The Tax-Slashing Campaign

Taxes, taxes, taxes! Ever since the resounding triumph of California's Proposition 13 last June, the nation has been shuddering with a kind of tax-cutting fever. Even at a time of prosperity, with the economy humming along at a trillion-dollar rate, poll after poll shows Americans in a mood of irritation and resentment about the amount of money they have to spend on the public needs. Tax-cutting measures of all sorts have sprouted in state legislatures and on local ballots. And as Americans prepare to go to the polls next month in the quadrennial confusion of off-year elections, taxes and the related problems of inflation and Big Government form just about the only national issue.

In Washington last week, President Carter and Congress confronted each other in a complex clash over the federal income tax. Carter had proposed a slash of $17 billion, combined with a number of "reforms" aimed largely at business and middle-class taxpayers. The House rejected most of the reforms, and then the Sen ate went on a spree of special tax cutting for special groups. It voted to boost the capital gains tax exemption from 50% to 60%, to grant deductions for parents with children in private schools and colleges, and to preserve the legendary three-martini lunch. Carter denounced the Senate votes as "inflationary" and "unfair." He threatened to veto the bill unless the House and Senate worked out a compromise that was more to his liking.

These concerns have been reverberating throughout the nation in the closing weeks of the 1978 election campaign. As always, the contest is a patchwork of local conflicts. All 435 House seats are at stake, along with 35 Senate seats, 36 governorships and most state and local offices. Nobody expects any radical changes in party strengths: the Democrats will probably, retain their 61-vote margin in the Senate and lose only half a dozen of their 287 seats in the House, a bleak prospect for the Republicans in an off-year election. In much of the country, indeed, many key issues are purely regional -- motorboat restrictions in Minnesota's Boundary Waters canoe area, a city charter revision in Philadelphia, a referendum on homosexual teachers in California --yet the money question is not only the dominant national issue but also the principal local one. And although the national temper is by no means so angry as is sometimes reported, it seems to be skeptical, self-centered and mistrustful of attempts to direct it.

Inside the Foley Cultural Center in Vallejo, Calif., the mood was festive even though the star attraction, Governor Jerry Brown, was late arriving. The ebullient Democrats of Solano County were celebrating, and the Governor seemed almost incidental. When Brown finally showed up, he was affectionately surrounded, cheered and heckled. If he has made an art of not taking himself too seriously, the audience had much the same attitude. Introducing the Governor, State Assemblyman Mike Gage asked, "Is there anyone in the audience who Jerry Brown has not irritated over the last four years?" All roared in agreement that they had been sufficiently irritated. Off to one side, a group began to chant, "Rome in '78! Rome in '78!" as though Brown might be a dark horse for the papacy. "You know he has an advanceman in Rome?" remarked a supporter.

The night was an illustration of the current politics of irreverence. Though Brown stands to win re-election by as many as a million votes, enough to launch his shot at the White House in 1980, he is tolerated rather than adulated in today's political climate. The public, in fact, seems to be suspicious of politicians of all kinds. "This is the strangest political mood I have ever encountered," says Mike Bakalis, the hard-driving Democratic candidate who faces an uphill battle for the Illinois governorship against the popular incumbent, Jim Thompson. "I've never seen an electorate more apathetic, more cynical and more unbelieving than this one." The same lament is made by the ever cheerful Republican Senator from Tennessee, Howard Baker, who is running far ahead of Democrat Jane Eskind. "There is anxiety, even animosity out there," he muses, sounding as if he were talking about a strange foreign land. "They tend to bite the first ankle that walks by them." Trying to explain how he came from practically nowhere to win an upset victory in the G.O.P. primary for Governor of Wisconsin, Lee Dreyfus declares, "Something is happening. It's that antiparty, anti-politician feeling."

