Clinton scales down short-term economic boost $15 billion package would be part of long-term debt reduction program

January 27, 1993|By Los Angeles Times

WASHINGTON -- The Clinton administration, seeking to balance its campaign pledges to create jobs and to curb the deficit, plans to propose a modest, short-term economic stimulus package as part of a larger, long-term deficit reduction program, according to administration officials.

The administration's key economic advisers are urging a one-time package of between $15 billion and $20 billion that is likely to be dominated by new federal spending on such programs as public works and education. That amount would be less than one third of the $50 billion to $60 billion stimulus plan that many Clinton aides originally advocated.

The White House said yesterday that both the temporary stimulus plan and the longer-term investment and deficit reduction program would be unveiled during President Clinton's first State of the Union Address on Feb. 17.

Secretary of Labor Robert B. Reich, fresh from a meeting Monday of Mr. Clinton's top economic advisers, said yesterday that the stimulus package was likely to be in the range of $15 billion to $20 billion.

House Public Works and Transportation Committee Chairman Norman Y. Mineta, D-Calif., meanwhile said that he was told last week by White House chief economic adviser Robert Rubin that the administration was considering a slightly higher figure of $24 billion for a stimulus package. It would be divided roughly into three equal segments: $8 billion for health and environment, $8 billion for transportation and infrastructure, and $8 billion for education and training.

While White House communications director George Stephanopoulos confirmed that the administration was planning a stimulus package, he insisted yesterday that its size had not yet been determined. The sudden flurry of discussion about economic stimulus followed a steady drumbeat by Clinton advisers on the need for economic sacrifice to achieve serious deficit reduction.

A series of grim layoff announcements by major corporations in recent days also has reinforced the idea among Clinton advisers that the country's economic recovery has not had a significant impact on employment. And economists are warning that the recovery, which began to gather steam after the November election, may be faltering.

More signs of sluggishness came yesterday: A new private report showed that consumer confidence leveled off in January after a big two-month gain, while the government said the pay and benefits of U.S. workers grew by only 3.5 percent in 1992, the slowest rate of annual growth in more than a decade. While most forecasters now believe that the economy grew by about 3 percent in the final three months of 1992, they expect growth to slow to about 2.5 percent in the first quarter of 1993.

Such a slowdown could stymie the administration's efforts to focus on long-term deficit reduction instead of short-term recovery. In fact, Clinton aides now seem to believe that they must take some action to help anxious middle-class Americans who elected Mr. Clinton on his promise of economic change and recovery.

"We may have to stimulate the economy in the short term," Mr. Reich said yesterday. "The job picture still doesn't look very good. The economy seems to be coming back. We're going to have some economic news pretty shortly that I think is going to show some progress, but on the job front, we still have a problem, and we can't have a genuine recovery, a real booming buoyant recovery, until we get those jobs back. So we may have to have a little bit of stimulus."

Congressional analysts and economists said they believed that the modest size of the proposed stimulus package indicated that it might amount to little more than "sugar-coating" for the bitter medicine of spending cuts and tax increases that Mr. Clinton also plans to propose in his State of the Union address. Economists noted that $15 billion to $20 billion in spending represents just 0.3 percent of the nation's total output of goods and services, not enough to have much impact on the economy.

"Doing a stimulus package of that size probably comes under the category of keeping your campaign promises, but not much more," noted David Rolley, an economist at DRI-McGraw Hill, an economic research firm. "But it does show a certain level of unease in the Clinton administration about the strength of the recovery."

David Hale, an economist, said, however, that a small stimulus package, coupled with a long-term deficit plan, would be well received in the financial markets.

Treasury Secretary Lloyd Bentsen indicated on Sunday that, while a $20 billion stimulus package was relatively small, it would still be valuable for its psychological impact on consumers.

"Unemployment is still 7.3 percent; you have 9.3 million people out there looking for jobs," Mr. Bentsen said. "And the president is committed to try to see that that's taken care of."

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