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Tipping point

Twenty years ago, House Speaker Thomas P. O'Neill Jr. blocked President Ronald Reagan's attempt to cut Social Security. Is that great battle a cautionary tale for President George W. Bush?

The Carter years were a political disaster for Tip O'Neill's Democratic Party. When handing the Democrats control of both the White House and the Congress in 1976, the voters had looked to the party for the promise of national revival. But the Democrats had staged a thoroughly miserable performance. They had been petty, selfish, and spiteful. They had looked beholden to special interests. They had refused to curb their insistent liberal base and chosen to fight a destructive, self-indulgent civil war in the presidential primaries in 1980. They had been intellectually clueless and politically inept.

The electorate's retribution was severe. It was not just what the Republicans won: the White House, the Senate, and a 33-seat gain in the House of Representatives. It was who had won: Ronald Reagan. Jimmy Carter was gone, Ted Kennedy dismayed. That left O'Neill, who stood as a symbol of the Democrats' failure but also as their best hope. "Until such time as we nominate a new presidential candidate, you are the leader of the Democratic Party as well as the highest public official of that party," leadership aide Burt Hoffman wrote in a memo to the speaker. "You are also, more than ever, the only person in a position to continue representing the ideals of justice and compassion."

It would be the defining historic moment for this bruised old white-haired man, and O'Neill knew it. His name, his pride, were on the line, but more important, so was what he believed. If Tip O'Neill failed to hold this last bridge, he knew that his place in history would suffer, but so would Franklin D. Roosevelt's legacy: The elderly whose fears of poverty and illness had been eased by Social Security and Medicare. The working-class kids going to college with Pell grants and federal loans. The water and the air that were getting cleaner, the wilderness preserved from development. The single mother or the motherless child who still, in this abundant nation, knew the pain of poverty.

Thomas P. O'Neill Jr. was no saint. In a lifetime in politics, he had gouged eyes, thrown elbows, bent the law, and befriended rogues and thieves. He could be mean and small-minded. But at his core there lay a magnificence of spirit, deep compassion, and a rock-hard set of beliefs. "You know you're right?" his wife, Millie, would ask him, as he adjusted his tie at the door in the morning. "Yes," he would say, and he knew it - knew it the way he knew the sidewalks of Cambridge, the liturgy of Sunday Mass, or how to stack a conference committee. "Then do your best," she would say, and off he would go.

He may not have had the looks of a movie star, but he had great instincts and sound judgment and a joy for life that could match Reagan's charm. Indeed, Reagan and O'Neill had much in common. They were broad-brush types who liked a joke and never let the facts get in the way of a good story. They could take a punch and come back swinging. They each had spectacularly talented staffs. Most important, and despite their acting talents, they stood out - among the sharpies and trimmers of the nation's capital - as men of deep conviction. Each was sustained, in much the same way, by his own distinctive mythology.

Reagan was a son of the small-town Midwest, a lifeguard and radio announcer who had made his way to the Golden State and become a wealthy movie star. He revered individual liberty, and his icons were the cowboy and the entrepreneur. His speeches rarely failed to cite the American Revolution, which had thrown down the government of a rotten tyranny and claimed the freedom and rights of man. O'Neill was a product of the East, of the great crowded cities. He reveled in the collectivity of purpose, in the fruits of charity, neighborhood, and fellowship. His was the creed of John F. "Honey Fitz" Fitzgerald and James Michael Curley, Roosevelt and the Sermon on the Mount. He too revered the Founding Fathers, but for the magnificent system of government they had built, which had proved so adaptable and addressed so many social ills.

Tip O'Neill versus Ronald Reagan. Theirs was no sophistic debate: These were worldviews clashing. And good it was, for the country, to have the debate, to stake the claim of a "more perfect union" against the demand for "life, liberty, and the pursuit of happiness" once again.

O'Neill and Reagan. Their struggle would bring out the best in them. Yet to equate them in November 1980 is to leap ahead of the story. Reagan was tasting his first triumphs, and O'Neill had still to serve a season in political hell.

There was no doubt in Tip O'Neill's mind as to what the number one priority was: to save the House. "Save the House. That was his goal. He killed himself going out around the country for guys," said his lifelong pal and aide Leo Diehl. Lose the House in 1982, and there would, indeed, be a revolution. Lose the House and lose most of the Great Society and much of the New Deal. "The Republicans had a real chance in 1982 to realign the parties," said his counsel, Kirk O'Donnell, and O'Neill concluded that "what you had to do was organize a successful retreat so that your troops would be, morale-wise and weapon-wise, ready to battle when the critical campaign of 1982 began."

