, assumes Congress would wipe out all funding for thirteen domestic programs. The 49 to 49 tie, achieved by wheeling in Senator Pete Wilson (R-Calif.) from his hospital bed, is broken by Vice President Bush.[12] The day belonged to Senator Domenici: "We have done," he crowed, "what many thought was impossible—significant deficit reduction."[13] A Democratic proposal including new revenues lost, 43 to 54, on May 8. The final plan is a lot like Senate Budget's plan from early March.


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May 11–16 : "The Senate just laid itself open to the charge it has become the latest mass abuser of the elderly," says Claude Pepper. House Republicans, during Budget Committee negotiations, say they'll gladly restore the COLA. The Democrats' plan, hammered out by new Chairman Gray after many meetings—of the leadership, the Budget Committee, and the caucus—also excludes tax increases. There is momentary hope of bipartisan agreement. Democrats have decided any taxes will be offered by their opponents. But the Democrats have frozen defense BA at the FY85 level, without even an inflation adjustment, for FY86. The Republicans cannot accept that.

On May 16 House Budget adopts its resolution, which purports to equal the Senate's deficit cuts in FY86 ($56 billion) but cuts $37 billion less over the next two years. The difference is mainly that the House Budget Committee plan eliminates only one program, General Revenue Sharing. Actually, the House plan matches the Senate for FY86 only by assuming some rather dubious things, for example, $4 billion in extra revenue from offshore oil leases and large savings from reduced government contracting with the private sector.[14]

May 23–24 : Rising to the challenge of meeting what Domenici calls the largest deficit reduction in history (even though you can't have a huge reduction without starting from an even huger deficit), the Democratically controlled House passes its own budget resolution (258 to 170). Democratic leaders say there will be no compromise on the COLAs; in fact, "if the Senate were to take another vote on the COLAs," in the Speaker's judgment, "they'd run so fast from it they'd trample all over themselves."[15]

Conservative Democrat Marvin Leath, wanting more deficit reduction, tries to add a COLA cut to the defense nominal freeze. Supporters argue that the elderly will go along if others are visibly sacrificing. Of House members, 56 seemingly agree; 372 do not. "There was an obvious coalition there," says one Leath supporter. "We just didn't hit them at the peak of their courage." The Congressional Quarterly Weekly Report sums it up: the "House Centrist Bloc [is] Still Waiting to Happen."[16] The president, of course, protests defense cuts. "I don't know how in the world we can get the Senate and the House together," Domenici laments.[17]

June 22 : "I'll repeat it until I'm blue in the face: I will veto any tax increase the Congress sends me," the president says in his weekly radio address.[18]

June 11–25 : After two weeks of getting nowhere, Domenici breaks off the budget resolution conference. He blames House intransigence on COLAs. But the polls, and House Republicans, as a consequence, are siding with House Democrats. Why are Senate Republicans so insistent?


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Because they've already taken the risk by voting for their own plan; as one puts it, "The political damage has been done."

June 26 : Speaker O'Neill says he, personally, favors expanding the tax on social security benefits for people of higher income.

June 27 : Domenici recalls the budget resolution conferees, hoping to make something of the Speaker's suggestion. Not wanting to be out front with a tax increase, House Democratic conferees said O'Neill was not speaking for them.[19] Six senators (three Democrats and three Republicans), led by Gorton and Chiles, suggest a plan with $59 billion in new taxes over three years, providing slightly less defense than in the Senate plan. It thus reduces the deficit by more than either the House or the Senate plans. It still eliminates the COLAs but suggests targeting 20 percent of those saving for programs for the needy elderly.

June 28 : Heard Budget Director Stockman, in an off-the-record speech, insist that substantial tax increases are the only way to slash the deficit "consistent with fiscal sanity."[20]

July 9 : A cocktail hour reception at the White House—including Chiles, Dole, Gorton, Gray, O'Neill, and Representatives Thomas J. Downey (D-N.Y.), and Mike Lowry (D-Wash.). Opening with a sermon against tax increases, President Reagan obviously didn't want to hear from Senators Chiles and Gorton about their compromise tax increases, saying (according to notes kept by Downey) "Dammit, I can't listen to all of this." The chair of the HBC, William Gray, tells Reagan that recurrent presidential attacks on the House Budget Committee are harmful to the process: "I told him to keep the rhetoric to a minimum and to get the facts straight." Reagan came to the meeting ready to abandon the one-year freeze on social security COLAs—linchpin of his agreement with the Senate Republican leadership. The meeting was held to see what the president could get for it. Dole and Gray debate the realism of savings in the House and Senate budget resolutions. Reagan suggests a "framework for agreement."[21] Stockman announces his resignation, effective August 1.

