Bush Urges Deep Cuts in U.S., Soviet Troop Levels in Europe : State of the Union: President proposes a reduction in military manpower to 195,000 on each side. Gorbachev will study the plan.

President Bush, driven by the crumbling of communism abroad and increasing pressure for defense cuts at home, called Wednesday for deep reductions in U.S. and Soviet troop levels in Europe.

In his first State of the Union address to Congress, the President proposed a further reduction in military manpower in Central and Eastern Europe to 195,000 on each side. Arms negotiators in Vienna had been aiming toward a target of 275,000 troops for each.

Bush’s formula for the troop demobilizations, if accepted by Soviet and Eastern European negotiators, would require far greater reductions in Soviet troops than American because Soviet troops now outnumber Americans by more than 2 to 1.

The Soviets would reduce their troops in four Eastern European nations--East Germany, Poland, Hungary and Czechoslovakia--from about 570,000 to 195,000.

U.S. troops in West Germany, Belgium, the Netherlands and Luxembourg, which now number 255,000, would also be cut to 195,000. But the United States, which now has 50,000 troops in the rest of Western Europe, would be permitted to keep 30,000 of them there.

The President also disclosed that the number of military personnel in Panama is now “close to what it was” before the United States invaded that country Dec. 20. And he announced that “well before the end of February,” the 9,500 troops airlifted into Panama for the mission will have returned home. That will leave about 13,000 troops stationed in Panama.

As congressmen of both parties registered their approval with sustained applause, Bush sought to capitalize on Soviet President Mikhail S. Gorbachev’s reforms and the wave of democracy that has spread over Eastern Europe.

“The events of the year just ended--the Revolution of ‘89--have been a chain reaction--change so striking that it marks the beginning of a new era in the world’s affairs,” Bush declared.

The time is right, he said, for the United States to move forward on deeper cuts in conventional arms as part of “a coherent defense program that ensures the U.S. will continue to be a catalyst for peaceful change in Europe.”

Gorbachev, responding to a telephone call from Bush on Wednesday morning, promised to “study” his new proposal, said a senior Administration official who asked not to be identified. Gorbachev, the official said, “was very appreciative of the placing of the call and said this kind of activity was conducive to good relations” between the two countries.

U.S. allies approved Bush’s new proposal before his speech, the official said.

Welcome Offer

Members of Congress welcomed Bush’s offer. “I don’t think the United States should totally withdraw from Western Europe,” said House Speaker Thomas S. Foley (D-Wash.), “but very substantial reductions are not only possible but inevitable.”

“If the Soviets reduce to 195,000, I think we can live with that,” said Rep. Duncan L. Hunter (R-Coronado), a conservative member of the House Republican leadership. “This is not the time for Congress to impose unilateral defense cuts on the Administration, and the President will be asking Congress not to take his (bargaining) chips away.”

Bush’s proposal specifies only that the troops be removed from their forward positions in Europe to their home countries. But both Soviet and U.S. officials have said they would demobilize most if not all of the forces that were withdrawn.

Opposed Deeper Cuts

Bush originally proposed the 275,000-troop level at a summit meeting of the NATO nations last May. As recently as eight weeks ago, in a press conference after meeting with Gorbachev, he said he did not favor deeper cuts.

“I’d like to get the (Vienna arms talks) in the bag first--get it locked up,” he said then. “We ought to manage that before we start the architecture of something else.”

But as the Soviet empire collapsed and Bush came under increasing pressure at home to make further reductions, he instructed his top military aides two weeks ago to review the situation and make further recommendations. The result, officials said, was Wednesday’s new proposal.

Except for his troop cut proposal, Bush’s nationally televised address contained few surprises. Speaking at a time when polls show his public approval rating approaching 80%, Bush found the union and the world to be in relatively good shape.

Sees Lower Deficit

Even the federal budget deficit, he said, is responding to a combination of spending restraint and sustained economic growth. Bush said his proposed budget for fiscal year 1991 would cut the deficit to about 1% of the nation’s economic output for that year, down from 6% at its height in the early 1980s.

“That budget brings federal spending under control . . . ,” he said. “Brings that deficit down further. And balances the budget by 1993--with no new taxes.”

In fact, the President renewed his drive for two proposals that would reduce tax rates:

--Capital gains tax. Bush would exclude from taxation 30% of the profits of investments that had been held for more than three years. The exclusion would be 20% for investments held from two to three years and 10% for investments held for one to two years. Congress blocked a similar proposal last year, but this year a reduction in the capital gains tax rate appears to have a good chance of enactment.

