Authors: Hedrick Smith
Early in 1982, the president approved three-cornered negotiations between the White House, the Senate Republican leadership, and the House Democratic leadership to seek a genuine bipartisan budget to curb runaway deficits and to calm Wall Street. Reagan and O’Neill stayed in the background while their lieutenants labored from January through April 1982. Always, the negotiations foundered on Social Security, taxes, and defense.
When all else had failed, the president and the speaker met face to face to try to break the deadlock. The public, its hopes fanned by the drama built in the press, puts great stock in “summit meetings,” expecting leaders to break through deadlocks and strike agreements. It does happen that way—but rarely. There is a much better chance for success for top leaders when their aides have made headway and all that is needed is a final push for full agreement. Moreover, bipartisanship does not spring up instantly between two adversaries. It has to be patiently nurtured, as President Eisenhower had nurtured it with Sam Rayburn and Lyndon Johnson in their private talks.
Reagan had not laid that groundwork with O’Neill. Since the inauguration, they had had only a couple of private encounters. Once in 1981, the president and Nancy Reagan had a gracious private dinner for the speaker and Millie O’Neill. The second time was the speaker’s sixty-ninth birthday on December 9, 1981; Reagan had him to lunch with only three aides, Jim Baker, Mike Deaver and Ken Duberstein. No politics or policies came up. They were just two Irishmen swapping stories until Reagan wistfully looked at his watch as if to say, “I don’t want this to stop. Why do we have to go back and run the country?” They walked to the elevator, arms on each other’s shoulders.
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But that personal warmth was gone when they met head to head on April 27, 1982, in the President’s Room of the Capitol. The air was thick with distrust. Places had been set for them side by side, but the speaker—maintaining a posture of equality and the politics of confrontation—moved his chair on the other side of the table, opposite Reagan. Then the two men squabbled about what aides could be present. O’Neill, who was accompanied by Majority Leader Jim Wright and Rules Committee Chairman Richard Boiling, wanted to add his aide,
Ari Weiss. Reagan, who had come with Ed Meese and Jim Baker, added David Stockman and Treasury Secretary Don Regan. Majority Leader Howard Baker and Reagan’s close friend, Paul Laxalt of Nevada, represented the Senate.
Each leader wanted compromise from the other. Reagan was looking for O’Neill’s willingness to cut social programs and Social Security COLAs. O’Neill wanted Reagan to roll back some of his 1981 tax cuts and his proposed increases on defense. Both men entered the arena warily. Aides told me that neither had much desire for the meeting; both had to be coaxed into going to avoid the public appearance of blocking agreement. Their private exchange echoed their public confrontations.
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After a rambling review of the spring’s negotiations, Reagan said he understood there were areas “where a little bit of give on everyone’s part could resolve the issue.”
But O’Neill, still burning from last year’s defeats, was not going to let 1981 pass unmentioned. He wanted first “to evaluate the 1981 cuts and how they affect this year’s spending.” Last year’s budget, he asserted, was unfair to many Americans.
Reagan, obviously nettled, parried firmly: “Our budget cuts have not done damage to America.”
“Mr. President,” O’Neill shot back, “the damage is that you have a rapid defense buildup and massive tax cuts.”
Reagan, his voice rising in anger, tartly reminded O’Neill of Jack Kennedy, who had held O’Neill’s congressional seat before him. Said Reagan: “Our defense spending as a percentage of the budget is much lower than in Kennedy’s days.”
O’Neill shifted to another pet line of attack, accusing Reagan of “just advocating trickle-down economics” and putting the nation in a “fiscal mess” and the economy into a downspin. “If we don’t have agreement, there will be massive deficits,” O’Neill declared. “If you’re going to be in cement [unyielding], we are not going to get a budget.”
Reagan’s response was equally sharp. “I’ve heard all that crap,” he burst out. “You have the first actual deflation in seventeen years. Interest rates are down.” And he ticked off gains from his program.
For nearly two hours, they swung at each other—“big roundhouse exchanges,” Stockman called them, “about who betrayed the Roosevelt revolution and what was the Roosevelt revolution. Tip would say what made America great was the New Deal and all of the things that we have brought to the American people: Now everybody has a retirement pension; now everybody can go to college; people can get day care; they have health insurance. And then the president would say that we’ve
been going to hell in a handbasket since 1932 when we started deficit spending and got government in all kinds of things it shouldn’t be in.”
