Daniel J. Palazzolo
University of Richmond
On July 29, 1997, Speaker Newt Gingrich joined fellow Republican leaders on the steps of the U.S. Capitol before a large audience of onlookers and the media to celebrate the passage of the 1997 budget agreement. The balanced budget agreement contained several "Republican" tax and spending policies: constraints on domestic spending, the largest savings in Medicare in history, and the first net tax cut in sixteen years, including cuts in capital gains taxes, a child tax credit, an increase in the exemption for estate and gift taxes, and increased individual retirement accounts. Several Republican lawmakers commented that, coupled with the passage of welfare reform in 1996, the budget agreement virtually completed the major goals in the Contract with America. Such sweeping policy changes would not have occurred without a majority of Republicans in the Senate and the House, and without the leadership of Speaker Gingrich.
Of course, the 1997 agreement was measurably different in both substance and process from the 1995 budget that articulated the goals of the Contract with America. The 1997 bipartisan agreement resulted from extensive negotiations between Republican legislators and key staff persons from the Clinton administration, whereas in 1995 congressional Republicans drafted their own budget, ignored the White House until the very end of the process, and engaged in a confrontational strategy that ended in gridlock. Moreover, the tax cuts and spending reductions enacted in 1997 were more like "Contract-lite" than the Contract with America, and the agreement contained several Democratic priorities: education tax cuts, children's health care, and restoration of welfare benefits for legal immigrants. So, while Republicans made policy gains with the 1997 budget agreement, they did not achieve the revolutionary goals aspired to in 1995.
Just as the 1995 Republican budget and the 1997 bipartisan budget agreement represent two different budgets, the tactics of Newt Gingrich in 1995 compared with 1997 represent two different approaches to leadership. In 1995, Gingrich was fully engaged at all stages of the budget process; he was confrontational; and he played a very public role in defining budget priorities. This is the caricature of the public and partisan speakership that defined Gingrich's first year in office. In 1997, Gingrich adopted a more traditional style of House leadership: managing the internal workings of the process, delegating policy details to committee chairs, weighing in at only the final stages of key decisions, and working as a "middleman" to mediate differences between committee chairs and party factions.
But it would be a mistake to view these two speakerships, or the two budgets, as distinct entities. They are, in many ways, interdependent and complementary. I have argued that that 1997 budget agreement emerged from the 1995 budget battles, and that without the rounds of partisan conflict in 1995-96, the 1997 budget certainly would have taken longer, and may not have been completed.1 Policy change under divided government requires successive iterations and time. Likewise, while a confrontational, almost warlike, leadership style may have come naturally for Gingrich, after the budget battles of the 104th Congress and the 1996 elections he seemed to learn about the necessities of priority setting and compromise in our system of government. Gingrich proved to be adaptable to changes in political and policy conditions, though he ultimately could not survive them. Of course, Gingrich would have preferred the spending levels and tax cuts in the 1995 budget, but seemed to learn that a second model of leadership was available to him, one that was far more conducive to legislative life of the United States House of Representatives.
Speaker Gingrich and the Republican Revolution
After the historic Republican takeover of the House in 1994 elections and the birth of the Contract with America, Speaker Gingrich asserted an unprecedented role in the budget process. Prior to 1995, House Speakers had begun to participate actively in the developing budget priorities, peaking with Speaker Jim Wright's activist role with the House Budget Committee in 1987. But Wright's policy leadership paled in comparison with Gingrich's pervasive role from the beginning of the budget process in 1995 to the final stages of a protracted stalemate with the Clinton administration in January 1996.
Gingrich made his presence felt immediately in 1995 on the question of how quickly to balance the budget. While the Contract with America called for a balanced budget constitutional amendment, it did not stipulate when or how to balance the budget. House Budget Committee Chair John Kasich (R-Ohio) was committed to significant spending reductions, but he did not think it was politically feasible for Republicans to enact the tax cuts and defense increases projected in the Contract and still balance the budget. Kasich began the process with the idea of putting the deficit on a "glide path" to zero over seven years. But to Gingrich a balanced budget was a moral imperative, and after weeks of serious debate Gingrich decreed that the House budget should be balanced (period) not merely gliding toward balance. In a February 15, 1995 meeting of Kasich and GOP leaders, Gingrich announced, "We are going to zero in seven years." Kasich replied, "I don't know that we can get the numbers together to make it credible." At that point, Gingrich asked his colleagues at the meeting to vote, and all but Kasich supported Gingrich's proposal. "Motion carries. You're outvoted, John. We're going to zero."2
From that point, the story of the 1995-96 budget has been well described in several accounts.3 House and Senate Republicans closed ranks on a seven-year budget plan that would reduce spending by $983 billion (including unprecedented cuts in entitlement programs: $270 billion in Medicare, $180 billion in Medicaid, and $170 billion in other mandatory programs targeted for to support individuals with low incomes) and cut taxes by $245 billion. Gingrich was the principal driver behind this budget - articulating GOP goals, testifying before congressional committees, chastising the Democrats for not offering "real reform," and ultimately negotiating policy details with White House staff.
