(FORTUNE Magazine) – ONE OF the great accomplishments of the Reagan era was to reduce government intrusion into business decision-making, from the boardroom to the shop floor. Kiss those days goodbye. No matter who wins in November, expect an increase in government intervention. The difference is one of degree and kind, not direction. Says conservative political analyst Kevin Phillips: ''The conservative trend peaked in the mid-1980s. We're now moving into a more centrist period.'' A fan of activist government, Massachusetts Governor Michael Dukakis talks of making business and labor ''partners'' with Washington in promoting economic growth. His plan is to use modest government subsidies to encourage large private investment in particularly needy industries and regions. He would also increase federal spending for such domestic programs as health, education, and child care. That would almost certainly mean higher spending and taxation, with Dukakis's business partners picking up much of the check. Vice President George Bush sees government as referee and gentle prodder. He would be more vigilant than Reagan in enforcing environmental laws. He would also be more willing to use the tax code to encourage specific activities, from entrepreneurship to child care. To the extent that tax increases are needed to pay for tax cuts, Bush aides predict, taxes would be levied on consumers, not producers or investors. But like Reagan, Bush would exert the power of the presidency to hold down the overall level of spending, and taxes. Warns the candidate: ''The surest way to kill the recovery is to raise taxes.'' Both nominees would impose new invisible taxes on business. Under pressure from political strategists worried about his elitist image, Bush recently signaled a willingness to support a higher minimum wage, a position long held by Dukakis. However, the GOP nominee continues to oppose more expensive federally mandated benefits backed by Dukakis. Among them: universal health insurance, parental leave, and comparable worth pay standards. Dukakis would also be tougher than Bush in enforcing antitrust, environmental, consumer, and labor laws. The bottom line for business: much higher costs under Dukakis.

