IN 1986, the taxpayer Protection Pledge was created. The pledge is a written and signed commitment from a candidate for office to his constituents, guaranteeing that the candidate will oppose and vote against any net tax increase.
Twenty-five years later, on August 2, 2011, the pledge stopped President Obama in his tracks.
Obama and congressional Democrats had a plan. They would turn the United States into a European welfare state. Something between Bismarck’s Prussia and modern-day Greece.
But federal spending in the United States had averaged “only” 20 percent of economic output, or Gross Domestic Product (GDP), for the last 40 years. State and local spending added another 10 or 12 percent. To get a really good social welfare state going and make citizens permanently dependent on the state requires spending approaching 52.8 percent of the economy, as in France, or Greece’s 46.8 percent, Sweden’s 52.5 percent, or even Britain’s 47.3 percent.
How to get from here to there?
Democrats were counting on Republicans reverting to type and in a fit of “bipartisanship” and “fiscal responsibility,” once again playing the role Jack Kemp mocked in the 1960s and 1970s — “the tax collectors for the welfare state.”
Obama, Senate Majority Leader Harry Reid, and Speaker of the House Nancy Pelosi used the economic crisis created by the selfless bureaucrats at Fannie Mae and Freddie Mac to dramatically ramp up federal spending. The $800 billion stimulus. A trillion in additional domestic discretionary spending. TARP, part two — another $350 billion. And Obamacare.
Federal spending rose from $2.9 trillion in 2008 to $3.8 trillion in 2011. In the first three years of Team Obama, federal debt rose by $4 trillion. The 2011 deficit was $1.414 trillion, and Obama’s 2011 budget projected a total debt increase of $10.4 trillion over the next decade.
Surely, the Republican Party would do the responsible thing and raise taxes to reduce the deficit. They had always done so in the past. In 1982, Democrats convinced Ronald Reagan to sign a deal that promised to cut spending by three dollars for every dollar of tax increases. In the following five years, taxes would be increased by $215 billion and spending was promised to be reduced by $645 billion. Adjusted for inflation, however, spending actually increased $177 billion above what it would have absent the deal — Reagan had been tricked.
Eight years later, then-president George H. W. Bush was promised two (not three) dollars in spending cuts for every dollar of tax increases (he was a cheaper date). The top tax rate was increased from 28 percent to 31 percent. Taxes were hiked by $137 billion over the next five years, but once again the promised spending reduction of $274 billion melted away. Spending actually increased $23 billion above pre-deal projections.
The Republican learning curve did not appear to be very steep.
But 20 years later, the Republican Party that Obama ran into, led by Speaker John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY), was very different.
IN 1986, AMERICANS for Tax Reform offered the Taxpayer Protection Pledge to all congressional candidates of both parties. During the campaign, Reagan endorsed the pledge in speeches, and campaigned for candidates who signed it. That November, 100 House members and 20 senators were elected, all of whom had made the written commitment to voters not to raise taxes. All were Republicans — except Tom Daschle, who won an upset victory in South Dakota when the Wall Street Journal editorial page highlighted the fact that he had signed the pledge while the Republican incumbent, James Abdnor, had balked.
In 1988, every single Republican running for president signed the Taxpayer Protection Pledge — except Senate Minority Leader Bob Dole. During the New Hampshire debate just before the nation’s first primary, Governor Pete du Pont explained that all the other candidates had signed the pledge and challenged Dole to do so also, offering the pledge to Dole, who visibly recoiled, as if a vampire being tossed a cross. Dole subsequently lost New Hampshire.
George H. W. Bush then campaigned on the infamous message “Read my lips, no new taxes,” and came from 17 points behind to defeat Massachusetts governor Mike Dukakis to become the first sitting vice president elected since Monroe followed Madison.
Bush broke his pledge in 1990, and fell from enjoying approval ratings in the 90s (largely driven by foreign affairs) to losing in the 1992 election, receiving only 37.45 percent of the vote.
Now, no person’s life is a complete waste. Some serve as bad examples. And Republicans learned from Bush 41: Take the Pledge, win the primary. Take the Pledge, win the general. Break the Pledge, lose the next election.
In the 1994 Republican landslide, more than 90 percent of House and Senate Republican candidates signed the pledge. As a result of the 2010 elections, when 98 percent of Republican candidates signed it, there are now 234 pledge-signing Republicans in the House and 40 in the Senate. There were only six House Republicans and seven Senate Republicans who failed to sign it.
