Second in a series of occasional articles
Tom Daschle was headed out the door for root canal surgery when his home telephone rang. His day was about to turn bad, for reasons having nothing to do with dentistry.
On this spring day, May 11, Daschle was still the Senate minority leader, with no expectation that title was about to change. For months he had been spending most of his working hours rallying Democrats to stop President Bush from passing the largest tax cut in a generation. The phone call put an end to that: It was Sen. Max Baucus of Montana, the senior Democrat on the Finance Committee, who told Daschle he had just cut a deal with his Republican counterpart and would be helping push a major tax cut through the Senate.
The conversation that followed, according to people familiar with the call from both ends, left both men briefly thinking their relationship would be permanently marred. Not prone to shouting, Daschle icily told Baucus he had abandoned his colleagues and assured him that people would remember his breach for a long time.
Shaken, Baucus called his chief of staff, Jeff Forbes, to describe the uproar rising within the Democratic caucus. "Buckle it up," Forbes told his boss. "The next couple weeks will be a ride."
The prediction proved true enough. And that wild ride -- not just in the Senate but across the capital -- seems destined to continue indefinitely. The incongruities of politics are rarely so jarring as this past week. Bush, aided by Democratic defectors such as Baucus, won passage of the tax cut that is the centerpiece of his domestic agenda. But his Republican Party, punished by a defector from its own ranks, lost control of the Senate when Sen. James M. Jeffords of Vermont announced he was becoming an independent. Washington has traveled to a place where its familiar, well-creased maps for how business is done are obsolete.
The tax bill that was crafted by Baucus and soon-to-be former Finance Committee Chairman Charles E. Grassley of Iowa was the product of an institution defined by fluidity -- a 50-50 partisan split in which Vice President Cheney's vote gave the GOP nominal control. When the Senate returns from the Memorial Day recess and Jeffords's official departure gives Democrats control, Daschle will take charge of an institution defined no less than before by fluidity -- a place where individual senators, acting on principle or whimsy, can tip the balance of power on virtually any issue at any time.
A small group of centrists willing to form alliances outside their own party will continue to enjoy a primacy far beyond what they knew before. This year's Senate is a place where Republicans such as Sen. Olympia J. Snowe of Maine, whose moderate stands once made her a marginal figure, was able to weigh in decisively on key features of the tax bill. Democrats such as conservative freshman Ben Nelson (D-Neb.), who in an earlier era would have toiled for years with little stature, could command attentive audiences from Senate leaders and even Bush when his vote was in play this year on a budget resolution.
"There's nothing magical about this; anyone who's willing to work from the political center can be influential," said Sen. John Breaux (D-La.), who has pursued the dealmaking possibilities as ardently as any colleague. "Every single senator can make the difference -- on anything."
The tax cut bill's journey through the Senate is a vivid case study of Washington at work in this new era. Both Baucus and Grassley on several occasions in recent weeks were lashed by colleagues in their own caucuses -- in Baucus's case, in unusually personal terms -- for conceding too much to the opposition. What looked to Baucus like principled compromise on the tax issue looked to many of his colleagues like rank opportunism. What looked to Breaux like a welcome revival of the legislative process after the stalemate and acrimony of the Clinton years, looked to Daschle like virtual anarchy, in which his ostensible leadership of Senate Democrats could be undone in an instant by freelancing dealmakers on his own side.
This article, part of an occasional series on Washington's balance of power during the first year of the Bush administration, examines the delicate compromises and maneuvers by which the tax cut cleared the Senate Finance Committee. It is based on extensive interviews with senators and their staff members, as well as administration officials.
Seeking the Gag Point Like many courtships, this one began with a casual meal. Soon after the election was resolved in Bush's favor, Baucus called Grassley and suggested breakfast. The most recent chairman of the Finance Committee, Sen. William V. Roth Jr. (R-Del.), had lost his bid for reelection. Baucus and Grassley, who had been sitting on the committee for years, were at last pivotal players on a panel that would be evenly divided -- 10 Democrats, 10 Republicans, with Grassley serving as chairman, Baucus as ranking Democrat.
As they sat in the Senate dining room, as Baucus recalled it, "I said, 'I have an idea. Let's you and I write this tax bill.' " Bush's victory, by this reckoning, had made a major tax cut inevitable, but the actual policy would have to be written on Capitol Hill. There was, Finance Committee sources said, a clear undercurrent to the conversation: If Baucus and Grassley did not assert themselves, the real work on the tax bill would be swiped away from them, carried out by uncompromising conservative ideologues such as Sen. Phil Gramm (R-Tex.) or Rep. Tom DeLay (R-Tex.).
