11/24/2012
American Economic History
Reaction Paper
Prof Grill
The Economic Impact of the Contract with America
Much can be written about the political success and failures of the Contract With America. Proposed in dramatic fashion on the steps of the US Capitol by 367 candidates for office on September 27, 1994, Republican members of the House of Representatives organized themselves and aligned their ideals around ten parts, much like the Bill of Rights and the original Commandments. These ten sections were more than a legislative agenda for action; they were a plan and pledge that members vowed to be held accountable for the next 100 days of the 104th Congress and beyond.
The economic policies outlined in the Contract with America were not new ideas to conservatives in the Republican party. Since the days of FDR’s “New Deal” and LBJ’s “Great Society,” conservatives questioned the role of government in the lives of everyday citizens. After Senator Goldwater’s defeat in 1964 and President Reagan’s two terms in office, “conservatives learned two lessons about the role of the Presidency. On the one hand, the President can have a profound international impact through his policies, as reflected in the winning of the Cold War and, later the war in the Persian Gulf. On the other hand, in the most fundamental area of the size and scope of government activities, the President could lead, but a Congress controlled by the opposition did not have to follow.” (The Contract With America, J. Gayner) During the mid-term Election of 1994, conservatives saw the opportunity to take the House and hold President Clinton’s liberal economic policies at bay.
The Contract 's preamble says, "In this era of official evasion and posturing, we offer instead a detailed agenda for national renewal, a written commitment with no fine print." Under the Contract the Republicans committed themselves to introduce the following legislation within 100 days:
1) "Fiscal Responsibility Act": the balanced-budget amendment plus line-item veto power for the president.
2) "Taking Back Our Streets Act": measures expanding prison construction, increasing sentences, and reducing the possibility of appeal for death-sentence cases.
3) "Personal Responsibility Act": welfare reform.
4) "Family Reinforcement Act": diverse measures including tax incentives for adoption.
5) "American Dream Restoration Act": mainly a different form of tax-sheltered retirement account.
6) "National Security Restoration Act": defense measures, mainly limiting US participation in United Nations ventures.
7) "Senior Citizens Equity Act": expanded tax breaks for Social Security recipients.
8) "Job Creation and Wage Enhancement Act": mainly a 50 percent reduction in capital gains taxes.
9) "Common Sense Legal Reforms Act": assorted changes intended to reduce excess litigation.
10) "Citizen Legislature Act": term limits for representatives and senators.
What was quite impressive was that nine of the ten items in the Contract passed the House: Only the constitutional amendment on term limits (which required a two-thirds vote) was defeated. “Within two years, however, the Republican ascendancy and Contract with America was in a shambles.” (American President: A Reference Resource, Mills) The rise of President Clinton’s popularity after his 1996 re-election over Bob Dole left many asking, “what happened?” Some say it was because the conservatives went too far in trying to use the Contract as a governing plan that a majority of voters didn’t endorse. The economy was in a much more productive state in 1996 than when Clinton ran for office in 1992, some suggest that consumer confidence was back and that “good times” were ahead for America.
The problem could be more with the Contract itself than the party that passed it. Out of the 10 sections, less than half directly addressed economic policy. “A principled conservative fiscal program would start by pointing out that over the next six years, federal budget deficits will total about one trillion dollars…. Presumably the Republicans don 't agree--if they did, why would their Contract include the Balanced Budget Amendment? Yet their contract gives no indication of where even a small share of the trillion dollars necessary to close the gap might come from.” (Washington and The Contract With America, J. Fallows)
On the entitlement issues of great importance at the time of the 1996 Election: Social Security, Welfare, and Medicare/Medicaid, “the Contract, amazingly, contains not a single word about controlling medical costs, by far the fastest-rising category in federal and state spending. Its welfare reform package includes a limit on spending for today 's main welfare programs. But these represent only about 1 percent of the entire federal budget, and the Contract 's welfare package as a whole would probably increase welfare costs.” (Washington and The Contract With America, J. Fallows) It would appear that these “Acts” were intended to refocus attention on personal responsibility and away from the federal government as the source of solving Citizens problems.
What hurt conservatives were not their ideas but their strict discipline of unwillingness to compromise with the President, putting their ideas ahead of what the majority of Americans wanted. Unfortunately for Republicans, they did not remember the lesson of President Reagan, who worked with the Democratic opposition he faced in the House. The new conservatives in 1995 gambled that they could force a Democratic President to accept their plan with public opinion and support - and Republicans lost. President Clinton, “sensing the opportunity to show his mettle, vetoed Republican-passed spending bills in the fall of 1995, citing proposed cuts in education and Medicaid as being unfair. The U.S. government closed its doors twice, first for six days in November and again for twenty-one days in December 1995. Three-quarters of a million federal workers were caught in the middle of this political jousting just before Christmas, left to wonder whether they would be paid during the holiday season. Angry Americans, faced with locked government offices and closed national parks, blamed the Republicans, forcing them to back down and pass a temporary measure to reopen the government on January 5, 1996. Voters who had once urged the Republicans onward in their attacks on big government now applauded Clinton for protecting their interests.” (American President: A Reference Resource, Mills Center)
Overall, the goal of the Contract with America was to attempt to reverse the increasing debt, role, and size of the federal government in the American economy. The ideas helped fuel the debate on re-examining the role of government and monitoring the Country’s debt. Never before has such a detailed document been such an important part of an election, or movement in a political party. While the Contract didn’t ensure a complete victory for Republicans in 1996, it did lay the fundamentals for the rise of Conservatism in 2000 and beyond.
WORKS CITED
“The Contract With America: Implementing New Ideas in the U.S.”
Jeffrey B. Gayner, 1995 The Heritage Foundation
“Washington and The Contract With America”
James Fallows, The Atlantic Online http://www.theatlantic.com/past/docs/unbound/jfnpr/jfreview.htm "American President: A Reference Resource" The Mills Center, Republican Contract with America http://millercenter.org/president/clinton/essays/biography/3
Cited: “The Contract With America: Implementing New Ideas in the U.S.” Jeffrey B. Gayner, 1995 The Heritage Foundation “Washington and The Contract With America” James Fallows, The Atlantic Online http://www.theatlantic.com/past/docs/unbound/jfnpr/jfreview.htm "American President: A Reference Resource" The Mills Center, Republican Contract with America http://millercenter.org/president/clinton/essays/biography/3
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