George H.W. Bush probably gave a thousand speeches in his life. But as the political world mourns his death this week, many of us remember just one sentence of one speech. You know exactly what I mean-- six words from Bush’s acceptance speech at the 1988 Republican convention.
“And I'm the one who will not raise taxes….My opponent won't rule out raising taxes. But I will. And the Congress will push me to raise taxes, and I'll say no, and they'll push, and I'll say no, and they'll push again, and I'll say, to them, "Read my lips: No new taxes."
I was in the New Orleans Superdome on that steamy August night. I heard Bush say those six words about two-thirds of the way through a 58 minute speech.
Three memorable phrases
These speeches are nearly always forgettable to-do lists. And this one was no exception. Except it included three memorable phrases. Two expressed powerful ideas about the American character and the importance of community: “a thousand points of light” and “a kinder and gentler nation.” They were widely mocked at the time but seem like important touchstones today. They perfectly described Bush’s vision of an America where we help one another through tough times.
The third, of course, was “Read my lips: No new taxes.” It was considered an act of political genius at the time and has been widely mocked since.
As an economics reporter for Business Week, I sat in press row, heard Bush’s words, and two thoughts immediately came to my mind. The first was, “There is my story.” The second was, “If Bush wins, he will regret this. He can’t possibly keep this promise.”
Defusing skepticism
It turns out that there was an enormous behind-the-scenes battle within Bush’s staff about the line, which was written by Peggy Noonan and Craig Smith. But it remained in the speech and, in the short-term, worked like a charm.
It was the headline Bush needed to defuse the skepticism of anti-tax Republicans, who never really trusted him--even though he had served eight years as vice president to their hero Ronald Reagan (who, by the way, raised taxes multiple times). After all, it was Bush who, running for the 1980 Republican presidential nomination, memorably described Reagan’s tax-cutting agenda as “voodoo economics.”
And “no new taxes” undoubtedly helped Bush get elected president in 1988. Though taxes were hardly the biggest issue in that race—a strong economy and foreign policy mattered more-- Bush’s explicit vow was a powerful contrast to the cautious hedging of his Democratic challenger Michael Dukakis. Republicans, and many independents, loved it.
No wiggle room
The problem, of course, was that Bush gave himself no wiggle room. The economy slowed and the budget deficit worsened. At the same time, Congress had imposed upon itself the Gramm-Rudman-Hollings Balanced Budget Act and a successor law that required automatic spending reductions, including for popular programs such as Medicare and Social Security, if Congress didn’t meet deficit targets.
Lawmakers eventually learned they could ignore the Gramm-Rudman constraints. But not in 1990. Reducing the budget deficit became a top policy priority. Negotiations between the Bush Administration and the congressional Democratic leadership dragged on for months.
And the prediction Bush made in his acceptance speech—that the Democrats who controlled Congress would push him again and again to raise taxes--was prescient. But he was wrong about his ultimate response.
“Tax revenue increases”
On June 26, Bush capitulated and gave the Democrats the one thing they wanted most. In a White House statement, he said, "It is clear to me that both the size of the deficit problem and the need for a package that can be enacted require all of the following: entitlement and mandatory program reform, tax revenue increases, growth incentives, discretionary spending reductions, orderly reductions in defense expenditures, and budget process reform.”
All that mattered was the phrase “tax revenue increases.” The headlines were devastating, none more than The New York Post: “Read My Lips…I Lied!” Bush himself was well aware of the consequences of his choice. In his diary, he acknowledged the political price he’d pay even though he thought it was the right choice for the country.
In the end, the Omnibus Budget Reconciliation Act of 1990 raised many taxes, including the top individual income tax rate, the individual alternative minimum tax rate, and payroll taxes (though it also expanded the Earned Income Tax Credit).
An object lesson…or not
Challenger Pat Buchanan ripped Bush for flip-flopping on taxes throughout the 1992 Republican primaries. Bush eventually, and repeatedly, apologized. Later, Democratic nominee Bill Clinton attacked Bush for lying and, of course, won the election and made Bush a one-term president.
But that wasn’t the end of the story. In the years since, anti-tax Republicans made the Bush experience into an object lesson for GOP politicians: Raising taxes will destroy your political career. In response, thousands of candidates for office at all levels have taken their own no-tax pledge, and fiscal policy has become utterly gridlocked.
Was that the right the lesson? A case can be made that Bush was not defeated by agreeing to tax increases in 1990. It was, rather, the act of breaking a promise, combined with a poor economy, that led to his defeat.
Whatever it meant for George H.W. Bush’s political career, OBRA 1990 helped lay the groundwork for a balanced federal budget by 1998. That it remained balanced until 2001, when tax cuts pushed by his son threw it back into deficit, is a story for another day. But Bush41’s decision to agree to tax increases in 1990 could be described as an act of policy courage rather than one of political malpractice.
