by Alan Murray
At about the same moment, Senator Bradley, who had been urging House Democrats to vote for reform, put through an exasperated call to fellow-reformer Kemp to find out why in the hell he had opposed the rule. Kemp tried to assure Bradley that his goal was not to defeat the bill, only to get the president’s attention. But the senator was dumbfounded. The guerrilla attack threatened to do considerably more than get the president’s attention. It could spell the death of tax reform, and Kemp, the Republican’s leading reformer, was helping to wield the murder weapon!
The defeat of the rule was a major loss for the president. His top domestic initiative had been beaten by a near-unanimous vote of his own party. It also was a blow to Baker; the administration’s legislative wizard had failed to foresee the House revolt. White House spokesman Larry Speakes tried to brush off the blame, “It is the members of the House that will have to answer to the American people, not the president.” But O’Neill’s remarks were more to the point: “Today, with glee in their faces, Republican congressmen voted to humiliate the man who led them to victory. They showed their contempt for the White House by voting overwhelmingly against the tax-reform process.”
Some House Republicans crowed about their victory, wearing buttons that read: RON AND DAN, TRY AGAIN. Others were more contrite. Even the GOP leaders who had led the attack had not expected to be quite so successful. “We did better this morning than we thought,” Dick Cheney said.
In the wake of the debacle, White House aides quickly forgot any reservations they had about the tax-reform effort. There was some finger-pointing between the White House and the Treasury, but that quickly disappeared in the face of the greater threat that they both now faced. The rule vote was a challenge to the president’s power and influence in his second term. The administration had to reverse it, as a matter of presidential pride and prestige. President Reagan was said to be angry and perplexed. An extraordinarily partisan politician, he did not understand how so many members of his own party could desert him.
The Treasury and the White House immediately launched a joint rescue effort. Baker got on the telephone and began to call House Republicans. Some were summoned to meet with the president. A few of them caved under the pressure, some claiming they “wouldn’t have voted against the rule” if they had known the president was going to lose. Others vowed to continue their battle and urged the president not to fight back.
It had been a close vote. Only eleven members needed to switch their positions to reverse the outcome. But there was also a new problem to cope with—a very serious one. The defeat of the rule had put the fate of tax reform in the hands of one man: Speaker O’Neill. He was the only person with the power to bring up the rule for a second vote, and it was not at all clear he wanted to do that. The Democrats, after all, had the political advantage. They had accepted the president’s challenge to draft a tax-reform bill that ended tax breaks and lowered tax rates. They had pushed it through the committee, over the objections of members of the president’s own party. A large majority of Democrats had supported the rule on the House floor—188 of the House’s 253 Democrats voted aye. They had, indeed, done everything necessary to assure that their reputations as reformers went untarnished. If the bill failed now, there would be no one to blame but the Republicans.
To help keep the speaker on board tax reform during the floor fight, Rostenkowski asked former O’Neill aide Ari Weiss to come back to Washington. An Orthodox Jew, Weiss had left O’Neill’s staff in November to live and work in Israel. Although only thirty-two years old, he had been with the speaker since he was twenty and was a skilled operator in the politics of the House and also a brilliant analyst of the substance of legislation. Weiss believed deeply in reform, and the speaker had great respect and affection for the young aide. He treated him like a son, calling him unabashedly “the most brilliant kid I’ve ever known.” Rostenkowski had hoped that with Weiss around, the speaker’s support for tax reform would not wane. Rostenkowski also did not hesitate to use his own close personal friendship with the speaker, a golfing chum, to assure his loyalty to the cause.
Rostenkowski still wanted his bill to pass the House. If it were going to be killed, he preferred that the Republican Senate be left holding the knife. Shortly after the failure of the rule vote, Rostenkowski declared that the president would have to find thirty Republican supporters before the bill could be brought up again. Later that afternoon, however, O’Neill upped the stakes: “As soon as the president informs me personally that he has a list of fifty to seventy-five Republican votes for passage of the bill, we will begin moving ahead with the bipartisan reform process.” It was a big demand—thirty votes was a struggle; fifty votes was a mammoth task. By setting a goal for votes, O’Neill signaled that he had been persuaded by Weiss and Rostenkowski to give tax reform another try. But he was not about to let the president off without extracting his pound of flesh. “The speaker thought we could jump six feet,” Dennis Thomas said later, “so he put up a nine-foot hurdle.”
O’Neill had mixed feelings about the tax-overhaul effort from the start. A big, hulking man with a bulbous nose and a thick thatch of white hair, the seventy-three-year-old speaker was an old-time pol who preferred politics to policy. He spent much of his time talking strategy with his friends over poker or golf. For Republican partisans, he had come to symbolize the worst of the Democratic party: the living embodiment of government run amok. But for those who knew him better, and for much of the public at large, the speaker also represented the best in the Democratic party. His understanding of complex policy issues was limited, but he believed deeply and sincerely in the need for a government that was compassionate and fair. He also was supportive of the younger Democrats who were searching for “new ideas” for the party, and he had been a booster of the seminal Bradley-Gephardt plan. Thanks to prodding by Weiss, he came to realize that the existing tax code was a travesty and he recognized the need for reform. But as a politician who had spent a quarter-century in the House and nearly a decade in the speaker’s chair watching numerous attempts to reform the tax system collapse in early defeat, he had little faith in its legislative prospects.
