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Party Responsibility Comes to Congress

The administration had fought for and won passage of its Gramm-Latta budget resolution in order to obtain two things: a revenue target that left room for its tax cut plans and reconciliation instructions to various House and Senate committees that ordered bigger spending cuts in different places than Democrats wished. But the resolution itself cut neither taxes nor spending; that required legislation. Now Reagan and his team moved to the next stage: passing the tax cut in the Economic Recovery Tax Act of 1981 (ERTA) and the spending cuts in the Omnibus Budget Reconciliation Act of 1981 (OBRA).

The Omnibus Budget Reconciliation Act of 1981
(OBRA, aka Gramm-Latta 2)

OBRA was the most sweeping legislation in modern American history. The budget resolution instructed thirteen Senate and fifteen House legislative, authorizing committees to report back to the budget committees with changes in programs ranging from Amtrak subsidies to Women's, Infants' and Children's nutrition, from AFDC to the Veterans Administration. More than its substance, the 1981 reconciliation was seen at the time as a revolution in process. For nearly two centuries Congress has been organized around its committees; in these sublegislatures members used their greater expertise, knowledge of substance plus connections with the affected interests, and power not to report legislation, to dominate policy making in their domains. Now the committees deliberated, but they did so, "meeting with a gun pointed at our heads," as Carl Perkins, chairman of Education and Labor, described their plight. They could not stall, or hold much in the way of hearings, or even represent their members. They were under orders to report out cuts,


like it or not. Democratic budgeters insisted that the committees respond, and the leadership backed the budgeters because it felt the party could not be seen as opposing deficit reduction. Suddenly, the American Congress, the most nonpartisan of national legislatures, saw an immense package of policies treated as a matter of party loyalty. The Republicans did not like the committees' work; they produced a substitute bill, once again cosponsored by Gramm and Latta and therefore called Gramm-Latta 2. The final showdown between the Democratic version of OBRA and the Gramm-Latta 2 substitute was a partisan battle unprecedented in its scope. Party responsibility and, most amazing, its enforcement had at long last come to Congress.

The budget resolution provided each committee spending reduction targets that had been justified by detailed assumptions about cutting methods. Only the targets, however, not the detailed assumptions, were binding. Committee members could meet the targets however they chose. They did so very differently than the administration and its allies had intended. The latter, therefore, consulting with GOP leaders and some conservative southern Democratic boll weevils, prepared a substitute for the work of seven committees. In the haste and last-minute bargaining, no one saw the alternative in final form until the day of the debate. Stuart Eizenstat, head of domestic policy in the Carter White House, described the implication of having a vote on such a package:

Passage of a Stockman-sponsored substitute on the House floor would create something akin to a parliamentary system, in which the prime minister's legislative package is voted on with little committee action and limited capacity for modification…. Congress would be forced to make the most sweeping changes in a generation in the substances of federal programs without going through the historic deliberative process to assure sound results or paying heed to the work of its own committees.[1]

Having deliberated under the pressure of time limitations that made it impossible to have hearings allowing a voice to those affected by changes, the committees themselves were in danger of having no say. If Reagan was proposing a revolution in spending priorities, reconciliation was a revolution in our form of governance.

"Congressional Government," wrote Woodrow Wilson long ago, is "Committee Government." Hence congressional power is committee power; the Reconciliation Act, by overruling committees, was widely viewed as imposing on the rights of Congress itself. "Reconciliation," proclaimed Richard Bolling, "is the most brutal and blunt instrument used by a president in an attempt to control the congressional process since Nixon used impoundment." From another point of view, congressional power is the ability to confront problems and apply to them the


judgment of the people, as filtered through a representational process. From this very different perspective, Leon Panetta, chairman of the House Budget Committee reconciliation task force, declared that "no one … can question that this document represents the ability of this institution to do its job, and to that extent I think our democracy has been well served."[2]

The sheer sweep of OBRA made its substance seem more revolutionary than it really was. It was very important, but other acts of Congress had had greater effects on our nation. In 1964 alone, at least two—the Civil Rights Act and the Gulf of Tonkin Resolution—were more important: the first committed the federal government to battle for racial (and later other categorical) equality in our society; and the second facilitated escalating the Vietnam War. In 1981 ERTA, to which we will return, was more important because it reduced taxes far more steeply than reconciliation cut spending, thereby shaping the politics of a decade.

The importance of reconciliation, however, could not be judged solely by policy outcomes in 1981. A better question is whether reconciliation represented a new pattern of decision making through which actions outside the committee—interest group relationship—whether ideological forces, or party, or the independent frustrations of politicians themselves—would become dominant.

Conciliatory Name, Hostile Process

After reconciliation became a matter of public debate, it was generally viewed as a brilliant maneuver by the Republicans, often ascribed to the wizardry of Budget Director Stockman. Even later it was possible to find offhand references to reconciliation as a 1981 innovation.[3] In fact, as our readers know, the crucial decisions to employ reconciliation emerged not from the Reaganites' need to pass their program but from the Democrats' desire to make the budget process meaningful. "For a chairman or anyone else to say he won't cooperate [in 1981] is not an option," declared James Jones. "The Speaker agrees with that. The budget process will prevail."[4]

House support for reconciliation came from a group of moderate Democrats, like Leon Panetta, who believed that process was necessary for responsible budgeting. Other leaders, such as Rules Chairman Bolling, who agreed with Jones on little else, did not want the party to appear to be using procedural tricks to thwart the president. Therefore, in spite of resistance by many who fought reconciliation in 1980, there was never any doubt that the House would reconcile in 1981. The 1981 reconciliation procedure differed from 1980's in two ways: the instructions required savings over a three-year period, and the process was extended


from entitlements and taxes to authorizations for nonentitlement programs.

