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Bush proposes big changes in State of Union.

President George Bush called on the Congress and American people to make big changes in his fourth State of the Union address to the nation last Tuesday night.

Noting it was a "dramatic and deeply promising time in our history, and the history of man on earth," the President said that the end of the Cold War meant that "we can now look homeward ... and move to set right what needs to be set right."

The President then announced a short term and long term agenda he proposes for the nation which would call for deep, unacknowledged, and unspecified cuts in investment in the nation's communities; but tens of billions of dollars of tax cuts for middle income and wealthy Americans.

In response to NLC President Glenda Hood and the NLC leadership proposals and discussion at the White House on January 16, the President announced to the nation he was appointing a Presidential Commission on America's Urban Families (see related story).

Referring specifically to the meeting and the proposal by Hood, NLC First Vice President Don Fraser, Mayor of Minneapolis, and NLC Past President Tom Bradley, Mayor of Los Angeles, the President said:

"They asked for the Commission, and they were right to ask, because it's time to determine what we can do to keep families together, strong and sound."

The President also adopted another NLC high priority: an end to unfunded federal mandates:

"We must put an end to unfinanced federal government mandates. These are requirements Congress puts on our cities, counties, and states--without supplying the money. If Congress passes a mandate, it should be forced to pay for it, and balance the cost with savings elsewhere. After all, a mandate just increases someone else's burden--and that means higher taxes at the state and local level."

The cuts are far less than the levels called for by NLC's delegates at the Congress of Cities, and far less than bipartisan leaders in the Congress have urged. They would leave defense spending for the next five years at levels far in excess of domestic discretionary investment.

Operation Tax Cut Storm

Comparing the troubled American economy to last year's threat from Iraq, the President said the recession "would not stand," and called for courage to defeat the hard times. He proposed a short term plan to heat up the economy and what he called a long term growth plan.

Under the short term proposals, Bush indicated he would be taking two immediate executive actions:

[section] a 90 day moratorium on federal regulations which could hinder growth; a review of all federal regulations; an order to federal regulators to ease up on bank regulations; and a speed-up of pro-growth expenditures over the next six months; and

[section] a change in federal income tax withholding to be effective next month which is projected to reduce withholding in 1992 by about $25 billion--but which would result in $25 billion less refunds next year. The proposal is projected to increase the federal deficit by about $19 billion to an estimated, record $399 billion. The White House did not say how it will pay for this provision, as required by the federal budget laws.

Noting that he had already put these actions in motion, the President asked Congress to act by March 20th on a multibillion tax subsidy package to stimulate the economy:

[section] changes in the alternative minimum tax;

[section] a 15 percent investment tax allowance;

[section] increased tax subsidies for passive real estate losses;

[section] modified rules to eliminate penalties for IRA withdrawals used for first-time homebuyers;

[section] a $5000 tax credit for first-time homebuyers; and

[section] a cut in the capital gains rate to a maximum of 15.4 percent.

The President said the package could be adopted without increasing the federal deficit or increasing taxes, but did not say how.

The President supported the action taken earlier in the day by the House Ways and Means Committee to extend expiring unemployment benefits in a reversal from his two vetoes from last year. The extension is expected to cost $4.4 billion according to the White House.

The Heart of the Matter

The President then told the Congress that his second part or long term program was the "heart of the matter" to ensure that America could continue as the leader of the economic world. He urged:

[section] removal of trade barriers and subsidies and approval of the North American Free Trade Agreement;

[section] support for his America 2000 education program;

[section] permanent extension of the expiring research and development tax credits;

[section] action on the pending crime bill which has passed the House and pending on the Senate floor. The President said "We need a major investment in fighting violent street crime," but did not provide details or make any proposal to bypass states and provide such assistance directly to community leaders;

[section] fund a huge increase in the HOPE housing program for public housing tenants and pass urban enterprise zone legislation.

[section] extend the expiring, NLC-supported municipal mortgage revenue bond and low income housing tax credit programs for 18 months;

[section] increase funding for the Head Start program so that 80 percent of eligible 4-year-olds in communities may participate;

[section] reform the nation's health care system. The President said he would be proposing tax credits of up to $3750 per family for a health care tax credit, but details of his health care legislative proposal would not be available until this month, nor any of the details of how to pay for it;

[section] get the federal deficit under control. The President called for a freeze on domestic discretionary spending, the elimination of 246 community programs, a real cap on entitlement spending, a freeze on non-defense federal employees, a line item veto, and an end to unfunded federal mandates on state and local governments;

[section] Congressional approval of last year's banking reform, energy, and tort reform legislative proposals;

[section] action to strengthen families and children, including the NLC proposed commission, a $500 per child tax subsidy increase, deductibility of interest on student loans, reform of the welfare system, and a strong rejection of racism and bigotry in America's communities.

Democratic Reaction

House Speaker Thomas Foley (D-Wash.) provided the official Democratic response, quoting from former President John F. Kennedy:

"|This nation cannot be strong if it is weak at home."

Noting that the nations whose freedom American taxpayers pay to protect through defense spending have all seen their average wage surpass that of workers in the United States, he said the urgent priority in the Congress in 1992 would be to restore growth and jobs.

Foley said middle income tax cuts, national health care, and fair trade would head up Democratic priorities in the Congress. And, setting his party apart from the Republicans, he said:

"We will insist that middle income tax cuts be paid for not at the expense of schools and health care, but by the privileged."

He said that Democrats would oppose any effort to widen, racial divisions in the country, that appeals to race should have no place in American society.
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Title Annotation:includes related article on Congressional reaction; 1992
Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Feb 3, 1992
Previous Article:Through leadership, funding Bush addresses education.
Next Article:In focus: a time for extraordinary leadership.

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