WHERE THE CANDIDATES STAND ON THE ECONOMY. The next president will have to sustain economic growth while shrinking the budget deficit. What's that mean for taxes? Second in a series on the key issues of '88. DUKAKIS
MICHAEL DUKAKIS'S official car as Massachusetts governor is a Chevrolet Celebrity made in Framingham, Mass. As passengers who have squeezed into the compact have found out, Mr. Dukakis does not believe in spending money on limousines. ``He is quite prudent,'' says Barry Stein, a Cambridge, Mass., business consultant who knows the governor. ``Spending money for show is something he is judicious about,'' Mr. Stein quips.
This doesn't mean that under Dukakis, the presidential limousine would get turned in for a smaller model. But Rob Shapiro, a domestic adviser to Mr. Dukakis, says of the candidate, ``His greatest influence is his own experience running the state of Massachusetts.''
Robert Reischauer, a fellow at the Brookings Institution in Washington, refers to Dukakis as a pragmatist. ``He's not the captive of any economic doctrine,'' says Mr. Reischauer, a Dukakis adviser.
From his experience running the Bay State, Dukakis ``takes the classic approach to economic development,'' Mr. Shapiro says. This sometimes entails government-business partnerships, and in some cases direct government involvement.
The three examples of Dukakis's economic thinking cited most frequently by his advisers are his program to train welfare recipients for jobs, the research and development centers Dukakis established in Massachusetts to help move economic ``laboratory'' ideas to the marketplace, and a project to help mature industries - particularly the textile industry - modernize. To Shapiro, these programs show that ``Dukakis really is a problem solver.''
Reflecting his Boston background, Dukakis's list of advisers is filled with Harvard PhDs. He gets advice from Lawrence Summers, Robert Reich, and Rosabeth Moss Kanter.
Mimicking George Bush, Mr. Summers says, ``Read my lips - no new loopholes.''
Summers also says new taxes would be only a last resort. And if taxes are imposed, Dukakis rules out a consumption tax such as a value-added tax. He derides Mr. Bush's proposal to reduce the capital-gains tax as a giveaway for the rich.
Instead, Dukakis plans to lower the deficit by, in part, stepping up tax-collection efforts. Although many experts disagree with him, Dukakis believes that stiffer enforcement by the Internal Revenue Service would bring in a significant portion of $110 billion in taxes owed the government but not collected each year. The tougher IRS enforcement originates from his experience in Massachusetts, where a crackdown, followed by a tax amnesty, netted the state billions in revenues.
Like Bush, Dukakis would try to bring the budget deficit down gradually. Some of his proposed cuts would come in the defense area, particularly by elimination of much of the funding for the Strategic Defense Initiative. Other cuts would come in health care and welfare.
Dukakis would form a ``Fund to Rebuild America,'' combining federal grants and private money. Initially capitalized with $500 million, it would be targeted to needy areas.
The governor calls social security a ``sacred contract,'' and indicates he would never make cuts in it. Although Dukakis has yet to announce a position on whether he would remove the social security fund in calculating the budget deficit, Summers says such a move should be done in a gradual manner.
Dukakis disagrees with his running mate, Texas Sen. Lloyd Bentsen, in opposing an oil-import fee. Such a fee would amount to ``a drain-America-first policy,'' Summers says. But Dukakis would use US production to fill the Strategic Petroleum Reserve.