Liberals in the Democratic caucus believed that the political situation was now clarified - that the demands of both conscience and politics dictated a scorched-earth campaign against Reagan. Though O'Neill might have been sympathetic, as a leader he had other factors to consider - particularly the political needs of the 50-odd moderate and conservative Southern Democrats known as "boll weevils," already the target of the Republican White House. Nor did O'Neill believe that the public would forgive him if he kept Reagan's program from the floor of the House. "The American people wanted to give Reagan a chance. ... So O'Neill decided to give Reagan a chance to offer his legislation and not play games with it, and to do it in a very public way so that we couldn't become the scapegoat," O'Donnell said.

The key, O'Neill told his aides, was to set up issues for Democrats to run on in 1982. O'Neill would give Reagan rope. Sooner or later, O'Neill believed, the economy and the electorate would turn on Reagan - and Democrats would ride that reaction back to power. Within days of the election, O'Neill had selected the basic strategy by which he and his party would operate in the next two years.

"We're going to give 'em enough rope," O'Neill said. "They can use it either to herd cattle or make a mistake. ... They've got to deliver." Of all the decisions O'Neill made in the aftermath of the 1980 election, giving Reagan the rope was the most significant. It was also the most painful, as it virtually ensured that O'Neill and his party would take a grievous beating in the first year of Reagan's presidency.

Reagan had warned in his inaugural address, "Government is not the solution to our problem: Government is the problem." And he meant it. "There was a hard-core group around Reagan who not only wanted to reverse the Great Society but also the New Deal," former Colorado senator Gary Hart recalled. "If they thought they could get away with it, they would go after Social Security, Medicare, and the core programs."

The Reagan regime, in the person of budget director David Stockman, devised an economic shock plan. There was early evidence that Reaganomics, as it came to be called, was set upon shifting sands. Stockman's plan depended on a "rosy scenario" that called for 5 percent real annual growth. And there was a "magic asterisk" in the plan for $44 billion in "future savings to be identified."

But if there were holes in Stockman's calculations, there were few omissions in the White House strategy for pushing the plan through Congress. The Reaganauts had gone to school on their predecessors' failures. "The record of the last four years is instructive," read one memo to Edwin Meese, Reagan's trusted counselor. "Jimmy Carter announced seven major economic programs, on average a new one almost every six months. No consistent signals were transmitted from the White House. The administration shifted course several times without ever communicating a sense of direction or a destination."

The White House chief of staff, James Baker, and others believed that the presidential honeymoon was a crucial period, because it molded a president's image as someone who could or could not get things done. "We were single-minded in those first six to eight months," said Baker. "We kept our eye on the ball. We had a 100-day plan."

Opposing the single-purposed White House lobbying team was a Democratic Party that was, ideologically, all over the map. In notes prepared for a March 4 House leadership meeting, O'Neill listed seven different groups of Democrats, spanning the ideological spectrum, that were working on responses to Reagan's proposals. "How do we try to keep all these groups under the same umbrella and discourage them from going public, which only serves to divide and weaken us?" O'Neill asked his lieutenants. And then, early on the afternoon of March 30, John Hinckley shot Reagan outside the Washington Hilton.

Reagan was hit by a bullet that bounced off his limousine and lodged in his lung. "Honey," he told his wife as doctors prepped him for surgery, "I forgot to duck." The president's gallantry, and the brio he brought to his recovery, moved his "revolution" to a higher plane. The country had endured almost two decades of assassinations, scandal, social turmoil, economic stagnancy, and unhappy presidencies. Now the old movie star, in the best Hollywood tradition, had taken a bullet, shrugged it off, and risen more determined than ever.

"Just when the honeymoon might ordinarily have been expected to begin to fade, it was deepened and extended," said Reagan aide Richard Darman. The White House shrewdly tied Reagan's return to action to the budget and tax debate, scheduling an April 28 comeback speech before a joint session of Congress.

The speech was a triumph, and O'Neill compounded his difficulties when, tired and feeling jet lagged on the day after his arrival home from a South Seas junket, he told reporters that the battle against Reagan was lost.

