Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.twt.news From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Markets await signals from the Clinton team Date: Mon, 9 Nov 92 14:59:57 EST Message-ID: \SE A;NATION \SS (WS) \HD Markets await signals from the Clinton team \BY George Hager \CR CONGRESSIONAL QUATERLY Now the tightrope act begins. With high expectations on one side and nervous financial markets on the other, President-elect Bill Clinton must figure out a way to accelerate a sluggish economy without driving up interest rates. It will be a neat trick if he can pull it off. So far, the markets appear to be treading water, waiting for the first signals from the Clinton transition team. Who will fill key jobs at the Treasury Department and the Office of Management and Budget? What will Mr. Clinton's economic stimulus package look like? At least for the short run, Wall Street had already built a Clinton victory into its calculations. "It's in the market," said Salomon Bros. Managing Director Steve Bell the day after the Clinton victory. "The market reaction has been very subdued." Mr. Bell, who was once GOP chief of staff for the Senate Budget Committee, said Wall Street was reassured by the perception that Mr. Clinton's 43 percent of the vote did not give him an overwhelming mandate. Further tranquilizing to investors was the failure of Democrats to win a filibuster-proof 60-seat majority in the Senate, Mr. Bell said. Mr. Clinton himself sought to calm any nervousness in the markets the day after the election: "Today I say to our financial and business leaders that although change is on the horizon, we understand the need to pursue stability even as we pursue new growth," he said. Just how Mr. Clinton will make good on his pledges is a mystery, but any economic plan he brings to Congress must include some strategy for complying with - or circumventing - the 1990 budget law. The product of a hard-won deal between President Bush and Congress, the law set strict rules on spending and tax cuts. Simply breaking the 1990 budget agreement is an option some in Congress already have begun to discuss, but such outright abandonment of fiscal discipline might spook the markets. The budget law does allow emergency spending, however, and a temporary shot of stimulative spending or tax cuts might not worry Wall Street quite as much as junking the deal altogether. Mr. Clinton will need money for any major attempt to put people to work, and congressional appropriators left more than $16 billion lying on the table when they finished their fiscal 1993 spending bills last month. The $16 billion is the difference between what was spent on the 13 regular fiscal 1993 appropriations bills and what they could have spent under the budget caps. The upside is that Congress could spend this money without violating the 1990 budget deal, and it is available right now. The downside is that most of it comes from the defense budget, and rules still technically bar its use for anything but defense programs or deficit reduction. The sum available certainly is not enough to revive the economy. "It's almost insignificant in a $6 trillion economy," noted Stan Collender, director of federal budget policy for Price Waterhouse, the management consulting and accounting firm. Others have suggested that it would take about $30 billion, or roughly 0.5 percent of the gross domestic product, to provide an economic jolt. Strategists have speculated that Mr. Clinton could combine the $16 billion in spending with a like amount of stimulative tax cuts to make a package of roughly $30 billion. Unlike the spending, however, any tax cuts would require an emergency exemption from the budget rules and would add to the deficit. According to scorekeeping figures from the Office of Management and Budget, Congress has used up virtually all its 1993 credit under pay-as-you-go rules that limit tax cuts. * Distributed by Scripps Howard. This article is copyright 1992 The Washington Times. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM