State of the Union

By MICHAEL DUFFY WASHINGTON

A few days after the embattled President delivered his State of the Union message, a little-known member of the opposition party appeared on prime-time television to decry almost everything the Commander in Chief had said. "The nation faces this year, just as it did last year, a tremendous deficit in the federal budget," the Congressman intoned. "But in the President's message there was no sense of sacrifice on the part of the government, no assignment of priorities, no hint of the need to put first things first."

The year was 1968. The President was a Democrat named Lyndon Johnson. The Republican backbencher was Texas Congressman George Bush. And the "tremendous" deficit was $25 billion. Twenty-four years later, the deficit has climbed to $399 billion, and every complaint Bush lodged against L.B.J.'s speech could be applied to his State of the Union address -- which he fervently hopes won't be his last.

In a speech that Bush's aides had touted as the most important of his term, the President, as usual, was at his best on foreign policy. He stole a march on Democrats by announcing deep cuts in the nation's strategic nuclear arsenal. But when he turned toward home, Bush fell short of his old standards for fiscal sanity or genuine sacrifice. When it comes to priorities, Bush made clear, his most important goal is to be re-elected.

Fighting the deficit is not a popular cause even in good times; amid this recession, it has ceased to trouble Bush altogether. Only once in his 5,000- word speech did he mention the deficit, perhaps because his proposed budget does almost nothing to reduce it. In October 1990, Bush traded away his "no new taxes" pledge and 20 points in opinion polls for a deficit-cutting budget deal with the Democrats, a sound attempt to lower short-term interest rates, stimulate savings and investment and boost Americans' stagnant standard of living. Less than two years later, Bush is abandoning that pact, convinced that re-election is more important than deficits. The budget he presented last week envisions a deficit of $352 billion for the next fiscal year, followed by shortfalls in the $200 billion range.

Democrats also want credit for taking cash out of the Treasury and putting it back in voters' pockets in an election year. The tax-cutting frenzy in Washington almost guarantees a repeat of the 1981 bidding war that helped produce the $3 trillion in government debt that the U.S. has racked up since then. Bush started the bidding off at $25 billion last week, suggesting a range of tax deductions and credits that congressional Democrats are sure to match and more likely exceed. The President asked Congress to pass his plan by March 20, a deadline that would permit him to sign a quick fix if the Democrats cooperate -- and bash them for hampering the fight against the recession if they delay.

The most disappointing giveaway in the President's budget was the shortsighted handouts to the real estate industry. At a time when the U.S. is dramatically overbuilt in commercial real estate -- some large cities are so overstocked with vacant offices it will take 10 years to fill them -- it makes little sense to add tax incentives to encourage more building. Bush no doubt wants to shore up the sagging fortunes of developers and the home values of middle-class voters, but it is hard to see how adding more mini-malls and * office complexes to the landscape will help either constituency. One leading G.O.P. official, grimacing at the size of the real estate tax break, described Bush's proposals to let real estate "investors" write off their losses on new buildings against other income as "insane." An aide to House majority leader Richard Gephardt was less blunt but no less pointed: "What the nation needs isn't more buildings. What it needs is more tenants."

Bush's long-term economic proposals to encourage savings and investment would have been credible if he had followed through on his boast to bring federal spending, particularly exploding entitlement programs, under control. Bush's budget did include a laconic proposal to cap the relentless growth in such programs as Medicaid and Medicare, but Bush himself glossed over the proposal in his speech, evidently afraid to use the politically charged word entitlement on national television. The next day, Budget Director Richard Darman backed further away from the cap, acknowledging that the White House would gladly abandon the controversial idea if Congress thought it unwise -- as it surely will. Too bad. Congress could go home and congratulate itself, said Republican Congressman Alex McMillan of North Carolina last week, "if we don't pass one other item out of the President's budget except for this one."

Bush's budget would allow him to play host at a big party, dispensing favors to friends. Average voters too may appreciate seeing a few more dollars in their paycheck when his plan to ease withholding rules goes into effect. However, the tax rebate is illusory: some workers will have to return the door prize to the IRS when they file their returns on April 15, 1993. But by then the election will be over.