KNOCK 'EM FLAT

By NANCY GIBBS

THE FACT THAT STEVE Forbes finds himself on the cover of TIME magazine this week says a little bit about Steve Forbes and a lot about American politics. A dark-horse candidate usually has to win something, or lose by less than expected, before he can hope to insert himself into the national imagination. Forbes is not the first rich man with a Big Idea to try to enter American politics at the top; nor is this the first time the mainstream candidates have courted an electorate so eager to rebuke them. So why is he now in second place in four key primary and caucus states, surrounded by reporters wherever he goes, seeing his flat-tax gospel embraced by the other campaigns and generally making the rest of the candidates feel so queasy?

The gravitational pull that Forbes exerts on the race first became clear in an Iowa debate two weeks ago, when Bob Dole still held a commanding lead in the polls but the contenders all aimed their knives at Forbes instead. They had been campaigning in the state for more than a year, Forbes for about three months. "Each of them felt they had to attack me to be able to contest Dole," Forbes told Time's Michael Kramer. "It apparently never occurred to them that by focusing on me, they created inadvertently the thing they most wanted to avoid--a two-man race between me and Dole." By last week Forbes had climbed to 15%, according to a TIME/CNN nationwide poll of likely Republican voters, behind Dole's 40% but ahead of everyone else, and the size of his crowds had increased fivefold.

Forbes enjoys some advantages over his opponents, of which his personal fortune is only one. Most of the press corps, and the voters, are treating him gently, though that will change as the scrutiny increases. He is so awkward in person--the boy who won't ask the girl to dance at the prom--that voters who meet him think he can't be for real, and so conclude that he must be. Unlike Dole, he has a single, clear message--Mr. Flat Tax--shellacked onto his forehead. Unlike both Dole and Phil Gramm, he is not a member in good standing of the American government. And unlike any other Republican, including Newt Gingrich, Forbes can present himself as a true revolutionary.

In fact, his campaign owes a debt to Gingrich, who in 1994 did the most to convince people that the government had replaced the Soviets as their mortal enemy: it overtaxed its citizens, divided families, squandered the nation's resources and disseminated softheaded values. But a year after their declaration of war, Gingrich and Dole lie bloodied in the budget trenches, and the political climate is if anything more divisive, unpleasant and ineffective than at any time in memory. Pollsters find that voters are at once unsated and disgusted: if the Republicans have faltered, the resentment against Washington politicians remains more powerful than ever.

It is a measure of this impatience that Steve Forbes, as unlikely a jockey as we are ever likely to encounter this side of Churchill Downs, is trying to ride that discontent to the head of the G.O.P. presidential race. Whether he ever intended, or expected, to get as far as he has is uncertain. Even less clear is whether he has the staff, the steadiness and steel to switch from quirky joyrider to formidable contender.

He calls this the most important election of the century. "Look," he says, "the purpose is not just to select a candidate to face Clinton. It's to choose a direction. That's why I'm in this--if only because I'm convinced that we can't win in '96 without a pro-growth vision of the kind I'm putting forth. If the party and the nominee adopt that, we'll win. If not, we won't."

In the universe he envisions, the tax system is only the first thing to go. Instead of entitlements, he prefers retirement accounts, medical savings accounts and "payments in kind" to welfare mothers, meaning "everything from food to medicine to diapers. Stuff that's hard for a mom to convert for substance abuse." Contrary to reports that he is intent on returning America to the gold standard, he says the gold standard is not a "perfect barometer" and if someone has a better one, "whether wampum, Snickers bars or seashells or whatever, I'll be ready to listen." When he talks about family values, it still all comes down to mortgage rates. "Economics and values are the same thing," he says. "The values we value are trust, thrift, a belief in progress and a belief that we are here to serve some higher purpose."

The heart of his fiscal crusade is his flat tax, a plan derided as "deja voodoo" by economists who blame Reagan's supply-side tax cuts for the explosion of the national debt. He has captured perfectly the fury Americans feel for a system they think treats them like suckers while the rich enjoy a secret tax code written just for them--notwithstanding that his flat tax could favor the rich even more effectively. But his appeal is not only to apparent fairness and simplicity, the allure of a tax return no bigger than a postcard. The plan is also a lethal attack on the whole "culture of Washington," which he proposes to starve to death. Convinced that cutting taxes will stimulate the economy, Forbes doesn't worry much about estimates that his plan might swell the deficit anywhere between $40 billion and $182 billion a year. He dwells instead on his belief that the flat tax would have an antibacterial effect: "Remove the code," he says, "and you remove the rationale for lobbyists."

