Advice on the economy isn't put into practice Impact of economic summit unclear

May 13, 1993|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau

WASHINGTON -- Five months ago they trekked from across the country, from corporate board rooms and labor union halls, think-tanks and universities, flower shops and computer companies, to Little Rock, Ark., to prescribe myriad cures for the nation's ailing economy.

It was Bill Clinton's economic summit, an absorbing, challenging, even entertaining data fest that prompted a profound shift in priorities from stimulating the economy to reducing the deficit.

But how do the participants rate Mr. Clinton's progress since then? There is a mixture of praise, frustration and disappointment among what Mr. Clinton called at the time "the most distinguished and diverse group of Americans ever to meet to discuss our economic program and problems."

Clinton supporters blame his problems on Congress. His critics say he switched signals and failed to fight hard enough for his $16.3 billion stimulus plan, which died during a filibuster by Senate Republicans.

"The summit set the direction, and he [Clinton] followed the direction, but the movement has not been as fast or as far as I would have liked," said Jeff Faux, director of the liberal Economic Policy Institute and one of the participants who advocated economic stimulus.

In Little Rock, James Tobin, Yale professor and Nobel Prize Laureate, urged the new Clinton administration to spend $60 billion a year for two years to reinvigorate the economy.

Today Mr. Tobin, one of the country's most respected economists, knows that his formula for boosting recovery fell on deaf ears.

With the economy showing initial signs of renewed vigor, Mr. Clinton introduced a budget calling for $500 billion in deficit reduction over five years, with only a single stimulus shot of $30 billion this year. But deficit-conscious Republicans in Congress balked at even that much of a boost. No major federal spending stimulus is now likely. If the economy is to recover, it will do so mainly at its own pace.

"Maybe, Bill Clinton is a very lucky guy and the economy will do well enough on its own," Mr. Tobin said.

For New York financier Felix G. Rohatyn, senior partner at Lazard Freres & Co. and architect of New York City's financial salvation in the mid-1970s, the most impressive thing about Mr. Clinton has been the sheer scope of the program he has embarked on since the summit.

"This was a very comprehensive agenda, and he feels committed to putting it in motion," said Mr. Rohatyn. "As happens very often when you try to do very large things, when you try to change the direction of a country, or change fundamental problems such as health care, it is not easy.

"Whenever you undertake something like this, it's going to get changed by Congress. I don't believe people should be rated after three months. Nothing is completed after three months. What I would say is the president is trying to do what he said he would do, and he should be commended."

That's not how Robert Cizik, boss of Cooper Industries of Houston and chairman of the National Association of Manufacturers, sees it.

He left Little Rock enthusiastic at the prospect of a program that would cut the deficit, create jobs, improve productivity. Now he believes the Clinton program will fail to achieve those goals, because it is heavy on tax increases and light on program cuts.

"Something happened on the way to the forum. On the way from Little Rock to inside the Beltway we got a different program. We have to say to ourselves -- how is this good for the economy?" Mr. Cizik said.

William H. Brandon Jr., an Arkansas banker and president of the American Bankers Association, went to Little Rock to urge an easing of banking regulations that were causing a small business credit crunch and hindering recovery.

Mr. Clinton was seized by Mr. Brandon's assertion that an easing of regulations could inject as much as $86 billion into the &L economy.

In March, fulfilling his promise to take "a big chunk [out of] the 10-foot wall called the credit crunch," the administration announced reforms to make business and farm loans easier to obtain.

"He has come out with a rather bold initiative on excessive regulation. At least the initiative was taken," Mr. Brandon said. "It wasn't just talk, but specific action."

John White, the Harvard professor who drafted the Ross Perot deficit reduction plan, also believes Mr. Clinton took his advice at the summit seriously.

"Clearly, he has done what I was urging him to do, which was to make this [deficit reduction] a central part of the administration's agenda," Mr. White said. "In that sense he has not only shown courage but a lot of skill, and he has changed the nature of the debate. We are now arguing about what to cut rather than increase. But, obviously, we are a long way from done."

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