The Presidency
Ronald Wilson Reagan, the 40th president of the United States, sounded the major theme of his administration moments after he took the inaugural oath from Chief Justice Warren E. Burger on a bright, warm January day. Dressed in formal morning dress, symbolizing a return to the elegance shunned by Jimmy Carter, Reagan declared: 'Government is the problem.'
With those words, the new president parted company with all of his predecessors, Republican and Democratic alike, since Franklin D. Roosevelt, who, in the depths of the Great Depression nearly 50 years before, established the federal government's role as protector of Americans' economic and social welfare.
Reagan was antigovernment, for the most part, except when it came to military spending. His chief aims in his first year in office were to reduce overall government spending (compared to what it otherwise would have been), reduce taxes, reduce federal regulation, and keep a tight check on the growth of money and credit. In pursuing these goals, the new president set out to dismantle or pare down many of the social programs established during the previous two decades. Another aim, to 're-arm America,' was a natural outgrowth of Reagan's strong distrust of the Soviet Union, which seemed to be a keystone of his foreign Policy. (See also UNITED STATES: Foreign Relations and National Defense.)
An asset in Reagan's quest was his exceptional ability to communicate by way of television with the American people. His long experience before the cameras as a film and television performer, together with a folksy, boy-next-door manner, contributed to his success in gaining enactment of much of his economic program.
The Reagan team.
Many of those who served under Reagan when he was a two-term governor of California (1967-1974) were given important posts in his administration. Among the cabinet members, Defense Secretary Caspar W. Weinberger had the longest relationship with the president and had served as California's director of finance during Reagan's governorship. In the White House, Edwin Meese III carried the relatively meaningless title of counselor to the president but clearly was first among equals on the staff, based partly on his service as a top Reagan aide in California. Michael K. Deaver, another Reagan intimate who had been the governor's director of administration (essentially a personal aide), also was a top White House adviser, with the title deputy chief of staff. Meese, Deaver, and White House Chief of Staff James A. Baker III, who had no previous connection with Reagan (he had managed George Bush's campaign for the 1980 Republican presidential nomination), formed a 'troika' that the president relied on heavily.
For his cabinet, Reagan chose primarily persons whom he did not know well at the time of their appointment. Perhaps the most controversial was Interior Secretary James G. Watt, who quickly became a target of environmental groups as he undertook a series of policy reversals, aimed largely at promoting mineral and other resource development on federal land. Faced with demands for Watt's resignation, Reagan put Vice-President Bush rather than Haig in charge of crisis management. Another pivotal figure was David Stockman, the young former U.S. congressman who was appointed to the cabinet-level post of director of the Office of Management and Budget. With his command of budget detail, Stockman was the key figure in working out sharp cutbacks in the fiscal 1982 budget and winning support for them in Congress. Late this year, however, the administration was seriously embarrassed when candid remarks Stockman had made for an Atlantic interview—casting doubts on the program he had helped to shape—were published. Reagan decided to keep Stockman on, saying that he remained 'indispensable.'
Good fortune.
One factor in Reagan's early successes in the White House was sheer luck. Even as he took the oath of office on January 20, for example, Iran was releasing the 52 Americans who had been held hostage for 14½ months, thus ending a period of national embarrassment that had plagued his predecessor, Jimmy Carter. Fortune smiled on Reagan in other ways. A glut of oil on world markets helped keep prices for energy from increasing as rapidly as in the previous two years, while bountiful harvests checked rises in food prices. These factors helped keep the rate of inflation in the United States below the double-digit level for much of 1981.
The Reagan style.
The president's approach to his job differed considerably from that of his recent predecessors. Reagan pictured himself more as a chairman of the board, ruling impartially among opposing factions within his cabinet, than as a dynamic chief operating officer, immersed in day-to-day details of government. He limited the hours he spent in the Oval Office, giving rise to criticism that he was a nine-to-five type executive who was not fully aware of important issues in both foreign and domestic policy. Reagan's 28-day summer vacation, spent mainly at his secluded 688-acre ranch in the Santa Ynez mountains near Santa Barbara, Calif., was one of the longest periods spent away from Washington by any president in modern times. When U.S. Navy fighters in the Mediterranean shot down two attacking Libyan jets on August 19, Reagan was not awakened to be informed of the incident for several hours; he later defended Meese's decision to let him sleep, saying that there had been no presidential decision to make at that point, anyway.
Economic program.
A significant element in Reagan's early effectiveness was his ability to focus his administration's, the Congress', and the public's attention on a few key issues. From the time that he proclaimed a 'new beginning' in his inaugural address, he concentrated on what he termed an economic recovery package, whose principal ingredients were curbs on government spending and lower taxes. The package reflected Reagan's belief in supply side economic theory, which held that if taxpayers kept more of their income, savings and investment would increase, spurring economic growth and general prosperity without government intervention.
In his first official act, the president imposed a freeze on hiring of civilian employees by all executive departments and agencies. His faith in free market forces was reflected by his abolishing the Council on Wage and Price Stability, first set up by President Gerald R. Ford in 1974 to urge restraint on labor in wage negotiations and on management in the setting of prices. The council had been a failure, Reagan said, and government had no business interfering in collective bargaining or trying to restrain prices by 'jawboning.'
In the same spirit, Reagan signed an executive order on January 28 to end remaining price controls on domestic crude oil and petroleum products. The controls, first imposed by President Richard M. Nixon in 1971, were scheduled to expire on September 30 anyway, but Reagan felt that they were interfering unduly with the free market and thus restricting exploration for oil.
Working closely with Stockman, Reagan presented to Congress a plan for the largest reductions in history in spending for nondefense programs (reductions from what would have been spent on these programs in the absence of new legislation). He promised to protect those he termed the 'truly needy' by retaining a 'social safety net' of government benefits. Funding for a host of social welfare programs, however, including food stamps and Aid to Families With Dependent Children, was to be reduced. Overall, Reagan requested cuts totaling $44 billion from the fiscal 1982 budget that had been submitted by President Carter.
On another front, Reagan proposed a 30 percent across-the-board cut in individual income taxes over three years, despite Democratic claims that it would be inflationary, add to the federal deficit, and benefit wealthy Americans more than others. He also sought sharp reductions in business taxes, in order to spur investment.
After his economic program was announced, Reagan's ratings in public opinion polls slipped. The Gallup Poll for mid-March, for example, indicated that 59 percent of the people thought he was doing a good job and 24 percent disapproved of his conduct in office. While this might seem favorable, it contrasted sharply with figures of 75 percent and 9 percent for Carter, 65-9 for Nixon, and 73-7 for John F. Kennedy at corresponding periods in their presidencies.
While the budget and tax fights raged on Capitol Hill, Reagan narrowly escaped assassination. Leaving a Washington hotel after addressing a labor union group on March 30, he was shot in the chest. His press secretary, James S. Brady, was shot in the head, and a Secret Service agent and a police officer also were wounded. Police immediately arrested John Warnock Hinckley, Jr., 25, and accused him of the attempted assassination.
Secret Service agents quickly pushed Reagan into his waiting limousine, which sped him to George Washington University Hospital, where he received a series of blood transfusions and underwent major surgery to remove the bullet.
During his 12 days in the hospital, Reagan's popularity soared. In his first public appearance after the shooting, before a joint session of Congress on April 28, he received a tremendous ovation, then pleaded, in a nationally televised address, for prompt passage of his budget cuts. On May 7, he won a major victory, when 63 conservative House Democrats joined 190 Republicans to defeat the leadership in the Democratically controlled House on a showdown vote on a budget resolution. A few days later, the Republican-controlled Senate approved a similar budget measure, by a 78-20 vote.
The president suffered a setback on a separate but related front later in the month, after he unveiled a series of proposals to reduce social security benefits by more than $46 billion over the next five years (although without reducing existing retirement payments). The Reagan administration said such reductions were necessary to protect the solvency of the social security system, but the Senate disagreed. By a vote of 96-0 on May 20, it adopted a nonbonding resolution opposing any future cut in benefits for early retirees and objecting to the whole Reagan plan on the grounds that it would save more money than was necessary to ensure the financial soundness of the social security system.