This feeling takes the form -- symbolically as well as practically -- of cutting taxes. Not everyone agrees how government spending should be reduced, though welfare appears at the top of most lists. People simply want tax relief; they will worry about the consequences later. Just about every politician with a prayer of getting elected is offering some kind of tax-cutting program. And it had better be generous. Dick Lamm, Democratic Governor of Colorado, is perplexed by the "excess of expectations. I've lowered the tax rolls, cut spending and brought more federal money back to the state. Yet people are saying, 'What has he done?' " Referendums putting limits on taxing or spending or both will appear on the ballots in 16 states. Voters in Michigan have their choice of three different propositions, including one that forbids the use of property taxes for operating schools without providing any alternatives for raising the money. A property-tax rollback on the ballot in Oregon is the main issue of the gubernatorial campaign. Democratic Governor Bob Straub, who opposes the proposition, is trailing ten points in the polls. His G.O.P. opponent, State Senator Victor Atiyeh, supports the proposal. Says he: "The voices I hear tell me that the people of Oregon want an absolute limit on their tax rates."

If the vox populi is loud and clear on the subject of taxes, it also is sending a vital subliminal message of growing disillusionment with big, wasteful government. "Proposition 13 has been oversimplified and sensationalized," says Pollster Pat Caddell. "The set of frustrations out there is larger than just taxes." Polling indicates that public dissatisfaction with government has risen at a much faster rate than resentment over taxes. A survey in Public Opinion, the periodical published by the Washington-based American Enterprise Institute, shows that hostility to income and property taxes has increased by only nine percentage points over the past 20 years, while the proportion of Americans who believe that government is wasteful has jumped from 46% in 1958 to 80% today. A special Yankelovich poll for TIME indicates that while most Americans rather unrealistically believe reduced taxes need not mean reduced services, they think the saving can come by cutting bureaucratic fat (see page 26).

Democrats and Republicans agree that government is under fire as never before. Says Phil Lewis, president-elect of the Florida senate: "The general feeling is that we've got about as much government as the people can stand." Size alone, however, is not the trouble. "There's the equity question," says Senator Gaylord Nelson, a Wisconsin Democrat. "People are willing to bear quite a bit of the burden if it's fairly shared. They get upset when they see that it's not." All too true, agrees David Pryor, Democratic Governor of Arkansas. "It's not the amount of taxes, it's how they're used. Proposition 13 is the taxpayers' way of expressing rage at a system that's laughing at them."

In its current mood, the public seems disposed to favor candidates who promise the least instead of the most, a dramatic switch from the chicken-in-every-pot, two-cars-in-every-garage philosophy of the past. "The public has gotten off the spending binge," says Deloss Walker, a Memphis political consultant who engineered the surprise victory of Businessman Fob James in the Democratic gubernatorial primary in Alabama. "People feel they themselves have tightened their belts, but the political leadership has not."

Increasingly, voters seem to be turning to relatively obscure businessmen to run state governments. A variety of millionaires won victories in this year's gubernatorial primaries: Democrats Robert Graham in Florida and Jake Butcher in Tennessee; Republicans William Clements in Texas and Jack Eckerd in Florida. "I am not a lawyer," boasts ex-Wall Streeter Charles ("Pug") Ravenel, who is running against veteran Republican Senator Strom Thurmond in South Carolina. Candidates who have never met a payroll, Ravenel argues, are not equipped to balance budgets. "I think we have a crisis of management in government. To solve public problems, we must energize the private sector and encourage it to take the initiative."

All the stress on bread-and-butter issues--inflation, taxes and spending--has blurred party distinctions, sometimes beyond the point of recognition. Democrats are sounding like Republicans, or even more so. Specifically, Democrats have been quick to sense, and act on, the popular support for some traditional Republican arguments. "It's beginning to look like everybody is in the same party," says

Utah's Republican Congressman Dan Marriott. In Oklahoma, a Democratic wit sums up the formula for success at the polls: "If you have a Democrat who walks, talks and acts like a Republican, then you have a lead-pipe cinch to win." Democratic Representative Abner Mikva of Illinois, long known as one of the most liberal members of Congress, is trying to live down his reputation in this election. He tells voters that no other member of the Illinois congressional delegation has voted against more spending bills.

