Chapter 7 Chapter 7 A Tale of Two Parties
If any political figure is associated with the post-1970s transformation of American politics and the rise of a new (and newly unequal) economy, it is surely Ronald Reagan. To detractors and admirers alike, he is the obvious leading man in the drama of the New Deal’s demise. Reagan was simultaneously the conservatives’ most eloquent advocate and their most successful candidate. He was, in a word, a game-changer. There was American politics before Reagan, and American politics after Reagan. Full stop.
Yet this familiar telling is profoundly misleading. Depicting Reagan as the personification of the modern Republican Party is twice mistaken: It overestimates the radicalism of Reagan’s GOP, and it underestimates the radicalism of the GOP that was to come fifteen years later (and whose activities and impact we will discuss in the next chapter). The profound transformation of the Republican Party from its moderate roots into a force committed to the full reversal of a century of domestic policy took more than the eight years of Reagan’s presidency to develop—indeed, the process continues to this day. Reagan was an inspiration and spur to this broader shift, but when he took office the ground was not yet prepared, and the party he governed was still a work in progress.
The image of Reagan as radical Republican conqueror is also misleading because it misses the organizational army that the GOP started to develop even before he took office and which Reagan only partially and temporarily directed. Reagan is the Edmund Hillary of the Republican revolution. His achievements were only possible because of the organization-building that took place beyond the sandstone walls of the White House.
Even before Reagan’s electoral triumph, the Republican Party took advantage of the organizational shifts that we charted in the past three chapters to construct a formidable party structure that linked interest groups and candidates through the powerful bonds of campaign money and favorable public policy. Using new technologies and innovative organizational strategies, the GOP translated its mastery of an increasingly money-driven campaign world into durable and sometimes improbable election victories—victories that, in turn, allowed them to build on the policy foundations of the late 1970s supporting the emergent winner-take-all economy. With organized labor weakened and organized business strengthened, the Democratic Party struggled clumsily to respond. Between the growing demands for money and the rapidly expanding capacities of the GOP, Democrats found themselves caught in a financial arms race. Unfortunately for them, they got to play the part of the late–Cold War Soviet Union responding to Reagan’s massive defense buildup.
The deep impact of this organizational imbalance revealed itself not at the high tide of the first-term Reagan revolution, but at its low point, the congressional midterm elections of 1982. 1982? Yes, here again our view of politics as organized combat points us to political turning points that a conventional telling of history ignores. We have already discussed how 1978 was important for what it brought—a conservative and business resurgence despite a Democratic Congress and President. 1982, by contrast, is important for what didn’t happen: the collapse of Reaganism. How the Reagan revolution survived this near-death experience provides unparalleled insight into the political shifts that laid the groundwork for the emerging winner-take-all economy of this era—and the ascendant winner-take-all economy that was soon to take center stage.
Reagan is remembered as a political colossus, but our collective memories are highly selective. The Gipper’s reputation as a political winner rests heavily on his exquisitely timed reelection campaign of 1984. Riding a brief economic boomlet (“It’s morning again in America”), the President coasted to reelection, demolishing a dispirited Walter Mondale. Just two years earlier, however, Reagan had faced a near-certain electoral rout. The luster was gone from Reaganomics. In early October, the administration had to announce that unemployment had topped 10 percent, a level not seen since the Great Depression. An ill-advised trial balloon of cuts in Social Security had badly damaged the President’s standing with elderly and blue-collar Americans. In the preelection Gallup poll, the president’s job approval rating (42 percent) was the lowest at that stage of a presidency since Harry Truman’s in 1946.1
Reagan and his advisers understood the gravity of the situation. Even under the best of circumstances, the first midterm election of a new presidency is typically a painful one, with an average loss in the postwar period of twenty-seven seats in the House. Under the grim conditions of 1982, Republicans could anticipate much worse. Through the summer and fall they watched as their candidates fell in the polls. As the executive director of the National Republican Congressional Committee (NRCC), Nancy Sinnott Dwight, later remembered, “It was a disaster facing us, of major proportions—55 to 60 seats.”2 Nor was this just ex post dramatics. Two prominent political science models, based on broad indicators of the political and economic climate, forecast Republican losses of fifty-eight and up to sixty seats respectively.3 To put those numbers in perspective, the two biggest drubbings of the past fifty years were 1994, when President Clinton’s party lost fifty-four House seats, and 1974, when Nixon’s Republicans lost forty-eight. In short, Republicans were looking at a historic rebuke. With Reagan’s domestic agenda resting on a shaky coalition of Republicans and conservative Democrats in the Democrat-controlled House, a loss of anything close to that magnitude would not just have placed the President firmly on the defensive for the duration of his term; it would have raised profound doubts about his brand of politics.
At the end of the day, House Republicans held their losses to twenty-six—a setback that was, by historical standards, extraordinarily ordinary. What saved the GOP, as political scientist Gary Jacobson has documented, was not the charm and skill of its leader, who was quite unpopular at the time. What saved the GOP was its pronounced organizational edge. The decisive races involved those where credible Democratic challengers confronted vulnerable Republicans. It was here that the organizational resources of the parties came into play. The Republican national committees—the RNC and the House and Senate campaign committees—were able to raise over six times as much as their Democratic counterparts, and they contributed almost six times as much to individual House and Senate candidates.
