Bill Clinton's 10 biggest problems

January 17, 1993|By Peter Honey | Peter Honey,Washington Bureau

Three days from the presidency, Bill Clinton confronts a worl already more perilous than the one that brought him victory less than 11 weeks ago. Old enemies are up to new tricks in the Middle East; the passing of the Cold War has raised a flurry of regional conflicts around the world. Meanwhile the economy continues to confound with conflicting signs of recovery and slide, and the deficit continues to grow. Mr. Clinton faces myriad challenges. But here are 10 widely viewed as the toughest, what he said about them during the campaign and the outlook for solution:

1. THE ECONOMY

Economists bicker over whether the recession has ended, but they generally agree that the biggest problem right now is jobs. Unemployment is currently about 7.3 percent, or 9.3 million people -- an improvement from the peak of nearly 10 million last spring, but significantly worse than the late 1980s when the jobless numbered about 7 million. The economy itself has not performed as badly, having grown by 3 percent last year while inflation stayed at about 3 percent.

What he has said: As a candidate, Mr. Clinton preached "investment in people" and promised to spend $20 billion a year on infrastructure development -- everything from highways to high technology development -- to create jobs and raise living standards. He spoke of forcing employers to spend 1.5 percent of their payroll on job training to improve technical skills. He has lowered his sights since then; aides now talk of halving infrastructure spending and of finding other ways to train workers. Mr. Clinton's advisers, meanwhile, continue to urge the introduction of an investment tax credit to encourage new factories and equipment purchases.

Outlook: While advisers predict an average 2.7 percent growth over the next four years, Mr. Clinton has to decide whether to make job growth a higher priority than reducing the massive federal deficit.

2. THE DEFICIT & ENTITLEMENTS

Making a dent in the deficit is increasingly dependent on the struggle to rein in the growth of medical costs, especially large entitlement programs such as Medicare and Medicaid. Most analysts believe it will also require tax increases beyond those already proposed for the wealthy. The Bush administration's recent revision of its annual deficit projections -- as much as $305 billion in 1997, nearly $70 billion more than previously predicted -- did not surprise Mr. Clinton's economic advisers, who had long accused the White House of understating the problem. Some think the new estimates are still too low.

What he has said: Mr. Clinton is using what he claims was an "unsettling revelation" to "revisit" his campaign pledges to halve the deficit by 1996 and cut middle-class taxes. "I have to put everything back on the table," Mr. Clinton said last week. His problem is how to raise revenue and stimulate growth at the same time: Tax increases or steep spending cuts could drive the economy back into recession. He is said to be considering tax increases for gasoline, tobacco and alcohol -- relatively painless revenue sources.

Outlook: His efforts will come to nought, aides say, if Mr. Clinton cannot persuade Congress to support the tough cuts and tax increases that will be needed.

3. HEALTH CARE

The challenge is to cut costs for those with health insurance and expand the net of affordable coverage for the 37 million Americans who have no health plan. The national health bill is rising far faster than inflation and currently accounts for around 13 percent of the economy, threatening to swallow up any hope of deficit reduction. Medicaid for the poor now consumes 14 percent of state budgets. Medicare for the elderly costs 7 percent of the federal budget and would consume 30 percent by 2025 at current rates of increase.

What he has said: Late in his campaign, Mr. Clinton adopted the concept of "managed competition," which would require the government to regulate insurers to ensure that everyone has access to health care at equitable prices, and would standardize care packages among approved insurers. Mr. Clinton also is proposing limits on national health spending in an effort to contain the spiraling costs of medicine and provide enough money to support coverage of the uninsured.

Outlook: The health-care industry has one of the strongest lobbies on Capitol Hill and has successfully repulsed efforts to reform it over the years. But the industry has never been in such disarray or demonstrated such a willingness to consider reform, analysts say, which may provide Mr. Clinton with the opening he needs.

4. POST-COLD WAR FERMENT

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