By nature, Mike Bakalis appears to be a fatalist. On a bumpy flight between Peoria and Bloomington, Ill., he admitted that he would fly in almost any weather. "When your time comes to go down, then you go down," he explained. With similar stoicism, he has learned to cope with political buffeting. Asked where he stands in the political spectrum, he replied without hesitation, "Right of center" -- words that would not have been uttered by a leading Democrat in a big industrial state a few years ago.

The conservative shift starts at the top of the party. For President Carter, this represents not so much a change as a return to his original strategy. At the beginning of his presidential campaign, he portrayed himself as a budget balancer, then gradually moved to the left after his nomination. In his first year in office he supported a boost in Social Security taxes, a phased hike in the minimum wage, which will reach $3.35 in 1981, and spending programs to combat unemployment. But as inflation has become the No. 1 domestic economic problem, he can now revert to positions that appear to be more comfortable for him and give him a better chance of re-election in 1980. Although many critics have attacked him for fumbling and indecisiveness, the successful summit conference at Camp David has altered that public perception. Though many Democratic candidates try to avoid identification with the Carter Administration, the President himself is not an issue in the campaign.

Carter's shift of stance on economic affairs has been modest compared with that of his rival in California. Up to primary day, Jerry Brown opposed Proposition 13; when it was approved, he became an overnight convert and began to talk as if the whole thing had been his idea in the first place. People laughed and scoffed, but Brown seems to have survived the flip-flop with votes to spare. The latest survey shows him 25 points ahead of his lackluster Republican opponent, State Attorney General Evelle Younger, whose campaign style is unkindly compared to a mashed-potato sandwich.

While denouncing taxes with reborn evangelical fervor, Brown has skillfully muted the effects of Proposition 13 by distributing an accumulated revenue surplus of $4 billion to communities deprived of property tax revenues. He also signed a bill in August cutting personal income taxes by $1 billion next year, a move that will save each taxpaying family an average of $150. For this behavior, Brown has not won the endorsement but certainly the blessing of the most popular figure in the state, Howard Jarvis, author of Proposition 13. Jarvis originally appeared in a TV ad praising Younger for successfully opposing the legal challenge to Proposition 13. But then the tax cutter decided to help out the Governor as well. He cut a tape praising Brown: "Sure, I wrote Proposition 13, but it takes a dedicated Governor to make it work."

TIME'S Los Angeles Bureau Chief William Rademaekers followed Brown one day last week as the Governor took his message to varied groups of voters. Boarding the chartered Learjet at Los Angeles, Brown first flipped through the morning papers, stopping at a story that reported unemployment statistics down. Jabbing his finger at the item, he said, "Government is flattening out. The private sector is pushing forward." Noting that corporate profits in California are double the national average, he said he expects the 1979 state surplus to be as large as this year's. So despite all the grim forebodings, no sharp cutbacks in public spending are anticipated.

Arriving in San Diego, Brown took his place at the head of a Columbus Day parade. With a red carnation nattily tucked in the lapel of a sober gray suit, he waved, shook hands and shouted, "How are ya?" or "Como estd?" Sitting in the reviewing stand, he showed a flash of anger when a reporter touched on one of those troubling matters of the gubernatorial style. He wanted to know if Brown had ever smoked marijuana. "I've answered that before," snapped the Governor, turning his head away. As the morning grew hotter, Brown doffed his jacket to give a brief speech in the 105DEG F. heat in Brawley, a town in the arid Imperial Valley. "Taxes are going down," he declared. "I didn't have much to do with Proposition 13. That was the other fella. But I did sign a $1 billion tax cut, the largest in the history of California. I have given you four years of prosperity, and now I'm asking you to let me consolidate, to give me four more years. I don't say everything is perfect. I'm a human being. I make mistakes. I change my mind. But I listen to you and I get things done." Later in the afternoon, Brown joined some black politicians at a meeting in a shopping center in Riverside. "Did you watch the game?" he asked as he shook hands. "The Dodgers won." Brown, in fact, had not watched the game, but he has mastered the knack of small talk. While his mostly black audience sipped cocktails and soft drinks and ate guacamole, Brown made his familiar pitch: "Campaigns are three things--taxes, jobs and crime. Taxes are going down, jobs are going up, and we have the most aggressive campaign against crime that we've had in a quarter-century."

