BEYOND THE WATER'S EDGE
The president countered talk of American decline, declaring that victory in the Cold War leaves the United States preeminent, trusted to act with restraint and lead support for freedom everywhere. He rejected a retreat from the world stage.
With the Soviet empire gone, the United States will revamp its nuclear weaponry and scrap a decades-old modernization policy. Deeper cuts are proposed in a swap with former Soviet republics: If they wipe out land-based, multiple warhead missiles, the United States will eliminate MX; cut Minuteman to one warhead; remove two of three warheads on sea-based missiles; and take nuclear arms off many bombers.
Touting Desert Storm, Mr. Bush stressed that the goal approved by Congress, and fulfilled, was the liberation of Kuwait. He avoided mention of Saddam Hussein, still in power in Iraq. He said Arab-Israeli peace talks and the release of U.S. hostages vindicate American policy.
Long-term agenda: Expanding markets worldwide for U.S. food, services and ideas with agreed cuts in tariffs and other trade barriers and copyright protection, a free trade zone for North America and congressional approval of his Enterprise for the Americas plan to boost trade and investment in the hemisphere.
The Bush blueprint for economic recovery is a smorgasbord of tax breaks and spending incentives for families, investors and industry.
A senior White House official called it "a very structured program to deal with very structured needs," but critics said it would do little to stimulate the economy in the short-term, could actually harm it in the long-run, and favored the rich in the meantime.
Main elements of the plan:
* A $500 increase in personal exemption for children. This offers no income tax relief for childless middle-income couples and gives more relief to richer families in the higher tax bracket. Example: a family with two children in the 31 per cent tax bracket would benefit by $310 yearly; the same family in the 15 per cent bracket would get $150; a family earning too little to pay tax would get nothing.
* Penalty-free use of up to $10,000 in IRA funds for first-time home buyers and for education and health costs, and a temporary tax credit of up to $5,000 for first-time homebuyers. Could help real estate market, but critics say most young couples do not have $10,000 saved in IRAs, and that a tax credit of $5,000 will not automatically overcome the lack of income that prevents many from buying homes. Bush plan would also allow home-sale losses to be written off against taxes.
* Changing the income tax withholding system to prevent too much tax being deducted from earnings. Estimated to put an vTC extra $25 billion in the wage-earners' pockets during the coming year, but will reduce taxpayers' refunds by the same amount next year.
* An additional 15 per cent depreciation allowance for investments in property and equipment bought this year and placed in service by June 1993. This could encourage business to advance planned investments but is unlikely to stimulate major new spending.
* A cut in long-term capital gains rate from 28 per cent to 15.4 per cent on the profits on assets held for at least three years, with lower exclusions for more briefly-held assets. Capital gains relief boosts government revenues in the short-run but is an expensive operation in terms of government revenues. Joint Taxation Committee figures show that 66 per cent of capital gains go to 4 per cent of the population, with the richest 1 percent of the population enjoying an average capital income of $156,00, while the average for 90 per cent was $252. Congressional Democrats are likely to fight this.
* An easing of credit restrictions to spur spending and making interest payments on student loans tax deductible to ease the family cash squeeze.
* A $.4 billion extension of unemployment benefits. Congress supports an extension and it will be popularly welcomed given the prospect of unemployment continuing at around 7 per cent throughout 1992.
THE MILITARY IN PEACE
President Bush wants to slash military spending by $50 billion over the next five years, effectively cutting the defense budget by 30 percent since he took office in 1989, but there's little or no chance Congress will do it.
In the Senate alone, cuts of $100 billion or more -- twice the amount proposed last night -- have been slowly gaining support for weeks. That's why Mr. Bush dug in his heels right from the start by saying, "This deep and no deeper."
Mr. Bush wants to avoid creating a "hollow army," meaning he will resist troop cuts beyond current plans to shrink active-duty forces by 521,000 by 1996. He doesn't want to cut training for those who stay in uniform.
To save money and protect troop strength, Mr. Bush signaled a (( dramatic shift in military spending. He slashed funds for high-cost strategic bombers, missiles and advanced weaponry that were designed for a fight with the Soviets that never came.