Gingrich set up a showdown with President Clinton, daring him to blink at the end game. But Clinton held firm, vetoing a series of bills and riding out two government shutdowns. In the end, Clinton won both the battle of the budget and the battle of public opinion. From January to December 1995, public unfavorable ratings of Gingrich went from 29% to 56%. By December, while 61% of Americans had a favorable opinion of Clinton, only 24% had a favorable opinion of Gingrich. By 51% to 34%, the public believed Clinton's proposals for the budget were better for the country than Republican plans.4 Gingrich was criticized by journalists and political scientists for pursuing a confrontational strategy, and he began to lose support among House Republicans. In one year, journalistic portrayals of Speaker Gingrich went from one of a brilliant strategist who led the GOP out of forty years in the minority to a spoiled egomaniac.
Though Gingrich clearly misjudged the political conditions after the 1994 elections and made several mistakes in terms of governing, it would be inaccurate to conclude that the 1995 Republican budget failed to advance the policy goals of the Republican party. In retrospect, a responsible party approach to governing made little intuitive sense after midterm elections at a time of divided government. Nevertheless, Gingrich successfully moved the policy agenda in 1995. History will record the fact the budget was balanced on President Clinton's watch, and he deserves credit for the 1993 budget that helped to reach that point, but Gingrich pushed Clinton to accept the balanced budget norm. By June 1995, with the aim of becoming "relevant" to the process, Clinton had proposed his own balanced budget and tax cut package, thus earning a "ticket" to the game of budget politics. So, by pushing the envelope in 1995, Gingrich cemented the goal of a balanced budget and raised the bar on what President Clinton could reasonably expect from the Republican Congress. It is hard to imagine that the same president who signed a bill to raise taxes in 1993 would sign legislation in 1997 that cut $145 billion from Medicare, froze discretionary spending below the rate of inflation, and cut taxes for the first time in 16 years.
Gingrich and the 1997 Bipartisan Budget Agreement
Reaching a bipartisan budget agreement in 1997 would require Gingrich to recede into the background and adopt a different approach to leadership. After Clinton was re-elected and Republicans lost eight House seats in 1996, the Republican revolution was dead. Gingrich recognized this reality in his reading of the 1996 elections, saying that he saw "no reason we can't find common ground" with the White House, and that "I don't start this new process automatically expecting us to get into a confrontation."5 One way for Gingrich to avoid confrontation was to delegate policy making to committee chairs and intervene only when it was necessary to maintain party unity or to facilitate passage of key legislation.
With his authority diminished, Gingrich delegated the task of negotiating the budget to House Budget Committee Chair John Kasich (R-Ohio). Kasich compared 1995 with 1997:
I think the biggest single difference was Newt let me do my thing and let me get it to the point where he needed to be in the room to resolve some of the issues we were not capable of resolving - the level of taxes, that sort of thing. But really I carried the thing all the way to where the train was leaving the station. He just let me do what I needed to do.6As Speakers before him, Gingrich was better positioned to guide negotiations by stipulating which policy proposals were acceptable to the party as a whole, while leaving the details up to policy leaders. For example, several studies showed that the consumer price index (CPI) overstated the actual rate of inflation, and Kasich sought an adjustment in the CPI which would have reduced increases in government benefits and tax deductions that were indexed for inflation. The issue divided the party; conservatives believed it would lead to higher tax payments, and members from marginal districts worried that Democrats would accuse them of cutting Social Security benefits. As negotiations ensued, Gingrich squelched efforts to change the CPI, insisting that the president must publicly commit to changing the policy as a condition for Republican support.
Gingrich also intervened to resolve intra-party differences. After the House approved a budget resolution, committees proceeded with reconciliation, a process by which committees develop legislative changes to meet the guidelines specified in the budget resolution. Often times, intra-party divisions emerge over legislative details, and the Speaker needs to intervene. The Speaker has the power to make "post-committee" adjustments to legislation and incorporate those changes into rules for floor debate and amendment. The Speaker seeks to mollify disputes and improve prospects for passing legislation.
Gingrich demonstrated his coalition building ability as he managed to resolve intra-party differences over the House Ways and Means tax bill. The budget agreement specified $85 billion in net tax reductions, roughly one-third of the tax cut approved by House Republicans in 1995. Thus, Ways and Means Chair Bill Archer (R-Tex.) developed a scaled down version of the 1995 Republican tax bill, creating concerns among several key Republican constituencies. Social conservatives supported the child tax credit, but they were disappointed that it would begin at $400 rather than $500 and that it would be delayed by one year. Small business groups liked the capital gains tax cut and revisions in the alternative minimum tax, but they argued that the limits on the estate tax exemptions were "unacceptable." Investment companies applauded the capital gains tax cut, but they raised concerns about several loophole closings. And the real estate industries liked the tax exclusion of up to $500,000 on the sale of a home, but lobbied against the bill because it taxed capital gains on investment real estate higher than other forms of investment. Archer also angered Committee Republicans with revenue increases contained in the bill: including an increase in airline ticket taxes, a tax on Indian gaming, and a repeal of the ethanol subsidy.7
Under pressure from groups and party leaders, Archer made a few adjustments to the bill before the Ways and Means markup, and the committee approved an amendment to remove the Indian gaming tax, but the essentials of the bill remained intact. In order to mobilize support for the bill, Gingrich made several key "post-committee adjustments" before the bill went to the floor, persuaded key groups to support the bill, and organized a media blitz to highlight the positive aspects of the bill. The most important adjustment was to restore the ethanol subsidy. Though Archer strongly opposed the subsidy, Gingrich supported it and a block of Republicans from agricultural states, several from marginal districts, threatened to vote against the bill unless it was restored. Since the vast majority of Democrats planned to vote against the tax bill, Gingrich needed every GOP vote he could muster. He told Archer, "The House is not going to be the place that kills ethanol."8 Gingrich removed the provision in the bill and incorporated it into a self-executing rule for consideration of the tax bill.
Gingrich met with leaders of key interest groups and urged them to endorse the bill. He pointed out that if the tax bill failed, they would get nothing, and that they would have another chance to affect the content of the bill when the conference committee convened to sort out the details. The leadership also staged several public relations events to blunt criticisms from Democrats who argued the bill was unfair to lower- and middle-income taxpayers. Ultimately, key GOP constituencies got behind the effort, and the bill passed by a vote of 253-209, with only 1 Republican voting against and only 27 Democrats voting for the bill.
Conclusion
The contrasts between 1995 and 1997 reveal important differences in Speaker Gingrich's approach to the budget. Like all leaders, Gingrich needed to adapt to changing political and institutional conditions. After the 1996 elections, an investigation into his alleged violations of House rules, and public criticism of his leadership style, Gingrich had lost the authority he wielded in 1995. He adapted to a new role, and he professed to having learned from his experience. As he reflected on the experience in 1995, Gingrich remarked: "One of the lessons I have learned in the last two years is you go slower, you prepare the ground, you make sure people understand."9
Yet, the two budget cycles are linked in important ways. Though Gingrich was open to compromise, he never relinquished his commitment to advancing Republican policy goals. As final negotiations with the White House temporarily stalled near the end of the process, Gingrich was present at several high level meetings with White House officials. The August recess was upon them and Clinton indicated that he was not in a hurry to complete the budget deal. Negotiators reached an impasse over the child tax credit, and Gingrich felt he had been tricked. Reminiscent of the untrustworthy relationship between Gingrich and Clinton in 1995-96, Gingrich angrily protested. "Forget it," he said, and bolted the room. There were limits to how far he was willing to compromise. Senate Budget Committee Chair Pete Domenici (R-N.M.) encouraged Gingrich to resume negotiations. But when Gingrich returned to the White House, he informed negotiators that Clinton would get nothing through the House if he continued to stall on the budget. Within days, the impasse was broken and the budget moved through Congress. In the end, Gingrich did not succeed in bringing about the revolution he envisioned, but he did succeed in cementing the balanced budget imperative and facilitating policy changes in taxes, Medicare, and welfare. Without Gingrich's steadfast leadership, budget policy would not be what it is today.
1. Daniel J. Palazzolo, Done Deal? The Politics of the 1997 Budget Agreement (Chatham, N.J.: Chatham House Publishers, 1999).
2. See George Hager and Eric Pianin, Mirage: Why Neither Democrats Nor Republicans Can Balance the Budget, End the Deficit, and Satisfy the Public (New York: Random House, 1997), 18-19.
3. See, especially, Elizabeth Drew, Showdown(New York: Simon & Schuster, 1996).
4. Survey results from Nancy Gibbs and Karen Tumulty, "Master of the House," Time, December 25, 1995/January 1, 1996, 60.
5. Quoted in Done Deal, 45.
6. Quoted in Done Deal, 46.
7. For details on Ways and Means handling of the tax bill, see Done Deal, 146-54.
8. Quoted in Done Deal, 161.
9. Quoted in Done Deal, 49.