There was also, say people who know the men, a more personal subtext to the conversation: As Baucus and Grassley knew, there was private chatter on Capitol Hill -- from fellow legislators and lobbyists -- that they were not entirely up to their new posts and were pale successors to such formidable figures as Lloyd Bentsen and Daniel Patrick Moynihan, who had chaired the committee in the past.
Truth be told, say even sympathetic colleagues, Grassley and Baucus were unlikely candidates to be go-to players on legislation as prominent and controversial as the tax cut. Grassley, a 67-year-old hog farmer and former mechanic, had fashioned a maverick reputation in the Senate over 20 years -- a conservative, to be sure, but not doctrinaire. He was one of just two Republicans in 1991 to vote against authorizing the Persian Gulf War. His slow-talking, down-home demeanor conveys guilelessness, but several colleagues said his handling of the tax issue demonstrated a shrewd appreciation of the legislative process. Still, Grassley hardly fancied himself a dealmaker.
"I don't like this stuff," he acknowledged in a recent interview, describing the bargaining he has led in recent weeks. "I like to present my ideas, and just let my arguments carry or lose the day." Even so, on tax cuts, he thought his responsibility as chairman was to somehow produce bipartisan support for a bill, if at all possible.
Baucus, 59, from a prominent Montana ranching family, was first elected in 1978. A diffident man -- his conversations are punctuated with nervous smiles and sighs -- Baucus had expertise on trade policy but had not established a commanding reputation on other issues.
He came to the tax bill with a conviction that politics should favor action and achievement rather than ideological combat. In his hierarchy of values, moreover, representing his state topped party loyalty. "I'm not a bomb-thrower, not a demagogue; I just want to advance the ball," he said. This conviction was fortified by some cold political facts: He is up for reelection next year in a state that Bush won by nearly 25 percentage points. A recent Mason-Dixon poll showed 61 percent of Montanans support Bush's full $1.6 trillion tax cut, and 57 percent said the issue will be an important factor in how they vote.
And so, for a stew of different motives, Baucus and Grassley began a collaboration that grew progressively closer as the year moved along. Both men said they realized that Bush's original proposal -- the $1.6 trillion cut that the House passed essentially unchanged on a partisan vote -- could probably not clear the Senate, and certainly not with the bipartisan flavor they both wanted, without significant changes.
The total cost would have to be smaller, the 39 percent top rate could not fall to the 33 percent Bush wanted, a host of other modifications would have to be made to direct more benefits to lower-income earners. The Bush White House, administration and congressional officials said, gave Grassley a green light to negotiate a bill; while keeping abreast of the talks, White House officials told other senators they felt certain that most of whatever Grassley negotiated away could be won back when the tax bill went to a House-Senate conference committee.
In early discussions, according to committee sources, Grassley and Baucus began by exploring a tax cut of just $1.1 trillion, though Grassley later made plain this figure would not fly with colleagues.
Meetings that started out weekly and progressed by the end to almost daily had a common theme: searching for the gag point. How much change was needed to get moderates of both parties to swallow the bill? Would that much change send the conservatives who dominate the GOP caucus into revolt? Would their own parties support sincere efforts to find common ground?
Angering Colleagues Earlier this month, Grassley got an answer to this last question. Meeting with a group of committee Republicans to describe the state of negotiations with Baucus, the chairman was suddenly in the role of pin~ata as colleagues swung away.
Grassley's colleagues were upset that his proposed reductions in the top rate were too low; that too many extra provisions had been added in, such as making the $500-per-child tax credit refundable so that low-income families who pay little tax could benefit; and that the schedule for implementing the tax cuts had been slowed down far too much, in order to lower the projected costs. Sens. Gramm and Don Nickles (R-Okla.), participants said, were especially scathing in critiquing Grassley's presentation.
As Grassley himself recalled it, a senator told him: "I would be embarrassed to present this to taxpayers."
Grassley was irked by the criticism. If he presented Bush's full plan to the committee, it would garner eight votes for, 12 against, with Northeast Republicans Jeffords and Snowe joining the Democrats. "In our system, 12 votes beats eight votes," he deadpanned.
