The Republicans: Some Victories, Some Doubts
In some ways it is easier to understand the Democrats in 1981 than the Republicans. The Democrats fought in the open, as is their wont. Most Republican maneuvering went on behind the scenes.
Howard Baker called the whole program a "riverboat gamble." At a luncheon meeting at the Post on January 7, Senate Finance Chairman Robert Dole presented not Kemp-Roth but instead the much more limited previous year's Finance Committee bill. Dole said it was his job to guide the Reagan program through the Senate, but he doubted that it would survive undiluted. Around the same time Barber Conable, ranking Republican on Ways and Means, was saying "I don't think for a minute that if the president proposes a flat-rate cut, Congress will agree. Congressmen have other measures, the cost of which will be a trade-off against the tax cuts."[22] He was right about "other measures," wrong about the tradeoff.[23]
The lobbyists were not about to wait for a second bill. As one of them put it, "the judgment around here is that there won't be a second bill or that it won't move in Congress. We're going to have to make every effort to get onto that first bill."[24]
The president was very sure of his position. A presidential adviser recalled:
You look at all the stories being published about backing and filling and they give the impression that Reagan was changing back and forth. That's wrong. The people around him were changing, or some of us were. We were having doubts, and the news coverage reflected that. Reagan hardly moved at all. At one meeting [in January] Reagan got a little impatient with us. He said, "Listen, you guys are talking to each other and no one is asking me what I think. I'm sticking with it [the 10-10-10 approach]."[25]
Republican economists were divided over the merits of the emerging package, but former Federal Reserve Chairman Arthur Burns was unusual in saying that "if I were an economic czar there would be no personal income tax cuts at all this year. We need to be very cautious about adding to the swollen budget deficits that are already in prospect."[26] No one really knew how the markets would react to the tax cuts; most preferred not to attack their own side.[27]
Republican politicians, even more than economists, hesitated to criticize the new administration.[28] This was their chance to govern; criticism was aid to the other side. Members of the administration like Darman and Baker, with backgrounds in other wings of the Republican party, had to show their loyalty to conservative ideals. Dole and Baker were in a similar spot, having both lost the nomination to Reagan; if they were critical, they could be suspected of trying to make the president look bad.[29]
The remarkable unity of Senate Republicans throughout 1981 resulted both from this desire to govern and careful efforts by the administration and Howard Baker to nurture the notion that they were all working together. In December Baker gathered Stockman, Regan, Jim Baker, Anderson, Dole, Hatfield (chairman of Appropriations), Domenici, and Jake Garn (chairman of Banking) to begin working out the program and strategy. Baker met with Reagan two or three times a week, and the White House lobbying staff was instructed to defer to his wishes. Every Tuesday Baker met with the Senate's committee heads, coaxing them toward unity. Although some Republicans had doubts, Senate Majority Whip Ted Stevens reported, they agreed to maintain public silence "because we realize that if one Senator tries to break down an agreement, then the others will do so."[30] Consultation and unity were enhanced by the fact that Reagan was loyal to his troops as well. When Baker announced
on March 26 that the executive committee of the Senate Republican Policy Committee had agreed to postpone considering "social issues" to 1982, he was blasted by the New Right. Reagan immediately told the Post that he agreed with the decision.[31]
Unity was easier on spending cuts than on tax cuts because, to a certain point, spending cuts fit both the Republicans' preferences and all politicians' perception of the public mood. Thus, Newsweek reported "private agonizing" by the nation's governors at their national conference but, by 36 to 2, they announced they were "prepared to accept budget cuts."[32]
An even better example of the mood came when Congress in March froze the price support for dairy products, preventing a scheduled increase worth $147 million in FY81 and $1.1 billion for FY82. There is a lot of money in milk, and it flows both ways, from Congress and to Congress. When Agriculture Committee Democrats in the Senate caucused about the issue, they began by talking about how to kill the proposed cuts but were soon discussing how bad it would look to be on the wrong side. "I would have found it very difficult," said David Pryor of Arkansas, "to vote for that particular program and then go home over the weekend and give speeches about the need to cut spending."
The Senate Budget Committee's maneuver in reconciling first, before a budget resolution, was designed to maximize both unity and spending cuts. It also seemed to accommodate the need to demonstrate spending reductions so that the tax cut would look more plausible. In SBC and floor action through March and into early April, the strategy seemed to succeed brilliantly. Republican unity on the Senate floor was overwhelming. Yet not all was as it seemed.
The most dramatic event went unreported until much later. Both protagonists have written about it. David Stockman writes,
A warm fire was crackling in Howard Baker's office, when we arrived at 9:30 a.m. on March 17. The Senate Republican leadership and Budget Committee members were already assembled…. Reagan led off with an Irish joke, and the meeting got down to business: their proposal to attack nearly one quarter of a trillion dollars in indexed pensions, affecting roughly 36 million Americans.[33]
In defiance of Stockman's plan, Domenici and his GOP allies had decided to attack the COLAS. As honest budgeters, interested not in policy revolution but in restraining spending per se, Domenici, his staff, and Democrats like Hollings and Chiles believed that spending control had to include a diet COLA. Domenici told of the incident in an op-ed piece for the Washington Post on January 21, 1986. Its title, "Ghosts of Deficit Forever," conjures up Dickens's Christmas Carol . The scene in Howard Baker's chamber is the last revealed to the guilty politicians by the Ghost
of Budgets Past. The end, revealed by the Ghost of Budgets Future, is collapse under Gramm-Rudman-Hollings. That should give the flavor of how Domenici felt about the scene he described:
The president leans across the table and tells the 12 Republican members of the Senate Budget Committee that he will not support a bipartisan attempt in that committee to freeze cost-of-living adjustments for Social Security recipients as part of a deficit-reduction plan. He asks them to join his opposing effort. In front of the senators is a sheet showing savings from a one-year freeze on the COLAs—$88 billion over five years, and more than $24 billion in the year 1986 alone.
The senators relent. They go back to committee and vote against the move to freeze the COLAs. Social security, although larger than all domestic non-entitlement spending programs put together, is protected in future budget battles; it comprises almost 25 percent of the non-interest spending in the federal budget.
Jim Baker did not think Republicans could ever touch social security; Howard Baker had helped arrange this meeting as a way of slowing down Domenici and his troops. The president told the group, "I promised I wouldn't touch Social Security. We just can't get suckered into it. The other side's waiting to pounce."[34] Stockman writes that the senators wanted to cut the COLA so they could put money back into other programs. That ascribes to the senators a quite remarkable lack of political acumen.[35] Rather, the meeting on March 17 became part of the long-term price of 1981, grounds for resentment and recriminations when the deficit blew up.