Democrats effectively had no organization. In July 1982, just months before the Democrats’ best shot to derail Republican momentum, the Democratic National Committee (DNC) was so broke it was forced to lay off fifteen people from its ninety-member staff. Candidates had to rely on the money they raised for themselves. Much of it ended up being wasted by powerful incumbents who didn’t need the help. As the opportunity for a “wave election” became clear in the late summer of 1982, party leaders begged these well-heeled incumbents to redistribute funds to underfinanced challengers—to no avail. One exception was a young Charles Schumer, the New York Democrat whom we will see again in the story to come. Already demonstrating the fund-raising prowess that would mark his political career, he was one of only two House incumbents to offer funds to Democratic insurgents. At the end of the campaign thirty-two incumbent Democrats were left holding over $3 million in unspent funds. Had that amount been in the hands of the party, it could have doubled its contributions to candidates. These unspent funds were on top of the money incumbents unnecessarily spent on themselves. Nearly a third of all Democratic spending came in races involving a Democratic incumbent who won with over 70 percent of the vote (only 13 percent of Republican money was spent on such races).4
Retrospectives from both parties’ leaders suggested that the NRCC’s capacity to shore up its incumbents saved ten to twenty seats in the House. In the Senate, too, Republicans won the close ones; a mere 35,000 votes in the right places would have shifted control of the Senate from the Republicans to the Democrats.5
Nor was 1982 exceptional. Throughout the late 1970s and early 1980s, the GOP’s massive organizational advantages helped it to get the maximum out of its electoral opportunities: In the four election cycles between 1978 and 1984, twenty-four U.S. Senate races ended with the winner enjoying just 51 percent or less of the vote. With their technological and strategic edge, the Republicans won nineteen of these tight races.6
In his previously discussed book Unequal Democracy, Larry Bartels finds an equally striking partisan impact of unequal finances in presidential elections. For fifty years, Republicans and their associated interest groups have had an edge in financing presidential campaigns. Using an elaborate statistical analysis, Bartels estimates the impact of that financial advantage on the GOP share of the presidential vote. It added about 1.5 percent in the 1950s and 1960s, over 3 percent in the 1970s, and almost 7 percent in the 1980s, before falling back to an average of about 3.5 percent in the 1992, 1996, and 2000 elections. This is an astonishing edge, easily enough by itself to have swung the presidential elections of 1968 and 2000 to the Republican candidate.7
The Hidden Life of the Parties
The huge organizational effect on display in 1982 belies the complacent way in which pundits—with their sustained depictions of out-of-touch Democrats and ascendant Republicans—simply equate election outcomes with popular will and the appeal of particular leaders. In the conventional view of politics as electoral spectacle, the two parties are seen as significant primarily because they provide the candidates for electoral contests. Attention focuses on those political celebrities, who battle like American Idol contenders for the fleeting affections of voters. The parties contribute further to the spectacle by giving political narratives the feel of sporting events. Which team is up? How big was the win? Who were the stars? What are the losers going to do now?
In this view, parties as powerful, durable organizational actors fade into the background. It is the voters who “send a message to Washington.” In its extreme version (one that many analysts implicitly hold), whoever wins elections must, by definition, be responding to voters’ wishes. Voters express their will through great electoral demonstrations. After that, Washington does their bidding. Or, if it fails to do so, it is because of the blunders or betrayals of the winning contestants—whose perceived missteps are dissected by a crew of pundits specializing in Monday-morning quarterbacking. As always, the focus is on individual politician-celebrities.
Parties, by contrast, often seem like an afterthought. Our House and Senate are not the British Parliament, where the victorious majority party provides the executive (the prime minister) and backbenchers are almost wholly dependent on the party. Trent Lott titled his memoir of his time as Senate majority leader Herding Cats. Lott’s view echoes Will Rogers’s famous depiction of the GOP’s rival, “I’m a member of no organized political party—I’m a Democrat.” But parties play a powerful role in American politics, and this role has been growing in strength since the 1970s. They do so precisely because they are organizers. Though very far from fully unified, the parties are nonetheless the great gatherers and coordinators in America’s fragmented polity. Indeed, the very fragmentation of our government makes the parties all the more influential when they can translate their organization into sustained attention and activity along the lines that they—and supportive interest groups and voters— want.
For starters, the parties are central vehicles for setting the agenda in Washington. They generally decide what the main topics of debate will be. Sometimes, of course, events themselves thrust an issue to the forefront. Yet much of the time it is the majority party that allocates the scarce and unbelievably valuable space on Washington’s docket. Republicans win and the subject is tax cuts. Democrats win and the subject is health care.
The parties don’t just decide what issues get discussed. For those issues that make it to center stage, the majority party plays the leading role in deciding what kinds of proposals actually stand a chance of being adopted. If Washington is going to respond to global warming, or rising health-care costs, or a breakdown of financial regulation, how will it respond? If there is going to be a big tax cut, whose taxes are going to be cut, and by how much? As we stress throughout this book, when it comes to policy, the devil is most assuredly in such details—trillion-dollar details.
The coordinating role of parties takes several forms. On the one hand, parties bring together collections of politicians, both to fight elections and to try to agree on policy. Of course, bringing together a group of politicians—each with his or her own constituencies, interests, and overactive egos—is the kind of challenge that gives rise to depictions like Lott’s. But party leaders have resources too: a range of carrots (like campaign funds or a good word with powerful interest groups) and sticks (like lost congressional committee chairmanships) that can advance or impede politicians’ careers. In recent years, these powers have helped make the parties, and especially the Republican Party, much more unified and disciplined. Sometimes the cats can be herded.
Parties don’t just try to round up politicians. Equally important, if less visible and less well understood, they try to bring together organized groups into successful coalitions. These groups can provide a party with critical financial and organizational support, in elections and beyond. Conversely, if powerful groups are sufficiently displeased, they can be a major threat. Of course, groups do not offer up support without certain expectations—expectations that overwhelmingly relate to the promotion of policies they favor. For this reason, parties face a dual burden: They simultaneously need to win over voters and please their most organized supporters.8 Managing this trick successfully is the true art of modern party politics.
Because parties are coalitions of groups as well as coalitions of voters, the electoral environment is not their only concern. They must also respond to major shifts in the organizational landscape. A big change in the balance between organized groups can create powerful new incentives, cross-pressures, and challenges. One can usefully think of the process in Darwinian terms: A major change in the political ecosystem generates new competitive pressures. For both individual politicians and the party itself, those pressures carry a simple, insistent message: Adapt or die.
Over the past few decades, the organizational upheavals that we chronicled in the last three chapters have profoundly altered the political ecosystem in which America’s two great parties compete. Each was pressed to adapt to this altered environment, and the way each adapted further transformed American politics—and the American economy—over the 1980s and 1990s. We begin, in this chapter, with the story of how the Republicans and Democrats scrambled to respond in the late 1970s and 1980s—a crucial period, as we shall see. The next two chapters show how first the Republicans embraced and then the Democrats accommodated the new realities of winner-take-all in the 1990s and beyond.
As the contrast between “embrace” and “accommodate” suggests, the evolutionary demands of America’s new political ecosystem proved very different for Republicans and Democrats. Reflecting their deepening alliance with organized business, Republicans found it much easier to discover a niche that suited their ambitions as the economic winners gained ground. For Democrats, the new environment was decidedly less friendly to the traits they had evolved. And nowhere was the contrast more clear than in the unglamorous but critical corner of the new ecosystem known as campaign finance.
