Spending Plan, Address Show Bush Sticks to Beliefs on Domestic Issues : Politics: The President’s positions on taxes and defense illustrate that he has not changed his stance, as conventional wisdom had predicted.

Since the beginning of his Administration, the line on President Bush has been that he is a leader whose domestic policies rested on no strong personal beliefs, that he would cut his political cloth to fit the changing demands of expediency.

Whatever else Wednesday’s federal budget and Tuesday night’s State of the Union speech may contain, they offer substantial evidence that this piece of conventional wisdom is wrong.

Faced with a recession that has imperiled his reelection and a staff divided over how he should respond, the President used the 1993 spending blueprint and his annual address to Congress to chart a course that is pure George Bush-Republican.

From his modest tax package and his “this deep and no deeper” vow on defense cuts to his reaffirmation of U.S. leadership around the world, Bush settled on positions that are consistent with everything he has stood for in the past--whatever their practical or political consequences may be.

At present, for example, most political strategists think candidates should shun foreign policy because voters want to focus on the nation’s manifold domestic problems. Bush in recent months has sought to play down his own involvement in foreign affairs.

Yet in the State of the Union speech, he led off with a paean to what four decades of American efforts to contain communism around the world had achieved. And he pledged to continue his own activist role.

“We are the United States of America, the leader of the West that has become the leader of the world,” he said. “As long as I am President, we will continue to lead in support of freedom everywhere. . . .”

But it was on the economic front that the core of Bush’s convictions could be seen most clearly.

Consider his plan to change the personal income tax withholding tables:

The move, which Bush can take by executive order without going through the Democrat-majority Congress, cuts no one’s taxes. It puts some small amount of extra money in peoples’ pockets now--about $3 per week for the average single taxpayer, budget officials estimate--in exchange for reduced refunds next year.

By giving consumers about $25 billion in coming months, this should stimulate the economy, experts say, but only a little. Administration officials agree but calculate that the change will make people feel better.

That sort of move illustrates Bush’s version of what he sometimes calls the “vision thing.” At the heart of the vision lies the fundamental tenet of the Republican credo that large-scale government intervention in the economy only makes matters worse, even in a stubborn downturn.

Because of that, Bush believes, the best government can do in the current situation are small steps that make voters feel better while the private enterprise system--helped along by the Federal Reserve Board’s cuts in interest rates--works its magic.

“The President’s feeling is that the recovery is on its way,” Treasury Secretary Nicholas F. Brady told reporters Wednesday in explaining the basic assumptions behind Bush’s plan.

If the economy revives sufficiently before Election Day in November, Bush’s patient adherence to his limited-government principles may pay off. If not, Democratic candidates almost certainly will argue that the time has come for a more active approach.

Many economists, particularly those who advise the Administration, believe that Bush’s course could pay off. “We are seeing some very subtle signs that the erosion in the economy is beginning to stabilize,” Federal Reserve Chairman Alan Greenspan told a congressional committee Wednesday.

But already, Democratic leaders have taken aim at Bush’s relatively passive view of government’s role.

“I saw no vision, no long-term plan,” complained Sen. Robert C. Byrd (D-W.Va.), chairman of the Appropriations Committee.

Each of the Democratic presidential hopefuls has called for a series of steps that would give the government a far larger role in shaping the economy--whether in the explicit form of an “industrial policy” to channel federal aid to selected industries or in the broader terms of increased spending on education, worker training and research and development.

Moreover, Democrats already have pointed out that the most active parts of Bush’s economic plan consist of steps, such as investment tax credits and capital gains tax cuts, that aid wealthy Americans more than the middle class or the poor.

Bush and his aides argue that the key to long-term progress for all Americans is greater investment in productivity and that such investment will increase only if the well-to-do get more incentives to invest--in the form of lower taxes. In addition, as Bush said in his State of the Union speech, taxes aimed at the wealthy often have impact on people further down the income ladder.

In one symbolically important example of that argument, Bush has proposed eliminating a luxury tax on yachts costing more than $100,000 and on private planes. Congress passed the tax last year as part of the five-year deficit reduction plan negotiated between Democratic leaders and the Administration in 1990.

Relatively small amounts of money are involved--$1.5 billion in taxes through 1995--but the White House knows how easily Democrats can turn the issue against Bush. Bush speech writers, therefore, left any mention of the luxury tax out of Tuesday’s speech, revealing it only in the budget documents Wednesday.

Why did Bush embrace the repeal proposal at all? Companies that make expensive boats, planes and other luxury goods say the combination of the tax and the recession has hit them hard and forced them to lay off many workers. Cutting the tax will be good for employment, Republicans argue.

The President “is going to build the economy with the programs he’s outlined. That’s what these incentives are for,” said Robert A. Mosbacher, the former commerce secretary and now Bush’s campaign chairman.

As Nation Grows, So Does Spending

TWO HUNDRED YEARS AGO: 1793 President: George Washington Treasurer: Alexander Hamilton U.S. population: 4.3 million Number of states: 15 Area: 888,811 square miles Headlines: * Yellow fever kills 4,000 in Philadelphia, federal government nearly shut down. * Fugitive Slave Act makes it illegal to prevent arrest of runaway slaves. Revenues: Customs: $4.3 million * Internal revenue: $0.3 million Other: $0.1 million Total: $4.7 million Expenditures: Army: $1.1 million Interest: $2.8 million Veterans: $0.1 million Other: $0.5 million Total: $4.5 million Surplus: $0.2 million

ONE HUNDRED YEARS AGO: 1893 President: Benjamin Harrison Treasurer: Charles Foster U.S. population: 67 million Number of states: 46 Area: 3,022,387 square miles Headlines: * Nation mired in depression, unemployment nears 20%, no benefits for jobless. * Ferris wheel makes its debut at the world’s fair in Chicago. Revenues: Customs: $203.4 million * Internal revenue: $161.4 million Sale of public land: $3.2 million Other: $17.8 million Total: $385.8 million Expenditures: Army: $49.6 million Navy: $30.1 million Interest: $27.3 million Veterans: $159.4 million Other: $117.0 million Total: $385.5 million Surplus: $2.3 million

TODAY: 1993 President: George Bush Treasurer: Nicholas F. Brady U.S. population: 256 million Number of states: 50 Area: 3,615,123 square miles Revenues: $1,164.8 billion Expenditures: $1,516.7 billion Deficit: $351.9 billion * Taxes on liquor and tobacco

Sources: Dept. of Commerce, Bureau of Census