Political Rivals Crowd the Pro-Business Platform : Election: When comparing stands on economic issues, Democrats sound like Republicans in calling for ways to expand the economy.

Lawrence A. Kudlow, an enthusiastically conservative economist fromthe Reagan White House, was flabbergasted as he watched Paul Tsongas on television the other day and heard the unabashed, pro-business views of the Democratic candidate for president.

“I know Tsongas is always saying the Reagan-Bush years were bad--but he’s sounding a lot like Reagan to me,” says Kudlow, who now works for the Bear Stearns & Co. brokerage firm in New York.

The oddity of a Republican analyst comparing a leading Democrat to Ronald Reagan is just one hint of the extraordinary economic climate influencing the course and debate of this year’s presidential campaign. They may be loathe to admit it, but the Democrats sometimes sound like Republicans these days, in their zealous appeals for economic growth to end the slump that began in mid-1990.

Unlike past campaigns, when issues of war and peace dominated the agenda, this year’s contest is often a forum on economics, with topics like trade, the capital gains tax and business investment incentives widely debated issues--sometimes with surprising results.

Indeed, the most liberal candidate in the race, Sen. Tom Harkin (D-Iowa), and the most conservative, Republican political pundit Pat Buchanan, are soul mates on the topic of trade, vowing to get tough with America’s rivals in defense of U.S. business and workers.

“I don’t know what’s happening here--does right meet left?,” wonders Jeff Faux of the liberal Economic Policy Institute.

The sense of uncertainty resonates through a puzzled and worried electorate. This is the first campaign since 1980, when incumbent President Jimmy Carter lost his reelection bid, taking place under the shadow of recession. The federal budget deficit is an astonishing $400 billion, and a huge budget gap is predicted for the indefinite future.

Consumer confidence has plunged to its lowest level in 18 years, as Americans sit in dread of layoffs, and fear their children, unable to afford houses, will never live as well as they do. The end of the Cold War leaves even more time for candidates and voters to focus on the troubled economy.

Yet in key respects, the economic discussion is narrower than in previous contests, with notable similarities between the leading Democrats and President Bush. In an echo of John F. Kennedy’s maxim that “A rising tide lifts all boats,” the Democratic front-runners today place more emphasis on expanding the economic pie, than on past appeals to redistribute the nation’s wealth through spending and taxation.

Tsongas, the former senator from Massachusetts, wants to shower business with tax credits for investment and research, and further encourage investment through a drastically reduced capital gains tax. President Bush proclaims his backing for a capital gains cut and a faster write-offs on business equipment. “The Tsongas message is the Bush message,” says Barry Rogstad, president of the American Business Conference, a coalition of fast-growth firms. “There is very little difference in the fundamentals in what they are saying.”

Clearly, there are important differences in the field, with no Democrat going quite as far as Tsongas in tax breaks for investors. Most of the aspirants seem to recognize, however, that the enormous deficit rules out any sort of massive jobs program.

Arkansas governor Bill Clinton also proposes a capital gains tax cut, for example, but he would limit the benefits to investments held in new businesses for five years.

Some of the Democrats distance themselves from Tsongas by emphasizing more hands-on effort by the federal government to upgrade the skills of the work force.

Clinton wants a speed-up in highway construction spending, a massive new program of college financial aid, and a nationwide apprenticeship training program for those who don’t attend college. Sen. Bob Kerrey (D-Neb.) recommends a new federal agency to promote civilian research and development, big cuts in defense spending to put money into highways, bridges and education, and special retraining programs funded by a 1% set-aside of business earnings.

Former California Gov. Edmund G. Brown Jr. would slash the defense budget and pour the newfound cash into major programs for energy conservation, education, transportation, and a new Civilian Conservation Corps for unemployed youth and high school drop-outs.

Sen. Tom Harkin (D-Iowa) says the defense budget should be slashed 50% to finance a modern version of the New Deal--dubbed the New Agenda--featuring big public works programs, with expanded spending for bridges, roads and highways, education and health care. He also proposes a civilian agency to direct research and development.

Yet even Harkin, whose campaign seems to be fizzling, proclaims, “I’m the pro-growth, pro-business candidate of the 1992 election.”

