Domenici, Known as a Doomsayer, is Winning Fight for Balanced Budget

THE BALTIMORE SUN

As the Senate was about to vote on a resolution to balance the federal budget by 2002, Rep. John R. Kasich, Republican of Ohio, slipped into the Senate chamber. Grinning happily, arms folded across his chest, the spirited young chairman of the Budget Committee looked upon a scene of Republican triumph, not unlike the one he had helped engineer a week earlier in the House.

Senate Budget Committee Chairman Pete V. Domenici, Republican of New Mexico, spotted him standing at the center door and strode up to the aisle to meet him. The two men grabbed each other in a bear hug.

They made a striking contrast. Mr. Kasich looked charged up in his unbuttoned blue blazer and checkered power tie. Mr. Domenici, a little stouter and slower-moving, had an avuncular air -- the Senate's version of Walter Cronkite.

Since the beginning of this year Mr. Kasich has been fond of quoting Mr. Domenici's explanation of their relationship: "Pete says that I'm the coffee and he's the cup."

Chatting with Mr. Domenici at the rear of the chamber, Mr. Kasich mentioned a letter that the Conservative Action Team, a group of House members who call themselves the CATS, had sent to House Speaker Newt Gingrich. The letter, signed by 81 members, said, "You can count on our votes against any budget resolution conference report that fails to balance the budget or significantly diminishes tax relief passed by the House."

The letter highlighted differences between the House and Senate versions of the budget resolution. Where the House wanted tax reductions on the order of $350 billion over seven years, Mr. Domenici had refused to consider any tax measure until all spending cuts that would lead to a balanced budget were in place and certified by the nonpartisan Congressional Budget Office.

Mr. Domenici understood the letter for what it was: an ultimatum to the Senate. His response to Mr. Kasich, according to Democrats who heard about the exchange later from Mr. Domenici: Ultimatums belong in the trash.

Coming from Mr. Domenici, the comment was no bluster or bravado. Nor was it a putdown of Mr. Kasich, the self-described "supply-side deficit hawk."

Around the time Mr. Domenici and Mr. Kasich were embracing, Phil Gramm, Republican of Texas, stood before the Senate to deliver an ultimatum of his own. Just a day earlier, he had been soundly defeated on a tax-cutting measure that was much like the one offered by Mr. Kasich in the House. But Mr. Gramm, who is running for the presidential nomination hard on the heels of Majority Leader Bob Dole of Kansas, was unbowed.

"I want my colleagues to understand," Mr. Gramm told the Senate, "that unless . . . we let working families keep more of what they earn, unless we provide incentives for growth, . . . I am not going to vote for that budget."

But Mr. Domenici had a message of his own. In his view, Republicans finally had within reach the goal they had espoused since Ronald Reagan became president: a balanced budget. If they failed to pass a budget resolution that balanced the budget -- and if they failed to do so over the issue of tax cuts -- the electorate would surely take revenge.

Mr. Domenici prevailed: The Senate approved his budget resolution, 57-42, and overwhelmingly defeated Mr. Gramm's effort to add $350 billion in tax cuts to the package.

In the end, Mr. Domenici emerged from the budget conference reaching a compromise rather than facing down an ultimatum. Where he had wanted to hold tax cuts to $170 billion, and the House called for cuts on the order of $350 billion, Mr. Domenici split the difference and settled for $245 billion.

Mr. Domenici and Howard H. Baker Jr. are close friends, but there were times in the early 1980s, when Mr. Baker was Senate majority leader, that Mr. Domenici was a painful thorn in his side.

"The purity of Pete's position and his strength in defending and ++ controlling expenditures got in the way of my political instincts," Mr. Baker said in a recent interview, recalling Mr. Domenici's role as Budget Committee chairman during the early years of the Reagan administration. "Mr. Domenici was never happy over the issue of unspecified savings that we used in the first Reagan budget," Mr. Baker said. "I dubbed them 'the magic asterisk.' Pete chortled and jeered over that." The asterisk was a $44 billion shortfall with a footnote saying that explanatory material would come later.

Since joining the Senate in 1972, Mr. Domenici had earned a reputation as a straight arrow. But he also was viewed as a worrier and doomsayer.

Former budget director David A. Stockman's White House memoir, "The Triumph of Politics: How the Reagan Revolution Failed," says Mr. Domenici admitted as much in 1981, when he warned Mr. Reagan of an impending explosion of deficits.

"Mr. President," Mr. Domenici began, "I don't like to be the guy with the bad news."

But it was bad news, and Mr. Domenici had made an accurate forecast. The senior senator from New Mexico was among the first in Congress to warn of deficits rising to $100 billion, then $200 billion. As he predicted, the public debt rose from $784.7 billion in 1981 to $2.05 trillion in 1989.

