The Tax Cut That Neutered Congress

By Lincoln Chafee '75 / March / April 2008
March 26th, 2008

On Inauguration Day, January 20, 2001, President George W. Bush and Vice President Richard Cheney went to work.

The centerpiece of their agenda was an unprecedented $1.6 trillion tax cut that took Congress by surprise. The magnitude of the cut caught even House Speaker Dennis Hastert off balance. That may have accounted for his candor, at a December 14, 2000, press conference, when he said that the across-the-board cut was too much; it would be bad public policy. No one would be able to understand fully the consequences of such a complex bill. He wanted to break the cuts down into their many parts and carefully consider one at a time, but he was quickly silenced and brought into line. After both Republican and Democratic presidents had worked hard for surpluses, and at dire political cost, why was the forty-third president now demanding this destructive round of tax cuts?

Daniel Adel
Many senators in the chamber had been around in the 1980s when so much effort had gone into the Gramm-Rudman deficit reductions. Finance chairman Charles Grassley of Iowa and budget committee chairman Pete Domenici of New Mexico were among them. Many had been there in 1990 when the president's father, President George H. W. Bush, agreed to raise taxes to shrink the deficit, a big factor in his loss two years later. With presidential leadership exercised and political pain already endured, why would we suddenly want to turn the treasury upside down and shake out every last dime. 

To me, the tax cut was a stalking horse. The Cheney-Bush strategy behind the cut was to set the tone—to preempt the Congress not just on taxes but on every issue. It would tame any future resistance to a radical agenda by serving up this politically irresistible prize: lawmakers could go home and say they had voted to cut taxes. The White House was out to neuter Congress, and the minute Congress rolled over for the cuts, it set the stage for one-branch rule in America and all the consequences we live with today. The two aggressive personalities at the top of the executive branch had tested the Congress and had found it lacking. A coequal branch of government? In their wisdom, the Founders had given us power to respond when events demand that we check and balance an unwise president. I looked around in the Senate and saw few who had the courage to wield that vital power.

Every bully and blowhard in the world sets the terms of intimidation right off the bat. The time to stand up is sooner instead of later. My older brother, Zech, taught me that important lesson by example when I was in the third grade at Potowomut Elementary School in Warwick, Rhode Island. In front of a cheering schoolyard, he put up his fists and boxed a bully out of a bad attitude. But the president had our number the minute we meekly acquiesced to his radical tax policy, and that would serve him well when he wanted to start a war on the false threat of a Saddam Hussein poised to attack America with weapons of mass destruction.

Many Americans' first image of the Bush presidency is date-stamped September 11, 2001. They forget the pitched political battles of his first nine months in office. The central front in his war on Congress was this $1.6 trillion raid on the public purse.

The outcome was uncertain, given the dynamics of an evenly divided Senate. Democrats were largely opposed, but Georgia Democrat Zell Miller, a throwback to the pre–civil rights South, had defected and even signed on as a cosponsor of the Bush tax cuts. Democrats were especially worried that John Breaux of Louisiana and Ben Nelson of Nebraska might waver. The Bush administration certainly put every bit of pressure they could on senators Breaux and Nelson back home, and on every other Democrat in a state that had voted Bush-Cheney.

The Democrats held steady, and in April, Ben Nelson, John Breaux, and I called a press conference to say we would use our votes to trim the $1.6 trillion to $1.25 trillion. If we could get one more Republican to stand with us, we could make it happen. We needed Jim Jeffords of Vermont and had been told to expect him at the press conference, but where was he? Stalling for time, Senator Breaux cracked jokes to keep an impatient media at least semi-entertained. Then the blue curtains at the edge of the Capitol press gallery parted and in walked the Vermonter, our critical vote.

Manny Ceneta/AFP/Getty Images
Vice President Dick Cheney (left) and Senate Majority Leader Trent Lott (center) field questions from the press in April 2001 after the Senate had taken the first step toward approving President Bush’s mammoth tax cuts. A month later, the cuts were approved by Congress. 
This was historic. Two Republicans and two Democrats had teamed up to deal a symbolic defeat to the Cheney-Bush team. It may seem ridiculous to call a $350 billion "trim" merely symbolic, but it was, in the context of the monstrous $1.6 trillion the White House demanded. Still the administration insisted on getting it all. To them, a penny less would mean total defeat. Their thinking, I concluded, was that any reduction, no matter how small, would telegraph that Congress had a role to play in governing America and the executive branch was something less than all-powerful.