Next stop: a bar in Riverside.

"Hey, what's happening?" barked Brown, as he strode in. "How about a beer for me? I've got money." Ten minutes later, Brown was gone. Winging back to Los Angeles (though the Governor remarked that he might prefer to head for the Santa Monica airport--presumably because it is closer to Malibu, home of his close companion, Singer Linda Ronstadt), Brown explained his attempt to blend liberal and conservative positions. "It's what I call mixing frugality with compassion. The people want fiscal responsibility and openness and experimental government. Anti-red lining, antismog regulations and farm labor laws--all these are compatible with a fairly hard fiscal policy. But just to fund everything in the public sector, I don't see that. The folks don't want it."

Some of the other races in which Democrats are trying to outpromise Republicans on the question of fiscal responsibility:

MASSACHUSETTS. In perhaps the most consistently liberal state in the nation, Edward J. King, a onetime guard for the Buffalo Bills and Baltimore Colts, preached tax-cutting to unseat incumbent Governor Michael Dukakis in the Democratic primary. Dukakis and liberals around the country are still not sure exactly what hit him. "Incumbentitis," the mere fact of holding office in this surprising, restless year, was doubtless a factor. In addition, Dukakis, though far from a big-spending liberal, had raised taxes after promising in his 1974 campaign that he would not. King is clearly to the right of his Republican opponent, Francis Whiting Hatch Jr., a proper Yankee of venerable lineage who is attracting the support of many liberal Democrats. Hatch, who proposes moderate tax relief, describes King's plan to cut property taxes by $1.3 billion over a three-year period as a "fiscal fantasy." MINNESOTA. Second only to the Bay State in its staunch liberalism, Minnesota has a Democratic candidate for the Senate no less conservative than King. Businessman Robert Short defeated liberal Congressman Donald Fraser in the primary, partly by calling for a whopping $100 billion cut (i.e. 20%) in the federal budget. Short's Independent-Republican opponent, David Durenberger, claims that such a slash would be a "disaster for the needy. We cannot afford either on humanitarian or economic terms such an unrealistic Short cut." Vice President Walter Mondale and state labor leaders then persuaded Short to say that his $100 billion budget cut was a goal, not an immediate prospect. FLORIDA. Taxes are relatively light in this state, but the economic issues are as heavy as elsewhere. The question is which gubernatorial candidate can move further to the right. Millionaire Drugstore Owner Jack Eckerd promises to put as much money into the race as "it takes to win." He is urging a state constitutional limit on taxes and spending. "The state government is the biggest business in Florida," he tells crowds. "And that's where my record has been. I'm going to use a lot of businesspeople to help solve some of our problems." His Democratic opponent, State Senator Robert Graham, wants to put a two-year freeze on all property taxes and establish a tax-reform commission. He claims to know the value of a buck, since he worked at 100 different jobs--from plumber to stable hand to cigar maker--during the primary campaign.

NEW JERSEY. The governorship is not at stake, but taxes provide the key issue in a zestful senatorial race. Conservative Republican Jeff Bell scored an upset primary victory over incumbent Senator Clifford Case by calling for a steep ; federal income tax cut along with sizable reductions in federal spending.

