Gramm in Congress

Senator Philip Gramm's economics and his politics were but different sides of the same coin. He believed not only in a market economy but also that competitive individualism was the proper basis for social life.

Representative Vin Weber (R-Minn.) commented that "in every conversation I've ever had with him about politics, he's had a vision and a strategy. At the core of that strategy is to permanently rip apart the Democratic coalition."^[50] Gramm wanted to weaken Democratic ability to support what he calls its "bought constituencies"—labor unions, farmers, students, the lot. "'The Democratic Party is the party of Government,' Gramm argues, 'and anything that lessens the power of Government, as against the private sector, is going to hurt them.'"^[51] Because the behavior he disapproves is doing what comes naturally for both politicians who get elected and constituents who receive benefits, Gramm set out to make that behavior unprofitable.

Gramm's distrust of institutions that restrain individuals extended to his behavior in Congress. No supporter of established authority, he ignored not only some normal incentives but also the normal authority structure of politicians. Conforming to the expectations of (or even agreements with) others was not his idea of fulfillment. Gramm would defer to neither those with the stature of chairmanships nor those with many years in office. He would not delegate to staff if he thought he could do a job better, however technical or "low-status." Gramm was a competitive individualist, trying to create institutions that encouraged persons like himself.

The new senator had long supported rules changes that would bolster his position, including the balanced budget/spending limitation amendment. Barely two months after assuming office in 1979 as a Democratic representative from Texas, Gramm (with Jones and Latta) tried—unsuccessfully—to add a balanced budget requirement in a bill to raise the debt limit. In 1981 he persuaded Majority Leader Jim Wright (D-Tex.) to join him in sponsoring another, but this time meatier, balanced budget bill. Like its far more famous successor, this 1981 bill required the president to sequester funds through automatic percentage cuts if the budget were not balanced. The bill died.^[52] Gramm offered it again in 1982. "I felt then," Gramm recalled, "the time had not come, but it was going to come."^[53]

Combining across-the-board cuts with spending limits was hardly without precedent: at least five efforts to do just this had been tried

between 1967 and 1972. The 1967 effort, attached to a continuing resolution, provided for percentage cuts while exempting uncontrollable, mostly entitlement, costs. The 1968 attempt was similar, except that six categories of expenditure were exempted: farm price supports, public assistance, social security, debt interest, veterans' benefits, and the costs of the Vietnam War.^[54]

From 1983 on, insiders such as Dole, Domenici, Bob Michel, and Trent Lott had more or less ineffectively floated similar proposals for impoundment authority and/or across-the-board cuts. Gramm, by contrast, was in dead earnest. He meant to attach his plan to the next increase in the debt ceiling—an increase particularly vulnerable to a deficit-reduction rider because it would raise the ceiling over $2 trillion. Senators did not want to have to admit voting for a $2 trillion debt; if they could say that simultaneously they had done something about the deficit, the vote would be easier to justify.

Gramm revised his 1981 bill to extend his sequestration procedure in stages over five years rather than to reduce the deficit to zero in one year. Everything, defense as well as social security, was to be in the pot. Exactly how sequestration would work he left vague. It is better to first get people committed to the principle and then work out the details later. By the end of August 1985, Gramm was winning support from his natural allies, such as the Chamber of Commerce. But it soon became apparent that he could not do it alone, for he was far from welcome everywhere. Distrust of him mingled with disbelief that so simple (some would say simple-minded) a solution could work or would pass. So Gramm decided to seek a minimum number of cosponsors—another Republican with better access and a Democrat.

Warren Rudman (R-N.H.), who had openly talked of retiring from the Senate because it seemed incapable of solving major national problems, asked to join Gramm. "This place," Rudman told a reporter, "is 99 percent frustration and 1 percent exhilaration. It's hard to live on that 1 percent."^[55] What Rudman lacked—budget expertise—he thought that Gramm, an economist, had. A former state attorney general accustomed to doing his own legal research, Rudman had looked at forty-three state statutes on budget balance in his own search for procedural reforms that would make deficit reduction more likely. And he had what Gramm needed; Rudman himself put it as delicately as possible: "I have five times more experience in the Senate than Phil Gramm has. I have a great working relationship with a wide range of senators on both sides of the aisle. And my work is very well respected. Not that Phil's isn't respected, but it takes time to develop."^[56] Rudman believed Gramm's proposal would do the job, though not quite in the way Gramm intended. The prospect of sequestration would be so horrendous, Rudman

thought, that it would compel Congress and the president to negotiate a reasonable settlement.^[57]

