How Clinton plan differs from Bush's Democrat relies more on government

September 11, 1992|By John Fairhall | John Fairhall,Washington Bureau

WASHINGTON -- Although some economists are skeptical, Bill Clinton is promoting a plan to create millions of jobs that differs sharply from President Bush's approach.

The Clinton ideas are given their broadest outline yet in a new book, released this week. But many gaps remain, including such details as how much his proposed tax cut would save families and which federal programs he intends to wipe out.

He promises not only to create "high-wage" jobs but to cut the budget deficit in half in four years with a program of increased federal and private investment in economic growth.

Some economists laud this strategy but warn that the numbers -- particularly Mr. Clinton's projections for economic growth and reducing the deficit -- don't add up.

Other economists charge the Democratic approach is a recipe for economic catastrophe in its call for $150 billion in new taxes over four years, $200 billion in new federal spending and employer-provided health insurance for all workers.

One thing most agree on is that Mr. Clinton's plan is different from the president's in its call for higher taxes on wealthy individuals, more federal spending to improve the economy and a stronger governmental role in the marketplace.

Another difference is that, until yesterday, when Mr. Bush put out a 29-page booklet on his plan dubbed "Agenda for American Renewal," only Mr. Clinton had had his plan printed.

Earlier this week, the Democrat added to his published literature with a 232-page book that binds together all their existing campaign proposals, from the economy to welfare reform.

Called "Putting People First," it costs $7.99 at book stores. Is it worth it? Here's what some experts say about its most important section, on the economy.

Creating jobs

Mr. Clinton proposes to stimulate the economy by spurring private investment through tax incentives for companies to buy new plants and equipment and by increasing federal investment in areas he believes encourage growth, among them: education and training; transportation, including high-speed rail; communications systems using fiber optics; sewage plants, and other pollution control measures.

His business-tax incentives resemble Mr. Bush's. One key difference is that while Mr. Bush proposes an across-the-board cut in the capital gains tax to stimulate investment, Mr. Clinton would provide this benefit only for long-term investment in job-producing businesses. As the Arkansas governor puts it, he doesn't believe people should get a tax break for buying yachts and race horses.

Brookings Institution economist Barry Bosworth believes Mr. Clinton is on the right track, though he questions some of the specific investments in infrastructure.

"I think that the fundamental problems in the United States are addressed when he said we have to find a way to increase investment, not increase consumption. And I think his approach of directly stimulating investment is far preferable to the indirect type of stimulus Bush has proposed," said Mr. Bosworth, who was director of the now defunct Council on Wage and Price Stability in the Carter Administration.

But William C. Dunkelberg, chief economist for the National Federation of Independent Business, an association of small companies, worries about Mr. Clinton's spending and tax plans.

"Our overall view would be that the biggest problem we're having with economic growth is that too large a share of our resources is going to the public sector," he said, adding, it's Mr. Clinton's "fundamental philosophy that the public sector should be more involved in problem solving, rather than less. From that perspective we're not going to be very happy with the program that he has to propose."

What really concerns Mr. Dunkelberg, however, is "what he would allow Congress to do." He fears measures, like the family leave bill approved yesterday by Congress, that he says "convert entrepreneurs into managers of social programs, rather than generators of jobs."

Taxes

To help pay for new federal spending and, he says, promote fairness, Mr. Clinton would raise taxes on the wealthiest Americans while modestly cutting them on everyone else.

The top tax rate would go up from 31 percent to 36 percent for couples with adjusted gross incomes above $200,000 and for single filers making more than $150,000.

"Middle-class taxpayers will have a choice between a children's tax credit or a significant reduction in their income tax rate," the new book says, without elaborating.

He also proposes to raise more tax revenue from business by closing loopholes and by collecting $9 billion to $14 billion in taxes he says are being avoided by foreign companies with U.S. operations. In all, he'd raise taxes over four years by $150 billion.

Herbert Stein, who was chairman of the Council of Economic Advisers in the Nixon Administration and now is at the American Enterprise Institute, opposes permanent tax cuts.

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