Money Changes Everything
William McKinley’s campaign manager and all-around power broker, Mark Hanna, famously summarized his line of work: “There are two things that matter in politics. The first is money. I can’t remember the second.” Hanna knew what he was talking about. In one of the most famous and polarizing elections in American history, Hanna’s candidate trounced his populist opponent, William Jennings Bryan—a victory facilitated by McKinley’s ability to double what Republicans had spent four years earlier and outspend Bryan 5–1.9
Hanna’s joke usefully reminds us that money has always been a central feature of American politics. Yet here, as in other respects, the 1970s was a watershed. It was during this period that television emerged as the major conduit connecting politicians to voters. Television helped to generate a more “candidate centered” politics, oriented around individual politicians who knew how to use the new medium effectively and had the star appeal it favored. A second technology, modern polling, accompanied the rise of TV and had complementary effects. Polling helped individual candidates craft their own profiles and finely calibrated messages. It gave rise to a vast new profession of pricey political consultants who could conduct and interpret the polls and advise candidates on strategy.
These changes fundamentally altered the nature of running for office: who was favored and who was not, how candidates spent their time and crafted their messages, and how campaigns themselves were organized. Their most measurable effect, however, was to substantially increase the role of money in politics. In the decade stretching from the mid-1970s to the mid-1980s, average real expenditures by incumbents in the House roughly tripled.10 In the new age of television, money became a prerequisite for electoral viability. Since it also served as a signal of viability, large war chests could be used to attract new contributions and deter possible rivals. Faced with these clear incentives, permanent, relentless fund-raising became a fixture of American politics, even for seemingly secure incumbents.
Of course, this development fit well with the new landscape of organized interests. Beginning in the 1970s, first unions and then (on a much larger scale) business groups formed PACs and began to channel unprecedented amounts of money into campaigns. In 1976, there were 224 labor PACs, a number that would increase modestly to 261 a decade later. Over the same period, corporate and trade PACs increased from 922 to 2,182. Both sides ramped up spending over the period, but throughout the decade, trade and corporate PACs were able to outspend labor two or three to one.11
This imbalance played directly into the hands of the GOP, which had more natural affinities with business and the well-to-do. Democrats had historically focused more on mobilization than fund-raising; and they were hurt badly by the declining position of organized labor. But the Republican edge was not an automatic one, at least not the huge imbalance that emerged. It reflected a sustained organizational effort by the GOP to seize the advantage in the new political ecosystem.
The Republican Revival
Here again, the Carter presidency carries a surprising political significance. It marked the arrival of an active, innovative conservative organizer at the Republican National Committee (RNC), William Brock. Brock was an establishment political figure—a former congressman and cabinet member—and there was little indication at the time that his appointment as head of the RNC would be a significant one. Yet he turned out to be a gifted organizational reformer. During Brock’s four-year tenure, stretching from Carter’s first year in office to Reagan’s, the RNC became a focal point for the remarkable resurgence of Republican organizational strength. Not coincidentally, this resurgence developed in tandem with rising business power—and with the first stirrings of the winner-take-all economy.
Brock took over at the low tide of the party’s political fortunes. Not only had eight years of Republican control of the White House ended with Carter’s victory over Ford, but the GOP held only 143 House seats and 38 Senate seats. Outside Washington, the situation was equally bleak. Republicans held only thirteen governorships and controlled just four state legislatures. Only a quarter of Americans identified themselves as Republicans.12 Beyond the formal machinery of the parties themselves, Democrats seemed to have an organizational edge. Incumbents of the majority party could draw on their own staff, as well as volunteers from organized labor. Their candidates had the steady access to funds that came from their control of the levers of political power.
Republicans, in short, were in desperate need of a stronger party. They got one. In just four years, Brock remade a sleepy, demoralized organization into a robust and ambitious one. Brock vastly expanded and modernized the party’s capacity to nurture and guide state-level and national activities. Most critical for the long haul, Republicans rapidly extended their natural financial advantage through cutting-edge fund-raising techniques. Brock’s key innovation was the energetic expansion of direct-mail operations, which allowed the GOP to tap its strongest supporters and raise unprecedented sums. With Democrats controlling Washington, Brock could maximize the use of the negative appeals on which direct mail thrives. The number of donors more than quadrupled, from 250,000 to 1.2 million. RNC net receipts from direct mail increased from $12.7 million in 1976 to $26 million in 1980.13 The preponderance of the new money came from small donations. But Brock’s Republican Eagles program, consisting of those who had contributed $10,000 or more to the party, also grew—from 211 donors in 1978 to 865 in 1980. Overall, RNC hard money receipts (the regulated dollars used to explicitly support specific candidates) grew from $29 million in 1976 to $78 million just four years later.14
By the time he left the RNC, Brock had created what political scientist Gary Jacobson called “by far the strongest national party organization in American history.”15 Brock had a staff of 350 at GOP headquarters—up from 200 four years earlier and four times the size of the Democrats’ operation. As the GOP’s 1982 Houdini act would demonstrate, Brock had far more money to allocate to the critical races where the parties’ candidates seemed evenly matched. Moreover, he was able to vastly outspend his rival on state and local party-building activities, candidate recruitment and training, and subsidized polling.16 To give a sense of the scale of Republican efforts, by the 1981–82 cycle, rapidly growing PACs would contribute $83.6 million to congressional candidates. During that same cycle, the three Republican committees (the RNC and the House and Senate campaign committees) raised an astonishing $191 million.17 As American politics shifted into a new era, Republicans were the first to make the crucial evolutionary moves that would allow them to capitalize on the new opportunities.
The new political environment also had huge effects on the Democrats, for whom the shifting balance of organizational power and the growing role of money were far less favorable developments. Struggling mightily to compete with their more organizationally dynamic rival, they adopted a strategy of binge and purge, piling up debt in election years to try to give Democratic candidates a fighting chance. As a means of adjusting to the new political ecosystem, however, the binge-and-purge cycle only provided temporary respite from the inexorable pressure to adapt. Slowly, quietly, the resulting adjustments would bring a transformed Democratic Party into closer alignment with the emerging realities of money-driven politics.
