CUOMO'S VOICE IS GETTING LOUDER AND LOUDER
As the traditional Labor Day campaign kickoff draws near, Democrats are strangely subdued. At clambakes, pig roasts, and state fairs, the bombast of a national campaign is absent, replaced by the whimpers of party officials mulling over a sparse crop of Presidential contenders.
But there's another sound dominating Democratic politics these days, an insistent background buzz that commands attention. "No agenda," it drones, radiating from the general direction of Albany, N. Y. It's a sound that some Democrats find more unsettling than the great stillness gripping the heartland--the sound of Mario Cuomo nagging.
FREE RIDE? No, the three-term New York governor isn't running for President, at least not in the sense of slogging through all those grubby early primaries. Cuomo made that clear in an Aug. 13 interview. "People can speculate all they like," he shrugs. "What I'd like them to do is save a little attention for the merits of my proposals."
Cuomo has them by the truckload. Hesitancy about the nomination hasn't stopped him from showering Democrats with a nonstop stream of unsolicited advice. There is Cuomo, the noncandidate, appearing before the American Stock Exchange on July 25 to call for new investment incentives. There's Cuomo again, at an Aug. 9 mayors' conference in Hyannis, Mass., where he remarked that President Bush is getting a free ride because "right now, the Democrats do not have an agenda for America."
And though no one recalls asking for an encore, Cuomo is taking his "Ask Mario" show on the road. In September, he'll deliver an address in California. The same month, he heads off on a totally non-Presidential trip to Japan. Later in the year, it's on to Europe.
But Cuomo is doing more than touring and talking. He will soon unveil an economic blueprint he hopes will frame his party's 1992 assault on Bush (table). Contents of the document, alternately described as a white paper by Cuomoites and an encyclical by party wags, have been made available to BUSINESS WEEK. The report should spark spirited debate: It represents Cuomo's most detailed exposition yet of an alternative economic policy.
Each feature of the plan, which relies heavily on "targeted" tax breaks and shifts in the tax burden, has been plugged into an econometric model designed by University of Pennsylvania economist Lawrence Klein. Another Cuomo brain truster, DRI/McGraw-Hill economist Lawrence Chimerine, contributed many key ideas. Others who played prominent roles are New York State Economic Development Administration chief Vincent Tese and Lee Smith, director of New York's competitiveness committee. Says Smith: "Some Democrats talk about health or other single issues. By taking on the central issue of economic growth, the Governor is filling the Democratic vacuum."
Meanwhile, back in "vacuum land" Cuomo's hectoring has begun to wear thin. Virginia Governor L. Douglas Wilder threw a harpoon Cuomo's way recently when he urged Democrats to ignore "pretenders to the throne" who preach fiscal responsibility "but then return to their home states, where they have blistered their citizens with deficit spending." Adds William Galston, a former aide to Walter F. Mondale: "This is really starting to tick people off. If Cuomo wants to be a one-man Democratic think tank, fine. But unless he gets in the race or definitively drops out, his ideas will be drowned out by political speculation."
Not all Democrats agree. "If Mario wants to offer advice to Democrats, that's healthy," says top media specialist Frank Greer. "He contributes a lot, even when he's nagging from the sidelines."
Although many wonder why the governor puts so much effort into crafting national positions, Cuomo insists he has been at it for years. He has often issued lengthy tomes on issues from child care to welfare reform. Says Cuomo: "People say `Oh, this is a campaign,' which it is not. But if that's what it takes to get people to focus on my ideas, terrific."
Cuomo's latest efforts have been framed by New York's fiscal swoon and the belief that Washington has to play a bigger role in capital formation. The result is a policy in sharp contrast to Bush's free-market approach. "The essential fault in Administration economic policy has been the overdependence on encouraging capital investment simply by freeing up wealth in the hands of the wealthy," Cuomo says. "That's supply-side, and it failed."
