CALIFORNIA ELECTIONS : SENATE / SIX-YEAR SEAT : Campbell Offers Plan to Cut Deficit and Taxes

Seeking to surge out of a tight contest with his conservative opponent, Republican senatorial candidate Tom Campbell on Monday proposed a federal deficit-reduction program that also held out the promise of tax breaks.

Coming two weeks before the June 2 primary, the two-term congressman from Stanford said the plan, premised on the passage of a balanced-budget constitutional amendment, would cut the growth in federal spending in half; for every $4 saved, $1 would go for tax cuts.

The plan is founded on quick passage of a federal constitutional amendment requiring a balanced budget, said Campbell, who was a Stanford Law School economics professor before being elected to the House of Representatives in 1988.

If the amendment could be adopted next year, the annual federal budget could be balanced by 1998, said Campbell, who is seeking the Republican nomination to the Senate seat held by Democrat Alan Cranston, who is retiring.

Addressing a breakfast session of about 75 supporters, Campbell said the budget deficit, expected to be about $400 billion this year, is inhibiting economic recovery and robbing billions from future generations of Americans.

“The deficit is a slow death, a slow killer,” he told reporters after the session, where he was joined by Martin Anderson, John Cogan and John Taylor, former officials of the Ronald Reagan and Bush administrations and fellows at the Hoover Institution who helped him draft the plan.

Campbell estimated the first-year savings from his program at $39 billion. Of that, about $30 billion would go to deficit reduction and $10 billion to tax cuts. If his proposal was adopted, income taxes could be reduced “across the board” by 10% by 1998, Campbell said.

Monday’s event at a Palo Alto hotel was billed by Campbell aides as a major policy announcement. Campbell is in a tight race with commentator Bruce Herschensohn in the primary election.

Campbell has said that Herschensohn is too conservative for mainstream Republicans and Herschensohn claims that Campbell is too liberal. So far, Campbell has focused much of his energy on attacking Herschensohn’s flat-tax proposal, which is contingent on balancing the federal budget.

Herschensohn campaign officials claimed Monday that Campbell was stealing their idea.

Campbell said support for the balanced budget amendment, which has languished in Congress for years, is accelerating, even among some Democrats. Campbell said that once an amendment is approved by Congress, he believes ratification by the necessary three-fourths of the states would occur rapidly.

But Campbell said adoption of the amendment alone would not necessarily bring federal spending under control. The proposed tax reduction is the incentive that would attract public support and make it irresistible to Congress, he said.

“If this works, it’s because it catches the imagination of the American people,” Campbell said.

The plan, which he hopes to introduce as a bill in the House this week, would require a 50% cut in the annual increase in the budget. Federal spending has grown by an average of about 6% in recent years, he said, and his plan would trim the rate of increase to 3%.

If Congress failed to agree on the reductions needed to achieve the savings goal, automatic cuts would be triggered, in the fashion of the Gramm-Rudman-Hollings deficit-reduction program adopted by Congress in the 1980s.

Campbell said his program is so simple and appealing that “you’re going to find a lot of people copying it. I predict the first one is George Bush.”

But Campbell was accused of copying the plan himself.

“The new conservative has been completely unmasked,” said Ken Khachigian, Herschensohn’s campaign manager. “The self-described smartest man in Congress evidently can’t think for himself.”

Herschensohn is the advocate of a simplified single-rate income tax that would be pegged at the level required to bring in enough revenue to balance the budget beginning in 2000. His plan was conceived by other fellows at the Hoover Institution, a conservative Palo Alto think tank, and tailored by Herschensohn to dovetail with a balanced budget.

Campbell has repeatedly attacked the Herschensohn plan, especially his proposal that all deductions be eliminated, including the one for interest Americans pay on home mortgages. That would be a disaster for the American ideal of home ownership, he has said.

Campbell said the decisions on what programs are to be cut, and by how much, would be made in congressional negotiations, but he said he opposed the use of defense budget savings to launch new social programs.