DANFORTH URGES TAX REFORM

U.S. Sen. Jack Danforth, in Cape Girardeau Thursday, told area Jaycees that tax reform is needed before there will be any long-term economic recovery.

The Missouri Senator also criticized a recent resurrection of "America first" isolationism and contempt of foreign affairs.

Danforth made his comments to a meeting of Southeast Missouri Region Eight Jaycees at Drury Lodge. Earlier Thursday, he also visited the U.S. Attorney's Office in Cape Girardeau.

Many of Danforth's comments were directed at concerns about the economy, the federal deficit and international trade. He emphasized that serious tax reform is needed in 1992.

But Danforth said proposals for small tax rebates by some senators, including presidential candidate Tom Harkin of Iowa, are misguided.

"As everyone knows, 1992 is an election year and politicians want to get re-elected," Danforth said. "We're going to have a tax bill that's an attempt to win votes. How do you win votes? You give people money.

"But is there anybody in this room that believes the economy of the United States is going to be improved by giving everyone $400?"

Danforth said the aim of tax reform should be to encourage savings and investment, not consumer spending.

"We, as a country, are under-invested; that's what a deficit is," he said. "I would argue that the tax bill we passed in 1986 was exactly the wrong thing."

He said the tax changes passed then attempted to "prime the pump of spending" at the expense of investment.

Danforth said that in order to cut the federal deficit, the government needs to contain health care costs and restructure the tax code.

"The two fastest growing parts of the budget are Medicare and Medicaid," he said.

Danforth said "major restructuring" of the tax codes should include a cut in the capital gains tax, investment tax credits, and research and development tax credits.

"We might consider as every other industrialized nation has done whether the time has come to do less taxing of earnings and more taxing of spending," he added. "It would be very controversial and the exact opposite of the approach of the 1986 tax cuts."

The senator said he's considering whether taxes could be restructured so that persons with income below a certain level would be exempt from income tax and that consumption or sales taxes be raised.

Danforth said the consumption tax could be "progressive" by exempting staple goods such as food, medicine and housing.

"If we're really going to have a growing economy and not so much consumer borrowing, we should not have a tax system that promotes spending and punishes savings and investment," he said.

Danforth also said President Bush needs to better enforce international trade regulations in order to counter unfair trade practices. He said protectionist tariffs and trade barriers are not the answer to U.S. international trade problems.

"There's a big difference between protectionism on the one hand and enforcement on the other," he said. "Enforcement says we're going to play this game, but we're going to insist the game is played fairly.

"This administration and past administrations have been very weak on enforcement."

Danforth criticized the "America first" assertions of liberals and conservatives alike. He said conservative political commentator and presidential candidate Patrick Buchanan's views on foreign affairs are a throwback to the Warren Harding and Calvin Coolidge administrations of the early 20th Century.

"Suddenly, there has become this rash of political statements by people that think they're presidential that we have to put America first and we shouldn't spend so much time on foreign affairs," Danforth said.

"It's generally a message of isolationism and protectionism. I not only think it's wrong, it's very wrong, and it's very dangerous."

Danforth said that just because the cold war is apparently over as reflected in the breakup of the Soviet Union and communist Eastern Europe the instability of the world demands American intervention.

He compared the situation in the Soviet Union today with that of Germany following World War I, when U.S. isolationism had its heyday. He said the vacuum created in Germany in the 1920s from economic and military failure led to the rise of Adolph Hitler and Nazism.

"Isolationism was not a program that worked well in the 1920s, and the best I could say is it's silly. The worst I could say is it's dangerous," Danforth said. "Politics, like nature, abhors a vacuum, and we can't abrogate (our) leadership in the world.

"If we don't do it ourselves, no one else will."

Danforth said he didn't want the newly-formed break-away commonwealth in the Soviet Union to be a new Soviet Union with only different leaders.

"My great fear is that it would be a re-run of the 1930s with Germany," he said. "The country had lost the economy, a war the Soviet Union just lost the Cold War and its pride, and it became fertile ground for the man on the white horse."