A Deficit on the Trail

By WALTER SHAPIRO

The Democratic candidate for President during the dark days of 1932 had few firm economic ideas. Buffeted by conflicting advice, he lamely tried to split the difference. His speeches were a study in contradiction, combining hints of bold spending programs with cries for a balanced budget. If Franklin Roosevelt's approach was inconsistent, even intellectually dishonest, it helped produce a landslide victory over Herbert Hoover and ultimately the New Deal.

That precedent is worth savoring as America runs short of borrowed time and borrowed dollars. Indeed, the hope that one of the 1988 contenders is a hidden F.D.R. may be the only comfort amid the dreary landscape of their economic pronouncements and records. None of the top-tier candidates in either party can claim to be talking sense to the American people. A few, such as Bob Dole and Michael Dukakis, can point to past accomplishments. But, for the most part, economic leadership is inversely proportional to standing in the polls. Bruce Babbitt in particular has advanced a laudable program on the deficit; most surveys put him last among the Democrats.

It is hard to rate the candidates solely on the basis of particular policy stances. None of them can predict the precise nature of the mess that he would inherit in 1989. Nor is there any one set of clear answers on what to do about the hideously complex results of years of economic blindness. To judge the candidates' potential as economic leaders, it is necessary to examine their mastery of financial complexities, their candor in facing economic reality and their credibility in light of their record.

By these standards most candidates in both parties are running a deficit. On the Republican side, it starts at the top with George Bush. There are many reasons he is a serious candidate, but economic leadership is not among them. Even as President Reagan is dragged toward fiscal flexibility, his Vice President is skittering away from the potential pitfalls of such flexibility by vowing that "I am not going to raise your taxes -- period."

Bush's refusal to consider new taxes is accompanied by support for a balanced-budget amendment, proposals for increased federal aid to education, and a refusal to specify where deep cuts could be made. Taken together, these positions are incoherent. Bush's only independent proposal is a plan to cut the top capital-gain levy from 28% to 15%. Supposedly that would eventually . spur investments, but it would probably reduce Government revenues initially, according to the Treasury Department. More broadly, Bush has not answered the most basic questions about his own economic philosophy. Until he became an acolyte of "voodoo economics," as he called Ronald Reagan's program in 1980, he was a standard deficits-do-matter conservative. What is he now?

Among the Republicans, Dole boasts the strongest record of economic leadership. He helped shape the 1982 tax increase, a measure that stripped away the worst excesses of Reaganomics. He fought courageously for a sensible deficit-reduction package in 1985 before being abruptly undercut by the Reagan Administration. But his budget concerns are not always so high-minded: the interests of his Kansas constituents came first when he led the fight for the 1985 farm bill, an ill-conceived subsidy plan currently costing more than $29 billion a year. Dole's principal weakness is the flip side of his pragmatism: his reluctance to articulate a philosophy or grapple with any ideas that are larger than what is necessary for the next congressional compromise.

Jack Kemp, alone among presidential candidates, suffers from the opposite malady: too much abstract philosophy. His early supply-side zeal produced a global world view that included everything from a return to a modified gold standard to maverick notions of monetary policy. Kemp's earnest fascination with economic ideas is praiseworthy, and he displays considerable knowledge of the global side of the equation. But his ideological rigidity often leads to absurd results, such as his insistence, until recently, that the deficits are no big deal. Perhaps the low point for a serious contender came in last week's debate when Kemp declared his flat opposition to any budget accord with House Speaker Jim Wright. That was little more than mindless pandering to conservative firebrands, since the political arithmetic in Congress adds up to no Wright, no deal.

In his insistence on free-market purity, Pete du Pont is another economic ideologue. He displays the courage that only an underdog seems able to muster in calling for the phasing out of farm subsidies. But he has stubbornly avoided discussing any broad economic agenda, even after the market crash, preferring instead to turn every question into a chance to push such peripheral proposals as drug testing in schools. Alexander Haig, with his outspoken denunciations of the Reagan deficits and his sophisticated understanding of international economics, is the last link to the tradition of boardroom conservatism that was once the bulwark of the Republican Party. Pat Robertson's economic views, such as they are, consist mostly of warmed-over Reaganism that barely acknowledges the current economic peril.

The rhetorical excesses of Jesse Jackson aside, most of the Democratic contenders are guilty of timidity in the face of market turmoil. Their vague calls for leadership and ritual denunciations of the Reagan deficits are of scant value in these parlous times. The Democrats are awash in position papers, but these narrow proposals fail to add up to a macroeconomic vision larger than the sum of its parts.

For all his Gatling-gun rhetoric about the Massachusetts Miracle, Dukakis does have more firsthand experience in managing an economy than any other candidate in either party. Required by his state constitution to produce a balanced budget, Dukakis has confronted the agonizing trade-offs that such a document requires. The picture Dukakis paints is impressive, until one also weighs his refusal to talk plausibly about the federal deficit. After paying lip service to the possibility of a tax hike, he quickly slides into insisting that up to $110 billion a year can be raised through aggressive tax enforcement. Tax economists contend this number is wildly exaggerated, but Dukakis uses it as a shield to avoid harder questions about budget and tax policy.

The report card is equally mixed on Richard Gephardt, a dedicated detail man who has spent the past two years talking bread and butter, doom or boom. His legislative credits are impressive: early advocacy of tax reform, hard work on the House Budget Committee, a key negotiator of the original Gramm-Rudman compromise. The downside is his authorship of the proposed Gephardt Amendment, which would allow a President to impose tariffs or other barriers against nations that run a persistent trade surplus with the U.S. Gephardt, backed by labor unions, denies that the measure is protectionist and argues it would simply give U.S. trade negotiators leverage to open foreign markets.

But the panic on Wall Street brings back memories of the disastrous Smoot- Hawley tariff, and many economists say Gephardt's amendment, if adopted, would spark a new trade war at a bad time. Reconciling Paul Simon's positions on the economy is like squaring the circle: he describes himself as a "pay- as-you- ) go Democrat," supports a balanced-budget amendment, and believes that a large-scale public-service jobs program could be paid for by cuts in the defense budget. His sincerity seems stronger than his arithmetic. Albert Gore has proved himself an innovative legislator in arms control and a number of esoteric fields, but not economics. His plan to restore economic confidence is built around such will-o'-the-wisp notions as securing greater cooperation from Japan and Europe. Jesse Jackson craves being taken seriously, but also wants to pay for ambitious social programs by slicing $75 billion (25%) out of the defense budget.

For all his political problems, Bruce Babbitt deserves plaudits for crafting an economic program that would equitably reduce the deficit without gutting social programs or defense -- and without resorting to flimflam and gimmickry. His secret: testing the American voters' tolerance for financial common sense and sacrifice. The centerpiece is the plausible notion that Government benefits should flow only to those who show financial need. To trim the deficit, he advocates taxing Social Security benefits and levying a $40 billion consumption tax, which would be reduced in case of a recession.

Of course, Babbitt is also a plodding speaker, an indifferent television performer, an ineffective fund raiser and, unless the auguries are all wrong, he will not win the Democratic nomination. Perhaps there is a moral in that somewhere, though not a very happy one.

With reporting by Michael Riley with Dukakis and Alessandra Stanley/Washington