Showdown at Gucci Gulch

by Alan Murray

  The convoluted provision was drafted to help only states that had raised most of their revenue from sales taxes and to cost no more than the $1.6 billion that Packwood had found to finance it, but it served its purpose. It quieted the complaints of the sales-tax senators and cut the legs out from under the D’Amato-Trible triple-threat amendment. Dole and Packwood met with D’Amato and Trible outside the chamber in front of the large wooden timepiece known as the Ohio Clock. “Packwood made it clear that he would view our amendment as a hostile act,” Trible recalls. The two dissident lawmakers already knew they did not have enough votes to beat the no-amendment coalition. They also concluded that pressing the point and then losing would so anger Packwood that they would have no leverage at all in the conference. “I realized if we tried and failed,” Trible said, “our chance of gaining any relief would be lost forever. The chemistry of the situation had changed…. Events had passed us by.”

  It was the final challenge for the Senate tax-reform bill; from then on, the debate was mostly a mop-up operation. The Senate faced dozens of minor amendments, most of which were accepted as “conference bait”—provisions that would be adopted on the Senate floor, only to be dropped in the later House-Senate conference. Many of these were extremely local in focus, including provisions to benefit a truck-leasing company in Des Moines, a housing project in Massachusetts, and flood victims in West Virginia. Senator Stevens persisted in plying his “extraordinary ways;” he won a special tax treatment for Alaskan Indian tribe corporations and another for the income from reindeer, which Bradley said would better have been granted at Christmastime.

  In the end, on Tuesday, June 24, only rhetoric remained. Dole attempted to trace the origins of the tax overhaul to his own tax bills since 1982. Bradley said the idea went back to the origins of the U.S. Constitution. Senator Joseph Biden, Democrat of Delaware, gave much of the credit to Bradley. Packwood gave credit to almost everyone: Rostenkowski, Reagan, Long, Bradley, Dole, Metzenbaum, the entire core group, and himself. He harkened back to the two-pitcher lunch and recalled saying to Diefenderfer, “Let’s give real reform a try.”

  For the benefit of the cameras, Dole requested that the senators vote from their own seats rather than follow their usual practice of bunching up in the well. The final vote on the 1,489-page bill was 97-3, with three Democrats dissenting—Carl Levin of Michigan, John Melcher of Montana, and Paul Simon of Illinois.

  “Nothing is certain in this life; the good Lord might call us home tomorrow,” Russell Long said after the vote, “but if we’re here on Labor Day, there’ll be a bill on the president’s desk.”

  Chapter 11

  The Running Shoes and the Sledgehammer

  Just two hundred and fifty paces separate the Senate chamber from the House chamber. The short walk across the second floor of the Capitol building is like a quick passage through history. From the Senate, the route leads down an ornate hallway past the Old Senate Chamber, with its sixty-four desks, quill pens, and brass spittoons, where Preston Brooks of South Carolina brutally caned Charles Sumner of Massachusetts on the eve of the Civil War; through the great Rotunda, the nine-million-pound cast-iron dome that symbolizes the very heart of the nation’s government, under which the bodies of Abraham Lincoln and John F. Kennedy lay in state; through a semicircular room lined with statues of sixty-six great Americans, including Frances Elizabeth Caroline Willard, one of the founders of the Women’s Christian Temperance Union, who stares sternly across at Huey Long, a man not known for moderate habits; and finally down a quiet corridor to the House chamber.

  Despite the proximity, the path is seldom trod by members of the House or the Senate. The two bodies are distinct institutions, and their members prefer to keep it that way. The one hundred Senators, who each represent an entire state and who serve relatively luxurious six-year terms, tend to feel superior to their 435 House colleagues; they maintain far-ranging interests and committee assignments. Members of the House, on the other hand, usually represent fewer constituents, run for reelection every two years, and tend to specialize in narrower areas of policy. Snobbery and resentment inflame the relationship between the two bodies, each taking pride in its own customs, its own rules, its own history, and its own ideas about how the nation should be governed. Disagreements between the two are common. It is because of those disagreements that many of the nation’s laws are ultimately written in one of the most unusual, most difficult, and least understood institutions of American government: the conference committee.

