Showdown at Gucci Gulch

by Alan Murray

  Looking exhausted from the long day, members repeated their oil arguments when the public session convened. Bradley was particularly vociferous during the debate. It was as if the provision were a personal insult to him, a matter of pride. Dark circles made the bags under his eyes seem even heavier than usual; he was badly in need of a shave. He refused to let up on the issue, demanding that votes be taken even though the decision clearly had already been made and he had lost.

  While other members looked as tired as Bradley, Long was still animated. He had spent most of the evening in New York City making a speech to businessmen and had flown back by helicopter. Keying off a charge by George Mitchell that the exception was unjustified, Long launched into the broad-gauged oratory that he learned from his legendary father:

  Mr. Mitchell is a great lawyer and a great judge. He had a lifetime job as a federal judge, and he sacrificed that to serve in the Senate. Why a man would do that, I don’t know.

  There was laughter in the crowd and a growing excitement as the audience realized that Long was about to roll.

  From a legal background, a life in the judiciary, he tends to look upon this tax law as that statue over there in front of the Supreme Court.

  He pointed vigorously, as if out the window, his arms pulling out of his shirtsleeves.

  They have a lady holding a scale. She’s blindfolded. She doesn’t know whose weight is on the left-hand side and whose is on the right-hand side. And that’s how they’re supposed to decide cases over there: not knowin’ who they’re helpin’ and who they’re hurtin’. Whoever puts the most weight on his side, wins. To say that we ought to pass laws the way they decide cases over there is as wrong as anything can be.

  He pounded the table and waved his hands.

  We fellas are lawmakers. We’re supposed to know who we’re helpin’ and do it deliberately, and know who we’re hurtin’, and do that deliberately. Now the people in the oil and gas b’ness are the most depressed industry in the United States.

  As he talked about the industry, he pounded his chest with both fists, speaking with such force as his tirade reached its climax that his voice started to squeak.

  If you’re sittin’ over there in that court, I can understand your sayin’, “I’m blindfolded. I’m gonna treat them all the same. This fella is broke, down and out. God knows he needs help. But the hell with him. I can’t do anything about it.” If you’re a judge, that’s how you’d do it. If you’re a lawmaker, you’d say, “That poor fella needs help, let’s help him.”

  With that, the vigor left the drive to kill the working-interest exception. Bradley looked angry, but defeated. There was no use in rebutting Senator Long—his rhetoric couldn’t be matched. More important, he had the votes.

  It was the last major hurdle of the evening. A few minor amendments were offered at the end, and in the rush to finish, Packwood accepted one by Senator Steve Symms, Republican of Idaho, even though it was not revenue neutral and lost $50 million. With his tie askew, Packwood began to stammer when he realized his mistake. “We’re making unwise decisions when we start down this path,” he said. Wallop, seeing Packwood’s distress, made an almost unprecedented offer: He said he would agree to alter the repeal of the withholding tax on foreigners that Packwood had given him for being “a good soldier.” The change would net $400 million, and more than pay for Packwood’s oversight. Packwood accepted the generous offer with great fanfare. The audience murmured in disbelief.

  Packwood then asked Darman, who was sitting at the table in front of the senators, if the administration had anything to say before the vote. The deputy Treasury secretary had spent much of the day on the phone, trying to hammer out a statement acceptable to the White House staff. Once again, the White House aides were dragging their feet. They were worried about the plan’s repeal of the capital-gains tax break and its cutback in IRA deductions. Rather than endorse the bill, they wanted a cautious statement that called the committee proposal “a major step toward meaningful tax reform.” Darman grew angry at their stubborn intransigence and said it would be better to say nothing at all than to make that kind of mealy-mouthed statement. This is a great and historic moment, he argued, and the president should take his share of the credit. Darman called Baker in Tokyo to complain, and Baker took up the matter with Chief of Staff Regan, who was also at the Tokyo summit. Finally, after much longdistance fighting and gnashing of teeth, a statement of support was agreed to. When Packwood gave the cue, Darman said the president had decided the Senate Finance plan generally fit his requirements for meaningful tax reform. “We congratulate you,” he concluded, “and the distinguished members of the Senate Finance Committee, for your bold tax-reform proposal.”

