Reagan: The Life (46 page)

Reagan responded to expressed concerns that the administration’s program of cuts in spending and taxes would produce large deficits. Pollsters had asked Americans whether they placed greater importance on lower taxes or a
balanced budget, and most chose the balanced budget. Reagan asserted that the question had been wrongly framed. He repeated that his proposed tax cut was really a refusal to raise taxes in the future. “A gigantic tax increase has been built into the system,” he said, referring to the effects of
inflation in boosting people into higher tax brackets. “We propose nothing more than a reduction of that increase.” The pollsters should make this clear. “Our choice is not between a balanced budget and a tax cut. Properly asked, the question is, ‘Do you want a great big raise in your taxes this coming year or, at the worst, a very little increase with the prospect of tax reduction and a balanced budget down the road a ways?’ … I’m sure we all know what the answer to that question would be.”

Reagan reiterated that the Democratic bill from the House was unsatisfactory. Fortunately, there was an alternative. Conservative Democratic congressman
Phil Gramm of Texas had worked closely with the administration from the start. As Gramm put it later, “
Stockman and I wrote the Reagan budget.” Gramm had enlisted Republican Del Latta of Ohio, and the two sponsored a measure that Reagan now endorsed. “
We embrace and fully support that bipartisan substitute,” the president said. It would accomplish the crucial goals of cutting spending, reducing taxes, and bolstering defense. And it would foster economic growth.

Two weeks earlier
NASA had completed a successful mission by the
space shuttle, returning America to space after a hiatus of six years. The timing couldn’t have been better for Reagan, who cited the mission as an example of America at its best. “With the space shuttle we tested our ingenuity once again, moving beyond the accomplishments of the past
into the promise and uncertainty of the future,” he said. “The space shuttle did more than prove our technological abilities. It raised our expectations once more. It started us dreaming again.”

He quoted
Carl Sandburg on American dreams: “The republic is a dream. Nothing happens unless first a dream.” Resuming his own words, Reagan continued, “That’s what makes us, as Americans, different. We’ve always reached for a new spirit and aimed at a higher goal.” He challenged Congress to dream with him. “We have much greatness before us. We can restore our economic strength and build opportunities like none we’ve ever had before … All we need to have is faith, and that dream will come true.”

T
HE SHOCK OF
the shooting, Reagan’s grace at death’s door, and his dramatic return made him politically irresistible. He knew his speech was a hit when scores of Democrats joined the cheering. Overnight calls to the White House registered the same enthusiasm. Reagan’s job approval rating, as measured by Gallup, bounced upward to 68 percent, higher than it had yet been and as high as it would ever go.

The Senate, under the guidance of the Republicans and Majority Leader Howard Baker of Tennessee, accepted Reagan’s direction on the budget easily. In the House, Tip O’Neill and the Democrats made a show of resistance. But as letters and calls supporting the president clogged the mailboxes and phone lines of House members, O’Neill found himself losing ground. “
Am I lobbying people?” he asked reporters rhetorically. “The answer is yes. Am I getting commitments? The answer is no.” Reagan was simply overwhelming, the speaker explained. “We’re facing a popularity issue. That’s what we’re facing out there.” And Reagan was too popular. “He’s done the greatest selling job I’ve ever seen.”

On May 7, nine days after the president’s appeal to the people, Reagan defeated O’Neill. Sixty-three Democrats joined the Republican minority to approve the
Gramm-Latta bill by a broad margin. “
We never anticipated such a landslide,” Reagan remarked privately. “It’s been a long time since Republicans have had a victory like this.” The administration celebrated and prepared to seal the triumph in the reconciliation of the Senate and House bills.

“T
HEN WE SHOT
ourselves in the foot,” James Baker recollected. The bullet was
Social Security. In the half century since Franklin Roosevelt had made it the signature program of the American welfare state, Social Security had developed an enormous and powerful constituency. Retired people and those approaching retirement were poorly positioned to replace lost income, including income lost to Social Security cuts; they believed, with reason, that society had made them solemn promises and that cuts to Social Security represented the worst kind of promise breaking. Moreover, the pensioners and near pensioners voted in proportions that put younger Americans to shame. Reagan understood this, which was why he had exempted Social Security from the initial round of budget reductions. But the system was becoming financially unsound as the ranks of the retired grew. Payments would soon exceed workers’ contributions, and the problem would get worse over time.

