In 1987, former Wall Street Journal reporters Jeffrey H. Birnbaum and Alan S. Murray wrote a wonderful book detailing the complex machinations of passage of the Tax Reform Act of 1986 - what many believe to be the most important piece of tax legislation since the code was created in 1913. If you think tax talk is boring, try describing the meticulous process of enacting new tax laws.
But Mr. Birnbaum and Mr. Murray artfully weave a terrific narrative of the drama and nuances behind closed doors of powerful figures such as Rep. Daniel Rostenkowski, Illinois Democrat, the larger-than-life chairman of the House Ways and Means Committee.
The book was aptly titled. As many insiders know, "Showdown at Gucci Gulch" references the marbled floors just outside the committee hearing rooms for the House and Senate tax writing panels. Nearly every day in 1986 (and even now), you could hear the "tap, tap" of those fine Italian loafers donned by slick lobbyists, sauntering up and down the halls, looking for lawmakers they could pigeonhole for an extra line of code that meant millions for his respective industry.
Despite those powerful interests, Mr. Birnbaum and Mr. Murray write of the triumph of policy in enacting a tax reform bill that defied the odds and closed massive loopholes. None of those reforms would have been possible without the direct, near-daily involvement of President Reagan. And while he didn't get everything he wanted, Reagan was able to leave his indelible mark on the entire process, bending the wills of his adversaries and ensuring the lobbyists didn't hijack the process.
I tell that story because there are loose similarities between what occurred in 1986 with tax reform to today's developments surrounding financial regulatory reform Perhaps the most obvious link is the rampant prevalence of Gucci Gulch figures - Armani-wearing Wall Street lobbyists hustling Democratic leaders for their slice of clemency.
Ahh, ol' Rosty would be proud!
But let's not forget what factors contributed to the financial meltdown of 2008. Here again, the comparisons are noticeable. With respect to the housing market, the federal government simply put its thumb on the scale, attempting to foist one sector of society, whether it had the means to pay or not, into the home buying market.
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