PERSPECTIVE ON THE GOVERNOR’S RACE : Read Her Book; Look at His Record : Kathleen Brown’s 62-page economic program leads to just one conclusion: stealth taxes are heading California’s way.

California is often the nation’s bellwether, foreshadowing national change from lifestyle to tax revolt. In addition to the direct importance of the California gubernatorial election this year, and its potential effect on President Clinton’s fortunes in the state in 1996, the race between Gov. Pete Wilson and Treasurer Kathleen Brown may well be a harbinger of things to come in other state and national races.

The Brown for Governor campaign is heralding its fourth economic plan for California, claiming it would rebuild California and create 1 million new jobs over the next four years (embarrassingly, this is about 25% less than private forecasters predict without her program). Gov. Wilson aptly decries the plan as more government involvement in private business affairs, more bureaucracy, more spending and a hidden tax increase.

Treasurer Brown asks California to read her plan. So, unlike some who have endorsed her candidacy and her program, we actually did so. It reminds us of Michael Dukakis’ and Bill Clinton’s programs: much invective, lots of new government programs, public/private partnerships (without private-sector consent) and shell-game arithmetic. This government micromanagement of capital markets, industry and the labor force is an approach that has failed miserably from Moscow to Massachusetts. If enacted, it would seriously damage California’s economy.

The most explosive issue is taxes. Brown, disingenuously, blasts Wilson for agreeing to tax increases in his first year, which he did in order to get large, permanent reductions in spending in the face of a dramatic and unexpected $15 billion deficit that he inherited. Those reductions in spending amounted to about $3 for every $1 of tax increases. Wilson has kept the Legislature under pressure and state general-fund spending has been flat for three years. It has not even increased for inflation. No other governor in the country has come close to matching that record. And if Wilson had not held the line so forcefully on spending? The independent Commission on State Finances forecast back in 1990 that state spending would be $60 billion today, compared to the roughly $40 billion actually being spent. In short, spending, and the taxes required to finance it, could well be 50% higher than today.

Now, to the details of the Brown plan. In a recent debate, Brown called for $5 billion in spending cuts but specified only $3 million of the possible cuts, less than one-tenth of 1% of her goal. Where is the other 99.9%? The plan itself talks about saving $411 million a year by cutting education spending. (Cut education first?) That’s only 8.5% of the spending cuts she claims she will make. There is no hint where the other 91.5%, or $4.6 billion, is going to come from. She does say that state government must “cut waste,” and that it is “imperative that we examine the assumptions underlying each and every activity.”

A careful reading of Brown’s entire 62-page economic program reveals that its bottom line is a stealth tax plan, craftily devised and disingenuously presented to finance her version of government industrial micromanagement of California. There are no billions of dollars of spending cuts. But there are lots of new programs and government bureaucracies. The spending cuts are rhetoric, but the new programs are real. If Brown were elected and had her programs passed into law by a Democratic-controlled Legislature, clearly taxes in California would go up--a lot. The pressure to have these new programs grow--along with the taxes to finance them--would be intense. Simple arithmetic says that just to raise the missing $4.6 billion a year, you would have to raise the 1995 income tax of Californians by a whopping 25%.

Now let’s look at some of the new state government programs Treasurer Brown would like to start and pay for with taxpayers’ money. There is a community reinvestment fund to “foster new lending to disadvantaged regions.” The state is to contribute $20 million of the $100 million fund. Where is the other $80 million to come from? Another “New Democrat” private-public partnership. But the financial junior partner here is going to call the shots and force the private sector, the banks and pension funds with fiduciary responsibilities, to pony up the other $80 million. Shades of Michael Dukakis in 1988 and Bill Clinton in 1992 (and his labor department today). A similar pattern is repeated in a “seed capital” fund, an “environmental loan-guarantee fund,” “a capital-access fund,” on and on. It seems under Brown, capital will be accessed in Sacramento, not at local financial institutions. This is stunning in the state that is the home of venture capital.

Brown claims she won’t raise taxes in her first year in office, but her plan calls for many new taxes and extensions of old ones. Add to this the billions that will be necessary when the new spending programs wind up, as usual with government, costing far more than projected. Brown seems to think that everything will pay for itself. Switching 43,000 state cars to alternative fuels, adding more state OSHA inspectors, piling state programs on top of federal programs and myriad other proposals, whatever their other pros and cons, somehow remarkably incur no new net costs. It’s as if Brown’s formula for saving money is spending it.

If Brown’s economic plan is put in place, there is no chance whatsoever for tax relief for the rest of this century. What we’ll have is higher taxes that will worsen California’s competitiveness as well as depress family incomes.

During the debate, she repeatedly told the audience that Gov. Wilson was a liar and cried: “Don’t read his lips, read my book.” You don’t need to read Pete Wilson’s lips, just take a look at his record.

And as for reading Kathleen Brown’s book, good idea. Every Californian should read her 62-page economic program. But they may not like what they find. They may be terrified.

An opposing view from the Brown campaign will be published later this week.