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Tax History: George H.W. Bush and the Death of Fiscal Pragmatism

Posted on Dec. 10, 2018

For a president who left office without many fans in either party, George H.W. Bush received quite a send-off last week. The bipartisan outpouring focused on Bush’s personal qualities: his decency, politeness, and penchant for writing thank-you notes. He also won praise for his foreign policy accomplishments, including his even-keeled navigation of the end of the Cold War, not to mention his coalition-building after the Iraqi invasion of Kuwait.

Bush’s domestic policy, on the other hand, has not been getting a lot of airtime recently. Instead, we have all been treated to a rehash of the conventional wisdom regarding Bush’s ill-advised “no new taxes” pledge, made during the 1988 presidential campaign. The candidate promised Americans he wouldn’t raise taxes and then broke that promise by agreeing to raise them in 1990. Voters responded to his treachery by tossing him out of office in 1992.

Or so the story goes. “In the years since,” wrote Howard Gleckman of the Urban-Brookings Tax Policy Center last week, “anti-tax Republicans made the Bush experience into an object lesson for GOP politicians: Raising taxes will destroy your political career. In response, thousands of candidates for office at all levels have taken their own no-tax pledge, and fiscal policy has become utterly gridlocked.”

This lesson does not amount to an ironclad axiom, however. No one really knows why Bush lost in 1992. There was a lot going on that year, including the improbable independent campaign mounted by businessman Ross Perot. But one thing is certain: Presidential elections (like all historical events) rarely turn on a single policy decision. History is a complex, multi-causal reality, and Bush’s loss to Bill Clinton can’t be explained solely by the president’s signature on the Omnibus Budget Reconciliation Act of 1990.

Still, Bush’s tax record is important. Viewed in broad historical context, it represents a transition point in American fiscal politics, marking the last gasp of Eisenhower Republicanism — a version of conservative fiscal governance that put a premium on reducing debt rather than tax rates.

Anti-Debt Republicans

Fiscal responsibility has been a bedrock GOP talking point since at least the 1920s. (Thank you very much, Calvin Coolidge.) However, the tax policy implications of anti-debt rhetoric have varied over time. Generally, mainstream Republicans have always preferred lower taxes over higher ones, but for most of the 20th century, at least some GOP politicians were willing to sacrifice their preference for lower tax rates to pursue smaller deficits.

Dwight D. Eisenhower was the most obvious adherent of this kind of Republican fiscal conservatism. Taking office when tax rates remained at the stratospheric heights reached during World War II and the Korean War, Eisenhower was suitably enthusiastic about cutting rates — someday. In the short run, however, he was willing to tolerate high rates for the sake of smaller deficits. Throughout the 1950s — and even during the two-year stretch when Republicans controlled not only the White House but both houses of Congress — Eisenhower and his GOP supporters gave tax rate reduction some occasional lip service but not much else. (Prior analysis: Tax Notes, Mar. 25, 2013, p. 1389.)

Of course, there were some rate-cutting mavericks in the GOP, even during Eisenhower’s presidency, and they were gaining strength, both within the party and across the electorate more generally. The tax revolt of the 1970s didn’t come out of nowhere, after all, but the relentless pragmatism of Eisenhower’s fiscal policy continued to guide the party’s national leadership well into the 1970s. (Prior analysis: Tax Notes, Apr. 28, 2014, p. 416.)

George H.W. Bush was a dyed-in-the-wool Eisenhower Republican when it came to fiscal policy. He made budgetary conservatism a key element of his 1980 campaign for the GOP presidential nomination, trying mightily to distinguish his sober pragmatism from the wild-eyed “voodoo economics” pedaled by the front-runner, Ronald Reagan.

Soon enough, however, Bush proved more than willing to swap his old-fashioned sobriety for Reagan’s optimistic embrace of supply-side tax reduction. It was a sharp reversal, and one that he tried repeatedly to downplay, but it was hardly an unusual feat in the history of vice presidential political gymnastics. Many nominees for the vice presidency have been drawn from the ranks of defeated presidential candidates; as such, they have often been forced to walk back their criticism and complaints about the candidate at the top of the ticket.

Bush’s reversal was more public than most, perhaps because his “voodoo” epithet was so quotable. But it was no more hypocritical than the policy flexibility exhibited by vice presidential candidates after every contested nomination.