  When Darman finished, Bradley quipped: “The president knows how to steal a headline ten thousand miles away.”

  Then Packwood called for the historic vote. He expected at most 16 ayes, but the night had gone remarkably well. Although he had lost the working-interest battle, Packwood had won the votes of all the oil-state senators as a result. Everyone voted aye. Pryor had told his staff earlier that he was going to vote nay, but his was the last name called, and faced with near-unanimity, he meekly pronounced aye along with the others. No one was willing to be hung out alone to be ridiculed for pandering to special interests.

  Packwood called the unanimous, 20-0 vote, a miracle, and in a way it was. Two and a half weeks before, Packwood pulled off the table a plan so badly battered by special-interest amendments that it was about to collapse of its own weight. Six days later, he unveiled a new proposal so radical that he was forced to disown it. Buried in that radical plan had been the rudiments of success—a rate structure so low that even the Finance Committee could buy it.

  The unanimous vote made it clear that a tax-reform bill was going to become law. Dole later characterized the event perfectly. In just a few days’ time, he said, “the bill went from immovable to unstoppable.”

  Chapter 10

  Politics Is Local

  The night after his unanimous victory, Packwood was on a plane headed home. The senator’s Republican primary was less than two weeks away, but he rested comfortably during the six-hour journey, secure in the knowledge that he had left his biggest reelection problem behind him. After weeks of dawn-to-midnight days, he had turned a huge potential liability into an important political asset. Prior to that flight, the Oregon senator had heard only complaints about tax reform in general and about his earlier bill in particular. But now that was all changed. Passenger after passenger walked up the narrow airplane aisle to congratulate him for his good work. “Thank God somebody’s done it,” one traveler said as he shook Packwood’s outstretched hand.

  On the ground, Packwood got the same reaction. The criticism that had been poured on his head for his failed effort the previous month was gone. Instead of peppering Packwood with complaints about his huge campaign hoard and his giveaways to special interests, the local news media began to praise him. Prior to the triumphant final vote, a cartoon in the Oregonian, the state’s major newspaper, had ridiculed a devilish-looking Packwood for having “seventeen versions of tax reform.” Afterward, a follow-up cartoon pictured a more benign-appearing Packwood on Bill Bradley’s shoulders throwing a tax-bill basketball through a hoop as the press exclaimed, “Incredible shot!” Oregonian editorials went so far as to concede that Packwood had “confounded the skeptics, including us” by producing a bill that would mean “real reform.”

  “There is special interest after special interest that is hit in this bill,” Packwood gloated, pointing out that many of the injured groups “contributed to my campaign.” It was a true boast. Packwood’s victory was encouraging proof that moneyed interests could not always buy their way to success in Congress.

  For the first time, polls unearthed a budding interest in tax reform among the populace. A Wall Street Journal-NBC poll showed a significant rise in public optimism about the effects of reform. Although the public still worried about losing
favorite deductions, 47 percent of those asked in June 1986—after the Finance Committee had finished its work—said they thought the legislation would help them personally, up from 39 percent in November 1985, during the Ways and Means markup. The House bill actually provided the average taxpayer with a bigger tax cut than the Finance Committee package, but it was the strong allure of lower rates that apparently won over public sentiment.

  Despite the swelling support, however, the battle for tax reform was far from over. The bill’s next hurdle, the Senate floor, had always promised to be one of its toughest challenges. Although the Senate operates with a veneer of gentlemanly decorum, it is often an unruly place. Its members were privately referred to as the “animals” by Majority Leader Dole, whose tough task it was to keep them under control. Tax bills, in particular, had traditionally caused near-chaos in the Senate, as the senators struggled to win special favors for their constituents. The whole idea of tax reform was an affront to their way of operating; it threatened to take away many of the goodies that they had tucked away in the income-tax code for the benefit of the folks back home. Holding together the fragile tax-reform package on the floor would not be easy. As Bradley put it: “Sometimes the Senate’s a little like jazz. You can’t predict what’s going to happen.”