“Tip O’Neill didn’t want the fight, the aggravation,” Rostenkowski says. “He was jelly in some respects.”
O’Neill thought tax reform was just too radical. “I always thought that the bill was a good idea,” he said, “that it had some merits and some dismerits, but I thought it was eight years ahead of itself. You just don’t come up with a revolutionary idea and make it fly in its first [session of] Congress. I just thought it would be six or eight years before it would actually come.”
The speaker was also under pressure from Democrats who were anxious to scuttle the whole effort. House Majority Leader Jim Wright, a Texan who worried about the bill’s effects on the oil industry among other concerns, wanted to see it defeated. Other Texas members fanned out on the House floor after the rule was voted down to urge their colleagues to leave the bill where it lay. Some members worried about the effect that a reform bill would have on the money-starved Democrats’ ability to raise much-needed campaign funds from special interests. The Republican revolt had removed the Democrats from the difficult box that the president’s call for tax reform had put them in, these members argued, so the party no longer needed to worry about being blamed for selling out to the special interests. Why put themselves back in that box?
On Thursday, December 12, the day after the rule went down, Baker, Darman, and Chief of Staff Regan had a tense two-hour meeting on the Hill with House Republican leaders. The Republicans used the opportunity to express their frustrations and to give the administration team a thorough dressing-down. At the meeting’s conclusion, Kemp and Michel asked if the president would consider sending them a letter in which he would agree to veto any bill that did not meet certain specifications.
Kemp and Michel had little in common; indeed, there was considerable resentment between the two men and their staffs. Kemp was a member
of the upstart breed of supply-side Republicans; Michel represented the more traditional Republican views that Kemp was trying to supplant. Nevertheless, both men were eager to find an excuse for reversing their votes against the rule. Kemp, by this time, realized that the rule vote might tarnish his reputation as a tax reformer and possibly hurt his chances for the 1988 presidential nomination. He wanted to be able to say that he saved reform, not that he killed it. Michel wanted an excuse to switch votes because he was a loyal party man and did not like opposing the president’s chief domestic initiative. The institutional pressure on the minority leader to back his president was intense.
In the meantime, Rostenkowski and the speaker waited for word that the president had rounded up fifty votes. It did not come that day. GOP support still fell far short of the mark. Late Thursday afternoon, the speaker recessed the House until the following Monday. It was clear there would be no answer from the White House before then.
On Friday, Baker and Rostenkowski met with O’Neill in the Capitol. The meeting took place in the speaker’s private office, his “inner sanctum,” filled with mementos of his life, his family, and his party. On the walls there was a drawing of his wife, Millie, and a photograph of a Thanksgiving dinner in Ireland with the O’Neills’ extended family. There was a case full of autographed baseballs. And everywhere, there were various-sized replicas of donkeys, the symbol of the Democratic party. Sitting across the desk from the speaker, the Treasury secretary was like a mouse in a den of cats. The Democrats had him over a barrel; they knew it and he knew it. He was there to ask for a favor, and he had no choice but to beg. He tried to steer the discussion away from partisan banter and to appeal instead to O’Neill’s liberal instincts. “Mr. Speaker,” he asked, “when in your lifetime will you have the chance again to take six million poor Americans off the tax rolls?”
The Democratic leader was unmoved. Baker explained that the Republicans needed an excuse to switch their votes, and he asked if the speaker would agree to change the rule in order to allow a vote on a Republican amendment increasing the personal exemption to $2,000 for all taxpayers. O’Neill said no. Baker asked if the speaker would allow some smaller change in the rule. It did not have to be big, he said; the Republicans who voted against the rule simply needed a “face-saving” change that would give them an ostensible reason for reversing their votes. O’Neill still refused. “You know this is your bill, this was your idea,” the speaker said. “Now you’ve got to produce the votes for it.”
It was a long meeting, and for Baker, a frustrating one. The only change the speaker would agree to was to allow a vote on a largely meaningless, nonbinding resolution sought by Michel that urged Congress to change the bill’s general effective date from January 1, 1986, to January 1, 1987. It was clear by now that Congress would not complete a tax-overhaul bill until well into 1986, and Michel was afraid the prospect of a retroactive effective date would create uncertainty and turmoil in the business community.
The Michel resolution was a thin reed for Republicans; it could hardly justify a vote reversal. Nevertheless, it was all the speaker was willing to give. Baker walked out of the meeting unsure of O’Neill’s intentions. Ari Weiss had returned to Israel shortly after the failure of the rule vote and was no longer around to remind the speaker of the importance of the effort. To be sure, O’Neill was not usually an obstructionist, but this time, Baker thought, the Democratic leader was teetering, and the fate of tax reform was teetering with him. It was one of the bleakest moments in the two-year struggle for tax reform. Baker was really worried. “That’s where tax reform had the best chance of going down the tubes,” he recalled later.