And while some would finance their tax cuts for the middle class by raising taxes for the wealthy, the tone of the campaign is more pro-middle class than anti-rich. Democratic candidates who trudged through the snows of New Hampshire were infrequently seen at soup kitchens or shelters. Instead, they visited manufacturing plants that boomed in 1988 but were suffering hard times in 1992, and offered their visions of putting people back to work. “There’s certainly less of an emphasis on (wealth) redistribution among Democrats than any campaign I can recall,” says Robert D. Hormats, vice chairman of Goldman Sachs International who served as assistant secretary of state for economic and business affairs early in the Reagan Administration.

Tsongas put it very bluntly in his 86-page manifesto, a document many Republicans would feel comfortable with: “You cannot redistribute wealth that is never created . . . Pro-business, some would call it. And so it is--aggressively so.”

Perhaps the most troubling issue for the White House candidates is taxation, which underscores the nation’s conflicting needs between a slumping present and uncertain future.

The short-term pressure might be for a tax cut, which would lighten the load of many households and possibly stimulate some extra consumer spending. But almost all economists disapprove of such a cut, because future gains in productivity--and therefore, the nation’s standard of living--dictate more savings and investment, not a jump in consumer spending.

“There is a basic mistrust of Washington by the financial markets,” which is driving up long-term interest rates despite negligible inflation in the economy, says Sung Won Sohn, senior vice president and chief economist at Norwest Corp., a major bank based in Minneapolis. When it comes to tax cuts, “nothing is the best thing that can happen,” he insists.

He blames the flurry of Washington tax talk for the recent rise in mortgage and bond rates.

President Bush opening the political bidding for the middle class voters by proposing a $500 increase in the exemption for each child, a $5,000 tax credit for first-time home buyers, a new Individual Retirement Account and the deduction of interest on student loans.

On the right wing, Buchanan promised cuts in taxes for the working and middle classes and elimination of the capital gains levy for persons with incomes under $50,000. Tsongas denounced tax relief plans as political pandering. Harkin also opposed any cuts in capital gains rates or reductions for the middle class.

Kerrey and Clinton hearkened back to traditional Democratic approaches, offering to pay for middle-class tax relief with funds extracted from more affluent Americans.

Brown, an individualist as always, offered a unique approach under the tutelage of supply side economist Arthur Laffer--abolition of the complex tax system, to be replaced by a flat 13% tax on all income, and a 13% value-added tax on business.

Health policy seems to be the only campaign issue with an unmistakable divide along historic lines between free-market Republicans and big-government Democrats. At least 35 million Americans don’t have health insurance, and millions more with coverage are fearful of escalating bills.

President Bush proposes tax credits to help the uninsured buy policies, and changes in law to make it easier for small firms to get insurance. Pat Buchanan wants employers to put the money they now spend for workers coverage into special medical accounts up to $3,000, with the workers getting a refund for anything they don’t spend. Insurance would be purchased only for expenses over $3,000.

In sharp contrast, Kerrey would scrap the entire private system, replacing it with a Canadian-style program in which every American is covered, and the government sets the fees. Financing would come from a new payroll tax on workers and employers. Brown also supports a single-payer system. Clinton calls for guaranteed universal coverage, with the government imposing tough controls on bills from doctors and hospitals, and restrictions on the growing use of technology.

In a day of growing concern about the nation’s standard of living, trade also stands out as a major, albeit tricky, issue. “The right and left can both agree on that one--that you should take a harder line on trade,” Hormats said. But with the campaign in flux, it’s not clear how voters will react. In New Hampshire, Kerry aired a TV ad in which he was on an ice skating rink, guarding a hockey net against shots from tough opponent, like the U.S. confronted by Japanese goods. But his strategists decided that the ad backfired.

It seems inevitable that economics will be the steady focus of the campaign until election day.

The recession that began in July 1990 has yet to yield to a meaningful recovery. And some say the candidates’ still have failed to take full measure of how to improve the economy. “They all have proposals that weakly improve economic growth--if they improve it at all,” said William K. MacReynolds, an economist at the U.S. Chamber of Commerce in Washington.

The Candidates And Economics

PRESIDENT BUSH

Growth: Reduce income tax withholding. Speed up federal spending. Freeze regulations for 90 days. Taxes: Increase personal exemption by $500 per child. Cut capital gains tax to 15.4%. New 15% investment tax allowance. Tax credit of $5,000 for first-time home buyers. Trade: North American free trade zone including Mexico. Work to open foreign markets to U.S. products. Push for world-wide negotiations to lower trade barriers.

Health: Tax credits for purchase of health insurance. New rules to make it easier for small business to get insurance.