Much of the 1980 reconciliation had solved the FY81 problem by spreading reductions over future fiscal years. Robert Reischauer, former assistant director of CBO, explains:

Both OMB Director Stockman and the Budget Committees had learned a lesson from Congress' initial experiment with reconciliation in FY 1981. In this experiment the tax-writing committees had circumvented the spirit of the one-year reconciliation instructions and had obtained some of their required savings by pushing year-end Medicare payments into the next fiscal year; other committees had reported legislation that provided only temporary savings.[5]

The major tax change in 1980 had involved a one-time revenue increase by changing the payment date for corporate estimated taxes.[6] Because the budget now included three-year spending and revenue projections, three-year reconciliation made sense. Democratic budgeters approved the shift.

Multiyear reconciliation could be quite significant, for budgeting was now no longer annual; decisions taken in 1981 would change events in FY84. The ideas were extending control and preventing some budgetary games; however, there were some drawbacks. Multiyear budgeting must rely on multiyear economic forecasts, whereas forecasters are even less able to project three years ahead than to predict the next year. As for preventing games, where committees pushed next year's spending into the following year, we will see that the move to a three-year budget focus, as the British treasury discovered when it tried something similar,[7] just meant that smart actors would push the same kind of action into the fourth year.

In 1981 there was little debate over the switch to multiyear reconciliation. House Democrats never did agree to reconciling discretionary program authorizations as well as entitlements; on that they had to be beaten on the floor. Reconciling authorizations may be necessary if you want to cut before appropriations are passed, making cuts that will last for more than one year. It so vastly increases the reach of the budget process that authorizing committee members of both parties disapproved. It also makes it hard to tell what, exactly, is being cut.

Because appropriations rarely call for amounts as high as those in authorizations, it is hard to project accurately the reductions involved in an authorization cut. The Senate solved this problem by comparing its new authorization levels to the CBO "current policy" projection—existing spending plus an estimate for inflation—of the likely appropriation. In the political circumstances of 1981, however, the assumption that


appropriations committees would give all programs an inflation adjustment was dubious. Stockman, for one, did not believe it. After the bill was passed, he remarked to Greider that "there was less there than met the eye. Nobody has figured it out yet. Let's say that you and I walked outside and I waved a wand and said, I've just lowered the temperature from 110 to 78. Would you believe me? … The government never would have been up at those levels in the CBO base."[8] Reconciliation of authorizations for discretionary programs was both more and less than it seemed: more permanence, less reductions.

Aside from objecting to reconciling discretionary program authorizations, the Democrats, of course, objected to the budget resolution assumptions about where cuts would be made. Unlike in 1980, therefore, Speaker O'Neill was willing to allow amendments during final floor consideration. This time he encouraged liberals to fight for their programs. "If it breaks the budget," O'Neill declared, "then that's the will of Congress. We are not going to roll over and play dead." Disagreeing, Budget Committee Chairman Jones argued that the Democrats' credibility required conforming to the instructions. "Tip wants to protect programs," Leon Panetta summed up the dispute, "and Jones wants to protect the process."[9] Until the committees met the June 12 deadline for reporting their proposals, however, decisions about possible amendments could wait.

When the House committees met, a number reached a consensus among their Democrat and Republican members. Bipartisanship in committee did not, however, guarantee a result the administration would like. The Interior Committee, for example, following its Senate counterpart, rejected the administration's plan to cut funding for purchase of new park land, cutting instead from other Interior Department programs; Public Works and Transportation cut aid to highways more than requested, met the targets for Economic Development Administration outlays but far exceeded them on budget authority, and refused to stop work on three major water projects. If the administration did not like the results, it would have to force Republican members of those committees to reject their own handiwork—not a good way to win their votes.

In devising the Gramm-Latta budget resolution, Stockman had proposed specific cuts to fit the resolution totals. "To remain consistent with the architecture of the Reagan Revolution fiscal plan," in Stockman's idiosyncratic view, the committees had to cut exactly the items on the "included" list. Those cuts alone were "legitimate"; Stockman blasts the "hirelings" at CBO for allowing the committees to count "unreconciled" cuts toward the reconciliation targets.[10] Ways and Means, for instance, planned $27 billion in cuts over three years instead of the expected $30 billion, but Stockman's real problem was where the cuts were made: "The


bill had achieved only $16 billion, or half of the instruction savings."[11] In short, they were instructed, in Stockman's mind, to make specific changes in the law; other changes were cheating.

Actually, reconciliation "instructions" consisted only of totals.[12] Reconciliation instructions in the budget resolution contained not a word about AFDC or unemployment benefits or any specific cuts. Instead, each committee had two categories of targets: (a) savings from entitlements and (b) savings by reduced authorizations on annually appropriated programs. What Stockman calls "instructions" were the assumptions or suggestions made, not in the resolution, but in the conference report that accompanied it. Members treated them as they had always treated the assumptions used to justify budget totals. Members fought over them because having something in a report is better (or worse) than having nothing at all. But nobody believed report language was final; thus, Bob Michel could tell his members that problems could be fixed later, and the Speaker could plan a challenge in later rounds.