Democrats failed to come close to raising the huge sums that the new GOP organization was hauling in. But even the lopsided revenue numbers understate the disparity. Much of the Democrats’ spending had to go to repay old borrowing. In 1981, as Democrats grappled to respond to the new competitive threat posed by Reaganism, the DNC was still paying off bills from the 1968 election. Perennially saddled by election-year debt as it sought to stay in the game, the DNC had little chance of making meaningful investments in party-building.18
Thus the initial financial imbalance between the two parties fed on itself. Under Brock and his successors, the GOP used its impressive resource base to build long-term organizational capacity. The more it built this capacity, the more the Democrats were forced to repeat the painful process of binge and purge. According to the Federal Election Commission, the three Republican Party committees already outspent the equivalent Democratic groups by a little less than 3–1 in 1976. Things got markedly worse from there. Over the decade that followed, as the need for spending ramped up rapidly, the GOP advantage grew. By 1986, the GOP had almost quintupled its revenues and outpaced the Democratic committees by nearly a 5–1 margin.19
Those who view politics as electoral spectacle often dismiss the significance of such organizational details. What matters, they say, is whether particular candidates, or party appeals, resonate with the all-powerful voter. The fact that this view is almost universally held in the media doesn’t make it any less flawed. Organization matters. As the 1982 election shows, sometimes it matters a lot.
Admittedly, much of the impact is hard to track. The financial imbalances allowed Republicans to invest in a wide range of activities that Democrats, scrambling simply to keep up the pace on costly campaign ads, could not hope to match. Republicans could invest in recruiting and training candidates, and bankroll more sophisticated campaign operations, from polling to voter-targeting. They had resources to plow into such critical but low-profile activities as funding tightly contested state legislative races. Control of state legislatures could mean control over redistricting efforts, which could eventually translate into more seats in Congress. In 1980, for instance, RNC funds poured into five close races for the Ohio state senate. Republicans won four, giving them control of that chamber.20
More important, Republicans had the flexibility of channeling election resources where they were most needed because the party itself directed a much larger portion of available funds. Aggregate measures of spending by candidates—which showed the two parties fairly even—masked a huge organizational imbalance. As noted earlier, Democratic spending totals rested in the hands of individual incumbents who could translate their positions of power into huge campaign war chests. From the point of view of the party, however, padding the accounts of incumbents who faced little danger was simply a waste of money. Indeed, it reinforced the tendency of these incumbent barons to exercise their independence. Getting the money to where it could do the party some good required a strong, central organization. Republicans had that; Democrats did not.
Democratic officials were well aware that William Brock’s efforts had spearheaded an organizational revival that had catalyzed and protected Reagan’s initial successes. 1980 was a debacle for the party, with nine Democratic senators, including such liberal lions as Frank Church and George McGovern, accompanying Jimmy Carter into forced retirement. Republicans also picked up three open seats, for a stunning overall swing of twelve that gave the GOP control of a chamber of Congress for the first time since 1954. Reflecting on the carnage, Anne Campbell, former head of the Association of State Democratic Chairs, admitted, “We were outspent, out-targeted and outpolled. The RNC did a superlative job. The Democratic Party should hold its head in shame.” House Speaker Tip O’Neill called for more attention to strengthening the national party organization by expanding fund-raising, direct-mail operations, polling, and advertising.21
In 1981, the party chose Charles Manatt as the new chief of the DNC. Manatt was a former head of the California state party and, crucially, had served as the chairman of the DNC’s finance council. He was viewed as an organization man through and through, who could modernize the DNC’s operations. “My goal,” Manatt insisted, “is to do the kind of job that Bill Brock did.” “We must institutionalize the Democratic Party,” he admitted. “The Republicans are way ahead of us… For many years, things were so easy for us that we didn’t have to set up our party in any institutionalized way.”22
Confirming Mark Hanna’s first rule of politics, Manatt saw money as key. Michael Steed, Manatt’s special counsel at the DNC, remembers the challenge his boss faced: “On the day that Manatt was elected, the good news was that in the morning we had $250,000 in the bank. The bad news was that by that afternoon, the $250,000 in the bank had been attached and that other bills were still showing up.”23 Manatt worked hard to develop a long-run financial strategy, including investments in direct mail, even as he sacrificed the DNC’s immediate organizational capacity. In 1981, the party’s revenues failed to fully meet its basic overhead, debt, and fund-raising costs. It had to borrow more just to fund a pitiful $300,000 for political activities. Astonishingly, it had been forced to lay off a sixth of its staff in the crucial period before the 1982 midterm elections.
Slowly, though, Manatt began to build the party’s financial capacity, turning direct mail into a significant source of funds for the first time. He also reached out to business, establishing a Democratic Business Council with (pricey) memberships available to both individuals and PACs. The Democratic Business Council contributed $1 million to the party in 1981, and was generating $3 million by 1984. All told, the DNC doubled the amount coming from large donations between 1980 and 1984—a major improvement but not enough to even begin to close the gap with the RNC.
Democrats, Business, and the Incumbency Card
At the same time that Manatt struggled to drag the DNC into a new political world, change was under way in the remaining citadel of Democratic power: Capitol Hill. Indeed, it is here that one can see most clearly how the new political ecosystem altered the thinking of leading Democrats. Forced to deal with a much more organized and assertive business community and facing powerful financial incentives to seek accommodation, the Democratic Party apparatus reached out to corporate donors as never before. Its appeals rested largely on Democrats’ one remaining trump card: incumbency. Despite Republican electoral advances, Democrats retained sizable majorities in the House until 1994. The Democrats’ seemingly permanent majority status helped to mitigate the GOP’s natural financial advantage, earning them the campaign donations of access-oriented businesses and other lobbies.24
Tony Coelho, who became head of the Democratic Congressional Campaign Committee (DCCC) in 1981, was the most successful practitioner of the Democrats’ financial counteroffensive. In 1980, as Coelho subtly put it, Democrats “had our access kicked.” Many in the party were increasingly eager to identify themselves as “business Democrats”—an identity they reinforced by voting in large numbers for the massive business tax cuts of 1981.25
The strategy paid off. In the last cycle before he took charge, the “D-triple-C” raised only $2.9 million in “hard” (that is, unrestricted cash) contributions—less than a sixth of the revenues produced by its GOP rival. By 1986, Coelho had increased that amount fourfold—still less than a third of the NRCC’s haul, but major progress. He did so largely through a clear-eyed assessment of the party’s constraints and opportunities, which led to the vigorous cultivation of business PACs. Coelho presented a business-friendly face to potential contributors and hired a full-time PAC liaison. “We provide the PACs with information on our candidates,” Coelho explained. “We say, ‘Here’s a candidate who’s reasonable, a candidate who’s taken a position that X PAC should be comfortable with.” Coelho doggedly insisted that many contributions came from PACs because “they like our businesslike approach.” Yet he wasn’t shy about acknowledging that Democrats could make a different pitch: “Business has to deal with us whether they like it or not, because we’re the majority.”26
In short, Coelho kept Democrats in the financial game by developing a prototype of the money-for-access system that the GOP was to perfect in House Majority Whip Tom DeLay’s K Street Project after 1994. Revealingly, in the Senate, where Democrats in the early 1980s lacked the majority status that was crucial to Coelho’s strategy, the organizational imbalance remained massive. During the period when Republicans held the majority (1981–86), the Republican Senate Campaign Committee outraised its Democratic counterpart by roughly 10–1.27
Throughout the 1980s, Democrats struggled to modernize their organizational infrastructure and compete with the GOP financially. Manatt’s successor, Paul Kirk, continued the financial renovation of the party. Kirk, a former Ted Kennedy aide (who would briefly fill the Senate vacancy left when Kennedy died in 2009), came to the position with strong backing from organized labor. Despite his ties to the liberal wing of the party, Kirk sought institutional reforms that would push the party in a moderate direction. At the same time, he redoubled Manatt’s fund-raising efforts, expanding both the DNC’s direct-mail operations and chasing the large donors who could provide “soft money” donations (that is, donations earmarked for party-building, which were not subject to the same restrictions as hard money). By 1988, he had helped to cut into the RNC’s traditional financial advantage.28 Yet despite the effort and accommodation, the Democrats’ new initiatives still left them struggling to keep up, and dangerously dependent on the incumbency card.