That was the important point we four rebels meant to drive home, and the administration knew it. Once we had the clout to trim the president's $1.6 trillion, we used it. A preliminary budget vote related to the bill went according to form, with Democrat Miller defecting; Breaux, Nelson, and the rest of the Democrats holding; and Jeffords and I voting in favor from the Republican side, bolstered by unexpected last-minute support from Republican Arlen Specter of Pennsylvania.

The administration had really cranked up the pressure on the vote to enact the bill, even calling local talk radio programs to do some arm-twisting. My turn came on the Steve Kass Show, a middle-of-the-road program with no particular ideological bent, broadcast from a modest studio in East Providence. One morning their phone rang, and instead of Angelo from Cranston it was Vice President Richard Cheney from Washington on the line. He hit all the radical talking points and urged Rhode Islanders to demand that I vote to return their unspent tax dollars to them and keep not a penny in reserve. It would be the end of all that was good if I supported a cut of $1.5999999999 trillion. The president needed the $1.6 trillion.

The administration did some arm-twisting up close and personal as well. One day in the Senate chamber a White House liaison tapped me on the shoulder. The vice president wants to see you.

I knew it was about the tax cut. I welcomed the chance to discuss my opposition face-to-face and was curious to see how the vice president would counter the points I made. As a former mayor and city councilman, I know about taxes. Eight times in my career I stood for election in campaigns where taxes were at least a leading issue and sometimes the issue. I had something to say about taxes, and to say to the vice president in particular. If we were going to cut into the surplus that the president's father had helped achieve at enormous political cost, let us invest in our assets, as any smart business owner would. We could put people to work fixing our aging highways, bridges, and levees; fix the marriage penalty and the inheritance tax; start helping local governments with the crushing cost of meeting special-education mandates; and fund programs to put us on the path to energy and environmental sustainability.

Because there is always room for compromise, I wanted to discuss supporting some of the tax breaks the president wanted. We could never agree on all $1.6 trillion, but I was prepared to agree on some of it.

As the Senate's presiding officer, Vice President Cheney had an ornate office off the Senate floor. I was ushered in past the velvet ropes, took my seat, and soon realized that my opinions were not up for discussion. The vice president had called me in so he could explain why I had to vote for the $1.6 trillion as is, why not a word was subject to amendment. It was a top-down, one-way "exchange of ideas," so to speak. His monologue went on for fifteen to twenty minutes. My thoughts on tax policy were unworthy of his time. I was furious. One side of me wanted to forget that I respected the office he held and talk to him as if we were a couple of blacksmiths with a bad bet to settle, but I checked my temper, shook his hand, thanked him for having me in, and walked out.

I left the vice president's office even more firmly committed to resisting the president's tax policy.

No doubt this was just one of many I-talk-you-listen meetings the vice president held with senators and representatives. He must have certainly leaned hard on Speaker Hastert and House finance chairman Grassley after they told reporters they doubted the wisdom of a single up-or-down vote on the mega tax break.

"We are most successful, especially in tax policy, when we start to take tax ideas and do them a piece at a time," Hastert said. Grassley, too, called for taking it one step at a time, especially in a Senate equally divided. But the far-right wing was rabid about "starving the beast," cutting taxes so deeply it would bring back deficits and force deep cuts in social spending, programs they saw as inevitably building Democratic constituencies. Instead of pushing back against the administration's ferocious demands on its radical agenda, leaders found it easier to fall in line. And this was the critical time for pushing back, the spring of 2001; Americans were not dying yet in the president's nation-building projects in Southwest Asia.

Although pollsters had the data on how disgusted voters were with the extremist agenda, here we were ramming through an extreme tax cut. Few Americans paid close attention to this pre–September 11 struggle in Congress, but the president was going back on many of his central campaign pledges and Congress was boiling—no middle ground, no compromise. The tax cut was the main fight, but the environment and women's reproductive freedoms were in play, too.

The defection of Vermont's Republican senator Jim Jeffords provided a window into this early discord between the Congress and the new administration. He grasped fully the implications of the Bush-Cheney team embarking on its radical agenda and attempting to marginalize and undermine Congress.

Jeffords had served in Washington for decades. In 1974 he was one of the few Republicans able to win election to the House in the immediate fallout of the Watergate scandal. He had seen a lot of ups and downs in the party's fortunes, but what was happening in Washington in the spring of 2001 led him to cross the aisle, become an independent, and caucus with the Democrats.