Stockman's interpretation of the process was far more revolutionary than desired by any semblance of a majority of the House. When he began to talk about assembling a substitute bill, his colleagues, particularly those whose committees had reached bipartisan agreement, reasonably started muttering about his dictatorial manner.

Seven committees, however, controlling most of the spending, could not agree. In Energy and Commerce, a committee that tilted toward the boil weevils, three Democrats—Gramm, Richard C. Shelby of Alabama, and James D. Santini of Nevada—sided with the Republicans against Chairman John Dingell's proposal, leaving the committee deadlocked at 21 to 21. Therefore, Chairman Dingell and ranking member James Broyhill (R-N.C.) each submitted plans to the budget committee, a quirk that may have been decisive in the outcome. In six other committees, majority Democrats made choices that Republicans could either not accept or at least try to avoid. Some were phantom cuts; some were real but immensely unpopular; some were just different.

The Agriculture Committee cut food stamps by the full $1.458 billion demanded by putting a cap on appropriations for the program. Because this altered neither benefit nor eligibility rules, the change was no more real than any of the many previous caps on food stamps, all of which had led to supplemental appropriations that exceeded the caps. That committee also reported $167 million in reduced Agriculture Department salaries and expenses through a 15 percent personnel reduction. Of course, it is always easier to attack the bureaucrats, but here even OMB warned that this slash would hamper department services.

The stakes in the Banking Committee were complicated by the fact that most programs spent their appropriations over a long period. Budget


authority—for the Export-Import Bank, community development, or housing rent subsidies—would pay for the interest subsidies on long-term loans, fund projects that would take ten years to build, or subsidize rents over the next thirty years in the units authorized this year. Differences in FY82 outlays, therefore, were far less important than differences in budget authority. A $40 million difference between the House and Senate in housing outlays was actually a $2.7 billion difference in budget authority, reflecting the Senate's decision to subsidize 150,000 new units compared to the House's decision to subsidize 176,000. In order to pay for the extra costs over the period covered by the reconciliation, only a small portion of the thirty years over which rent subsidies would be required, the House committee cut the Export-Import Bank by $1.1 billion more than the Senate had. OMB's attack on the Democratic plan declared that it "would have the effect of shutting down all new lending operations … with severe consequences for U.S. foreign trade." Had Stockman changed his mind about Ex-Im? No, but he was more interested in cutting housing. "In short-order advocacy," one colleague explains, "one uses the arguments that the audience will find convincing."

The Science and Technology Committee took the opportunity of their small expected changes in energy research to forward legislation that would close down the Clinch River breeder nuclear reactor project. This was another project that Stockman considered an absolute boondoggle (though it goes without saying that he, like many others, may have been mistaken), but it was in Tennessee and very important to Howard Baker; now Stockman objected when the Democrats did something he had previously proposed.

Stockman objected to the Ways and Means Committee's package because the House Democrats suggested (of all things) giving only half the 1982 social security COLA in July and the rest in October; they used the $1.9 billion savings to preserve some benefits in AFDC, ignoring the administration's proposed consolidation and reduction of social-services grants. Hardly anybody believed the administration's claim that added flexibility from its proposals would make up for a 25 percent reduction in funding for those grants. Cutting social security was a serious policy choice, but it could also be a version of the "Washington Monument" game: a cut rousing such protest had to be rejected now or repealed later.[13]

The members of the House Post Office and Civil Service Committee (HPO&CS) were specialists in creative compliance. Rather than switching from semiannual to annual COLA for Civil Service Retirement—that issue again—the House committee proposed ending another aspect of retirement law that frequently came under fire: "double dipping," in


which military retirees collected their military retirement while still working on the civilian side of government. Civil Service pay would be reduced by the full amount of the military retirement pension. Besides the possible inequity of changing the rules on those veterans in midstream, the catch was that the estimated $870 million in savings would disappear if affected employees then quit the federal service and took jobs in the private sector. Most might not, but nobody knew. As with social security COLAs, the cut itself was not a scam; budget analysts had been protesting the double dip for years. But the administration had reason to doubt the savings would really materialize.

In the Post Office area of its jurisdiction, HPO&CS was expected to find $956 million in savings. Postmaster General William F. Bolger thought this much could be saved by allowing a nine-digit zip code. Neither authorizing committee liked that idea; instead, the House committee suggested closing 10,000 small post offices. This cut had long been suggested by observers, even by the Postal Service itself. The difficulty was not in its merits; it had not and would not come to pass because it was extremely unpopular. People like to have nearby post offices. To minimize the resulting pain, the House committee provided that the Postal Service would submit a plan for the office closings, which either house could veto within sixty days of its submission. It was widely suspected that such a veto was inevitable; thus, in the end, there would be no cut.