For Democratic politicians, of course, the stark organizational imbalance sent its own kind of Darwinian message: You’re on your own. Each candidate needed to build an independent financial base to succeed. Like Willie Sutton’s answer to the question of why he robbed banks, individual Democrats needed to go where the money was. In practice, this meant two things: the new breed of affluent activists, and the business groups that were gaining political prominence.
Understandably, Democrats sought to gain support from the new bastions of affluent activism we discussed in chapter 6—the advocacy groups that had burst onto the scene in the 1960s and 1970s to champion the concerns of upper-middle-class Americans about environmentalism, consumer rights, and other postmaterial causes. As the new liberalism eclipsed the old liberalism, Democratic politicians came to rely heavily on well-off social liberals to meet the increasing cost of electoral campaigns. By the mid-1990s, EMILY’s List—the feminist group that bundles contributions to support pro-choice candidates—had become the single biggest PAC in the country, giving $12 million to Democratic candidates.29
Business was the other major source of new financial support, and Democrats as well as Republicans successfully sought its favor. Despite its bipartisan outlays, however, business was actually treating the two parties very differently. When business gave money to Democrats, it went almost exclusively to incumbents, especially moderate to conservative ones. Republican incumbents got money too, but the GOP also got large sums for party-building efforts. Democratic incumbents could finance their reelection bids, but meanwhile their party was falling further and further behind in the money chase.
The targets of business largesse in the two parties differed because the goal of the contributions differed. Financing the GOP was an investment. Business dollars nurtured a cadre of elected officials committed to advancing a deregulatory and tax-cutting agenda. Moreover, contributions to candidates were reinforced by generous institutional support. Business bankrolled an intellectual infrastructure committed to advancing the religion of free markets, refining messages for public consumption, and marketing them energetically. As we have seen, business also gave much more heavily to the Republican Party organization, helping the GOP to outperform Democrats in closely contested elections.
Money to Democrats played a different, if no less critical, role. It was a form of insurance. Revealingly, the money went largely to individuals rather than to the party as an organization. It was destined for the powerful and “moderates,” with the goal of minimizing any prospect of distasteful legislation. Carefully targeted contributions could effectively exploit the multiple channels American political institutions make available for blocking, dilution, or delay. Even grudging or quiet support from a handful of Democrats—particularly well-placed ones—could make a huge difference. Such allies could help keep issues off the agenda, substitute symbolic initiatives for real ones, add critical loopholes, or insist on otherwise unnecessary compromises with the GOP. Willing Democrats could also provide valuable bipartisan cover for business-friendly Republican initiatives. Here, as in so many other ways, Democrats and Republicans could play distinct but complementary roles in supporting business interests.
Building a Business-Friendly Party
On economic issues, this increasingly visible cluster of business-friendly Democrats took organizational form with the creation of the Democratic Leadership Council in 1985.30 The DLC began to take shape in the early 1980s in response to the Reagan juggernaut and the search for a more competitive (that is, electable) Democratic Party. Most of the push came from southerners in the party’s conservative wing. Louisiana representative Gillis Long, cousin of the legendary southern populist Huey Long, and his aide Al From provided the initial impetus, but Walter Mondale’s 1984 campaign debacle closed the deal.
The DLC officially formed in 1985, with Missouri congressman Dick Gephardt as chair. He was joined by a group of prominent or rising figures, mostly southern, who included Charles Robb of Virginia, Sam Nunn of Georgia, Lawton Chiles of Florida, John Breaux of Louisiana, Al Gore of Tennessee, and Bruce Babbitt of Arizona (later fixtures would include Bill Clinton and Joe Lieberman). They sought to change the direction of the party, both by reforming its rules to diminish the weight of liberal activists and by retooling its message to make it culturally and economically more conservative. Both moves were designed to make the party more electorally competitive, especially in the South.
In this last ambition the DLC fell short. In that conservative region, Democrats would continue to cede ground to ascendant Republicans. In other respects, however, developments in the party more closely tracked the DLC blueprint—and by 1992 would emerge in full form in the “New Democrat” campaign of Bill Clinton. The party’s appeals began to mute aspects of cultural liberalism on guns, affirmative action, and crime, and took a tougher line on national defense. Proposals for welfare reform were structured to send a reassuring message to moderate voters about work and family.
Yet the DLC’s reformation project was clearly as much or more about economics. Most of the group’s leaders had built careers on a business-friendly posture, and they pushed to make that stance more prominent in the Democratic Party. From the outset, the group built its organization by bringing wealthy individuals attracted by the DLC message into contact with prominent public officials. In the words of a sympathetic historian of the DLC:
The lure for most donors was the association with an individual elected official or the desire to cultivate relationships with a handful of the party’s rising stars… The DLC consciously used this cachet to attract wealthy benefactors, offering, for instance, private retreats with DLC leaders for its most generous donors. Indeed, from the beginning, just as the DLC’s membership was limited to elected officials, its base of support was similarly select… In that sense, the DLC was an elite organization in every regard.31
The DLC’s economic message stressed the need for adjustment to “the new realities of the postindustrial global economy.” It emphasized that government should work with a soft touch to foster a strong business climate, promoting free trade and investments in technology, infrastructure, and training to enhance the productivity of the workforce.32
Perhaps most significant, the DLC placed heavy stress on deficit reduction as a key element of economic policy. Moreover, DLC leaders framed the deficit issue in a way that is now familiar but was at the time a substantial change, identifying “entitlements” as the biggest problem. The move involved a subtle but radical rebranding of entitlements from their traditional meaning of earned benefits to one reflecting a something-for-nothing mentality. In this new language, both welfare and Social Security were “entitlements,” and Washington needed to replace “the politics of entitlement with a new politics of reciprocal responsibility.” The DLC stressed the need for a “hard look at federal entitlements and subsidies.” Strikingly, during the 1990 deficit reduction fight, it took a position well to the right of the eventual agreement between Democrats and the Bush White House, opposing any tax increases as a way of reducing deficits.