Such defections are rare in the Senate, but they do happen. In 1994, Democrat Richard Shelby of Alabama switched to the GOP side. Democrat Ben Nighthorse Campbell of Colorado did the same a few months later. But Jeffords is the only senator in history to alter control of the Senate between elections by doing so, unseating every committee chairman simply by crossing the aisle. He had dealt an enormous defeat to President Bush, and that took courage.

The Jeffords defection was a stark demonstration of how much turmoil the administration had caused with its assault on the Congress. The legislative branch was wracked with tension in the first eight months of 2001. That was why it took us until the Saturday before Memorial Day to adopt a budget, something normally done in March or April.

The Senate passed $1.25 trillion in cuts, and the House had swallowed whole the president's demand for $1.6 trillion. The two bills were reconciled in a bitterly partisan conference. We finally called the roll on a $1.35 trillion "compromise." It was an absurd piece of legislation based on a budget gimmick.

Republican backers of the administration saved face by building in a ten-year sunset provision that, through some accounting sleight of hand, would allow them to claim they had gotten the full $1.6 trillion.

It was irresponsible lawmaking, and it created nightmares for financial planners that continue to this day. If you die on December 31, 2010, your heirs pay no estate tax; die a day later and they owe Uncle Sam 55 percent of everything beyond the first $675,000 of the estate, which is exempt.

Under the sunset provision in the new law, all the changes made in the spring of 2001 expire ten years later. Your heirs may owe astronomical taxes or no taxes at all, depending on when you "plan" to die. More than a few financial advisers have been met with uncomprehending stares when they explain the reality of this ludicrous law to a client.

No one knew when the conference committee would report out and we would be called in to vote on the Bush-Cheney tax cut. It came on a Saturday when everyone was scrambling to get home for the weeklong Memorial Day recess. I was in the Capitol that day, in casual clothes, and quickly borrowed a jacket, a tie, and a pair of dress shoes so I could be admitted to the chamber to cast my nay vote. For a moment I wondered if the tax cutters might be right and I might be wrong. Maybe we really could afford these tantalizing tax cuts.

Deep down, the fiscal conservative in me said, no, the sunset provisions are irresponsible. Stick to your guns.

Senator Jeffords, the man who had turned over control of the Senate to the Democrats, strangely voted yea. It was a token peace offering and a parting gift to the Republican establishment that he had served for so many years. I had walked into the chamber thinking I would be the only Republican to vote against the tax cuts. To my surprise and delight, Senator John McCain had also voted nay. A legislative assistant called out the news to me as I closed the door to my office and headed home to Rhode Island for the recess. It certainly felt good to have some Republican company on this tough vote. Since John had not supported previous efforts to scale back the tax cut, I assumed he saw, as I did, the idiocy and irresponsibility of the sunset provision added in at the conference.

Nonetheless, Republicans back home were furious with me, despite their admiration for John McCain.

A few weeks later, I asked for a meeting with the president. I admired his father, President George H. W. Bush, and had gone to school with his brother Jeb, then governor of Florida, but the president and I were not on familiar terms. We had shaken hands once or twice. Now he was the president, and I did not want any ill feelings to fester over the tax cut. I had done something like this several times before: after fighting with the Democrats on the Warwick City Council, I had made a point of sitting down with them over a few beers. I wanted to tell the president I felt strongly that Democrats and Republicans needed to work together and needed his leadership to bring that about. He had promised as much during the campaign, and now we had a divisive fight over taxes, a Republican had defected, and the Democrats were back in control of the Senate. But on another level, I just wanted to spend some valuable time with the president so I could get a sense of the person with whom I would share the reins of government for the next three and a half years.

The president welcomed me into the Oval Office. It was only my second time in that famous setting, the seat of the executive authority in America. The president was friendly at first, but soon we were both being frank and I told him he was risking Republican seats in the Senate in 2002 with his hard-line agenda. We could lose moderates Susan Collins of Maine and Gordon Smith of Oregon. Their constituents would naturally associate them, as Republicans, with an extreme agenda and that would leave them vulnerable. "Don't worry about Susan and Gordon," he told me, in a tone that did not encourage further discussion of how his agenda might threaten us moderates. I asked why he was pushing a hard line on abortion when most Americans are sick of politicians stoking that emotional and most personal issue of all time. "Even Laura is pro-choice," I said, not knowing if it was true. I had read it somewhere and thought I could discern the truth in his reaction.

