COLUMN ONE : Competing Plans for Prosperity : With the economy the main election issue, presidential candidates are mapping out divergent routes to fiscal health, and they envision different roles for the government.

David Fish remembers what it was like when he was younger, when his father worked on the line at Chrysler, and every night rolled up the driveway to their home in the suburbs of Detroit behind the wheel of a 1971 Chrysler New Yorker, a 350-horsepower monument to the majesty of the American auto industry.

“When I was a kid, I thought we were the richest people in the world,” Fish said one day last spring, as he sat over a slice of pizza in a Roseville, Mich., shopping mall. “My father’s goal was to have enough money to become a Republican.”

Today Fish, a beefy, open man in his 20s, isn’t sure what went wrong. He went to college, which his father never did, and earned his degree in history. Now he’s working nights, as a nurse’s assistant in a mental health hospital, and making only “enough to get by.”

“It’s just not like I thought it would be,” he said less in anger than confusion. “In my dad’s day, you could go out and start at $25,000, work your way up, raise a family. Now business has you by the cojones. “

The vast expanse between the economy in which David Fish is struggling and the one where his father prospered is the terrain on which the 1992 presidential campaign is being fought.

Today the median family income adjusted for inflation is slightly lower than it was in 1973--a period of sustained income stagnation unmatched in this century except during the Depression, economic historians say.

The lingering recession has forced into focus anxieties rooted in those numbers about living standards, jobs, upward mobility and America’s ability to compete in the global economy. “There’s no question voter concern about the economy transcends the immediate impact of the recession,” says Democratic pollster Mark Mellman.

In a recent Gallup Poll, nearly 80% of those surveyed said the United States is in an economic decline. Over two-thirds said they were worried that young Americans would not be able to live as well as their parents.

That unease is dictating the agenda for the men seeking the White House. In this first post-Cold War election, President Bush, Arkansas Gov. Bill Clinton and independent Ross Perot are struggling above all to persuade voters they have the right battle plan to restore America’s strength in the global economic competition and resume the growth in living standards that voters like Fish once assumed was their birthright.

On some individual issues, such as job training or access to college education, Clinton and Bush offer similar ideas. But the plans the two men have presented diverge at their cores--in their assessment of the nation’s economic problem, and government’s role in responding to it. Clinton says the United States is slipping behind its foreign competitors and must undertake fundamental reforms to reverse the slide. He pins his hopes for economic renewal on closer partnership between Washington and business, and more spending on what he calls the building blocks of productivity--education, training, research, infrastructure. In all, Clinton wants to carve out for government an aggressive role in promoting prosperity reminiscent of Germany or Japan.

Bush insists the nation’s problems are not so bleak. He says Clinton is “absolutely wrong” to maintain the U.S. economy is in economic decline, and condemns his opponent’s activist agenda as “social engineering.” Bush says the key to long-term prosperity is limiting government, removing regulatory shackles on business and increasing exports by establishing vast new free trade zones, like the one the President will sign today with leaders from Canada and Mexico in San Antonio.

Open Trade Hazards

Though he hasn’t fleshed out his views in as much detail, Perot is closer to Clinton than Bush in both his assessment of America’s position and his response. If anything, Perot is more skeptical of open trade and more supportive of direct government cooperation with business than Clinton.

Perhaps more than any presidential candidate before him, Clinton has centered his campaign on addressing the squeeze on American living standards. His speeches are studded with comparisons to Germany and Japan, and he rarely leaves a podium without warning that American workers and firms are losing ground.

His response reflects the new consensus in liberal thinking exemplified in writings by such analysts as Robert Reich and Ira Magaziner, two of his closest advisers.

In an increasingly globalized economy, Clinton argues, low-skill workers in industrialized countries face inexorable downward pressure on their incomes because they are competing with men and women in the Third World who will work for a fraction of their hourly wage.

Implicitly, Clinton acknowledges that nothing can be done to protect those highly-paid and relatively low-skill manufacturing jobs--to restore the world in which David Fish’s father thrived. “No person running for office can reasonably promise to make the American economy the way it used to be,” he said recently.

Protectionism isn’t the answer because too much of the U.S. economy now depends on trade, Clinton maintains. (With qualifications, Clinton endorsed the Mexican free trade agreement last Sunday.) Instead, he says, the only way to reinvigorate the domestic economy is to move more workers into high-value manufacturing and services by increasing the incentives for private investment and undertaking dramatic efforts to increase Americans’ education and skills.

That philosophy has launched a veritable armada of specific policy proposals from Clinton, in four basic areas:

* To increase skills, Clinton would create a new federal trust fund that would allow all young people to borrow money for college, launch a national apprenticeship program for young people not bound for college and require all employers to spend 1.5% of their payroll training their work force, or pay an equivalent sum into a federal program to provide such training.

* To encourage private investment, Clinton would make permanent an existing tax credit for research and development, offer an investment tax credit and cut capital gains taxes 50% for entrepreneurs who start new businesses and hold onto them for at least five years.