By last week he could claim that he's already won the contest that matters, to the extent that "others are stealing my ideas." Just when President Clinton and Republicans in Congress admit they are unable to cut the budget through negotiations, Forbes arrives and proposes to do it by fiat. Now, says Jack Kemp, who was only one of the many voices last week calling for a brand-new tax system, "the whole debate is how low to have the tax-rate system, how fair it should be." The issue reached critical mass on Wednesday, when Gramm unveiled his own version of a flat tax and Kemp's commission, which Dole had charged with reviewing the tax code, issued its recommendations.

The copycat spectacle was gratifying to Forbes, who especially savored Dole's dilemma when the majority leader stood before the cameras as Kemp laid out a dozen principles for changing the tax code. "He clearly wanted out of there as quickly as possible," Forbes observed. "He wasn't comfortable. I think he's never been one for major ideas, especially on the tax side." Editor that he is, Forbes even writes his opponent's script for him. "He could have said, 'In 30 years, I've seen what a monstrosity this system is. I may even have contributed to the monstrosity. I know as my career closes that America needs to change.' And there people would say, 'Hey, look at that. He's got experience, he's not afraid to learn.'"

But it didn't happen that way, and Forbes hopes the contrast was not lost on voters. Forbes is an amiable prophet, a genial man with a heartfelt belief that if America's entrepreneurial energies are unleashed, its families protected and its politicians chastened, everything will turn out O.K. This may be his most surprising contribution to the race: after a year in which Republicans like Pete Wilson, Pat Buchanan and Phil Gramm tried to outworry each other on affirmative action, immigration and crime, along comes Forbes, who wipes the polarizing issues off the table. In their place is the Reaganesque liturgy of hope and opportunity: "You don't have to bash immigrants," says Forbes' former media adviser Sal Russo, "you don't have to condemn minorities, you don't have to talk about flag factories. You can appeal to the best instincts and be successful."

This combination of a renegade vision and a faith that it will work distinguishes Forbes from the other candidates, whom he calls, in his charming preppy lexicon, "sourpusses" and "gloomy-doomies." Dole, with his barbed wit and allergy to abrupt innovation, is the most vulnerable to the comparison. "There's been a paradigm shift in politics, and I don't think Bob gets it," says Jan Anton, a California entrepreneur who was the state co-chair for Dole in '88 but is leaning toward Forbes this time. "Dole's a wheeler-dealer. He's just trying to hang on and avoid mistakes. Forbes is an outsider. He has a clear, coherent message, and he has the money to tell his story. So he can't be blocked."

Forbes doesn't so much transform the race as create one--if not in Iowa then certainly in New Hampshire, where his message could take hold, as well as in Delaware, Arizona, the Dakotas and South Carolina, the contests that follow. He has the means to dog Dole all the way to the convention if he chooses; and by refusing federal campaign funds, he can spend as much as he wants, wherever he wants. He has already shed upwards of $2 million in Arizona. In Iowa and New Hampshire he will spend at least twice what the law permits the other candidates to spend. His opponents claim the press has given him a free ride, whether charmed by the idea of an editor-king or just looking for a plot twist with which to torture the front runners.

But it is more accurate to say that Forbes is the best thing that ever happened to Dole. Like Colin Powell before him, he has soaked up attention that the other candidates desperately need. At one point, Dole's staff referred to Forbes as Darth Vader, because he was killing the Senator's enemies. Now Dole operatives like to reassure themselves that Forbes stands little chance of actually defeating Dole in Iowa, where organization is still supposed to count for more than advertising. "You can spend $25 million of your own money and buy yourself a position in the polls," says Dole campaign staff member Darrell Kearney, "but you can't buy caucus attendance."

Dole, a perpetual candidate in that state for the past decade, has campaign chairs in all 99 counties and is close to having chiefs in the 1,600 to 1,700 of Iowa's 2,142 precincts he's deemed necessary to win. Less than a month before the big night, Forbes has 26 county chairs signed on and 750 volunteer precinct workers, as well as a professional phone bank making 4,000 calls for him daily. Forbes supporters tend to be mainly independents and moderates with weak party ties who are younger than Dole's or Gramm's backers by at least 10 years and less likely than the diehards to haul themselves to a caucus on voting night. "My observation," says Gramm's pollster, Linda DiVall, "is that the Forbes vote is a place holder where people are parking their vote because they haven't seen Gramm or Alexander on the air to the extent they have seen Forbes."