  For the tax bill, the conference would be crucial. The tax-reform debate had raged for four long years, and both the Senate and the House had struggled mightily to produce their own versions of the legislation. Now, virtually everything that had been done would be put on the conference table for a small group of senators and representatives to dispose of as they pleased. The two tax bills were in many ways mirror images: The House bill closed many corporate tax loopholes, but left the tax preferences used by individuals largely untouched, while the Senate bill made sweeping reforms on the individual side of the tax code, but left many of the biggest corporate tax breaks unchanged. That meant the twenty-two conferees had wide leeway to determine the final shape of the most comprehensive tax-overhaul bill in the nation’s history.

  Legislative conferences have their origins in fourteenth-century England and were also used by some of the colonial legislatures before Congress was created. They came of age in the United States in the mid-1800s, when the Senate and House grew increasingly antagonistic. By the turn of the century, conferences had become so critical that Senator George Norris of Nebraska, one of the legislative giants of the time, called the conference committee a “third house” of Congress and “often the most important branch of our legislature.” Today, says Senator Mark Hatfield, the senior senator from Oregon who as chairman of the Senate Appropriations Committee attended dozens of these testy negotiating sessions, “more legislation is written in conference than in committees. It may be the most significant institution in the whole Congress.”

  Simple or otherwise noncontroversial bills can clear Congress without going to conference. If the differences between the House and Senate versions of a measure are small, they can be worked out by sending the bill back and forth between the two bodies until both find it acceptable. On major tax bills, however, conferences are inevitable. Taxes are not small matters. They alter the finances of countless individuals and corporations, and the conference is the last chance for those interests to soften the blow or boost the benefits. A conference committee is not provided for by the Constitution and is little understood by the public, but it is there that final decisions are made about who bears the tax burden. In often cramped and stuffy rooms, away from the gaze of the public, unpredictable events occur and tax laws are written.

  The interplay of personality—always an important element in the workings on Capitol Hill—takes on magnified significance in conference. Conference meetings are like labor-management bargaining sessions, and the skill and stamina of the lead negotiators can be critical. A clever conference operator, like former Finance Committee Chairman Long, can make the most of these high-pressure dealings. Long once kept secret the fast-approaching date of his own marriage so that he would not lose leverage in a conference. If his House counterparts had known that Long had a deadline, they could have waited him out and forced concessions. They never found out—until Long already had won most of his issues.

  For tax reform, the final decisions would rest largely in the hands of just two men: Bob Packwood and Dan Rostenkowski. The two had little in common: Packwood was a maverick legislator from a largely rural state; Rostenkowski was a machine politician from a big city. Packwood was cerebral, analytical, a collector of rare books and special editions; Rostenkowski was physical, a man of gut instinct, a devotee of red meat and golf. Packwood was new to his chairmanship and still uncertain of how to wield the power that accompanied it; Rostenkowski was accustomed to his high-ranking post
and well-trained in the mechanisms of power. The differences in style between the two chairmen were symbolized by the gifts they received from the pro-reform lobby, the Tax Reform Action Coalition: Packwood was given a pair of running shoes; Rostenkowski, a sledgehammer.

  These two, very different men, working mostly by themselves behind closed doors, would serve as the last arbiters for billions and billions of dollars’ worth of tax breaks. Their decisions during a few, short weeks in the summer of 1986 would deeply affect every person and every corporation in America. The clash of their contrasting personalities would shape the tax code for years to come.

  Packwood and Rostenkowski had met in conference before, and the results had been explosive. During a House-Senate conference over the 1984 tax bill, Rostenkowski criticized a fringe-benefit provision favored by Packwood. The red-faced senator—who was not yet chairman—responded by saying in open session that Rostenkowski “doesn’t know what he’s talking about.” The observation might have been true: Rostenkowski was not always quick to grasp complicated tax matters. But it was an unwise comment for the Oregon lawmaker to make to the powerful House chairman. Rostenkowski said nothing, but with his head half-buried in his hand, his pinky ring exposed beneath his big chin, he slowly shifted his eyes to where Packwood was seated. The public insult had been registered, and the retribution was swift. Packwood lost the fringe-benefit issue.