It was an honest statement of the speaker's "give him rope" strategy, the wisdom of which was being underscored by the red ink then pooling at Stockman's feet. But huge chunks of the Democratic caucus - impulsive liberals and younger moderates - were furious. "Les Aspin and the guys were saying, 'Why don't you step down? You're too old. You're dragging us down.' I'd go in the office, and he'd be sitting there smoking a cigar, really morose," Representative Joseph Moakley of South Boston recalled. "There were a lot of days Tip didn't want to get out of bed and put on his shoes."

In the end, Reagan carried every one of the 190 Republicans and 63 of O'Neill's Democrats. The speaker looked rumpled and distracted in his closing argument. Its logic and diction were as disheveled as his clothes. "Do you want to meat-ax the programs that have made America great?" he asked. It was a stunning triumph for Reaganomics.

On April 7, 1981, O'Neill had been the featured guest at a Christian Science Monitor breakfast. His staff had prepared a six-page briefing packet with a suggested theme: "Democrats in the House have their act together." But for O'Neill, the morning did not go well. He was too much himself. As the reporters snickered, he defended, in most memorable terms, the big-spending Great Society.

'I've been one of the big spenders of all time," O'Neill confessed. "I remember when a doctor came in and told us the average dwarf was 26 inches high. He said he could increase that to 52 inches. He brought in six dwarfs. Over the years I sneaked into the budget $45 million.

"We used to be able to sneak these in. Nobody knew. But nobody is going to be able to do that anymore," O'Neill lamented. "There are 150,000 dwarfs in America. Does anyone have an obligation? Is it the obligation of the federal government? I think it is."

The meeting broke up, and the reporters rushed to their bureaus to write about Tip O'Neill and the dwarfs.

As an initial foray into media politics, O'Neill's performance at the breakfast was off-message at best. "This was a person driven in large measure by his sense of compassion," aide Ari Weiss recalled. "And he started to make this speech that reflected his deepest commitments and emotions, of how this was something that the families of those children could not provide, and wasn't it the role of government. And as he began to talk about it, straight from the heart, the reporters started to guffaw."

Lost in the jokes was an important development: The old dog was trying new tricks. The speaker was fighting back, and on Reagan's turf, in a battle for popular opinion. The decision had been made: It was Tip O'Neill who would challenge Ronald Reagan, not some telegenic young stand-in.

"The Republicans wanted him to be the symbol of all that was wrong with government," said Representative Richard Gephardt of Missouri. "He could have just retreated into his office. To his credit, he realized he couldn't do that. He had to stand his ground."

"He knew we needed to do something. And he did it," said the speaker's spokesman, Chris Matthews. "He took on the role." Matthews was himself proof of O'Neill's willingness to try new tricks. He was a spinmeister, the first ever employed by a speaker of the House.

Matthews found that O'Neill was self-conscious about his looks and dubious about competing with the movie star in the White House. But a sturdy journalistic imperative - get the other side of the story - provided O'Neill with an opening. Reporters needed a Reagan foil, and that was a role the speaker could fill. Still, it was a tough, evolutionary process. "You had to beg him to do interviews," Matthews recalled. "And I wanted desperately to say ... that is the only way to become a figure in American politics. You cannot customize it. You cannot come in and tailor it. All you can do is go in, let them see who you are, and let them make their own judgments about you. It's a distillation, not an accumulation. What matters is what comes through. And what came through for him," said Matthews, "was this big guy with a good heart and a lot of guts."

"The pendulum swings," O'Neill kept saying. He and the Democrats were flailing about, searching for a political opening, when, in May, the Reagan administration made its first political blunder. It was an issue custom-made for O'Neill: The Republicans were scheming to cut back Social Security. If the defense budget was untouchable, and the tax cut sacrosanct, the Reagan administration would face massive budget deficits unless it reduced the soaring costs of Social Security and other so-called entitlements.

Republicans in the House and Senate were game for what Stockman described as "a frontal assault on the very inner fortress of the American welfare state." In early May, Stockman made his move, proposing to cut back Social Security benefits for beneficiaries who chose early retirement. The press then revealed that the administration was also planning to delay that summer's cost-of-living increase. It was a critical turning point, O'Donnell recalled. "This was right from O'Neill, right from his gut. He was on his way to work, reading the paper, and he read about Stockman's cuts, and he came into the morning conference we had and asked, 'What do you know about these proposals?' And nobody knew anything about them," O'Donnell remembered.

