previous sub-section
Nine Return of the Deficit
next sub-section

Bye, Bye, Balanced Budget

Senate Republicans outlined an alternative package of budget savings that would cut social spending less while raising taxes and slicing defense slightly more than the president had suggested. The gypsy moths were supporting larger defense reductions (which, we should always remember, still meant large increases in real defense expenditures).[37] Their willingness to defect was demonstrated by two votes on appropriations bills. In spite of opposition from the GOP leadership, the conference report on the HUD-Independent Agencies bill got enough Republican votes to pass on the House floor. Then thirty-nine Republicans, led by Silvio Conte, opposed a motion to recommit the Labor/HHS/Education bill so as to implement the 12 percent cuts. The motion failed, 168 to


196

249. Meantime the administration had not developed the promised package. Neither entitlement cuts nor revenue enhancements were revealed, as promised, on October 20. Not unreasonably, with his own men stymied, Reagan gave Howard Baker private approval to see what kind of deals the senators could work out for their proposed package.[38]

Democrats were emboldened by a September 23 rally in Washington, organized by a coalition of labor and civil rights groups, that drew 250,000 protesters of Reaganomics. As the recession deepened, the Democrats became assertive. "It is a shame," the Speaker declared, "that it takes the human tragedy of unemployment to show the Reagan economic nonsense for what it is." As their programmatic cuts were implemented, the result most embarrassing to the administration was the issuance of new regulations for school lunches, including one and a half ounce hamburgers with catsup defined as a vegetable. After Democratic senators munched a sample lunch at a press conference, the new regulations were withdrawn for redrafting.

The leading economic indicators had slumped 2.7 percent in September; the recession was looking longer and deeper all the time. On November 2 his economic advisers met with President Reagan for another round of crisis talk. Stockman and Senate leaders worked up an outline for changes that would eliminate the $100 billion deficit that senators (publicly) and Stockman (privately) expected in FY84. Senate Budget Committee Republicans envisioned, over three years, $80 billion in tax increases and $30 billion in defense spending decreases, compared to the March budget.[39] Now Stockman, aided by Baker, Meese, Weidenbaum, and Martin Anderson, sought the president's support. Donald Regan led the opposition.

Backed into a corner, the president declared, "I did not come here to balance the budget—not at the expense of my tax-cutting program and my defense program. If we can't do it in 1984, we'll have to do it later."[40] Or much later, for Reagan would not budge. When Stockman reminded Reagan that he as president was publicly committed to balancing the budget by 1984, Donald Regan disagreed, saying that this was only a target; the press had pushed Reagan into viewing it as a promise. Regan won on Monday; Stockman tried again on Tuesday, with commerce secretary Malcolm Baldrige's support, but to no avail; on Wednesday (November 4) the Treasury secretary told Senate leaders that there would be no tax hikes. Because the senators were unconvinced, on Thursday the president made a strong statement to a meeting of private money managers opposing tax increases. Reagan agreed with his advisers that it was not possible to balance the budget. "That's very obvious," he told them, "but a larger deficit is the least of our problems. What we have to do is get inflation down and business activity and employment


197

up. If there's a bigger deficit then, the man in the street will say, 'That's okay, things are better.'"[41]

House Republicans supported the president in rejecting the OMB/Senate "Fall Offensive." "You don't raise taxes during a recession," declared Jack Kemp. Barber Conable called fine-tuning the deficit in order to achieve a major reduction in interest rates "an exercise in moonbeams." "Changing your policy every Thursday afternoon isn't an economic program," he snorted.[42] Given enough mainstream conservative support, Reagan saw no political reason to budge. One can ask how all these people could be so foolish, as Stockman does, or why the president of the United States kept advisers who wanted him to be something other than he repeatedly insisted he was. The inconsistency was not within the president himself but within the advisory apparatus he created.

As for policy, Reagan did not accept the same analytical framework as either his frustrated budget director or most of his other aides. As he told Pete Domenici, in the final meeting of 1981's efforts to design a package, the issue was not the deficit; rather, "when government starts taking more than 25 percent of the economy, that's when the trouble starts. Well, we zoomed above that a long time ago. That's how we got this economic mess. We can't solve it with more of tax and spends"[43] That the rest of the industrialized world and, indeed, the United States had enjoyed the greatest prosperity in human experience with total government expenditures above the danger line did not enter Reagan's calculations: as we have seen, he saw that as "false" prosperity. Stockman, Domenici, and others kept trying to point out that even under very optimistic assumptions (5 percent real growth), the nation faced massive deficits. But Reagan accepted no such thing as a historically validated, reasonable limit to growth. As he felt later with his Star Wars initiative, the president was not convinced that just because something had not been done was no reason it could not be tried.