No tax increase passed the House or Senate from 1994 to January 2009. Sixteen days after his inauguration, Obama signed a tax hike on cigarettes. (So much for Obama’s promise never to raise any form of taxes on anyone who earned less than $250,000. The only American who smokes and earns more than $250,000 is named Barack Obama.)
The pledge has allowed Republican candidates to brand the Republican Party as the party that will not raise your taxes. The pledge allows a candidate to make his no-tax-increase promise credible. For 3,000 years, politicians have been promising to keep taxes low, but it’s never been easy to tell if they meant it. Today, voters know that congressmen and Senators remember the fate of Bush 41 and so would only sign the pledge if they truly intended to keep it.
The no-tax-increase brand has strengthened the Republican Party. A voter can walk into the voting booth, three sheets to the wind, with little knowledge of the candidates, and know with 98 percent certainty that if he votes for the Republican, that candidate will not raise his taxes. (He may invade countries he cannot pronounce or find on a map, but he will not raise taxes.)
Just as Coca-Cola protects its brand with advertising and quality control, so too Republicans have had to maintain quality. If you bring a bottle of Coke home and, halfway through your drink, find a rat head in the bottom of the bottle you do not say to yourself, “I just may not finish this particular bottle of Coke this evening.” It makes you wonder about buying Coke in the future. It damages the brand. Elected Republicans who vote for tax increases are rat heads in a Coke bottle. They damage the Republican brand for all other Republicans. Theirs is not a victimless crime.
Obama’s goal was, and is, to destroy this powerful brand and breach the wall of opposition to higher taxes. He needs Republicans to raise taxes to pay for the higher level of spending his coalition demands.
OBAMA BELIEVED HE WOULD win this fight on August 2, when he threatened to shut down the government and default on America’s debt if Republicans would not raise taxes to help pay for his additional spending.
Democrats prepared for this showdown more than a year in advance. Obama created the Bowles-Simpson debt commission, featuring chairmen Obama personally appointed: former senator Al Simpson of Wyoming, and Clinton loyalist Erskine Bowles. The Commission promised to recreate the 1982 and 1990 budget deals. Simpson and Bowles promised $3 trillion of spending cuts and $1 trillion in tax increases. Congressman Paul Ryan (R-WI), a member of the commission, voted against its final recommendations because he estimated that the tax hikes would be closer to $2 trillion. The Heritage Foundation calculated that they would be more like $3 trillion.
In response to the failure of the Bowles-Simpson Commission, in January Senator Dick Durbin (D-IL), Obama’s closest friend in the Senate, cobbled together the “Gang of Six,” a group of three Democratic and three Republican senators dedicated to finding a compromise deal. The Gang promised to put the recommendations of the debt commission into legislative language. Never happened. In writing, the real size of the tax hikes and questionable nature of the spending cuts would have been obvious.
Sadly, Republican Senator Tom Coburn of Oklahoma, one of the Gang of Six, became an advocate for granting the Democrats real tax hikes in exchanges for promises of spending cuts — in other words, a repeat of the ’82 and ’90 deals. He suggested that raising a trillion dollars in taxes by reducing tax deductions, credits, or exemptions should somehow not count as a trillion-dollar tax hike. Coburn’s efforts to break the Republican Party’s unity in opposing all tax hikes was soundly defeated. Boehner and McConnell staked out a new, two-part Republican position: first, demand that there be no tax increases, and second, insist on spending cuts as large as the requested increase in the debt ceiling. In the debt ceiling fight, Republicans set two key precedents.
First, the model of 1982 and 1990 is forever repudiated. Tax hikes will have no part in the effort to reduce spending. Nor should they: spending problems can be fixed only by reforming and reducing spending.
Second, any future increase in the debt ceiling will always require a matching spending cut of the same or larger amount. This is now the “Boehner Rule” and, along with the “taxes are off the table” rule, will — if maintained with Republican as well as Democrat presidents — actually bend down the cost curve of government. Slowly.
These two precedents leave Republicans with a clear goal, namely to refuse to increase taxes to pay for Obama’s European-sized government while reversing the over-spending of both the Obama and Bush administrations.
This struggle will never end. Every year and every election the Democrats will come up with new reasons for higher spending. Global warming. Or global cooling. Old spending programs (FDIC, Fannie Mae, Freddie Mac) creating new crises that require new spending programs. Whatever. Like a teenage boy on a prom date, Democrats keep asking for the same thing in different ways. The response has to be firm, repeated, and unyielding. And it doesn’t do any good to say, “No, No, yes.”