He also resented the implication that paying deference to political reality was an ideological sin. "I'm just as doggone conservative as they are," he said in an interview. "Why do I have to go kowtow to them? They should have as much respect for me as I have for them."
Baucus's treatment by his caucus made Grassley's seem like a massage. In Baucus's office, the session Daschle called May 10 to hear the state-of-play from the Montanan is now remembered jocularly as "Black Thursday."
One by one, fellow Democrats lit into Baucus, particularly the "three Ds": Sens. Mark Dayton (Minn.), Byron L. Dorgan (N.D.) and Richard J. Durbin (Ill.). Their theme was that Baucus was either being disloyal or naive. The tax cut would hobble government to help the rich, they said, and the surpluses that supposedly justified the cut were disappearing with the cooling economy. Responding to Baucus's protests that his negotiations were making the tax cut more progressive, Sen. John F. Kerry (D-Mass.) said Baucus was being had: Republicans were getting virtually all they wanted in exchange for some crumbs for Democrats.
The session closed with Daschle, remarkably, telling the ranking member of the Finance Committee that he was not empowered to reach any deal with Grassley.
"You don't have the authority," Daschle said.
"I don't have the authority to negotiate?" replied Baucus, stunned.
"That's right," Daschle said.
Reaching a Deal Daschle and Baucus left the meeting with different understandings of what had transpired. Daschle thought Baucus had given his consent that he would not shake hands with Grassley until at least the next week and not before meeting with the caucus again. Baucus believed he had been noncommittal on this point and left the meeting to agonize over his choices overnight.
In fact, Baucus was justified in feeling victimized by mixed signals from his own side. Earlier, on April 26, the Democrats on the Finance Committee, on which Daschle also sits, met and gave a go-ahead to Baucus's negotiations with Grassley. (People familiar with Daschle's view said he believed that endorsing talks was not the same as empowering him to complete a deal.)
Meanwhile, Baucus was learning something about the dynamics of caucus politics: The people who hollered the loudest in meetings were often the ones with the least at stake -- people not up for reelection imminently, or states where voting against a tax cut was not necessarily the perilous stand it is in a swing state. Many of the people who sat quietly in caucus meetings later sidled up to Baucus and encouraged him to craft a tax bill that a Democrat could vote for.
In fact, both Baucus and Grassley found themselves encouraged by a small but pivotal group of senators in their respective parties who were approaching the tax plan from a posture of "Yes, but" or "I might, if."
Jeffords was one of them. Foreshadowing his historic defection last week, the understated Vermonter had made clear during last month's budget vote that he wanted a central role. On April 4, after repeated warnings to the White House and the Senate GOP leadership that he could not support a $1.6 trillion tax cut and was eager to see more spending on his signature issue of special education, Jeffords was in a meeting with Sen. Pete V. Domenici (R-N.M.), the chairman of the Senate Budget Committee.
Jeffords said he could not agree to Domenici's appeal to support an administration-backed resolution that set the overall terms for this year's tax and spending bills and walked out of the meeting. He went straight to a news conference Breaux was holding with other moderate senators and endorsed an alternative, crafted by the Louisiana Democrat, that shaved the tax cut by about $400 billion and ordered new money for education.
It was a signal moment. "It meant that the centrists had the votes," said a Senate aide close to the negotiations. "It really was the first time that the centrists and moderates had the power to do something. Before it was hard to point to one thing they had done."
A month later, Jeffords was eager to exert similar leverage on the tax bill. Among his priorities, he told Grassley, was making a provision known as the child tax credit refundable, regardless of income levels. Conservatives criticize that as a kind of welfare through the tax code: People get money back even if they pay little or no tax. Jeffords also pressed for a similar measure ensuring that changes designed to fix the so-called marriage penalty in the tax code also apply to low-income people eligible for the earned-income tax credit.
Jeffords's voice added to the critical role played by the two women on the Finance Committee -- Snowe and Blanche Lincoln (D-Ark.). They insisted that the child tax credit be refundable, so that a woman working full time at the minimum wage -- a salary of just over $10,000 -- could count on a benefit. Grassley disliked the provision, but Snowe made it clear he would lose her vote -- and the unanimity of committee Republicans -- if he didn't go along.
Snowe also viewed lowering the top rate to 33 percent as too expensive and too generous to the rich. "I told him it was too much," she recalled of her sessions with Grassley. "I said I could go to 35 percent."
