Dukakis: U.S. Must Cut Deficit

MEDFORD, Mass.--The United States must reduce its budget deficit, improve its factories and ease the Third World debt crisis before the nation's trade shortfall can be attacked, Gov. Michael S. Dukakis said in a speech yesterday.

"The core question...is whether the United States has the will to reverse its competitive decline and to expand into the world market," Dukakis told a Tufts University audience.

The third-term Democratic governor, who plans to declare his formal candidacy for president within weeks, said the nation must expand its world trade with American-made industrial products, "not just with services or fast food franchises."

"We need our basic industries," he said. "Our national security cannot become hostage to raw materials purchased abroad, processed abroad, and transported to America from manufacturing enterprises abroad."

A first step in reversing the nation's trade deficit is "to get our fiscal house in order," he said.

Paying interest on the nation's budget deficit soaks up American savings and drives up the value of the dollar, Dukakis said. He cited a U.S. Commerce Department statement that the budget deficit was the "critical element" in producing the $170 billion trade imbalance.

Dukakis repeated his call for better tax collection to reduce the budget deficit.

"This year the federal government will not collect $110 billion in taxes owned that aren't being paid," he said. "In short, with $200 billion budget deficits staring us in the face, we have been looking the other way while one out of every five Americans has failed to pay his or her taxes."

Dukakis called for increased investment in the nation's "infrastructure"--the roads, railroads, transit lines and water and sewer systems. He criticized President Reagan's recent veto of a massive highway and transit bill as shortsighted.

He also called for more spending on education and worker training. And he had harsh words for business school graduates who go on to lucrative Wall Street careers instead of working to increase the productivity of American industries.

The governor called for a balance between spending on military research and for civilian purposes. He said the Japanese are spending three times more on manufacturing technology than the United States.

Dukakis said Third World development crisis that "threatens the stability of democratic governments in Asia and Latin America and that has contributed heavily to our deficit in trade. For a substantial portion of Latin American debt, interest payments have been generated by reducing purchases of U.S. goods."

Dukakis endorsed proposals by Sen. Bill Bradley (D-N.J.) for dealing with foreign debt, such as equally sharing the costs of the debt load and offering debt relief to selected countries.