In Heat of Battle, Darman Put Taxes Back on the Table

In 1990, Richard Darman was trying to cut the enormous budget deficit.
In 1990, Richard Darman was trying to cut the enormous budget deficit. (By Bob Daugherty -- Associated Press)
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By Steven Mufson
Washington Post Staff Writer
Saturday, January 26, 2008

From his spacious quarters in the Old Executive Office Building in 1990, White House budget director Richard G. Darman ran one of the most skillful -- and fateful -- budget battles in modern political and economic history. For a year, the battle commanded Washington's attention and briefly shut down the federal government.

The deal negotiated that year by Darman, who died of leukemia yesterday at age 64, is his most notable legacy. Along with the first Clinton budget, it balanced the federal government's books for a decade and established the rules popularly known as "pay-go" still quoted to justify balancing tax and spending cuts.

But Darman's deal also backtracked from President George H.W. Bush's "Read my lips: No new taxes" 1988 campaign pledge. Blamed by many conservative Republicans, including the current President Bush, for contributing to Bill Clinton's victory over Bush senior in 1992, it has become a warning to some partisans of the dangers of the sort of compromise that Darman believed in.

When I arrived in Washington in early 1990 to cover economic policy, Darman was still angling for a deal that would close the enormous budget deficit. Schooled in backbiting during his years in the Nixon administration and in more soft-touched techniques as deputy to Treasury Secretary James A. Baker III in the Reagan administration, Darman relished the politics of his job and its substance, including reform of government lending programs, tweaks in Medicare reimbursement formulas, military spending details and the distribution effects of tax increases.

He did this with a style that was partly arrogant and partly puckish. He compared entitlements programs to the computer game Pac Man, whose characters gobble up everything in sight. He said proponents of big spending were like the character in a TV commercial for maple-flavored oatmeal who wailed, "I want my Maypo!" And he belittled conservative Republicans who talked about a "new paradigm" by warning in 1990 against "neo-neo-ism" in policy fads that sounded like "Tide, New Tide and insistently New New Tide."

To his staff, he was demanding. "He would come to staff meetings and rip me to shreds every day," said Thomas Scully, who worked as an associate director at Darman's Office of Management and Budget. But, Scully said, "he knew the workings of government better than anyone I ever knew."

"I don't think anyone would say he was an obstructionist," said Robert Reischauer, who was director of the Congressional Budget Office when Darman was budget director. "For tactical reasons he could be obstinate, but he knew that the problem needed to be solved when the curtain went down."

He had built relationships with some leading Democrats, including House Ways and Means Committee Chairman Dan Rostenkowski, during the 1986 tax reform that he helped negotiate. By 1990, however, Democrats wanted Darman and the Bush administration to embrace the tax portion of any budget compromise and share the responsibility.

Darman talked about the idea of an "immaculate conception" for tax increases and program cuts. Seeking to gain distance from the partisan rhetoric of Washington, he moved talks with top Democrats to the officers' club at Andrews Air Force Base, where reporters wouldn't see the deal being born. It didn't work.

Many people thought it was fitting that Darman was at the center of these talks because of his role in drafting the big 1981 Reagan tax cuts. "I don't know which is worse," President Ronald Reagan's budget director, David A. Stockman, later quoted Darman as saying at the time, "winning now and fixing up the budget mess later, or losing now and facing a political mess immediately." Stockman later recalled that Darman said, "We'll win it now, we fix it later."

When I asked Darman about that in 1990, he didn't deny saying it. But he said "the thought never crossed my mind, and I don't think the thought ever crossed Stockman's mind, that we would wait a decade."

That summed up not only the Darman dilemma but also the dilemma of contemporary U.S. politics: Republicans have taken taxes off the fiscal table, no matter how sensible they might be. That makes compromise difficult and it could be bad policy, too. In addition to raising revenue, the small gasoline tax increase that conservative Republicans were able to purge from the final 1990 deal "might have been good energy and environmental policy," Darman said in a talk last March.

Even after making those sorts of adjustments, he earned the lasting enmity of conservative Republicans who, led by then-Rep. Newt Gingrich, voted against the deal, nearly sinking it, and who then launched an ultimately successful campaign to overthrow GOP moderates.

Darman was never a favorite of the Republican ideologues. Even during the Reagan administration, Darman later wrote, many GOP partisans used ideology "as a litmus test by which to separate the black hats from the white hats. And their version of the purity test was one I could not pass."

After he left government, he joined Carlyle Group of the District and became chairman of AES Corp. of Arlington, an electric power company. Over lunch seven months ago, he was full of enthusiasm for solar power. He said climate change legislation was inevitable, though he added, "I don't see the Bush team as capable of managing a legislative compromise they can live with." He said that "neither at home nor abroad are they inclined to build coalitions."

It might have been the sort of legislative deal he'd enjoy making.

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