Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 24, 1993 TAG: 9301220129
SECTION: BUSINESS PAGE: F-2 EDITION: METRO
SOURCE: BY PETER G. GOSSELIN KNIGHT-RIDDER/TRIBUNE
DATELINE: WASHINGTON LENGTH: Long
CLINTONOMICS LOOKS LIKE SUPPLY-SIDE ECONOMICS
Bill Clinton could hardly have picked a more awkward moment to become president of the United States.The nation is at a historic turning point - free at last from its dozen-year dalliance with Reaganomics; finally relieved of its costly burden of Cold War; by all rights, ready to choose new challenges, scale new heights.
Except for the bills.
During the campaign, Clinton barely mentioned Washington's multi-billion dollar deficit or the pile of corporate and personal debt that straps the American economy. Since, he has barely mentioned anything else.
Whatever balance the new president strikes between funding his promises for the future and paying off the bills of the past is bound to be an uncomfortable one, both for a man who craves public approval and for a nation that wants to soar once again.
"This isn't going to be any New Frontier," said John Morton Blum, a retired Yale historian and an authority on the Roosevelt and Kennedy administrations. "We just don't have the money."
If Clinton did not fill his campaign speeches with talk of debts and deficits, what he did fill them with - what he promised to serve up in big dollops if elected - was Clintonomics, a stew of new "public investment" in roads, research and education, plus a few taxbreaks, intended to fix what ails the economy.
At first, the mixture looked an awful lot like the old Democratic recipe of tax and spend, a point on which President Bush harped during the campaign. But like so much else that Bush did last year, the outgoing president's attacks missed the point.
For in embracing Clintonomics Clinton actually rejected key elements of the old Democratic catechism, against which Bush had railed, in favor of a program that looks suspiciously like one from which Bush, not Clinton, is the apostate - supply-side economics.
Consider:
Traditional Democrats have long held that a president's first economic duty is to use Washington's wallet to manage the "demand" side of the economy, insuring that there are enough consumers to demand the products that producers supply and, if not, stepping in to fill the gap with a plug of new government spending.
But not Clinton. The Arkansas Democrat has barely mentioned the words "fiscal stimulus," the economist's term for such offsetting government spending, even as powerful voices in his own party have called for one. And though he may yet offer a stimulus package, it is likely to be more show than substance.
By contrast, supply-siders, who until now have come only from the ranks of Reagan Republicans, believe that the first object of government solicitude should be the "supply" side of the economy, the one that produces both the products Americans buy and the jobs that employ them. And if one is to believe his campaign rhetoric, so does Clinton.
To be sure, Reagan and Clinton supply-siders differ over what kind of solicitude is called for. Reaganauts think that government should unleash the private sector to compete by cutting taxes and regulation. Clinton thinks that it should jump in to help the private sector compete by providing better roads and communications, smarter workers and new research.
But the underlying economic themes are strikingly similar, and so may be some of the underlying weaknesses.
Thus, what happened to Reagan's supply-side revolution may offer a clue about some of the dangers that Clinton faces.
Not everybody agrees about what derailed the Reagan revolution, but three things surely contributed: blindness to some basic economic trends, an economic theme that was easily bent to other purposes than the one intended and wildly excessive optimism about what supply-side could accomplish and when. The Clinton camp shows signs of suffering from similar weaknesses.
The former Reagan budget director, David Stockman, wrote in his book, "The Triumph of Politics," that Reagan and his top lieutenants had little interest in conventional economic wisdom when they took office. As a result, they paid almost no attention to the fact that the country was in the midst of a Federal Reserve-engineered recession that was slicing government tax revenues and raising the deficit when they put together their 1981 tax cuts. These cut revenues and raised deficits still further.
Even some Clinton supporters worry that the new president has a somewhat similar disinterest. Only two members of Clinton's top economic team are trained economists, and one, Laura D'Andrea Tyson, Clinton's choice to head the Council of Economic Advisers, espouses views outside the economic mainstream.
Reagan and his top aides were convinced that any problem with their economic plan would be corrected by a burst of entrepreneurial enthusiasm brought on by their supply-side tax cuts. Though the plan eventually delivered on some of its promises - for example, boosting private investment - it never did so at the pace or to the extent promised. Even supporters worry that the same will be true of Clinton's public investments.
In Reagan's case, the mismatch between economic rhetoric and reality helped add $3 trillion to the federal debt. In Clinton's, it could force him to drop portions of his public investment agenda in favor of deficit reduction.
Right after the election, Clinton promised "to focus on this economy like a laser beam." But more than anything else, what he locked onto was the deficit.
Key aides have sought to portray the change of emphasis as having been forced on Clinton by unexpected increases in the deficit. But their explanations seem disingenuous. The trend toward higher deficits, if not the exact level of that trend, was clear even before the election. And Clinton zeroed in on the deficit issue before aides say he knew of most of the higher deficit numbers.
Aides acknowledge that Clinton was behind a pessimistic presentation on the deficit at his televised economic summit last month in Little Rock. Though Clinton appeared at the event to be receiving the bad news for the first time, his own aides had actually prepared the material. It was presented by John White, the architect of Ross Perot's deficit reduction plan, who is now at the Kennedy School.
"They told me what they wanted and I said `You better give me the numbers you have,' " White said during an interview. Aides, rather than White, prepared the slides used at the summit to show the higher deficits. Subsequently, the Clinton camp has come up with still higher numbers.
Clinton's focus on the deficit has served some practical purposes; it has reassured nervous financial markets and provided splendid political cover in case he must renege on campaign promises.
But these don't seem adequate to explain why the new president would go to such great lengths to advertise an issue that runs at almost complete cross-purposes with the public investment agenda on which he campaigned.
The answer may lie in the way Clinton plans to govern. Unable to satisfy both the nation's desire to get on to new challenges and to pay off its old bills, Clinton seems to be setting up distinct camps within the new administration to compete over what balance should be struck.
In this, he is taking a page from President Franklin D. Roosevelt, according to Blum, the Yale historian. "Roosevelt was happy with advisers who disagreed. He'd let them fight and then bring their disagreements to Papa to settle," Blum said.
Blum said the arrangement can let a president finesse issues like the deficit on which the public is divided, and try out different, "sometimes diametrically opposite," policies in areas like public investment or health care, where it is not clear what works best.
But, he said, "You can end up with policies that cancel each other out, and it's very easy to look like you're stumbling."