The Two Elderly Irishmen and Other Misleading Explanations

Nevertheless, the belief has persisted that the real obstacles preventing balance were not the factors we have mentioned but willful, perverse, and short-sighted politicians. What might be called the "two elderly Irishmen" thesis has held that the ideological extremism and personal intransigence of the two most influential party and institutional leaders, President Reagan and Speaker O'Neill, confounded and suppressed the underlying consensus. Neither the replacement of Representative O'Neill by Representative Wright, the conduct of the 1988 presidential election, the collapse of the National Economic Commission, nor the early rounds of budgeting in 1989 revealed such previously hidden agreement.

Had "Dutch" Reagan been willing to accept tax increases, or had at least not insisted on deep cuts, while manifesting willingness to reduce defense, accommodation on the budget readily could have been achieved. Had "Tip" O'Neill similarly been willing to reduce future social security benefits, agreement would have been much easier. True enough in both cases, but is this truth relevant?

Asking the Speaker to cut social security was like expecting him and his party to open a vein and spill out their political blood. Aside from their deep concern about elderly recipients, social security was and is the preeminent symbol of all they have accomplished and all they believe they stand for: the positive use of government to better the lot of people needing help. Asking Ronald Reagan to accept tax increases as good for the country was the same as telling him to renounce his political career and office, for his most important belief would be judged false. The implication would be that the government is a better judge than individuals of what they should do with their income. Instead of income being left with those who earned more, the Republican constituency, it would go to government, that is, to the Democratic party constituency, to pay off their supporters. Reagan's seemingly simple-minded children's

allowance theory (if they haven't got it, they can't spend it) was aimed at weakening, if not formally splitting, the Democratic party. Taxes are hardball.

Ronald Reagan and Tip O'Neill were not outside the mainstream of their political parties. Neither was seriously challenged from within, and each ended his term in office more popular than he began. Their unchallenged supremacy should give pause to those who think of them as somehow deviant.

There is far more truth to the hypothesis that the deficit problem stems from the unwillingness of Americans to pay for what they want. True enough—witness the gap—but that doesn't explain much. An appropriate answer to this smug contention (implying that you are reckless but I am responsible) is, "So what else is new?" People always want more than they can afford; we need to know why the seemingly inevitable deficit result finally occurred after 190 years.

Partisans would argue that the deficit arose from the sins of their opponents. Democrats blame the dishonesty of "Rosy Scenario" and Reagan's irresponsible tax cuts and excessive defense buildup. Republicans blame Democrats' refusal to cut wasteful, poorly targeted, and ineffective social programs. We try not to take sides, but we should point out the effect of the division. If you blame the deficit on somebody else's error, the deficit should be solved by correcting that error. Democrats who believe the deficit was created by raising defense and cutting taxes think it only fair that the shortfall be eliminated by cutting defense and raising taxes. To eliminate the deficit by cutting domestic spending seems, to them, to endorse the original mistake. Republicans feel a deficit created by social spending should be eliminated by cutting social spending. Thus dissensus about the cause adds to the belief that how we eliminate the deficit is a question of justice, of right and wrong, and thus not easy to compromise.

Again, mathematically, both sets of partisans have a point. Either's approach would reduce the deficit. But earlier in this book we argued from data that the magnitude of the likely FY1990 deficit, roughly 3 percent of GNP, was caused by the interaction of (1) long-term policy commitments and (2) widely-held views on both the limits of acceptable taxation and the desirability of more defense (a view shared in 1980 by both parties), with (3) unexpected economic changes that slowed economic activity, abruptly halted inflation, and drove up interest costs. Neither party expected the drop in inflation to reduce revenues so drastically; the difference between Democratic and Republican tax plans was less significant than their joint misjudgment of the economy. The politicians managed to return revenues to their historic plateau around 19 percent of GNP, but the interest costs incurred in the interim, and public

support for the vast bulk of federal activity, made further deficit reduction difficult. Now who is responsible for that? Everyone and no one.

Perhaps the difficulty is in our budgeting institutions? Institutions do matter: the spending cuts of 1981 would have been much more difficult without reconciliation, and Senate offset procedures somewhat inhibit measures that would increase the deficit. A constitutional amendment might make unbalancing the budget more difficult. But the present problem is how to eliminate a deficit, not how to prevent one. The only institutional solution that might work is one that would cut some large group of people (the elderly, the poor, business, the military) out of the political process so they could then be cut out of the budget. We hope and believe that solution is not available. Otherwise, Gramm-Rudman proved that as long as the same players have power, we will have the same results.

Or maybe the crisis just isn't clear enough. The budget summit of late 1987 is as good proof as anyone could want that the problem isn't a lack of panic. Indeed, everything in it—the pressure of the market after "Black Monday," the exasperation and obfuscation, the ideological hostility, the unwillingness to go beyond a certain amount of pain, the uncertainty about the reality of the semisolid mass of spending cuts and revenues—can be met again simply by inserting one's thumb anywhere in our account of prior battles. The sheer repetitiveness of these events (Didn't I meet you last year in Aggravation City?) is stunning.

Throughout the past decade, apostles of budget "responsibility" among experts, politicians, and the media wanted to believe that the necessity of budget balance constituted an irresistible force, such that eventually they could force the deficit reductions so obviously needed. Our story is filled with examples of mainstream politicians predicting that all congressional incumbents would suffer if they did not do their duty to fix the deficit. Instead, the 1980s were the best decade for incumbents in our nation's history. Or, the markets would force action. After the shocking stock market decline of Black Monday, Tom Kenworthy, in the Washington Post, reported that for budget balancers like Representative Buddy MacKay (D-Fla.), "who have been trying to engineer a fiscal crisis all year in order to force a 'grand compromise' on the budget … Wall Street's troubles have arrived in the nick of time."^[2] But even Black Monday could not help politicians find a package that would eliminate the deficit at what seemed like a reasonable policy cost.

Thus Ronald Reagan was pragmatic enough to enter into negotiations—he would have looked bad otherwise—but such "pragmatism" did not extend to giving up his principles. If he gave in on taxes and defense, then government, he believed, would be intrusive domestically and weak internationally. In his two-decade political career his side had gone from a mocked minority to the White House; if he had frequently

bowed to others' sense of pragmatism, he would not have been in office. In government but not of it, President Reagan felt responsible to his supporters, not the moderate state managers. Speaker Jim Wright, in turn, believed his party's values worth fighting for. In the wake of the crash, he tried to influence the summit held by White House and congressional leaders by forcing a Democratic reconciliation package, featuring $12 billion in new revenues, through the House. It was a bruising battle, "a rowdy, vituperative floor fight and a one-vote victory wrung amid Republican charges of vote manipulation." Republican Whip Trent Lott was so mad at the Democratic leaders, he said, "I don't want to talk to them, let alone negotiate."^[3] He also blasted the leadership's "Mussolini instinct."^[4] This could do little for the bipartisan spirit necessary to budget compromise, but that was only significant if such a spirit existed in the first place. There was some, but not enough for the "irresistible force" of budget necessity to overcome the "immovable objects" of party leaders defending what their parties stood for.

The problem has not been stubborn leaders, the sins of the partisans, the cowardice of politicians, the flaws in our budgeting institutions (at least, not now), the inherent flaws of democracy, or, of all things, insufficient attention to the deficit. The problem has been in the target itself, the balanced budget, and in the policy and political theories of the forces of responsibility who are its strongest proponents.