Deficits 817income tax rate from 28 percent to 31 percent and
levying higher taxes on gasoline, liquor, expensive
automobiles, and certain other luxuries. This damaged
his credibility and angered conservative Republicans.
“Read my lips,” critics muttered, “No more Bush.”
Another drain on the federal treasury resulted
from the demise of hundreds of federally insured sav-
ings and loan institutions (S&Ls). S&Ls had tradi-
tionally played an important role in nearly every
community, and a secure if sleepy niche in the econ-
omy: home mortgages. In the 1980s Congress per-
mitted S&Ls to enter the more lucrative but riskier
business of commercial loans and stock investments.
This attracted a swarm of aggressive investors who
acquired S&Ls and invested company assets in high-
yield but risky junk bonds and real estate deals.
In October 1987 the stock market crashed, ren-
dering worthless the assets held by many of the S&Ls.
Hundreds were plunged into bankruptcy. In 1988
Michael Milken, the junk bond “guru,” was indicted
on ninety-eight charges of fraud, stock manipulation,
and insider trading. He pleaded guilty, agreed to pay
$1.3 billion in compensation, and was sent to jail.
Drexel Burnham Lambert, his investment firm, filed
for bankruptcy. The junk bond market collapsed.
Because S&L deposits were insured by the federal
government, taxpayers were forced to cover the losses.
The reserve fund for such purposes—$5 billion—was
quickly exhausted. In 1991 Congress allocated $70 bil-
lion to close the failing S&Ls, liquidate their assets, and
pay off depositors. The Justice Department charged
nearly a thousand people for criminal involvement in a
mess that, according to most estimates, would eventu-
ally cost taxpayers $500 billion.
During the preceding two decades, the American
nation, like the automobiles that stretched for blocks
in line to buy gasoline during the oil embargo, had
been running on empty. The federal government was
deeply in debt. Corporations had exhausted their cash
reserves. Workers lived in fear of the layoff or bank
foreclosure notice. Gone were the fanciful expressions
of an earlier era—long and wide-bodied chassis, roar-
ing V-8 engines, sweeping tail fins, chromium grills
like the jaws of a barracuda. Most cars had become
simple boxes, trimmed with plastic, whose efficient
four-cylinder engines thrummed steadily.
The nation’s aspirations, like its cars, had become
smaller, more sensible. Politicians muted their
rhetoric, rarely issuing grandiose declarations of war
against some intractable foe of humanity. Corporate
executives spoke of “downsizing” firms rather than
building them into empires. And the American peo-
ple increasingly hunkered down in their own private
spaces, which they locked up and wired with alarms.rubble. The Iraqi forces, aside from firing a number of
Scud missiles at Israel and Saudi Arabia and setting fire
to hundreds of Kuwaiti oil wells, simply endured the
rain of destruction that fell on them daily.
On February 23 Bush issued an ultimatum to
Saddam: Pull out of Kuwait or face an invasion. When
Saddam ignored the deadline, UN troops (most under
U.S. command) attacked. Bush called the assault
“Desert Storm.” Between February 24 and February 27
they retook Kuwait, killing tens of thousands of Iraqis.
Some 4,000 Iraqi tanks and enormous quantities of
other military equipment were destroyed.
Bush then stopped the attack, and Saddam
agreed to UN terms that included paying reparations
to Kuwait, allowing UN inspectors to determine
whether Iraq was developing atomic and biological
weapons, and agreeing to keep its airplanes out of
“no-fly” zones over Kurdish territory and other
strategic areas. Polls indicated that about 90 percent
of the American people approved both the president’s
management of the Persian Gulf Warand his overall
performance as chief executive. These were the high-
est presidential approval ratings ever recorded.
President Bush and most observers expected
Saddam to be driven from power in disgrace by his
own people. Indeed, Bush publicly urged the Iraqis
to do so. The Kurds in northern Iraq and pro-Iranian
Muslims in the south then took up arms, but Saddam
used the remnants of his army to crush them. He also
refused repeatedly to carry out the terms of the peace
agreement, chiefly by hindering the UN inspections
for weapons of mass destruction. This led critics to
argue that Bush should not have stopped the fighting
until Baghdad, the Iraqi capital, had been captured
and Saddam’s army destroyed.
President Bush on the Gulf Warat
http://www.myhistorylab.com
Deficits
The huge cost of the Persian Gulf War exacerbated the
federal deficit. Candidate Bush had promised not to
raise taxes, saying in a phrase he would later regret,
“Read my lips: No new taxes.” As president he recom-
mitted himself to that objective; in fact he even pro-
posed reducing the tax on capital gains. But like his
conservative predecessor, Bush could not control the
deficit. Congress obstinately resisted closing local mili-
tary bases or cutting funding for favored defense con-
tractors. Reducing nonmilitary expenditures, especially
popular entitlement programs such as Medicare and
Social Security, also proved nearly impossible.
The deficit for 1992 hit $290 billion. Bush had
no choice but to join with Congress in raising the top
WatchtheVideo