Other Ideas: Cuts of $50 billion in defense spending over five years. New Individual Retirement Accounts.

PAT BUCHANAN

Growth: Provide investment tax credits for business. Freeze federal spending, hiring and salaries. Repeal most recently adopted federal regulations; impose a two-year ban on new rules. Taxes: Cut taxes for working class and middle-class Americans. Eliminate capital gains tax for anyone making less than $50,000 a year, and reduce it to 14% for those above $50,000. Trade: Play hardball in trade talks. Impose stiff charges on products dumped in American markets. Ban from top government jobs former registered agents of foreign countries. Health: Allow companies to open medical savings accounts for workers up to $3,000; firms provide insurance for higher amounts. Those without coverage at work be given a tax deduction to open accounts.

Other Ideas: Phase out all foreign aid. Term limits for members of Congress. Financial vouchers to allow parents to pick schools for their children.

JERRY BROWN

Growth: Spend $300 billion over 10 years to increase energy efficiency and conservation. Target special industries for growth: space, bioscience, electronics, telecommunications. Taxes: Abolish current tax system and replace it with 13% flat tax on all incomes with deductions only for mortgage interest, rent and charity donations. For business, a 13% flat tax.

Trade: Improve American products and foreign markets will open up.

Health: Government sets fees and pays all charges in single-payer system like Canada. Encourage prevention.

Other Ideas: Accept no campaign donation over $100. Cut military budget by 50%. Bring back Civilian Conservation Corps.

GOV. BILL CLINTON

Growth: Speed up highway bill spending to create 200,000 jobs. Urge banks to renegotiate loans at lower rates, and federal regulators to take lenient approach to banks. Taxes: Tax cut for the middle class; higher taxes for those earning above $200,000. Replace the exemption for children with a more valuable credit. Expand earned income credit for the poor. Trade: Take tougher approach with trade laws to open Japan’s markets. Join with other nations in efforts to help economies of Eastern Europe and Latin America. Health: Guarantee universal coverage. Government efforts to control health care costs, reform insurance markets and limit excess use of technology. Clinics in poor schools. Other Ideas: National exam system for major subjects for all elementary and secondary schools. National trust fund to borrow for a college education. Cut defense spending by 30%. SEN. TOM HARKIN

Growth: Spend $35 billion immediately for highways, bridges, mass transit, housing, education and job training. Create agencies to develop and commercialize new technologies. Taxes: Investment tax credit for manufacturing, mining, agriculture and construction. Permanent research and development tax credit. Opposes capital gains tax cut. Trade: Discourage importation of goods produced by prison and child labor. Pressure Japan to open its markets. Promote Latin American and Eastern Europe as markets for U.S. products. Health: Devise a program of universal health insurance. Develop guidelines to stop unnecessary medical procedures. Increase research on cancer, AIDS, Alzheimer’s, mental illness and arthritis. Other Ideas: Cut defense spending 50% in 10 years. Increase spending for public schools. National service corps to provide free college education for specific careers--doctors, teachers or police. SEN. BOB KERREY

Growth: Accelerate spending for highways and mass transit. Extend unemployment benefits for 13 weeks. Government backing for loans to small and medium businesses. Taxes: Refundable tax credit for 20% of Social Security and Medicare payroll taxes. Investment tax credit for business. Trade: Fight “predatory” trading practices by other countries. Use trade laws to force open foreign markets. Expand trade with new industrial nations and Eastern Europe. Health: Universal coverage in Canadian style system. Government sets fees and pays bills. Financed by payroll tax, 4% on companies, 1% on workers. Other Ideas: Cut defense spending 30% to 40% over 10 years. Reduce cabinet, Congressional committees and staff. Guarantee financing of college education for interested high school graduates.

PAUL TSONGAS

Growth: Stimulate manufacturing through tax credits for investments. Promote civilian R&D.; Ease anti-trust laws to encourage joint ventures. Taxes: Cut capital gains taxes for long-term investments. Create permanent research and development tax credits. He opposes tax cuts for middle-class. Trade: Develop “economic loyalty” program, encouraging Americans to buy U.S.-made goods. Health: Encourage “managed care” to hold down health costs. Individuals join health maintenance groups. Expert doctors review treatments to eliminate unnecessary spending. Other Ideas: Change quarterly financial reports by corporations to encourage longer-term thinking. Raise gasoline tax every year by 3 to 5 cents a gallon to finance mass transit.