Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 14, 1993 TAG: 9302140304
SECTION: HORIZON PAGE: D-1 EDITION: METRO
SOURCE: BOB DEANS COX NEWS SERVICE
DATELINE: WASHINGTON LENGTH: Medium
CLINTON TO GIVE US TOUGH THE CHOICES ON WEDNESDAY
Short on magic and long on tough tradeoffs, the plan President Clinton will unveil Wednesday in a nationally televised speech to Congress will show how he expects to deliver on competing promises. Clinton pledged to create millions of jobs while slashing billions of dollars off the federal budget deficit.That economic pledge ranks first among his five top legislative priorities. The others are reforms in health care, welfare, national service and campaign finance.
First, the jobs. Without those the recovery could peter out soon, driving the deficit even higher than the $310 billion - another $1,211 in debt per American - it is projected to hit this year.
Since Clinton won election, the economic news has been mixed. The economy grew in the last three months of 1992 at a healthy annual rate of 3.8 percent, but many of the country's most stalwart corporations continue laying off workers by the tens of thousands.
In January, the official unemployment rate finally edged down to 7.1 percent after being stuck for three months at 7.3 percent. But the main reason for the drop appears to have been that half a million people stopped looking for jobs, so they weren't counted as unemployed.
Despite the recent growth, most companies still aren't hiring. Many managers do not want to increase costs by expanding payrolls until they are convinced that the recovery will last.
The catch is this: The recovery might not last, unless businesses begin hiring new workers.
The economy grew recently because consumers spent money faster than they earned it, raiding bank accounts and loading up their credit cards to satisfy pent-up demand.
"In essence, what consumers did was go on a buying rampage and draw down savings," explained economist Gordon Richards of the National Association of Manufacturers.
That can't last forever. Richards said, "When you see weak employment growth, you have a warning sign."
That's why Clinton has signaled that his most urgent economic task is to try to put several hundred thousand people back to work this spring.
Top White House economic advisers have indicated that Clinton plans to stimulate job growth with some $30 billion in federal spending increases and tax breaks for new and growing businesses.
In the short term, that could increase the deficit, but perhaps not as much as ignoring unemployment would.
Joblessness raises the deficit in two ways: Idle people don't pay taxes, so revenue suffers, and they increase the amount the government must pay out for unemployment benefits, food stamps, welfare and other support.
Congressional economists estimated that last year's lackluster economic growth and unemployment rates well above the 1989 level of 5.3 percent cost the government some $90 billion, or nearly one-third of the deficit.
Clinton's stimulus package won't reduce unemployment to anything close to the 1989 level: a $6 trillion economy can't be moved much by a $30-billion shove.
So Clinton wants to balance his short-term steps to create jobs with a long-term deficit reduction plan. Lower deficits could spark even greater job growth down the road by holding down or reducing interest rates.
Deficit reduction would require Clinton to increase some taxes and cut some spending. He already has promised to do both, but there is a drawback to each.
Raising taxes reduces the amount of private money available for the investment that generates jobs. Slashing spending shaves jobs off the payrolls of government agencies and private businesses that serve those operations.
Sooner or later, all of that must happen, and nothing Clinton proposes Wednesday can change that.
"The unpleasant truth," Congressional Budget Office Director Robert Reischauer testified this month before the House Budget Committee, "is that there are no alternatives to painful measures."