Overview
During the 101st U.S. Congress (January 3, 1989 to January 3, 1991), the Democrats held a majority in both the House of Representatives and the Senate. Because of the Democratic Party majority in both houses, Republican President George H. W. Bush faced opposition for many of his initiatives during his first two years of administration, leading to a "gridlocked government".
101st Congress - Senate Map
This chart illustrates the composition of the United States Senate during the 101st Congress. Red indicates 2 Republican seats, dark blue indicates 2 Democratic seats, and pink indicates one Republican and one Democratic seat.
The Federal Deficit
Early in his term, Bush faced the problem of what to do with leftover deficits spawned by the Reagan years. Reagan’s policies of cutting taxes and increasing defense spending in relation to the Cold War had exploded the federal budget deficit, making it three times larger in 1989 than when Reagan took office in 1980. The deficit had reached a high of $220 billion in 1990. Bush was dedicated to curbing the deficit, believing that America could not continue to be a leader in the world without doing so. He began an effort to persuade the Democratic controlled Congress to act on the budget. However with Republicans believing that the best way was to cut government spending, and Democrats convinced that the only way would be to raise taxes (particularly on the rich), Bush faced problems when it came to consensus building. Bush was further constrained by the emphatic pledge he had made at the 1988 Republican Convention—“read my lips: no new taxes”—and found himself in the difficult position of trying to balance the budget and reduce the deficit without breaking his promise.
Compromise and Taxes
In October of 1990, there was a brief government shutdown when Bush vetoed the budget Congress delivered. In the wake of the struggle with Congress, Bush was forced by the Democratic majority to raise tax revenues; as a result, many Republicans felt betrayed because of Bush's "no new taxes" pledge. Angered Republican congressmen defeated Bush's proposal which would enact spending cuts and tax increases that would reduce the deficit by $500 billion over five years. Scrambling, Bush accepted the Democrats' demands for higher taxes and more spending, which alienated him from Republicans and gave way to a sharp decrease in popularity.
Near the end of the 101st Congress, the president and congressional members reached a compromise on a budget package with the Omnibus Budget Reconciliation Act of 1990. The Act increased the marginal tax rate and phased out exemptions for high-income taxpayers. Despite demands for a reduction in the capital gains tax, Bush relented on this issue as well. This agreement with the Democratic leadership in Congress proved to be a turning point in the Bush presidency; his popularity among Republicans never fully recovered.