by Ira Shapiro
On January 17, Carter and congressional leaders came together for an announcement. Carter would kick off his presidency by offering an economic stimulus package to give the sluggish economy a moderate, and hopefully noninflationary, boost. Carter proposed to cut corporate taxes by $900 million and called for modest increases in public works and other job-creating programs. The most visible feature of the proposal would be a tax rebate of $50 for each taxpayer and for those on Social Security. Michael Blumenthal, the new secretary of treasury, testified that the rebate would “provide a quick injection of spending into the national economy.” As far as tactics were concerned, the White House hoped to secure a quick legislative victory, both to stimulate the economy and to establish political momentum for subsequent initiatives. But a quick victory without early congressional buy-in would be almost impossible, and the new administration had not made an effort to work out the economic package with the Hill.
The rebate came as a surprise to the Senate, and the initial reaction to Carter’s initiative was ominous. Blindsided by the announcement, Democrats struggled to be supportive of the idea, even though many of them thought it strange. For the first time in almost a decade, Senate Republicans seized the advantage that comes from being in the opposition. They felt no compunction to support the president’s proposal. Moreover, thanks to the work of Howard Baker, John Tower, and Jacob Javits, they swiftly assembled a credible alternative to put forth.
Within a week, the thirty-eight member Republican conference offered a $26.2 billion plan to compete with Carter’s $30 billion stimulus. The Republicans sought to replace the one-time rebate, which they called a “temporary gimmick,” with “sizable, permanent” tax cuts. The Republican plan would lower tax rates on the first $18,000 of gross income. They also proposed an employment tax credit, a home insulation credit, an increase from $400 to $600 on the amount of dividend income taxpayers could exclude from taxes, and an exclusion of $100 for interest income. For good measure, they also threw in a jobs training program for young unemployed people. It represented the first Republican effort to become the party of tax cuts, and it certainly would not be the last.
With competing proposals in hand, Senators busied themselves arguing over their respective ideas to stimulate the economy. Unbeknownst to them, Carter was moving ahead with an entirely separate initiative that would prove to be the centerpiece of his domestic program: energy.
On February 2, Jimmy Carter delivered his first televised “fireside chat” to the country. Wearing a cardigan sweater and a tie, sitting by a fireplace, the president laid out the grim facts. The United States was using far too much energy. Production could no longer keep up with consumption. The nation was becoming increasingly and dangerously reliant on imported oil. In response, he sketched a program that would include conservation, increased coal production, increased emphasis on solar and other alternative and renewable forms of energy, and a recommendation that Americans lower thermostats to 65 degrees during the day and 55 during the night. He asked Congress to consolidate the energy programs split among fifty government agencies by creating a new Department of Energy, and stated that he had asked James Schlesinger, the former secretary of defense in the Nixon and Ford administrations, to take the lead on a comprehensive energy plan to be prepared in the next ninety days.
If the tax rebate had rattled the senators, Carter’s fireside chat now came as an utter shock. During the campaign, Carter had placed no particular emphasis on energy. After the election, his study of the issues convinced him that America was facing a crisis that necessitated immediate action. Characteristically, Carter and his White House team had done very little, if any, consultation with Capitol Hill, and the frosty reaction from many members reflected not only the difficulty of the issues, but how unhappy they were about being blindsided.
Now they were being asked to expend political capital of their own to support economic and energy initiatives that they felt had been foisted upon them. This rankled many of the Senators, such as Ernest F. Hollings, a Democrat from South Carolina and one of the most forceful and caustic personalities in the Senate. At a Budget Committee hearing on February 4, Hollings referred to Carter’s call for Americans to make sacrifices during the fireplace chat: “While he’s asking us for sacrifice, his team is up here asking us to give everyone 50 bucks.”
Despite mounting and widespread doubts about whether the rebate would be effective, the economic stimulus package, including the rebate, inched forward in the Senate Finance and House Ways and Means committees. Democratic Senators and Congressmen were unenthusiastic, but they wanted to be supportive of their new president. That is, until a few weeks later, when Carter dropped a brand new bombshell.