"Call Danny," O'Neill said.

O'Donnell spoke to the Ways and Means staff and discovered that chairman Dan Rostenkowski and his colleagues were playing down the controversy because they felt a fiduciary responsibility, as good Democrats, to work with the White House to make Social Security solvent. "Danny doesn't want to play politics with it," O'Donnell told the speaker. Though O'Neill generally let his committee chairmen make such calls, this time the knife was too close to bone.

"I have a statement on the Social Security," O'Neill said at his May 13 press conference, reading from a typed page. "A lot of people approaching that age have either already retired on pensions or have made irreversible plans to retire very soon. These people have been promised substantial Social Security benefits at age 62. I consider it a breach of faith to renege on that promise. For the first time since 1935, people would suffer because they trusted in the Social Security system."

"Are you saying that is a serious political mistake?" a reporter asked.

"I'm not talking about politics. I'm talking about decency. It is a rotten thing to do," O'Neill said. "It is a despicable thing."

A few days later, the speaker stunned the Capitol press corps by arriving in the House radio and television gallery: To everyone's surprise, here was the speaker looking to get on television. He made all three network news shows that night. The following weekend, O'Neill broke a three-year drought and appeared on a Sunday talk show. The first question was a softball about the president's tax bill. "I'm opposed to the Reagan tax bill, number one, because it's geared for the wealthy of the nation instead of being spread out among the working class of America and the poor people," O'Neill said.

A few minutes later, he went for Reagan's throat. "He has no concern, no regard, no care for the little man of America. And I understand that. Because of his lifestyle, he never meets those people. And so consequently, he doesn't understand their problems. He's only been able to meet the wealthy," O'Neill said. "I think he'd do much better if he had brought in some people close to him who are from the working force of America, who have suffered along the line, not those who have made it along the line and forgotten from where they've come."

What made the speaker's performance effective was that his rhetoric reflected his personal beliefs. The viewers at home could taste the authenticity. So could Reagan, who went into a slow burn. "Ronnie," his wife, Nancy, recalled, "was very hurt by the harsh criticism that Tip had leveled."

The battle raged all summer. Meanwhile, consternation was growing in the Reagan camp. "If - as they think likely - our economic policies fail, the Democrats could become the ultimate winners," Darman privately warned Reagan. It was a prospect that was increasingly worrying Stockman. The problem was in the math, for the White House was losing its riverboat gamble. The political victories of the Reagan revolution had not set off the bull market that Stockman had predicted, and the Federal Reserve had embarked on a tight-money course to cut inflation. There was no way around it: Stockman needed more cuts.

On August 3, Reagan and his aides gathered for a working lunch, and Stockman showed Reagan the consequence of that summer's legislative victories: They would need from $250 billion to $500 billion in further spending cuts over the next four years, or the government would face multibillion-dollar budget deficits. "Dave, if what you are saying is true," said Reagan, "then Tip O'Neill was right all along."

"Oh, no," said Stockman. Why, he had plans for a "September offensive." But in the speaker's office, they were planning an offensive of their own.

On August 4, as the press continued to sing of Reagan's victories and Stockman paged through his black budget books, earmarking proposed cuts in Social Security, veterans' pensions, food stamps, farm subsidies, and other federal programs, Kirk O'Donnell delivered an 11-page memo to his boss. O'Neill would come to call it "The Plan."

"Out of the triumph of the Republican Economic Program," O'Donnell wrote, "Democrats have some consolation. The economy is no longer our burden; it is a Republican economy, Reagan has assumed total responsibility." Democratic pollster Peter Hart had identified a soft spot in Reagan's popularity, O'Donnell noted: Hard times were looming, and the voters were getting impatient. "A recession brought about by tight money is at hand," O'Donnell wrote. "It is an ideal time to expose the weaknesses of the Reagan economic program. Control of Congress will be the issue in 1982. ... It is time to take the offensive."