How to reform the system evoked bitter fights within the administration.
Richard Schweiker, the secretary of Health and Human Services and a former member of Congress, advocated broadening the
base of Social Security by extending it to currently exempt government workers and employees of nonprofit organizations. Doing so would increase revenues without immediately expanding outlays and would buy years, perhaps decades, of relief.

David Stockman judged this exactly the wrong approach. “
Schweiker and I might as well have been standing on different planets,” Stockman wrote. Calling Social Security a “Ponzi scheme,” he said that bringing in more contributors would compound the deception. “Our job is to shrink the Social Security monster, not indenture millions more workers to a system that’s already unsound.”

Stockman swayed most of his administration peers with supply-side logic and some tactical compromises that ultimately brought even Schweiker around. He presented his program of benefit cuts at an Oval Office meeting where he wrapped his argument in budget arcana no one in the room could rebut. Reagan, as a candidate, had often complained about Democrats’ faux fixes of Social Security; at this meeting he again berated the Carter administration. “
They gave us the largest tax increase in history and said it would be sound until 2030,” he said. “Now we’re here four years later and it’s already bankrupt. It just proves what we’ve always said.”

Stockman nodded vigorous agreement and praised the president’s
insight. Reagan accepted Stockman’s proposal, delighted at the thought of finally making Social Security sound. Stockman ally
Martin Anderson congratulated the president on a genuine breakthrough. “You’ll be the first president in history to honestly and permanently fix Social Security,” Anderson said. “No one else had the courage to do it.”

James Baker hadn’t been prepared for the supply-siders’ blitz. “
I was apoplectic,” he remarked afterward. Baker was certain there would be a backlash against the Social Security cuts, and he believed the president hadn’t been warned. “
Our success on the budget resolution may have encouraged him to shoot for the moon on this issue, which he had talked about for years.”

Baker didn’t think he could change Reagan’s mind directly, given the president’s pleasure at having saved Social Security. So he worked to deflect the criticism away from the White House. He called a meeting of the
Legislative Strategy Group. “
Look,” he said, “we’ve all agreed around here that the economic program is number one, top of the list. So let’s be a little concerned about whether we screw up the agenda.” He decreed that the Social Security plan be presented to the media and the public as a Health and Human Services project, not something from the White House. “To be precise,” he emphasized, “this isn’t Ronald Reagan’s plan. It’s Dick Schweiker’s. Has everybody got that?”

David Stockman objected. “This isn’t extraneous to the president’s economic plan,” he declared. “It’s integral to it, because it”—the overall plan—“doesn’t add up without it.”

Schweiker said Baker was sabotaging the Social Security proposal. “If there’s
any
doubt as to where the president stands, this’ll be dead on arrival when it gets to the Hill.” Schweiker wondered where Baker got the idea he could dictate political strategy. “By damn, I’ve spent twenty years on the Hill, and I know when something will fly. So let’s not start on the defensive. This is a plan we can be proud of.”

Baker refused to reconsider. Reagan’s fingerprints must not be on the Social Security plan, he said. It was Schweiker’s responsibility.

“I was furious,” Stockman recalled. “But there was nothing I could do. Baker was chief of staff.”

Baker’s misgivings proved accurate. “Within two days I knew we were in deep trouble,” Stockman remembered. The budget director met with congressional Republicans to explain the Social Security reforms. “No sooner had I finished the final sentence of my opening remarks than Congressman
Carroll Campbell of South Carolina lit into me like a junk
yard dog. ‘You absolutely blind-sided us with this Social Security plan,’ he seethed. ‘My phones are ringing off the hook. I’ve got thousands of sixty-year-old textile workers who think it’s the end of the world. What the hell am I supposed to tell them?’ ” House speaker O’Neill happily piled on, calling the plan “despicable” and a “rotten thing to do” to seniors. Massachusetts Democrat
James Shannon of the House Ways and Means Committee pinned the blame on Reagan. “He has gone too far,” Shannon said. “It’s time we stood up.”