During his private study of domestic issues during the transition, Carter had become incensed about the wasteful, pork-barrel spending attached to water projects in the south and west of the United States. He saw them as “worthless dams” that caused more harm than benefit. Characteristically, Carter had reviewed each project personally and made the final decision alone.
On February 19, without previous consultation, the White House began notifying members of Congress that it intended to cut off funding for nineteen projects that had been previously approved by Congress, the Army Corps of Engineers, and the Interior Department. The projects were in various stages of construction and had been championed by senators for years, disproportionately from the West and Louisiana. Political candidates routinely promise a break with “politics as usual,” but Carter really meant it. The water projects had strong support from Scoop Jackson, chairman of the newly constituted Energy and Natural Resources Committee, and Russell Long of Louisiana, chairman of the Finance Committee, who would inevitably be the two most influential senators in determining the fate of Carter’s energy and economic programs. No president other than Carter would have picked a fight with Jackson and Long over the Corps of Engineers water projects.
Russell Long was one of the Senate’s most formidable and remarkable figures. His father, Huey Long, the legendary “Kingfish,” had risen to power in Louisiana and Washington, as governor and then senator, on the radical ideas of “share-our-wealth” and “every man a king” before being assassinated in 1935. Russell Long had been elected to the Senate in 1948 one day before his thirtieth birthday. He had arrived in the Senate with a memorable freshman class that included Lyndon Johnson; Hubert Humphrey; Paul Douglas, the liberal lion from Illinois; and Robert Kerr of Oklahoma, the oil magnate who had founded Kerr-McGee Corporation. Now, only Long remained, having spent nearly half his life in the Senate.
Short and doughy-faced, often stuttering and hard to understand, Long could be easily underestimated—but only at one’s peril. By any measure, Russell Long was one of the most formidable legislators ever to serve. He had chaired the Finance Committee since Kerr’s death in 1963, and as Bill Proxmire once said admiringly: “He knows the tax code as thoroughly as the Pope knows the Lord’s Prayer.” Armed with great substantive knowledge, he was also an absolutely superb negotiator, who regularly outsmarted and outmaneuvered his House counterparts. He was a master of building consensus in his committee, treating his members generously and fairly. Utterly straight with his colleagues, he would often warn them against voting for amendments that he was offering. “No question about it,” one of his liberal colleagues commented, “next to Hubert Humphrey, [Russell] is clearly the most congenial man in the Senate.”
He formed great friendships with even those liberals, like Walter Mondale and Gaylord Nelson, who came to the Finance Committee dedicated to eliminating the oil depletion allowance. The liberals were charmed by Long’s uncanny ability to zealously defend the oil and gas industries while channeling his father’s populism. Long championed the concept of employee stock ownership programs (ESOPs) and in 1975 had been one of the architects of the new program to give an Earned Income Tax Credit to the working poor. At one time, Long had suffered from alcoholism, which contributed to his being replaced as Dem
ocratic whip in 1969, but he had stopped drinking years ago. The year 1977 found Russell Long at the peak of his skill and at the pinnacle of his career.
Jimmy Carter would face the challenge of seeking to legislate a national energy policy when the Finance Committee chairman was an extraordinarily effective defender of the oil and gas industry. Carter would compound that challenge by not understanding Russell Long. The president expressed confidence that he could handle the Louisiana senator. He would learn the hard way that his confidence was misplaced.
BY MARCH, EMOTIONS WERE running high in the Senate, as the Democrats unenthusiastically continued to push Carter’s economic agenda. On March 10, the rebate barely survived two party line votes (10–8) in the Finance Committee. Long then demonstrated the dexterity that made him such a formidable legislator. He helped the administration prevail on the rebate but went to the Senate floor to say that the water projects would do far more good for the economy than the rebates would. Abe Ribicoff concurred, stating that he would support the administration on the rebate “with a great deal of skepticism. In all the years I’ve been on the Finance Committee, I’ve never known a group of economic advisers to any president to be correct.” But he concluded: “This is a new administration, and they ought to be given a chance”—presumably, to make their own mistakes.