Rudman also recruited Fritz Hollings, former Budget chairman, far more senior than his two colleagues. Hollings's influence was limited by his minority status and his less-than-perfect relationship with his colleagues, but he made the bill look bipartisan. Gramm would have been quite happy to see the sequester actually occur; Rudman thought the sequester was so crazy it would force a bargain on some other terms; and Hollings's preference was never really clear. "One of the great things about Gramm-Rudman-Hollings," a sponsor commented, "is that everybody saw something different in it."^[58] Of such stuff are grand coalitions made.

The three worked first on defining a more precise proposal and then selling it to others. They divided up the lobbying task but agreed that none of the three should face the press alone. Gramm would be the outside man, working with the White House, conservative groups, and OMB (where his old friend and colleague James Miller had been nominated to succeed Stockman). Hollings, and especially Rudman, were the inside men, selling it to the senators.

Leaving details aside, their product was a radical revision of the policy base. Gramm-Rudman-Hollings set declining targets for the deficit, from $180 billion in FY86 to $144 billion in FY87, $108 billion in FY88, and so, in $36 billion chunks, to zero in FY91. If, as each fiscal year began, Congress had not yet acted to meet these targets, then an automatic procedure, the sequester, would take effect, reducing budget authority across-the-board by whatever amount was required. "It's one of the rare examples I've seen since I've been here of a truly new idea," Slade Gorton commented. "There's a tremendous inertia under the present system in favor of the status quo. The genius of GRH … is that it profoundly changes the consequences of inaction." Unlike previous proposals to grant impoundment authority, GRH would not allow the president either to pick and choose or to refuse to make cuts—or so the sponsors claimed.

No one, but no one, in the Senate wanted to vote for a $2 trillion debt limit; it was obscene. "I frankly don't believe, as the Majority Leader," Senator Dole told a group of business executives, "I have the votes" to pass the new debt limit. This reluctance gave Gramm, Rudman, and Hollings leverage: they had the stick of holding up a vote and forcing their colleagues to vote against budget balance; they offered the carrot of doing something that might actually achieve balance—and that certainly would change things.

There were many technical difficulties. "Senator," a key author of the final package recalls asking Gramm, "how do you cut 10 percent out of

medicaid? As a program manager, what do I do? What do I tell the hospitals?" How do you cut budget authority in order to get the needed outlays? Does it mean that a program spending half as quickly must have its budget authority cut twice as much? Do you cut outlays by repealing obligations already entered into, thereby abrogating contracts? The answers to such questions could determine whose priorities were favored by the plan. The administration, however, signed on to the concept without much attention to such details.

The new White House team (Chief of Staff Don Regan brought new people when he changed places with James Baker) was immediately charged with amateurism if not incompetence in comparison to the Stockman-Baker-Darman triumvirate they replaced. Naturally, they weren't pleased. And though they admired the old team's savvy in dealing with Congress, the new group saw itself as far more attuned to the president's desires. Like the man they worked for, the White House staff was appalled by the deficit. Adding a trillion dollars to it in the president's first term did not sound wonderful to them; nor did the existing budget process work to their liking. "After having beaten your head against that rock and it didn't move," a senior staff member explained, "you step back and see if there isn't some other way.^[59]

Perhaps some sort of impoundment would work? Staff members recalled that in the Treasury Department in 1984 and sporadically in the White House during winter and spring 1985, there was talk of a "4-3-2-1" approach, ratcheting down the deficit by 1 percent of gross national product per year until it reached zero.

The idea of a staged decline in the deficit was hardly original, but no one had turned a staged reduction into a political commitment. The difficulty was that the practice of simply promising to balance the budget was losing credibility.

While the president was at his California ranch in August, after his operation, further discussions reemphasized the undesirability of accepting gigantic deficits without providing an acceptable path to reducing or eliminating them. President Reagan was thinking also that he did not want to be known as the man who left town with the biggest deficit ever. There must be a way. As he boarded his helicopter on the ranch to start back to the White House, budget documents in briefcase, the president motioned to Don Regan's top aide, Dennis Thomas, and told him that while there was no way to restore balance in one year, something along the lines of 4-3-2-1 might be feasible. Would he work out the numbers?

