Archive for Wednesday, January 29, 1992

BUSINESS LEADERS GIVE HIGH MARKS TO BUSH SPEECH, LONG-TERM PLANS

January 29, 1992

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Members of the local business community said they found reasons to be happy with the economic proposals in President Bush's State of the Union address.

"I thought the president's speech was right on target," said Gary Toebben, president of the Lawrence Chamber of Commerce.

"I was most encouraged by the long-range plans he had for the economy," he said. "I am less optimistic about the short-range plans because I think no one really is in a position to jump-start the economy in the short-term the way we all would hope."

Toebben said the four points in the address that he thought were most important for long-term economic health were Bush's calls for cutting the capital gains tax from a maximum of 28 percent to 15.4 percent; offering a tax credit for first-time home buyers and allowing them to use Individual Retirement Account funds for down payments on homes; providing tax incentives for and greater government investment in research and development; and improving the quality of U.S. education.

TOEBBEN said that despite criticism that a capital gains tax cut would benefit only upper-class Americans who make investments, a reduction would benefit the entire U.S. economy.

"It is necessary in order to add to the tax base and modernize plants and equipment and infrastructures that make us more productive and able to compete in the global marketplace," he said.

The education reforms Bush proposed also would improve the long-term health of the economy, Toebben said.

"It was the acknowledgement that education that includes training and retraining (of American workers) is absolutely essential as a component of us becoming more competitive in the global economy," he said.

John Bush, senior vice president of Columbia Savings, said he was encouraged by the proposals designed to encourage first-time buyers to purchase home.

"I THINK it will be a definite boost to new construction and the housing market," he said, noting that the inability to come up with a down payment is the biggest obstacle to home ownership for the first-time buyer.

"Of all the points in the speech, I think that's the one that you can definitely see coming home to roost in Lawrence."

Columbia's Bush also said he was happy to hear the president acknowledge that regulation of financial institutions, which was designed to check the widespread failures of banks and thrifts, may have gone too far.

Banks and thrifts now are reluctant to make loans out of fear that regulators will penalize them, he said. Relaxing that regulation "could definitely help spur not just the savings industry but the banking industry," he said.

Todd Sutherland, president of University National Bank, said he listened to the president's speech with an ear toward anything that might have an effect on interest rates.

"ANYTHING he did that would be seen as inflationary would scare people, and he didn't do that," he said, noting that the bond market reacted favorably this morning.

Sutherland was skeptical of the net benefits the president's proposal to cut the capital gains tax would bring.

"I wonder what he's going to have to give away to the Congress to get that if he's going to get it through at all probably some kind of corresponding tax increase," he said.

Norman Clifford, an economist with Kansas University's Institute for Public Policy and Business Research, said the president's proposals such as the home buyer incentives and the plan to revise income tax withholding tables to increase take-home pay are designed for short-term results.

"Those are proposals designed in a real short-run sense to get aggregate demand up. I don't think that's real surprising given that there's an election in November," he said.

Clifford said the long-term solutions Bush offered were proposals to lower the capital gains tax rate, to spur research and development and to increase the depreciation allowance on equipment and machinery.

"It doesn't seem to be a very comprehensive look at long-run kinds of problems, but it's there," he said.

"I guess my personal opinion is that (the economy is facing) big long-run issues and these are not big long-run answers."

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