WHEN ALL three presidential candidate agree, that's a signal to everyone else to be cautious. They agree enthusiastically that business investment needs to be increased, and that the way to do it is through tax cuts. That's true enough, with certain qualifications. But it's important for voters and taxpayers to keep it in mind that the benefits of that investment will develop only slowly. Specifically, it is not a sufficient answer to the present inflation.
Business tax cuts reach the inflation rate through a three-stage process. Tax cuts can induce more investment, which can raise productivity, which in turn can hold down prices. But at each stage, everything depends on how it's done. President Carter's tax proposals would do more for investment than Mr. Regan's, because they are more directly tied to it. But even the most vigorous flow of investment is not likely to raise productivity more than two-tenths of a percentage point annually. That's worth doing, but a reduction of two-tenths of a percentage point in an inflation rate of 10 percent doesn't make much of a difference.
There are only two basic strategies for pulling down the inflation rate significantly over the next presidential term. One, bleak and unattractive, is to run the economy in low gear with unemployment well beyond traditionally acceptable levels. The other is some sort of direct government intervention in wage increases, the crucial part of the mechanism that perpetuates inflation.
Most economists favor intervention, to avoid suppressing growth and living standards. John Anderson, who tends to follow expert advice, has come out for wage-price guidelines enforced by tax-based incentives. But President Carter actually proposed precisely that device two years ago, in his real wage insurance plan. It attempted to induce employees to settle for annual increases of 7 percent, by promising to compensate them if the actual inflation rate were to go higher.The disign of this program was exceedingly complex and Congress, fearing huge costs to the government, refused to touch it. That venture appears to have exhausted the administration's ideas about wage intervention. It currently murmurs of an incomes policy next year, but there's nothing specific yet.
Mr. Reagan's inflation program, with its reliance on massive reductions in tax rates and somewhat less massive reductions in spending, is the most daring of the three. Last week he triumphantly produced economic projections to prove that he could cut personal individual income tax rates 30 percent over the next three years and still balance the budget by 1983. But those economic projections assume extremely high inflation throughout those years, raising taxes as fast as Mr. Reagan cut them. Under Mr. Reagan's assumptions, taxes in 1983 would be as heavy, in relation to gross national product, as they are today. Instead of balancing the budget to reduce inflation, he is evidently proposing to use inflation to balance the budget. The dangers in three more years of high inflation hardly need elabortion.
Investment is an appealing topic for both candidates and their listeners, for it carries a message of future prosperity. That message is not wrong, but first inflation will have to be remedied. To the immediate question, none of the answers so far is persuasive.