George H.W. Bush Ruined Bipartisanship

A common claim—made by a certain Internet troll who puts up an economics blog at nyt.com some years after he won the Nobel Prize—is that partisanship in Washington came on with Rep. Newt Gingrich’s Republican Congress in 1995. The new GOP majority chafed that it had to deal with President Bill Clinton and became obstreperous.

Before that, things were pretty swell in Washington city, as they used to call the place. Chris Matthews says that in the 1980s, Tip O’Neill’s Democratic Congress and President Ronald Reagan got on famously. The Last Gentleman was President George H.W. Bush, who brought big coalitions together in favor of moderate policies, even if the electorate would hound him from office after one term for being a compromiser. Noble man, he who was wiser and steadier than the moody and erratic voters.

The Last Gentleman… Apparently this was the working title, now ditched, of the rather official biography of Bush I. The book has come out as Destiny and Power, by Pulitzer Prize-winning presidential biographer Jon Meacham. It’s a fascinating book, as it must be, chronicling the years of this man-on-the-spot who was CIA director, almost Gerald Ford’s Vice President, ambassador to China and the United Nations, Reagan’s Vice President, President, and father to another president. “Quincy” (after Adams) they nicknamed W. Should have been “Quincy!”

Bush’s career, his “resume,” was as formidable, extensive and high-echelon as they come in politics. You would think that therefore, this figure would have made some signal contributions to American political rhetoric. Indeed he did. Bush said two—and only two—consequential and lasting things as a national leader, two lines still alive and kicking in 21st century usage in the lexicon of public affairs, over his meaty career.

These were “voodoo economic policies” and “read my lips, no new taxes.”

It is not necessary to rehearse the meaning and context of these remarks because they remain go-to parts of our language, well understood instinctively by average guys and gals. Voodoo economics—ah yes, that refers to the argument floated now and then by cranks (and by Bush’s opponent in the 1980 presidential primary, Reagan, against whom Bush directed the remark), that tax cuts spur growth and increase revenues, a theoretical dream and practical impossibility.

“Read my lips, no new taxes”— this is the chief modern exhibit of the very essence of politicians, their propensity to fib. Who cites “I am not a crook” (or for that matter, “if you like your healthcare plan, you can keep it” not to say, in a disconcerting counter-example, “I did cut down that cherry tree”) anymore? Bush’s gem on accepting the Republican nomination for President in 1988, two years prior to his tax increase, and four years prior to his rout from office, is juicy as ever.

But isn’t all this at the heart of sage leadership? You do what you know is right, even if unfashionable, and even if they mock you for years afterward. That’s what’s best for the country. And hey, a prophet is never understood in his own place. (Let’s amend this biblical pearl for the Barack Obama era: Profit is never understood.)

Jon Meacham got unprecedented access to Bush’s personal papers, including the presidential and pre-presidential diaries. Boy, are these things pieces of work. The first four sentences of the paragraph just above? They distill the essence of Bush’s diary entries, in particular on the matter of the ill-starred 1990 tax increase.

Since the time of Tacitus, historians have noticed that prominent figures try to fool them as such figures write anything down that could be meant “for posterity.” It has been annoying, over the ages, to correspond with someone who thinks that he or she is going to turn into a big wheel someday and be the subject of biographies and histories. Every sentence is orotund and careful. Historians are never faked out, unless they want to be (click here for an example). Sources are guilty until proven innocent, as a professor of mine used to say in the classroom.

The 1990 tax increase. Tiny thing. Took the top rate of the income tax from 28 to 31%. Today it’s 39.6%; under W., 35%. Goodness, 31% was basically the fourth-lowest top tax rate ever, after 1913’s 7%, the 25% of the Roaring 1920s, and the 28% that it switched out. You need a microscope to see the 3-point rise in 1990. Totally trivial matter that Bush did that. Making a big deal about the 1990 income tax increase, in a negative way, is so…cranky.

Actually, Bush’s 3-point increase in the top rate of the income tax is the most catastrophic thing that has happened to political comity in Washington, what we quaintly call bipartisanship, in several generations.

The question is: What was this rate of 28% that Bush so cavalierly cashiered, breaking his pledge and becoming the eternal butt of jokes for doing so? It was Reagan’s headline thing—wasn’t it?—that of the supply-siders, the voodoo economists whom Bush was finally getting his revenge upon. Twenty eight percent at the top was the hallmark of the Reagan Revolution, its essential characteristic, its heart and soul. Right?

Quite wrong. It was that of the last democratic socialist in office prior to Bernie Sanders, Sen. Bill Bradley of New Jersey. No kidding. Reagan’s big fat legendary tax cut of 1981 cut the top rate all the way down to 50%, not a mite lower, and not at all for salary income, which was getting dunned at the max of 50% when Reagan took office. The supply-siders, including Rep. Jack Kemp who had authored the bill which inspired Reagan’s 1981 cut, and Arthur Laffer, wanted a further cut down to 38% by the time the administration folded in eight years.

Bradley, Dan Rostenkowski and Dick Gephardt—remember those names? They were the very lions of the Democratic Congressional majority in the Reagan years—said no, the top rate of the income tax has to be cut more than that, to 28%. And they got it done. The supply-siders joined the Democratic consensus in the Tax Reform Act of 1986 to cut the top rate down to 28%, and to have only one other rate (of 15%), so that the income tax was nearly a flat tax at a low rate.

Say what? There is no need for me to explain this obvious and manifest history, since the most notable example of political long-form journalism of its time was written about it, Jeffrey H. Birnbaum and Alan S. Murray’s bestseller Showdown at Gucci Gulch (1987). Gucci? Yes, the aficionados of that luxe brand, that token of the lifestyle of the rich & famous in the 1980s, were to be the casualty.

The point of the act was to devalue tax loopholes and lobbying. If the top rate were high (as it was at 50%), the argument ran, then exemptions from it would have great value. The way to kill special privileges and “K Street” (the home of Washington lobbyists in their sharp Gucci outfits) was to lower the top tax rate. Cutting the top rate from 50 to 28% meant that an exemption that had enabled a 100% gain—instead of keeping 50 cents of the marginal dollar in income one kept all of it—went way down in relative worth. An exemption from a 28% rate meant that one did not at all double one’s income care of tax-preference carve-outs. One kept 72 cents of the marginal dollar, after tax, and stood to gain at most only 28 cents via tax preferences as secured by a K Street fixer.

The Democrats—indeed, the democratic socialists—in Washington realized that the high marginal rate was a boon to the rich and well-connected. They teamed with the supply-siders to push through the greatest example of bipartisan domestic legislation since the 1960s, if not since World War I. Of course tax revenues came in healthy when the rate-cut happened, and of course the economy did well.

This is the thing that Bush disturbed when he broke his promise. Democrats and Republicans had finally just gotten real about undue power and influence in Washington and somehow joined to run it from town. This epic achievement, one of the very greatest of modern political history, was fragile, of course, because of the sinister forces that would seek to undo it. Bush did an unimaginable favor for the masters of the dark arts of cronyism by making the top rate of the Tax Reform Act of 1986 unstable. By bumping it up a little, just to 31%, the 28% rate never had a chance to become sacred. Sure enough, it has bounded up by effectively 15 points since then. Now exemptions are worth something again.

Especially in the Obama era, Washington is a boomtown. All sorts of comers are booking carve-outs in the tax and regulatory codes that are contrary to the public interest in any objective sense and enhance the fortunes of the narrowly self-aggrandizing few.

This is a major aspect of the legacy of the political economy of President George H.W. Bush. This one-termer will deserve the stern eye of history when it comes. Here was a chief executive, a last gentleman if you can believe it, who was either too addled or, more plausibly, too arrogant to defend the stunning and wholesome bipartisan consensus given to him. And here was a man who made phony arguments—not merely in press conferences but in his diary—about the need to shore up accounts. Audiences were supposed to mistake them for years on end as expressions of a good rationale. “I hear the quiet people others don’t”—namely the little guy—Bush said in the same speech as “read my lips.” Yet another miserable inaccuracy as the successor to Ronald Reagan prepared for his arrival, and the real spirits of the economy faced the prospect of substandard leadership.