The DLC’s economic posture gave organizational expression to a set of ideas and positions that came to anchor the party’s conservative wing—a wing that took on special prominence given the financial realities facing Democrats and the difficulties of breaking through gridlock as GOP strength grew. It also pointed to a fundamental, revealing asymmetry between the parties—the Democrats had a strong, organized faction pulling toward the positions of the other party.33 On economic issues, the GOP lacked anything comparable. This striking difference showed up in two powerful ways: the inability of Democrats to push effectively for reforms that challenged powerful economic interests, and the willingness of many Democrats to accede to, or even cosponsor, Republican initiatives to support the emerging winner-take-all economy.
If the DLC gave organized expression to this dynamic, the remarkable career of Louisiana Democrat John Breaux offers a more intimate portrait. Breaux, a former aide to the spectacularly corrupt Louisiana governor Edwin Edwards, first achieved national prominence as a member of the House in 1981. Siding with the Republicans on critical budget votes in return for sugar subsidies helpful to local business, Breaux famously insisted that his vote could not be bought—but “it can be rented.”34 Over time, as Breaux became more prominent (eventually becoming a powerful figure in the Senate and, directly following Bill Clinton, chair of the DLC) he refined this posture into something more statesmanlike. Positioning himself as a broker between the two parties, Breaux repeatedly called for his own “bipartisan” compromises that either undercut progressive initiatives (most significantly by backing an alternative to the Clinton health plan) or advanced policies highly favorable to business (the Medicare Prescription Drug Bill of 2003) and the affluent (the Bush tax cuts of 2001). Breaux typified an emerging generation of Democratic barons who, in a context of increasingly conservative and powerful Republicans, virtually assured the failure of any significant initiatives on behalf of the middle class.
Breaux’s career reveals another, more subtle impact of the massive new wave of money on the Democratic Party. The growing importance of financial connections resulted in an increasingly profitable set of career linkages connecting the Democratic Party apparatus to the world of lobbying. Movements from elected or appointed office, congressional or presidential campaigns, or important staff positions to lucrative lobbying roles proliferated.
To take one of many examples, Peter Kelly, a Connecticut lawyer who served as the party’s finance chairman from 1981 to 1985, joined the powerful Republican lobbying firm of Black, Manafort, and Stone. Around the same time, the firm hired former aides to the Democrats’ two top tax legislators, Senator Russell Long and Representative Dan Rostenkowski.35 Of course, the value of lobbyists like Kelly rested heavily on their access to Democratic policymakers, which they continued to cultivate once they settled in their new positions. Like a rapidly increasing share of his colleagues, Breaux would end his career as an elected official by moving to a lucrative post on K Street.
Whose Party Is It?
Increasingly during the 1980s, the Democrats lost their capacity to speak to the economic concerns of the little guy. The shift in the interest group basis of the party (toward nonmaterial upper-middle-class issues), combined with the stark moderating pull exerted as business support became more critical, diminished the momentum toward policy activism on economic issues. Democrats faced less and less demand to present a sharp, populist economic message, and more and more pressure to refrain from such a position. They responded with a crouched economic posture that offered little of appeal to the middle class.
Most notoriously, this involved a decade-long effort to reposition the party as the advocates of deficit reduction.36 Unable to compete with Reagan’s tax-cutting largesse, Mondale famously, and disastrously, fashioned himself as the “eat your peas” candidate by openly acknowledging the need to raise taxes. Time and again, Democrats returned to the same argument—in part because the conservative wing of the party made it all but impossible to agree on any alternative.
Democrats also showed surprising receptivity to the widening deregulatory agenda. Recall that in the late 1970s the Carter administration, backed by Democrats like Ted Kennedy, had encouraged deregulation of sheltered industries like trucking and airlines. From there, however, deregulation spread. Spurred by lobbyists seeking new opportunities, the effort morphed from a careful, sector-by-sector analysis of the costs and benefits of regulation to something more like a free-for-all. Old ideas of a mixed economy based on checks and balances gave way to a simple mantra: Economic regulation was outmoded and market self-regulation should be the new norm.
Without a serious organizational counterweight, deregulation fed on itself. As new sources of competition emerged, they gave rise to new demands from still-regulated companies for yet more freedom from oversight. Alfred Kahn, the architect of Carter’s initiative, could only shake his head decades later. Banks, he insisted, “were a different kind of animal… They were animals that had a direct effect on the macroeconomy. That is very different from the regulation of industries that provided goods and services… I never supported any type of deregulation of banking.”37
Yet plenty of Democrats did. In 1980, they passed legislation freeing savings and loans from restrictions on the interest rates they could charge. Two years later, the bipartisan Garn–St. Germain Depository Institutions Act introduced sweeping deregulation that allowed the savings-and-loan industry to enter a wide range of new businesses with very limited oversight. Among the cosponsors were Democratic congressmen Steny Hoyer and Chuck Schumer. The reforms created a now-familiar set of perverse incentives, expanding opportunities to score big by betting with other people’s money. The debacle that followed was an eerie precursor of the financial implosion of 2008, although this time the damage was largely contained within the S&L industry. The S&L crisis, which cost taxpayers over $125 billion in direct outlays, was a thoroughly bipartisan affair. Early efforts to correct the problems (at a time when the costs would have been minimal) were effectively blocked in Congress.38 The whole sordid business was capped by a mostly Democratic (save for John McCain) scandal involving Charles Keating, the head of Lincoln Savings and Loan.
