Dole Turns to Variety of Advisors for Input on Economic Blueprint

Should taxes be slashed? The White House aide was dubious.

Cut them, went the argument, and the economy would respond with a flourish of activity, delighting voters, helping workers, galvanizing support for the president.

“That sounds very interesting, but who else believes this besides you?” asked the White House official, according to Jude Wanniski, a tax-cutting apostle who participated in the debate more than 20 years ago.

Today, that aide, Donald H. Rumsfeld, is the top policy advisor to Bob Dole, the Republican presidential hopeful. And as Dole prepares to unveil an economic plan that supporters tout as the elixir for his struggling campaign, questions that have divided the GOP for decades seem embodied in the candidate himself.

To sort it all out, Dole has turned to advisors from universities, think tanks, Wall Street and, not surprisingly, his old home of the Senate. He has summoned Stanford University economist John B. Taylor to the campaign plane, consulted old colleagues such as Sen. Pete V. Domenici (R-N.M.), listened as experts picked apart assorted proposals and sparked a cross-country debate via fax and telephone.

Dole has kept his own counsel as rival factions competed for his approval, setting up a contest between two major approaches: cutting taxes across the board, which would benefit Americans of varying incomes more effectively, or rolling back tax hikes approved by Presidents Bush and Clinton, which would have its greatest impact on those in higher tax brackets.

It was reported Saturday that campaign and GOP sources were saying Dole will propose repealing the 1993 tax increase sponsored by Clinton and making Social Security payroll levies tax deductible. But the sources said Dole was expected to stop short of either recommending an immediate across-the-board tax cut or proposing a repeal of the 1990 tax increase.

But other campaign sources insisted that no final decision has been made. “To say that Dole has signed off on something--I wouldn’t say that,” one official said. Others said discussions about the plan would continue today.

A senior Dole strategist cautioned against premature reporting of specific tax-cut proposals, but added that the agenda to be unveiled Monday in Chicago will include “a repeal of various tax increases” that provide “the largest possible tax cut for people who have moderate and low incomes.”

The men and women in Dole’s idea factory are virtually united in the goal of slashing taxes as a way to enliven the economy.

For Dole, still remembered as one of the toughest obstacles to supply-side tax cuts in the 1980s, shifting the question from whether to cut taxes to how much--and in what manner--is a remarkable transformation.

His supporters, meanwhile, are hoping the release of his plan will spark a transformation of its own, focusing more attention on the economy in an election year when many Americans hate the tax code and yearn for higher living standards.

“If whatever we do can’t be described in terms of its impact on economic growth and leading to fundamental tax reform, then it just doesn’t make it,” said Vin Weber, a former Republican congressman from Minnesota.

Several Dole advisors have brought their pet concerns to the making of the plan.

Taylor, a mainstream Republican and former member of Bush’s Council of Economic Advisors, has marshaled the academic troops and armed Dole with statistics about meager productivity growth during the Clinton years. Martin Feldstein, a Harvard University economist dubbed “Dr. Gloom” during the Reagan administration for his cautious economic forecasts, has advocated broader individual retirement accounts as a way to promote saving and investment.

Gary Becker, a Nobel laureate from the University of Chicago known for his imaginative research into labor economics, supports free-market solutions for urban ills. Judy Shelton, a scholar at Stanford’s Hoover Institute; Charles Wolf of the Rand Corp. and others have weighed in on the link between tax cuts and economic growth.

Three Republican senators--Spencer Abraham of Michigan, Robert F. Bennett of Utah and Connie Mack of Florida--have pushed for the across-the-board tax cut pending a broader overhaul of the tax system.

And much to the surprise of some campaign officials, Dole’s former political rival, publishing magnate Steve Forbes, has emerged as an influential, pro-growth voice, gaining stature in recent weeks and steering the discussion toward sweeping tax reform and bigger tax cuts.

To help prepare a bold stroke on the economy, the campaign recruited Rumsfeld in early June.

A former defense secretary who once served as President Gerald R. Ford’s chief of staff, Rumsfeld has remained discreet about the internal policy debate. But he is believed to have emerged as an influential voice for the principle of tax cuts as a way to achieve prosperity.

“The idea that the United States of America has to be satisfied with a puny 2% or 2 1/2% growth is utter nonsense,” Rumsfeld said recently.

In the quest to cut taxes, Dole is known to be sympathetic to several measures that may be included in his plan.

He is known to like the proposal by Sen. John Ashcroft (R-Mo.) to make Social Security taxes deductible as a way to ease financial burdens on working families. Similarly, he is interested in a tax credit for families with children.

Most observers expect some form of capital-gains tax cut to be included in the plan. Dole also has been a vocal advocate of easing estate taxes, a move he sees as aiding small businesses and family farms, and offering tax credits for certain charitable contributions.

Clearly, all the items start to add up, especially for a politician long dedicated to combating the federal budget deficit: An across-the-board tax cut alone could cost almost $100 billion a year. If Dole’s tax cut looks like a “budget buster,” as one critic put it, the Clinton campaign is prepared to make that point loudly.

Dole has been reminded of that danger by such allies as Domenici, his longtime Senate colleague. “You can be sure that whatever we’re doing is going to be paid for because of Domenici’s involvement and Dole’s commitment to a balanced budget,” said one GOP source.

No example illustrates the flavor of the crosscurrents inside Dole’s campaign better than the ongoing tug-of-war between those who seek the across-the-board tax cut and those who favor a rollback of the 1990 and 1993 tax increases.

At a key meeting in late July, it looked like the across-the-board camp had carried the day. The rollback, these advisors argued, would make Republicans vulnerable to charges of favoring the wealthy.

“I think the rollback idea is really a silly idea, it’s virtually a stupid idea,” said Bruce Bartlett, an economist at the conservative National Center for Policy Analysis.

But its advocates, including Forbes, like the idea that--for the 1993 tax increase, at least--a rollback would clearly isolate Clinton from Dole and other Republicans who were vehemently against the measure. By rolling back the Clinton hike, “you’ve already got the lines drawn,” one rollback advocate explained. “It doesn’t confuse the issue.”

Times staff writers Ronald Brownstein, Edwin Chen and Maria L. La Ganga contributed to this story.