Bush Calls for Growth While Cutting Deficit : Congress Gets His ‘Realistic’ Budget Plan

WASHINGTON —  President Bush, unveiling a $1.16-trillion budget that calls for a modest shift of funds from the military to social programs, urged the Democratic-controlled Congress on Thursday to work with him to “keep America growing while cutting the deficit.”

“I don’t propose to reverse direction,” said Bush, who took office last month after serving as former President Ronald Reagan’s loyal vice president for eight years. “We are headed the right way. But we cannot rest.”

Offering a rosy view of U.S. relations around the world, Bush declared: “We meet at a time of extraordinary hope. Never before in this century have our values of freedom, democracy and economic opportunity been such a powerful political and intellectual force around the globe.

“Never before has our leadership been so crucial,” he continued, “because while America has its eyes on the future, the world has its eyes on America.”

And on the domestic front, Bush was equally optimistic. His voice occasionally cracking from a cold that has dogged him during his early weeks in office, he presented what he called “a realistic plan for tackling” the budget deficit while addressing some “very clear priorities.”

“We can afford to increase spending--by a modest amount, but enough to invest in key priorities--and still cut the deficit by almost 40% in one year,” he said.

Additional Funds

He asked Congress to vote additional funds in a number of areas--including education, the environment and the homeless--that he frequently mentioned during his campaign in calling for a “kinder and gentler” government.

The President’s intention to boost domestic spending while achieving deep deficit reductions, however, rests on foundations that many in Washington consider to be overoptimistic. Bush’s new budget, for example, assumes that the economy will continue growing even as interest rates tumble--a combination that even fellow Republican Alan Greenspan, chairman of the Federal Reserve Board, finds unlikely.

Democrats in Congress reacted to Bush’s program with keen skepticism, even though they joined in repeated applause that punctuated his speech.

“A kinder and gentler America?” said House Speaker Jim Wright (D-Tex.) in the official Democratic response to the speech, which was broadcast immediately afterward. “That’s old-time Democratic religion.”

“All this sounds fine,” said Sen. Robert C. Byrd (D-W.Va.). “But how is he going to pay for it?”

Bush, as he has throughout the first weeks of his Administration, asked Congress to work more closely with him than it did with the White House during the closing years of the Reagan Administration. He urged members of Congress “to come forward with your proposals, if they are different.”

“Let us not question each other’s motives,” he said. “Let us debate. Let us negotiate. But let us solve the problem.”

Prominent among the problems identified by Bush is the federal budget deficit. He proposed to reduce it to about $91 billion in the fiscal year that begins Oct. 1, fully $72 billion less than this year’s deficit, even as he would initiate a variety of social and economic programs.

Economic growth, combined with some judicious spending cuts, would make it all possible, he suggested.

Backs One-Year Freeze

“In light of the compelling need to reduce the deficit,” Bush said, “I support a one-year freeze in the military budget.” After that, he insisted, increases above inflation will be required.

“I will not sacrifice American preparedness, and I will not compromise American strength,” he declared.

At the same time, he urged caution in dealing with the Soviet Union. While the United States will continue to work for peace, he said, the Soviets retain a powerful military machine with objectives that often conflict with U.S. interests.

Bush, who has faced criticism for delaying a resumption of arms negotiations with the Kremlin pending a review of the state of U.S.-Soviet relations, defended the delay. “Prudence and common sense dictate that we try to understand the full meaning of the change going on” in the Soviet Union, “review our policies carefully and proceed with caution,” he said.

And, he declared, he has assured Soviet President Mikhail S. Gorbachev that once the review is done, “we will be ready to move forward. We will not miss any opportunity to work for peace.”

In barely a passing reference to an issue that was central to the Reagan Administration, Bush called for firmness in supporting self-determination and democracy throughout Central America, “including in Nicaragua.” He made no reference to supporting the anti-Sandinista rebels.

Turning to domestic policy, the President said that his budget represents his best judgment of how to address the nation’s priorities. He acknowledged that, while there are areas where he would like to spend more than he proposed, the nation could not afford it “until we get our fiscal house in order.”

