Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.bonus,americast.usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Thu, Nov 5 1992 Date: Thu, 5 Nov 92 05:22:46 EST Message-ID: 11-05 0000 BONUS: Clinton has economy's diagnosis USA TODAY Update Nov. 5, 1992 Source: USA TODAY:Gannett National Information Network Bill Clinton is the new doctor on the case. The patient is the economy. Emergency treatment during Clinton's first 100 days as president could determine whether the patient continues to recover or requires long-term care. Much depends on the state of the economy in January, Clinton advisers say. Between now and his Jan. 20 inauguration, Clinton and his team will scrutinize the patient's charts. How weak is the economy? Is a transfusion necessary? WHAT SCENARIOS DO CLINTON ECONOMIC STRATEGISTS LAY OUT? If the economy is sinking: An aggressive stimulus package that would call for spending $5 billion to $20 billion to rebuild roads and bridges this fiscal year - above what is already budgeted for fiscal 1993, which began Oct. 1. If the economy is still growing weakly: A mild stimulus package, possibly in the form of targeted 10% investment tax credits for businesses and tax cuts for households with incomes below $80,000, to encourage spending. If the pace of economic growth picks up: No stimulus this fiscal year. If the economy picks up enough this quarter, Clinton and his advisers might decide they could avoid midyear budget tinkering. WOULD AGGRESSIVE GOVERNMENT SPENDING ENSUE? Clinton advisers say the administration would choose aggressive government spending in January only if economic indicators show the economy getting weaker. "If the economy is in bad enough shape, (there are projects) waiting to be implemented in every city and state in the country," says Robert Shapiro, a key Clinton adviser and head of the Progressive Policy Institute, a Washington think tank. WHAT IS THE GOAL? Create jobs fast. As many as 20,000 to 30,000 jobs are created for every $1 billion in government spending, Shapiro says. Many experts believe the economy is so sluggish now because job growth hasn't picked up. In previous post-World War II recoveries, an average 300,000 jobs a month were added to payrolls. Now, companies getting lean for the long haul continue to cut workers. In September, 57,000 jobs were lost, the Labor Department says. WHAT CAN CLINTON DO? Of course, Clinton can't set up a jobs program by himself. He would need Congress' approval to add to the $1.5 trillion current 1993 federal budget, which sets spending from Oct. 1 through Sept. 30. And he might have a battle getting 535 self-styled economic experts in the House and Senate to agree on how big the economic stimulus package should be. But Clinton has advantages that his predecessor did not in dealing with the Democratic-controlled Congress: He is a Democrat, coming off an impressive election win. WHO WILL HELP CLINTON? The president-elect also would have to get other specialists - such as Federal Reserve Chairman Alan Greenspan and the seven Fed governors - to agree on the best treatment for the economy. Greenspan's specialty is fighting the fever of inflation, which was running at a 2.9% annual rate the first nine months this year, lowest since 1.1% in 1986. Greenspan has told Congress that the Fed is willing to stimulate economic growth by increasing the nation's money supply or lowering interest rates as long as the stimulus doesn't rekindle the fever. WHAT DOES GREENSPAN THINK? Greenspan is keenly aware that an aggressive government spending plan to create jobs might be a case of the cure being worse than the disease. If bond investors see the additional spending as boosting inflation, they could drive long-term interest rates higher, all but canceling the benefits to the economy of more jobs. WILL GOVERNMENT SPENDING HELP OR HURT? Without offsetting taxes or spending cuts, any additional government spending this fiscal year would add to a deficit estimated at $341 billion, up from $290 billion last year. And adding to the deficit would almost certainly push interest rates higher, because to finance the spending, the government would have to sell more Treasury bills and bonds to the public and offer buyers higher yields to take them. HOW IS THE ADMINISTRATION CURING THE JITTERS? Clinton's advisers are emphatic that Clinton would pay for additional spending by cutting the federal budget before he would increase the deficit. To calm jittery financial markets, which are already nervous about a Democratic administration with a Democratic Congress the first time in 12 years, whatever stimulus is applied will have to be combined with credible deficit cuts, advisers acknowledge. There are no plans to stimulate the economy by ballooning the deficit, says Shapiro, who supervised the writing of a 400-page transition book. WHAT IS IN THE BLUEPRINT? Clinton's economic blueprint calls for trimming the deficit to $296 billion this fiscal year, assuming moderate economic growth, vs. the $341 billion projected by the Office of Management and Budget. Clinton hopes the economy will be well enough by January that he can avoid the complications of an emergency spending package. If the economy is better and needs less stimulus, he may try to forge a deal with Congress to get some tax cuts or credits that would be applied to fiscal 1993. WHAT ARE SOME POSSIBILITIES? Businesses would be allowed a 10% tax credit on the money they spend to build factories or buy equipment. New small businesses would be offered a 50% tax exclusion if the company is held by the original owners at least five years. In his promised middle-class tax relief plan, households earning less than $80,000 would get a choice of paying a lower tax rate or taking a $100 to $300 tax credit for each dependent. WHAT WILL THE CUTS INSPIRE? Those cuts and credits are designed to encourage companies or individuals to buy something they might not have bought otherwise. The ripple effect: $4 to $9 of added economic activity for every $1 the government loses in revenue, says Gene Sperling, Clinton's campaign director for domestic policy. For example: The family that pays lower taxes goes out to dinner. The waitress spends her tips at a clothing store, which hires more employees. WHEN WILL CLINTON START WORKING ON HIS PLANS? Even if Clinton decides not to push for a heavy spending package this fiscal year, he won't wait to send Congress elements of his Putting People First program. Clinton's economic prescriptions are well known. He announced his economic strategy June 22 at a U.S. Conference of Mayors meeting in Houston. And as the economy faltered in the summer, that strategy became the centerpiece of a spirited campaign. Now, the election is over and the economy is still ailing. The last doctor - George Bush - didn't prescribe any special remedies. He thought the best treatment was to let the disease run its course. He's been removed from the case. Bonus Editor: Kate Coughlin. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM