by H. W. Brands
Congress wasn’t listening, not yet. The House and Senate bills went to the largest reconciliation committee in American history, comprising 72 senators and 183 representatives. The discussions there recapitulated the arguments made in the separate houses, with the added wrinkle that the expectations and sensitivities of the participants confusingly reflected the traditions of the two houses simultaneously instead of each separately. The Democrats dragged out the process, hoping for distraction from the public and perhaps more missteps by the administration.
Reagan got to know Tip O’Neill better. O’Neill could swap Irish stories with Reagan, but he was all business when it came to politics. “Tip O’Neill is getting rough,” Reagan observed in his diary. “Saw him on TV telling the United Steel Workers union I am going to destroy the nation.” On another day O’Neill took his complaint to Reagan directly. “Tip was bluster on the phone and accused me of not understanding the Constitution—separation of powers etc.” At issue on this occasion was Reagan’s proposal to expand state control of programs funded by the federal government. O’Neill opposed it, arguing that Congress had the obligation to oversee spending of money federal taxes raised. “Claims Congress would be abdicating its responsibility,” Reagan jotted. The president disagreed. “In truth, Washington has no business trying to dictate how states and local governments will operate these programs.” But Reagan expected nothing different from O’Neill. “Tip is a solid New Dealer and still believes in reducing the states to administrative districts of the federal government. He’s trying to gut our program because he believes in big spending.”
O’Neill’s bluster wasn’t without effect. The Democrats held up the tax bill long enough that Reagan felt compelled to bargain. They wanted a smaller tax cut in the first year; in exchange they would accept a reduction in the top tax rate on unearned income, from 70 percent to 50 percent, which Reagan wanted but hadn’t proposed. “I’ll reluctantly give in,” the president noted to himself, “provided they’ll accept the 3-year across the board cut which will be 5-10-10 instead of the 10-10-10 we originally proposed.” The old negotiator in Reagan quietly smiled. “I’ll hail it as a great bipartisan solution. H--l! It’s more than I thought we would get. I’m delighted to get the 70 down to 50. All we give up is the 1st year 10 percent beginning last January to 5 percent beginning this October. Instead of 30 percent over 3 years (36 months), it will be 25 percent over 27 months.”
Yet even with this compromise, the tax and budget bills moved slowly. “Jim Wright is playing games,” Reagan observed of the House majority leader from Texas. Wright was revisiting the Social Security issue, condemning the administration for wanting to eliminate the floor under pay ments to individuals, which remained in both the House and the Senate versions of the budget bill. “It is a political trick aimed solely at creating a 1982 election year issue for the Democrats,” Reagan remarked. Senate leaders were throwing the issue back to the White House. “Sen. Baker said I could fight or retreat—he’s not sure we can win either on the floor or in the conference committee.” Reagan vowed to fight it out. “If I retreat, the gains we’ve made in lowering inflation will be lost. It will be taken as a test of my determination and looked upon as a sign that I’ll back down on the tough decisions. Well, I have no intention of retreating; I’ve sent a letter to our leaders on the hill informing them that early in August I’ll go on TV to discuss the Social Security problem. I think this will shake Jim Wright more than a little.”
In fact he didn’t wait until August. Reagan appreciated his own gifts, and he recognized that his ability to reach voters, to speak to them in terms they understood and felt, was his administration’s most potent weapon. Each time he had spoken on the economic package, he had moved the measure forward; one more blow and the logjam should be broken.
“I’d intended to make some remarks about the problem of Social Security tonight,” he told a national audience in the final week of July. “But the immediacy of congressional action on the tax program, a key component of our economic package, has to take priority.” This bit of rhetorical indirection—he had intended all along to speak about the economic package—allowed him to rebut an argument involving Social Security that was being made by opponents of the economic package. “I’ve been deeply disturbed by the way those of you who are dependent on Social Security have been needlessly frightened by some of the inaccuracies which have been given wide circulation.” Reagan sought to allay the fears with a straightforward promise. “I will not stand by and see those of you who are dependent on Social Security deprived of the benefits you’ve worked so hard to earn. I make that pledge to you as your president. You have no reason to be frightened. You will continue to receive your checks in the full amount due you.”
Tip O’Neill and other Democrats doubtless bridled at Reagan’s misrepresentation of their position. Their complaint was not that current recipients of Social Security would be shortchanged but that future recipients would receive less than they were slated at present to receive. But the Democrats had to admire Reagan’s rhetorical sleight of hand; he had the audience and they didn’t.
Reagan went on to lampoon the substitute tax bill promoted by the House Democratic leaders. “If I could paraphrase a well-known statement by Will Rogers that he had never met a man he didn’t like,” he said, “I’m afraid we have some people around here who never met a tax they didn’t hike.” The Democratic bill claimed to cut taxes, but the cuts were ephemeral, Reagan said. He produced a chart showing two paths for future taxes. The path produced by the Democrats’ bill was lower than the path of the bipartisan bill favored by the administration, but only for two years. After that, because of inflationary bracket creep and an increase in Social Security taxes, it soared $100 billion above the bipartisan track. “The majority leadership claims theirs gives a greater break to the worker than ours,” Reagan said, with a sly smile. “And it does—that is, if you’re only planning to live two more years.”
Reagan called on the American people to hold their elected officials accountable. “Contact your senators and congressmen,” he said. “Tell them of your support for this bipartisan proposal. Tell them you believe this is an unequalled opportunity to help return America to prosperity and make government again the servant of the people.”
AGAIN REAGAN’S APPEAL worked its magic. The response from voters was overwhelming and positive. The next day Reagan met with members of Congress, urging their support. “All of them told the same story,” he noted afterward. “Their phones in their districts and in the Capitol were ringing off the wall … There is no doubt the people are with us.”
Where the people—and the president—led, Congress followed. The reconciliation deadlock on the budget finally broke; Howard Baker phoned the White House: “The bill is done.” The bargain called for cuts from projected spending of 3 percent for fiscal 1982, 4 percent for 1983, and 4.5 percent for 1984. The cuts ranged widely across the waterfront of federal activity. Schools took a 20 percent hit. Food-stamp funding fell 15 percent. School lunches lost a third, Medicaid a round $1 billion. The Job Corps gave up a fifth of its budget, the CETA program of apprenticeships its whole tab. Support for public housing fell 40 percent, for the arts and humanities 30 percent.
Reagan praised the budget bill as entailing “the most sweeping cutbacks in the history of the federal budget.” He thanked and congratulated all who had made it possible. Then he waited for word on the tax bill.
It arrived the next day. The House debated for seven hours on July 29; at the end of the debate the members cast their votes. Forty-eight Demo crats joined 190 Republicans to give Reagan a solid 238 to 195 victory on the key roll call. The Senate’s favorable decision came as no surprise, though the overwhelming margin, 89 to 11, hadn’t been foreseen. The tax law accomplished nearly all of what Reagan expected and some things he had only hoped for. It cut personal income tax rates by 5 percent in the first year and 10 percent in each of the next two years. The top rate fell from 70 percent
to 50 percent on both earned and unearned income. The lowest rate declined from 14 percent to 11 percent. The tax rate on capital gains was reduced from 28 percent to 20 percent. Business depreciation was accelerated, and the marriage penalty for two-income couples was diminished. The exclusion for estate taxes was increased, exempting all but the very wealthy. The biggest bonus for the administration was the indexing of tax rates to eliminate bracket creep.
Members of the administration clapped themselves on the back for their brilliant triumph. “I cannot imagine anything that will help the economy more,” Caspar Weinberger told Donald Regan, who fully concurred. Reagan, in his diary, called the outcome of the tax and budget battle “the greatest political win in half a century.”
In the moment of victory such self-congratulation was in order. Reagan and his team had indeed won a great battle. Yet there was another battle ahead, and if candor had informed the mood, Reagan would have been required to admit that the coming battle would be harder than the one just finished. Metaphorically speaking, while the tax cuts were written in the political equivalent of stone, the spending cuts were written on paper, in ink that might readily evaporate. A congressional promise to cut taxes can be taken, almost literally, to the bank; a congressional promise to cut spending has to fight its way through committee after hostile committee.
But this was Reagan’s day to celebrate. At a session with reporters at his California ranch, the president said of the new measures: “They represent a turnaround of almost half a century of a course this country’s been on and mark an end to the excessive growth in government bureaucracy, government spending, government taxing.” He praised the Republican leadership in Congress and the Democrats who provided crucial support. The elected officials, though, had simply heeded the popular will. “The real credit goes to the people of the United States, who finally made it plain that they wanted a change.”
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A REPORTER AT THIS session asked Reagan a question unrelated to taxes or the budget. “Mr. President,” he said, “on the air controllers’ strike, the International Association of Air Controllers has called on you to negotiate with PATCO. Why do you continue to believe that you should not negotiate with them?”
The Professional Air Traffic Controllers Organization, or PATCO, represented the men and women who guided commercial planes through American skies. The union had responded to the rampant inflation of the later 1970s and early 1980s as other labor organizations had done: by demanding higher pay. But its position was different from that of many other unions in that the controllers’ employer was not a private corporation but the federal government. The union, in talks with the Department of Transportation during the spring of 1981, sought annual pay increases of $10,000 across the board and a reduction of the workweek from forty hours to thirty-two. The reduction in hours was to acknowledge the peculiar stress of the controllers’ job. But PATCO president Robert Poli and Transportation secretary Drew Lewis agreed, just three hours before the union’s June 22 strike deadline, to a much smaller deal, giving the controllers a $4,000 raise for their existing forty-hour week. Poli endorsed the deal as reasonable, if not everything the union wanted, and he referred it to his members. They took a very different view and rejected the pact by a margin of twenty to one.
Lewis and Poli resumed their talks but got nowhere. “We’re still miles apart and there hasn’t been much bargaining,” the federal mediator reported a month later. Lewis called the union’s latest demands, which were considerably closer to its original position, “nothing short of outra geous.” The union meanwhile set another strike deadline, August 3. As it approached, Poli declared, “The outlook now isn’t good.” Lewis rejoined that a strike by the controllers, as federal employees, would be illegal. “We’re going to bring the full force of the Justice Department down on the traffic controllers,” he warned. “It will probably be both civil and criminal penalties, and the penalties will start immediately.”
Lewis’s position had Reagan’s full backing. The president had followed the talks closely from the start. “Negotiations are still going on to try and head off tomorrow’s illegal strike by the air controllers,” he wrote in his diary just before the first deadline. “I told Drew L. to tell their union chief I was the best friend his people ever had in the White House but I would not countenance an illegal strike nor would I permit negotiations while such a strike was in process.”
When the second deadline passed and the union made good on its strike threat, Reagan took swift and decisive action. “This morning at 7 a.m. the union representing those who man America’s air traffic control facilities called a strike,” Reagan read to reporters on August 3. “This was the culmination of seven months of negotiations between the Federal Aviation Administration and the union. At one point in these negotiations agreement was reached and signed by both sides, granting a $40 million increase in salaries and benefits. This is twice what other government employees can expect. It was granted in recognition of the difficulties inherent in the work these people perform. Now, however, the union demands are seventeen times what had been agreed to—$681 million. This would impose a tax burden on their fellow citizens which is unacceptable.”
Reagan explained that the nation’s air-traffic system continued to operate despite the strike. Supervisors had pitched in and were filling the roles ordinarily occupied by the controllers. “In the New York area, for example, four supervisors were scheduled to report for work, and seventeen additionally volunteered.” Some controllers had resigned from the union to cross the picket lines. Reagan commended these brave individuals’ public spirit, which was exemplified by the comment of one of them: “How can I ask my kids to obey the law if I don’t?”
Reagan emphasized this man’s point. “Let me make one thing plain,” he said. “I respect the right of workers in the private sector to strike. Indeed, as president of my own union I led the first strike ever called by that union. I guess I’m maybe the first one to ever hold this office”—the presidency—“who is a lifetime member of an AFL-CIO union. But we cannot compare labor-management relations in the private sector with government. Government cannot close down the assembly line. It has to provide without interruption the protective services which are government’s reason for being.”
The distinction between the public and the private sectors was crucial, and it explained the sanction Reagan held over the heads of the striking controllers. He had long admired Calvin Coolidge for his modesty and small-government views; he knew that Coolidge had come to national prominence as Massachusetts governor when he declared, during a Boston police strike, “There is no right to strike against the public safety by anyone, anywhere, any time.” Such was the attitude Reagan adopted toward the controllers, and it was one he shared with Congress, which had passed various laws forbidding strikes by federal employees. The controllers, moreover, as a condition of employment had signed an oath not to strike. “It is for this reason,” Reagan said, emphasizing the personal pledge, “that I must tell those who fail to report for duty this morning they are in violation of the law, and if they do not report for work within 48 hours, they have forfeited their jobs and will be terminated.”
MANY OF THE controllers didn’t believe him. Skilled workers have always had leverage over employers in contract negotiations, as their skills are difficult to replace quickly. The controllers assumed that a strike would paralyze air travel and compel the government to improve its current offer.
On the other hand, the administration had the leverage of the law, as well as that of a monopoly employer. The private market for air controllers is very small; if the PATCO members lost their federal jobs, most would have to find new careers.
Reagan hoped the controllers’ economic self-interest, their commitment to their sworn word, and their fear of prosecution would bring them back to the control towers of the nation’s airports. Many responded as he wished. About a quarter of the PATCO members defied the strike call and reported to work. These co
ntrollers, together with the supervisors, kept about half the country’s flights in the air.
But that meant that half were grounded. The airlines hemorrhaged revenue from the lost business; they reported losing $10 million a day from canceled flights and customer alienation. The controllers conse quently considered the airlines their allies and hoped that if the Republican administration didn’t heed labor officials, it might listen to corporate boards.
Yet Reagan stood firm. The administration moved to decertify PATCO as the bargaining agent for the controllers. The Justice Department brought suit against Robert Poli, and a federal court found him in contempt. The court set a fine of $1,000 per day if the union chief didn’t call off the strike. The union as an organization faced fines of $1 million per day. Drew Lewis asserted that the president was quite serious about the August 5 deadline. “I don’t care whether it’s 9,000 or 12,000 or 100,000,” he said. “Whoever is not at work will be fired.” No less to the point, Lewis declared that the government was readying replacements for the strikers. “We will be advertising. We have a number of applicants right now. There’s a waiting list in terms of people that want to be controllers.”
The deadline came and went, with most controllers still out. The firings began. Dismissal notices were sent to the strikers; several strike leaders were jailed. “I’m sorry, and I’m sorry for them,” Reagan told reporters. “I certainly take no joy out of this.” But the strikers had brought it on themselves, and he had no intention of changing his mind.
