(FORTUNE Magazine) – Howard Dean is thundering that he's going to abolish Bush's "irresponsible" tax cuts. Dick Gephardt is itching to start a trade war with somebody. Joe Lieberman sounds more like a Republican every day. Yes, folks, the primary season is officially upon us. And for all the cynicism typically associated with Iowa and New Hampshire, this is a presidential cycle in which policy differences, even among Democrats, are stark and serious when it comes to tax policy, the deficit, and trade. From Howard Dean out front to Senators Joe Lieberman and John Edwards in the rear--and Gen. Wesley Clark, Representative Gephardt, and Senator John Kerry in between--only six of the nine Dems have remotely possible chances of becoming President. (If we're wrong, mea culpa to Dennis Kucinich, Al Sharpton, and Carol Moseley Braun.) All trail Bush in head-to-head polls, but it would be rash to conclude that none is electable.

When this cycle began a year ago, the Democrats were counting on the economy to provide traction as an issue. The sharp recovery and a (so far) slowly declining unemployment rate are taking some of that edge off--but only some. Democrats still believe there's political gold to be mined in the jobs issue (particularly since the latest monthly data showed virtually no job growth), and in those unnerving deficits.

Take the latter. Fiscal policy--or more specifically, taxes--has suddenly become a hot issue for the Democrats. Front-runner Howard Dean shot to the head of the polls mainly because he opposed the Iraq war. But along the way he happily proposed rescinding every penny of Bush's tax cuts, his somewhat dubious logic being that everything was fine under Bill Clinton, so let's just go back to the tax code in place when he left office. Among Democratic activists, who despise Bush, that didn't hurt Dean. Now, as more people start to pay attention to the campaign, he'll face greater scrutiny. Every other candidate except Gephardt--who'd repeal all of Bush's tax cuts to fund a massive health insurance scheme--has said he would retain some form of tax relief for the middle class while raising taxes on corporations and the rich to bring down the deficit. (Definitions of who the "rich" are, of course, vary: Edwards, for example, draws the line at individuals earning more than $240,000 a year.) Clark, running second in New Hampshire, recently issued a fairly detailed plan for sweeping tax reform. It would retain some of Bush's tax relief for families earning less than $100,000 but also raise tax rates on income over $1 million. Clark says the proposal is "revenue neutral"; critics say it amounts to a significant tax increase. In any event, it would not, at least, add to the deficit. Clark now has Dean's attention, and the Vermonter will apparently soon respond with his own new tax reform proposal.

Politicians with specific proposals to cut spending tend not to get nominated. For that reason what they say about balancing the budget is about as squishy as it can be. Edwards is fairly typical: With a straight face he says he would cut "excessive spending" by "closing government agencies that have outlived their usefulness, like the Office of Thrift Supervision." But as Economy.com chief economist Mark Zandi points out, at this point the game is simply establishing more credibility than the President on an issue that Americans say they care about--in this case fiscal sobriety. (How much they actually do care is another subject.) Says Zandi: "The people really in charge at the White House just don't seem to believe deficits matter that much. Most of the Democrats are at least saying that it does, and that they'll do something about it."

What voters do absolutely care about, of course, is employment. And the steady drain of manufacturing jobs, especially in critical battleground states like Michigan, Ohio, Pennsylvania, and West Virginia, makes trade policy particularly critical this year (witness Bush's politically driven, boneheaded steel-tariff decision, which he was forced to back down on late last year). Here there are substantive differences among the Democrats. Gephardt, who must win in Iowa to have a prayer in this campaign, has been a flat-out protectionist for years. He calls the U.S. trade deficit an "American crisis and a global tragedy." That Gephardt is beyond redemption on trade is not news. (Though seriously, Dick, the trade deficit may be an American "crisis," but a "global tragedy"? Last time we checked, the Chinese were not crying in their snake soup over how much stuff they were selling us.) More interesting is that Dean and Edwards have followed him, making it clear, for example, that any new trade agreements would have to meet stiff--and arguably unrealistic--labor and environmental standards.

Lieberman, by contrast, has bluntly warned that protectionism is fool's gold. So have Clark and (to an extent, anyway) Kerry. That common sense could conceivably serve one of them well in later primaries in bigger, more economically diverse states. That candidate will be whoever finishes second behind Dean in New Hampshire. The rest will be history.

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