Divided government gave us welfare reform and a balanced budget

Nothing will get done. You are going to hear that a thousand times over the next two years, from cable panels, from columnists and from your brother-in-law at the table. It sounds wise. It sounds like experience talking. And it has the great virtue, for the people who say it, of being too vague to be proved wrong. I want to put a different sentence on the table, and I want to back it up with a century of the record: some of the biggest things that conservatives ever got done were done when the two parties did not share the same building.

Let's set the facts first. In the elections on November 3, 2026, Democrats won control of both the House and the Senate, as reported by NPR, NBC and others in the days after. The new Congress convenes on January 3, 2027. Donald Trump remains President. Republicans will be the minority in both chambers when that Congress begins. That is the starting point, and I will not give you seat counts or predictions, because I do not have them and neither does anyone else. What I can give you is what happened the last times Washington looked like this.

What divided government forces

Under the Constitution, a bill needs the House, the Senate and the President. If either chamber is in the hands of the party opposite the White House, then any law that passes is a law both parties had a hand in. There is no way around that. Under unified control, a majority can pass what it wants by itself, so it is tempted to write the biggest bill it can and dare the other side to stop it. Under divided control, nothing passes unless each side can stand in front of its voters and say, "We got something."

That is the pattern in the cases below, and you will notice it each time. The laws that came out of divided government were not the pure vision of either side. They were what both sides could sign. Sometimes that was a good bargain. Sometimes, as in 1990, it was a bad one. The difference between the two, as we will see, had everything to do with whether the people at the table knew what they wanted and what they would not give up.

1983: Reagan, Tip O'Neill and a Social Security rescue

By the early 1980s Social Security was running out of money on a schedule, and everyone in Washington knew it. The retirement program that had been created in 1935 faced a cash shortfall within a few years. President Reagan, a Republican, faced a House controlled by Democrats under Speaker Thomas "Tip" O'Neill, while the Senate was in Republican hands. The two sides appointed a bipartisan commission headed by Alan Greenspan to find a way through, and the result was a package that was signed on April 20, 1983.

The package was a classic divided-government deal. It raised the retirement age for full benefits gradually, to 67 for younger workers, over a long phase-in. It made part of the benefits of higher-income retirees taxable. It moved up scheduled payroll tax increases. It brought new federal workers into the system. Republicans accepted revenue they did not love. Democrats accepted benefit changes they did not love. Neither side could claim a clean victory, and each side could say it had saved the program. For the details of how the program works and where we are today, see How Social Security works and the promise built into its 1935 design.

The lesson: the hard, ugly problem that neither party wanted to own alone got solved because both had to own it.

1986: the tax reform that cut the top rate to 28 percent

The Tax Reform Act of 1986, signed by President Reagan on October 22, 1986, passed a Congress in which Democrats ran the House and Republicans the Senate. It is, to my mind, the model of what a divided-government bargain can accomplish. It lowered the top individual rate from 50 percent to 28 percent, and the corporate rate from 46 percent to 34 percent. To pay for it, it closed loopholes and tax shelters, which meant fewer special deductions in exchange for lower rates across the board. The House Ways and Means chairman, Dan Rostenkowski, a Democrat from Chicago, worked with Senate Finance chairman Bob Packwood, a Republican, and the idea had been championed by Democrats like Senator Bill Bradley and Representative Richard Gephardt as well as by Reagan.

Why does it matter now? Because it shows that the largest conservative aim, lower rates on a wider base, was achieved with a Democratic House. The deal worked because both sides could claim something: Republicans got lower rates, Democrats got the end of shelters they considered unfair to ordinary taxpayers. We tell the longer story in The Reagan Tax Cuts Rate by Rate and the Tax Reform of 1986.

1990: the deal that went wrong

Now the cautionary tale. In 1988, George H. W. Bush had accepted the Republican nomination with a promise about taxes, "read my lips: no new taxes," that became the most famous line of his campaign. He was elected. In 1990 he faced a Congress with Democrats running both the House and the Senate and a budget deficit that everyone agreed was a problem. After months of negotiation, Bush agreed to a budget package that included tax increases. The package also contained spending caps and a pay-as-you-go rule, but the tax increase is what people remembered.

House Republicans were split. Newt Gingrich, then the minority whip, opposed the deal, and the House rejected the first version of the package in early October 1990 before a revised version passed later that month. The pledge was broken. Many Republicans felt betrayed, and the broken promise became a main exhibit in the arguments that followed the 1992 defeat, when Bush lost to Bill Clinton. I'd caution that historians argue about how much of that defeat the tax increase explains. The economy, the third-party candidacy of Ross Perot and other factors all mattered. But the political damage inside the party was real, and our fuller account is in Read My Lips and How the 1990 Budget Deal Led to the 1992 Defeat.

What's the lesson? It is not "never make a deal." It is "never give away your central commitment unless you get something big in return." Bush gave up a pledge he had made to the voters, and in exchange he got spending caps that, as we will see, helped in the end, but that nobody gave him credit for at the time. A divided government deal can go wrong if you are the one who gives and the other side gets to claim the win.