In sum, Democrats staggered through the 1980s on economic matters. With the party’s new affluent base and stronger relationship with the business community, incumbents had sufficient resources to effectively counterpunch against Republicans in the White House. And the Democrats retained control over a critical citadel in American politics—the House of Representatives. Yet that control was increasingly unsteady, with the party leadership leaning precariously on the twin crutches of support from affluent social liberals and incumbency advantage. Worse for the Democrats, it was ever more clear that they had lost the capacity to create either an effective economic message or viable legislative coalitions for populist policies. These problems would only worsen in the following decade, as the pace of economic and political change accelerated, ushering in a new economic world.
The Emerging GOP Coalition
On the other side of the partisan aisle, the story was one of growing determination and focus, as the Republican Party marched steadily rightward. As conventionally told, this story has an obvious leading actor: Ronald Reagan. Yet during Reagan’s presidency the political base for a sustained economic conservatism remained incomplete. In practice, Reaganism was a halfway house between the reluctant New Dealism of Richard Nixon and the winner-take-all enthusiasm of George W. Bush.
This is not to minimize the import of Reagan’s election. In the watershed year of 1980, Reagan dispatched first the moderate, establishment Republican George H. W. Bush and then the Democratic incumbent Carter. In doing so, he dispelled any doubts about the electoral viability of a rhetorical economic conservatism that identified government as “the problem, not the solution.” Only a few years before, Reagan was widely seen as out of the mainstream of American politics—an echo of the catastrophically failed candidacy of Barry Goldwater. Many analysts had a hard time taking him seriously as a national candidate. Yet he was a perfect fit for a time of economic turbulence when Democrats’ control of all the levers of government provided an easy foil. Reagan was a master at targeting growing popular frustration and economic anxiety toward Washington. The term “Reagan Democrats” captures Reagan’s success in winning white, working-class voters in both the South and the North— a crucial voting bloc that supported the charismatic candidate if not, yet, the GOP as a whole.
Nor was it just campaign rhetoric. Reagan’s election accelerated Washington’s shift to the right on economic issues. Deregulatory momentum got an additional boost. Reagan’s famous showdown with the air-traffic controllers union, in which striking workers were summarily fired, was just the most visible face of an aggressively antiunion posture apparent in both the NLRB and the Department of Labor. Backed by a now much more organized conservative movement that fed the White House with a steady supply of policy ideas and personnel, Reagan stacked agencies with close allies of business. Once installed, these appointees proceeded to rewrite rules in corporate-friendly ways, while drastically slowing the pace and severity of enforcement actions.39
Reagan’s signature policy move—supported by conservative Democrats as well as Republicans—was, of course, the “supply-side” tax cut of 1981. The 1981 tax bill combined large rate cuts, a variety of additional breaks for high-income households, and sharp reductions in business taxes. Crucially, if less prominently, the legislation also indexed tax brackets to inflation. “Bracket creep” had silently pushed up government revenues without legislators ever needing to vote in favor of taxes. Its elimination represented a major policy victory, ending one form of policy drift that had been hugely beneficial to liberals by allowing them to fund social programs without openly raising taxes.
The tax cuts of 1981 were a major policy landmark. Yet even more significant than their economic effects was their impact on the GOP’s “brand” and its own self-image. In a move of lasting significance, Ronald Reagan placed lower taxes at the heart of the GOP agenda and economic message, supplanting the emphasis on budget balance and incremental change of a previous Republican generation.
Yet ironically, even as Reagan’s tax cuts signaled a dramatic shift in policy and message, they also represented the legislative high-water mark of the Reagan presidency. Despite Reagan’s electoral successes, the GOP never came close to capturing the House. Instead, Reagan was forced to assemble a working coalition from issue to issue and strike repeated compromises with his nemesis, House Speaker Tip O’Neill. By 1982, with the economy in recession, the deficit growing rapidly, and the president’s popularity plummeting, Reagan had to accede to significant tax increases. He did so again in 1984. After stumbling badly over his apparent willingness to cut Social Security, Reagan tacked to the middle. Saved from irrelevance by Republicans’ remarkable 1982 rescue, he participated in a bipartisan 1983 plan that shored up the classic New Deal program through a traditional combination of modest benefit cuts and, again, higher taxes.
Not even Reagan’s landslide reelection could impart new momentum to the cause of economic conservatives. Indeed, the grand domestic policy initiative of Reagan’s second term, the 1986 tax reform law, was the epitome of a rationalist, middle-of-the-road policy compromise. Negotiated with congressional Democrats, the legislation was carefully designed not to “starve the beast” in Washington but to be revenue neutral. It shifted the tax burden from ordinary citizens to firms by financing lower tax rates through the elimination of a variety of tax loopholes. It was, in short, a reform designed to improve the status quo rather than overthrow it (even though the new status quo it created was quickly undermined by the forces of winner-take-all politics).
Thus in practice, especially after its first year, Reaganism was not the conservative economic juggernaut that its critics and enthusiasts usually portray. After an initial flurry of activity, it devolved into a much more limited enterprise. Reagan did succeed in blocking new government programs, and his eight years in office inaugurated what would prove to be a generation of policy drift. Rarely, however, was the president able to mobilize sufficient support for ambitious initiatives of his own. In part, of course, this was because Republicans never controlled Congress. Almost invariably, the president found himself sitting across the negotiating table from traditional New Dealer Tip O’Neill, whose outlook on government was radically different.
It was in Congress, however, where the seeds for a true Republican revolution were growing. Even as Reagan faltered, a new version of economic conservatism—grounded not on fiscal rectitude but on tax cuts for those at the top and deregulation on an ever-widening scale—was gaining strength on Capitol Hill.
Congressional delegations are like multiple sediment layers. They reveal the long-term transformation of a party over time. Older members of the party embodying the circumstances and traditions of an earlier generation coexist uneasily with younger members more attuned to present organizational and electoral realities.
So it was when Reagan entered office. The Republican Party in Congress still featured a large bloc of traditional fiscal conservatives, as well as Eisenhower-style moderates from the Midwest, Northwest, and Northeast. These moderates had built successful careers by accepting the mixed economy and making peace with the most popular and durable elements of the New Deal. Like Nixon, they were skeptical of the economic radicals. Indeed, their views were nicely summarized by Dwight Eisenhower, Nixon’s reluctant patron and the quintessential example of a successful Republican moderate. In a letter to his brother Edgar, written on November 8, 1954, Eisenhower signaled his disdain for those who sought to roll back the New Deal:
Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid.40
Under Reagan’s watch, however, the ranks of those holding the views Eisenhower had scorned were growing. The “old” party was slowly giving way to a new one—a party that would spearhead a new economic conservatism. Large cohorts of conservative Republicans had entered the House in the late 1970s and early 1980s, including Dick Cheney and Newt Gingrich in 1978, Vin Weber in 1980, and Dick Armey and Tom DeLay in 1984. Closely associated with the Reagan revolution, they saw the status quo as both unacceptable and vulnerable.