  The two clashed again in late 1985, when they both served on a major conference panel chaired by Rostenkowski. The bill was a budget measure that included a provision to finance a Superfund for cleaning up toxic waste. Packwood’s Finance Committee wanted to pay for the Superfund by imposing a broad-based excise tax on manufacturers. Rostenkowski opposed such a broad tax, but many of his own House conferees sided with the senators. Eager to resolve the issue, Packwood called for a meeting of the conferees without asking Rostenkowski’s approval. An angry telephone call from the House chairman quickly followed.

  “You shouldn’t have called the conference meeting without my permission,” Rostenkowski growled into the phone.

  “You can’t control your conferees on Superfund,” Packwood shot back. “They’ve got the votes to override you.”

  “You may be right, but you still shouldn’t call the meeting without my permission.”

  “Well, I have called the meeting, I am calling the meeting, and we are going to put it [the broad-based tax] in the Superfund title over your objection—because we can.”

  The conversation came to an abrupt end when Rostenkowski slammed down the receiver.

  The tax conference of 1986 seemed destined to continue this rocky relationship. Even before it got underway, a controversy erupted over who would chair the House-Senate committee. By tradition, the chairmanship of tax conferences alternates between the chairman of the Ways and Means Committee and the chairman of the Finance Committee. In early June, when it was Packwood’s turn to chair a conference on a bill involving water projects, the senator tried to decline the post, hoping to leave himself poised to become chairman of the upcoming tax-reform conference. The ploy failed, and Rostenkowski became chairman of the all-important conclave instead, but the incident, at least for a while, deepened the gulf that already separated the two men.

  Soon after the Senate passed its tax-reform bill, Packwood again snubbed his House counterpart. At a joint appearance before a group of women lobbyists and tax aides, each of the chairmen was asked to speak for a few minutes about tax reform. Packwood went first, talking for twenty-five minutes while Rostenkowski waited and listened. Then as Rostenkowski began his three-minute remarks, Packwood slipped out, unwilling to stay and hear his House colleague. Recognizing that trenchlike warfare lay ahead, the group presented each chairman with a World War I combat helmet. With these two in charge, the monumental task of melding two versions of tax overhaul was not going to be easy.

  The first step for both chairmen was to choose their fellow conferees. It was an important decision; the final tax bill would reflect the preferences of this select group. Rostenkowski’s conferees had undercut his position on the excise tax in the Superfund conference in 1985; neither he nor Packwood wanted a similar situation to arise during the upcoming tax conference. To succeed at their delicate task, both men needed to have fellow negotiators who would support them and give them room to make necessary deals. Rostenkowski wanted a majority of his conferees to be unswervingly loyal to him; Packwood knew he could not count on that kind of unquestioning support from the senators on his panel, but he wanted at least to be certain that his conferees supported reform.

  By tradition, the chairman and the ranking minority member of the committees chose the conferees, and the speaker of the House and presiding officer of the Senate supported those selections in their respective chambers. Conferees were usually chosen according to their seniority on the committee, but when Rostenkowski came to see Speaker O’Neill in July 1986 to discuss the tax conference, the white-haired speaker asserted his authority.

  “I want Gephardt on there,” O’Neill said. Representative Gephardt had little seniority on the Ways and Means panel and had not been a major player in drafting the tax bill. But O’Neill knew that having Gephardt on the panel would highlight the Bradley-Gephardt bill and help focus attention on the Democrats’ role in reform.

  “I can’t put him on there,” Rostenkowski said. “I’ve gone on seniority.”

  The speaker’s voice grew firm. “Dan, let me tell you something. Wilbur Mills never said that to Sam Rayburn when Sam Rayburn was speaker of the House. The rules say that the speaker shall name the conferees. I am the one that has the right and I want Gephardt on there.”

