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Bushonomics already showing signs of steering toward middle of the road

WILL George Bush promote a ``kinder, gentler'' form of economic policy for the United States than Reaganomics? Michael Cosgrove, principal of an economic advisory firm, the Econoclast, thinks so. Like numerous other economists, he is speculating on the economic meaning of a Bush presidency. Since Mr. Bush himself didn't spell out his economic goals clearly during the campaign and may not even have precise ideas himself at this stage, much of the chatter may prove unreliable. But it's intriguing.

Mr. Cosgrove expects the Bush administration ``to slowly walk away from Reaganomics over the next four years and tilt administration economic policy to middle of the road.'' Mr. Bush and his advisers figure this shift will give them a better shot at recapturing the White House in 1992, says Cosgrove, also a professor at the University of Dallas's management school.

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``Let's face it - there is nothing kind or gentle about free-market economics,'' he states. ``Reaganomics created a strong, healthy economy, but it also created nasty side effects such as unemployment, plant closures, mergers, bankruptcies, and people with outmoded skills.''

David Hale, an economist with Kemper Financial Services Inc., in Chicago, sees the Bush economic policy team as ``likely to be more pragmatic and less confrontation-oriented than the economic policy team of the first Reagan administration.''

Mr. Hale finds such Bush nominees as James Baker III as secretary of state, Nicholas Brady at the Treasury, and Richard Darman at the budget office to be ``centrist and pragmatic' - more reminiscent of the first Nixon administration than the ideological hard-liners (monetarists and supply-siders) who ran the US Treasury during the early 1980s.

As a result, this group should be more effective at pursuing compromises with Congress on important questions of fiscal policy, says Hale. There is a ``fair chance'' the team will be able to produce a fiscal 1990 budget that comes close to meeting the Gramm-Rudman-Hollings requirement by reducing the federal deficit to $110 billion or $120 billion through a mixture of excise tax increases, nominal spending freezes, and optimistic economic assumptions.

Both Hale and Cosgrove expect Washington to take measures to restrain the wave of mergers and leveraged buyouts.

Cosgrove recalls how the Reagan administration early on issued a new, less restrictive set of merger guidelines for the Justice Department and the Federal Trade Commission. The Bush administration, he says, will likely issue new, tougher guidelines.

``Away from Wall Street there is a lot of support for a slowdown as many people question the value added of mergers,'' he says. ``Plus, people don't like the side effects.''

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Hale suggests that some congressmen will attempt to pass legislation limiting the deductibility of interest payments on debt used to finance share purchases and takeovers.

The kinder, gentler Bush policy could also include tax credits for day care, education, and possibly other measures, notes Cosgrove. That would alter the Reaganomics policy of lowering marginal tax rates (those rates charged on the last dollar of income), and preventing a loss of revenues by simultaneously closing tax loopholes.

Could it really be that the economic policy pendulum is starting to swing back toward, dare we say it, a slightly more ``liberal'' position?

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