Kennedy Urges Trust Fund for ‘Peace Dividend’

In an ambitious effort to chart a new course for the Democratic Party in the post-Cold War era, Sen. Edward M. Kennedy on Monday proposed creating a federal trust fund for domestic needs to spend what he estimates could be a $169-billion “peace dividend” over five years.

By putting the money--cut from the defense budget--into a trust fund for such things as education and health care, the Massachusetts Democrat would keep the peace dividend from being used for deficit reduction, as many other Democrats and Republicans have suggested.

Meanwhile, in Los Angeles, Sen. Alan Cranston announced his own approach to cutting defense and using the savings for domestic programs. He contended that the Pentagon budget can be halved by the end of the decade. The savings, he estimated, would by then total about $150 billion a year.

But, in trying to soften the blow to defense industry-dependent Californians, Cranston said at a press conference that industries now making military planes and defense equipment could be re-tooled to build commercial jets and computers for classrooms.

The two proposals are likely to spur the growing debate within the Democratic Party about how best to take advantage of the new political realities created by easing East-West tensions.

Kennedy, the longtime champion of traditional liberalism, told a student audience at Georgetown University here that the changed international scene can help Democrats resolve “the profound political dilemma” that has crippled the Democratic presidential chances for most of the last two decades.

“Every time we suggest a new initiative,” Kennedy said ruefully, “our Republican opponents respond that what we really want is to raise taxes or to widen the budget deficit.”

But the turmoil in Eastern Europe has given Democrats new reason for hope, he contended. “Now, a transformed world can also transform our politics.”

Kennedy called for reducing Pentagon spending by 7% in real dollars in fiscal 1991--a deeper cut than the 2% that President Bush has said he is willing to accept--and by an additional 5% every year through 1995. The cumulative total, his aides estimate, would be about $169 billion by 1995.

Other Democrats have called for substantial defense cuts, notably House Ways and Means Chairman Dan Rostenkowski of Illinois and Senate Budget Committee Chairman Jim Sasser of Tennessee. But none of the proposed cuts have been as deep or as sustained as the reductions proposed by Kennedy and Cranston.

In addition, Kennedy’s proposal was distinguished by his call for a trust fund that would reserve the windfall from defense cuts for designated domestic needs.

That idea is certain to be criticized. But Kennedy argued that domestic programs have been “long short-changed” in order to fund the defense buildup carried out under President Ronald Reagan. He said domestic programs “should not be depleted again.”

Nevertheless, Kennedy cautioned that, in funding new programs, emphasis must be placed on achieving results.

The return has to be measurable and real, he said. “The problem in the public mind--and the public is right--is that, in the past, the money went out, whether or not the results came in.”

Kennedy and Cranston are the latest major Democratic figures to address themselves to the changed world conditions. Last month, House Majority Leader Richard A. Gephardt of Missouri called for a broad program of U.S. aid to the emerging democracies in the former Soviet satellite states of Eastern Europe and to the Soviet Union itself.

More recently, Gephardt joined other party leaders, including Arkansas Gov. Bill Clinton, Georgia Sen. Sam Nunn, and Virginia Sen. Charles S. Robb, in a broad statement of principles issued under the aegis of the Democratic Leadership Council.

They sought to shift the party away from its links to special interest groups and toward the so-called political mainstream. Their statement set forth such beliefs as “the promise of America is equal opportunity, not equal outcomes,” and “the Democratic Party’s fundamental mission is to expand opportunity, not government.”

In contrast to Kennedy, Cranston did not couch his proposal in thematic political terms, but rather as an economic reaction to changing world concerns.

“The Cold War is over,” he declared. “The time has come at long last to think seriously about peace . . . . We must think hard of how we can make peace work for us.”

Cranston refused to detail specific military cutbacks--other than the B-2 bomber and rail-based MX missiles, of which Democrats have long disapproved. However, he said cumulative savings from defense cuts could total $375 billion by 1997.

Cranston cited military curtailment studies drawn up by the Congressional Budget Office and the Brookings Institution, a Washington think tank, but he did not endorse any particular set of cuts.

“There are various choices,” he said.

The senator did suggest “high priority” areas for spending his estimated savings through 1997, including $123.1 billion for transportation, more than $60 billion each for education, housing and environmental cleanups, and $53 billion for health programs. And $15 billion, he said, would be used to combat crime and drug problems.

Cutbacks to the defense industry are a touchy political issue for Cranston, because California is the home of many big-ticket defense programs, including the B-2 Stealth bomber.

The senator brushed aside suggestions that the sharp cuts he advocated would force widespread lay-offs. Instead, he suggested that firms that now base their business on defense contracts would simply shift their focus.

“There will be new job opportunities, new profit opportunities for those engaged in defense industries,” he said.

” . . . We will have great opportunities for those producing military planes to start producing civilian transportation systems.”

But he ruled out investing government money for the expensive re-tooling that would be required. The federal government’s role, he said, would best be limited to “pump-priming.”

Cranston did not address the notion of a trust fund to protect the assets realized by cutting defense. But--adopting an economic approach generally espoused by Republicans--he suggested that the deficit could be lessened by the increased revenues he said would derive from investment.

“There could be a very, very rapid transition from wartime to peacetime production that will lead to great productivity for American workers and high living standards for all our people,” he said.

Although Cranston’s next re-election campaign is two years away, there was a campaign flavor to his proposal. The senator’s popularity has plummeted in the wake of accusations that he was one of five senators to pressure federal regulators to back off their investigation of savings and loan executive Charles Keating.

And, when laying out the program at a downtown Los Angeles press conference, Cranston reiterated his determination to run in 1992.

“I assure you,” he said of the defense proposal, “this is a long-term project for me.”