Recovery plan stumbles in the streets of America


WASHINGTON -- Already, some of the early income tax filers in Cuyahoga Falls, Ohio, have started hounding mailman Richard Hanna for their refund checks.

"Today? Tomorrow? Will it be here soon?" they ask.

"People live for these refund checks," says Mr. Hanna, a 26-year veteran of the U.S. Postal Service. "And they're a lot more likely to buy big-ticket items with a refund check than with a few more dollars a week in their paychecks. I know I would be.

"I really don't think a couple of bucks a week is going to do much good for the short term."

A couple of bucks a week is what taxpayers could find in their pockets with President Bush's proposed change in income tax withheld, one of the various incentives and tax breaks outlined in his fiscal 1993 budget.

And like Mr. Hanna, many Americans -- from Cuyahoga Falls to Groton, Conn., to Diamond Bar, Calif. -- say they believe that the president's proposals are little more than tinkering and would have little, if any, effect on the strains, squeezes and sacrifices they feel in their everyday lives.

Bud Henry, a real estate agent with Richard Sowers Realtor Inc. in Diamond Bar, says the president's proposal for penalty-free use of Individual Retirement Account funds along with tax credits for first-time home buyers will do little to bring back his business, which has dropped off 60 percent in the past year.

"How many first-time home buyers do you know who have IRAs? These are not the yuppies of America. These are kids getting out of school; they're 21-year-olds," says Mr. Henry, whose office has shrunk from 22 agents to 6.

The tax break -- a credit of up to $5,000 for first-time buyers -- may work to stimulate the housing market in the long run, he adds, "but it's not something a first-time home buyer can put in his pocket when he goes to buy a home."

The purchase of homes -- especially condominiums and starter homes, he says -- has virtually come to a halt in his neck of Southern California. His hope is that Mr. Bush and Congress will push for looser regulations on lending, rather than tax breaks.

At Luzzi's Pizza & Deli, a popular lunch spot in Groton, Conn., for employees of the Electric Boat Division of General Dynamics Corp., the hopes yesterday were even keener, the anxiety more palpable, the danger more immediate.

The proposal for cuts in military spending would terminate construction of Seawolf submarines, a project that now employs about 17,000 workers at Electric Boat, and would jeopardize the jobs of many others.

"If they end up cutting everything, we all could lose our jobs," said one man, asking that his name not be used. "My son might have to drop out of college, and my daughter might not have the chance to go to college. In this area, it's going to be pretty hard to find another job. McDonald's is going to have a long waiting line."

Joseph Luzzi, who just opened the pizza parlor down the block from the nation's leading submarine builder, said his regular customers lately have been lunching on fear along with meatball subs.

"People are very, very worried. Very, very shaky," said the owner, who himself fears having to close shop if he loses his customer lifeline. "Things don't look good for the Connecticut area here. It's going to be a ghost town."

And it is the unemployed, as well as the working poor, who will reap the least from the fiscal '93 budget, according to their advocates.

The president's pledge to make health insurance "affordable for all low-income people not now covered" through a health insurance tax credit translates to no help at all, says Lynn Clothier, president of Indiana Health Centers, a private, non-profit Indianapolis-based organization of 14 clinics serving low-income and homeless populations.

"The really hard hit, the people we see who are at or [near] 100 percent of poverty -- I don't think they're paying much in taxes," shesays.

And the working poor are most strapped by cash-flow problems, she adds.

"For them to think about having additional money pulled out of their paychecks for health insurance, even if they're going to get it back later, is going to be a hard sell for the average worker bee," she says. "For them to have to upfront the money for either insurance or health care and wait until tax time to get the money back means they'll go without necessary health care.

"A lot of people in Washington have forgotten what it's like to live hand-to-mouth," she says.

Beyond that, she says, the complexities of the tax code keep many low-educated, low-income families from taking advantage of tax breaks such as those proposed by Mr. Bush.

Even within her own staff, she's noticed that "the higher the income, the more readily they buy into benefits that have tax incentives. The lower the income, the less readily they buy into it. They don't understand it.

"It's not that they're dumb," she says, "they don't understand. It's complex."