Chief of Staff Don Regan joined the presidential plane in St. Louis. Thomas briefed him, Regan discussed the matter with the president, and Thomas was asked to work on alternative paths to multiyear balance, without touching social security or increasing taxes. Thomas called in

Joseph Wright (then running OMB until Stockman's replacement was found); the two believed they could make the numbers add up without defense being hit much harder. The missing links were the mechanism to assure compliance and the strategy to secure political support.^[60]

On September 12 came the first phone call from Senator Gramm outlining his proposal. It received a cautious welcome; the welcome came because it fit with the 4-3-2-1 scheme pushed back a year; the caution was due to the necessity of checking various bases. One was the Pentagon: Could the five-year proportional cut be merged with 0-3-3 (one year of keeping defense steady in real terms, followed by two years of 3 percent increases)—the agreement that the White House thought it had won in the budget resolution? OMB was asked to supply possible domestic cuts that would add up to the proposed annual deficit reduction. Concern with political acceptability was limited by the new OMB team's lack of experience and the hope that the sequester would change the political dynamic.

Treasury wanted a clean debt ceiling increase.^[61] Defense Secretary Weinberger and National Security Advisor Bud McFarlane cared far less about getting domestic cuts than about avoiding defense cuts; GRH just didn't seem like a good deal. But, from Reagan's and Regan's perspectives, the question was not whether defense would be cut—that was already happening—but whether the administration would get anything in return. A "senior White House aide" explained to Kirschten and Rauch that, in 1985 and before, the administration

had the worst of all possible worlds. Defense cuts were used to pay for the restoration of social programs that you had opposed and with no effect on the deficit. You couldn't get a consultant in to figure out how to mess it up more than that. The difference between current law and what might exist under Gramm-Rudman is that at least here, if there is to be a hit on defense, it will be applied to deficit reduction.^[62]

What remained was an idea that could change the strategic environment in the president's favor. If the bill did not pass, it could still score political points: "We were really worried the Democrats were going to kick the blank out of us on the debt ceiling, and boy this came around just at the right time."^[63] Gramm's new plan might have pitfalls, but it beat the alternatives.

Challenged to explain why he had vigorously advocated support for GRH despite its admitted imperfections, a member of the White House staff answered with other questions: "Is this imperfect? Relative to what? Is it more or less imperfect than what we have tried for the last five years, the result of which has been a trillion dollars worth of debt?"^[64]

On October 4 the president endorsed GRH in a "rousing political speech" delivered in New Jersey.^[65]

By that time Dole and Domenici had swung behind the plan, and social security had been taken out of the pot. One might have thought that this would make GRH less attractive to Dole and Domenici; apparently, however, they decided that the threat of the sequester was powerful enough, even so, to force later action. Dole became so eager for GRH to pass that he kept the Senate in session for the entire weekend of October 5–6 to dispose of various proposals. Republicans thought they had Democrats on the spot.

Some Democrats were not so sure. A Reagan official recalled being at Ways and Means "when Gramm-Rudman came over. Gephardt looked at it and said the same thing as Dole and Domenici: he thought 'can this be?'—it's the undoing of the Reagan revolution, ensuring a defense cut and almost certainly a revenue increase." Lawton Chiles didn't like GRH but saw the potential to change it from "a single barrel act with the barrel aimed at Congress and not the President" to a gun pointed both ways. After all, Domenici and his staff had no desire to give Reagan a free hand. While Domenici would not take all of Chiles's changes, agreement was reached on a package of about twenty-five amendments that dealt with some technical and constitutional issues. Carl Levin (D-Mich.), a solid liberal, decided that the sequester would represent a more equal threat if Reagan's discretion could be further limited. On October 9 Levin won passage of an amendment that defined the subdivisions across which cuts had to be uniform, not as broad aggregates of budget "accounts" but at the much more specific level of individual "programs, projects or activities"—in essence, anything mentioned in an appropriations bill or, as it finally developed, committee report or agency submission. To preserve the remnants of presidential discretion, Gramm tried to prevent that amendment but Rudman went along.

