Perot plan to end deficit calls for painful measures

July 26, 1992|By New York Times News Service

WASHINGTON -- Ross Perot unveiled a far-reaching economic plan yesterday that would eliminate the budget deficit in five years by increasing income taxes on the rich, imposing higher taxes on Social Security for upper-income recipients and taking other painful measures that most presidential candidates have shied away from in recent years.

Details of the plan, being reported in the next issue of U.S. News & World Report, show in far greater detail than previous news accounts the pain that Mr. Perot's proposals would inflict on Americans of all income levels.

It calls for raising gasoline taxes by 50 cents a gallon, doubling taxes on cigarettes and taxing some employer-paid health insurance plans as if they were income.

The plan, which was being prepared for the Dallas businessman before he abandoned his campaign for the presidency, focuses on trying to make U.S. industry more competitive by cutting capital gains taxes, providing tax credits for new investments and for worker training, and diverting of money from military research into the civilian sector.

The article quoted Mr. Perot as saying that he would "do whatever I have to do" to press presidential and congressional candidates to consider the plan. U.S. News provided the New York Times with a copy of the plan yesterday.

Political analysts say that Mr. Perot's plan, by discussing in detail the types of difficult measures needed to balance the budget, is likely to step up the pressure on President Bush and Arkansas Gov. Bill Clinton, the Democratic nominee, to address what they would do to eliminate the deficit.

"This is a plan that Mr. Perot has put out to be debated by the American people," John P. White, the Perot issues director who is the plan's main author, said in a telephone interview yesterday. "Balancing the budget, in order to get us back on a growth path that will make the United States competitive, is an issue too important not to be fully and openly debated by the candidates."

Mr. Perot's plan promises to turn the present deficit into a surplus of $8 billion by 1998.

Mr. Perot would subject 85 percent of Social Security benefits to taxation for individual recipients with income of $25,000 or more and for couples filing jointly with income of $32,000 or more. At present, just 50 percent of those benefits are taxed.

His plan also proposes allowing businesses to deduct just 50 percent of entertainment expenses, down from the current level of 80 percent. It would also limit deductions on mortgage interest to the first $250,000 of a mortgage.

Mr. Perot also proposed cutting farm subsidies by a total of $17 billion over the next five years.

U.S. News said that a study by an economics consulting firm commissioned by Mr. Perot found that his plan would result in somewhat slower economic growth and somewhat higher unemployment during the mid-1990s because reducing the deficit would be a drag on the economy by slowing down spending.

But the consulting firm, DRI/McGraw Hill of Lexington, Mass., found that the plan would increase exports, reduce long-term interest rates and result in an additional $1 trillion in private investment over the next decade. The study said that the plan would ultimately speed up growth and increase economic output about $2,000 for each U.S. family by 2002.

Mr. Perot's plan would take a hatchet to a lot of federal spending. He would cut military spending by $40 billion more than Mr. Bush plans over the next five years. He suggests massive cuts in mass transit and arts programs and recommends eliminating plans for a space station.

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