Last week I had a chance to spend several hours with one of Bill Clinton's top economic advisers. I have to admit that I went into the meeting as a skeptic, with serious worries about Mr. Clinton's tax, spending and industrial policy agendas. By the end of the meeting my skepticism was gone. I was terrified.

I had that sinking feeling of déjà vu all over again that we remember from the days of Jimmy Carter. Mr. Clinton's economic advisers have packaged an aggressive social agenda masquerading as an economic program. They believe the econometric models. And they don't have a clue how the financial markets work.

The Clinton team offers an economic plan based on the following beliefs:

-Economic declinism.  America's ability to create wealth, they say, has been declining for the past 20 years. Nowhere do they acknowledge the 18 million new jobs and the 28% increase in real gross domestic product during the 1980s, or the world-class growth of U.S. manufacturing productivity in the same period.

-Germano-Nippo-phobia. Global competition is supposedly killing us; Japan and Germany are cleaning our clocks in the "high-tech, high-wage" industries of the future; thus, we must adopt German and Japanese methods to compete in the 1990s. Again, no one mentions that Japan's stock and land prices are imploding, or that its banking system is being kept intact by government bailouts. Ignored, too, is the difficulty Germany's social democrats are having absorbing the costs of unification.

-Taxes on capital don't matter. Tax rate cuts, the Clinton team mantains, had no effect on savings or investment capital in the 1980s, so raising tax rates won't drive capital away in the 1990s. Competition for increasingly mobile pools of international capital is instead waged with roads, bridges, fiber optic networks and grants for worker training, not with after-tax returns on capital.

-Wealth bashing.  The most effective way to raise a lot of tax revenue in a hurry is supposedly to increase tax rates on the highest incomes "because so many millionaires were created in the 1980s." Mr. Clinton and his advisers will create a new tax bracket (36% or 38%, they are still arguing over our wallets), increase the alternative minimum tax for individuals and add a surtax on undeserving millionaires to bring the top marginal tax rate to 40%-42%. They do not believe these people will take any meaningful evasive action. The slow-thinking millionaires will simply hand over their wallets to the government.

-Nerve-dead financial markets. Higher marginal tax rates, the Clinton team assumes, will not increase interest rates, reduce stock prices, investment, productivity or real income, or drive capital away from the U.S. None of these activities are sensitive to after-tax considerations, apparently.

-Government activism.  Since the private marketplace can't seem to get the job done, it is the job of government to invest in "the common elements of production" (skills, education, R&D, transportation, etc.). The Clinton team favors a "hands-on" program. That is of course precisely what we should be worried about.

-Wise-men-ism. Although investors are apparently brain-dead to changes in relative after-tax rates of return, the way to get business managers to undertake investment projects is through subsidies, tax credits and other incentives that presumably also operate through manipulating the same after-tax rates of return on capital. The Clinton team has an aggressive industrial policy in mind, complete with committees of wise men charged with assembling a list of critical industries and technologies for our future. These industries are to be singled out for special help from the government. (I guess Mr. Clinton's advisers are so pleased with what welfare has done for the inner cities that they want to try it out on high-tech industries.)

-The Third Way.  This New Age approach to economic policy is based on a partnership between government and business. The goal of Third Way industrial policy is to find ways to keep foreign competitors out of our markets and to subsidize the efforts of companies and industries the all-wise government believes to be especially deserving.

Clintonomics may sound like traditional liberal Democratic thinking, advocating a larger role for the government in the economy. But in a very important sense it is a radical departure. Mr. Clinton is the first Democratic candidate since the 1930s whose economic program is not based on Keynesian demand management.

Mr. Clinton's emphasis on using taxes, subsidies and credits to induce changes in business behavior is somewhat reminiscent of supply-side, incentive-based thinking. But the similarity is only skin deep. Supply-side policies focus on removing the disincentives to work, save and create wealth caused by overactive government policies. Mr. Clinton's policies, in contrast, rely on the dark side of supply-side thinking.   They attempt to use taxes and subsidies, crafted by government apparatchiks, to manipulate market prices in order to engineer a social or economic outcome the private market would not otherwise produce.

In this sense, Mr. Clinton's policies are potentially much more disruptive than those of Jimmy Carter, who explicitly rejected the market mechanism when dealing with the economy (remember price, wage and credit controls?). Mr. Carter's policies shut markets down, bringing about sudden financial crises, which ultimately forced the government to revert to the market mechanism. Mr. Clinton's policies, in contrast, will distort market outcomes, which could impede economic performance for a long time.