The most complicated maneuvering went on in the Education and Labor Committee where the leadership had to pressure the dominant liberals into complying with reconciliation. Chairman Carl Perkins of Kentucky reported that the committee voted for cuts because he was assured that floor amendments would be allowed; Perkins did not want a plan drafted by those whose "hard-hearted actions … brought us to this situation in the first place." Once it agreed to cut, the committee decided to slash those programs that Republicans or boll weevils most favored, on the theory that it would be nearly impossible for such cuts to survive on the floor. Impact Aid, most useful in areas with military installations (i.e., the South), was closed down; student loans were banned for families with incomes over $25,000 a year; 25 percent of the elderly who received nutrition support would lose it; and 68,000 children would be removed from the Head Start program. In short, the Education and Labor Committee went after the more middle-class programs, those serving categories whose legitimacy (unlike people on "welfare" or in public service jobs) was difficult to challenge. The chairman, representing a coal-mining area, was the main sponsor of the black-lung disability pension program; he used reconciliation as a chance to deal with the financial problems of that fund, which was projected to have a $2 billion deficit


by the end of FY82. Rather than follow budget instructions to save $60 million through eligibility tightening, he added a new fee on coal sales that would raise $553 million; he now had an extra half a billion dollars to give back to other programs.[14]

When you do not want to go there, wherever it is, many paths will take you to some other place. The committee Democrats were meeting the targets but not ending up where Stockman wanted them. The proper analogy for the reconciliation battle of 1981, however, is not that of a traveler but rather a series of military maneuvers: you try to get somewhere, but have to face an opposing army with other ideas; where you end up depends on relative resources and who maneuvers best. Perkins and, originally, the Speaker felt that they could best protect liberal programs by first playing the Washington Monument game on a grand scale and then allowing amendments to restore funds. Jones, who wanted to meet the budget's targets because he thought the Democrats should not be seen to obstruct a stronger budget process, disagreed; he wanted a closed rule, allowing no amendments: Take it or leave it. O'Neill's strategy was also questioned by both liberals and moderates at a May 20 Democratic caucus meeting. Some liberals felt O'Neill's approach might let Republicans off the hook by giving them a chance to vote to fund the more popular programs; or that the middle-class programs with greater Republican support would be restored and poor people's programs would not. Some budget balancers wanted to allow "zero-sum" amendments, restoring social cuts but compensating with reductions in other programs. While the Education and Labor Committee drafted its plan, assuming it would, as the Speaker promised, be alterable on the floor by amendments, support for such tactics steadily eroded within the caucus.

Thus in early June, seeing that most committees would not cut the budget as they had desired when drafting the Gramm-Latta Budget Resolution, Stockman and Gramm decided to produce what they called a "Son of Gramm-Latta" reconciliation bill, which others would call Gramm-Latta 2. OMB staff began the drafting secretly. On June 2, when he met with the president and GOP leaders, Stockman harshly criticized the emerging committee bills; he won approval from Minority Leader Michel for a round of meetings with committee Republicans to present the administration's case. Echoing other Republicans, Michel declared that "a committee has to have some latitude to do its thing" but added that, "if the committee system does not work, we should be backed up with a substitute to conform to the budget resolution."[15] In private, he insisted that Stockman downplay threats of an alternative.[16] Stockman then held another meeting with leaders of the GOP/boll weevil coalition in which his "pitch for this comprehensive substitute to the committee


reconciliation bills elicited a torrent of criticism." Michel concluded that OMB should keep on with its drafting but also keep quiet. Committee sensibilities had to be protected. As Stockman reports,

"We can't have the appearance that this is being written downtown," [Michel] said. He told his aide, Billy Pitts, to mobilize the minority staff on each committee to begin drafting a substitute bill to cover each of their jurisdictions.

"Make sure OMB has complete input," he admonished Pitts, "but it's got to be written on our typewriters."

It was a start, but his orders were ambiguous. The committee staff could—indeed, would—deduce that it was a mandate to draw up the bill their way, as long as they let OMB put in its two bits.[17]

On June 12 Michel, Gramm, and Latta announced their agreement on a framework for a substitute. By late Saturday, June 13, Stockman had a draft of a plan almost identical to the budget resolution "instructions"/assumptions.[18] By that time it seemed that the Education and Labor plan was heating up objections to the overall package, for other Democrats did not want a substitute to destroy their committees' work just because Education and Labor had gone too far. Jones claimed on June 15 to have the backing of thirteen committee heads for a closed rule forbidding a substitute. Such committees as Agriculture and Post Office, for example, could afford to let their bills be passed because the kinks in their packages, as designed, could be dealt with later. Education and Labor, however, did not want a closed rule because the committee did not want to cut Head Start and had not included ways to get the cuts to self-destruct.[19]

Responding to these other committees, the leadership pressed Perkins to "persuade his Education and Labor Committee Democrats to revise their reconciliation report so that no floor amendments would be necessary."[20] Education and Labor restored impact aid and Head Start money, allowed student loans regardless of income (the Senate had put on a "needs" test), and restored some money for the elderly. Instead, committee Democrats slashed another $1 billion from public service jobs and about $400 million in miscellaneous programs. The adjustments moved the package toward the administration but not near enough.

At Stockman's instigation, President Reagan, at his June 16 press conference, the first since his wounding, called the House package "unconscionable." "This is a fine time to start picking and choosing between who's being hurt by a $37 billion cut," retorted Leon Panetta.[21] Speaker O'Neill denounced as "dictatorial" the president's attempt to impose his own details. Democrats stressed that 85 percent of the cuts in the package


were either recommended by the administration or approved previously by the House.[22]

Even if some committees had pretty much ignored Republican preferences, the idea of a substitute drafted by OMB, bypassing the committee system altogether, did not sit well even with GOP legislators. In spite of their earlier win on the budget resolution, the administration's strategists knew they could lose. Richard Darman assessed the stakes in a memo to the president on June 17: winning would provide momentum and an increased perception of Reagan's leadership and commitment; losing would have the opposite effect. "The votes for Gramm-Latta II are not there now," Darman wrote, "and it will take a major effort to get them." The president chose to take the risk.[23] There were also risks in doing nothing. Success with the tax bill, linchpin of his whole package, was still in doubt; a win on reconciliation could create momentum for that fight. Final passage of the tax bill, by agreement with Senate leaders, depended on making the spending cuts. But that in turn required conference agreement on reconciliation, which could be very difficult if the two houses passed very different bills—a point emphasized by Senator Domenici.[24]