These younger Republicans were critical of a congressional GOP leadership that seemed comfortable with the art of compromise and reconciled to permanent minority status. Many of these members coalesced around Newt Gingrich and his Conservative Opportunity Society. Gingrich and his supporters were devoted to a strategy of full-out confrontation with the majority—a confrontation that they thought could topple the Democrats and remake the GOP at the same time. As a close ally would observe in the early 1990s, “It was [Gingrich’s] understanding that political parties are cultures and that cultures are self-reinforcing and that a political party that had been a minority for as long as the Republican Party had been a minority party had learned all the habits of being a minority.”41
Gingrich also knew something else: Sooner or later, politicians lose or leave office. If they fail to adapt to a new environment, they lose or leave office sooner. Two distinct processes transform congressional parties—“replacement” of old members by new ones and “conversion” as sitting members shift their positions to accommodate new pressures. Both processes were gradually strengthening the hands of the new conservatives.
Replacement itself has two distinct components. One form occurs when a particular House or Senate seat switches from one party to the other. By far the most important part of this process in the past generation has been the dramatic shift in representation in the South, which has moved from solidly Democratic to solidly Republican. Once the civil rights movement had clarified national partisan politics, it was only a matter of time before the nation’s most conservative region aligned with the nation’s more conservative political party. A few Southern Democrats, like Phil Gramm, caught the shifting winds and switched to the regionally ascendant and ideologically more palatable GOP. For the most part, however, they stayed Democrats. The electoral advantages of incumbency generally made it possible to hang on. Everyone could see, however, that the Southern Democrats were dead men walking. When they left office, their replacements were almost invariably far more conservative Republicans.
The second form of turnover that drove the party ever further rightward occurred within the GOP itself: the replacement of moderate Republicans by more conservative ones. This process was particularly pronounced in the South, where the new brand of economic radicalism sold especially well. As the party became more southern, the ranks of the most fiercely committed grew. Even outside the South, however, new members who replaced old ones were almost invariably more extreme on economic issues. They saw themselves as pursuing Reagan’s agenda, yet they took positions well beyond anything Reagan had seriously tried to achieve when in office. And though the results would not show until the following decade, they were on the march. By 1989, their leader, Gingrich, had risen to the position of minority whip, and his conservative insurgents had turned up the heat so high that they had forced Democratic Speaker Jim Wright to resign.
The Death of the Old Guard
During the 1980s, thoughtful observers (like Thomas Edsall in his classic The New Politics of Inequality) could see that along with rising inequality a new kind of politics was emerging.42 From the Reagan tax cuts, to the firing of striking federal workers, to the deregulation-induced S&L crisis, Washington was increasingly weighing in on the side of the have-it-alls. Yet compared to what was to come, all this was rather tepid. In fact, in the midst of the mild-mannered presidency of George H. W. Bush—Reagan’s 1980 establishment foe who had derided supply-side tax cuts as “voodoo economics”—calls for radical change seemed to be receding.
George Herbert Walker Bush was an old-school Republican. He was an instinctive compromiser, trained in the establishment GOP habit of treading carefully around social and economic policy issues that were traditionally Democratic terrain. Anointed by Reagan, he had won grudging conservative support with his famous “read my lips, no new taxes” pledge during the 1988 campaign. In office, though, Bush proved willing to compromise with Democrats on big domestic issues such as the Clean Air Act Amendments of 1990 and the Americans with Disabilities Act. To disgusted conservatives, those bills suggested that he and other old-guard Republicans like Bob Dole might spout conservative rhetoric but would administer liberal programs in practice.
The unforgivable, however, was Bush’s betrayal of his “no new taxes” pledge as part of his agreement to a huge deficit-reduction compromise in 1990. At the time, this deal seemed to be just one of what would be a long series of deficit-cutting packages that began in 1982 and would continue through 1997. Repeatedly, these agreements had combined tax increases (painful for Republicans) and spending cuts (painful for Democrats). Ronald Reagan had accepted similar packages, but only after he had established a record as an energetic tax-cutter. In retrospect, however, 1990 was a watershed, as important to the evolution of the GOP as the ambitious and politically more successful tax initiatives of Reagan in 1981 and George W. Bush in 2001.
1990’s historic significance stems from the earthquake it triggered among Republican elites. Shifting structures of political influence are often virtually invisible for extended periods of time because they have not yet developed to the point where ascending groups can mount an effective challenge. Beneath the surface, as the journalists Daniel Balz and Ronald Brownstein ably show in their 1996 book Storming the Gates, a new Republican Party had gradually been taking shape, as an older generation of political moderates and fiscal conservatives gave way to an insurgent generation of hard-line conservatives and radical tax-cutters.43 The new breed of conservative elites was gradually pushing up against the old. 1990 was the moment when this pressure finally burst.
The revolution was led by the new guard’s leader, Newt Gingrich. In the face of a Republican president’s appeal for compromise to reduce the deficit, Gingrich and his allies convinced well over half the Republicans in the House to inflict a humiliating defeat on their party’s ostensible leader. In the short run, Bush was able to regroup and pass a revised (and, given the need to gain more Democratic votes in place of the rebels, more liberal) package. But the long-term effect on the Republican Party was profound. Bush’s relations with the conservative wing were permanently damaged. As his son George W. observed firsthand, this damage was to prove very costly when Bush sought reelection two years later. Republican moderates never recovered. Gingrich’s rebellion put House Minority Leader Robert Michel on notice: This was to be his last term at the top. When Michel announced his retirement, Gingrich and his allies swept into the leadership and rapidly signaled a much more aggressive and radical posture.
Republicans had long fought against higher taxes, but this goal had always been in tension with a commitment to fiscal conservatism. The traditional attitude was well captured in Gingrich’s derisive description of Senate leader Robert Dole as “the tax collector for the welfare state.” Gingrich’s new-line Republicans reversed the priority between fiscal conservatism and tax cuts: Reducing taxes was paramount—a priority to be advanced at every opportunity. Even more important, they pushed for an energized and cohesive party dedicated to a radical restructuring of government’s role to unleash the winner-take-all economy. The baby steps of the 1980s were ready to give way to something more ambitious.