* To increase public investment, Clinton would shift federal dollars from military to civilian research and development and establish a Rebuild America Fund that would spend $20 billion annually to rebuild roads and bridges, develop new environmental technologies and construct advanced computer and communications networks.

* To control health care costs, which he says burden American companies more heavily than their competitors, Clinton would require all employers to insure their workers but impose stringent price controls through a new national health care board.

Looking to sharpen the ideological divide, Bush contends that Clinton’s agenda amounts to control of American society by “a new economic elite of the so-called best and brightest.”

On the campaign trail, the President emphasizes measures to roll back government. His Agenda for American Renewal cites as the fundamentals for economic growth: “lower tax rates, limits on government spending, greater competition, less economic regulation, sound money, and more open trade . . . “

In the past two months, Bush has promised an across-the-board tax cut, additional tax reductions for small business and a mechanism that would allow Americans to divert up to 10% of their taxes from government operation toward deficit reduction. All this follows his long-standing proposal to cut capital gains taxes almost in half.

Education Reform

Bush has also stressed the need to reform the education system by providing parents with vouchers they could use to help send their children to private schools and thus use the force of competition as a bludgeon for change in the public schools. And he has actively promoted measures to limit lawsuits against American business--particularly product liability cases from consumers claiming they were injured by faulty products--that he says inhibit American competitiveness. He has also promised a one-year moratorium on most federal regulation.

Most sweepingly, he has raised the possibility of boosting exports by extending the free trade zone he negotiated with Mexico and Canada through Central and South America, and eventually into parts of Asia and Eastern Europe.

All of these initiatives are designed to limit government influence over the economy. That’s where Bush wants to draw his line with Clinton: “The most fundamental disagreement between us,” the President says, “(is) whether the driving engine of growth is government interventionism or entrepreneurial capitalism.”

But at the same time, the President has emulated several Clinton proposals that expand government. He has recently offered a new job training voucher, a new program to help all students obtain access to funding for college and has also promised to extend an apprenticeship program, now being tested in six states, to all 50.

Even on the use of government to direct technological investment--the “industrial policy” which he constantly derides--Bush has sent mixed signals.

His Administration has resisted funding increases for several Democratic initiatives, such as a Commerce Department program that works with business to develop advanced technologies. But on the campaign trail Bush trumpets his support for greater cooperation between federal labs and business. He has also backed substantial increases in federal spending on research in high performance computing, biotechnology and advanced manufacturing research, as well as the creation of a government industry consortium to develop advanced electric batteries. By almost any accepted definition, experts say many of those activities qualify as industrial policy.

“I think there has been a real tug-of-war in the Administration between those who have tried to push the President toward some kind of rational technology policy, and those who have said don’t touch this with a 10-foot pole, and the result has been a muddle,” said Sen. Jeff Bingaman (D-N.M.), a leading Democratic voice on technology policy.

Investment Capital

Perot actually takes a more traditionally liberal line on many of these questions than Clinton. He has repeatedly criticized the proposed Mexican Free Trade Agreement as a threat to U.S. jobs and called for the United States to toughen its stand in trade negotiations against Japan and other competitors. And he has urged a more extensive industrial policy than even Clinton, calling on Washington to “target and stimulate new industries.”

In his campaign manifesto, United We Stand, Perot writes: “To keep . . . our nation competitive, new industries sometimes need to be fertilized and incubated.” Exactly what Perot means by such language isn’t clear; but at various points in his career, he has called for the United States to develop its own version of the Japanese government agency--MITI--that works intimately with business to plot strategy and develop new technologies.

Beyond his interest in industrial policy, Perot places most of his chips for economic revival on increasing the availability of capital for investment. In contrast to Clinton’s plan, his agenda offers little on improving education or worker skills. He focuses instead on measures to increase national saving and investment; but he also proposes a series of tax incentives to funnel more investment toward start-up companies.

On one point, there is virtually bipartisan agreement about these plans. Both Clinton and Bush come under fire for failing to confront the federal budget deficit aggressively enough. Perot has cited that failure as a principal reason he returned to the race. He has offered an ambitious plan to eliminate the deficit through across-the-board spending cuts, a 50-cent-per-gallon hike in the gasoline tax over five years, a small rise in income tax rates and increased taxes on Social Security benefits.

Not only political but economic dangers loom: Some believe that either Clinton or Bush face the prospect of a revolt in the financial markets next year if they don’t revise their plans to more boldly address the deficit.

“The financial markets will bring them to their knees, either by causing long-term interest rates to rise or causing a crisis in the dollar,” predicts investment banker Jeffrey E. Garten, author of “A Cold Peace,” a recent book on relations between America, Germany and Japan.

Analysts assess Perot’s agenda largely by how much importance they place on rapidly reducing the deficit. Those who consider deficit-reduction the cornerstone of long-term economic strategy worry that such substantial tax hikes and spending cuts would further depress the economy for the next several years.

Opinions about the Bush and Clinton plans divide largely along entrenched ideological lines.

Liberals say Bush’s promises to revive the economy by again cutting taxes ignores the evidence of the past 12 years. Others question his commitment to expanding federal efforts on job training or access to college, noting he has paid little attention to such concerns before the campaign. And some worry that his sweeping proposals to ring the globe with new free trade zones would make it easier for U.S. manufacturers to shift jobs abroad and greatly intensify the downward pressure on wages for low-skill workers at home.

