CONVENTION '96: WHERE'S THE PARTY?

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Whatever else it was, the Reagan Revolution was indeed a 180 degrees turn in the party's views of deficit spending. For more than a century the G.O.P. had been the party of balanced budgets. Goldwater actually opposed Kennedy's 1963 tax cut on the grounds that spending cuts had to come first. But the constant warnings against deficits, and the corresponding insistence that popular but costly programs had to be cut, had also made the G.O.P. a party of bitter medicine. Democrats could promise more sugar at every election year. By the late 1970s the G.O.P. was asking itself which role it wanted to play, Cassandra--or Santa Claus?

Enter eight reindeer, to the sound of sleigh bells. Supply-side theory, developed by Jude Wanniski and Arthur Laffer and passionately advanced by New York Representative Jack Kemp, held that sharp cuts in income taxes would actually increase government revenues by unleashing the pent-up power of the economy. Jobs and higher wages would explode like popcorn, from which higher tax revenues would follow, despite the lower rates. In no time, the supply-side theory went from being a disputed intellectual curiosity to being the unofficial doctrine of the party. It made possible a new, infinitely optimistic Republicanism, one that permitted Reagan to promise lower taxes without reductions in the most beloved federal benefits, like Social Security and Medicare. Popular programs at popular prices. Attention, K-mart voters.

One reason taxes became a sharper issue is that prosperity had moved so many wage earners into the middle class, lunch-pail Democrats turned two-car suburbanites. Then inflation pushed them into ever higher marginal brackets. That immense new middle class began focusing on what government took from them, a chunk of their paychecks, instead of the things it gave them, like student loans and government-backed mortgages. In 1978 California produced the tax revolt that culminated in Proposition 13, a 57% cut in property taxes. That same year Kemp and Delaware Senator William Roth Jr. proposed a 30% across-the-board federal tax cut.

The 25% Kemp-Roth cut approved in the first year of Reagan's presidency failed to produce revenue in anything like the amounts the theorists had projected. Meanwhile, throughout the Reagan years, though discretionary spending dropped by more than a third, not a single major federal spending program was eliminated. Republicans were still unwilling to embrace Goldwater's frank and fatally unpopular rejection of the big-budget entitlements like Social Security and Medicare. (When the G.O.P. Congress made a feint at Medicare last year, its approval rating plummeted.) The predictable result was a massive increase in the federal deficit, $1.5 trillion over eight years, and a crisis that reopened the split between supply-siders and fiscal conservatives like Dole and George Bush. To this day, movement conservatives resent Dole for pushing through a $98.3 billion tax increase in 1982 followed by another for $50 billion two years later--the undertakings that led Newt Gingrich to call him the "tax collector for the welfare state"--and for supporting the 1990 tax deal Bush made with Democrats to bring the budget in line.