The issues were so complex that Reagan's aides did not believe this was a good place to employ Reagan's television skills.[25] Although sixty-three Democrats had sided with the Republicans on Gramm-Latta 1, only about forty showed up when a breakfast was organized for those defectors.[26] Meanwhile, at least fourteen gypsy moths were unhappy with a number of administration proposals and bargained for changes.[27] In a meeting of the Conservative Democratic Forum, Ed Jenkins of Georgia pounced on Phil Gramm for repeating the Reagan and Stockman claims that the Democratic cuts were fraudulent. "We're still Democrats," he fumed. "And if you can't live with that, you ought to go work with Stockman and become a bureaucrat."[28] Both boll weevil and mainline Democrats said that Reagan could count on about twenty boll weevil votes.[29] But twenty was not the needed twenty-seven. Besides, provisions designed to lure the conservative boll weevils, now that the votes were about real cuts, might only alienate the more liberal gypsy moths. Michel led rounds of negotiations with Republicans on each committee, with the gypsy moths, and with the administration to develop a package from which no Republicans would defect.

One's view of those negotiations depends on who you are. To Stockman, Republican gypsy moths were demanding an unconscionable list of concessions. He saw Bill Green of New York as "the chief trouble-maker of the lot."[30] Green reported that he and his colleagues had simply "fought for the programs most important to our region and met with considerable success."[31] Medicaid, mass transit operating assistance,


guaranteed student loans, energy conservation, and the Legal Services Corporation were among the programs on which Stockman had to compromise. Stockman reports as well that Republican committee staffs were a "smoldering hotbed" of revolt. No doubt they felt they were doing their job, drafting legislation that reflected their members' preferences.

"Fluid" hardly describes the situation; turbulent comes closer. Republicans were having a hard time finding enough votes. After a series of meetings on June 17 and 18, however, Michel won a crucial change: the administration would challenge only the seven committees on which Republicans had not helped to produce the HBC plan. Hence Republicans on the other committees would not face a direct challenge from their own party and president. Instead, Republicans, cut out of committee deliberation, were now getting a voice in the administration substitute.[32]

Republican amendments, announced on June 19, largely involved entitlements: of the more than $18 billion in added cuts in entitlements over three years, over $12 billion would come from programs that served mainly lower- and lower-middle income groups.[33] Republicans restored funding in a number of areas to attract boll weevils—for example, the Clinch River reactor and Impact Aid.

The Budget Committee had no formal authority to modify the other committees' plans. Nevertheless, its Democratic majority removed the provision for a later vote on shutting down the 10,000 post offices. The Budget Committee also added the Dingell package of Energy and Commerce Committee cuts. Because Energy and Commerce had divided evenly, Budget suggested that the Rules Committee allow the alternative package, sponsored by Joel Broyhill (R-N.C.), to be voted on as an amendment. Otherwise, Budget requested a closed rule.[34]

While a majority of Democrats strongly supported preventing amendments, enough objected to the closed rule that a whip poll suggested it might not pass.[35] Besides, additional cuts proposed by the Republicans did not seem popular. Why not allow amendments, but only for those further cuts? The Speaker could have some "beautiful" votes, not on Democratic proposals to remove cuts from a package (the original idea), but on Republican efforts to increase them. There could be votes on extra Republican slashing of the poor, the students, the hungry, and less sympathetic (but perhaps more powerful) groups like federal employees. The prospect was too tempting; the leadership changed its mind and had the Rules Committee produce a new rule.

The rule was announced on June 24, and it was a beauty. Not one but six Republican amendments would be in order. Each would include some less popular changes; none would include the "sweeteners"—which,


after all, would increase spending—that the Republicans had inserted to win votes, such as targeting impact aid and increasing funding for the Export-Import Bank. The president's supporters would have to separately approve cutting food stamps, "capping" medicaid, housing cuts, federal employee COLA changes, deeper cuts in child nutrition and student loans, cuts in AFDC and social security. Furious, knowing that if the vote occurred as the rule intended they would lose, Republicans and boll weevils would have to fight to change the rule, the Speaker's strongest ground. If the GOP indeed could count on only twenty boll weevils to begin with, it would be a very close fight.

Stockman feels the new rule actually did him a favor. Republicans were so angry, he writes, that "it got their partisan dander up, and for the first time in weeks they felt that the enemy was the Democrats, not me."[36] Steven Smith reminds us that if a few Republicans had defected, and if that had been enough to beat their president, they would have been left with an awesome responsibility. The vote was bound to be partisan.

The White House lobbyists' count on the evening of June 24 showed the Republicans several votes short.[37] The president, when he heard of the Democrats' plan, inserted an attack on them into his speech at the National Junior Chamber of Commerce convention in San Antonio. "Without these added reductions," he proclaimed, "we will have nearly $22 billion of red ink, an unbalanced budget and a more inflationary pressure in the next few years…. It's a sad commentary on the state of the opposition, when they have to resort to a parliamentary gimmick to thwart the will of the people."

Jim Wright declared that what was at stake was "the right to make a choice," that Congress owed the president cooperation but "not … obeisance, obedience, and submissiveness."[38] The president was invoking popular sovereignty; the Democratic leaders were invoking separation of powers. Both sides waved the banner of the public good; Democrats called on party loyalty, while the president asked waverers what he could do to help them with their particular problems.

