Page 9


There probably were 20 or more of us in the room. Nineteen, including Weinberger himself, knew that his contention was sheer sophistry. But one man believed it, because he chose to believe it. The President of the United States actually believed that day that military expenditures did not add anything to the deficit. Shortly before the bidding war on the tax cut began in early June, Stockman said, you offered an olive branch of compromise, which would limit the tax cut largely to lower-income taxpayers. But by then the administration held the upper hand. “None of us believed a deal could or should be made with the House Democratic leadership. But we all thought there was a chance of separating Rostenkowski and the other middle Democrats from O’Neill, Wright, and the hard-core, redistributionist liberals,” Stockman wrote. Could your “olive branch” have prevented the deficit we now have? The bidding war between Rostenkowski. and Reagan in 1981, contesting which could produce the more seductive package of tax cuts, was in my judgement a terrible mistake. It is true that I did try to persuade the President to a compromise that would give the cuts primarily to lower-income taxpayers. I had reduced my proposal to written form, summarized on one sheet of paper. I handed copies around to a group of eight or 10 people sitting in the Oval Office. My plan would have reduced the budgetary drag to slightly less than half the cost of the Reagan plan. I was watching the President carefully. He read it, then looked over to Ed Meese. I saw Meese shake his head in a negative gesture. That was the end of that. Yes, absolutely! If Reagan had shown any disposition whatever to compromise with the Congressional leadership we could have stimulated the economy much more effectively at less than half the cost. In the following year, 1982, a little handful from the House leadership, from the Senate leadership and from the White House sat down together in the president’s ceremonial office off the Senate chamber and again explored the possibilities of budget compromise. Congress in the preceding year had set in motion a 30-percent cut in top tax rates, to be effectuated over a three-year period at 10 percent a year. On this second occasion, Reagan had offered to join with us if we would reduce Social Security, and Tip had said, ‘Take that off the table; we’re not even going to discuss that!’ At that point, I offered what I called a ‘5-5-5 Solution.’ I proposed that increases in pay and entitlements of all types by freezing them in place for five months; overall increase in military spending to only 5 percent above the level of the previous make those cuts applicable only to people making $50,000 a year or less in taxable income. According to projections of professional economists on the House Budget Committee staff, this action would have practically wiped out the deficit anticipated for that coming fiscal year. Reagan spoke to me as though he were addressing a child. ‘But don’t you see, Jim,’ he pleaded, ‘that would only exacerbate the progressivity of the income tax, and that is what has gotten us into all the trouble today!’ That attitude was at the heart of our differences on taxes. The gulf was very nearly irreconcilable. I believed in the progressive income tax; he did not. I believed in antitrust enforcement; he did not. I believed in helping the public schools; he believed in helping private schools. These differences made any meaningful compromise between our diametrically different viewpoints very tenuous indeed. It should be added at this point, I think, that Reagan always wanted to give a public appearance of reasonableness, of a willingness to compromise. He liked to refer to his own ideas as ‘bipartisan.’ But he was singularly unyielding. His idea of a ‘compromise’ was our simply agreeing to a solution he had already conceived unilaterally and advertised as a ‘bipartisan approach.’ Stockman wrote, in frustration, “The Reaganites were, in the final analysis, just plain welfare state politicians like everybody else.” He cited Dick Lyng, the undersecretary of agriculture who wrote the USDA budget and protected California citrus growers with preservation of their market orders; and Jesse Helins, who “couldn’t get reelected at all without bringing home the socialist bacon from Washington,” such as his 1983 amendment to the dairy bill that preserved tobacco allotments. Of course, he was coming at it from a different direction than you were. But did Reagan and his allies simply direct the welfare in a different direction? Stockman surely engages in a carelessly permissive use of terms when he says that the Reaganites were ‘just plain welfare state politicians.’ It is true enough that the big tax cuts for upper-bracket Americans could be called Keynesian in a bizarre sense. They were, in their own peculiar way, attempts to prime the pump. Indeed, they were by far the most costly pump priming in American fiscal history. More effective economic stimulus could have been provided at a fraction of their cost to the treasury. But if they were ‘welfare,’ they were welfare for the wealthy. They were Robin Hood in reverse. They widened the gap enormously between rich and poor. They concentrated the nation’s wealth into ever-fewer hands. They reduced the buying power of the average American and of the most unfortunate and greatly enhanced the profits of the top 2 percent. They set off a rash of mergers and leveraged buyouts. Along with the maniato deregulate and to ignore antitrust enforcement, they resulted in fewer and bigger banks, fewer and bigger newspapers, fewer and bigger airlines. But you don’t have to take my word for that, although I tried my damnedest to warn of these trends when I first saw them set in motion. Read Kevin Phillips’ excellent treatise, The Politics of Rich and Poor. He catalogues it all quite clearly. And Kevin is, or was, a Republican. Probably never called a ‘redistributionist.’ How have the budget decisions made in 1981 and later during the Reagan Administration hamstrung Congress and the President today? The chaotic budget decisions made in 1981, compounded in my judgment by the misguided so-called tax ‘reform’ of 1986, have undoubtedly made it much more difficult for Congress and the President to stimulate a meaningful economic recovery today in face of the crippling budget constraints that those decisions brought on. For one thing, while quadrupling the national debt, they have added enormously to the unproductive drag of debt service \(interest payyear before anything else can be done. This, is the fastest growing item of the budget and is second in its cost only to military I have not studied the budget documents for the current fiscal year, but it is my impreschoked about $283 billion out of the treasury last year. It was only about $50 billion in 1980. This, of course, is dead weight. It doesn’t buy a single school book, build a single mile of road, buy a single weapon, pay a single soldier. But it leaves that much less from our tax dollars with which to reinvigorate the economy, rehabilitate the infrastructure, clean up the environment, improve the schools or do any of the other socially useful and necessary things that are the rightful business of government. What, if anything, can Clinton do to correct the budget policies of the past 12 years? You ask what if anything President Clinton can do to correct the budget policies of the past 12 years. I believe he is trying his desperate, dead-level best to do everything within his power to correct those deranged policies. I happen to believe, contrary to a lot of commentary I read, that he is doing a good job against tough odds and determined opposition. THE TEXAS OBSERVER 9 Mow .,..y..v.i VVOC-V.N. .”..0107