Feinstein Targets Economy, Voter Discontent : Politics: Candidate for Sen. Seymour’s seat urges presidential line-item veto, tax cut for the middle class and incentives for business.

With an attack on the “mess in Washington,” Democratic Senate candidate Dianne Feinstein portrayed herself Wednesday as a political outsider who embraces the usually Republican idea of a line-item veto for U.S. Presidents, coupled with a requirement that the chief executive submit a balanced budget each year.

Feinstein, the former San Francisco mayor and Democratic nominee for governor in 1990, also proposed tax cuts for middle-class Americans, business tax incentives to lift the economy out of the recession, and federal aid for areas hit by military base closings.

In an address that the Feinstein campaign billed as a major statement on the economy, Feinstein said federal tax law should be revised so that it rewards investment rather than speculation, which she said it did during the 1980s.

And pulling on a populist cloak, Feinstein called for the elimination of the perks enjoyed by members of Congress--from subsidized haircuts to free parking at Washington airports--and proposed a rollback in congressional pay raises until the budget is balanced or the economy revives.

“I say it’s time to start rocking the boat in Washington,” Feinstein, 58, told a luncheon meeting of the Century City Chamber of Commerce.

Referring to “them” in Washington, she said: “I’m tired of reading their lips and depending on their economic misforecasts. Either they don’t know what the heck is going on in California or they don’t care.”

Feinstein is seeking the two-year Senate term held by Republican John Seymour, who was appointed to the post by Gov. Pete Wilson when Wilson resigned from the Senate to become governor. State Controller Gray Davis has said he intends to run for the same post, thus setting up a Feinstein-Davis match in the Democratic primary in June.

Davis, not commenting directly on her proposals, issued a statement saying: “It’s about time that Democrats began taking an interest in California’s economy. Companies are moving elsewhere, leaving our workers high and dry. Economic growth is the engine that fuels the programs that we care about.”

Feinstein’s speech made it apparent that she is one of several Senate candidates, including some Republicans, who believe that the key issues in 1992 will be the economy and voter discontent.

“Today, the message from hard-working, honest people is clear: No more double standard for Congress and the White House,” she said. “No more double-digit pay raises when millions of Americans are without work, no more savings and loan scandals, no more BCCI fiascoes. . . .

“I’m not part of the Washington/Sacramento political axis. I spent my career at the local level, solving problems for people, creating jobs and fostering a climate for economic opportunity.”

In outlining her program Wednesday, Feinstein said the country needs to “put Washington’s house in order,” provide short-term stimulation of the economy and develop sustained long-term economic growth.

“Ethics reform must be at the top of the list,” she said in calling for a rollback in the congressional pay raise and other benefits received by officials in Washington.

Then, she added, the White House should be given the power to reduce individual spending items through the so-called line-item budget veto such as that enjoyed by the California governor. The line-item veto was a major priority of Ronald Reagan when he was President and has been embraced primarily by Republicans, usually in combination with a constitutional requirement that the federal budget be balanced.

Most Democrats have charged that the line-item veto would transfer too much power over spending to the Executive Branch, but Feinstein said “the President must exercise leadership and accept accountability. Without a line-item veto, a chief executive officer can’t really control the budget.” Part of that responsibility, she added, was a requirement that the President submit a balanced budget to Congress each year.

Feinstein also called for steeper cuts in the defense budget, a tax cut for the middle class, restoration of some investment tax credits eliminated by the 1986 Tax Reform Act, the creation of other tax incentives to stimulate new businesses, a buy-American policy for military procurement, tougher action against nations that restrict their markets to American goods, incentives for California defense industries to remain in business, and aid for areas hurt economically by military base closings.