The question was, What have you done for me lately? And Ronald Reagan would not be found wanting. He found six Texas Democrats at dinner with home-state utility executives in the University Club. He didn't talk to Martin Frost, a party loyalist, but spoke to each of the other five. "At least three of them—Ralph Hall, Charles Wilson and Jack Hightower—were on the fence until they heard from the president, even though they voted with him on the budget resolution in May," according to Frost.[39] Reagan called at least nineteen congressmen in the final day of lobbying. On some, as they reported, he used soft sell:


Rep. Charles Wilson conceded he was going to stick with his party on the procedural vote Thursday, but a telephone call from the president helped persuade him otherwise. Wilson said the president told him, "You've gone this far with me, it would be a shame after we took all this heat to lose it now."

But Wilson said Reagan also asked him, "Is there anything you're really interested in that you'd like to talk about?" Yes, replied Wilson, synfuels. The administration's sharp cuts in federal subsidies for these projects troubled him. The congressman said the gist of Reagan's reaction was, "My door's open. Come on over and talk when this is over."[40]

It is nice to be president; just being friendly and showing interest can make a member of Congress feel like progress is being made. John Breaux of Louisiana was more demanding. "I went with the best deal," he declared after he extracted from the president a rather vague promise not to oppose sugar price supports in the House's later consideration. This was not exactly the same as support for the sugar subsidy, but it was a distinct change of administration position, made the morning of the crucial vote on the rule, potentially costing consumers $2.2 billion annually (but costing nothing if liberals in the House managed to kill the program on their own).[41] Breaux and Billy Tauzin (D-La.) claimed that the sugar switch determined their vote. When asked if that meant he could be bought, Breaux replied, "No, but I can be rented."[42]

By including in the revised package extra money for medicaid ($350 million), $400 million more in low-income fuel assistance, $260 million more for mass transit and some extra for Conrail, the administration also bid for the support of the gypsy moths.[43] Because it was a party matter, and they did not much like the Democrats' tactics, the gypsy moths were likely to back the administration on the rule fight. They also were won over by a sense that they could not be nailed as hard-hearted budget slashers because the Democrats themselves had gone so far in that direction.[44]

As time for the vote approached, the president expected to lose. His speech, written for that evening in Los Angeles, included a lot of "we shall fight on the beaches" rhetoric designed to show determination in the face of defeat.[45] In a battle fraught with drama and bitterness, Bolling's motion for the previous question, preventing amendment to the Democratic rule, was voted down, 217 to 210. The Republican substitute rule, allowing separate votes on the Gramm-Latta package and on the Energy and Commerce (Broyhill) section, was adopted, 214 to 208. The president had won his gamble; he changed his speech.

Gramm-Latta 2, made available only the next morning, was a hastily stapled, scribbled-on mass that included the phone number of a CBO staffer and a raft of provisions whose meaning was at best unclear. But


its basic drift was clear enough for members to make their choices. Newsweek estimated that "the projected Reagan savings melted from nearly $22 billion to $12 billion as sweeteners were offered, some handwritten, into his draft bill."[46] Dennis Farney of the Wall Street Journal got the story right:

The highest stakes in the battle aren't dollars, as unprecedented as the deep cuts are. The highest stakes involve legislative policy and the opportunity Mr. Reagan has to rewrite in a single bill scores of programs affecting millions of citizens. Because of yesterday's victory, Mr. Reagan now has the opportunity to achieve much of his domestic legislative program before the House recesses for the Fourth of July—and without ever submitting the package to the scrutiny of House committees.[47]

House Democrats had given in to fiscal restraint, but they had tried to cushion and direct the blow; they had come within inches of victory, only to lose because of twenty-nine defectors, some of whom they had expected to hold. Their bitterness ran deep: "Traitor," "Judas," "You sold out to the fat cats." "Don't ever speak to me again." "It's amazing what a call from the president does to people who otherwise have character."[48] William Brodhead convened a meeting of the executive committee of the Democratic Study Group to make recommendations for enforcing party discipline, possibly including revoking committee memberships, such as Representative Gramm's on Budget.

The final vote was yet to come. Stockman had been dealing on the details of Gramm-Latta 2 up to the last moment before the vote on the rule. "We ain't gonna make it," Bill Thomas, Republican of California, told him, "unless you open the soup kitchen." Unable to tell if the waverers Thomas spoke of would really defect or were just holding him up for more goodies, Stockman held his nose and went for a final half-dozen deals.[49]

Assembled in such a last minute rush, the Republican substitute so grossly violated congressional standards of draftsmanship that Democrats hoped to evoke legislative pride, especially among senior southerners, to switch a few votes.[50] In the confusion, liberal leader Phil Burton (D-Calif.) was reported to have surreptitiously obtained the draft so his side could have a first chance to figure out what was in it. A Democratic leader (no friend of the late Burton) later claimed that "if Phil Burton hadn't been screwing things up, we might have won. … Somehow he got a hand on it, and we lost our virtue, the claim that we were better than they were." Perhaps that blunted Democrats' claim that Republicans were not playing by the rules with their ludicrous-looking draft; perhaps not. The vote was so close that anything might have altered it.


