Tax Cuts, Anyone?

Predictably, campaign '96 strategists are locked in a battle for the high ground on that most politically sensitive of issues: the economy.

For President Clinton, that means building the case that his policies have generated growth and created jobs. It's a case that the economic figures at least partially bolster. Gross domestic product numbers, out today, indicate accelerating growth. At the same time, Labor Department figures show a second-quarter uptick in wages, keeping them just ahead of inflation. But some economists, and even some of the president's fellow Democrats, don't give these last numbers much weight.

Corporate downsizing and stagnant wages remain key economic realities in many parts of the country, and politicians from both parties will be highlighting them this fall.

In the Dole camp, the strategy is to downplay the Clinton numbers and emphasize that whatever economic growth Clinton has presided over, it hasn't been enough. The Republican formula for a vibrant economy? Deregulation and tax cuts, with an emphasis on the latter.

Bob Dole is reportedly on the verge of unveiling an income-tax proposal of Reaganesque proportions, perhaps 15 percent across the board. That would mark a sharp break with Mr. Dole's past criticism of supply-side theory, which holds that tax cuts will spark growth and thus boost tax revenues.

More to the point, a Dole promise of sharply cut income taxes could mark the end of the campaigns' efforts to keep deficit reduction and a balanced budget high on the nation's agenda this political year. The deficit-ballooning of the 1980s showed that it can be extraordinarily difficult to reconcile deep tax cuts with fiscal responsibility. And the 1990s have shown how hard it is for politicians to tackle government spending - especially entrenched entitlement spending.

Dole and his advisers will come up with ways to justify a tax cut and show that it can be paid for by further budget trims and the revenue that will flow from the economic activity generated by lower taxes. The details will be crucial: Budget trimming has proven slow and slippery even without the added complication of a tax chop. It's hard to see how revenue stimulation can significantly close the gap.

Both major candidates are publicly committed to deficit elimination by early next century, just six years off. They should be debating how their programs, including a tax cut, will get the nation there.

And they should be reminding Americans why a balanced budget, with its credible promise of enhanced investment and growth, is worth the effort.