From Perot's Playbook.

A page from H. Ross, as well

A NEW-STYLE campaign--call it "Hurricane McCain"--is ripping through George W. Bush and the office-holding Republican establishment. But close to the eye of this new hurricane is an older idea: the debt-reduction mania of Paul Tsongas and Ross Perot.

Tsongas won the .New Hampshire primary in 1992 by declaring that he would put an an end to "pander-bear" fiscal irresponsibility. Perot, with his flip-charts, turned the fiscal-austerity fight into a popular crusade.

Throughout the '90s, GOP operatives spent long, fretful hours figuring out how to deal with Perot. His simple budget-cutting arithmetic threatened the GOP's presidential arithmetic; put simply, a GOP nominee couldn't win if Perot siphoned off millions of votes. This explains Newt Gingrich's obsession with the balanced-budget amendment, and his catastrophic 1995 decision to shut down the government (from which, incidentally, the congressional Republicans never recovered). These ill-advised moves were designed to co-opt the Perot movement; but they actually succeeded in splintering and marginalizing the congressional GOP.

By favoring massive debt reduction over broad-based taxpayer relief, the GOP helped ensure that paying down the debt would become the Holy Grail, along with responsible-sounding but still-nebulous plans to "save" the Social Security and Medicare entitlements.

McCain is hewing closely to the Tsongas-Perot script. "People in New Hampshire are telling me, `Senator McCain, save Social Security. Put some money into Medicare, and pay down that debt.'" It's not quite as stirring as "Tear down this Wall," but it seems to be working. According to pollster John McLaughlin, McCain voters favor saving Social Security (60 percent) over tax cuts (30 percent)--a two-to-one margin.

Has the McCain campaign decided that neo-Perot budget austerity is the ticket to victory? Campaign co-chairman Warren Rudman says no; I'm not so sure. The former New Hampshire senator now heads the Concord Coalition, a budget-watchdog group that strongly opposes tax cuts; but he says there was never any conscious decision to emulate Perot, merely a decision "to go after the broad middle of the country." Is McCain emulating Tsongas, then? "No, no," Rudman responds. "That was purely John's instinct--that honesty, truth-telling, and integrity in government would connect with people."

Rudman himself is a very interesting character. He co-authored the 1985 Gramm-Rudman deficit-reduction plan, which, by threatening to cut entitlements, was a key factor in the GOP's loss of its Senate majority in 1986. A former New Hampshire attorney general, he has already been touted by McCain as a likely U.S. attorney general, though Rudman says that at age 70, he'd rather not: "I've already got a life. I'd prefer to be an outside counselor, sort of an honest Vernon Jordan."

Rudman has had a noticeable influence on McCain's economic views. McCain voted in favor of the landmark Reagan tax cut of 1986; as recently as last year, he voted for an across-the-board tax cut. But this year, he has converted to Clinton orthodoxy and favors debt reduction over tax cuts. On the campaign trail, he appeals to voters who doubt the staying power of the current prosperity and believe that paying down the federal debt is a moral imperative on a par with paying family bills.

The problem is, neither the politics nor the economics of federal deficits and debt reduction have ever added up. On the politics, look at Gerald Ford in 1976, or George Bush in 1992, or Bob Dole in 1996. (True enough, Dole had a 15 percent tax-cut plan. But voters were familiar with his past record of tax increases, and skeptical grass-roots conservatives stayed home.)

Even more importantly, the economics are faulty. If federal debt is so bad, why has the economy been so terrific, for so long? According to the National Bureau of Economic Research, the U.S. has just completed its seventeenth year of uninterrupted prosperity. This historic boom was touched off by Reagan's tax cuts and deregulation, along with the Volcker-Greenspan disinflation, and continues to this day. So what's the rationale?

McCain and others argue that debt reduction will bring down interest rates. But in fact, interest rates fell substantially during the 1980s, even as the debt grew substantially in order to finance the defense buildup and the tax cut. Over time, as growth-induced revenues flowed in, the tax cuts paid for themselves.

The reason interest rates fell--from around 14 percent in 1981 to around 6 percent today--is that inflation, which is the major determinant of interest rates, dropped from 14 percent in 1980 to roughly 2 percent today. Federal debt financed peace and prosperity--but it did not prevent lower inflation, or low interest rates, or record-setting economic growth, or low unemployment.

Also, if McCain were to succeed in eliminating the federal debt, he would undermine Alan Greenspan's ability to conduct monetary policy. Federal Reserve purchases or sales of Treasury debt are the primary tools in expanding or contracting the money supply.

Further, foreign central banks park their excess dollar reserves in interest-bearing Treasury debt. If there were no U.S. debt, then the whole international trade-balance payments mechanism would be upset. Foreigners would be forced to sell dollars and invest instead in euros or Japanese yen. This would undermine the dollar's reserve-currency status at precisely the time when countries around the world are adopting the dollar as their new currency of choice.

Paying down the federal debt would thus threaten the global financial stability that depends on dollarization.

And we would feel the consequences right here at home: A sinking dollar would lead to significant inflation and interest-rate increases that would, together, end economic growth.

Foreign investors, on the other hand, would benefit greatly from the proposed paydown of U.S. debt. Nearly 40 percent of the $3.2 trillion marketable Treasury debt is held by private and official foreign accounts. Treasury buybacks of this debt would send nearly 10 percent of the proceeds to Japan, 8 percent to Britain, about 4 percent to Communist China, and over 2 percent to OPEC. Only 4 percent of the cash would go to Main Street U.S. households; the rest would accrue to pension funds and mutual-fund companies.

Clearly, if the goal is to help family finances, across-the-board tax cuts are a better idea.

Nor will debt reduction prevent more rapid federal spending. Since the emergence of surplus tax revenues two years ago, government spending has shifted into high gear--rising more than 5 percent (twice the inflation rate) during the past year. It had actually been declining, albeit modestly, in the mid '90s.

So why is McCain being an obsessive over debt reduction? He's trying to be an electoral synthesizer, piecing together the biggest Republican tent since the Reagan landslide in 1984. But--unlike Reagan--he seems willing to blur his ideological and philosophical convictions in the process. Instead of attracting voters to his principles, the candidate of character is making a bet on "issueless prosperity."

There are risks in this strategy. Al Gore will be vying for many of the same votes, but his Clintonian spending programs will provide real cash to the American middle class, not just foreign bondholders. If McCain and Gore agree that debt paydowns are more important than tax cuts, the Republican base of grassroots conservatives might stay home, while lower- and middle-income Democrats turn out and vote for government cash goodies.

In the end, McCain's attractive personality could carry the day; stranger things have happened. But color me skeptical. Democracy is about the rule of law, not the rule of even the most personable and valorous men. All the truly successful presidents combined personal optimism with a clear policy agenda. In this sense, John McCain is still a work in progress.

Mr. Kudlow is an NR contributing editor and a columnist for National Review Online.