Nobody was sure about the bill on its merits. Rudman himself called it "a bad idea whose time has come."^[66] When Senator Nancy Kassenbaum (R-Kan.) told Dole she couldn't support GRH because social security had been excluded, Senator Dole responded, in his usual wry way, "Oh, you've read the bill," as if knowledge of its contents would reveal its irrationality.^[67] Yet the Senate's leading budgeters still went along. They thought that eventually the sequester would force Reagan to give in on taxes to save defense and force House Democrats to give in on social security to save other domestic programs.

Ronald Reagan had a different view. The president viewed GRH as good because it avoided tax increases while guaranteeing domestic cuts, instead of merely promising them. Some liberals hoped it would force

deep cuts in defense. And both liberals and moderates expected to push the chief executive into accepting tax increases.^[68]

Nevertheless, many Democrats had doubts. Declaring that "we're buying a pig in the poke," Minority Leader Robert Byrd informed the Senate that "we're not prepared to bring the Sword of Damocles down on the poor, the young, the old, on all the defense and domestic programs."^[69] He and Chiles offered a Democratic party substitute: a plan that would balance the budget by 1990. If annual targets were missed, the amount would be made up one-third from taxes and one-third each from domestic and defense programs. Means-tested programs were exempt.^[70]

The Byrd-Chiles plan was defeated 59 to 40.^[71] With this last gasp, Senate opposition to Gramm-Rudman collapsed. On October 9, almost all Republicans and half of the Democrats, by an overwhelming 75 to 24, voted in favor of the Deficit Reduction and Balanced Budget Act of 1985. Explaining his vote, indeed his cosponsorship of GRH, liberal champion Senator Edward Kennedy (determined to remove the albatross of profligacy from Democratic necks) spoke in institutional terms: "We can no longer afford a deadlock in which the Congress stands its ground and the President refuse[s] to meet us halfway."^[72] Phil Gramm, triumphantly anticipating the next step, predicted that "with both [Democratic] senators of Massachusetts voting for it here, with one of them a co-sponsor, it's going to be difficult for Tip O'Neill to sweep this movement under the rug, since it's bigger than the House."^[73] Many senators rationalized backing the plan by assuming the House would take the rap for killing it, but House leaders were not at all sure they could do so.

Speaker O'Neill declared that GRH would "subvert the Constitution," that it resulted from an "artificial crisis," and that Gramm and other Republicans were responsible for the "mess the nation is in."^[74] Yet his party was split among liberals and older members who wanted to kill the plan, conservatives who would vote for anything that claimed to reduce the deficit, and pragmatists who, like Gephardt, thought they could turn GRH to the party's advantage.^[75]

It turned out that they could not beat GRH. As a staff member informed us, "We counted and knew we would lose the southerners."^[76] So the issue became whether it was better to let the disaster occur and later blame the Republicans or to try and "fix" GRH. A senior House Democrat recalled:

I was one who said, let's give it to 'em. They got Teddy Kennedy; all the liberals in the Senate were blowing about the deficit and how responsible they were. I said to Tip, let's give it to 'em. Then [my liaison to the Budget Committee] kept coming in with another terrible consequence…. We

changed it from an absolutely asinine piece of legislation to something with the thinnest coating of reason.^[77]

In the end, under the leadership of Democratic Caucus Chair Richard Gephardt (D-Mo.) and Whip Thomas P. Foley (D-Wash.), a concerted effort was made not to produce a bill the president would have to veto or that the Senate could not accept but to get one more to the Democrats' liking that would still follow the original model.

When GRH was added to the Senate debt ceiling on October 9 and sent over to the House with that bill, House leaders feared they would lose a vote on the GRH sections. Instead, on October 11, they won approval for a conference on the debt ceiling. Democratic House leaders appointed forty-eight representatives to the conference, determined to build support by thoroughly investigating all issues raised by the sequester proposal. They had some time because on October 9—"much to Dole's disgust"^[78] —the Treasury had initiated a complicated maneuver in which it used the Federal Financing Bank to borrow $5 billion, respecting the debt ceiling and enabling the government to function until November 1.

The Senate appointed nine conferees, conspicuously excluding Gramm, Rudman, and Hollings. One reason was personal; Gramm was left out (like Hamlet without the prince) for fear he would enrage members of the House.^[79] "This legislation passed probably in spite of him," Representative Trent Lott (R-Miss.) commented, advising Senate Republicans to keep Gramm even out of the House gallery.^[80] By excluding all three, the Senate leaders could claim their reasons were impersonal—mainly, seniority. But there was a larger purpose: Finance and Budget leaders themselves wanted to control the Senate position.

