President Bush and the Battle over the FY 1991 Budget: The Death of the
“No New Taxes” Pledge
Biographies:
Michael Boskin, Chairman, Council of Economic Advisers
Nicholas Brady, Secretary of the Treasury
Richard Darman, Director, Office of Management and Budget
Marlin Fitzwater, White House Press Secretary.
Roger Porter, Presidential Aide
John Sununu, White House Chief of Staff
Terms:
Gramm-Rudman-Hollings Deficit Reduction Law (GRH)
Also known as the Balanced Budget and Emergency Deficit Control Act of 1985
Passed in 1985. Mandated that the federal budget be balanced by October 1990, when
the budget for fiscal year 1991 was due. Established annual budget deficit targets that
declined to zero over a period of 6 years—i.e., in FY 1986, get the budget deficit to less
than $171.9 billion; in FY 1987, $144 billion; in FY 1988, $108 billion; in FY 1989, $72
billion; in FY 1990, $36 billion; and in FY 1991, $0.
Automatic spending reductions would be levied if a target was missed in any given year.
Known as a sequester, this would shut down the parts of the federal government that
were denied funds.
In 1987, Congress amended GRH so that a balanced budget was not required until 1993.
In 1990, GRH underwent drastic revision as part of the negotiations between the Bush
administration and Congress over the FY 1991 Federal Budget. These modifications
altered the sequester process.
1989
April 14
President Bush and Congressional leaders appeared
in the Rose Garden of the White House to announce
an agreement concerning the Fiscal Year 1990
Federal Budget.
Bush had entered office in January facing a national
debt of well over $2 trillion, with a yearly interest
of some $200 billion. President Bush had pledged
during the 1988 campaign that he would not raise
taxes. After sending his FY 1990 Budget to
Congress on February 9, Bush and his economic
team negotiated a compromise with Congress that
reduced the FY 1990 budget deficit as required by
the Gramm-Rudman-Hollings Act of 1981 (GRH),
without raising taxes
The Rose Garden ceremony, see
http://bushlibrary.tamu.edu
August 15
President Bush met with Richard Darman, Director
of the Office of Management and Budget, John
Sununu, White House Chief of Staff, and Nicholas
Brady, Secretary of the Treasury, to discuss the
administration’s approach to the FY 1991 budget.
Darman warned that given the current economic
situation, crafting a budget would be extremely
difficult and might involve choices among
politically damaging options.
1990
January 29
President Bush submitted his proposed budget of
$1.23 trillion for fiscal year 1991.
He proposed reducing the deficit to $64 billion,
barely within the mandate in Gramm-RudmanHollings. Bush’s proposed budget did not cut
Social Security, it reduced defense spending by
2.6%, and it reduced capital gains taxes. The
budget included over $20 billion in new revenues,
largely collected through ‘user’s fees,” which the
administration insisted were not taxes.
March 5
The Congressional Budget Office released its
annual re-estimate of the President’s budget and
concluded that the FY 1991 budget deficit would be
$131 billion.
March 6
Representative Dan Rostenkowski (D-IL),
Chairman of the House Ways and Means
Committee, met at the White House with Darman
and Sununu to warn them that he would be putting
forward his own budget plan with a serious
emphasis on deficit reduction. The three then spoke
with President Bush, who agreed not to declare
Rostenkowski’s budget dead on arrival.
Later that day, President Bush, Darman, Sununu,
and Brady met to discuss budget strategy—and the
politics behind it. Bush approved a course in which
the administration would try to negotiate a
compromise budget with Congress that included
both spending reform and deficit reduction, leaving
open the possibility of new taxes.
March 11
Rostenkowski presented his own budget proposal.
He called for an across the board freeze on all costof-living increases in all spending categories, as
well as a fifteen cent per gallon tax increase on
gasoline.
March 14
Darman met with the House Democratic Budget
Group and assured them that the administration was
serious about budget negotiations and deficit
reduction. They expressed a willingness to work
with the administration.
March 20
President Bush met with Vice President Dan
Quayle, Darman, Brady, Sununu, Chairman of the
Council of Economic Advisers Michael Boskin, and
Presidential aide Roger Porter to outline the
administration’s goals in any negotiations with
Congress over the budget. According to Darman,
all in attendance agreed on the need for some sort of
revenue-raising measure.
March 28
The Republican leadership in Congress gave the
president their support for White House budget
negotiations with Congressional Democrats.
April 29
Negotiations between the White House and
Congress went nowhere. President Bush met with
Darman, Sununu, and Brady.
The President’s staff argued that Bush needed to
meet with the Congressional leadership from both
parties to express his commitment to a negotiated
settlement of the budget. They also argued that
future negotiations should be publicized and should
be conducted as summits. Bush agreed, with a few
modifications.
May 1-2
President Bush successfully made the case for
serious budget negotiations in separate secret
meetings with Senate Majority Leader George
Mitchell (D-ME), Senate Minority Leader Robert
Dole (R-KS), Speaker of the House Tom Foley (DWA), and House Minority Leader Robert Michel
(R-IL).
May 6
President Bush and his economic team met with the
Congressional leadership at the White House to end
the impasse over the FY 1991 budget proposals.
Darman warned that a sequester of funds, or a shutdown of the government, would be disastrous. The
president indicated that he was willing to negotiate
on taxes.
May 9
President Bush, along with Darman, Sununu, and
Brady, met with Mitchell, Dole, Foley, and Michel
in the first public budget negotiating session.
Mitchell pressed all to agree that there would be no
preconditions on negotiations. White House Press
Secretary Marlin Fitzwater released a statement to
that effect.
May 15
President Bush met with a group of 26 Members of
Congress to outline the discussions he had had with
Mitchell, Dole, Foley, and Michel.