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The argument never got nasty, but it was frequently abrasive. It got hung up over who was responsible for the “going-in” paper setting out a possible compromise budget formula, including a controversial five-percent ceiling on Social Security COLAs. Stockman had prepared the paper, picking up something once suggested by Boiling. Had the mood been right, it could have been a joint proposal. But it was a political orphan—it carried no one’s name, least of all Reagan’s. The mutual mistrust made it the devil at the critical moment.
Boiling smelled a political trap. O’Neill felt Reagan was trying to avoid taking political responsibility, and he asked whether Reagan was offering a Social Security proposal.
Reagan, also fearful of being trapped, dodged the question. Instead of urging a joint approach, he protected himself. “I didn’t put this proposal on the table,” he said. “This is the proposal that came from Congress.”
O’Neill stiffened. If anything was to be done on Social Security, he asserted, it had to be done by both sides. He paused and waited. When Reagan did not seize that opportunity, O’Neill pulled back. “If the president isn’t putting this on the table, then I’m taking ours off the table,” O’Neill asserted.
From then on, things went downhill. They all took a recess. The Democrats came back angry that reporters had been told by White House officials that the Democrats were proposing cuts in Social Security COLAs. Howard Baker, trying to salvage the bipartisan approach, came up with a complicated, staggered freeze in COLAs in exchange for a matching delay in Reagan’s tax cuts. “It feels like passing a pineapple,” said Reagan, who did not want to give an inch on his tax cuts, “but I’m willing to do it.” But it was an uneven deal. Financially the Baker plan had much greater long-term impact on Social Security COLAs than on tax cuts, and the Democrats rejected it as unequal.
Jim Wright ventured another idea—leaving out Social Security entirely, but postponing Reagan’s tax cut for a year in exchange for domestic spending cuts and other measures.
Reagan erupted. “You can get me to crap a pineapple”—he grimaced—“but you can’t get me to crap a cactus.”
Silence. It was over. Neither Reagan nor O’Neill wanted to to get up first and take the blame for ending the meeting. Jim Baker broke the deadlock: “Let’s all get up at the same time.”
The session had been ill fated. O’Neill complained that Reagan was
never serious, and cited Donald Regan’s handing the president a prepared press statement as they left the room—evidence of advance planning for failure. The Republicans were equally critical of O’Neill as aggressively partisan and unyielding. Obviously, neither side was ready yet for a grand compromise on terms that would satisfy the other.
“They were just two Irishmen going at each other,” Howard Baker told his aides later. “There was no way they were going to agree. They were not even close all day.”
Eventually, with recession worsening, O’Neill got his way. Reagan had to give ground to try to tame the deficit. Congress took the initiative, Tip O’Neill allying with Howard Baker and Senate Finance Committee Chairman Robert Dole, to produce a three-year $98 billion tax increase. It repealed important parts of Reagan’s 1981 tax cut, especially on the business side, and made cuts of roughly $150 billion in domestic programs. Reagan mistakenly thought he was getting a three-for-one deal, three dollars in budget cuts for every one dollar in tax increases. Actually, Stockman’s fancy arithmetic made it look that way to Reagan—a fateful problem because it blocked future attempts at a grand compromise.
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Reagan complained for five years Congress gypped him in 1982. But Dole, O’Neill, and Howard Baker all insisted to me that Congress came up with the promised budget cuts. Stockman agreed. “It was totally a myth that we got gypped,” he said, “Totally.”
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As opposition leader, O’Neill got the satisfaction of substantive triumph in 1982: Reagan’s swallowing a huge partial rollback of his 1981 tax cuts. That so enraged ardent Reaganites that half of the House Republicans voted against the big tax bill, despite Reagan’s backing it. Instead of Democrats being badly split as in 1981, Republicans were now factionally divided. Quick with public relations gimmickry, the White House hailed the tax increase as a Reagan victory—though Reagan had resisted tax increases for months. Substantively this was O’Neill’s triumph. His opposition game was working.
In the 1982 elections, with the country plunging into the deepest recession since the 1930s, Democrats regained twenty-six House seats.
They knocked off a batch of freshman Republicans who had voted loyally with Reagan in 1981. The Democratic comeback cooled Republican talk of realignment, for the time being. For Reagan, the 1982 election was a political low point; for O’Neill it was sweet vindication for his politics of confrontation.