The Gramm-Latta 2 amendment passed 217 to 211, almost the same as the crucial rule vote (217 to 210). The similar numbers, however, hid some flux. Five Democrats who had voted with the Republicans on the rule then opposed Latta's amendment, while five other Democrats supported Latta on June 26 after supporting their party on June 25. If the Democrats had held nine of those ten waverers on either vote, they would have won. The closeness of Reagan's margin was shown again when, in a complicated maneuver, Jones tried to get the bill recommitted to require changes in social security, student loans, and block grants; he failed by only 215 to 212.

Then came the separate vote on the Energy and Commerce provisions. The Republicans had spent all day dickering for support for the Broyhill provisions. Four Democrats who voted for the president on the rule, however, had cut a separate deal with Dingell involving natural gas issues. They did not want to back out of the deal with their chairman, one of the tougher characters on the Hill. A number of gypsy moths preferred Dingell's version because it did not cut medicaid so severely. Ultimately it seemed as if Dingell had the votes. The Republicans chose not to offer the Broyhill plan. "It was one of those decisions," Stockman recalled, "made in about four minutes as a result of sheer chemistry—the time of the day, the sequence of events, how tired the players are. Basically it was the right decision because if we had lost it, we also might have lost the whole reconciliation bill on final passage."[51] Preserving the appearance of control of the floor was vital for preserving actual control.

The tactics worked; when the reconciliation bill was voted on as amended, it passed 232 to 193. The wider margin occurred because a number of Democratic committee leaders, sure that the bill would pass, wanted to guarantee themselves a role in what would be a highly complicated conference with the Senate. These votes also ensured that Phil Gramm did not get to that conference. James Jones explained, "We had to go pretty much on seniority, and we couldn't name Stockman."[52]

All but a very few members voted ideology and party. But the balance on those lines was so close that a few defections either way could determine the result.[53] Legislators exploited the closeness of the vote to win concessions from the side they were likely to support anyway. Boll weevil leader Charles Stenholm, for instance, got a solar energy plant in his district. Ultimately, the victory had less to do with what Reagan himself did than with the idiosyncrasies of a small group of House members.

The administration was so nervous about its slender margin that it feared bringing the bill back from conference for another vote. Two of Howard Baker's staffers later wrote that "many planners, particularly David Stockman, did not believe these coalitions would endure or could be rebuilt for the vote on the conference report. Consequently, the administration


undertook a major campaign to persuade the Senate to accept the House bill."[54] Ronald Reagan asked Baker on July 17 to accept the House version. But when the Senate leader met with his chairmen the next day, he found them distinctly unenthusiastic about the idea. First, they had worked hard for many things in the Senate bill and did not wish to give them up. Second, the hastily prepared Gramm-Latta 2 needed considerable technical cleaning up; the Senate's leaders had reports that many of the bill's supporters had voted for it assuming the conference would fix the glitches. They unanimously rejected Reagan's plea and went to conference.[55]

We have already seen why there might be doubts about Gramm-Latta's drafting. The other side of the Senate's resistance to Reagan requires a short description of the Senate bill.

There was never any doubt that the Senate's package would closely resemble Reagan's. The major exception was in some block grant proposals. Congress just does not like to give up its voice in programs. Consequently, in the Senate Labor and Human Resources Committee, two liberal Republicans, Lowell Weicker and Robert Stafford, sided with the Democrats to water down the block grant plans. Noting a general lack of enthusiasm for the whole idea, the administration decided not to challenge the committee's decision. Beyond the block grant issue, there was little Senate conflict about the spending-cuts package.

For precisely that reason, however, the bill became the perfect vehicle to carry various riders. "People saw the train pulling out of the station," as Howard Baker put it, "and they just all got on."[56] Or, as Robert Reischauer describes it, "the committees ran amok, stuffing their reconciliation legislation with authorizations, reauthorizations, new regulations, and all sorts of 'extraneous' legislation."[57] Senate Democrats, particularly Byrd and Hollings, objected to this process just as Barber Conable had complained when House Democrats did the same a year before. After negotiations, the leaders agreed that Baker would offer an amendment stripping the bill of a wide variety of provisions; individual amendments would then be offered on the floor to restore a number of those to the bill. "If we are going to go down this road of including extraneous matter," Byrd explained, "I want it to be done here, on this floor—come in the front door and let every senator, with his eyes open, have a chance to vote on it as we now have in connection with adding legislation to an appropriation bill."[58] Only some deleted passages could be offered as amendments.[59] These latter provisions, in the jurisdictions of the Banking and Commerce committees, were in fact restored on the floor.

The conference itself lasted until July 28. It was of extraordinary size—184 House members and 72 senators meeting in 58 subconferences.


Yet it was remarkably calm and uncontentious. The only real controversy involved the social security minimum benefit. Both houses had endorsed repeal of this $122 per month payment, which OMB claimed largely benefited state and federal retirees who were covered by other plans but had also worked for a short time under social security. With the social security forces finally mobilized and pressuring legislators, Richard Bolling tried to get the conference to reopen the issue but was not supported by other House leaders. Instead, the House voted on a separate resolution to restore the benefit; it passed 404 to 20. The Senate then refused (57 to 30) to consider the motion. Perhaps they knew that they could gather no more votes than they had on June 26; perhaps process-oriented Democrats like James Jones were not willing to sabotage the reconciliation process at that late date; perhaps their defeat on the tax cut on July 29 left the Democrats with no desire to fight. That was the extent of Democratic maneuvering; House leaders didn't even bother calling for a recorded vote when, on July 31, Congress passed the conference report on the Omnibus Reconciliation Act of 1981.

