Clinton's Team Floats Proposals For Economy
Cabinet officials propose stimulus package, as Federal Reserve warns that growth is weak. ECONOMIC STRATEGY
TOP Clinton administration officials have been carefully testing the waters before the White House formally launches its economic plan. Labor Secretary Robert Reich's statements this week seem to reflect the tentative approach.
Mr. Reich Tuesday underscored the plan to push for a short-term economic stimulus package of "between $15 billion and $20 billion." In the wake of bad news about the nation's deficit, it was a bold declaration of interest in more public spending.
With no dramatic opposition to his proposal, Mr. Reich the next day pushed a bit further, saying that a package of up to $25 billion may be necessary.
Since President Clinton took office Jan. 20, the new members of his Cabinet have been floating proposals on taxes and spending and watching them be carried by the tides of public response. "One of his people will say something one day, and then [White House Spokesman George] Stephanopolous will disavow it the next," observes Joseph Cobb, chief economist for the Senate Republican Policy Committee.
Treasury Secretary Lloyd Bentsen, for example, raised the specter of a broad-based consumption or energy tax on a Sunday talk show, and drew immediate fire from diverse groups, such as the American Petroleum Institute and Citizens for Tax Justice, which warned that it would hurt America's poor the most.
While the 10-day-old administration has not committed to any specific action on the economy, it has defined its goals. Tax policy will be designed to discourage consumption, promote savings, and increase investment. New spending initiatives will be accompanied by strong efforts to reduce the federal deficit.
Amid the flurry of possible approaches, Federal Reserve Board chairman Alan Greenspan appeared before the congressional Joint Economic Committee to comment on the state of the nation's economy. While inflation remains under control, job growth remains weak, he says, and banks are still reluctant to lend - two realities that will dampen consumer spending, business expansion, and economic growth.
BANKERS contend that the lending outlook is complicated by laws that have tightened regulations on banks, with higher capital requirements and tougher loan restrictions. Small firms, the biggest generator of jobs, are hindered by regulations that limit expansion and hiring capacity.
Mr. Greenspan, who has long-implored lawmakers to control government spending and raise revenue, seems to like what he is hearing from the new administration, especially Mr. Bentsen, with whom he began weekly meetings on Wednesday. "Cooperation is already accelerating," Greenspan said. The prudent Fed chairman, who cautions against anything more than a modest fiscal stimulus package, says he and Mr. Clinton's team currently share the same economic policy views.
But before the Senate Budget Committee on Tuesday, Congressional Budget Office director Robert Reischauer laid out the country's future balance sheet in very stark terms: "If further steps are not taken to curb spending or to increase taxes, the deficit could reach $650 billion [more than double the current total] ... 10 years from now." An economic stimulus package may be useful in the short term, he says, if the recovery continues to follow an uneven path. "But ... it will add to the federal government 's deficit. And it will make the long-run problem a touch more difficult to solve."
Clinton is admittedly eager to win lawmakers' favor before he formally submits a package.
Mr. Cobb, who is responsible for analyzing legislation when it hits the Senate floor, says that when Clinton addresses the nation on Feb. 17 with his State of the Union speech, "he will offer guidelines to an economic package," he says. "It'll be the same tactic we've seen all week. He'll gauge the public reaction, and won't really give us anything solid until he submits the budget as late as mid-March."
Responding to charges that Clinton is well past his own Jan. 20 due date for delivery of an economic program, Stuart Eizenstat, President Carter's domestic policy chief and slated for an appointment in the Clinton administration, says, "When the new deficit projections came out, it clearly caused a need to relook at the whole economic package - the dimensions of it, the middle-class tax cut, and so forth."
Instead of racing against a self-imposed deadline, Mr. Eizenstat told reporters at a Monitor breakfast, "it's a heck of a lot more important [or Clinton to] build a consensus in Congress, pre-negotiate this package, and get the darn thing done than to try to come up with a half-baked package ... and find that it flounders."
Clinton's test, Eizenstat says, will be whether "he gets his program passed, and passed promptly, showing he can break the gridlock on the economy."