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Debt Ceiling Deadline Approaches: Ronald Reagan Looms Over Debate

TOM RAUM   07/23/11 03:19 PM ET   AP

Ronald Reagan Debt Ceiling Debate

WASHINGTON — Ronald Reagan might as well be sitting in on the troubled debt talks, so frequently is his memory invoked by both sides. But for vastly different reasons. Conservative Republicans praise the 40th president's steely advocacy for smaller government and lower taxes.

President Barack Obama and his Democratic allies praise Reagan because, they say, he was the sublime compromiser, willing to work with Democrats such as House Speaker Thomas P. "Tip" O'Neill of Massachusetts to forge landmark tax and Social Security deals and willing to raise the federal debt ceiling so the government could keep borrowing to pay its bills.

Can both be true?

In fact, both camps are experiencing a touch of Reagan amnesia.

Debt talks between Obama and House Speaker John Boehner came to a grinding halt Friday night when Boehner abruptly broke them off, raising new uncertainties that a deal could be struck to avert a threatened government default.

Reagan did push through deep, across-the-board cuts in tax rates in his first year of the presidency in 1981, fulfilling a campaign promise.

But the following year he signed the largest peace-time tax increase in U.S. history, the Tax Equity and Fiscal Responsibility Act of 1982. He raised taxes in every succeeding year of his presidency except the last. As California governor, Reagan also signed the biggest tax increase in state history.

"There was a consistency to Reagan on taxes, which was basically that he cut them when he could, but raised them when he had to. He was not dogmatic on this issue, as his current day followers seem to think," said economist Bruce Bartlett, a senior policy analyst in the Reagan White House and a top Treasury official in President George H.W. Bush's administration.

Bartlett noted that Reagan's tax increases took back about half of his signature 1981 tax cut. When he left office in 1989, federal taxes accounted for 18.4 percent of the nation's gross domestic product, compared with the 18 percent average for the two decades before he took office. By contrast, tax revenues are forecast to be just 14.4 per cent of GDP in 2011.

Some tea party-courting Republicans cite Reagan's low-tax, small-government mantra as they insist they won't support any increase in the government's borrowing power past Aug. 2, unless significant budget cuts are made and taxes kept constant.

Yet during Reagan's two terms, he presided over 18 increases in the debt ceiling. He even publicly scolded Congress for playing hardball politics with the debt limit and bringing the nation "to the edge of default before facing its responsibility." That's a passage the White House and congressional Democrats are now fond of recycling to their advantage.

Obama has been paying new homage to the former Republican president he once called transformative as he remains locked in a standoff with Republicans.

"Ronald Reagan worked with Tip O'Neill and Democrats to cut spending, raise revenues and reform Social Security," Obama noted a few days ago. "That kind of cooperation should be the least you expect from us."

In a recent exchange with House Majority Leader Eric Cantor, R-Va., Obama complained that House Republicans weren't giving an inch on raising taxes and were frustrating compromise efforts. According to Cantor, Obama ended the meeting saying, "Can you imagine Ronald Reagan sitting here?"

It was an apparent suggestion that Reagan would have been more accommodating or less likely to engage in political trench warfare.

The facts: The big 1980s domestic-policy deals cited by Obama happened at a time when there were more politically moderate members in both parties than in these highly polarized times, and when congressional leaders had more flexibility in finding common ground.

It's true that Reagan did not engage as much in the day-to-day bargaining. The big bipartisan agreements of the Reagan years were mostly cobbled together by O'Neill's forces and moderate Republican leaders such as Sens. Howard Baker of Tennessee and Bob Dole of Kansas, and Rep. Barber Conable of New York.

Still, Reagan and O'Neill clearly liked each other and enjoyed socializing. Although House Speaker John Boehner, R-Ohio, played golf with Obama and had tried for a "grand bargain" compromise with him, their relationship does not seem to be anywhere near at the same comfort level as that between Reagan and O'Neill, two gregarious Irish-Americans.

That may have become clear late Friday, when the talks collapsed, with each side blaming the other.

Looking back to the 1980s, with the exception of a few major deals like on Social Security, the day-to-day dealings between the Reagan administration and O'Neill were largely contentious and partisan.

Yet that Social Security agreement remains a model for those who yearn for less partisan times now.

Threats of approaching economic chaos were as much in the air in early 1983 as they are now, as Social Security was fast running out of money and benefit checks were at risk.

The eventual deal that rescued the program involved changing Social Security tax-rate schedules, imposing income taxes on the benefits of higher-income individuals, and raising the retirement age in steps to 67 for those born after 1960. It was put in play by a bipartisan commission headed by Republican economist Alan Greenspan, later to become chairman of the Federal Reserve.

It was fine-tuned by a high-level group of nine House and Senate members.

That bipartisan group met in secret locations for weeks to hammer out the final details, remembers Paul Light, who at the time was a congressional fellow with Conable, the senior Republican on the House Ways and Means Committee and one of the negotiators.

The talks coincided with the Washington Redskins' march to the team's Super Bowl victory over the Miami Dolphins in January 1983.

"The Gang of Nine could actually sit around the table and say, `Go Redskins.' That just created camaraderie that I don't see now," said Light, now a public policy professor at New York University. "And the compromise lasted 30 years, which isn't bad."

So in the end, how can Reagan be both a hero to Republicans for arguing against tax increases – and to Democrats for agreeing to them?

"That's what made him such an incredibly good politician," said Stephen Hess, a presidential scholar at the Brookings Institution.

Reagan was a master of blurring distinctions with compelling rhetoric, Hess suggested.

"People often see in him what they want to see, or what they are looking for. And that has been certainly true of other great politicians in their time as well."

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Filed by Elyse Siegel  |