Next four years look promising, but some things need dealing with

The Outlook

November 10, 1996|By Jay Hancock and Bill Atkinson

THE COUNTRY is in the sixth year of economic expansion. Inflation is on its knees. Interest rates are heading down, and the stock market keeps chugging higher. So, what should we worry about as Bill Clinton saddles up for a second term?

Douglas G. Ober

Chairman and CEO, Adams Express Co., Baltimore

With a Republican Congress and Clinton at the head of the shop, I feel reasonably comfortable.

One of the best characteristics of Bill Clinton is he listens to his advisers. If he's got good advisers in place, he will do well at influencing the economy. If he brings in people to advise him from the Council of Economic Advisers and the Commerce Department who are uninformed, then we could have some serious problems.

Our greatest concern is inflation and what might happen with inflation. We have been in a period of very benign inflation, and it looks like there could be some major tension there, not that Mr. Clinton is involved directly with that. We have seen employment at a very high level, but we haven't seen any significant increase in wages. I think there will be increasing demands for higher wages; this, in turn, will have to flow through to prices, which will result in inflation.

Higher inflation is probably the worst thing that could happen to the economy because any time inflation goes up, Social Security payments go up, Medicare payments go up and more dollars are chasing fewer goods. It is a self-regenerating problem.

Carl W. Stearn

Chairman, CEO, Provident Bankshares Corp., Baltimore

It seems to me that Clinton is like a snake oil salesman, and everyone knows who he is but he still sells snake oil. Give him a platform to sell and he'll pretend he solves the problem and he sells the solution when it isn't one. That is what worries me.

For example, the deficit-reduction plan. The savings all come in the last year or two. There are increased taxes involved in this, there are cutbacks that have to involve entitlements. I don't think it is going to work.

There are a lot of secular things that need to be dealt with. There is a growing number of employees who have a very difficult time making ends meet. The disparity of the lowest of the working people and the highly paid managers is widening. We haven't solved as a country the increased displacement of jobs. The unemployment levels in Europe are above 10 percent; neither we nor the Europeans have figured out how to deal with that as a long-term economic problem. Unless we address those problems, you can be darned sure that we are going to run into much more troublesome situations.

I don't think it [the country's economic future] is bleak, and I don't think it's a grim future, but I do feel we have to be more willing to face our problems and deal with these issues more realistically. I hope that over the next four years we will face up to those genuine problems.

Paul Boltz

Chief economist, T. Rowe Price Associates, Baltimore

We're looking for a continuation of the status quo. That's partly why Wall Street is cheered. It'll be the same players with the same policies that have brought us moderate, steady expansion with moderate, steady inflation. The main thrust of the first Clinton administration was in the area of free trade and raising taxes. We're not expecting any major new developments in the area of trade. Nor would we expect that, with Congress in its current makeup, the administration would be pushing for higher taxes.

We think both the administration and Congress want to make progress on entitlements. They started to chip away at those problems with welfare reform. But that is a small problem compared to Medicare, Medicaid and Social Security. But if they can do that, this will be a historic Congress and a historic presidency.

Jennifer W. Lambdin

President, Allied Investment Advisors, Baltimore

My concern more is that the economy continues to roll along at a modest pace. The administration doesn't necessarily control that, but an administration can interfere with it.

You've got inflation under control and moderate economic growth. That's good. Having the balance between the Republicans controlling Congress and a Democrat in the White House, that's a nice balance from the perspective of the financial markets. I'm just worried about consumer debt levels and the impact it might have on the economy if it continues. We have pretty full employment, which is a great thing.

What you have to worry about from an economic perspective is wage inflation, which pushes interest rates up.

Globally, there is this whole question of worker backlash, the downsizing issues and consolidation. It is becoming more and more of an issue. A big question is whether people can be retrained or develop the skills necessary to succeed in the information age.

Pub Date: 11/10/96

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