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The news fell on Washington like a bomb. Bush's approval rating dropped 8 to 10 points over the next two weeks. Aroused Republicans shrieked that Bush had given away their party's only winning issue in the post-cold war era. Many White House officials agreed. "It was the biggest single mistake of his presidency," a senior official said. "We took a big political hit for it, and what did we get? Nothing."
In fact, Bush's conversion did little to bring the talks out of their coma. Darman thought that the deal might be struck by August. But the Democrats continued to procrastinate, giving away little, particularly on social programs. The Democratic stall obscured the best-kept dirty secret of the budget talks: House Republicans were no more willing than their opponents to support Darman's proposed cuts in health and retirement benefits and other ( federal entitlements. They bombarded Sununu's office with private pleas to protect special programs. They signed joint letters opposing cuts in pork- barrel programs. At one point, senior White House officials polled House G.O.P. members to see how many votes they could get for cuts of various sizes. "You know how much we raised from these guys?" a frustrated Bush aide asked in August. "To get 50% of the House Republicans to vote for a package, we can cut $4 billion, maybe $6 billion from entitlements."
In an attempt to jump-start the bargaining in late July, Darman proposed that both parties simultaneously put their offers on the table so that neither could gain a partisan advantage. But that notion fizzled. Two days before the so-called "immaculate conception" was due to take place, Senator Robert Packwood, a garrulous Oregon Republican, disclosed that Darman planned to eliminate income deductions for state and local taxes. Predictably, both Republican and Democratic Governors exploded, complaining that the idea would make it impossible to balance the budgets in their hard-pressed states. Democratic summiteers labeled the new tax a political maneuver. Within days the talks broke down. Darman later claimed to reporters that the Administration "never wanted" to eliminate the deduction.
Still, a consensus was developing: raise cigarette, gasoline and alcohol taxes, extract more revenue from the wealthy through income tax surcharges, cut domestic spending and defense. The sticking point was Bush's cherished plan to reduce the tax on capital gains. But the political temperature was rising, heated by the crisis in the Persian Gulf. The threat of war dimmed the prospects for taxes on stock-market trades or energy consumption. Rising oil prices and the specter of new inflation even moved opportunistic House Republicans led by Newt Gingrich to call for new tax cuts. "Everyone," Darman said in mid-August, "is looking for an exit."
Near the end of August, Darman drafted a speech for Bush linking the Persian Gulf crisis with the budget. Darman argued that the economic pressures caused by the Iraqi invasion made getting the deficit under control more important than ever. He envisioned reconvening the negotiators after Labor Day and cutting a deal in time for an announcement on Sept. 12, after Bush returned to Washington from a speedily arranged summit meeting with Mikhail Gorbachev.