The centerpiece of Cuomo's plan is a "net investment tax credit." Unlike the old 10% ITC, which cost $30 billion a year, the new break would be limited to "productive" investment. "I'm talking about things like pollution-control equipment," Cuomo says. But even a limited ITC tilts heavily toward manufacturing at the expense of services, so the idea may be more nostalgic than effective.
Next, Cuomo, despite railing against the rich, wants to cut the capital-gains tax, now equal to the top income tax rate. He'd phase it down from 33% to 10%. To spark long-term investment, assets would have to be held for five or six years to qualify, while rates would be hiked on assets held under a year.
To complete his role as something of a reverse tax reformer, Cuomo would raise the top tax rate on the wealthy to 38%. And he backs a cut in Social Security payroll taxes to help workers. "It's a very regressive tax," says Chimerine, "and the middle class needs relief."
Some advisers are also urging Cuomo to return to pre-1981 depreciation rules. But he's cautious, saying only that such a costly plan might be phased in. The old system was considered an expensive boondoggle for real estate. Since that's one of New York's comatose industries, Cuomo doesn't seem unduly distressed. "I wouldn't mind a boondoggle for real estate right now," he jokes. "Just a little one."
To help pay for all his tax breaks, Cuomo would junk last year's budget deal. "Terrible," he thunders. He'd convene a bipartisan commission and slash Pentagon spending and entitlement programs. Then he might impose a gasoline tax of 20~ a gallon, which would encourage energy conservation and ease the deficit. "It doesn't make sense to take the political hit for a nickel," he says.
UNFAZED. He figures his strategy would help boost economic growth from an anemic 0.8% in 1991 to 3% to 3.5%--and release a flood of new revenues. Some economists are dubious. "If you liked the 1970s, you'll love this," scoffs Robert J. Shapiro, of the centrist Progressive Policy Institute. "It's a disturbing collection of tax giveaways from the `70s, and even good ideas like the middle-class tax cut could be washed out by higher gasoline taxes. The key notion seems to be that Washington policymakers can make better decisions than markets."
The criticism doesn't faze Cuomo. Asked whether he is veering away from free markets, he says: "Exactly right. We've had 10 years to show how well the market worked, and we've been shown a $350 billion deficit and $3 trillion in debt. Thanks for the lesson." As for pesky questions about `92, Cuomo repeats his "no plans to make plans" mantra and urges: "Forget about me. Remember the message." Sure, Governor. Now about those trips . . . .
ELEMENTS OF CUOMONOMICS
CUT CAPITAL GAINS
To stimulate long-term investment, Cuomo would lower capital gains taxes on assets held for over 5 or 6 years. He may boost the rate on assets held under a year.
TAX THE RICH
Cuomo would hike
the top tax rate to 38% vs. 33% now.
The Governor backs a Democratic plan to cut Social Security taxes for middle-income Americans. He'd pay for it by raising the ceiling on wages subject to the tax.
RAISE GASOLINE TAXES
Cuomo may call for a 20~-per-gal. gas tax, raising the levy 5~ a year for four years.
Cuomo wants to bring back the costly ITC, repealed in 1986, but limit it to new assets and "productive" investments.
To stem a U.S. competitive decline in critical technologies, Cuomo would raise the 20% R&D tax credit to 30%.
Cuomo might try to restore the pre-1981 system of depreciation schedules, which closely tie write-offs to the economic life of plant and equipment.
Cuomo champions a much tougher U.S. trade stance with Japan and the EC.
FIX THE BUDGET
Cuomo considers last year's budget summit a sham. He'd start over with a bipartisan commission that could recommend sweeping cuts. The Governor envisions big savings in the defense budget and favors means-testing medicare and other entitlement programs, thus denying payments to the well-heeled.
Cuomo dislikes the term "industrial policy," but he favors an activist government role in channeling resources to favored industries. He wants a "national technology policy" to increase government-sponsored R&D and backs expanded job-training programs.Lee Walczak in Albany, N. Y.