In Reagan's 1980 campaign for the presidency, he promised America that he would cut taxes, reduce spending and balance the budget. Reagan started out strong. In his first year in office, Reagan passed $39 billion in budget cuts. But, in 1982 America was experiencing it's worse recession since the Great Depression. Reagan's approval rating hit rock bottom, the economy was failing and so were the hopes for a balanced budget. Yet, by time November reelection came around, the economy started to rebound. Then in December of 1985, president Ronald Reagan signed the Gramm-Rudman-Hollings Deficit Reduction Act. This act created a series of deficit targets meant to balance the federal budget by 1991. It required automatic spending cuts (or sequestration) across the board if these targets weren't met. Fifty percent of the cuts would come from discretionary spending, and fifty percent from defense. Social Security, Medicare and several welfare programs were exempted from a potential sequester.
In 1986, President Ronald Reagan held out his hands in a show of compromise with the Democrats when he asked that House Speaker Tip O'Neil join him in balancing the federal budget. Reagan called for a balanced budget, not through tax increases, but rather through limiting what government spends, "We do not face large deficits because American families are undertaxed; we face those deficits because the Federal Government overspends." Here is an excerpt from Reagan's 1986 state of the union address:
"Mr. Speaker, you know, I know, and the American people know the Federal budget system is broken. It doesn't work. Before we leave this city, let's you and I work together to fix it, and then we can finally give the American people a balanced budget.Here is a link to the hand-shake picture (sorry it is not public domain) .
Members of Congress, passage of Gramm-Rudman-Hollings gives us an historic opportunity to achieve what has eluded our national leadership for decades: forcing the Federal Government to live within its means. Your schedule now requires that the budget resolution be passed by April 15th, the very day America's families have to foot the bill for the budgets that you produce. How often we read of a husband and wife both working, struggling from paycheck to paycheck to raise a family, meet a mortgage, pay their taxes and bills. And yet some in Congress say taxes must be raised. Well, I'm sorry; they're asking the wrong people to tighten their belts. It's time we reduce the Federal budget and left the family budget alone. We do not face large deficits because American families are undertaxed; we face those deficits because the Federal Government overspends."
In late 1986, the Supreme Court ruled the Act unconstitutional on the grounds that it gave Congress undue budgetary power. And in 1987, congress passed a new sequestration act that pushed back the date of a balanced budget to 1993. And it wasn't until 1998, that the government finally balanced the budget under President Bill Clinton.
http://www.presidency.ucsb.edu/ws/index.php?pid=36646
http://vm136.lib.berkeley.edu/BANC/ROHO/projects/debt/1985grammrudmanhollings.html
https://en.wikipedia.org/wiki/Gramm%E2%80%93Rudman%E2%80%93Hollings_Balanced_Budget_Act
http://www.pbs.org/wgbh/americanexperience/features/general-article/reagan-recession/
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