The 1990 budget deal, in which President George H.W. Bush formally went back on his “No new taxes!” pledge and cut a sweeping deficit reduction deal with congressional Democrats. It ended up haunting Bush in varying ways for the rest of his presidency.
The ’90 agreement was the product of more than six months of negotiations between Bush and a bipartisan group of congressional leaders. Deficits were soaring and Democrats, who controlled both houses of Congress, demanded that any plan include a significant revenue component. Despite his ’88 rhetoric, Bush had always been more of a pragmatist and was willing to go along, and so were Bob Dole and Bob Michel, the pragmatic conservatives who led the GOP in the Senate and House.
The drama unfolded in two phases. In the first, a plan was drawn up that relied heavily on fees, excise taxes, cuts in social welfare programs, and new restrictions on tax deductions. The aim was to cut the deficit by $500 billion over five years, and the idea was for Bush to be able to say that he hadn’t raised income tax rates on anyone — and to keep conservative Republicans, particularly in the House, in line. But this ended up infuriating Democrats, who believed the deal put far too much of the burden on middle- and lower-income Americans. At the same time, conservatives in the House — urged on by a rising star named Newt Gingrich — still rallied in opposition. In early October ’90, the deal went down to defeat in the House by a 254-179 margin. A majority of Republicans (by a 105-71 margin) and Democrats (149-78) opposed it.
This triggered a brief government shutdown and a sharp drop in Bush’s approval ratings, which had been almost unnaturally high during his first two years on the job. With the midterm elections approaching, Bush then compromised further with Democrats, who had majorities in both chambers, agreeing to a plan that shifted more of the burden to the wealthy by raising the top marginal income tax rate from 28 to 31 percent.
A full-scale revolt from the right ensued, with conservative leaders branding Bush a sellout. When the new deal came up for a vote, the partisan divide on Capitol Hill was clearer. In the House, Republicans overwhelmingly opposed their own president’s plan by a 126-47 margin. Democrats backed it by a 181-74 spread. It passed the Senate, where the GOP’s ranks weren’t as conservative, on a 54-45 vote and was signed by Bush in early ’90.
To the anti-tax right, all of this served to confirm their long-held suspicion that Bush wasn’t really one of them. He’d run for president in 1980 as a moderate Republican, deriding the supply-side theory that Ronald Reagan championed as “voodoo economics.” At that time, Bush’s wing of the GOP was still a force, but Reagan’s was the future. By the end of the decade, supply-side theory had become GOP gospel, and Bush had reinvented himself as a true believer. This was the backdrop for his “Read my lips: No new taxes” proclamation at the party’s 1988 convention. It was all enough to convince conservative leaders to put their doubts aside and to help Bush succeed Reagan.
But Bush, with the ’90 budget, showed that he’d been faking it — a fact that one conservative voice after another was happy to point out.