It should be no shock that most business leaders prefer Bush, malapropisms and all. In a recent Fortune 500/CNN Moneyline poll of CEOs from Fortune's Industrial 500 and Service 500, 86% chose Bush, 7% Dukakis. Says Richard Rahn, chief economist of the U.S. Chamber of Commerce and a Bush adviser: ''As a Texas wildcatter he experienced the trials of starting a business, and he understands how government can mess things up. As a board member of eight corporations (including Texasgulf, Eli Lilly, Purolator, and three banks), he's also seen how other companies operate. As President, business will not find him a hard sell.'' Even those few business leaders who are comfortable with Dukakis concede that the feeling has not always been mutual. In his first term Dukakis seemed downright hostile, raising taxes and cutting the state's corporate chiefs out of decision-making. After his defeat -- which businessmen helped engineer -- a chastened Dukakis returned to office with a new consensus-building style that helped generate some enthusiastic business support. Recently, however, the old antagonisms flared again. Dukakis doubled his state's corporate minimum tax and limited preferential ''subchapter S'' tax treatment, which allows closely held corporations to be taxed at lower rates. Says disenchanted supporter Lewis Shattuck, president of the Smaller Business Association of New England: ''A lot of business people are telling me, 'We told you so.' '' Even longtime Dukakis defender John Culinane, chairman of Culinet Software, has said, ''One place Dukakis remains light is in relations with business.'' $ The contrarians base their support on Dukakis's ability to craft compromise out of conflict. Says Joe Henson, chairman of Prime Computer: ''A lot of us are concerned that we are not dealing with the fundamental problems facing the country. Then we look at Mike, and know of the energy, commitment, and tough- mindedness with which he's grappled with Massachusetts's problems, and we're convinced he'll do the same for the nation.'' Henson may know something the rest of us have missed. Dukakis, along with Bush, has been less than courageous in spelling out the difficult choices necessary to eliminate America's most pressing economic problem, the budget deficit. But a close look at what the candidates have said and done in the past suggests important distinctions on that and other key issues facing corporate America. SOME GOOD NEWS about Dukakis is that he seems better poised to achieve major deficit reduction than Bush. The trouble is, progress is likely to bring higher taxes. The Democratic nominee has promised to meet with congressional leaders shortly after the election to craft a bipartisan budget compromise. The deal would probably include less money for defense and more for domestic ''investments'' in regional development, child care, education, roads and bridges, and the like. On the tax side, Dukakis has proposed a tax amnesty and enforcement program. He will try to leave to Congress the dirty work of proposing tax increases, most likely on upper-income individuals and corporations. In promising to work with Congress, which will surely be Democratic, Dukakis has left this option wide open. As he told Fortune, ''No serious candidate can rule out new taxes.'' By contrast, Bush is stubbornly tax averse. He is sticking with his so- called flexible spending freeze, which would hold the growth of overall non- Social Security spending to the inflation rate. Congress will demand more spending, but Bush would tough it out, at least in the beginning. He'd point to rosy economic forecasts. He'd brandish threats of Gramm-Rudman sequesters and vetoes. On the whole, his relationship with Congress would be confrontational. As long as he sticks to his no-tax pledge, business will get less deficit reduction, but also less government spending and no new taxes. While Dukakis prefers direct federal investments to spur growth, Bush would rely primarily on tax incentives. ''It's a classic split between a supply- sider and a demand-side manager,'' says economist Jack Albertine, vice ! chairman of Farley Industries. Bush has proposed a reduction in the capital gains tax from 28% to 15%. True to supply-side dogma, he argues that such a cut could spur profit-taking and actually increase revenues by as much as $5 billion a year. Treasury agrees, but the Congressional Budget Office, using different estimating techniques, says the cut would cost the Treasury $3.9 billion. Says Dukakis: ''What Bush is talking about is crazy. It's another tax cut for the wealthy.'' Behind the scenes, Bush advisers are looking at other sorts of tax incentives to spur savings and investment. One idea is to create a savings program similar to tax-deferred individual retirement accounts. The new plan would allow more taxable withdrawals, say for education, housing, and medical bills. Since such proposals would clearly cost money, one adviser speculates that Bush might wind up raising sin, energy, or other consumption taxes to pay for them. Says he: ''The idea would be to improve the tax system without increasing the overall tax burden.'' Dukakis is skeptical about the power of tax incentives. He doesn't believe the Reagan tax cuts worked as planned. Instead of spurring savings and investment, he maintains, ''they sowed the seeds of today's budget and trade deficits.'' Faced with $150 billion budget deficits, he says, ''we can't afford the revenue losses'' associated with new tax breaks. A more proven and fiscally prudent approach, he contends, is the one he used to spread the Boston-area high-tech boom to troubled regions of Massachusetts. He would give modest grants and low-interest loans to companies that invest in certain high- unemployment areas or high-technology centers. So far Dukakis is planning to spend only $500 million in new federal monies on such ventures. But he hopes the money will draw ''three to five times'' as much private investment. The Vice President and his advisers consider this watered-down version of industrial policy dangerous at worst, ineffective at best. Says Stanford University economist Michael Boskin, a top Bush adviser: ''The same programs have been tried in Sweden, France, and Italy, and abandoned in favor of our own free-enterprise system.'' The Democratic nominee would lead business down another costly European trail, that of ever-increasing federally mandated wages and employee benefits. To labor's delight, the Massachusetts governor supports raising the minimum wage from $3.35 to $4.55 an hour over three years. He has endorsed such popular benefits as universal health insurance, parental leave, and comparable worth. Dukakis advisers are not moved by complaints from businessmen that such programs would bury them in costs. ''Corporate profits are up, aren't they?'' asks one rhetorically. They make a fairness case. Says Harvard economist Lawrence Summers, a top Dukakis adviser: ''Not mandating benefits puts companies that do the right thing at a competitive disadvantage.'' Though reluctant, Bush has started down this costly road too. In a bid for blue-collar votes, he says he is willing to increase the minimum wage in exchange for a subminimum for young workers, which he calls a training differential. He has also indicated an interest in promoting parental leave. But campaign domestic policy director Deborah Steelman emphasizes, ''We would absolutely not support mandated parental leave.'' The campaign is trying to figure out how tax incentives might be structured to enable parents to take time off. Bush, however, will likely remain opposed to universal health insurance and comparable worth. A card-carrying union member (American Federation of State, County, and Municipal Employees), Dukakis would boost labor's influence in the White House, as well as on the factory floor. Recently the Democratic nominee reminded advisers to include labor leaders in his major policy sessions. Among his favorites: AFSCME President Gerald McEntee; Owen Bieber, president of the United Auto Workers; and Lynn Williams, president of the United Steelworkers. DUKAKIS would likely support changes in labor law to enhance labor- management cooperation. Harvard business school professor Rosabeth Kanter, a Dukakis adviser, points out that current law interferes with workers' ability to participate in many management decisions. Dukakis would also like to see union organizing made easier. Bush, whose oil drilling company had no union, talks about the importance of cooperation between workers and bosses but has shown no interest in labor law reform. The governor also would try to put the brakes on takeovers. ''The merger and acquisition binge is not contributing to the productive side of our economy,'' he says. He thinks many deals have been ''financial games'' that force ''very good companies to borrow to defend themselves.'' He supports legislation that would increase disclosure requirements, ban golden parachutes and greenmail, and prohibit a raider from using the pension funds of the company he is trying to take over to help finance the deal. Not surprisingly, he opposes federal legislation backed by the securities industry that would preempt state antitakeover laws, like his own in Massachusetts. He also promises to toughen antitrust enforcement, which he says has been a joke under Reagan. Investment banker Felix Rohatyn of Lazard Freres, a Dukakis supporter, considers the governor's antitakeover proposals moderate: ''He would make it a little more difficult for raiders and speculators with huge amounts of junk bond leverage to take over companies and break them up.'' Wall Street takeover expert Joseph Perella sees the matter differently: ''Dukakis's position is basically that of big business, which feels threatened by unsolicited junk bond takeovers. In Dukakis's world, only fat-cat GM-type companies would be able to do acquisitions.'' Bush opposes antitakeover legislation. Says Boskin: ''The Vice President is instinctively opposed to such intervention.'' However, he might rely on the tax code to provide a broad disincentive to speculative activity. One possibility: an idea being pushed by Treasury Secretary Nicholas Brady, a longtime friend, for a multi-tier capital gains tax with higher rates for short-term holdings. In sharp contrast to Dukakis, Bush would continue Reagan's relaxed antitrust enforcement policies, which have facilitated a major and mostly healthy restructuring of corporate America while enriching Wall Street in the process. Bush was a major proponent of financial deregulation as chairman of the President's regulatory task force, and aides say he will continue to push for it. Dukakis's position is a bit more complicated. As governor he has supported some of the most far-reaching bank deregulation of any state. But he is stuck with a Democratic platform calling for a reversal of deregulation. Dukakis's advisers say privately that he won't push the party plank, and many banking experts think he will support further deregulation on the federal level if elected. At the same time, though, he could be expected to support pro- consumer legislation requiring banks to clear checks faster and disclose more information to customers, which can raise costs. Predicts Charles Gabriel, a banking expert at the Washington Forum: ''No doubt banks will get new powers in the next four to six years no matter who is President. But with Dukakis there will be a higher pricetag because of consumer-related baggage.'' The two differ sharply on Third World debt. ''Dukakis is instinctively more pro-Latin America than pro-bank,'' says economic adviser Larry Summers. Dukakis told Fortune that he likes Senator Bill Bradley's plan to postpone or forgive much of the Third World's debt. Bush would likely continue the Baker plan, which encourages more bank lending and continued debt repayment in return for pro-market reforms in Third World countries. Says a Bush campaign spokesman: ''We don't see any reason for American banks to take losses in order to help foreigners.'' The Duke's tough environmental stands worry energy producers. He opposes much offshore oil and gas development on environmental grounds, filing suit to stop drilling off the Massachusetts coast. Not surprisingly, former offshore oilman Bush supports most such development -- save for one tract off the California coast, an exception he made during that state's primary. ''The problem with Dukakis's position,'' says Adam Sieminski, an energy expert at Washington Analysis Corp., ''is that the most likely place to look for oil and gas is offshore.'' Dukakis opposes -- and Bush supports -- development of the biggest unexplored onshore reserve, Alaska's Arctic National Wildlife Refuge. Both Bush and Dukakis say they support safe nuclear generating stations. But apparently Dukakis hasn't found one yet, at least not in his own neighborhood. The governor helped block the opening of New Hampshire's Seabrook facility, near the Massachusetts line, by failing to approve an evacuation plan. He applauded the shutdown of his state's Pilgrim nuclear plant on safety grounds. Some manufacturers are thinking of expanding elsewhere because of high electricity rates and brownouts. Says Thomas Phillips, president of Raytheon, the state's largest employer: ''We're in a very vulnerable situation.'' MANUFACTURERS are worried about Dukakis's interventionist bent on other fronts as well. He has promised to beef up enforcement of occupational safety and health standards, a topic on which Bush has been mute. Dukakis also opposes a national product liability law backed by Bush, which business believes would help hold down exploding liability insurance costs. Dukakis believes responsibility for product liability should remain with the states, though he has given a nod to businessmen who argue that the current system is chaotic by suggesting that states agree on a common approach to the problem. The sector of the economy that would fare poorest under Dukakis is small ; business, which is least able to bear the cost of Dukakis's partnership plans and regulatory agenda. By contrast, Summers suggests, ''big business may learn to love Dukakis.'' But then, polls show big business already loves George Bush.