So it is possible that this week will turn out to have been Forbes' 15 minutes of fame. But that has not kept the rivalry between Forbes and Dole from taking on the quality of shadowboxing. Both Forbes campaign manager Bill Dal Col and Dole campaign manager Scott Reed were once Kemp staffers, and they have kept in touch over the years. Early on, Dal Col would routinely let Reed see the text of Forbes' ads before they ran, "but no more," he says. "Things have got too hot. They're crazed about the ads." Reed notes that Forbes was the first to go negative, and with misleading information. He ran one ad attacking Dole for voting to raise lawmakers' pensions, then denounced Dole for denying he ever did it. In fact, Dole voted to raise salaries, and since pensions are tied to salaries, it was effectively the same thing. That might have been no more elastic with the truth than other negative ads--except that Dole actually supported a measure that would have, for the first time in decades, reined in federal pensions, something Forbes omits to mention.

Dole waited a long time before he fought back; for one thing, since the whole Forbes phenomenon was hurting his opponents more, he hoped they would fight off the upstart themselves and let him remain above the fray. But money troubles in the Gramm and Alexander camps--though both have raised millions, their cash on hand is sometimes precarious--prevented them from making sustained counterstrikes, and so it fell to Dole. His campaign staff argued for a while about how and when to fight back and decided to aim a broadside at Forbes (tag line: Untested leadership. Risky ideas) just before the Iowa debate on Jan. 13, which may have been what inspired the others to go after Forbes instead of the front runner. "Dole's people were absolutely delighted with the debate," explains Craig Fuller, former campaign manager for Pete Wilson. "Forbes is helping Dole a lot by establishing a glass ceiling: Forbes and everybody else can see Dole, but they can't break through to touch him." The next morning the Des Moines Register proclaimed Dole the winner.

This has left the other candidates fuming. "The great, huge perversion of all of this," says Alexander campaign media adviser Mike Murphy, "is that [Forbes] got in to stop Dole, but the only effect he's having is to help him. In exchange for helping Dole, he's going to get to be the Secretary of Rich Clueless Guys." Gramm shares Alexander's dilemma, but he has more to lose. Gramm cannot rely on Dole to target Forbes much longer, since the Dole camp wants only to wound Forbes, not kill him off. That means Gramm will have to attack Forbes on the air if he hopes to slip past him in the polls. In Dole's dreams, Gramm comes in second in Iowa and Forbes places second in New Hampshire, so it does not boil down to a two-man race too early. Ideally, by the time Forbes' weaknesses have been highlighted, it would be too late for anyone else to replace him as Dole's main rival.

Forbes has the most distinctive campaign style of anyone in the field, which is to say none. It is all his handlers can do to get him to unclasp his hands. There's not a chance he'll loosen his tie. He is devoutly unglib, though a fluid speaker who uses no notes. However remote he may seem from their life and experiences, people say he seems honest and authentic, someone who doesn't stare over your shoulder when he's talking to see who has come into the room. "You ask him a question, and he doesn't build you a watch, he answers it," says Dr. Charles Kalil, 82, a semiretired Phoenix, Arizona, physician. "It's refreshing to talk to a politician who doesn't hem and haw and has the facts."

Though he may seem like a political neophyte, Forbes actually got his start early, when he and his Bedminster, New Jersey, neighbor Christie Todd (now the Governor of his home state) were chosen to present dolls to Pat Nixon for Tricia and Julie during the 1952 campaign. He used to hold mock elections for his stuffed animals, and could rattle off by heart the state voting patterns county by county.

It has been irresistible for reporters to plumb the rich psychic themes of Steve Forbes' relationship with his flamboyant father, the late Malcolm Forbes Sr. His father, after all, is the man who used to make his children practice the bagpipes and wear matching kilts to church on Sundays; who bought a bottle of Thomas Jefferson's claret for $157,000; who rode motorcycles and hot-air balloons, escorted Elizabeth Taylor and collected homoerotic art, Faberge eggs, 12,000 toy soldiers, an island in Fiji, a chateau in Normandy and a palace in Morocco.

Steve makes it plain that he doesn't intend to compete with his father, though in some ways he has already surpassed him. As editor of his eponymous magazine, he led Forbes to the top of its class with more advertising pages than any other magazine between 1992 and 1994, thanks to deep discounts and aggressive salesmanship. Under Steve's leadership, the family business, Forbes Inc.--which owns 14 newspapers and 10 magazines plus real estate--has, according to Forbes, been profitable. As testimony to his economic savvy, his friends cite the fact that he has won the Crystal Owl award, given by USX Corp. for the most accurate economic forecast, four times--more than any other financial journalist.