The first issue that O'Neill confronted was Social Security. The program was in trouble; a subcommittee led by Representative Jake Pickle, Democratic of Texas, had been struggling to craft a bipartisan cure, and O'Neill's analysts had been privately warning him for two years that the main trust fund was in "critical" shape and likely to run out of money in 1982. But to save the House, O'Neill needed an issue, and Social Security promised to be one. And so O'Neill made a far-reaching decision to politicize Social Security, ordering his Democrats to withdraw from the bipartisan alliance with Republican moderates that had guarded the program from conservative attacks. "O'Neill took Social Security and just drove it home ruthlessly and in some respects dishonestly, but with great effectiveness," Newt Gingrich recalled.

By putting Social Security and the other social insurance programs into the political mix, O'Neill was exposing them to assault - indeed, daring Republicans to make the attack. The Democratic scare tactics upset senior citizens, exposed the party to the charge of demagoguery, and fed the growing cynicism about politics and government. It all began to look like a game, and Social Security and Medicare became but pieces on the board. "The Republicans will never trust the Democrats again on Social Security," said Representative Lud Ashley, Democrat of Ohio. "It was made clear to them, indelibly and lastingly, that this is the third rail, and if you touch it you get burned. ... And that was almost totally Tip's doing."

O'Neill played hardball, blocking all legislation from Pickle's subcommittee. Reagan had no room to counterattack. On September 24, he capitulated. In a letter to O'Neill, the president renounced the cutbacks he had proposed and called for the establishment of a bipartisan commission to seek a solution. Stockman's "September offensive" had failed. As the economy slowed under the Fed's tight rein, unemployment rose to 8 percent and interest rates hit 20 percent. Finally, in mid-October, Reagan admitted the truth: There would be no robust supply-side dividend, no 5 percent or better annual growth.

The 1982 election was a year and change away when, on October 21, O'Neill rose to say "I told you so" on the House floor. "Today the government made it official," he said. "We are in a recession, and it's a real recession. For months we have been told just the opposite. We have been told that everything was going to be all right, that we were headed for prosperity, for an economic renaissance. The president on August 5 said he had everything that he wanted. He had his rich-man's tax cut. He had his budget cuts. Yes, indeed, now we are facing economic reality. We are in a recession."

For almost a year, O'Neill had worked toward this moment. He had given Reagan rope, and now the rope had become a noose.

The recession of 1982 was the worst economic downturn since the Great Depression. On November 2 of 1982, the Democrats picked up 26 House seats - a total that exceeded both expectations and historical precedents.

O'Neill had won elections before. Knowing what to do with victory was as important a test. His most lasting legacy as speaker was the deal he now struck with Reagan to preserve Social Security, a bailout plan with benefit cuts and tax hikes on a 50-50 basis. The speaker rarely attended such ceremonies, but he was there at the White House on a raw April day when Reagan signed the bill that saved Social Security from Stockman's knives. With the scratch of souvenir pens, the Reagan revolution came to an end.

Reagan could justly claim to have ended the nation's drift toward a Western European-style social democracy. Americans had reaffirmed their love of risk and freedom, of markets and entrepreneurs. In the 20 years after Reagan's election there would be no new federal agencies or departments; the US government work force would shrink; Reagan-Bush appointees to the Supreme Court would dismantle chunks of the Warren Court's legacy; and the one Democratic effort to create a new federal entitlement - the doomed push for national health care in 1993 - would lead to a Republican takeover of the House. To win reelection in 1996, Democrat Bill Clinton would promise that "the era of big government is over." Reagan couldn't have said it better himself.

Yet, in no small part because of Tip O'Neill, who staggered against the ropes in the summer of 1981, the Reagan revolution remained merely attitudinal. Slowly, but largely because this bleeding, pained old man kept hollering "fairness" and "justice" as Reagan pounded him around the ring, the American people stopped to consider those principles, debated and decided what was too costly and what was unfair, and put the revolution on hold.

"There should be no doubt about what experience has demonstrated: The specific ideas necessary to make radical cuts in modern American government consistently fail the test of public acceptability," Darman concluded after Gingrich's attempt to reprise the revolution failed in 1995. "The reality is that the American government is as big as it is, acting in the areas that it does, primarily because a substantial majority of Americans wants it roughly so."

O'Neill may have sensed the end of the revolution as he huddled on the White House lawn that cold spring day, watching Reagan sign the Social Security bill into law. The Great Society was bruised yet breathing. And Franklin Roosevelt's legacy was untouched. The souvenir pen in O'Neill's hand was proof.

"This is a happy day for America," the speaker said. He had remembered where he came from. He had kept the faith.