Reagan's original budget-cutting plan emerged from Congress essentially intact, however. By the end of July, Congress had cleared a so-called reconciliation bill that did most of what Reagan had asked in the way of limiting federal programs. On the tax bill, he compromised to a greater extent, largely with the conservative Democrats (who became known as the boll weevils, since many were from the South) who held the balance of power in the House. Reagan scaled back his proposed first-year tax cut from 10 percent as of July 1, 1981, to 5 percent as of October 1. In addition, he endorsed additional tax cuts for working couples, wealthy investors, oil royalty owners, and other groups to sweeten his package.
Reagan met often with members of Congress and spent hours on the telephone to seek their support on the tax bill. After he asked Americans, in a nationally televised speech on July 27, to write their congressmen urging passage of his plan, Congress again gave him what he wanted. The key vote in the House—the major battleground—was 238-195, with 48 Democrats joining 190 Republicans on the winning side. The final tax bill cleared Congress on August 4.
Thus, in just six months in office, Reagan had achieved a dramatic turnabout in the direction of government. Congress had passed unprecedented spending cuts for the fiscal year starting October 1, 1981, and also had approved the largest tax cut in U.S. history, lowering federal revenues by nearly $750 billion over the next five Years.
O'Connor appointment.
Outside the economic area, Reagan scored a political success with his selection of Sandra Day O'Connor, a 51-year-old Arizona appeals court judge, to be the first woman justice in the history of the Supreme Court. (An opening on the Court arose when Justice Potter Stewart retired.) Reagan's choice of O'Connor, a follow-up to a campaign pledge to place a woman on the high bench, was widely praised, although sharply criticized by fundamentalist religious groups and antiabortion leaders on the grounds that she was antifamily and had once voted for a proabortion amendment while a member of the Arizona legislature. O'Connor said in her Senate confirmation hearings that she was personally against abortion. She was confirmed unanimously by the Senate and took her place on the Court in late September.
Air controllers' strike.
In a controversial decision, Reagan ordered the dismissal of thousands of air traffic controllers employed by the Federal Aviation Administration, after the air controllers' union went on strike August 3. Regan declared there would be no negotiations during the walkout, illegal under federal law, and refused to consider amnesty for the strikers. As a result, the nation's airlines were forced to curtail their flights by an average of 25 percent and were expected to have to do so through much of 1982. Pending the training of new controllers, the air control system was run by supervisors, nonstriking controllers, and military controllers temporarily assigned to the FAA. AFL-CIO leaders accused Reagan of 'union busting,' widening the breach between the administration and organized labor. Opinion polls indicated that most Americans supported the president's unprecedented dismissal order, in part because the controllers, who averaged $33,000 a year in salary, were seeking a $10,000 annual increase when they struck.
Opposition and economic problems.
The president's handling of the air controllers' strike was one factor prompting a protest march that drew more than a quarter of a million persons to Washington, D.C., on September 19, designated Solidarity Day by its chief sponsor, the AFL-CIO. It was one of the largest protest marches ever held in the nation's capital, as labor and civil rights groups joined in condemning a number of administration policies, including the cuts in funding for many social welfare programs. Reagan was out of town at his Camp David, Md., Retreat while the demonstration leaders denounced his economic program as favoring the rich at the expense of the poor.
The march occurred just as other critics of Reaganomics—as Reagan's economic program was widely called—were beginning to raise their voices. On Wall Street, stock prices started to slump in mid-August, reflecting investors' fears that Reagan's plan would not keep annual budget deficits from rising to $60 billion or more. Members of Congress on their August visits to home districts heard widespread complaints from farmers, owners of small businesses, and consumers about high interest rates that seemed stuck at near-record levels. Reagan decided to seek additional budget cuts to contain the deficit and to reassure the jittery financial markets that he could balance federal income and expenditures by 1984, as he had promised.
The president declared that even the defense budget, sacrosanct to this point, would no longer be exempt from reductions. After behind-the-scenes clashes between Defense Secretary Weinberger and Budget Director Stockman, however, Reagan proposed only a $2 billion cut in military outlays for fiscal 1982 and a $13 billion total reduction for 1982 through 1984.
Reagan also appeared ready to propose a three-month delay in the 1982 social security cost-of-living increase, to pare spending by nearly $3 billion. However, a chorus of protests from Republican leaders in Congress persuaded him to seek $3 billion worth of new tax increases instead. A key proposal in Reagan's new austerity package was a 12 percent across-the-board cut in federal nondefense spending, on top of the reductions achieved earlier. This cut, plus changes in eligibility requirements for such programs as medicare and medicaid, were projected to save $13 billion in fiscal 1982.
The president encountered increased opposition in Congress, both from those opposed to new spending cuts and from those (including many Republicans) seeking much bigger tax increases to control the budget deficit for fiscal 1982. As recessionary trends became evident in the fall, many economists were predicting that the deficit would exceed $60 billion.
Reagan announced in November that he would stand firm on spending cuts but would wait until early 1982 to give Congress specific requests for reductions in entitlement programs and increases in taxes. He indicated opposition to any large-scale tax increases, while acknowledging that his goal of a balanced budget by 1984 probably could not be achieved.
Awacs sale.
While meeting greater resistance from Congress on his economic program, in late October Reagan once more demonstrated his ability to use the power of his office to achieve his goals, in this case the sale to Saudi Arabia of five airborne warning and control system (Awacs) planes, as well as additional equipment for F-15 fighter planes the Saudis had already ordered from the United States. The sale, which could have been stopped by vetoes from both houses of Congress, was turned down by the House, but heavy lobbying by Reagan, who argued that a defeat on the issue would be a blow to his ability to conduct foreign policy, swayed sufficient votes in the Senate to allow the sale to go through.
White House opulence.
As Reagan sought further cuts in federal outlays for such programs as job training and food stamps, the opulent style of living that he and his wife, Nancy, seemed to prefer became subject to increasing criticism. The inaugural festivities had been the most expensive in history, costing an estimated $8 million. The Reagans had also accepted private contributions of over $800,000 for redecoration of the White House. In addition, Nancy Regan ordered about $200,000 worth of china at nearly $1,000 a place setting, using part of the funds supplied by their wealthy friends. Even the president's favorite candy—the common jellybean—was put into an expensive Waterford crystal jar.
Politics
Reagan in command.
President Ronald Reagan, declaring that he had mandate from his landslide election victory, dominated the course of U.S. politics in 1981, while the Democrats debated the best survival tactics in a new, more conservative era. By the time Congress recessed in late summer, Reagan had won smashing victories on his proposed budget and tax cuts, not only in the Republican-controlled Senate but in the Democratic-led House as well. In the process, he humbled House Speaker Thomas P. ('Tip') O'Neill, Jr. (D, Mass.), who had become a symbol to Republicans of the big-city liberal with discredited political ideas.
For much of the year, Democrats in Congress seemed to watch helplessly, as Reagan dismantled social welfare programs that were products of past Democratic administrations. They did rally successfully against the president's campaign to cut future social security benefits, however, and stiffened ranks against a second round of budget cuts initiated by Reagan in late September.
High interest rates, which severely depressed housing and automobile sales and helped plunge the economy into a recession late in the year, were clearly a political liability for Reagan and the Republican Party by the fall. Representative Guy Vander Jagt (R, Mich.), head of the Republican congressional campaign committee, said the outcome of the 1982 elections was at stake.
Democratic alternatives.
Some Democrats, stung by GOP criticism that their party had run out of ideas, formed the Center for Democratic Policy to think up fresh approaches on major policy questions. Its chairman was Terry Sanford, president of Duke University and former governor of North Carolina.
Major national Democratic figures generally kept a low profile during Reagan's extended honeymoon period. Senator Edward M. Kennedy (D, Mass.) announced January 21 that he and his wife of 22 years, Joan, would get a divorce. The couple had lived apart for some time, although Joan Kennedy had campaigned for her husband in his losing effort to wrest the party's presidential nomination from Jimmy Carter in 1980. The announcement came the day after Reagan, the first divorced man to win the presidency, took the oath of office.
Former Vice-President Walter F. Mondale, who joined a law firm with Minnesota and Washington, D.C., offices, kept alive an interest in the 1984 nomination for president. Former President Carter sharply criticized Reagan in July, in a newsletter sent to former officials of his administration. California Governor Edmund G. (Jerry) Brown, Jr., who had made two tries for the nation's top office, indicated that he would seek a U.S. Senate seat in 1982.
Leaders and tactics.
Both major political parties got new chairmen in 1981. The Republicans elected Reagan's choice, Richard Richards of Utah, to head the party, after Bill Brock resigned to become the U.S. special trade representative. Richards, a lawyer, stirred controversy by criticizing ultra-conservative, independent political action committees for running sharply negative television ads against Democratic senators up for election in 1982. 'They create all kinds of mischief, and they're not responsible to anyone,' Richards said. However, White House political adviser Lyn Nofziger defended the groups, particularly the National Conservative Political Action Committee, known as 'Nick-pac,' on the grounds that they raised legitimate doubts about Democrats.
NCPAC naturally became a target of many prominent Democrats, who charged that its ads distorted voting records. In announcing the establishment of a group called Democrats for the 80's, to counter NCPAC's tactics, Democratic party activist Pamela Harriman accused the NCPAC of making 'a travesty of civility, fair play, and accountability.'
For its part, the Democratic Party named Charles T. Manatt, of Los Angeles, to succeed the retiring John C. White as national chairman. Manatt, who was elected with backing from organized labor, promptly allocated 15 of 25 at-large seats on the Democratic National Committee to union leaders, drawing some fire from blacks and Hispanic groups for the action . He also set up a greatly expanded direct mail campaign.
The party in July named a commission headed by North Carolina Governor James B. Hunt, Jr., to find ways to strengthen the role of elected officeholders in the choice of a presidential nominee and to recommend methods of shortening the primary campaign season, which now stretches from January to June. The former goal went counter to the 'Reform' efforts mounted by liberal Democrats over the past decade. In another decision seen as a rebuff to the party's liberal wing, the Democratic National Committee deceded to reduce the number of delegates at the 1982 midterm convention from 1,600 to 900.
A Republican trend?
The Republicans, despite feeling some unease over the state of the economy, were described as 'very upbeat, very optimistic' about the future by Mary Louise Smith, a former national committee head. Opinion polls indicated that the Republican Party, once regarded as a permanent minority, was gaining adherents steadily while the Democrats lost ground. Population shifts away from the Democratic-dominated cities of the Northeast into the more conservative Sun Belt territory of the South and West lifted GOP spirits. The redistribution of congressional districts as a result of the 1980 U.S. census was expected to benefit traditionally Republican areas.
Despite the dominance of Reagan, no Republican ground swell was disclosed in the scattered 1981 congressional elections. In fact, the Democrats picked up a seat in Mississippi this June, when liberal Wayne Dowdy defeated favored Republican Liles Williams, who had Reagan's endorsement. On the other hand, the White House persuaded Representative Eugene V. Atkinson of Pennsylvania to switch from the Democratic to the Republican Party, and other conservative Democrats were expected to cross over before the 1982 elections.
Congress
The first session of the 97th Congress responded to the election mandate of 1980 by assenting to a sweeping reorganization of federal economic policy—the most abrupt change in direction in American government since the New Deal.
With a Republican majority in the Senate for the first time since 1955 and a more conservative, though still Democratic-controlled, House of Representatives, new President Ronald Reagan steered the first phase of his economic recovery program through Congress in less than seven months. Republicans and conservative Democrats joined to endorse Reagan's philosophy of less government spending and less government intervention in people's lives.
In enacting the largest package of budget reductions and tax cuts in U.S. history, Congress and Reagan set an example of partnership in 1981 unmatched since the Great Society days of President Lyndon B. Johnson. A comparison with the first session of the 95th Congress—the first year of President Jimmy Carter's administration—was equally as dramatic. Within six months of taking office in 1977, Carter had alienated many legislators of his own party by a series of miscalculations and faux pas from which he never fully recovered. Reagan, on the other hand, immediately impressed Capitol Hill with the professionalism of his White House staff, especially his team of seasoned congressional liaison lobbyists, and his own easy, congenial manner. Unlike Carter, Reagan developed many friendships in Congress. A close friend of long standing, Republican Senator Paul Laxalt of Nevada, assumed an informal leadership role, becoming the president's 'eyes and ears' in the Senate.
Reagan was fortunate to begin his presidency on the day the American hostages in Iran were released. His program in Congress was also helped by an easing of the inflation rate, a slight dip in unemployment, and a leveling off of gasoline prices. All these factors prolonged Reagan's 'honeymoon' in Congress until September, when his call for additional spending cuts, unfavorable economic news, and controversial foreign policy and defense decisions led to a decline in congressional support.
The 1981 session dealt almost exclusively with the Reagan ecomomic program. Congress had little time to study other matters, including the so-called issues—abortion, school busing, affirmative action, school prayer—that were so important to New Right conservatives. Early in the year, the administration and the new Republican leadership in Congress had agreed to put off consideration of these divisive issues until after the new economic plicy was in place.
An exception to the preoccupation with the economy was defense, which Reagan virtually exempted from the budget-cutting ax. In fact, the Defense Department was the only sector of government to receive a substantial increase in spending.
Leadership changes.
With Republicans controlling the Senate by a 53-46 margin over the Democrats (there is one independent, Harry F. Byrd, Jr., of Virginia), Howard H. Baker of Tennessee, the minority leader in the last Congress, replaced Robert C. Byrd of West Virginia as majority leader. Although Baker had angered conservatives in earlier years by his support for the Panama Canal treaties and his stand on some other issues, he was unopposed at the GOP's caucus in December 1980. In the only contested Senate leadership race, James A. McClure of Idaho defeated John Heinz of Pennsylvania, 33-20, for the chairmanship of the Senate Republican Conference, a policy-making body. Another change was the election of Strom Thurmond (R, S.C.) as Senate president pro tempore, replacing John C. Stennis (D, Miss.).
Although they picked up 33 seats in the 1980 election, Republicans remained the minority party in the House of Representatives. There were 243 Democrats and 192 Republicans when the new Congress convened January 5. Democrats reelected Speaker Thomas P. O'Neill, Jr., of Massachusetts and Majority Leader Jim Wright of Texas. In one of the few races for key committee chairmanships, Representative James R. Jones (D, Okla.) was elected chairman of the House Budget Committee, defeating Representative David R. Obey (D, Wis.) by a 121 to 116 vote.
Most of the action was on the GOP side, as Republicans revamped their entire top leadership. Robert H. Michel of Illinois was elected minority leader, besting Guy Vander Jagt of Michigan by a vote of 103-87, and Jack F. Kemp of New York was elected chairman of the Republican Conference over John H. Rousselot of California by a 107-77 vote. Trent Lott of Mississippi was elected minority whip, the position held by Michel in the 96th Congress, defeating Bud Shuster of Pennsylvania, 96-90. And Richard B. Cheney of Wyoming defeated Marjorie S. Holt of Maryland, 99-68, for the chairmanship of the Republican Policy Committee.
Though they retained numerical control of the House, the Democrats' ability to direct the legislative process was thrown into doubt by the pro-Reagan sympathies of several dozen Southern and Western Democrats. Even before the new Congress convened, a group of 34 conservative members pressed Speaker O'Neill for a greater voice in party affairs, including a demand for more conservatives on key committees. A group of 47 House Democrats later banded together in an informal group calling itself the Conservative Democratic Forum. Most of the members came to be known s the 'boll weevils' for defecting to the GOP on the budget and tax cut bills.
The 97th Congress was younger on average than its predecessor. There were two more women—19 in the House, two in the Senate—and two more blacks—17 compared to 15.
Reagan economic program.
The main elements of the president's ambitious economic package—a budget blueprint for the 1982 fiscal year, massive long-term cuts in government spending, and a 25 percent across-the-board cut in personal income tax rates—were on Reagan's desk for signature by early August.
Budget cuts.
The spending reductions were achieved through a two-stage legislative strategy masterminded by Reagan's director of the Office of Management and Budget, David A. Stockman. The result was a cut of almost $32.4 billion in the fiscal 1982 budget proposed by Carter, which affected hundreds of federal programs and even eliminated some of them. For the period 1981-1984, total cuts in federal outlays were estimated at $130 billion.
In February, the president appealed to Congress to give America a new economic beginning, calling for budget cuts of $41.1 billion in the fiscal 1982 spending requests submitted by President Carter before he left office. Republican leaders agreed to use the budget reconciliation procedure set forth in the 1974 Budget Act as the mechanism by which Congress would consolidate the governmentwide cuts in one package. On March 23, the Senate Budget Committee voted to require 14 authorizing committees to achieve spending reductions of $36.4 billion for fiscal 1982. On April 16, the Democratic-controlled House Budget Committee approved a budget resolution calling for savings of $15.8 billion in fiscal 1982 and $61.3 billion for the period 1982-1984.
On May 7, the House, in the first of Reagan's string of impressive victories on economic policy, rejected the Democrats' modest package of budget cuts in favor of the Reagan-backed alternative known as Gramm-Latta, for its sponsors—Representatives Phil Gramm (D, Texas) and Delbert L. Latta (R, Ohio). Gramm-Latta called for fiscal 1982 savings of $36.6 billion and provided for the president's three-year tax cut proposal. On the 253-176 vote, 63 Democrats joined 190 Republicans to insure passage. The House version called for a total budget of $689 billion and a projected deficit of $31 billion for fiscal 1982. On May 12 the Senate, by a 78-20 vote, passed a budget totaling $700 billion and including a $50.5 billion deficit. Two days later, House-Senate conferees agreed on a final budget of $695.5 billion with a $37.6 billion deficit. Congress gave final approval to the budget resolution in late May.
In mid-June, the House and Senate Budget committees began drafting a reconciliation bill to implement the budget resolution. The Senate approved cuts of $38.1 billion on June 25. The next day, the House gave Reagan his second major budget victory by approving, 217-211, a Republican-drafted bill enumerating $38.2 billion in budget cuts. On the crucial vote making possible consideration of the Republican version, 29 conservative House Democrats joined 188 Republicans to pass the measure. During July, the administration revised its spending and revenue projections. The final agreement reached by conferees on the reconciliation package provided for spending cuts of $35.2 billion for fiscal 1982 and $130.6 billion for fiscal years 1981-1984.
Few nondefense programs were spared the budget ax. Among the hardest hit were social welfare programs, including social security, Aid to Families with Dependent Children, food stamps, school nutrition programs, and CETA (Comprehensive Employment and Training Act) programs. Savings also were made by consolidating social programs into block grants administered and controlled by the states. Thirty education programs were consolidated into a block grant, although Congress insisted on retaining control of the more expensive ones. Over 20 health programs were combined into four block grants, but Congress again insisted on keeping some programs separate under federal control.
The Department of Energy also had its budget slashed sharply. Numerous alternative energy projects and fuel assistance programs were eliminated or drastically curtailed. Others, such as those giving the president certain powers to make fuel allocations during emergencies and to ration gasoline, were eliminated.
Spared the budget ax was most of the medicaid program, as Congress refused to go along with the president's request to put a ceiling on federal contributions to the states for medicaid reimbursements if they failed to keep medicaid expenses within targeted limits. In addition, political pressure appeared likely to force the restoration of at least part of the minimum social security benefit.
