Neither Bush nor Clinton is confronting the hard numbers, but at least each is proposing ... BABY STEPS

By John Greenwald

WHO WOULD DO THE BEST JOB of leading the U.S. out of its economic mess? Would it be President Bush, who advocates tax cuts to unleash what Republicans like to call the magic of the marketplace? Or Bill Clinton, who wants to use the power of Washington to rebuild America's creaky infrastructure and pour resources into job-training programs?

At its economic forum last week in New York City, TIME asked a panel of leading economists and marketplace experts to assess the Bush and Clinton programs. Such analysis is a bit like looking at clouds, since both candidates offer wispy details and imaginative arithmetic. Their vagueness is not surprising, as the federal deficit has made it almost impossible to craft a stimulative economic plan in which the numbers add up without aggravating the red ink. "They really don't have solutions because the problems are so complicated nobody can solve them, not even within the next 10 years," said the Boston Co.'s chief economist, Allen Sinai.

Yet overall, the TIME panel welcomed the campaign as the start of a long- overdue effort by political leaders to wrestle with underlying economic problems and to put forth long-term solutions. Between the two candidates, the economists judged Clinton as somewhat more aggressive in doing so. "This is a watershed year in terms of the proposals that we've seen," said Sinai. "Both candidates are at least admitting and calling attention to the problems." The public nonetheless is still struggling to weigh the merits of the proposals and find any salvation in them. "Neither candidate's program has had any effect on consumer confidence whatsoever," said Gail Fosler, chief economist of the Conference Board, which tracks consumer and business trends. The TIME forum's analysis of the major proposals:

GROWTH

Neither Bush nor Clinton would do much to jump-start the economy next year, according to panel members. "There's much ado about nothing here, from a broad economic point of view," said Sinai, noting that the candidates' tax and spending proposals tended to offset each other, leaving little room for stimulus. The Bush program, which is chockablock with spending cuts to pay for | tax reductions, "would make a weak upturn a little weaker," Sinai said, while Clinton's plans "would make a weak upturn no worse, but not really any better." In the long run, he added, "the Clinton program would give us more productivity and more potential output."

JOBS

The heart of Clinton's plan calls for an $80 billion four-year public-works project to rebuild roads and bridges and create a national fiber-optic information network to enhance learning and to link homes, schools and offices. Clinton also wants a national education and retraining program, financed by a 1.5% payroll tax, for all employees from the mail room to the executive suite. Bush rejects the very idea of public-works projects but has belatedly called for a $10 billion four-year worker-retraining program.

By and large, members of the TIME panel endorsed Clinton's infrastructure plan. "We could start to repair roads and put a lot of people to work without any increase in wage costs because there are so many unemployed construction workers," said Donald Ratajczak, director of the economic forecasting center at Georgia State University. Fosler, however, said the plan would "dress the economy up rather than fix it."

The panel generally liked Clinton's education and training proposals as well. But Dan Lacey, publisher of the newsletter Workplace Trends, warned that unions could frustrate the Democrat's plan for a national apprenticeship program by limiting entry to such skilled occupations as plumbing and carpentry. "If you don't believe it," he said, "ask a unionized plumber whether he thinks it's a good idea to increase the number of plumbers in America tenfold." Lacey added that neither party had addressed burgeoning payroll costs, ranging from health insurance to Social Security, which will discourage firms from hiring employees even when the economy picks up steam.

TAXES

Bush would reduce personal income tax rates 1% across the board, saving the average family about $5 a week, which he would offset with mostly unspecified spending cuts. And he continues to call for chopping the top capital-gains rate from 28% to 15.4%. Clinton would juggle the tax code to redistribute income, cutting taxes by about $11.50 a week for a middle-class family of four, raising the top rate from 31% to 36% on incomes above $200,000 and slapping a surcharge on earnings above $1 million. Clinton would also lower the capital-gains rate to 14% for long-term investments in new companies and crack down on alleged tax avoidance by foreign firms with U.S. operations.

