Bush proposes shifting U.S. programs to states

January 30, 1991|By Stephen E. Nordlinger | Stephen E. Nordlinger,Washington Bureau of The Sun

WASHINGTON -- President Bush proposed last night a hefty shift of $15 billion in federal programs -- ranging from health to education to transportation -- from Washington to the states so they can be operated "more efficiently."

Federal funding would remain the same, the president said in his State of the Union address to Congress, but a proposed single consolidated grant would cut federal overhead expenses and "move power and decision-making closer to the people."

The president also called on the chairman of the Federal Reserve Board to lead a study of the highly controversial issue of cutting capital gains tax rates, instigating a rare involvement of the Fed in a dispute between the White House and Capitol Hill.

Despite the defeat of this tax break the past two years, the president proposed it again but asked Fed Chairman Alan Greenspan to sort out "technical differences" so that the White House and Democratic congressional leaders "can avoid a return to unproductive partisan bickering."

The issue involves whether a reduction in the rate would raise or lower federal revenues. The president has argued that revenues would rise because investors would sell their assets and pay taxes once the rate was reduced. Democrats contend that a lower rate would reduce revenues and argue that the measure would mainly help the rich.

A senior administration official said Mr. Greenspan was selected because of his "reasonable stature and independence" as Fed chairman and his past work in overhauling the Social Security system.

Mr. Greenspan has long advocated a rate reduction to stimulate investment, the same stand taken by the administration.

In his package of domestic proposals, the president also called for increasing educational opportunities by reviving a Reagan administration plan for vouchers. They could be used by low-income parents to enroll their children in public or private schools of their choice.

This program would mark the first time the federal government would provide money for school choice, a plan that is rapidly gaining support in some education circles.

The education establishment, however, has expressed concern that a tuition voucher system would undermine support for public schools.

The educational choice plan is one of several ideas growing out of the White House effort to promote the notion of "empowerment," which emphasizes the role of self-help in improving life for the poor.

"We must return to families, communities, counties, cities, states, institutions of every kind the power to chart their own destiny and the freedom and opportunity provided by strong economic growth," Mr. Bush said last night.

In another effort to carry out this idea, the president embraced a plan long pressed by Housing Secretary Jack F. Kemp to encourage tenant control and ownership of public housing.

Saying that he was increasingly concerned about the health of children of the poor, the president recommended a stepped-up role for the federal government in combating infant mortality in the nation's largest cities, which have some of the nation's highest infant death rates. The funds would be used for prenatal care.

Other domestic proposals in last night's speech included:

* A sweeping overhaul of banking laws so that banks, now in a serious economic squeeze, could become more competitive.

* Higher spending on math and science education and a new state-federal partnership to improve the nation's highway system.

* A permanent tax credit to businesses for research and development of new technologies.

The current credit expires in December.

* A tax-free family savings account and penalty-free withdrawals from individual retirement accounts for first-time homebuyers, both of which he recommended last year and both of which Congress rejected.

* Strengthened laws against job discrimination "without resorting to the use of unfair preferences." Mr. Bush vetoed civil rights legislation last year, saying it would institute job quotas.

* A "crime summit" of the nation's law enforcement officials, soon to be convened by Attorney General Richard L. Thornburgh, to reduce the crime that "stalks our cities."

There were few details of any of the programs in the president's speech or on a White House "fact sheet" provided to reporters.

With a budget deficit of about $300 billion this year casting a dark shadow across the government, the president apparently felt unable to offer more than a few domestic initiatives.

A senior administration official said the budget, to be sent to Congress next Monday, would stay within the "pay as you go" framework adopted in last fall's deficit-reduction agreement.

Under those new budget rules, any new spending must be matched by spending cuts or tax increases.

The president was particularly inhibited by the Persian Gulf war, which could add $15 billion to the federal budget deficit after taking account of foreign contributions of $36 billion.

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