Last July, President Bush fired off the first salvo in the clean air debate-an imaginative bill that promises to break the decade-long logjam on clean air. Now, round two has been hurriedly completed, resulting in a not-so- kind-and-gentle compromise between the Senate and the administration, which needlessly stifles environmental innovation and reduces economic growth. The focus of attention now shifts to the House, where members face a huge temptation to add ornaments to an already ornate tree.

If the legislative trends continue, we run the risk of implementing a massive industrial policy for the United States without giving more than a moment`s thought to its consequences. Let`s take stock of some prevailing myths surrounding the clean air debate and develop a recipe for displacing ignorance with insight.

Myth No. 1: America`s air is getting dirtier.

Reality: An EPA study on emission trends reveals we have made steady progress in reducing air pollution in most categories between 1978 and 1987. More needs to be done, especially on urban smog, but by most measures the air in our cities and the country as a whole has gotten better, not worse. The health risk from airborne lead emissions from gasoline has been eliminated. Annual emissions of all major air pollutants regulated by Congress has gone down by millions of tons over the past decade.

Myth No. 2: Both of these bills will clean up the air.

Reality: They will make significant progress in reducing air pollution. However, they will not solve the urban smog problems instantaneously or even over the next decade. Moreover, it will be a minor miracle if the attainment schedules in these bills are met.

Myth No. 3: Both of these bills will substantially reduce public health risks.

Reality: They will have a minimal impact on cancer-at most, reducing cancer cases by two-tenths of 1 percent. On the other hand, the bills will reduce ozone levels, thus making it somewhat easier to breathe in highly polluted areas. If public health were truly the primary concern, though, we would be much better off using the additional billions for clean air for increased cancer research, improved hospital care and better education so that our economy will prosper.

Myth No. 4: The Senate compromise significantly strengthens the environmental goals in the administration bill.

Reality: There is not a dime`s worth of difference between these bills environmentally. They both make virtually identical gains in addressing acid rain, air toxics and urban smog. The primary difference is that the president`s bill is more sensitive to the need for stimulating environmental and economic progress. The Senate compromise subsidizes the use of expensive scrubbers designed to reduce acid-rain-causing emissions at power plants.

This provision may save a few high-sulfur coal mining jobs, but at the expense of jobs in low-sulfur coal mining and natural gas production. Sen. Byrd offered a deal to Sen. Mitchell while administration officials and Senate Republicans took a back seat.

The scrubber provision not only increases electricity costs, but also encouraged the use of an energy-intensive technology that adds to the global warming problem by increasing carbon dioxide emissions. Relatively clean fuels, such as natural gas, are penalized.

The Senate compromise further micromanages the way automakers make cars by specifying stringent standards for the tailpipes and forcing automakers to use a large canister in the gas tank to reduce emissions. Such micromanagement has its cost. The tailpipe standard alone will cost consumers an extra $600 per vehicle, adding over $8 billion annually to the cost of the bill.

The administration`s approach, in contrast, would increase competition in the market for cars and fuels by setting broad environmental targets and allowing the marketplace to decide how best to achieve these standards. Who cares if our children are driving electric cars or cars powered by cleaner gasoline, natural gas or methanol-so long as the air in our cities is breathable?

Myth No. 5: The Senate compromise will not have an adverse impact on jobs or U.S. competitiveness.

Reality: Americans will double expenditures on clean air (from $30 billion to $60 billion) in the years to come, dramatically affecting jobs. A study I conducted with Dr. Wilbur Steger for the Business Roundtable suggests that jobs lost from controlling air toxics alone will total 20,000 to 200,000, unless Congress makes special exceptions for selected industries.

Ironically, this compromise will easily add another $10 billion in costs to the initial administration bill without buying any environmental improvement. Wasting such staggering sums can weaken even the mightiest of nations.

The Senate compromise would result in major changes in the regional pattern of employment as well as the mix of industry in the United States. One can argue about the precise nature of these changes, but they are likely to be substantial. As pollution control expenditures soar and electricity rates increase, domestic manufacturing, particularly heavy industries like steel, will feel further strains.

Myth No. 6: The Senate compromise will encourage industry to develop environmental innovations by increasing flexibility.

Reality: The administration bill allowed great flexibility in achieving reductions of both acid-rain-causing emissions and automotive emissions. The Senate compromise is a giant step backward, sacrificing flexibility to accommodate special interests. In addition to subsidizing the production of dirty coal, the Senate bill eliminates opportunities for flexibility in reducing the nitrogen oxides that contribute to acid rain and smog. It also creates special categories for certain vehicles, such as taxi fleets and buses, and requires that these vehicles use ''special'' fuels (something other than cleaner gasoline). Such micromanagement is costly and yields little, if any, additional benefit.

What can be done?

Two things. First, Congress and the administration should develop estimates of the overall economic impacts of the Clean Air Act. No government agency has undertaken this exercise, yet the public must understand the trade- offs between jobs and economic growth on the one hand, and environmental progress on the other.

Second, and most important, all parties to the debate need to recognize the importance of creating a regulatory structure that will encourage industry to search for greener solutions. We do not have the technical know-how now to deliver the environmental quality we want. Simply having Congress mandate that result will not work unless business is given a direct incentive to cooperate. The best way to make continued environmental progress is for legislators and regulators to set the broad environmental goals and let industry achieve them in the most efficient, environmentally effective manner.

In short, we need a Clean Air Act that minimizes federal oversight, gets maximum bang for our environmental buck and allows us to make sustained environmental progress in the years to come. It`s now up to the House to heed the call.

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