Reagan failed to gain some of his other requests as well. One of his priorities was to establish user's fees for persons or businesses who used federally maintained facilities, but Congress refused to go along. Congress also did not come to grips with the hidden, or 'uncontrollable,' expenditures in such areas as the various social security programs, medicare and medicaid, civilian and military pensions, and certain unemployment and welfare programs. Together, these areas accounted for about one-third of the federal budget. Reagan himself promised not to cut some of these 'social safety net' assistance programs for the truly needy.
Tax cut.
Gaining congressional acceptance of a three-year tax cut—the centerpiece of Reagan's economic program—proved to be a tougher challenge for the president than cutting spending. Passage required an all-out White House lobbying effort to obtain the votes of enough House Democrats to overcome the Democratic leadership's strong opposition to major portions of the plan.
The tax cut idea also came from the 1980 presidential campaign, when Reagan embraced so-called supply-side economics, an unorthodox theory for reducing inflation and stimulating the economy. According to the theory, a comprehensive tax cut would induce people to save, which in turn would provide the capital to increase productivity, thus creating new jobs, lowering unemployment, and reducing the rate of inflation. The legislative vehicle for this program was the Kemp-Roth tax cut bill drafted in 1980 and backed by Reagan with modifications. The plan underwent further changes in 1981 during the legislative maneuvering between Congress and the White House. Democrats proposed a less generous tax cut and skewed the reductions to those in the lower tax brackets.
To win over needed Democratic support in the House, the administration added various 'sweeteners,' including tax breaks for oil producers, to persuade Southern Democrats to bolt their party. Despite the House leadership's efforts to stem the Reagan lobbying, the GOP-conservative Democratic coalition prevailed, giving Reagan a 238-195 victory on the tax bill July 29. This time, 48 Democrats joined 190 Republicans to provide the margin. In the Senate, the vote was 89-11, with 37 Democrats joining 52 Republicans.
Besides the three-year, 25 percent reduction in individual tax rates, the Reagan measure contained a significant provision never before approved by Congress: indexing of income tax rates to offset the effects of inflation, beginning in 1985. It also provided for accelerated tax write-offs for business investments and special-interest benefits added to ensure congressional approval. Reagan signed both the budget and tax bills on August 13.
September proposals.
Hardly had the euphoria of August subsided when new fiscal concerns threatened to unravel the administration's program. The White House acknowledged that further steps would be needed to keep the 1982 deficit from exceeding the $42.5 billion figure that had been projected in July. Reagan vowed to keep the deficit from getting any higher, and on September 24 he addressed the nation to announce that further cuts of $13 billion as well as $3 billion in additional taxes would be needed. Defense cuts were also to include an across-the-board reduction of 12 percent in nonmilitary appropriations.
House Speaker O'Neill said the president would have 'tremendous problems' getting the new round of cuts through Congress. Reagan's new requests also met resistance from a group of moderate Republicans, mainly from the Northeast and Midwest. Known as the 'gypsy moths,' they had supported the president in the spring on the assurance that domestic programs of interest to their constituencies would be spared further cuts. Meanwhile, many conservatives in Congress called for much higher tax increases than Reagan had proposed, to help move toward a balanced budget.
The president said in November that he would wait until early 1982 to ask for any tax increases or for specific changes in federal benefits programs, which had been expected to provide about $3 billion of the spending cuts he wanted. However, Reagan indicated he remained committed to his proposed new spending cuts. He was expected to concentrate his attention on the fiscal 1982 appropriations bills pending in Congress late in the year, some of which called for expenditures exceeding even the figures approved by Congress in the reconciliation bill passed in the summer.
Defense.
During Reagan's 'honeymoon' period with Congress, whatever misgivings some members may have had about the size of the proposed military buildup were overwhelmed by the outpouring of support on Capitol Hill. In revising Carter's last budget, Reagan added $8.1 billion for defense spending in fiscal 1981 and even larger increases for subsequent years. The closest congressional critics could come to blocking the defense plan was on an amendment offered in the House to the annual defense weapons procurement bill. Rejected by a wide margin was a proposal to trim $8 billion from nonessential military items and cut waste.
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