“He is just going to pit the bottom third of our workers against 60-cents and 80-cents-an-hour workers abroad,” says Pat Choate, an author and economic consultant based in Washington. “If you get these agreements you are permanently capping the wages of that bottom third of our workers at the minimum wage.”

Conservatives, meanwhile, are skeptical that Clinton’s new spending in areas such as education will do much good unless coupled with more system-wide reforms, such as private school vouchers, which he opposes. And many question whether his infrastructure investments will be guided by economic necessity or pork barrel priorities on Capitol Hill. Many business lobbyists say Clinton’s tax, health care and environmental proposals will inhibit their ability to compete.

But there are signs this year that these familiar ideological divides are breaking down. For a Democrat, Clinton has secured unusually broad support from the business community, particularly among high-technology companies.

Bingaman says such gestures are a sign that even many business leaders--frustrated by competing with German and Japanese companies working closely with their governments--are ready for Washington to play a more assertive role. John Young, the chief executive officer of Hewlett- Packard Co. and a Republican who chaired a commission on competitiveness for President Ronald Reagan, said as much when he endorsed Clinton in September: “To be successful as a nation, we have to forge a private sector-public sector partnership.”

Parting of Ways

But some economists note that it remains a leap of faith to assume that such an interventionist government will strengthen America’s long-term competitive position more than the largely laissez faire policies of the Reagan and Bush era.

It is along this border that Bush and Clinton fundamentally part ways. At the bottom line, Clinton believes purposeful government action can make things better; Bush’s instinct is that government tends to gum up whatever it attempts, so it is best to attempt little.

“Bush says the U.S. is going to rebound on its own and the right kind of public policy is a minimalist one,” says Garten. “Clinton is saying we’ve got to fundamentally restructure our systems.” On that spectrum, Perot comes out nearer to Clinton--though it’s still unclear whether he can regain enough credibility to exert much influence on the economic debate.

While that remains an open question, Clinton and Bush agree on at least one point: When voters go to the polls in November, they will be choosing between two very different visions of the road to lasting prosperity, and equally divergent philosophies of government’s role in building it.

Increasing Competitiveness: The Candidates’ Proposals

Here’s a snapshot of the proposals President Bush, Bill Clinton and Ross Perot have offered to increase U.S. economic competitiveness.

INDUSTRIAL POLICY

Bush: Has increased funding for advanced technological research, but he generally resists calls for greater business-government joint planning as misguided effort to pick “winners and losers” in the economy.

Clinton: Proposes creating a federal agency to fund research into cutting-edge domestic technologies, establishing a national network of 170 manufacturing centers to help small companies adopt advanced production techniques, and launching a $20-billion annual investment in rebuilding roads and bridges and constructing advanced transportation and communications networks.

Perot: Calls for government to work closely with business to “target and stimulate new industries, applications and inventions.”

*

TRADE

Bush: Negotiated North American Free Trade Agreement with Mexico and Canada; proposes to extend free trade zones through Central and South America, and into portions of Asia and Eastern Europe.

Clinton: After weeks of hesitation endorsed free trade agreement last Sunday but said he would not sign the treaty unless the U.S. reached agreement on additional measures to protect American jobs, and ensure protection of the environment and worker rights in Mexico; promises to toughen stand against Japan but warns against protectionism.

Perot: Criticizes proposed free-trade agreement with Mexico as a potential threat to U.S. jobs and promises a much tougher posture toward Japan in trade negotiations.

*

ACCESS TO CAPITAL

Bush: Has strongly pushed for across-the-board capital gains tax; recently proposed additional tax cut for entrepreneurs starting new companies similar to long-standing Clinton proposal. Would make permanent existing tax credit for research and development and offer additional tax breaks for new investments in machinery.

Clinton: Would cut capital gains only for entrepeneurs starting new companies; supports tax credit for new business investment, and would also make permanent existing research and development credit.

Perot: Would eliminate capital gains taxes on investments in start-up companies; reduce capital gains for investments in other companies held more than five years; explore other means of increasing savings, such as tax-free personal savings accounts. Also backs investment and research tax credits.

*

EDUCATION AND SKILLS

Bush: Builds his educational reform agenda around vouchers that would help parents send their children to private schools, would establish a fund from which all Americans could borrow up to $25,000 for college and recently proposed to create job training vouchers worth up to $3,000 for all dislocated workers and expand apprenticeship programs for young people not bound for college.

Clinton: Would fully fund Head Start program and create a national apprenticeship program for non-college bound students; would create a trust fund from which all Americans could borrow money for college, paying back the debt either as a percentage of income over time or through two years of national service; would require all companies to spend at least 1.5% of their payroll on worker training or contribute an equivalent sum into a national program to provide such training.

Perot: Offers no proposals to increase access to higher education or job training in his campaign manifesto, but existing programs would face 15% reductions, as part of his proposed across-the-board cuts in all discretionary federal spending.