July 10 : President Reagan meets with House and Senate budget conferees to outline the framework for agreement. He and the Speaker have agreed to retain the COLAs while giving defense its inflation adjustment on budget authority. To make the numbers sound better, they'll use the House defense outlay figures. Funny numbers. How, one might ask, will they hit the year's informal target of $50 billion in deficit reductions?

Senator Domenici, who had been left out of the cocktail reception and who felt that Reagan had achieved too little in spending cuts, doesn't take seriously the president's call for a bipartisan effort to recover the


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same $28 billion that would have come from the COLA freeze. Speaker O'Neill professes himself "very happy" with the outcome but disagrees sharply with Majority Leader Dole about what was decided. COLAs were gone for good, not merely, as Dole insisted, pushed toward the edge of the table.[22]

July 11 : Republicans are feeling betrayed; Bob Dole charges the president with "surrendering to the deficit." Nor, in Dole's opinion, does Chief of Staff Don Regan seem exactly eager to take on the budget.[23] A frustrated Dole vents the wrath of senators at being dumped after they stood up to make the tough choices. Obviously, the White House has underestimated the reaction (defeat, dismay, anger) of senators to going back on the COLAs. Not every Democrat is overjoyed; many are disgusted with what their conferees gave away on defense. According to Representative Mike Lowry, "O'Neill and Wright … would give away the world for COLAs." Lowry thinks that accepting the Senate position on budget authority for defense eventually will force Democrats to cut domestic programs still more.[24]

July 12 : Reagan, meeting with the twenty-two Republican senators up for reelection, "apparently fanned the bad feelings," instead of reducing them. "'If the president can't support us,' Senator Grassley declares, 'he ought to keep his mouth shut.'" In his seriocomic way, Majority Whip Senator Alan Simpson (R-Wy.), said (of the White House bargain) "that was not an agreement by the fifty guys who jumped off a cliff over here."[25]

There is still no budget resolution. Unless House Democrats come up with an offset for the then sacrosanct COLAs, Dole and Domenici say they will not meet. "Nuts," or words to that effect, came from the House conferees, who offered $3 billion at most. If the senators wanted more, let them be the proposers.[26]

July 13 : President Reagan undergoes surprise cancer surgery. The attacks on him are muted. "We're not mad at him," says Dole. "We're mad at the deficit."[27]

July 15 : White House spokesman Larry Speakes says the president wants a budget resolution "this week." The conference resumes, and Domenici suggests discarding the Reagan/O'Neill framework. House conferees reject the Gorton/Chiles plan, but Gray promises a new spending cut proposal.[28]

July 16 : The House votes, 239 to 181, to waive the point of order against considering appropriations without a budget resolution. Chairman Gray offers $24 billion more, over three years, in spending cuts and a compromise figure on defense BA. Domenici says the House defense number violates the framework that, a day before, he had suggested discarding.[29]

July 17 : A headline reads: "Talks on Fiscal 1986 Budget Collapse,


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Agreement This Summer Seems Unlikely." Senate conferees, led by Domenici, and including Chiles and Hollings, are complaining that domestic cuts proposed by House members are fictitious. Even if it's true, House members say they have already cut below the support in their chamber.[30] Terming the complaint sanctimonious, Gray accuses the senators of "moving the target" to seek ever greater domestic cuts. Not so, Domenici retorts. "I disagree radically with you," Gray snaps back. When Representative Wright suggests that conferees "exorcise the devil of bad feeling" by not preaching, Domenici says, "Don't preach to us." His parting words are "don't call us, we'll call you."[31]

July 18 : The president, from his hospital bed, pleads for an item veto, but the Senate fails (57 to 42) to apply cloture (a rule requiring a three-fifths majority). The filibuster is led by the chairmen of Appropriations (Mark Hatfield, R-Oreg.) and Rules (Charles Mathias, R-Md.) who argue that the item veto amounts to usurpation of power.[32] "If the president wants a balanced budget," asks Senator Weicker, "why has he not submitted one?"[33]

July 22–23 : Domenici gives Dole a birthday present comprised of the thirty-five plans for budget resolutions the Senate Budget Committee had considered in 1985.[34] "The more we look at it," Dole tells reporters, "the more we're giving up."[35] Dole, meeting with Don Regan, David Stockman, House Minority Leader Robert Michel, and others at the White House, wonders whether perhaps COLAs could be indexed against inflation only every two years.[36]