The Senate, in fact, stood up first. Without waiting for the administration’s Social Security plan to arrive, the upper house preemptively buried it by a unanimous vote.

“
And that was that,” Baker remarked later. The administration dropped the Stockman plan and said no more about it. “Social Security was off the front pages, but at a significant cost to our legislative momentum,” Baker reflected.

T
HE
S
OCIAL
S
ECURITY
debacle cost the administration weeks and cast doubt on the entire project of tax and budget reform. Reagan rolled with the reverse but refused to retreat. Springtime brought invitations to college commencements; Reagan accepted an offer of an honorary degree at the institution with which he had long been identified in the public mind. Notre Dame had given degrees to other presidents, but none of them had played George Gipp. After warming the crowd with one-liners even he admitted were hoary—“
A university like this is a storehouse of knowledge because the freshmen bring so much in and the seniors take so little away”—he riffed on his famous role. “Today I hear very often, ‘Win one for the Gipper,’ spoken in a humorous vein,” he said. “I’ve been hearing it by congressmen who are supportive of the programs that I’ve introduced.” He pointed out that the story was more complicated than was commonly known, and he said it might serve as a parable for the present. “Rockne could have used Gipp’s dying words to win a game any time. But eight years went by following the death of George Gipp before Rock revealed those dying words, his deathbed wish. And then he told the story at halftime to a team that was losing, and one of the only teams he had ever coached that was torn by dissension and jealousy and factionalism … It was to this team that Rockne told the story and so inspired them that they rose above their personal animosities.” Congress should take the lesson and pass the administration’s tax and budget bills.

Congress wasn’t listening, not yet. The House and Senate bills went to the largest reconciliation committee in American history, comprising 72 senators and 183 representatives. The discussions there recapitulated
the arguments made in the separate houses, with the added wrinkle that the expectations and sensitivities of the participants confusingly reflected the traditions of the two houses simultaneously instead of each separately. The Democrats dragged out the process, hoping for distraction from the public and perhaps more missteps by the administration.

Reagan got to know Tip O’Neill better. O’Neill could swap Irish stories with Reagan, but he was all business when it came to politics. “
Tip O’Neill is getting rough,” Reagan observed in his diary. “Saw him on TV telling the
United Steel Workers union I am going to destroy the nation.” On another day O’Neill took his complaint to Reagan directly. “
Tip was bluster on the phone and accused me of not understanding the Constitution—separation of powers etc.” At issue on this occasion was Reagan’s proposal to expand state control of programs funded by the federal government. O’Neill opposed it, arguing that Congress had the obligation to oversee spending of money federal taxes raised. “Claims Congress would be abdicating its responsibility,” Reagan jotted. The president disagreed. “In truth, Washington has no business trying to dictate how states and local governments will operate these programs.” But Reagan expected nothing different from O’Neill. “Tip is a solid New Dealer and still believes in reducing the states to administrative districts of the federal government. He’s trying to gut our program because he believes in big spending.”

O’Neill’s bluster wasn’t without effect. The Democrats held up the tax bill long enough that Reagan felt compelled to bargain. They wanted a smaller tax cut in the first year; in exchange they would accept a reduction in the top tax rate on unearned income, from 70 percent to 50 percent, which Reagan wanted but hadn’t proposed. “
I’ll reluctantly give in,” the president noted to himself, “provided they’ll accept the 3-year across the board cut which will be 5-10-10 instead of the 10-10-10 we originally proposed.” The old negotiator in Reagan quietly smiled. “I’ll hail it as a great bipartisan solution. H--l! It’s more than I thought we would get. I’m delighted to get the 70 down to 50. All we give up is the 1st year 10 percent beginning last January to 5 percent beginning this October. Instead of 30 percent over 3 years (36 months), it will be 25 percent over 27 months.”