How large were the reductions in the act? Truthfully, nobody knew. The most careful analysis of Reagan's policy, the Urban Institute's Changing Domestic Priorities Project, analyzed the changes for the entire year, rather than those in the reconciliation act alone. But many caveats included in the project report should be noted.

Congress made certain accounting shifts and mandated technical assumptions that led CBO's reported numbers to substantially exaggerate the impact on nondefense reductions. Largest among these was the shift of the strategic petroleum reserve to off-budget status…. However, the most egregious example of specious savings was the shift of $685 million in Medicare payments from the first month of FY 1982 to the last month of FY 1981, so that it would show up as 1982 budget savings. Congress had done just the reverse the year before when it wanted to show cuts in the 1981 budget. So credit was taken twice for a nonexistent reduction.[60]

Furthermore, as Stockman had noted, the CBO baseline assumed increases, to keep up with inflation, which probably would not have been made even without reconciliation. Not only was that adjustment to the baseline questionable, but inflation, as it turned out, was lower than predicted; the baseline, therefore, was too high to begin with. For all these reasons, the estimated FY82 reductions of $35.2 billion that emerged from the conference were certainly too high.

Nevertheless, no matter what the course of the economy, substantial changes in government policy would have both immediate effects on millions of Americans and long-term fiscal consequences: altering food stamp, AFDC, and unemployment compensation eligibility; encouraging


states to reduce medicaid costs; limiting hospital reimbursements for medicare; eliminating more than three years of impact aid except where children lived on federal property; terminating public service jobs; nearly terminating Trade Adjustment Assistance; substantially changing the school lunch program; arranging annual instead of biannual COLAs for Civil Service pensions; allowing higher tenant payments, stricter eligibility, and fewer units of subsidized housing; and terminating student and minimum social security benefits.

Whose bill was it, anyway? The common interpretation—that, as one Republican budget leader put it, "it was an administration package engineered with the boll weevils"—is a bit too convenient. It lets Republicans blame the pain they inflicted on the administration and allows Democrats to stigmatize the OBRA package as not merely bad policy but poor procedure. Ultimately Gramm-Latta 2 was drafted on the typewriters of Republican staffs of the affected committees. One of Stockman's colleagues expressed the OMB perspective in a way that fits the situation. When we asked if Gramm-Latta 2 were "assembled by OMB," he replied,

Would that that were true. We sent down a draft reconciliation bill. The minority staff directors were told to review the thing, and they stuffed in their own proposals…. A lot of those things had been on the Republican committee members' agendas for years. The Gramm-Latta section on education was the 1979 and 80 Asbrook [John, R-Ohio] higher education amendments. Everybody cleaned out their closet. In the first stage we cleaned out our closet, and in the second stage, the real stage, they cleaned out theirs.

The actual drafting of legislation, not its proposal, is, in fact, the "real" stage. There were no hearings, but most provisions of Gramm-Latta 2 had been floating around for years. Few understood many of the provisions, but then legislators rarely know what is in a bill. They count on colleagues and staff, committees or party, to alert them to problems, and, for the Republicans at least, the process was not really so different in 1981. The provisions for each committee were approved by that committee's Republicans. Thus, the decision to challenge only the sections committee Republicans had not approved was crucial. It was Reagan's victory, but it was Congress's bill. That is the bottom line: Congress did what it wanted. Gramm-Latta 2, the Omnibus Budget Reconciliation Act of 1981, defined the boundaries of what Congress was willing to cut from domestic government.

Cosmos, it is said, is a special case of chaos. The reconciliation of 1981 looks like chaos, but there was direction. Between the district concerns of the boll weevils (who were glad to cut spending so long as agriculture


and water projects and impact aid and the military were protected) and the similar concerns of gypsy moths (who would support their party but not if it meant cutting transportation or fuel or education assistance in a way that looked as if they were really hurting their districts), the river of budget cuts was more channeled than its speed and turbulence suggested. Some committee heads were carried along kicking and screaming. Others grabbed logs, holding on to maintain the full panoply of benefits to which they were pledged, preserving a bit here, losing bits there. Amidst the pulling and hauling, trickery was joined to ideology; illusion became an instrument of policy. As if in a house of mirrors, expenditure cuts changed shape when looked at in different ways.

Stockman and perhaps others wish all the churning and illusion could have been circumvented by a few clean decisions. But that is neither American democracy nor Congress at work. Consent had to be built through a series of compromises, and those bargains (or agreements; the word used affects how the process sounds) defined the limits of consent in a democracy in which neither Ronald Reagan nor David Stockman was elected to provide a specific package of spending reductions.

The fuzzy areas would surely need settling. Stockman had his agenda of future cuts. Even what was seemingly agreed would be fought again, as the Democrats attempted to overturn the verdict of 1981. The losers did not consent to the result, and were almost as numerous as the winners. Getting it back would be difficult because they would have to beat a veto but, when conditions improved, the Speaker would try again. OBRA was only the first of many battles, but it was the biggest and the most decisive. The question for the future was: Would conflict be contained or expanded to a point where it threatened to break the budget process that, in its messy way, had produced Gramm-Latta 2?

Actually, there was another question for the future. All these domestic spending cuts had been justified in the name of a balanced budget. Yet Republicans had also rationalized that spending cuts would make room for tax reductions. If they cut taxes much, they might lose budget balance. Could they find some happy medium of lower taxes and a balanced budget?

The answer to both questions, whether they could find a happy medium and limit future conflict, depended on what would happen to the tax bill.


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