1996: the welfare reform that Clinton signed

In the elections of 1994, Republicans won both the House and the Senate, the first Republican House in forty years, running on the Contract with America. President Clinton, a Democrat, was still in the White House. You could not ask for a cleaner case of divided government. We cover that story in The 1994 Contract With America and the End of Forty Years of House Rule, and the shutdowns that came with it in The 1995 and 1996 Government Shutdowns in Dated Steps and the Lessons Learned.

On welfare, Congress passed reform bills, and Clinton vetoed two of them, one in December 1995 and one in January 1996. He then signed a third, the Personal Responsibility and Work Opportunity Reconciliation Act, on August 22, 1996. The law ended the old Aid to Families with Dependent Children program, a federal entitlement with no time limit, and replaced it with block grants to the states called Temporary Assistance for Needy Families, with work requirements and a five-year limit on federal assistance for most families. It was a conservative idea of long standing: send the money and the responsibility to the states, require work, and put a clock on dependence.

Pay attention to the sequence. The Republican Congress did not get its first bill signed. It sent a second, and a third, and each time it pressed its case, while the President, running for reelection, moved toward the center. That is the nature of a divided-government win. It takes persistence, and the willingness to accept a bill that is less than perfect so that it becomes law. For a closer look at the politics of that bill, see two vetoes, one signature and the 1996 welfare law that put marriage in statute.

1997: the Balanced Budget Act and the surpluses

The last act in this story is the Balanced Budget Act of 1997, signed by President Clinton on August 5, 1997, after negotiations with the Republican congressional leadership, including Speaker Gingrich. A companion law, the Taxpayer Relief Act of 1997, signed the same day, cut the tax on capital gains and created a per-child tax credit, one of the items the Republican Congress had been seeking since the Contract with America.

The budget then moved into surplus. The federal government ran surpluses in the fiscal years 1998 through 2001, four years in a row, and fiscal 1998 was the first surplus since fiscal 1969. I need to be careful here about credit, because it is a favorite of both parties. The surpluses came from several things: a strong economy and rising capital-gains revenue, the discipline of the spending caps first put into law in 1990, the tax increase of 1993 that Republicans uniformly opposed, and the 1997 deal. Anyone who tells you one law did it all is selling something. What I will say is that a Republican Congress and a Democratic President working under a rule that neither side could simply ignore produced restraint that neither produced alone. For how Washington built its budgeting rules, see How Washington learned to budget, from the 1921 act to the 1997 deal.

The best argument against all this

The skeptic says: "You are cherry-picking. Divided government also gave us shutdowns, debt-limit brinkmanship and years of nothing. In 1995 and 1996 the government shut down. In 2011 the debt limit became a weeks-long standoff. Divided government is gridlock with a better public relations department."

That is a fair challenge. The record does show those episodes, and the 2011 fight, which ended in spending caps, is covered in the 2011 debt-limit fight that produced real spending caps. Divided government does not guarantee good outcomes. Here is the better way to put it. Unified government can pass anything, which means it can pass a mistake. Divided government passes only what both sides will sign, which means fewer laws and, on average, a lower chance of a law that is wildly out of line with what the country will accept. Conservatives, who have always been more worried about what government does than about what it fails to do, should not be too quick to call that a disaster.

The lessons for a minority party

Here are the practical lessons, in numbered form, since the history points to them again and again.

1. Know what you want. The 1986 deal worked because Republicans knew they wanted lower rates. The 1996 welfare law worked because Republicans knew they wanted work requirements and state control. The 1990 deal went wrong in part because the pledge at stake was given up without a clear return.
2. Win something both sides can call a win. A bill that humiliates the other party will not get a signature. A bill each side can explain to its voters will.
3. Be persistent. The welfare law was the third attempt. The fight to end the old system took more than one try.
4. Do not trade your central promise for a seat at the table. Presence is not progress.
5. Remember the veto runs both ways. With Donald Trump in the White House, any bill needs his signature or a two-thirds vote in both chambers to override a veto. That is a feature of the Constitution, not a prediction about what anyone will do. We discuss the tools of a minority in What the Minority Party in Congress Can Still Do When It Doesn't Run the Floor and, for the money bills in particular, in how a minority party fights a spending bill when it does not have the votes.

What it means for your family

If you are worried about the next two years, I'd ask you to look at what actually touches your household: your taxes, your retirement, your health coverage and the prices at the store. Every one of those was shaped, at some point in the last century, by a bargain between parties that did not agree on most things. The bargains that lasted were the ones that were specific, that asked each side for something, and that were passed at a time when both sides had a reason to deal.

Do not tune out. A divided government is a time when pressure on both parties works. Members of both parties listen to constituents when their votes matter. That includes yours.

The bottom line

• Divided government does not mean nothing happens. In the record, it produced the 1983 Social Security rescue, the 1986 tax reform, the 1996 welfare law and the 1997 budget deal.
• The deals that last are specific, and each side can explain them to its voters. Watch for the specifics in anything that moves.
• The 1990 budget deal is the warning: do not give away a central promise unless you get something big in return.
• Do not accept the idea that gridlock is automatically bad. A government that passes less can also do less damage.
• Write to your senators and representative about the one or two issues that matter most to your family, and tell them which deals you would support and which you would not.