Technocrat, reformer see different routes to economic rebirth.

WASHINGTON -- Bill Clinton and Jerry Brown both say they want to see a vigorous U.S. economy again. What they disagree on is how to get there.

The two Democratic candidates for President call for promoting jobs and long-term investment. And both look the huge federal budget deficit in the eye and say they can pay for new programs in health care, infrastructure, and other areas by making government leaner.

They also want to revive a domestic agenda that the Democrats say has been badly neglected since the election of Ronald Reagan in 1980. Their renewed emphasis on rebuilding America's cities and decaying infrastructure could bode well for the municipal bond market.

Finally, the two men share a certain lack of specificity on how to tighten the government's belt while launching new programs. "Give us a break, it's early in the campaign," said one Clinton adviser in a moment of candor.

Beyond that, they go their different ways.

Mr Brown says the country's whole economic and political system has to be remade before the United States can escape the economic trough it fell into during the Bush administration.

Despite years in the California political establishment, first as governor and then as a corporate lawyer and lobbyist, he voices distrust of business's political influences and says a radical revamping of taxes is needed to unleash the country's productive forces.

Mr Clinton does not endorse the Bush administration's frequent bows to the marketplace as the arbiter of economic policy, but he is far from a business basher. The Arkansas governor derides Mr. Brown's talk of a flat tax, emphasizing instead of a gradual revamping of the federal budget.

Mr. Brown charges that Washington is a well-oiled machine run by lobbyists and congressmen who distort the economy to feed greedy special interests. Mr Clinton believes government must simply be better managed to get the economy back on track.

"Brown has a predilection for silver bullet solutions, whereas Clinton is much more sophisticated about the various levers you need to control to maintain and control a growing economy," said Roger Hickey, a spokesman for the Economic Policy Institute, a liberal think tank.

"Jerry Brown is a kind of protest candidate with his talk of reforming the electoral process, taking small campaign contributions, and cleaning up Washington," Mr. Hickey continued.

"Clinton has fashioned a program that most people call moderate, while Jerry Brown is both left wing and right wing," he added. "In many ways he's more liberal than Clinton, although on tax policy with this flat tax he has taken the advice of a lot of people who are right wing. So Jerry Brown as usual tries to be in two places at once."

Clinton's Approach

The Clinton strategy extends beyond challenging an incumbent President when polls show widespread dissatisfaction with the economy.

The Arkansas governor voices his own brand of skepticism about the economic policies nurtured by Democrats over the years.

"This campaign can't be just another shallow political quarrel between Republicans and Democrats in Washington," Mr. Clinton said in a major policy speech last month at the University of Pennsylvania's Wharton School of Business. "For more than a decade, both parties have failed us there. In 1992, the very future of the American dream is at stake.

"If the Republicans' failed experiment in supply side economics didn't produce growth, create upward mobility, or prepare millions of Americans to compete in the world economy, neither will the old Democratic theory that says we can just tax and spend our way out of any problem we face," he added.

Robert Shapiro, vice president of the Economic Policy Institute and a top Clinton adviser, said, "He is generally critical of the traditional liberal view that it is the role of government to determine the allocation of economic results. We believe government should provide opportunities, not guaranteed results."

"He sees the economy is the ultimate source of prosperity," Mr. Shapiro adds. "He believes in markets and enterprise, but he also recognizes the reality that the opportunity to participate in that enterprise is often skewed."

Mr Clinton's long-term economic strategy emphasizes a collection of programs to beef up U.S. education and spur corporate investment in productive enterprises. He also seeks to bring private and government resources together in an effort to avert the traditional public role of doling out dollars.

As for education, Mr. Clinton calls for full funding of the Head Start program and national testing standards for all elementary and secondary schools. He backs a national apprentice program for high school students who do not go on to college.

He favors creating a national trust fund to provide loans for college students. Students would repay the loans with salary deductions from the jobs they get after graduation or by participating in a national service program as teachers, police officers, or some other public employment.

Mr. Clinton's urban agenda includes an ambitious program to rebuild U.S. infrastructure by accelerating the current six-year highway program financed by gasoline taxes into two years. Such an approach would create tens of thousands of new construction jobs and help lift the economy immediately, he argues.

He also says it is worth considering a public-private corporation for infrastructure spending that would be self-financed. He has not given details, but the idea would be to support viable projects that can also attract private investment.

In general, Mr. Clinton's municipal strategy favors a mix of federal and local programs aimed at revitalizing U.S. cities. For example, he calls for "a revamped" urban development action program, with cities and private sources matching funds provided by the federal government.