After being beaten up by conservatives over his concessions, Grassley began to make sure he had some protective guards. Before one meeting with Republicans, he told Snowe to make sure she was there: "I'm going to need your help," he said.
Baucus, too, eventually found some colleagues to help share the heat. At a lunch of Senate Democrats a few days after he struck the deal with Grassley, his colleagues started beating him up again. Sen. Robert G. Torricelli (D-N.J.) stood up to defend Baucus and say that he had done Democrats a service by helping move the tax cut legislation to a place where some Democrats could vote for it.
Torricelli was one of those Democrats. He comes from a state where anti-tax sentiments had propelled Christine Todd Whitman, now Bush's Environmental Protection Agency administrator, to the governor's mansion, and he had often preached a gospel to fellow Democrats: Never be perceived as the pro-tax party. Facing a criminal investigation into his financial relationships with a contributor and a reelection campaign next year, the man known as "the Torch" had special reason to be wary of the tax issue.
On May 11, after a night brooding over options, Baucus woke up concluding that the barrage he had faced the day before from Daschle and other Democrats should not prevent him from moving forward. He decided that day to try to strike a bargain with Grassley, though he said he harbored doubts it would be possible.
For nearly four hours that morning, the two men -- who had grown genuinely fond of each other during their months of collaboration -- showed the other his bottom line. Among other points, Baucus insisted that a deal could not fly unless the child tax credit was made refundable for more people. Grassley said his caucus would revolt if the timing of a tax cut were not accelerated, so that rate reductions would occur sooner.
A deal was reached. Baucus placed his fateful phone call to Daschle. And Grassley and Baucus went before the cameras to explain their plan -- a $1.35 trillion cut that lowered the top rate to 36 percent. The bill still gave by far most of its benefits to the rich, who pay by far the most taxes, but it steered more relief to lower-income scales than the House plan did. Four days later, the plan passed the Finance Committee 14 to 6, with Baucus and three other Democrats -- Breaux, Lincoln and Torricelli -- joining the majority. The bill passed the full Senate with 62 votes.
Learning, Moving On Daschle's hostile reaction was only the beginning. All through the weekend before the committee vote, Baucus called members of the Democratic caucus. It was "a better bill" than they might have imagined, he told them. Again and again, he got a similar response: "You are going to get rolled."
There was, Baucus knew, at least a possibility that the skeptics were right. Baucus and Grassley had set about conscientiously to find middle ground. But it was possible that conservative senators and House members would join to simply throw out the committee's work and return to the House version. It was even possible a deal would be cooked with Grassley and Baucus out of the room.
In the end, this did not happen, though some conservatives and White House officials did their best to derail the Senate's work. After two days of meetings, House and Senate negotiators voted late Friday night on a deal that puts the top rate at 35 percent and preserves much of the expansion of the child tax credit that Snowe and others fought so hard for. The House voted 240 to 154 for the measure yesterday after an all-night session, and the Senate followed about two hours later, 58 to 33. Bush will sign the bill sometime next month.
But the lessons of the tax bill as it moved through the Senate are still coming into focus. One is that personal relationships are regularly and sorely tested in a capital with power balanced so precariously. But it is also true that relationships repair rapidly. A few days after their sullen phone call, Daschle and Baucus held a long meeting to make up and move on.
Daschle was disconsolate about the far-reaching consequences of the tax bill and how casually it had passed; the Senate, he said, had spent more time debating renaming National Airport after Ronald Reagan. But by nature, he was not inclined toward payback, associates say. And the politics of a narrowly divided Senate scarcely made that an option anyway.
"Regardless of what the circumstances are, you have to accept the fact that I'm not a Lyndon Johnson," Daschle said. "I can't intimidate someone into doing what I want them to do. I have to accept what comes and move on to the next issue."
These next issues are looming. Breaux said the dynamics on the budget and tax votes could be repeated on such issues as Medicare reform, or a patient's bill of rights, giving centrists new clout. But that clout requires a certain nerve to exercise. Recalling the hazing his colleagues gave him, Baucus boasted, "I may be a masochist -- I like the heat."
Others, though, saw a man who did not seem to be enjoying the multiple tugs of party loyalty, political self-interest and his own estimates of the public interest.
"I think he's hurting," said Breaux, who emphatically is not. To the Louisianian, the lesson is to take advantage of the opportunities the Senate now presents. "This is the place to be -- and the time to be here."