By some measures, the 1990 budget deal was a success: It helped shrink the deficit, then at 5 percent of gross domestic product, by $492 billion — $850 billion in today’s dollars — over just five years. And it passed with support from both parties.
But in other ways, the 1990 budget deal set the stage for today’s fiscal deadlock. At the center of it all was the Dirty Harry-style pledge that President George H.W. Bush had issued during his 1988 presidential campaign — “Read my lips: No new taxes.” Although an agreement was eventually reached that raised taxes and cut spending, many Republican lawmakers thought the deal and its aftermath proved the folly of compromise.
“The 1990 budget agreement was real bloodshed. It was a civil war within the party,” says John Feehery, who worked for Republican former congressmen Tom DeLay (Tex.),J. Dennis Hastert (Ill.) and Robert H. Michel (Ill.), who was at the center of the 1990 dealmaking.“We’re still living in the world of that agreement. That’s when it became really radioactive to vote for tax increases.”
The budget saga became a tale of how to get Bush to gracefully break his pledge — except there was no graceful way to do it. When he realized he might need to back away from his vow, Bush searched for some new lines. In mid-1990, he sent, as a memento, a copy of one of his radio addresses to Rep. Fred Upton (R-Mich.), whom he was promoting for reelection. In the text, which still hangs in Upton’s office, Bush had crossed out the phrase “no new taxes” and scribbled in the words “limiting taxes.”
All summer in 1990, as the Oct. 1 deadline for a budget neared, negotiators tried to avoid bold steps and looked for what some called an “immaculate conception” — a package that would raise taxes yet help them escape blame for new taxes.
Bush’s budget director, Richard G. Darman, told Senate Majority Leader George Mitchell (D-Maine)that a tax increase would somehow “just emerge” from a meeting of Republican and Democratic leaders. Mitchell later said he was “very suspicious” because White House Chief of Staff John Sununu said he would seek to blame the Democrats for making a pitch for higher taxes.
Many of the same games being played today were played back then, too. Certain taxes were labeled “fees” or “revenue enhancers.” The administration talked about higher tax “revenues” rather than higher tax rates.
Ultimately, the government shut down for three days before a deal passed in a 21-hour, all-night House session. Higher tax rates and revenue accounted for 28 percent of the total deficit reductions. Democrats accepted trims in Medicare and constraints on the growth of domestic discretionary spending. The top income tax rate was raised from 28 percent to 31 percent, though a proposed increase in the gasoline tax was rejected.
Neither side liked the deal, and it tore the Republican Party apart. Richard Viguerie, a conservative activist, later told a PBS documentary that Bush had “betrayed the Reagan revolution” by breaking his tax pledge. It would be “one of his legacies that he will have to carry always, that he lied and betrayed, because he didn’t raise taxes kicking and screaming.”
Bush tried to appease the right wing, to no avail. Though he urged passage of the agreement, he also said that “there are some things in it I had to gag and digest.” House Minority Leader Michel, a moderate, cited Alexander Hamilton’s defense of the imperfect Constitution and said the deal was “the best the present views and circumstances of the country will permit.” He also noted that “the American people would rather have imperfect progress than perfect paralysis.”
It was a tepid defense of an ambitious effort to control the federal deficit, and it didn’t fly with the party. House Minority Whip Newt Gingrich (R-Ga.) had led a revolt against Michel and the Bush White House so that in the end, only 47 of the 176 House Republicans voted for the package. Though he came to the White House for the bill-signing ceremony, Gingrich refused to appear in the Rose Garden with other GOP leaders.
Within four years, Gingrich was House speaker and Michel was cast aside. Meanwhile, Bush had lost the White House. He failed to get credit for tackling the deficit, and he suffered blame for caving on his tax pledge.
President Obama is living in the shadow of the 1990 deal, a chief executive once again seeking to strike a compromise with a balkanized Congress. House Speaker John Boehner (R-Ohio) must look over his shoulder at Majority Leader Eric Cantor (R-Va.) the way Michel did at Gingrich. And the overwhelming majority of Republican lawmakers — many of whom have taken a no-new-taxes pledge created by activist Grover Norquist, president of Americans for Tax Reform — cringe at the possible consequences of embracing a tax increase.
Conservatives who worry that Boehner will cut a deal with the White House have compared the current speaker to Michel, now 88 and retired from Congress. In 2009, radio commentator Rush Limbaugh called Michel the “most compliant loser on the face of the Earth,” and Boehner has been decried as “Bob Michel in Wolf’s Clothing” on the conservative blog Ricochet. The blogger blasted Michel as “a perpetual compromiser” who “had no stomach for confrontation.”
Norquist thinks a 1990 redux is impossible. “This is a fantasy on the part of the liberal Democrats that the Republicans would be stupid enough to repeat 1990 and throw away a winning hand politically,” he said recently. “Why would you elect a Republican Senate if they just sat down with Obama and raised everyone’s taxes?”
But it may be time to reconsider the history of the 1990 budget deal. As long as any increase in taxes is equated to political suicide, managing America’s finances will prove difficult.
“There was a period when the highest goal for Republicans was getting a balanced budget, and if you had to raise taxes, you would do that,” says Feehery, the former GOP congressional aide, who is now director of government affairs at the communications and lobbying firm Quinn Gillespie. He defends the legacy of compromise embodied by Michel, who as House minority leader helped shepherd Reagan’s agenda through Congress in the 1980s.
It is also too simplistic to blame Bush’s failed reelection bid on his broken tax pledge. After the budget deal, his approval rating spiked to 90 percent following the Persian Gulf War. The lingering effects of the savings-and-loan debacle and a tight monetary policy by Alan Greenspan’s Federal Reserve weakened the economy, contributing to his defeat. Moreover, disaffected Republicans disliked his support for civil rights initiatives and the Clean Air Act.
Darman, who died in 2008, had advised the 1988 Bush campaign against making the tax pledge in the first place, arguing presciently that it would tie Bush’s hands as president. “For me and for President Bush, the line was to prove as haunting as it was memorable,” he wrote later in his book “Who’s in Control?”
But Darman, a Republican centrist reviled by many conservatives, also argued in his book that Bush could have broken his pledge without catastrophic political results. He said much of the public expected the president to break his promise. Moreover, he added, Ronald Reagan won a resounding reelection in 1984, two years after he signed the biggest tax increase in history, rolling back some of the excesses of a 1981 tax cut.
Noting that Bush’s rivals in 1992 — Bill Clinton and Ross Perot — both favored even higher taxes and collected 62 percent of the vote between them, Darman said, “It seems hard to defend the proposition that the vote against President Bush was a vote against taxes.”
He also said that Bush would have paid a smaller political price for breaking the pledge if he had not seemed to be gagging on it. “It would have been far more understandable and acceptable if the public could have seen clearly that the price was paid in order to achieve things that were good for the country,” Darman wrote.
That spirit of pragmatism seems almost quaint and naive in our new, uncompromising era. Now, the bulk of the Republican Party has chosen to treat current tax rates — themselves the result of a process of give and take and lobbying as chaotic as the debt negotiations — as though they were engraved on tablets of stone. And to avoid an unholy budget deal like the one in 1990, they have cast Norquist in the role of Moses at Sinai, coming down to rally his restive followers. The danger is that the economy will end up getting tossed onto a burning bush.
Steven Mufson, the Washington Post’s energy correspondent, covered U.S. economic policy for The Post in the early 1990s.