Jim Stiles, executive director of the Sunset Park Family Health Center in Brooklyn, N.Y., agrees that tax credits "do not do a great deal of good in a neighborhood like mine." He points to a large underground economy where small businesses employ workers off the books, and thus without tax deductions.

And he believes Mr. Bush's call for an increase in the personal tax exemption for children -- an average savings to families of $75 a year per child -- is "insignificant" to the struggling working-class families he sees.

On the other hand, he applauds the president's proposed increase in funding for community health centers. "It's the largest increase we've seen in a decade," he says. "We were shocked. That's significant."

But to others, the president's budget talk was thought to have been about as significant as it was riveting.

Sandra Jones, a tour guide in Kennebunkport, Maine, where the Bushes have their summer home, watched the Boston Celtics on television Tuesday night instead of her neighbor's State of the Union address.

Apparently, so did many others.

"I was with 90 people this morning, and no one even mentioned the budget," Ms. Jones says. "I guess that says something, but I don't know what. There weren't any comments at all. People just wanted to see the president's home. The nation's in the president's hands -- and we watch the Celtics." First-time home buyers: Looking for your first home? You'll likely get some help from Uncle Sam this year. The president wants to offer first-time home buyers a $5,000 tax credit, spread over two years. Congress is expected to back this approach or another Bush proposal -- already included in numerous congressional bills -- that would let first-time home buyers use money from Individual Retirement Accounts toward a home purchase.

Investment tax credit: Another likely winner. The president wants to help businesses modernize by proposing to allow additional first-year depreciation of 15 percent of the purchase price of new equipment purchased before next January and put in place by July 1993. Expect some kind of investment tax credit to emerge between the president and Congress, whose members find merit in the proposal.

Jobless benefits: There has been such strong support in Congress for granting another 13-week extension of unemployment benefits that Mr. Bush's new proposal puts him at the end of a parade that has already started. His approval means the measure can now go through without another veto fight.

* Capital gains: This is where the election-year battle lines ar likely to be drawn most clearly between the Republican president and the Democratic leadership in Congress. Mr. Bush has bent hard toward the conservatives with a proposed deep cut in the tax rate on profits from the sale of assets. Democrats may ultimately agree, but only at the price of some form of tax increase on the rich.

* Health care: Mr. Bush is offering a $3,750 health insuranc credit for poor families. Most Democrats say that the proposal is HTC too narrow and doesn't address other income groups without health insurance, or the soaring costs of health care. There is some chance the credit could be enacted as part of a wider program pushed by Republicans.

* Domestic spending cuts: The amount of money spent o domestic programs this year will not increase one penny next year, Mr. Bush has vowed. He will almost certainly be ignored by Congress, which will allow a little growth for inflation. The lawmakers will also refuse to eliminate any of the 246 federal programs Mr. Bush says "don't deserve federal funding." That's a chestnut that goes back to the days of President Ronald Reagan, who found that members of Congress don't like to scrap pet projects.

* Defense cuts: President Bush's bottom-line reduction is $5 billion over five years, but that leaves a pretty slim "peace dividend" of roughly $27 billion in hard cash by 1997, barely one-tenth of the Pentagon's annual budget. Some Republicans and a horde of Democrats want far deeper cuts now that the Soviet menace has disappeared, maybe on a scale of $100 billion or more. Even Defense Secretary Dick Cheney thinks Congress may get away with it.

* New weapons cancellations: Stealth disappears; Seawolf sinks Because there's no chance the former Soviet republics will spend their rubles to develop new radars and quieter, deadlier submarines, the Pentagon thinks it can live with one SSN-21 Seawolf nuclear attack submarine and 20 B-2 Stealth bombers. One immediate dilemma: The House may be unwilling to allow more than the 15 planes already approved, especially since another $4 billion is needed in 1993.

* Troops at home and abroad: Gen. Colin L. Powell, chairman o the Joint Chiefs of Staff, says current plans to reduce the active-duty military to 1.6 million by 1996 gives the United States "the minimum force needed for our enduring needs." That includes a permanent military presence in Europe of 150,000 troops, a number many lawmakers say could go much lower. But Congress will fight proposed cuts in the National Guard, claiming they're cheaper to maintain than are active forces, but worrying more about how they'll look to voters if they shut down their local armory.

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