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Think you know the Reagan and Bush era? Think again.

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Mr. Woodward was referring to the Gramm-Rudman-Hollings act for a balanced budget. The law provided for automatic spending cuts – and they turned out to be steep ones – if the deficit topped certain targets. The act was a response to growing budget shortfalls stemming from lower taxes and higher defense spending. One version passed in 1985, and after the Supreme Court struck it down, Congress passed a revision in 1987.

Gramm-Rudman-Hollings had only a limited direct impact on the deficit. But it led to some important plot twists in the saga of fiscal policy.

At first, Republicans applauded the measure as a way to curb spending. But in 1990, the prospect of big across-the-board cuts prompted President Bush to break his “no new taxes” pledge. After he lost the 1992 election, it became Republican conventional wisdom that his loss stemmed from the tax reversal. That belief, in turn, hardened GOP opposition to tax increases. Whereas Reagan had actually agreed to several tax hikes starting in 1982, the post-Bush Republicans have been far more resistant.

Bush’s budget struggles show how quickly circumstances can change.

Initially, some lawmakers were willing to accept huge across-the-board cuts in defense because the cold war was ending. But in the summer of 1990, shortly after Bush gave in to a tax increase, Saddam Hussein invaded Kuwait. The Gulf War, now just months away, would prove to be a massive undertaking, and sequestration would have made it much harder. This example should give pause to those who are shrugging their shoulders at the current round of defense cuts. History is a tale of expensive surprises.

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