Now that Gramm-Rudman-Hollings had reached the conference committee stage, Congress began hearings on the bill. The star witness was a staffer, Steve Bell of the Senate Budget Committee. "The curious thing," an aide recalled, "was, Steve Bell was front and center, and he carried the testimony…. He did a superb job of explaining and translating the provisions." Several legislators suggested Bell should be "stapled" to GRH so he would always be there to answer questions. Thousands of staff hours were devoted to investigating issues ranging from determining the bill's constitutionality to sequestering a contract.

After about two weeks, the House conferees broke down into task forces. Whether these were bipartisan efforts to evolve a House position or partisan efforts to develop a Democratic position depended on the participants. Task Force 1 on economic issues, such as whether the targets should be void during a recession, was led by old rivals, David Obey and Jack Kemp. It was not very bipartisan. Task Force 2 on the details

of sequester—what to cut, when, how?—had the most participation and staffing: Gephardt, Panetta, Fazio, Waxman, and Whitten for Democrats; Gradison, Tom Loeffler, and Bill Frenzel for Republicans—the budget pros. Task Force 3 investigated how GRH would amend the process itself; that was Rules Committee territory and the key players were Martin Frost (D-Tex.) and Minority Whip Trent Lott. Finally, Task Force 4 covered constitutional issues. Democrats were led by Jack Brooks, the tough, experienced chairman of House Government Operations, and Mike Synar, a young Oklahoman ready to make his mark. Republicans were led by Richard Cheney of Wyoming, leader of the party conference and, as former chief of staff to President Ford, an old hand in executive-legislative relations.

Democrats in Task Force 4 were less interested in resolving constitutional issues than in pointing up its unconstitutionality so that the Supreme Court would void the law. Democrats in Task Force 2 felt that if they could make the terms tough enough for the president, it might force him into a tax hike that, for Democrats, would mean it had "worked." "Working" had two totally contradictory meanings: a sequester that was rational enough to be lived with or one that was crazy enough to force people to make some other deal. Within the latter category, a GRH that worked meant, for each player, something that would force the other guys to deal. Therefore, their positions depended on calculating how the hostage game would play out.

What would happen, for example, if Congress in some future year met its GRH target with a tax hike? Then Reagan could veto the taxes, saying he was not increasing the deficit because GRH would make the automatic cuts. Leon Panetta proposed a rule that sequester authority would lapse if the president vetoed deficit-reduction legislation, but that rule was rejected because it might provoke Reagan to veto GRH itself. Senate leaders wanted GRH to be tough enough to coerce Reagan but not so bad that he would veto it. Democrats decided that, if Reagan were to veto GRH, he should be forced to do so in behalf of his unpopular defense buildup rather than his popular objection to taxes.

On October 22 James Baker announced that, if the ceiling were not raised by November 1, the Treasury would begin dipping into the Social Security Trust Fund. Members of Task Force 2 could not find a Goldilocks solution—provisions that were "just right" (or, in this case, "just wrong" enough). On October 31, Senate leaders formally proposed disbanding the conference. Senate and House Republicans devised a new version of GRH that cleaned up many technical problems. House Democrats would present their own version. If the GOP won on the House floor, the battle was over.

One difference between the two plans reflected the parties' traditional

economic positions. Republicans wanted to set deficit targets regardless of economic conditions. Democrats, in Keynesian fashion, wanted the size of the deficit reduction to depend on those conditions. Another issue was who would have authority to determine whether or not the sequester would be triggered and to allocate the cuts. The House gave CBO, not OMB, that power. Giving an arm of Congress such direct power over the executive was probably unconstitutional, which could invalidate the whole law, but Brooks and Synar didn't like the law to begin with so an unconstitutional provision served their purposes. The Republican plan rested final authority with the GAO, also an arm of Congress, but its head, the comptroller general, was appointed by the president. Recent district court cases implied that the comptroller general, as an "officer of the United States," might be deemed able to exercise the sequester authority.

The key issues involved terms of the sequester. Democrats required a sequester for FY86 as well as subsequent years, set a lower deficit target for each year, and aimed to balance the budget in 1990 instead of 1991. They intended to make Republicans, who had twenty-two of the thirty-four senators up for reelection in 1986, pay for the consequences of cuts.