Meanwhile, Lott continued to prime his whip group on ways to fight the bill. The president’s strong appeal was weakening the resolve of some Republican members, and they needed to know how to answer the tough queries they were getting from the administration and from their constituents. Seminars were convened to coach reluctant members.
QUESTION: How could a good Republican oppose the administration’s top domestic priority?
ANSWER: Since my president said he’d veto this bill if it came to his desk, I voted against it.
QUESTION: How could anyone oppose a bill that takes six million poor people off the tax rolls?
ANSWER: It may take six million off the tax rolls, but 1.5 million of them will be unemployed.
Desperate for support, the White House decided to take the rare and risky step of sending President Reagan into the lion’s den. The president agreed to go to the Hill to meet with the House Republican Conference, the group that had helped start the revolt in the first place. It was a big gamble: By going to the Capitol, the president was putting his reputation on the line. Nevertheless, Darman and Thomas both argued strongly that the move was necessary; there was no other hope of getting the fifty votes the speaker demanded.
The president met with the GOP conference at 2:15 P.M. on Monday, December 16, in a private session, sealed away from the public and the press. Going into the meeting, the administration had rounded up only about thirty-eight votes for the bill, and many of those were uncertain. The speaker had given the president until 8:00 that evening—less than six hours away—and time was rapidly running out.
In introducing the president, Kemp was unrestrained in his criticism of the Ways and Means bill:
Mr. President, we all appreciate your gesture in coming here, and we would like to respond by being equally gracious and candid. As you know, all of us revere your leadership. The vote on the rule last week, in the view of some of us, prevented a choice presented by the House Democrats—between a bad tax bill or no tax bill. In its current form, the Rostenkowski bill fails to fulfill the pro-growth, pro-family promise of your original proposal. And Bob Packwood was quoted the morning of the vote as saying he did not believe the Rostenkowski bill would be substantially changed in the Senate. I would like to emphasize that it is the substance of the bill, on items like the $2,000 personal exemption and incentives for investment, which is at the root of concern about the bill.
The crowd was ready to take on the president, but in classic Reagan style, he disarmed them. He had just returned from Fort Campbell, Kentucky, where he had attended a memorial service for 248 Army soldiers who had died when their transport plane crashed into the woods of Newfoundland. Before even mentioning the tax bill, the president, visibly moved by the emotional experience of that morning, called for a moment of silent prayer. “That took the sting out of our bite,” Lott recalls. “That changed the whole mood in the conference.”
After the prayer, the president made a few brief remarks, urging the group to support the tax-reform process. As soon as he was finished, he was assaulted by questions from members who were clearly hostile to the bill. The first speaker criticized the 38-percent top rate; the second complained about the personal exemption; the third hit the oil-and-gas provisions, and the fourth complained about the effect on heavy industry. It seemed as though everyone in the cavernous room was lined up against the president and reform.
The president was sympathetic. He too wanted a $2,000 personal exemption, he said; he too wanted better investment incentives; but tax reform was important to him and important to the Republican party. If the House let it die now, there might never be a chance to resurrect it. If the House passed the bill, on the other hand, the president himself would make certain that it was changed before he signed it into law. If it did not meet his concerns about investment incentives, about the personal exemption, about the top rate, he would veto it, he said.
The first break in the barrage of criticism came from Illinois Representative Henry Hyde. A large man and an impressive debater, Hyde had been a member of the House for more than a decade and had impeccable conservative credentials. He had been an outspoken opponent of the tax bill and the rule, but after listening to the president for a while, he rose to speak: “Mr. President, if you say you’ll fight for the $2,000 exemption, the rate reduction, effective dates
, and a lower capital-gains rate, I don’t need a letter. I’ll vote for it.”
Hyde’s comments were just what Reagan needed. The meeting changed from a debate over the tax bill to a show of loyalty for the popular president. A few other members followed Hyde’s example, speaking in favor of the president and pledging their support. Reagan’s presence made an impact. The Republican rebels had been willing to complain mightily about the White House, about Regan, about Baker, and especially about Darman, but when it came to the president, their defiance seemed to melt. As Thompson and Oglesby watched the crowd, they could see some of the members warming to the president’s request, clapping loudly at each pause in his answers. They jotted down the names of those who clapped most vigorously and made notes to telephone them right after the meeting to ask for pledges of support.
At the end of the meeting, a secret ballot was taken. Forty-eight members indicated they would support the bill. It looked as though there might be enough votes to satisfy the speaker’s demand. Still, the blind ballot was only a rough count. Members were under the spell of the president at the time; their positions could easily change in a few hours or even a few minutes. Moreover, the administration head-counters had to have the names of those who were willing to support them and most of those who had been swayed by the president’s speech were not talking. “If he changed minds,” Representative Gradison said after the meeting, “the changed minds were attached to quiet bodies.”