(FORTUNE Magazine) – POLITICS & POLICY/ Cover Stories 32 STOP KIDDING US ! A message to presidential candidates George Bush and Michael Dukakis: It' s time to tell us the truth. Short of a miracle, the only way to rid ourselves of the $150 billion budget deficit is to cut spending and increase taxes. For everybody' s sake, let' s get realistic. by Ann Reilly Dowd

36 THE CASE FOR A CONSUMPTION TAX Just about every other country has adopted a national value- added sales tax to bring in more money. So why should the U. S. be any different? It offers maximum gain at minimum pain. by Andrew Kupfer

THE ECONOMY 40 THE RESURRECTION OF THE RUST BELT Cassandras have been saying that the industrial heartland of America is dead and that its workers are frozen in despair. Humbug ! After being all but counted out in the early 1980s, the heartland is back swinging. Industry is more competitive than it has been for years. by Myron Magnet

47 HOW THE WORKERS FARED In their own words: Five tenacious survivors -- four men and a woman -- tell their stories.

CORPORATE PERFORMANCE 50 MAKING THEM RICH DOWN HOME Meet Ralph Ketner, the pride of Salisbury, North Carolina. Back in the late Fifties, he peddled stock in his new grocery store to friends and neighbors. Now 87 of them are millionaires, and Food Lion is America' s fastest- growing supermarket chain. by William E. Sheeline

53 THE $3 MILLION LAWN MOWER

54 OTHER HOMETOWN HEROES

MANAGING 58 THE ARRIVAL OF THE BABY- BOOMER BOSS The Vietnam veteran . . . The war protester . . . One by one, they' re moving into the corner office. But this does not portend the radical changes you might have dreaded -- or hoped for. The baby- boomers have grown up to be managers of moderation. They have adult ideas about business, and they' re tough. by Kenneth Labich

TECHNOLOGY 65 ( A STAR WARS LASER COMES TO EARTH Behold the free- electron laser. It began as a military dream: The Strategic Defense Initiative program financed research to build something that could zap enemy missiles. That hasn' t worked so far, but the lasers are markedly more versatile than their conventional civilian cousins. Even though each of these devices costs $2 million and requires tons of cement shielding, with engineering improvements they may work revolutions in medicine, microelectronics, and the manufacture of chemicals. by Anthony Ramirez

ENTREPENEURS 70 CAMPEAU IS ON A SHOPPER' S HIGH ''Eccentric'' isn' t the only thing they call the man who battled long odds to grab 382 prestigious U. S. department stores. Some go so far as to call the flamboyant new proprietor of Bloomingdale' s, Burdines, and Jordan Marsh ''Ivan the Terrible'' as well. by Kate Ballen

COMPETITION / Portfolio 74 KOREA: TOMORROW' S POWERHOUSE The Land of the Morning Calm doesn' t always look that way, as this photographic tribute to the many faces of its people shows. They are the hardest working on earth, and thanks to them the economy has gone from torpor to triumph. Despite political tensions, Koreans are taking a break next month to throw a 16- day, $3 billion extravaganza: the Summer Olympic Games. Congratulations ! by Louis Kraar

DEPARTMENTS

4 EDITOR' S DESK

6 INDEX

8 NEWS/ TRENDS Democrats like anxiety, takeover boom ahead, Mexico' s muddled matnana, cars that just say no, and more.

21 FORTUNE FORECAST Growth is slowing, so the Fed won' t push up interest rates this year. But watch for short- term rate increases in 1989. by Vivian Brownstein

25 PERSONAL INVESTING Quarterly investment strategy report: Stay invested, but expect bumps. by John J. Curran.

Also: Portfolio Talk with Source Capital' s fund manager George Michaelis.

55 COMPANIES TO WATCH

83 FORTUNE PEOPLE Harvey Kinzelberg finds focus beneath the waves, an odd high school reunion for the Singers and the Sturmans, and more. by Terence P. Pare

84 ON THE RISE

85 OTHER VOICES High housing prices are giving companies and their workers fits. Not enough employers are doing anything about it. by David C. Schwartz

88 LETTERS TO FORTUNE

91 KEEPING UP by Daniel Seligman

COVER: Alex Quesada of Matrix took the photographs of Michael Dukakis and George Bush.