But it is in politics that the son could outshine the father; Malcolm, who twice tried and failed to win the Governor's race in New Jersey, called the presidency the "Holy Grail" of American politics. "When I first met Steve," recalls his friend Peggy Noonan, former Reagan speechwriter and author, "I said, 'I get it--the oldest-son reaction to Dad. Dad is colorful; Steve is sedate. Dad is a showman; Steve is reticent. In time I changed my view. The fact is, Steve has always held views that were daring. He's every bit as colorful, but it's all inside, not as showy. There's old Dad, with all his splash and dash; he ran for Governor. And there's Steve--he's running for President. Who's more daring?"

His decision to enter the race this year owes much to a broken heart: Forbes was long a devoted backer of Jack Kemp, having chaired Empower America, the refuge for conservatives like Kemp and Bill Bennett. Had Kemp entered the race, Forbes would be snug at home editing his magazine right now. But when the vacuum opened, Wall Street Journal writer turned political consultant Jude Wanniski, another New Jersey neighbor, faxed Forbes a memo late last spring about how it all could work. Forbes pondered...and pondered. He was very tempted, and very cautious, and so decided to do some market testing. Russo conducted no fewer than 14 focus groups in Iowa, New Hampshire, Arizona, South Carolina and several other early states--a large number even for an established campaign."We tested the hell out of the flat tax," Russo recalls. "It worked really well. A home run every time." At the end of each focus group, Russo asked the participants if they would scrap the tax code even if it meant losing some of their favorite deductions. And while many pollsters since then have found support drying up under such questioning, Russo says those he asked remained enthusiastic.

Some Kemp followers were still a bit leery of falling in line behind Forbes instead. It was hard to make the leap from a former football star who seemed to genuinely care about the plight of inner-city families to an heir of a publishing fortune who had never run for office before. Forbes added a wrench when he resisted making himself part of the sale. He allowed a team of consultants to film him at work and on the road but balked at making his quite happy-looking family (his wife and five daughters) part of the portrait. The barrier spooked his handlers: here was this admittedly rich but fairly normal guy at home with his pets and his station wagon with more than a 100,000 miles on it who was bound to be portrayed as the capitalists' tool unless they offered an alternative persona.

Forbes' wife Sabina is supportive but reluctant to plunge into the limelight. (He met her at a debutante party in 1970 while he was at Princeton. He offered her a cigar; she accepted, and five weeks later they were engaged.) And her hesitation may seem all the more understandable now that Forbes has earned the stature to be eviscerated by his opponents and the press. His refusal to make public his tax returns is bound to fuel charges that he has something to hide (last week Dole preemptively released nearly 30 years' worth of tax returns)--like how much he would stand to gain personally from his tax scheme. Focus groups by rival campaigns find that Forbes' TV ads have given him high name recognition and a high approval rating, but closer questioning shows that many voters don't know his plan would scrap the deduction for mortgage interest and charitable contributions, while exempting all income from interest, dividends and capital gains. The more people learn about his flat tax, said a campaign manager, the less they like it.

Already rival conservatives are challenging his rather libertarian positions on issues like abortion ("I want abortion to vanish," he says, but adds that "to change the law you have to change the culture, little by little. It takes persuading other people. There is no other way in a democracy"). Gramm jumped on Forbes' support for Clinton's "don't ask, don't tell" policy on gays in the military, a nudge-nudge-wink-wink way of raising the rumors of his father's bisexuality. All Forbes will say on the subject is, "What Dad meant to us is great. He's not running, and I won't get into his life-style." On gay rights generally, he says, "I take a live-and-let-live approach."

The Forbes camp can feel the counterattack gathering strength. "One thing's for sure," says Dal Col, "the political structure doesn't like this. They are not happy. If Steve doesn't become President, they will reform the campaign-finance laws to make sure this doesn't happen again." By late last week polls by rival campaigns in Iowa showed Forbes' negatives climbing from 15% to 30% as the attacks hit home. For his part, Forbes claims to be having a great time. But, he says, "it's like the old frog story. Sometimes you're getting boiled real good, and you don't know you're dead till you are."

--Reported by Michael Duffy/Washington, Michael Kramer with Forbes and Tamala M. Edwards/Sioux City, with other bureaus

With reporting by MICHAEL DUFFY/WASHINGTON, MICHAEL KRAMER WITH FORBES AND TAMALA M. EDWARDS/SIOUX CITY, WITH OTHER BUREAUS