Mr. Baker described Mr. Domenici as a "team player," someone who will adhere to the party line when it's necessary. But, he said, "being a team player doesn't mean that he will give up on his beliefs. Pete will assert his position to the last word."

Baker learned that fact in the struggle over the magic asterisk, which Mr. Domenici called a "pig in a poke." Stephen E. Bell, then Mr. Domenici's staff director and closest adviser, exhorted his boss not to let Mr. Baker finesse the enormous short fall. According to the Stockman book, Mr. Bell asked Mr. Domenici, "Do you really want to go down in history as the budget chairman who couldn't add?"

In his memoir, Mr. Stockman admitted that he "had underestimated Domenici." The only way he saw to stop Mr. Domenici was to tar him. First, he turned to the pundit Robert Novak, whose columns are akin to a bulletin board for conservatives. At Mr. Stockman's urging, Mr. Novak wrote that Mr. Domenici was getting in the way of the Reagan Revolution.

Then Mr. Stockman prevailed on the Wall Street Journal's editorial page editor, Robert L. Bartley, to print a withering editorial entitled "John Maynard Domenici." Next came calls from Mr. Reagan, still hospitalized from an assassination attempt and basking in national good will. Calls from Mr. Baker, Mr. Dole and Vice President Bush followed.

"Domenici lost his nerve if not his conviction," Mr. Stockman wrote, "and for the moment beat a tactical retreat." Mr. Domenici faced a similar problem in April and May of this year, as he tried to hold the Budget Committee together around his insistence that spending reductions would have to come before tax cuts.

In a floor statement shortly before the budget resolution passed, he recalled that at the beginning of the year, "as I looked at the [11 other Senators on the Budget Committee] . . I wondered how I would get 12 senators to vote together. . . . That is a very diverse group of Republican senators."

Mr. Domenici held about 40 meetings with committee members and Senate leaders to hammer out the budget resolution, eventually getting all of the committee's Republicans on board.

Substantial concessions were made. For example, Agriculture, Nutrition and Forestry Committee Chairman Richard G. Lugar, Republican of Indiana, had identified nearly $15 billion in savings from farm programs. But in the resolution that emerged from the Budget Committee there were only $8 billion. Sens. Christopher S. Bond, Republican of Missouri, and Charles E. Grassley, Republican of Iowa, "worked with Domenici's staff to blunt those cuts," Mr. Bond said.

And then there was the tax issue. For 15 years, tax cuts had been the rallying cry of supply-side Republicans, who argued that lower taxes would cause federal revenues to rise on a tide of entrepreneurship and new investment.

The tax-cutters had powerful support on the Budget Committee. Mr. Gramm, who had promised to bring a tax cut proposal to the Senate floor, was on the committee, and so was his close friend and supporter, Republican Whip Trent Lott of Mississippi. Another committee member, freshman Spencer Abraham of Michigan, followed Mr. Gramm's cues closely. The committee roster also included Republican Policy Committee Chairman Don Nickles of Oklahoma, another avid tax-cutter.

Complicating matters for Mr. Domenici, the race for the Republican presidential nomination had put Mr. Dole and Mr. Gramm into a game of tax cutting one-upsmanship. Seventeen days before the floor vote on the budget resolution, Mr. Dole declared on the CBS News show "Face the Nation": "We're going to have tax cuts. We're going to deal with capital gains rate reductions, home child care credit . . ."

The first challenge for Mr. Domenici was to hold off Mr. Gramm. That proved easier than expected. According to an aide close to the committee, Mr. Domenici appealed to Mr. Gramm for help and he agreed not to insist on tax cuts in the committee bill. Mr. Gramm did not want to muddy the waters with a committee fight; as he saw it, failing to report a balanced budget resolution out of committee would have been the worst possible scenario. He would be better served by taking the matter to the floor and offering an amendment. That way he could fight Mr. Dole out in the open.

When Mr. Gramm backed the committee resolution, he brought along Mr. Abraham and Mr. Lott -- although both of them later voted for Mr. Gramm's tax-cutting amendment.

Mr. Domenici also found a sympathetic ear in Mr. Grassley, who said that his constituents in Iowa were telling him, 2-1, that they preferred spending cuts to tax cuts -- especially when they were Mr. Domenici's cuts and not Mr. Lugar's. And, Mr. Grassley said, he felt haunted by the ghost of the 1980s. "Reagan got elected to balance the budget," he said, "and I was elected to balance the budget. If I had voted for the Domenici budget in 1981 and not for the magic asterisk, things might be different today. I'm 61 now, and this may be my last chance to see a balanced budget."

Jeff Shear is a reporter for the National Journal, from which this article was adapted.

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