  “If you feel that way about it,” replied Rostenkowski, “then you can name the whole committee.”

  “Look,” said O’Neill, “this is a Democratic bill; we can’t afford to have it defeated. I want you to put on members of the committee that you think will support it.”

  Rostenkowski then combed the committee list, choosing those most likely to support reform, tossing out those most likely to oppose it, regardless of their seniority. He passed over the committee’s second-ranking Democrat, Sam Gibbons of Florida, who had challenged the chairman vociferously and repeatedly during the markup the previous year. He also skipped others, such as his old pal Ed Jenkins of Georgia, who he knew would fight him on some important provisions. Instead, he chose younger committee members, like his Chicago protégé, Marty Russo, and Donald Pease of Ohio, a staunch and hardworking advocate of tax overhaul. Other Democratic conferees included J. J. Pickle of Texas, Fortney “Pete” Stark of California, and Charles Rangel of New York. The Republicans were allowed to choose four conferees—senior Republican John Duncan of Tennessee, Bill Archer of Texas, Guy Vander Jagt of Michigan, and Philip Crane of Illinois—but these members were destined to be irrelevant in the final stages of drafting the bill, just as they had been during the House negotiations.

  For Packwood, finding loyal foot soldiers was more difficult. The senators were an independent crowd. Nevertheless, Packwood too decided to lay aside seniority to get members of his committee who were most loyal to his package. He particularly wanted Bradley on board, and also Moynihan, who had supported his efforts in putting together a reform bill. He asked Long, the ranking Democrat, to include both of these senators among the Democratic conferees. Long, fearing that Bradley and Moynihan might team up to oppose his cherished oil tax breaks, agreed to pick the two, provided Packwood included Republican Malcolm Wallop, an oil-industry supporter, among his conferees. The deal was then set: The conferees would include the core-group senators—Packwood, Chafee, Danforth, Wallop, Moynihan, and Bradley—as well as Long, Dole, William Roth of Delaware, Lloyd Bentsen of Texas, and Spark Matsunaga of Hawaii.

  The Senate and House conferees were a study in contrasts. Most of the senators were millionaires, and many had been educated in Ivy League schools. Moynihan was a former Harvard professor and a former ambassador to India and to the United Nation
s. Chafee was a former governor of Rhode Island and secretary of the Navy during the Nixon administration. Danforth was a Yale-educated lawyer, minister, and heir.

  While the members of the House delegation were as knowledgeable as or more knowledgeable than their Senate counterparts about tax law, they were more down-to-earth. Their numbers included Pete Stark of California, a man of great wealth and sophistication; as well as Donald Pease, a soft-spoken, unassuming representative from a battered rust-belt district; and Marty Russo, the tough-talking Chicago arm-twister. The senators sometimes looked down their noses at their House counterparts; one senator noted with a touch of disdain, for instance, that Russo sometimes wore short-sleeved shirts under his sports coat. For their part, the House members thought the senators were haughty and ill-prepared.

  On top of these differences in style were differences in substance. The senators thought the House conferees were naïve and feared that the House’s heavy-handed corporate reforms could cause serious damage to the economy. The Democratic House members thought the senators had become too caught up in their own “capital formation” rhetoric and that they did not have the stomach for real reform.

  Aware of the differences that separated them and their bills, Packwood and Rostenkowski at first acted like two wrestlers on the mat, circling each other, waiting for the other to move first. They were anxious and uncertain about how to approach the opponent.

  Then on June 27, three days after the Senate approved its bill, Rostenkowski made the first move. The House chairman recognized the significance of Packwood’s surprising legislative rout. Even though the House bill had larger tax cuts for most Americans, the Senate’s low 27-percent top rate (32-percent, counting the phantom surtax) had captured the public’s imagination. Speaking in Boston on June 27, Rostenkowski said: “If there is a lesson to be learned from the Senate victory, it’s the power of low rates…. I would be willing to shoot for the Senate’s top rate as long as we approach the House’s after-tax income distribution.”