Resistance was building. Byrd had expressed his unhappiness with the failure of the Carter administration to consult as early as January 26, less than a week after Carter was sworn in. Now, the handling of the water projects had infuriated him afresh, and he decided it was time to act. On April 5, after meeting with the president and congressional leaders, Byrd told the press that the rebate was doomed unless Carter compromised on the water projects. Jody Powell, Carter’s press secretary, responded to Byrd: “We’ve indicated what our position is on the water projects.” The president was as little interested in compromising as he had been in consulting in the first place.
Two days later, Carter made a special appearance in the White House press room, stepping up the pressure on Congress for the rebate and stating that he would not trade water projects in order to get it. On April 11, columnists Rowland Evans and Robert Novak reported that Senator Lloyd Bentsen had urged Carter to walk away from the rebate altogether, as the economy was now showing signs of improvement. Many administration officials privately agreed, but Carter remained firm. A presidential aide opposed to the rebate said that surrender on the rebate “just isn’t Jimmy’s style.” Instead, the administration doubled down, raising the stakes ever higher. On April 12, Secretary of Labor Ray Marshall gave a major speech in Michigan where he said that if Congress did not approve the rebate, it would hurt consumer confidence and make it impossible for the administration to bring unemployment below 7 percent that year.
Yet on April 14, in a stunning reversal, the president announced in the White House briefing room that he had decided to abandon the rebate proposal. Carter based his decision on the evidence that the economy was improving and no longer needed the jolt that the rebates would have provided. He also noted his concern that his upcoming energy proposals would be costly and could have a potentially inflationary effect. He also acknowledged that winning the Senate vote would have required a “bruising battle” and that he did not want to spend his political capital on the rebates when he wanted to focus on other priorities, including the energy plan. Carter noted that he had consulted with congressional leaders and it was “a mutual decision.” Byrd called the retreat “a wise decision,” though the reaction on Capitol Hill was mixed.
Edmund Muskie, the first chairman of the Senate Budget Committee, had worked to defend Carter’s $50 rebate proposal, and now found that the president had abruptly cut him off at the knees. “What kind of fucking fiscal policy is this, Charlie,” Muskie raged to Charles Schultze, the chairman of the Council of Economic Advisers. Calling Carter’s decision “a disappointment” and a “breach of promise to the people,” Muskie ridiculed the lack of “steadiness” in economic policy: “We cannot allow our policies to be dictated by every small movement of the economic statistics. Should we propose stimulus during the slowdown, oppose it when Christmas sales turn up, propose it again when the severe winter descends, and once again oppose it when spring raises the temperature and our spirits?” Muskie also charged that Carter “did not consult with us adequately, gave us no warning [and] retreated from a program that was a month in the making.” In a stroke, Carter had angered one of the most formidable members of the Senate, and perhaps his most important potential ally.
ED MUSKIE HAD COME to the Senate in the large Democratic class of 1958, after being a popular and effective governor of Maine. From the beginning he was proud, principled, and prickly. Arriving in the Senate in January 1959, he quickly managed to get on the wrong side of Senate Majority Leader Lyndon Johnson. In their first meeting, Johnson, in a patronizing tone, had advised Muskie not to commit his vote too quickly, but to wait until “the roll call came to the M’s.” Shortly thereafter, Johnson was counting votes on a motion to change the cloture rules, an issue of critical importance to him. When he approached Muskie, seeking his vote, the new senator responded dryly, “Well, Lyndon, I think I’ll wait until the M’s are called.”
Johnson began to refer to Muskie as “chicken shit,” his all-purpose term for those he felt were disrespecting him. When the new Democratic senators received their committee assignments, Johnson denied Muskie a seat on any of the three committees that he requested. Instead, he gave Muskie the least attractive set of committee assignments that he could put together: Banking, Government Operations, and Public Works.
