Long-range fate of economy starting to worry Americans Public's concerns extend beyond current recession.

February 26, 1992|By John Fairhall | John Fairhall,Washington Bureau

WASHINGTON -- Worried about their jobs and their children's future, Americans want to know what the presidential candidates intend to do about the sputtering economy.

For many of the voters in next Tuesday's Maryland primary, this is the only issue. But the public's concerns don't end with the current recession.

One of the questions driving the debate in Campaign '92 is whether the economy is in a long-term decline.

The candidates' answers generally break along party lines: Democrats insist the economy needs a government-led overhaul, while the Republicans propose less radical measures and less government involvement.

In another party-line split, the Democratic candidates' economic plans emphasize federal investment in education, training, research and development, while the Republicans' plans do not.

Surprisingly, some of the Democratic candidates embrace a long-held Republican goal of cutting capital gains taxes. But these Democrats want to balance that by increasing income taxes on the wealthy, a position opposed by President Bush and his chief challenger, Patrick J. Buchanan.

The issue of middle-class income tax cuts also divides the candidates. Arkansas Gov. Bill Clinton, Nebraska Sen. Bob Kerrey and Mr. Buchanan support such cuts, which are disdained by the president and Democrats Tom Harkin and Paul E. Tsongas.

Of all the candidates, former California Gov. Edmund G. "Jerry" Brown Jr. can claim the most original proposal: replacing the current tax system with a flat tax of 13 percent on all income.

Among the Democrats, Mr. Tsongas is the leading doomsayer. He says "America is facing great economic peril" and bases his campaign on a program to expand manufacturing.

Other Democrats are almost as gloomy. Mr. Harkin, a senator from Iowa, warns "America is in economic decline." Mr. Kerrey says "fundamental change" is needed. Mr. Clinton says, "Our country is trouble. We're falling behind economically. . . ."

Mr. Brown focuses less on the economy than on what he terms a corrupt political system. But he, too, favors major change, starting with the tax system.

President Bush is decidedly more upbeat. In his State of the Union address last month, he said "we need a longer-term plan to keep combustion going and to guarantee our place in the world economy."

Mr. Buchanan rails at "growth in regulations, growth in government spending and growth in taxes" under President Bush, but he calls for nothing more drastic than a return to President Reagan's early tax and budget policies.

On trade issues, Mr. Buchanan and Mr. Harkin stand out in their opposition to free trade agreements with Mexico and in their rhetoric with regard to Japan.

Although Mr. Tsongas criticizes "Japan bashing" in speeches, the written proposals of the former Massachusetts senator put him closer to Mr. Harkin.

Mr. Tsongas argues for economic loyalty, urging Americans to buy American when domestic products equal or surpass foreign ones in quality. He also says he'd insist on open markets $H overseas and prevent dumping of foreign products.

Mr. Tsongas' overall economic plan won him critical acclaim during his New Hampshire campaign and helped propel him to victory there. Republicans conferred their highest praise, saying sounded like one of them on economic issues.

But Mr. Tsongas has come under more fire, from other Democratic candidates who criticize his plan for being too Republican, and from economists. Herbert Stein, a former GOP economic adviser, criticized him in the Wall Street Journal Monday for being too pessimistic.

"Mr. Tsongas' inventory of the state of the American economy does not include the fact that output per capita in the U.S. is 25 percent higher than in Japan and one-third higher than in Germany. Neither does he recognize that real per-capita income after tax in the U.S. rose by 18 percent between 1980 and 1990," Mr. Stein wrote.

Mr. Stein also asserts that Mr. Tsongas lacks a coherent plan for reducing the deficit -- a criticism that many economists aim at all the candidates.

Isabel Sawhill, economist and senior fellow at the Urban Institute in Washington, said "none of the candidates has been particularly courageous about the deficit. They're all just sort of conveniently ignoring it as far as I can tell."

The deficit "is sucking what little bit of savings we have out of the system and leaving very little money for private investment that we need to modernize our factories and make our economy competitive again," she said.

Ms. Sawhill complained that tax cuts for the middle class -- a core part of the economic programs of Mr. Clinton and Mr. Kerrey -- do more harm than good by adding to the deficit.

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