BOX: WHAT'S THE DIFFERENCE? TAXES BUSH -- ''No new taxes, period.'' -- Cut capital gains tax rate from 28% to 15%. -- Would consider some kind of new incentives to encourage savings and investments. DUKAKIS -- New or increased taxes as a ''last resort'' to cut the deficit. -- No cuts in capital gains rates, which he calls ''another tax cut for the wealthy.'' -- For now ''we can't afford the revenue loss".

TRADE BUSH -- Generally opposes protectionism.

DUKAKIS -- Would offer short-term protection to threatened industries willing to make investments that enhance productivity.

TAKEOVERS BUSH -- Favors Reagan's lax antitrust policies. -- ''Instinctively opposed to government intervention.''

DUKAKIS -- Promises tougher antitrust enforcement. -- Favors legislation to curb takeover abuses and limit junk bond financing.

ENERGY BUSH -- Supports nuclear power. -- Supports most offshore oil production and petroleum exploration in the wildlife preserve in Alaska.

DUKAKIS -- Has opposed nuclear plants in New England on safety grounds. -- Would restrict offshore oil leasing, and prohibit drilling in the Alaskan wildlife preserve.

LABOR BUSH -- Would consider a higher minimum wage in exchange for a lower minimum for young workers. -- Opposes federally mandated employee benefits such as universal health insurance and comparable worth.

DUKAKIS -- Supports higher minimum wage. -- Supports universal health insurance, parental leave, and comparable worth.