Never a True Convert

Still, there is reason to believe that Bush’s reversal was especially insincere. When making his own run at the presidency in 1988, Bush continued to emphasize his newfound commitment to antitax conservatism. His public embrace reached its peak during the GOP convention that year, when he offered his (in)famous promise not to raise taxes.

“The Congress will push me to raise taxes,” Bush said during his convention acceptance speech, “and I’ll say no, and they’ll push, and I’ll say no, and they’ll push again, and I’ll say to them, ‘Read my lips: No new taxes.’” It was a rhetorical tour de force, and it seemed to prove convincing — or at least convincing enough — to both Bush’s conservative critics within the GOP (of which there were many) and among the voting public at large.

Not quite two years later, however, Bush reneged on his promise. On June 27, 1990 — in the midst of contentious negotiations with Congress that looked a lot like the ones Bush had predicted — the White House released a rhetorically anodyne but politically explosive statement: “It is clear to me that both the size of the deficit problem and the need for a package that can be enacted require all of the following: entitlement and mandatory program reform, tax revenue increases, growth incentives, discretionary spending reductions, orderly reductions in defense expenditures and budget process reform, to assure that any bipartisan agreement is enforceable and that the deficit problem is brought under responsible control.”

“Tax revenue increases,” while still vague, was not the kind of language that could be reconciled with Bush’s convention speech. Still less could it be squared with comments made by Bush’s budget chief, Richard Darman, during his Senate confirmation hearing. Pushed to explain what might qualify as a tax increase for purposes of Bush’s antitax pledge, Darman responded memorably: “If it looks like a duck, walks like a duck, and quacks like a duck, it’s a duck.”

By any measure, Bush’s 1990 acceptance of tax revenue increases was a duck. The fact that the president embraced that duck with some notable reluctance was immaterial. He was still abandoning his earnest pledge to the American people.

More broadly, however, Bush was simply reverting to form. From 1980 to 1988 he was a Reaganite tax cutter. But once installed in the Oval Office, he reverted to the pre-Reagan version of himself, accepting his role as a reluctant tax raiser in much the same way that Eisenhower had tolerated high tax rates in the 1950s. Both Bush and Eisenhower were more interested — much more interested, really — in fiscal probity than tax reduction.

A Transitional Figure

Contrary to what many people will tell you, there is nothing inherently wrong with backtracking on an unsustainable promise, and in fiscal policy, lots of promises turn out to be untenable. Fiscal policy, by its very nature, is an exercise in managing scarcity, balancing legitimate needs against unavoidable limits. It requires politicians to compromise not simply with their political opponents, but with reality as well.

Bush, for all his shortcomings, was very good at compromise. It came naturally to his relentlessly polite, self-effacing, thank-you-note-writing self. But those skills couldn’t save him in 1992.

Ultimately, Bush’s loss — and more specifically, the meaning attached to it by Republicans who followed him — was a turning point in the history of the GOP. As an individual, Bush personified the transformation of the Republican Party that occurred in slow motion between the 1960s and the 1990s. While much of the commentary around his death has cast him as the last of a dying breed, he was, in fact, a liminal figure. As Peter Dreier wrote in The American Prospect:

Despite his blue-blood ancestry, Bush was actually a transitional figure in American history who helped build bridges between the so-called Eastern ruling class Republican establishment and the newer, libertarian wing of the party based in the Sunbelt, particularly Texas, Arizona, Florida, and Southern California (particularly Orange County, which until recently was solid right-wing Republican).

Bush was similarly liminal in his approach to fiscal policy. Caught between orthodoxies both old and new (“Balance the budget!” versus “Cut taxes!”), he tried in vain to split the difference. He failed, and in the process marked an inflection point in the history of Republican fiscal politics.

But here’s the thing about inflection points: They’re not a one-and-done phenomenon. One inflection point invariably follows another, even if the interval is impossible to predict. While it’s too early to tell, we may be reaching another inflection in the history of GOP fiscal politics. The middling success of Republicans in selling the 2017 tax cut to wary midterm voters may suggest that the old formulas aren’t working so well anymore. Republicans don’t seem poised to abandon their antitax politics anytime soon, but tax relief may not be the golden ticket that it once was. As fiscal pressures continue to mount — in the form of higher annual deficits and rising total debt — pressures on the GOP’s antitax policies may start to increase, too.

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