"Don't you bring my wife into this," the president snapped.

He did not deny that the first lady, like most American women, thinks the government should stay out of their most private and difficult moral decisions.

TIM SLOAN/AFP/Getty Images
An ebullient President Bush gives a thumbs up to the press in March of 2001 after learning that the bulk of his tax cuts were passed by the House of Representatives.  
When the meeting ended, I felt worse about him than when I arrived. I was shaken. I admire old-fashioned virtues, chief among them honesty. Even at this early date in his tenure, the president had demonstrated an undeniable capacity for mendacity. America took him at his word when he said that he was a uniter, not a divider; that our foreign policy would be humble; that he would address climate change by regulating carbon dioxide. In the first months of his administration he had already turned his back on these bedrock campaign pledges.

My visit with the new president did nothing to assuage my apprehensions. The man—and by that I mean the inner man, the essential man—seemed unequal to the awesome powers entrusted to him. I was worried about the damage he might do over the next few years, never mind in a second term, which seemed unthinkable at the time.

What motivates a man to break his promises? I cannot help but think back to A Charge to Keep, the autobiography the Texas governor wrote in 1999 with his political communications director, Karen Hughes. I identify with a part of the book because the president and I have one sad event in common: we both lost a younger sister to an early death.

When I was fifteen, my sister, Tribbie, a gifted young horsewoman, died in a riding accident. I was away at school and learned of the tragedy in a television news report.

When President Bush was seven, he lost his sister, Robin, to leukemia.

When I read what he wrote about that experience, I thought I saw some deep scars there. One day his sister was gone and "no one talked about it much."

He wrote: "The 1950s were a time when a death or any other personal tragedy in a family was viewed as just that: personal. I didn't know that, of course, I was only seven ... I was young enough, and my parents loved me enough, that Robin's death did not traumatize me."

I felt bad when I read the president's account of an experience he had later, at boarding school, in writing a paper. "It was a story about emotions and I was trying to find a unique way to describe 'tears' running down my face.... The paper came back with a 'zero' marked so emphatically that it left an impression visible all the way through to the back of the blue book." How tragic that his teacher could not understand an obvious cry of anguish.

I intend no second-guessing of how the Bush family handled Robin's death. In such tragedies, every parent does his or her absolute best and deserves complete empathy and understanding. But I was so rattled by the president's words in the Oval Office that I was casting about for clues as to how one man could be so ready to battle the world around him, on issues large and small.

Oddly, his pugnacious and intractable attitude remains a big part of his mystique with the Republican core that is still energized as I write this in 2007. Despite his many hollow words and the myriad failures—from Hurricane Katrina to Iraq to peace in the Middle East—the core still loves the fact that President Bush will never back down or change course or admit error. Theirs is the rigid form of thinking that will define the smaller, more aggressive, more extreme Republican Party of the future.

After the Memorial Day recess, we came back and spent a sweltering summer rearranging chairs as the committees reorganized under Democratic leadership and the staffs changed accordingly. We did nothing on the issues important to voters.

That August, while in Maine, I picked up a Bangor Daily News and read that the Bush-Cheney tax cuts were already proving too deep and that nonpartisan budget analysts were forecasting deficits. I thought this would have the Democrats, in their new majority, sharpening their long knives and spoiling for an even bloodier fight when we reconvened in September.

Of course, no one had any idea how dramatically the world would change that September. But even back in June, before we knew the president would soon lead our response to the murder of nearly 3,000 American civilians, something very disturbing came through for me in his demeanor and attitude in the Oval Office. I want to describe it as insecurity, but even that is not the right word.

Several times, the president went out of his way to remind me that he was the commander in chief. You don't have to keep telling me that, I thought. I know who you are. Like others, I have been around people who are good at wielding power. They never have to tell you they are in charge. They just are, and you know it. What I saw and heard that day really unsettled me. I'm the commander in chief... I'm the president... I'm the commander in chief... It was unpresidential.

That September, as I watched the Twin Towers collapse in smoke and dust, I had a sinking feeling about the president's capacity to respond wisely.

Former U.S. Senator Lincoln Chafee is a visiting fellow in international relations at Brown. On September 16, 2007, he announced he would leave the Republican party to become an independent. On February 14, he endorsed Senator Barack Obama. This essay is excerpted from Against the Tide. Copyright © 2008 by the author and reprinted by permission of Thomas Dunne Books, an imprint of St. Martin's Press.


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