A subtle but vital difficulty was the translation between outlays and budget authority. In order to make outlay cuts of a certain amount how much, and which, budget authority should be sequestered? Democrats believed prior contracts, particularly in defense, could not sensibly be sequestered. That put a greater burden on current and future spending. Republicans either believed or pretended to believe that it was possible. Beyond that were extremely complicated issues on handling new budget authority with widely varying spend-out rates.^[81]

The Democrats chose a version that would devastate defense procurement to protect personnel. An aide recalled how, on the morning of November 1, "we got the table from CBO and I started to hand it out, then I looked at it and thought, 'Oh, no, we're not handing this out'—it was called the defense special rule and would have cut about $50 billion in Budget Authority to get $10 billion in outlays." On a matter as complicated as GRH, however, nobody understood everything. In fact, the staffer who wrote the special rule told us, "I wanted it that way. The people in Armed Services wanted to shift the cuts to procurement." Luckily for the Democrats, they didn't explain it, and nobody noticed; thus, they were able to bring a very hard bargaining position into the second conference.

The policy issue that most divided Democrats was deciding which programs would be excluded from the sequester process. Republicans excluded several dozen small programs (on which there were real technical

problems), social security, and interest on the debt. House Democrats, wanting to add a number of other programs, were divided as to how many. The short list included AFDC, food stamps, Women and Infant Children (WIC), SSI, child nutrition, and veterans' pensions and compensation. The long list would have added, among others, education and community health programs.

Caucusing on the evening of October 31, House Democrat negotiators supported the short list but only by twelve to eleven.^[82] "Essentially it was a tie," recalled an aide who was there. The next morning, November 1, the Speaker went with the short list, urging Waxman, Rostenkowski, and other holdouts to go along. The Democrats also wrote a rule strictly limiting cuts in medicare. "As an individual," the Speaker said of the short list, "I'm opposed to it." But "I face the facts of life. This bill will pass."^[83] Budget Chairman William Gray, who otherwise had been very quiet, persuaded the Black Caucus to go along (we don't say "reluctantly" because that was true of almost everyone). "We're holding our noses," declared the chair of the Black Caucus, Mickey Leland of Texas, "but we're committed loyalist Democrats."^[84] Most Democrats spoke of "damage limitation."^[85]

The key was Marvin Leath of Texas, the boll weevils' man on the Budget Committee. Assiduously courted by Gray and other Democratic leaders, he had been made to feel a part of the decision process within the party. They had been especially attentive to his concerns about veterans. Like many of his colleagues, Leath was more worried about the deficit than defense; he had wanted to freeze everything. His policy preferences were probably closer to the Republicans, but there were no pressures to "support the president," no calls from constituencies or Ronald Reagan himself, and no evidence of an electoral realignment. A full-fledged weevil in 1981, Leath led all but two of his colleagues in support of the Democratic plan. On November 1 it passed the House, 249 to 180. On November 6 the Senate adopted the revised, Republican version of GRH.

A new conference began on November 12. Senators now had someone to bargain with: a unified House Democratic contingent that had demonstrated impressive support on the House floor. To the original fifty-seven, nine conferees, including Gramm, Rudman, and Hollings, were added. Rostenkowski, because the debt limit was a Ways and Means matter, chaired the conference; at his suggestion, the real work was done by a smaller group of twenty-nine.^[86] It became clear that senators were not trying to make the president a budget czar and that representatives were not out to scuttle the bill.^[87]

The second conference was a three-cornered game among House, Senate, and administration. To the extent that both sets of conferees

wanted to bind the White House, they were allies. No player was sure whether the sequester would happen. The conferees' words suggested that the sequester would be so bad that everyone would negotiate to keep it from occurring; yet their actions—endless bargaining over the terms—suggested fears that it might indeed occur.

