concerning the rapidly growing federal deficit. This
situation gave rise to political gridlock, as the gov-
ernment found it extremely difficult to accomplish
anything at all.
Reagan’s First-Term Budget and Tax Cuts In the
1980 presidential election, Republican presidential
nominee Ronald Reagan easily defeated Democratic
incumbent Jimmy Carter. Riding on Reagan’s coat-
tails in the national elections, the Republicans gained
thirty-four House seats and twelve Senate seats. Con-
sequently, the Democratic majority in the House of
Representatives was reduced, divided, and weak-
ened, while the Republicans won control of the Sen-
ate for the first time since 1952. Democratic repre-
sentative Tip O’Neill of Massachusetts remained
Speaker of the House, and Republican senator
Howard Baker of Tennessee became the majority
leader.
During its 1981-1982 session, Congress, especially
the House, was primarily concerned with Reagan’s
first budget. It emphasized major reductions in
taxes, domestic spending, and economic regulation,
as well as increased defense spending. Despite their
losses in the 1980 elections, the Democrats retained
a comfortable majority in the House of Representa-
tives. Furthermore, Tip O’Neill was a liberal north-
ern Democrat determined to protect his party’s
domestic-policy legacy rooted in Franklin D. Roose-
velt’s New Deal and Lyndon B. Johnson’s Great Soci-
ety. O’Neill was also skeptical of Reagan’s assurance
that a combination of tax and domestic spending
cuts, deregulation, and higher defense spending
would reduce inflation and unemployment, stimu-
late widespread prosperity, and eventually result in a
balanced budget.
Reagan’s staff, however, circumvented O’Neill by
lobbying and negotiating with moderate and con-
servative southern Democrats in the House, known
as Boll Weevils. Realizing that Reagan had carried
most of their districts by wide margins and was most
popular among Southern white voters, the Boll Wee-
vils cooperated and compromised with Reagan and
House Republicans. The Boll Weevils agreed to vote
for Reagan’s tax cuts, defense spending increases,
and some domestic spending cuts if Reagan pro-
tected agricultural programs from major cuts. Rea-
gan agreed, and he likewise moderated other do-
mestic spending cuts in order to secure the votes of
moderate northeastern and midwestern Republi-
cans in Congress, known as Gypsy Moths. In particu-
lar, Gypsy Moths opposed major cuts in environmen-
tal, cultural, and educational programs.
After Congress passed Reagan’s compromised
budget bill, its next major legislative task was the
Economic Recovery Tax Act of 1981, commonly
known as the Kemp-Roth Act. Cosponsored by two
Republicans, Representative Jack Kemp of New York
and Senator William Roth of Delaware, and sup-
ported by Reagan, this act sharply reduced both in-
come tax rates and the number of tax brackets, while
indexing tax rates to inflation. Reagan signed the
bill into law on August 13, 1981. The Kemp-Roth tax
cut was a product of supply-side economics, the eco-
nomic theory that influenced the Reagan adminis-
tration and most Republicans in Congress. Advo-
cates of supply-side economics claimed that major
tax cuts would stimulate greater savings, invest-
ments, and economic growth, thereby benefiting
most Americans and eventually yielding higher tax
revenues that would reduce or eliminate budget def-
icits. By the late 1980’s, critics of supply-side eco-
nomics blamed its tax policies for the widening eco-
nomic inequality among Americans, as well as the
nation’s increasing budget deficits. The national
debt had more than tripled over the course of the
decade, as the government was forced to borrow
more money to finance the debt, thereby growing it
at the same time. This vicious cycle, critics asserted,
threatened future economic growth.The Social Security Controversy President Reagan
and the Republicans in Congress were largely suc-
cessful in decreasing the nation’s tax burden, but
they were less successful in making substantial cuts
in social welfare benefits (also known as entitle-
ments), especially Social Security for retired and dis-
abled Americans. Wanting state governments to as-
sume more domestic responsibilities and rely less on
federal aid, Reagan suggested that the federal gov-
ernment would assume complete responsibility to fi-
nance and regulate Medicaid for the poor if the
states assumed full responsibility for the Aid to Fam-
ilies with Dependent Children (AFDC) and food
stamp programs. Congress rejected this proposal.
Reagan, however, achieved his objectives of gradu-
ally eliminating the General Revenue Sharing (GRS)
program, a major federal aid program for cities and
states, and sharply reducing federal spending on
public housing and urban renewal.The Eighties in America Congress, U.S. 243