  The founding fathers intended the Senate to be the great deliberative body of the legislature. Statesmen like Daniel Webster, John Calhoun, and Stephen Douglas made their mark there. The grand oratory of those nineteenth-century senators had become rare by the time of the tax debate in 1986, but long-winded rhetoric had not. Modern-day senators were the sort of people, one Senate aide observed, who could give a speech in the shower. Unlike House members, who had to walk to a microphone before speaking, each senator had a microphone at his or her own desk and could rise at any moment to join in the debate. For anyone who watched the Senate, the sight was a familiar one: A senator would rise, button his jacket as if by reflex, raise his chin, and then begin. The speeches could go on for hours. The light at the top of the Capitol dome would often be seen shining late into the night, signifying that the Senate was still in session.

  Unlike the House, the Senate has few rules to limit debate, or to restrict amendments. Senators may filibuster a bill—talk endlessly to prevent a vote from happening. They may delay a bill by offering amendment after amendment. Former Majority Leader Mike Mansfield once observed that a single obstinate senator “can tie up the Senate for days, and if he allies himself with a few other senators, he can tie up the Senate for weeks.”

  In such an unrestricted environment, tax bills were open season. During the 1981 tax bill, the senators debated for 102 hours and adopted eighty-one amendments. During the 1982 tax bill they debated for thirty-four hours and adopted forty-nine amendments. And they debated the 1984 tax bill for in hours, adopting eighty-six amendments. Offering a big tax-overhaul bill on the Senate floor was like tossing a piece of bread to a flock of seagulls: Everyone wanted a bite.

  Although the course through the Senate would be perilous, the tax-reform bill had several important forces working in its favor.

  First of all, the 20-0 Finance Committee vote had convinced highly paid business lobbyists that the tax bill now had unstoppable momentum. Their first response to the vote was shellshock. “Terror and disbelief is the reaction,” said Wayne Thevenot, president of the National Realty Committee, an association of big real estate developers. “At least our people have nice, big buildings of their own to jump from.” But most business lobbyists quickly concluded that it was pointless to keep fighting the bill. The Senate Finance Committee had been their last chance, and they had lost. As DuPont Chairman Richard Heckert put it: “At some point, you stop lying in the street and kicking and screaming, because nobody gives a damn anyway.”

  With tax reform clearly on its way to passage, the most savvy lobbyists decided it was time to jump on board. Packwood’s bill, for most of them, was the lesser of two evils. It raised corporate taxes by $100 billion, while the House bill raised corporate taxes by $140 billion. That gave corporate lobbyists $40 billion worth of reasons to support Packwood’s plan. Overnight, almost every business group in town became ardent supporters of the Finance Committee proposal. Even Charls Walker, who had fought tax reform at every turn, now saw the futility of opposing the entire effort, and voiced support. “The Packwood tax plan deserves early passage,” he said.

  The most virulent opponents of the effort became born-again reformers. During the Ways and Means debate in November 1985, the Chamber of Commerce of the U.S.A. said the House tax bill “would be disastrous for the American economy, American business, and the American worker.” But the Finance Committee bill, it said a half-year later, would “on balance have a positive effect on long-term economic growth and job creation.” Likewise, the National Association of Manufacturers, which thought the House bill would “pose extremely high risks for the economy,” urged the Senate to pass the Finance Committee bill—without alteration.

  The high-sounding rhetoric masked the real reason for supporting the bill—it was the lobbyists’ last chance to save themselves and at least some of their favorite tax breaks. Every interest group in Washington wanted to show support for the measure in hopes of currying favor with Packwood and his committee. The Senate bill, they knew, would not be the final bill. The ultimate fight would come later, after Senate passage, when representatives of the Ways and Means Committee and the Finance Committee sat down together to reconcile the two bills in a House-Senate conference. Many corporate interest groups already had made an enemy of Rostenkowski by fighting his bill in the House. They still had a chance, they thought, to make amends with Packwood and win some concessions in the final negotiating.