Mr. Clinton also backs tax-favored urban enterprise zones, an idea revived by President Bush after the Los Angeles riots. In addition, he wants incentives for private and public pension funds to invest in urban programs.

To address the federal budget, he combines calls for new programs with cuts in existing ones. He emphasizes budget savings that can be made from defense cuts deeper than those planned by the Bush administration, but he is vague on which programs and bases can be axed. Mr. Clinton's aides warn that overly steep cuts would only tack ex-military personnel onto the unemployment lines.

One proposal involves making 3% across the board cuts in federal agencies' budgets to trim administrative outlays. But there is also a promise to gradually raise to 18% from 9% the share of federal outlays devoted to infrastructure and other long-term investments.

In a similar vein, Mr. Clinton talks of the need to establish a national health-care system, but he is vague on how to fund it aside from using unspecified savings in administrative and insurance expenses and curbs on drug costs.

On tax policy, aides insist their candidate remains committed to increasing the tax rate on the wealthy and trimming rates for the middle class as a matter of fairness. When the tax-cut policy debate was hot earlier this year, Mr. Clinton called for a $350 per year reduction in taxes for middle-income families financed by higher taxes on the wealthy. In speeches, he has complained of studies showing that Americans in the top 1% grabbed a greater share of wealth during the 1980s.

Brown's approach to economic policy is founded largely on his support for a flat tax, which he argues would be fairer to individuals and easier for businesses to comply with.

Brown's Agenda

A Brown policy paper calls the current tax regime "an example of the failed and corrupt leadership of our country" and a "4,000-page travesty rife with loopholes and deductions, the bulk of which exist only for the benefit of the wealthy few."

It is the wealthy individuals and corporations who in turn fund the re-election war chests of congressmen and the political establishment in Washington, Mr Brown asserts.

The former California governor favors a 13% tax on individual income, with full deductions for mortgage interest, charitable contributions, and rent. Businesses would pay a 13% value added tax, similar to the way European firms pay a tax on the additional value they add to a product or service.

Mr Brown defends his flat tax scheme against criticism that it is overly simplistic and beneficial to the rich. For low-income individual who must pay a lot of their income in rent, a full deduction would be progressive compared to other home owners who pay a smaller share of their income for a mortgage, he says.

To ensure a flat tax is fair, Mr. Brown has also talked of allowing the standard deduction and personal exemption for families with income under $50,000, with a gradual phaseout that would take hold fully for those with incomes above $100,000. And he has also suggested restoring the earned income tax credit for low-income taxpayers and allowing them a special low rate of 12%.

Mr. Brown's aides insist a flat tax would not necessarily boost costs for consumers. Businesses must stay competitive and cannot quickly pass on any increase in taxes, they argue. Moreover, they say, a flat tax would replace Social Security and corporate income taxes that businesses must normally pass on to consumers.

Proponets say a flat tax would stimulate business investment by simplifying the tax code and cutting the cost of capital. Firms would thus be freed to step up investment and devote fewer resources to paying for attorneys and accountants to run the company books.

Even skeptics find merit in simplifying the tax code and cutting rates. In fact, tax simplification first gained notice in the 1980s, when it received support from political leaders as far apart as Sen. Bill Bradley, D-N.J., and then-President Reagan.

However, the problem of taxpayer compliance increasing business costs remains, according to James Payne, director of Lytton Research & Analysis in Sandpoint, Idaho. In an article to be published later this year by the Institute for Contemporary Studies, Mr Payne calculates that private sector compliance costs in 1990 totaled $232 billion.

The Candidates' Resources

Other programs favored by Mr. Brown are based on his experience as governor. He notes that California added 2.2 million jobs during his two terms, when it was riding a boom in high tech, defense, and real estate. And he cites his support for small business loans and the use of the state's industrial development bonds, which allowed local governments to issue debt for capital improvements.

When it comes to resources and people to bring political programs to the people, Mr. Clinton clearly comes out on top.

Besides Mr. Shapiro, top Clinton strategists include Harvard University lecturer Robert Reich and consultant Ira Magaziner, who specializes in international business. Other advisers include Derek Shearer, an economics professor at Occidental College; Roger Altman, vice chairman of the Blackstone Group; and Robert Rubin, senior partner with Goldman Sachs & Co.

Others who know Mr. Clinton or have worked with him on occasion include Paul London, an economic consultant in Washington, and Isabel Sawhill, senior economist at the Urban Institute.

Mr. Brown's economic team has proved to be less organized. Repeated calls by reporters to campaign headquarters in Santa Monica, Calif., failed to elicit names of economic advisers. Other calls were not returned, and a routine request for a biographical resume was not met.

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