Budget negotiations began on Capitol Hill among
the 26 members involved in the negotiations. No
progress was made.
May 17 - June 20
Budget negotiations continued to stall after
unproductive meetings on Capitol Hill between
White House staff and a bi-partisan group of
Members of Congress.
June 22
Brady and Darman report to President Bush on a
meeting they had held June 21 with Senator Lloyd
Bentsen (D-TX) and Congressman Rostenkowski,
during which both Democrats indicated they were
amenable to negotiating a deal with the White
House that they would then sell to the Democratic
leadership.
June 25
President Bush met with Republican budget
negotiators, all of whom agreed, a few with some
hesitation, that a budget deal that raised taxes was
acceptable, but only if the deal met certain
conditions.
June 26
President Bush and his staff agreed at a meeting
with the Congressional leadership (as well as
Representative Richard Gephardt (D-MO)), that any
budget deal would have to include entitlement
reform, reduction of defense and discretionary
spending, budget process reform, and tax increases.
Serious budget negotiations started with this
agreement. Following the meeting, President Bush
issued a written statement, which said that in order
to solve the "deficit problem….tax revenue
increases" may be necessary in the federal budget
for FY 1991. It was the first time Bush had publicly
reneged on his pledge from the 1988 presidential
campaign of “no new taxes.” By 12:30 p.m., Press
Secretary Fitzwater reported that calls to the White
House were running 12 to 1 against the President.
Statement available via the Bush Library at:
http://bushlibrary.tamu.edu/
August 4
Congress began its summer recess. The twenty-six
Members of Congress (the budget negotiators) had
met throughout the summer with White House staff,
most prominently Darman, Sununu, and Brady, but
were unable to reach a budget agreement.
Bush wrote in his diary of the negotiations, “I much
prefer foreign affairs. I salute Sununu and Darman
for doing it.”
September 7
The Congressional budget negotiators returned to
Washington and began meeting with White House
representatives at Andrews Air Force Base. All
hoped this would be the final round of negotiations.
The talks quickly stalled over capital gains taxes.
September 10
In a speech to Congress after the Iraqi invasion of
Kuwait, Bush exhorted lawmakers to “address our
budget deficit—not after election day, not next year,
but now.”
September 17
Budget negotiations at Andrews went nowhere.
The group of 26 negotiators from Congress agrees
to turn over the talks to the Congressional
leadership (Mitchell, Dole, Foley, and Michel,) to
work with Darman, Brady, and Sununu from the
White House.
“The talks are not collapsed,” Gephardt declared,
“We’re just moving them to a different stage.”
September 25
Bush told reporters that he would veto a budget
agreement that did not contain “real spending
reduction and real process reform.”
September 30
The Bush administration and Congressional
negotiators reached a budget deal for FY 1991, right
before the mandated sequester.
Congress also passed a continuing resolution to
keep the federal government funded through
October 5.
October 1
In the Rose Garden, Bush, his budget team, and the
Congressional leadership gathered to announce an
agreement on the FY 1991 budget.
The budget cut almost $120 billion from entitlement
and mandatory programs, $182 billion from
discretionary programs, and instituted a “pay as you
go” system that mandated any new programs be
paid for at the time of their initiation. The plan also
called for $134 billion in tax increases, the majority
of which came from a phased in gasoline tax.
President Bush said, “I do not welcome any such
tax measure…However, this one does have the
virtue…of contributing to deficit reduction.”
Representative Newt Gingrich (R-GA) announced
his opposition to the agreement and refused to join
other members of Congress in the Rose Garden.
Rose Garden statement available via the Bush
Library at: http://bushlibrary.tamu.edu/
President Bush signed a continuing resolution that
provided funds to keep the government operating
through October 5, preventing a government shutdown.
For Bush’s remarks on his action, see the Bush
Library at: http://bushlibrary.tamu.edu/
October 5
The House of Representatives voted 254 to 179 to
reject the budget bill, with a coalition of
conservative Republicans led by Gingrich joining
Democrats to kill the compromise. The defeat of
the budget ensured that the government would shut
down unless lawmakers passed, and Bush signed,
another continuing resolution that provided funds.
October 6
The House passed a continuing resolution that
would keep the government running through
October 12. President Bush vetoed it that same day,
saying, “It is time for the Congress to act
responsibly on a budget resolution—not time for
business as usual.”
For the veto message and a Bush press conference
go to http://bushlibrary.tamu.edu.
Portions of the federal government closed, mainly
public attractions such as National Parks. Most key
military operations were exempted from the shutdown, which was important because the American
military was gearing up to fight the Gulf War.
Public outcry over the government shut-down grew,
with much of it directed at President Bush.
October 9
Under intense public pressure, President Bush
signed a second continuing resolution that funded
the government through October 19.
October 9–27
Congress worked to recraft a budget deal.
October 20
President Bush signed another continuing
resolution. This one kept the government running
until October 24.
October 25
President Bush signed another continuing resolution
to keep the government running.
October 27
The House passed a budget bill in the early morning
by a vote of 228 to 200. The Senate passed the bill
that afternoon by a 54 to 45 margin.
The bill called for the reduction of the federal
deficit by $43 billion in FY 1991, and by nearly
$500 billion over a five-year period. The bill
mandated tax increases for almost every American,
but also provided spending cuts in farm, housing,
and veterans programs.
The passage of the budget bill happened without the
support of conservative Republicans, led by
Gingrich, who refused to vote for new taxes.
News conference on the resolution of the budget
crisis at http://bushlibrary.tamu.edu.
November 5
President Bush signed the Omnibus Budget
Reconciliation Act of 1990.