Bush to back tax credits to help buy health care Budget designed to lift economy, campaign

January 05, 1992|By Robert Pear | Robert Pear,New York Times News Service

WASHINGTON -- In his budget request to Congress later this month, President Bush intends to propose tax credits to help people buy health insurance, further cuts in military spending and major new restrictions on the payment of government benefits to the affluent, administration officials say.

Mr. Bush's advisers say the tax credits will be the centerpiece of his election-year strategy to show that he has a substantial domestic policy and to fend off attacks by Democrats who contend that he has no plan to aid the 34 million Americans who lack health insurance.

The president is also under political pressure to revive the economy. His budget is expected to forecast economic growth for 1992 of 2.5 percent to 3 percent, about the range expected by many private economists.

To combat the recession, Mr. Bush is expected to propose some type of tax benefits for first-time homebuyers, and administration officials said they were considering a tax credit of up to $2,000 for such buyers.

While traveling yesterday in Singapore, Mr. Bush suggested for the first time that any peace dividend ought to be used "to stimulate the economy." He said he would like to put any savings from cuts in the military budget "into the pockets of the American taxpayer."

Such a move would require renegotiation of the 1990 budget agreement, which requires that any savings be used to cut the budget deficit.

Administration officials say the president also intends to propose once again a cut in the tax on capital gains, the profits from investments. He is also likely to ask Congress to restore some sort of tax credit for business investment in plants and equipment.

Even some Republicans question whether those measures would be sufficient to stimulate the economy, but administration officials see them as necessary for political reasons.

Mr. Bush's campaign strategists say he probably cannot get re-elected on foreign policy and domestic promises alone, and they see the budget request as a manifesto for the campaign.

The president's budget request for the 1993 fiscal year will comply with overall spending limits set in the bipartisan budget agreement enacted in November 1990, administration officials said. But they said Mr. Bush was considering removing the ban on shifting money between the military and domestic budgets.

The officials said that in view of the collapse of the Soviet Union and the demise of communism, Mr. Bush will propose a military budget below the maximum allowed by the 1990 budget law. They predicted that he would seek $285 billion in military spending for the next fiscal year, which begins in October. The limit is $291.5 billion.

By moving on his own to pare the military budget, Mr. Bush hopes to pre-empt efforts by Congress to make deeper cuts, officials said.

He is likely to seek cancellation of weapons systems such as the Seawolf, a nuclear-powered submarine whose main mission -- attacking Soviet submarines -- now seems outdated, budget officials said. When loaded with weapons and electronic equipment, each Seawolf costs more than $2 billion.

Administration officials say the tax credits for buying health insurance are consistent with the Republican precept that the government not impose costly new mandates on employers or establish a vast new program of national health insurance to supplant the private market.

Tax credits are a prominent feature of a health care bill introduced in November by Sen. John H. Chafee of Rhode Island and 20 other Republican senators.

That bill, like plans being drafted by the administration, would authorize tax credits to help individuals, families and businesses buy health insurance or health care services.

Administration officials say Mr. Bush will describe his philosophy and general approach to "health care reform" in his State of the Union message, scheduled for Jan. 28, or in his 1993 budget request, which goes to Congress within a few days of the speech. Detailed proposals would follow a few months later.

Tax credits are offset against income taxes; a tax credit of $500 reduces a person's tax liability by that amount. Under the proposal contemplated by the administration, the credit would be refundable. In other words, the government would pay an amount equal to the credit to people so poor that they pay no income tax.

As for the military budget, Arizona Republican Sen. John McCain, a member of the Armed Services Committee, said last week: "It's almost a certainty that there will be further reductions in defense spending. We've just got to face realities."

Mr. McCain also wants to end production of the B-2 stealth bomber. He predicted that there would be "a free-for-all" over the Pentagon budget as Congress re-examines the 1990 budget agreement and reassesses threats to national security.

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