  Another factor that helped the cause of reform was that fact that the bill would be one of the first major Senate debates broadcast on television. The House had been on the air for years, but the stodgy Senate had resisted until the summer of 1986. The Senate was an exclusive club, with customs and practices that senators feared might seem odd to the outside world. Television was viewed as an undignified intrusion, especially by old-timers like Senator Long. But even the U.S. Senate could not block progress forever, and it finally agreed to a trial run. As the debate on tax reform approached, senators hired media consultants to spruce up their wardrobes (red ties and blue shirts were preferred) and to coif and dye their hair. Packwood even checked the camera locations to see what spot on the semicircular floor would afford him the most flattering angle. (As it turned out, the place he chose was the wrong one. It was too close to the brown leather couches in the rear of the chamber where staffers always sat; as Packwood spoke, a constant stream of scurrying aides could be seen over his shoulder.) Thanks in part to the prying eye of television, members were leery of appearing to obstruct reform. They feared that their usual long harangues might look unseemly to the public. Few wanted to risk appearing in full color on the evening news as a defender of “special interests.”

  The prospects for reform also got a boost from the new Gramm-Rudman budget law that had been enacted a year earlier. Under the law, amendments that increased the budget deficit could be blocked by an objection from any member of the Senate. For technical reasons, that portion of the budget law was not in place in the early summer of 1986 when the tax debate began, but the spirit of Gramm-Rudman prevailed, and the senators were under pressure to keep all amendments revenue neutral. That meant senators wishing to restore a tax break would also have to propose a way to pay for that break. It was a new discipline for the senators. A similar rule had helped the bill win approval during the final day’s proceedings in the Finance Committee, and it was sure to help the measure on the Senate floor as well. Often, the Senate could tie itself in knots over the most minor tax legislation, but with this new requirement of revenue neutrality, the chances of approving major amendments diminished significantly.

  To help propel the bill through the Senate, Packwood began organizing his rapidly growing
band of supporters. Once again, he turned to Bill Bradley for help. Thus far in the tax-reform debate, Bradley had nudged his brainchild along mostly by giving credit to others: first to the president, then to Rostenkowski, and then to Packwood during the second and ultimately successful phase of the Finance Committee markup. “There’s plenty of credit to go around,” he was fond of saying. As a basketball player, Bradley said, “I always got as big a kick out of giving an assist as making a basket.” Now it was time for Bradley to go to the hoop himself. He became a key coalition builder among Democrats on the Senate floor. With typical energy, Bradley reached out—one at a time—to his fellow Democrats to recruit them to join a bloc of tax-reform backers.

  Bradley also worked to convince Packwood to adopt an important strategy: to build a coalition to oppose all amendments. Packwood had initially thought his bloc of supporters should be sworn only to oppose amendments that were paid for by raising rates, but Bradley urged a tougher stand. He reasoned that any exception to a solid front against all changes to the bill would lead to the disintegration of the entire pro-reform coalition. An amendment that saved one tax break, he argued, might be paid for by eliminating a break that was important to other members of the group, causing dangerous schisms. The bill was fragile, and keeping it from falling apart was going to be a delicate task. As a show of good faith, Bradley even abandoned his own plans for an amendment to kill the oil drillers’ tax-shelter loophole.

  Packwood believed amendments would probably be inevitable on such a major bill; nevertheless, he bought Bradley’s recommendation. The two men began rounding up other senators who were willing to pledge to fight every amendment. Baker and Darman also persuaded the president to back the no-amendment strategy. By the end of May, just three weeks after the Finance Committee reported its bill to the Senate floor, Packwood and Bradley had convinced thirty-two of the Senate’s one hundred members to stand with them.