Muskie initially sulked, but then threw himself into his committee work. Before long it became clear that Johnson had inadvertently done Muskie a real favor. After publication of Rachel Carson’s Silent Spring in 1962, almost overnight, the environment became an important concern for Americans from coast to coast. Muskie became the chairman of the public works subcommittee dealing with environmental pollution. Starting in 1963, and continuing for the next decade, Muskie became the principal author and architect of the Clean Air Act and the Clean Water Act, far-reaching and creative legislation mandating industry to make dramatic improvements in their operations to improve America’s air and water quality. Muskie’s efforts derived strength from a great staff led by Leon Billings, a passionate liberal from Montana, who would become known throughout Washington as the power behind the chairman and a major force in his own right.
By 1968, Muskie had achieved enough prominence to be chosen by Vice President Hubert Humphrey to serve as his running mate against Richard Nixon and Spiro Agnew. Against the backdrop of the turbulent events of that year, Humphrey lost narrowly, but Muskie, by all accounts, acquitted himself extremely well in the national spotlight. He emerged as a leading contender for the Democratic nomination in 1972 and solidified his position with a calm, statesmanlike response to Nixon’s “law and order” campaign on the eve of the 1970 off-year election.
Muskie entered the 1972 Democratic primaries as the clear front-runner. However, his campaign proved to be top-heavy and slow-moving, far too Washington DC–oriented, and his previous ties to Humphrey, a defeated Democratic nominee still linked to Vietnam, were unhelpful to say the least. It is unlikely that Muskie could have defeated McGovern, whose campaign was powered by the energy of the activist Democrats who opposed the Vietnam War. But the Muskie campaign also melted down because of “dirty tricks” orchestrated by the Nixon reelection campaign, including a fabricated letter, leaked in New Hampshire, which accused Muskie of insulting French-Canadians by calling them “Canucks.” Muskie’s campaign dissolved in the snows of New Hampshire, at an extraordinary press conference in which the press reported, inaccurately, that the angry candidate had broken down in tears.
Muskie returned to the Senate, understandably embittered. He became increasingly active on foreign policy issues, as opposition to the Vietnam War intensified. The subsequent revelations of the Watergate Com
mittee that he had been one of the victims of Nixon’s dirty tricks further enhanced his stature. By 1977, Muskie had become one of the most influential of senators, respected for his accomplishments, his intellect, and his rectitude. He had played a key role in enacting the Budget Control and Impoundment Act in 1974, which legislated a complex process through which Congress would reassert its power over the federal purse. It seems extraordinary in retrospect, but prior to the Budget Act, Congress enacted the thirteen appropriations bills separately, without making any attempt to monitor or manage the overall federal budget. Muskie became the first chairman of the new Senate Budget Committee, which gave him a unique responsibility for making the new legislation work and reining in Congress’s free-spending ways and the chance to think broadly about the budget, federal priorities, and overall economic policy.
Muskie welcomed the challenge; he had given notable speeches in 1975 and 1976 about the importance for Democrats to discover fiscal responsibility and make sure that important government programs ran well, messages not usually heard from liberal Democrats. He even sponsored “sunset” legislation, which required all existing federal programs go out of existence unless periodically reauthorized—a position that labor and other liberal Democratic constituencies hated. Deeply respected, authentically liberal, but fiscally tough-minded, Muskie was the Budget Committee chairman from central casting: the perfect choice for a thankless job that would pit him, at one time or another, against most of his Senate colleagues—and the president, as in the case of Carter’s flip-flop on the rebate. But Muskie was also a potential bridge between Carter and the liberal wing of the Senate.
In truth, with respect to the rebate, the circumstances had left Carter no good way out. He would have been (and in fact, was already) condemned for his rigidity in pushing a bad idea, or for his fecklessness in walking away from it. The Washington Post, in a scathing editorial, wondered whether the Democratic senators who had supported the rebate despite their reservations would support the president on a tough issue next time around, after he had left them hanging. It was a good question, and how it was answered would go a long way to determining the success of the Democratic administration. The ill-conceived rebate would soon be forgotten, but the clash of styles and perspectives between the president and the Senate would be a constant problem in what would prove to be the defining issue facing the country on the domestic front.