When the president invites Republican legislators to the White House that week, Dole insists that a range of legislation be discussed. "The primary purpose," he said with some exasperation, "is not to spend 90 percent of the time talking about the budget."[37]

July 24 : On a strict party-line vote, 22 to 14, working from the House budget resolution, House Ways and Means met its reconciliation target today by voting revenue increases and spending decreases that are supposed to reduce the deficit by $19 billion over three years. It's fairly typical: medicare providers cut, a scheduled tax decrease (on cigarettes) again postponed, and more money for welfare.[38]

July 25 : There they go again: attempting to break the impasse, Republican leaders up the ante; they are proposing a $5 a barrel tax on imported oil, biennial indexing of both COLAs and the tax code that would not take effect until after the 1986 election, and still big cuts in other domestic programs. All the Senate conferees except Jim Sasser (D-Tenn.) support the proposal. They still are trying to make big cuts in one area palatable by cutting in other areas as well. The $338 billion deficit reduction in three years is considerably larger than their earlier biggest reduction and $70 billion more than the House resolution. The


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Senate budgeters' strategy still isn't working. Chief of Staff Regan says the administration will study the proposal carefully; but his boss, the president, caught on the way to a cabinet meeting, repeats his war cry: "I'm not for any tax." Speaker O'Neill makes a point of telling reporters that he is "stubbornly opposed" to reducing social security benefits and that Northeasterners like himself were against oil import fees.[39]

July 28 : Read in the New York Times today that "almost every day some members of Congress express frustration at their failure to reach agreement on a budget plan setting overall spending levels."[40] The House, however, had already passed five of the thirteen regular appropriations bills, all of which freeze spending at 1985 levels. "A freeze is on," notes Representative Neal Smith (D-Iowa), "budget resolution or no budget resolution."[41]

July 29 : After meeting with GOP legislative leaders, President Reagan rejects the taxes and COLA reductions in the new Senate proposal. That writes finis to the three-year, $300 billion deficit-reduction package put forward by Republican leaders. Complimenting the conferees for a good try, Reagan advises them to "act with dispatch … put aside their differences, get down to business and produce a budget." A little galling, no? Senator Dole is bitter: "There will not be too many Republican senators responding to pleas from the White House." Dole has his hostages, too. He predicts that "there will be no tax reform this year unless there is a budget."[42]

July 30 : Senator Dole fails to show up for a meeting with President Reagan.[43] "There won't be any plank-walking anymore," says Senator William Cohen (R-Maine). "Not unless Bob Dole is the one that makes the request." A lot of anger is directed at Donald Regan, who "didn't hurt his relations with Senate Republicans," according to Senator Gorton, "because they weren't any good to begin with." Senators try to back off from anger at the president himself—Gorton moving from "the president has sold us down the river again" (July 30) to "he's the greatest political asset we have and he remains that asset" (August 1).[44] They're still resentful.

August 1 : Domenici, Chiles, Gray, and Latta, after two nights of meetings, reveal to their fellow conferees a compromise plan: essentially the House wins. The only big program terminated is revenue sharing. Yet domestic discretionary programs not for the poor take a 20 to 30 percent hit. All budget conferees except Hollings endorse the plan, which then whizzes through House and Senate by large margins before Congress goes home for August. "The one thing we have not done," said Senator William Armstrong (R-Colo.), summing up prevailing feeling, "is solve the underlying problem: the deficit."[45] It is projected at $171.9 billion for FY86. Hollings fumes that, in resisting deficit reduction, "you've got


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Tip O'Neill and Jim Wright acting like they work for the White House."[46] Moderate Republican Senator Warren Rudman (N.H.), in frustration, also opposes the conference reports.[47]

August 2 : Calling the budget resolution "not a giant step—maybe a bunny hop," William Gray put his finger on an aspect of the situation—self-denigration—that has been troubling participants who have struggled so hard to come up with something. The public could hardly appreciate the progress that has been made, he complained, when "the people who participated in it are pooh-poohing it."[48]

August 15 : Amid harsh attacks on the budget resolution (as "a limp rag"—David Stockman), CBO Director Rudolph Penner comes up with the surprisingly optimistic conclusion that there has been "enormous progress from the kind of disastrous projections we were making just a year and a half ago." The nonpartisan CBO chief says the projected deficit for FY90 has fallen from 6 percent of GNP (as estimated in 1984) to 2.1 percent (as of August 1985). Shutting down the defense buildup, DEFRA, and the new budget resolution (if enforced) could, by FY87, get the deficit to a level where interest payments would begin to decline. So why the hysteria? Penner says it is due to members expecting the problem to be "solved all in one year."[49] He may be right, but no one is listening.


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