--The “family savings plan.” Families with income of less than $120,000 could contribute as much as $5,000 to an account whose earnings would be tax-exempt. After seven years, the savings could be withdrawn tax-free.

Cities Rescue Plan

The President, without specifically naming the proposal, vehemently denounced another proposed tax reduction: a plan by Sen. Daniel Patrick Moynihan (D-N.Y.) to cut Social Security taxes. The Social Security system is now running annual surpluses of many billions of dollars.

Cites Rescue Plan

Bush said the Social Security system was rescued from financial instability by a package of tax increases and benefit cuts in 1983, and is now operating on a sound financial basis.

“Our budget fully funds today’s benefits--and it assures that future benefits will be funded as well,” he said. “The last thing we need to do is mess around with Social Security.”

Bush announced some lofty domestic goals, such as increasing the high school graduation rate to at least 90% and making U.S. students first in the world in math and science achievement by the year 2000. But he disclosed little in the way of plans to reach those goals.

“Every school must offer the kind of disciplined environment that makes it possible for our kids to learn--and every school in America must be drug-free,” he declared.

Although Democrats and other critics have accused Bush of short-changing social programs in the budget he announced Monday, the President declared that he would do what it takes to invest in America’s future.

“The budget commitment is there,” he asserted. “The money is there.

“It’s there for research and development, R&D--a; record high,” he said. “It’s there for our housing initiative--hope, to help everyone from first-time home buyers to the homeless. The money’s there to keep our kids drug-free: 70% more than when I took office in 1989. It’s there for space exploration: another record high.”

Bush said he had lived up to a commitment at last fall’s education meeting with the nation’s governors by proposing a record increase in funds--an extra $500 million--for the federal Head Start program to prepare underprivileged children for school.

With his budget facing stormy weather in the Democratic-controlled Congress, the President called for bipartisan cooperation. “The American people did not send us here to bicker,” he declared.

“I offer my hand to all of you,” he said. “Let’s work together to do the will of the people. Clean air. Child care. The excellence in education bill. Crime and drugs. It’s time to act.”

Aides’ Message Differs

However, while Bush talked cooperation and refrained from criticizing Congress, his aides have said the President was prepared to confront Congress if necessary and use his veto power if the legislators pass measures that do not meet his standards.

Marlin Fitzwater, the White House press secretary, warned that a veto of the Clean Air Act could turn out to be “the first salvo” in the presidential strategy, and he said the child-care act could face the same fate. Both measures are working their way through Congress and are expected to be sent to Bush later this year.

“Every proposal we make the Democrats want to put their stamp on it,” he said. They insist on providing more funds, he said, and on dictating the way the programs should operate.

Calling on Congress to give careful consideration to recommendations of health care studies now under way, Bush announced that he was instructing Louis W. Sullivan, secretary of health and human services, to lead a review of recommendations on the quality, accessibility and cost of the nation’s health care system.

Targets Health Costs

“I am committed to bringing the staggering costs of health care under control,” he said, giving special emphasis to what many see as one of the most significant issues of the 1990s.

As one sign of his seriousness in attacking environmental problems, Bush pointed out he is proposing to elevate the Environmental Protection Agency to Cabinet rank.

“Not more bureaucracy, not more red tape,” he said, “but the certainty that here at home, and in our dealings with other nations, environmental issues have the status they deserve.”

He pointed out his budget “provides more than $2 billion in new spending to protect the environment, with over $1 billion for global change research. And a new initiative I call ‘America the Beautiful’--to expand our national parks and wildlife preserves and improve recreational facilities on public lands.”

Bush said his Administration is determined to encourage the “creation of capital--capital of all kinds. Physical capital: everything from our farms and factories to our workshops and production lines, all that is needed to produce and deliver quality goods and quality services.”

The United States needs to save more money, he said, and expand the pool of capital for investments that would mean more jobs and economic growth.

BUSH’S TROOP PROPOSAL President Bush proposed a massive cut in U.S. and Soviet troop level in Europe. The proposal: Soviet troops in East Germany, Poland, Czechoslovakia, Hungary CURRENT SOVIET LEVEL Total: 570,000 THE BUSH PLAN Total: 195,000 U.S. troops in West Germany, Belgium, the Netherlands and Luxembourg CURRENT U.S. LEVEL Total: 255,000 THE BUSH PLAN Total: 195,000 U.S. Troops Elsewhere in Europe CURRENT U.S. LEVEL Total: 50,000 THE BUSH PLAN Total: 30,000