In wake of conference, deficit problem remains ON POLITICS

JACK GERMOND AND JULES WITCOVER

December 18, 1992|By JACK GERMOND AND JULES WITCOVER

WASHINGTON -- President-elect Bill Clinton's economic conference at Little Rock has received largely favorable reviews from critics impressed by the diversity of the group and the wide range of ideas that were put forward. What the conference has not done, however, is produce a consensus on the most vexing political problem Clinton faces in dealing with the economy: the federal deficit.

Opinion polls find the voters ambivalent about the deficit. Most say they consider it a serious problem to the point that they would be willing to forgo tax reductions if the deficit were reduced as a consequence. On the other hand, the same surveys find voters unwilling to sacrifice federal programs or pay higher taxes to achieve that same end.

Clinton himself reflects that ambivalence. He keeps talking about "investment" in the future when what he means is higher spending on some federal programs -- to improve the infrastructure, for example -- that he believes will pay dividends by stimulating economic growth and producing higher revenues. has pledged to cut the deficit in half in his four years in the White House but never specified what mix of taxes and cuts would be used.

The political danger for the incoming president lies simply in the fact that he is a Democrat, a president from a party that the Republicans have been so successful in depicting as committed to the "tax and spend" policies of liberalism. If Clinton does not manage to make significant progress on the deficit, he can expect the Republicans to run against him in 1996 on the argument that his claims he represented "change" and was "a different kind of Democrat" were fraudulent.

Despite the outcome of the 1992 election, the campaign produced some evidence that the big spender label still had political sting. To their surprise, the campaign managers for President Bush found in polling and focus groups that the "tax and spend" argument Bush made during the first debate influenced more voters in his direction than the question of Clinton's history in avoiding the draft and the allied issue of whether he could be trusted.

Moreover, professionals in both parties were convinced by Election Day that the threat of Clinton as a big spender, simply because he was the Democratic nominee, was his heaviest piece of political baggage. The saving grace was that Bush's record on the deficit and economic issues was so weak the president lacked the credibility to make the case effectively.

The president-elect reflected that knowledge in choosing Senate Finance Committee Chairman Lloyd Bentsen of Texas to be secretary of the Treasury and Rep. Leon Panetta of California, chairman of the House Budget Committee, to be his director of the Office of Management and Budget. Both are considered "deficit hawks" and their selection was intended to send a message to the financial community, as well as the electorate, that the new administration is committed to ending the days of $300 billion to $400 billion annual deficits -- and debt service costs becoming second only to entitlement programs in consuming federal dollars.

Clinton also has raised the possibility of changing the budget to separate expenditures for regular operating costs from those classed as investments. But the problem here is deciding what represents an investment. The term may apply clearly to building new roads and bridges, but what about the costs of retraining workers for the changing economy?

The real problem with any honest confrontation of the deficit is what it has always been while the federal debt has been skyrocketing over the last 12 years -- the fact that such a policy inevitably is going to be painful. No one has written any scenario that does not involve reducing the costs of entitlement programs.

Clinton, of course, is just as aware of this as his predecessors and the members of Congress who have been reluctant to face up to the deficit all these years. That is why he is talking about the necessity for cutting health care costs as the first step in making it possible to reduce spending for Medicare and Medicaid.

The Little Rock conference stimulated obvious euphoria about this new hands-on president seeking a consensus on the economy. But it didn't solve the most intractable problem of them all.

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