But some initiatives, he said, could fit into next year’s budget, even though he adhered to his campaign pledge of no new taxes. Among his requests was more money to prosecute organized crime and drug traffickers.

“I mean to get tough on the drug criminals,” he pledged. “Let me be clear: This President will back up those who put their lives on the line every day--our local police officers.”

Devoting most of his speech to domestic priorities as he laid out his agenda for the first time, Bush spelled out his plans for improving education, boosting economic productivity and extending American leadership in technology as keys to building a better future.

Capital Gains Tax

His previously publicized proposal to cut the maximum tax rate on capital gains from highs of 28% or 33% to 15%, he declared, would increase long-term investments, increase government revenues, encourage savings and create new jobs. But the proposal already has run into heavy fire from Democrats who charge that it will favor the rich at the expense of the poor and result in a loss of government revenue.

Bush, who during the campaign said that he would like to be known as “the education President,” said that the most important competitiveness program of all is one that improves education.

Vowing to work to cut the dropout rate and to make America a more literate nation, Bush said: “What it really comes down to is this: The longer our graduation lines are today, the shorter our unemployment lines will be tomorrow.”

Calling for “a new attitude about the environment,” Bush said that he soon will propose clean air legislation that will include a plan to reduce by a fixed date the emissions that cause acid rain--”because the time for study alone has passed, and the time for action is now.”

Reagan had long delayed action in favor of further study.

Bush called for the indefinite postponement of three proposed lease sales that “have raised troubling questions”--two off the coast of California and one that could threaten the Everglades in Florida.

“Action on these three lease sales will await the conclusions of a special task force set up to measure the potential for environmental damage,” he said.

Bush said that he also is directing the Justice Department and the Environmental Protection Agency “to use every tool at their disposal to speed and toughen the enforcement of our laws against toxic waste dumpers.”

“I want faster cleanups and tougher enforcement of penalties against polluters,” he said.

Speaking passionately about the “scourge of drugs,” the President quoted from a letter a mother in Pennsylvania wrote him after being struck by his message on drugs in his inaugural address.

Not 12 hours before, the woman wrote, she and her husband had learned that their son, “bright, gifted, personable,” was addicted to cocaine. “Please, find a way to bury the supply of cocaine. Get tough with the pushers. (Our son needs your help.)”

“My friends,” the President said, “that voice crying out for help could be the voice of your own neighbor. Your own friend. Your own son. Over 23 million Americans used illegal drugs last year--at a staggering cost to our nation’s well-being.”

Bush said that he is asking for an increase of almost $1 billion to escalate the war against drugs. Some of the additional funds, he said, would be used to expand treatment for the poor and for young mothers.

Some of the money, he said, would be devoted to urban schools and much of it would be used to protect the nation’s borders against drug trafficking, with help from the Coast Guard, the Customs Service, the State and Justice departments “and, yes, the U.S. military.”

Saying that he is “deeply troubled by the plight of the homeless,” the President told Congress that “the moral imperative to act is clear.”

“We in government cannot stand on the sidelines,” he said. “We must confront this national shame.” His budget called for a $165-million increase over Reagan’s proposal for spending to combat homelessness.

Bush expressed support for Puerto Rican statehood and said that Congress should move to let the people of the commonwealth express their opinion in a referendum.

Addressing the first major issue to confront his young Administration--the crisis in the savings and loan industry--Bush urged Congress to enact within 45 days the reform proposals he unveiled on Monday.

“We must not let this situation fester,” he said.

He said that while most of the thrift institutions are honest, punishment for the others must be certain.

“Make no mistake: Those who are corrupt, those who break the law, must be kicked out of the business; and they should go to jail,” he said. A Justice Department task force has been established to investigate fraud in the savings and loan industry.

Bush described as “massive” the task the nation faces in cleaning up the nuclear waste from “decades of environmental neglect” at nuclear weapons plants.