1 Waving a dollar bill in front of audiences, Bell demands a return to a sound currency. Not to be outdone, Democratic Candidate Bill Bradley advocates a $25 billion federal income tax cut that will largely benefit people who earn less than $40,000 a year. At the same time, he reminds voters that the Federal Government has the responsibility to provide for basic human needs, such as health, education and employment. He also makes frequent reference to the time he was a star on the New York Knicks basketball team. "You know, I spent a lot of years running around in short pants in drafty arenas. And I think we shared moments of triumph, moments of sadness, moments of intense pressure."

CONNECTICUT. In a tight race for Governor, Democratic Incumbent Ella Grasso has discovered that a chief problem is her own rather earthy personality. An old-school politician who gives as well as she gets, Grasso called her primary opponent an s.o.b., among other things.

Her Republican adversary, Congressman Ronald Sarasin, faults her for substantially increasing the state budget. But Grasso has produced a surplus for three successive years, and she has proposed sales and business tax cuts for the 1979 budget. Sarasin is leading a petition drive for a state-constitution ban on an income tax and a limit on spending. He says of the 50,000 people who have signed to date: "I see them as supporting the concept. I hope they support me."

PENNSYLVANIA. Democrat Pete Flaherty is considered ahead in the Governor's race, partly because he was a penny pincher even before Proposition 13. As mayor of Pittsburgh, he trimmed the city payroll by about 25% and reduced real estate taxes. Even so, neither Flaherty nor his G.O.P. opponent, Richard Thornburgh, is calling for a state tax cut, since Pennsylvania is running a small deficit. Instead, both are proposing constitutional amendments to limit state spending. As U.S. Attorney for Western Pennsylvania, Thornburgh sent some 200 gangsters and corrupt public officials to prison. But one of these, Numbers Racketeer Anthony Grosso, is getting revenge. He is ostentatiously supporting Thornburgh and distributing literature calling Flaherty a "nitwit." Complains Thornburgh: "Sabotage."

NEW YORK. The Empire State has the highest taxes in the nation, and both sides favor cuts. But there are personal differences. When a Democratic state senator asked if he could make an appointment with Governor Hugh Carey, he was informed that the Governor did not like to meet people. That attitude seems to typify the current campaign. Carey is markedly ill at ease making small talk with the folks, though he excels at defending his record in office. If he wins reelection, much of the credit will go to Media Consultant David Garth, who has managed to convey a livelier image of the Governor. The Republican candidate, silver-haired Perry Duryea, is a millionaire Long Island lobsterman who has spent 18 years in the state assembly. He is attacking Carey for vetoing a bill to restore capital punishment, an issue that predominates in crime-plagued New York City. By mounting a phone operation that reaches some 400,000 city voters, mostly in Queens and The Bronx, Duryea hopes to reduce the usual huge Democratic majority and thus win the election.

TEXAS. Again a personality clash between two conservative candidates. "I think the race is getting to be more fun all the time," says William Clements, the multimillionaire oil-drilling contractor who is running for Governor. Clements' idea of fun is to skewer his Democratic opponent, Texas Attorney General John Hill, whom he derides as a "claims lawyer and a career politician." When Hill accused Clements of resorting to "Nixon-style Watergate tricks," the Republican replied: "Hill seems a little sensitive to me." The main campaign issue is how to spend the state's $3 billion surplus; no matter which candidate wins, the taxpayers are sure to get some relief.

The Republicans are bewildered and outraged by the way the Democrats have appropriated the traditional G.O.P. issue of fiscal prudence. "There's a law against shoplifting," says Michigan Congressman Elford Cederberg. "We ought to have a law against issue-lifting." Adds Mike Thompson, head of the Florida Conservative Union: "Republicans must be sharp enough to point out that the Democrats are stealing our issue. If we let them get away with it, we have no one to blame but ourselves. The theft of an issue becomes an issue."

Or does it? Most Americans do not seem to care who lowers their taxes and reduces spending as long as somebody does it. Beyond that, the Republican Party is still perceived as the organ of big business that is most at home in a country-club setting. Surveys show that a majority of the public believes the Democrats, who ran up the spending in the first place, are best equipped to bring it down again. In good times and bad, they are expected to look after the common man.