TIME's panel generally saw little to cheer in either Bush's or Clinton's income tax proposals. The economists said the Robin Hood-like Clinton plan would tend to reduce saving by the wealthy without providing much of a boost to the embattled middle class. Bush's across-the-board tax reduction, said Ratajczak, would provide far less stimulus today than in 1980, when the wealthy paid a top rate of 50%. Similarly, a cut in the capital-gains tax would have less punch now, when inflation is low, than it would in periods when inflation is driving up asset values, Ratajczak said. Moreover, the economists noted, the national obsession with income tax cuts seems to be fading. Said David Hale, chief economist for Kemper Financial Services: "The tax-cut issue is not important as it was, because the public focus has shifted to the holes in our system."

SPENDING

To pay for tax cuts, Bush would save $293 billion over five years by placing a cap on the runaway growth of such entitlement programs as Medicare, food stamps and farm subsidies while exempting the largest and most politically explosive item, Social Security. He also would give taxpayers the option of checking off 10% of their taxes to reduce the federal debt, thereby triggering spending cuts, most of them unspecified so far, that could total another $250 billion. The TIME economists saw Bush's cuts as political gimmicks with little chance of enactment. "You can't cut in all the places that his program says and have anything left of government," Sinai asserted.

To help finance his infrastructure buildup and other spending, Clinton would eliminate 100,000 federal jobs and pare defense spending by $40 billion more than Bush has called for over four years. Many of Clinton's spending cuts, including more than $17 billion to be saved by a management overhaul of the Resolution Trust Corporation, which is handling the savings and loan cleanup, seem overly dreamy, according to Fosler. Concurred Hale: "The defense cuts are not in my opinion obtainable" in view of regional conflicts in Eastern Europe and other parts of the world.

THE FEDERAL DEFICIT

While the budgetary impact of the candidates' proposals rests on a host of iffy assumptions, Sinai calculates that the Bush and Clinton plans would both shrink the federal deficit. Bush's plan might reduce the shortfall (currently about $350 billion annually) by a total of nearly $245 billion over five years, while Clinton's would shave some $80 billion over four years. Yet the panelists argued that deficit cutting, which tends to slow economic growth, should be put off until the economy is stronger. "I think the public is right to worry about the deficit but wrong to worry about it this year," said Ratajczak. "We should put it on a back burner, but only for the short run."

HEALTH CARE

Bush and Clinton have been maddeningly vague about their health-care prescriptions, particularly with regard to how they would finance them. Bush would provide tax credits for the poor to enable them to pay as much as $3,750 for basic health insurance for a family; but he has not said how he would recoup the lost tax revenues. Clinton would give companies and employees the option of buying health insurance from a government-sponsored program. But, like Bush, he has not discussed the crucial issue of funding. Hale warned that a payroll tax to finance health care, which Clinton's camp has considered, would destroy jobs at small companies.

TRADE

Bush strongly endorses the North American Free Trade Agreement, which would link the U.S., Mexico and Canada into a single trade bloc. Clinton has waffled on the pact, calling for more provisions to protect the environment and retrain U.S. workers who would lose their jobs if employers moved to Mexico. TIME's panelists generally supported the pact, contending that more jobs would be gained through expanded export opportunities than would be lost through factory relocations. Lacey dissented, warning that the pact would turn Mexico into "a low-wage industrial ghetto" that would drain off U.S. jobs.

None of these programs would have any impact unless the next President could get them through Congress. Panel members agreed that Clinton would have an easier time of it, since both houses seem likely to remain in Democratic hands. But whatever program does emerge from the legislature next year will bear a marked congressional imprint. "My own very strong feeling is that a stalemate is not a workable outcome," Fosler said, regardless of who is elected President. Both candidates recognize that voters have become impatient with government gridlock, she noted. "I think there is a sense that nobody is in control."

TIME's panelists said the next President should move swiftly in his first ) 100 days to fill that void. Sinai and Ratajczak stressed the need for programs to put people to work and spur long-term growth. Hale called for stimulus at first and a program to reduce the deficit. Fosler urged a review of all federal policies that affect business costs, with a view to bringing them down. But no matter what ideas they advocated, the economists agreed that the time for clear and concerted action has arrived.