The final terms of Gramm-Rudman would be set by House Democrats and Senate Republicans, the two groups that, as majorities, were responsible for the operation of their chambers and the functioning of government. Since 1982, deficit reduction had required such a coalition of responsible legislative majorities. "Inevitably," Representative Fazio said, "the people who run institutions are going to have to compromise. We're driven together by our responsibilities."^[88] His colleague Leon Panetta thought the polarizing effect of elections could be countered by putting "the two elements together that have the most to lose—Senate Republicans and House Democrats. Both have a responsibility to lead their institutions."^[89] Against the view that Democrats ought to allow Republicans to fail, House Whip Thomas Foley argued that "there's an incumbent's party as well as a Democratic or Republican party. Bad news falls on the government in general." Nor would Democrats in office lose out, for, Foley concluded, "if there are great events being celebrated, no stage is too small to get everybody in office on to take a bow and take credit."^[90]

Its proponents could hope that GRH, by threatening a train wreck in the form of a sequester, would impel the leaders of these responsible majorities both to avoid blame for possible carnage and gain credit for deficit reduction by negotiating a settlement. What made leaders leaders, however, was responsibility to their own constituencies. Foley owed allegiance to House Democrats and the people they represented; if he shirked that, he would be in a very weak position to serve the institution. In the negotiations over GRH, as in all previous budget battles, party leaders tried to serve both areas of responsibility by compromising, but compromising less than the other guys.

When the real bargaining began on November 12, House Democrats had a pretty simple agenda: make GRH as bad as possible for Republicans; maximize the hit on defense; keep as close as possible to the House set of domestic exclusions; and minimize Reagan's discretion. Democrats were divided on whether GRH was a good idea or not; many would have been happy if the whole episode ended with either Reagan vetoing the bill or the Supreme Court outlawing it. In their minds, however, they did not really have to choose between sabotage and salvage. Democrats defined the choices that might provoke a veto merely as good policy.

One complication for the Democrats lay in the chance that the sequester might be activated. Did they really want to clobber defense? Not

as much as their proposal would have done. Les Aspin (D-Wis.), elected chair of the Armed Services Committee at the beginning of 1985, wanted to hit procurement more and personnel less; he was a critic of the Pentagon and a leader of the congressional group of military reformers. Yet as chair of a fairly hawkish committee, as well as by his own choice, Aspin did not want to cripple the military, as several years of cumulative cuts under GRH might do. As a leader of those who thought the Pentagon should allocate its resources intelligently, Aspin objected to a plan that would slash resources without even a pretense of logic.

The other complication was how drastically the Democrats wanted to change the budget process in order to accommodate GRH. The whole sequester process would be meaningless, for example, if Congress, after the sequester, could pass supplementals to replace the money. Or Congress might pass no appropriations before the sequester; then there would be nothing from which to sequester. The budgeting schedule would have to be revised to include the new sequester stage. These matters raised difficult issues of relations among committees, particularly Ways and Means, Appropriations, and Budget.

Senate conferees were out to strengthen their Budget Committee at the expense, especially, of Appropriations. Domenici, Chiles, and their staffs already had escalated the battle between those committees in 1985 by trying to hold Appropriations to outlay targets; in GRH they wanted a series of reforms that would bind Appropriations in budget resolution choices.

Senate conferees also had to deal with a sequester's effects on running the government. There was no way to sequester medicaid, but, if that were excluded, the hit on other things would have to be bigger. Each issue interacted with all the others to make the senators' choices particularly difficult.

The administration knew what it wanted—essentially the opposite of what House leaders wanted—but not how to get it. Although Gramm was, more or less, the administration's representative, he was not, as the best-known sponsor, likely to urge a veto that might be in the administration's interests. The Pentagon had a real interest in how defense was treated, but Secretary Weinberger wanted to kill GRH more than to shape its terms. Throughout November and into December, the DOD remained aloof from conference negotiations. At OMB, Jim Miller was new, scrambling to assemble a FY87 budget proposal. Domenici and Packwood were emphatic that the bill now was theirs, not the president's, so OMB's chief lobbyist was excluded from negotiations.^[91]

The political dynamic left President Reagan on the spot. Once the Senate and House agreed, they could present him with a take-it-or-leave-it proposition. He could veto, but then he would be in the embarrassing

position of not only opposing deficit reduction but also reversing his own stand. Even the pressure from the debt ceiling began to reverse. When the government ran out of money yet again on November 12, Treasury could not repeat its social security maneuver; and Reagan certainly didn't need a fiscal confrontation before his November 14 meeting with Soviet Party Chairman Gorbachev in Geneva. Congress and the administration agreed therefore to a temporary increase in the debt limit, giving negotiators another month to work out their differences.

Before Thanksgiving the core group of negotiators neared settlement on some crucial issues. Over the holiday recess staff made further progress. At 1:00 a.m. on December 10, conferees settled the last outstanding issue. In describing the law as passed we will highlight the meaning of key compromises.