In an effort to change the G.O.P. image and arouse voter excitement, many Republicans have been trying a different tactic this campaign. They have been championing the Kemp-Roth bill, which calls for a 33% federal income tax cut over a three-year period. The measure is based on the theory of Economist Arthur

Laffer, who argues that a tax reduction would stimulate business activity, which in turn would generate new tax revenues to make up for the lower tax rates. Republicans have thus been able to urge tax cuts without having to say what programs should be cut--implying that there is a delectably free lunch after all. But it has not been an easy message to sell to an electorate skeptical of political promises. For many conservatives, it is too extreme a departure from traditional doctrine.

Trying to drum up support for Kemp-Roth, a group of Republican leaders, including New York Congressman Jack Kemp, toured the country for three days last month in what they called a "tax blitz." At the cost of $150,000 for the trip, the Republicans figured they got $2.5 million in free publicity. But their live audiences were hardly worth the effort. In

Detroit, only a small fraction of the 1,000 people invited to a breakfast bothered to turn up. The group drew a mere 30 spectators at a gathering in a backyard in Brooklyn. G.O.P. National Chairman Bill Brock told the Brooklynites: "The average New Yorker pays $800 more in federal income tax today than four years ago. I think that's insane." His audience agreed, but still seemed a bit baffled by the Kemp-Roth 33% solution. As Ann Hickey told the Republicans at a subsequent stop in Upper Darby, Pa.: "I just don't see how you can cut taxes without cutting services, and I want to know what services are going to be cut." The still untested Kemp-Roth theory may prove to be reasonably correct, but G.O.P. Congressman John Anderson of Illinois sardonically admits: "The average voter does not understand how the Laffer curve works, and neither do I."

Offered such a host of plans and proposals, a certain number of voters will respond by not responding. "People are going to vote with their feet by not going to the polls," asserts Caddell, who anticipates an alltime low turnout. Others will focus all their attention on a single issue. Former President Gerald Ford, for one, worries that single-issue interest groups -- for and against abortion or gun-control or environmental regulations, etc.-- will increasingly determine election outcomes. He told TIME Chicago Bureau Chief Benjamin Gate that such groups pose "dangerous ramifications for the two-party system." Business associations, he feels, are also becoming too narrowly focused on single issues. The proliferating political action committees, financed by private corporations, unions or associations, are solely concerned with the passage of particular legislation, not with broader party and national problems. "Our professional managers," said Ford, "have become political neuters."

How long will the conservative climate last, and how far will it go? Few political experts will hazard a guess. They are all too aware of the dizzying changes in U,S. politics.

Only a decade ago, many prophets were foreseeing an era of accelerating radicalism; that did not occur.

Perhaps there is no more consistent conservative in Congress than Texas Republican Senator John Tower, a laconic politician who uses a pithy campaign slogan, HE STANDS FOR TEXAS, and that, son, speaks for itself. On a campaign flight between Texarkana and San Antonio, Tower expressed a sense of vindication at the turn of events: "What is happening is what we said would happen all along. Eventually, Government would get so big that it would become oppressive."

How much Americans will be willing to cut back Government remains to be seen. For the moment, of course, the liberals are on the defensive. Their candidates have taken to wearing camouflage, and many of their traditional policies have been abandoned. Paradoxically, Ted Kennedy is a favorite in the presidential polls even though he remains pretty much of a traditional liberal. But his popularity probably has more to do with his personal magnetism and his family name than with his policies per se. If party lines are blurred and issues confused, however, that does not mean that leadership is out of style. On the contrary, at such a time a candidate's personal qualities become more crucial. "Respect for personal integrity is at an alltime high," says Caddell. Wayne Youngquist, a sociologist at Marquette University, makes a similar point: "People want leaders with vision rather than programs." Even if conservatism is overtaking liberalism and individualism is prized over collective action, vision is always in demand and often rewarded at the polls.

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