1985: Democratic Damage Control
Two years later, after the drubbing that Reagan handed Walter Mondale in 1984, Tip O’Neill shifted to a cannier opposition game: selective confrontation. He did not fight Reagan head-on across the board as in 1981–82. He picked fights carefully and thereby raised his odds of winning, and he pulled many of the 1981 Democratic defectors back into the party fold. In early 1985, the speaker lay back in wait, but his tactics got more aggressive in the fall, when he zinged Reagan on South Africa, trade, the MX missile, and aid to the Nicaraguan
contras
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The highly partisan 1984 campaign had snuffed out the brief period of bipartisan cooperation in 1983. The one issue where Reagan and O’Neill agreed in 1985 was tax reform. But in the aftermath of Reagan’s landslide, O’Neill deflected White House assaults on the deficit issue, and protected his Democratic majority by letting Republicans feud among themselves. By Reagan’s second term, Senate Republican leaders and House Democratic leaders had moved closer together on economic issues, and the gap had widened between Reagan and the entire Congress.
For congressional Democrats, the 1984 election had been a tactical and moral victory. Despite low inflation, economic recovery, and Reagan’s enormous popularity, Democrats picked up two seats in the Senate and lost only fourteen in the House, much less than Republicans had been gunning for. As O’Neill pointed out, Reagan won the presidency by 16 million votes, but Democrats outpolled Republicans for the House by 5.7 million votes.
Nonetheless, after his painful beatings in 1981, Tip O’Neill was wary of President Reagan, riding high again after his landslide. Mondale’s disaster had damaged the Democratic party’s national image, and O’Neill had to adapt his strategy to that fact. Like Reagan, he was relying on pollsters to coach his opposition game. Right after the 1984 election, O’Neill had Bill Hamilton, a widely respected Democratic pollster, survey public attitudes toward the Democratic party. Years of Reagan’s attacks, as well as Mondale’s campaign, had taken their toll. Hamilton found that Democrats had the image of big taxers and big
spenders who were soft on defense. Moreover, the speaker was hearing from little people in his home district.
“I went around to some places, walked a few mills,” he told me, voice rising in surprise. “Jesus, this lady stops me and she’s packing sausages, minimum wage: ‘Tip, I love you. I voted for you for fifty years. I’m sorry you’re gonna leave [retire].’ She says, ‘I love the president. Tip, don’t be mean with him.’ ”
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That kind of talk, plus Hamilton’s advice, persuaded O’Neill to change his tune. In 1981, he had tried to defend social programs and to limit retrenchment. After the 1982 election, he had pushed through a couple of modest jobs programs. Now, in early February 1985, he did an about-face. He publicly called for cutting government programs—programs for which he had never had great love, such as Nixon’s federal revenue sharing with state and local governments, Small Business Administration, and Economic Development Administration, as well as Jimmy Carter’s urban development grant program. Reagan wanted to go much further. His budget proposed killing more than twenty programs and slashing a score of others. O’Neill’s tried damage control: Go with the flow, but channel it to protect your favorites.
Just as important, O’Neill was determined to keep Democrats from stepping on a political landmine by pushing a tax hike to lower the deficit. He wanted to erase that bogey from the Mondale campaign and to force Reagan to take the initiative. Majority Leader Jim Wright took the opposite tack. “We owe it to the future generations to start paying our way,” Wright asserted, “and we ought to be responsible enough to go ahead and recommend … the minimum tax on the successful corporations, the most profitable businesses, and individuals of the country, and devote the proceeds of that tax to deficit reduction.”
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As speaker in 1987–88 and with the Senate back in Democratic hands, Wright played hardball against Reagan on taxes. But in 1985, O’Neill overruled Wright; he gave orders to kill all Democratic proposals to raise taxes. It was tactics, not conviction.
O’Neill felt Reagan had demagogued the tax issue in 1984 against Mondale (as Democrats had demagogued Social Security against Republicans), even though Reagan had signed tax increases in 1982, 1983, and 1984. In 1985 he was not going to give Reagan ammunition. “Do I personally think the nation needs taxes? Sure, I think the nation needs taxes,” O’Neill told me in 1985. “I think we’re on a temporary economic surge, that down the road eighteen months or two years from now we can be in one hell of a recession and ultimately a depression. We’re living on borrowed funds.… We get investments from all over
the world, and that’s keeping our economy fluid at the present time. So our nation needs a tax bill, but we’re not gonna give you a tax bill until the president of the United States says, ‘Hey, the time has come. My policy has been wrong.’ ”
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