On November 6, 1981, Ronald Reagan publicly admitted that he could not expect to balance the budget in 1984; he adopted Regan's line that it had always been a goal, not a promise. On November 10, bowing to the lack of agreement within his congressional party and staff, the president announced that he would put off decisions on the promised tax and entitlement measures until the FY83 budget was issued in January. Retreat on two fronts made the administration all the more eager to show its toughness on the third. Reagan took a hard line on discretionary appropriations: "I stand ready to veto any bill," he told reporters at his press conference, "that abuses the limited resources of the taxpayers."

On that same day, Atlantic magazine hit the newsstands with William Greider's long article, "The Education of David Stockman." There was little in that piece that Stockman had not said in one form or another


198

to other reporters. Yet the blunt language—"supply-side was trickledown theory"; "the hogs were really feeding" on the tax bill; "there are no true conservatives in Congress"—and the powerful effect of seeing it all in one place created a sensation.[44] Democrats pounced on Stockman's admissions; the OMB wizard had been revealed as a blue-smoke-and-mirrors artist who admitted not only that all the numbers were bad but also that nobody understood them. Senator Hollings declared for the Democrats that "after the Stockman performance, I don't see how we could undercut the President."[45] White House and congressional figures were widely quoted, though not for attribution, claiming that the budget director had betrayed the president.

Anyone shocked by Stockman's revelations had not been following Washington politics very closely. The surprise was not Stockman's beliefs but his secret arrangement with Greider, assistant managing editor of the unfriendly Washington Post . It was not even a matter of feeding a reporter; experienced hands could usually identify the unnamed source of a reporter's story. The unusual part was Stockman's revelation of his own doubts. Washingtonians expect officials to use reporters to plant their private versions of reality into the public debate. The puzzle was how to explain the Stockman/Greider relationship in these terms. Either the budget director all along had been preparing an escape hatch—a defense so he would not be blamed if the policy blew up—or he was obtuse. Such were the conventional reactions, and there was surely some self-promotion and foolishness in the arrangement. There is something wistful yet wrong about wanting it both ways, as if only good intentions mattered. There was something more as well.

After one reads both Greider's and Stockman's books, it seems evident that their relationship was peculiarly equal. Rather than looking for information to publish, Greider was challenging Stockman's view of the world. And Stockman accepted it; as an ideologue who nevertheless believed in exchanging ideas, he was refreshed by a chance to question right and wrong, how the world works. Stockman's penchant for changing his mind seems almost immoral in the political world where commitment is everything; but for an academic, the continual willingness to criticize his own ideas and to take other critics seriously may be admirable. This is to endorse neither Stockman's policy judgment nor even the Greider arrangement. Rather, the fact, not merely the content, of conversations with Greider show how much Stockman remained the policy-oriented theorist who dreamed of a politics of justice resting on free-market economics.[46] Cynical in his manipulations, Stockman still could be shocked by Weinberger's failure to provide a good, clean, analytical debate on defense. He wanted to believe that a liberal like Greider could be won over by argument.


199

None of this garnered points for Stockman in November 1981. Instead he had to dramatically display loyalty to the administration, showing above all that he served at the pleasure of Ronald Reagan. Jim Baker provided the script: "You're going to have lunch with the President. The menu is humble pie. You're going to eat every last mother-f'ing spoonful of it. You're going to be the most contrite sonofabitch this world has ever seen." In a lengthy press conference after lunch, Stockman proclaimed his loyalty and described the lunch as "a visit to the woodshed after supper." An Oliphant cartoon showed Reagan and the paddled miscreant; a little creature in the corner of the drawing commented, "You should have used the other side of the axe!"[47] The public drama of a chastisement helped soften the scandal of Stockman's supposed apostasy.

In their meeting, Stockman reports, the story was quite different. Apologizing, he told the story of his long ideological journey—how he had worked to make Reaganism work only to be thwarted by the ways of politicians. The president, after all, had traveled the same path from small town values through a rejected liberalism and back to the right wing. Reagan, too, resented the politicians' obstruction; he was more than willing to believe that the press was the real enemy. He had read the article and judged, as we do, that the whole story was more about a frustrated zealot than an apostate. He had never liked to fire people; besides, Stockman knew the budget details that Reagan did not want to know, and the president also knew his budget director's biases. Reagan told Stockman to stay on.[48]

Although he stayed, the Atlantic article, as Laurence Barrett explains, deprived the budget director his "shield of purity. Now he could be attacked for his character as well as his policies."[49] Still, many felt better about an administration with Stockman than without him. Thirty-two Republican senators signed a letter to the president declaring that "we need him as part of the team."[50]

The Atlantic article, combined with Reagan's retreat from the balanced budget, raised questions about the administration's resolve on fiscal policy. With things sliding out of control, both budget director and president looked for a chance to reassert their authority.


previous sub-section
Nine Return of the Deficit
next sub-section