Bush Travels South to Ask Budget Plan Backing

President Bush, taking advantage of the congressional recess to pump more life into his budget proposals, Wednesday defended his beleaguered plan to cut taxes on capital gains as a necessary tool to promote jobs and even the odds for American companies battling foreign competitors.

Delivering a self-congratulatory but persistently sketchy portrayal of his national priorities to the South Carolina Legislature, Bush renewed his call for approval of his $1.16-trillion “realistic plan” for taming the federal deficit and expanding domestic social programs.

The President also challenged Congress--as he has since he unveiled his budget in a nationally televised address Feb. 9--to work with him in determining the “hard choices” for spending cuts that would be required by his budget. Though besieged by Democratic members of Congress to specify which cuts he favors, Bush remained silent Wednesday.

Spirit of Compromise

Despite that refusal, Bush also tried to reflect, to the Democratically controlled Legislature here, the spirit of compromise that he has sought to nurture with the Congress.

“I speak to you in the spirit of bipartisanship,” Bush said, smiling. “I’ve got to--you’ve got us outnumbered.”

The President’s mention of his capital gains tax proposal--which would slice taxes on the sales of stocks and other investments to 15% from the present level of up to 33%--marked his first public defense of the issue since Democrats resoundingly turned against the notion after his budget speech.

Rep. Dan Rostenkowski (D-Ill.), chairman of the tax-writing House Ways and Means Committee, has said he will “strongly resist” the capital gains proposal, which is seen by its opponents as benefitting the wealthy. Bush did not mention the capital gains tax break in a budget speech he delivered Monday in New Hampshire.

In Columbia, on the second of three trips this week to states that were crucial to his 1988 election, the President argued that the capital gains reduction would result in “more revenue”--a claim fiercely contested by some economists who contend the cut could shrink federal income.

“It spurs investment, and investment means more jobs, and jobs mean opportunity,” declared Bush, who maintains that companies would reinvest money saved in taxes. “And opportunity is the foundation of American progress.”

Further, the President said, the cut would give American businesses an edge they currently are lacking against overseas competitors.

“A lower capital gains rate helps our international competitiveness,” he said. “All of our biggest trading partners, including Japan and West Germany, tax capital gains modestly if at all.”

Exemptions by Other Nations

Most other nations offer either exemptions or preferential treatment for forms of capital gains, making the overall rate generally lower. Both West Germany and Japan exempt from taxation any capital gains made on securities.

Speaking separately to reporters, presidential spokesman Marlin Fitzwater brushed aside criticisms from Congress that Bush has failed to adequately specify which domestic programs he would cut to fulfill his own proposal for $11 billion in reductions in that area.

“Details are being exchanged all the time,” Fitzwater said, referring to budget talks now under way between Budget Director Richard G. Darman and congressional leaders. “Darman goes up there with an armload of books and numbers so there’ll be details emerging on a continuing basis.”

Fitzwater also underscored the mood of compromise that the Administration has sought to evoke with Congress since Bush’s inauguration. “We’re very flexible,” he said of the budget talks.

While not touching on the controversy surrounding his capital gains tax nor filling in gaps in his tendered budget, Bush was quick to highlight before the Legislature what his Administration sees as the pluses of its program.

He repeated his pledge not to raise taxes, reiterated his support of a line-item veto and balanced budget amendment and said his package had “set priorities” in a time of “tough choices.”

“My budget is a realistic plan that does more for education, more for the environment and more for the space program,” the President said. “It makes a larger investment in scientific research, to help keep America competitive into the next century. It spends more on the Head Start program to help make America strong into the next generation. . . .”

Bush’s travels this week are meant to keep pressure on Congress, which is in the midst of a week-long recess, by hardening support in the nation for the President’s proposals. But Bush’s trip was also a political valentine to the states that boosted him to the presidency.

Monday’s trip--the first in this week’s series--took Bush to New Hampshire, where his candidacy was revived a year ago, and Wednesday brought him to South Carolina, the state where he trounced his opponents less than three weeks later and earned a spate of publicity before 1988’s Super Tuesday primaries.

On Friday, the President will visit Missouri, a crucial Super Tuesday swing state that swung in Bush’s direction last March 8, giving him the unofficial nomination.