Regarding Clinton's Economic Package
Levinson, Mark
Bill Clinton won the presidency by promising the "most dramatic economic growth program since World War II." In contrast to Bush, who offered no solutions to economic problems (he barely...
...According to Marshall and Tucker, in today's economy the key policy factors are not adequate consumer demand or the growth of the money supply...
...The cornerstone of Clinton's proposal to create a high-wage work force is to increase spending on training and education...
...the fierce competition of Japan, Western Europe, and the newly industrialized countries, which pay low wages and discourage unions...
...For that, a program of sustained social planning and investment would be required...
...The higher-than-expected economic growth led some in the Clinton administration to question the need for any economic stimulus...
...The higher deficit projections seemed to call into question Clinton's proposals for job training, investments in public works and a middle-class tax cut...
...These institutions could do much more to alleviate the third-world debt burden and to inject investment into those areas of the world economy that now act as a drag on economic growth...
...A recent example is a new book (Thinking for a Living) by Ray Marshall, secretary of labor in the Carter administration, and educator Marc Tucker...
...Paradoxically, cutting spending to reduce the deficit may increase the deficit...
...Each decline of one percent in unemployment reduces the deficit by some $50 billion...
...If jobs increased as they have in past business cycles, several million workers who currently lack jobs would again be employed...
...and the difficult transition from war production required by the end of the cold war...
...The fundamental problem facing the U.S...
...In this caricature of the labor market, good jobs exist but they cannot be filled by workers who lack the necessary (symbolic, analytic) skills...
...It has become an article of faith that while the economy of the future will require more high skilled professional and technical workers, the work force will increasingly consist of workers with inadequate skills...
...The kind of available jobs depends on industrial, trade, and macro-economic policies...
...Clinton inherits a sluggish economy savaged by twelve years of Republican mismanagement...
...Clinton's program tries to please everyone...
...Although this may have boosted the economy last year, it will result this spring in higher-than-expected tax payments...
...The deficit last year was equal to 5.4 percent of the $6 trillion in new wealth created in 1992 in the United States...
...In addition there were strong objective reasons, despite the uptick in economic growth and the new deficit figures, to carry out his campaign pledge to aggressively stimulate the economy...
...David Stockman once admitted that the purpose of the deficit was to make the Reagan revolution irreversible...
...The new deficit projections are no reason to make deficit reduction the top priority...
...economy...
...Cutting spending too much could cause a slowdown if not a recession...
...There has been no job growth for two years now...
...Segments of big business—some openly, some obliquely— are supporting this resistance...
...Shortly after the election it was announced that the economy grew at an annual rate of 3 percent during the second half of 1992 and that the deficit was higher than previously thought—close to $300 billion a year through at least 1996...
...Clinton's four-year plan consists of tax increases and spending cuts totaling $500 billion and new spending of $170 billion...
...inadequate productive investment...
...But what corporations "would be naturally inclined to do" is not necessarily what is best for the U.S...
...People who SPRING • 1993 • 143 Clinton Proposes, We Respond want an activist government would have to acquiesce: "There isn't any money...
...the power of unions...
...With the urgency of fiscal stimulus seemingly taken away by unexpected economic growth and the new deficit figures making deficit reduction the administration's top economic priority, Clinton appeared, for a time, to be left with an economic program that combined Perot's 142 • DISSENT Clinton Proposes, We Respond emphasis on deficit reduction with Bush's hope that the economy would take care of itself...
...q SPRING • 1993 • 145...
...These are mainly systemic problems, not merely part of the usual up-and-down cycles of capitalist economies...
...This is a dangerous half truth...
...Clinton appears to be faced with a contradiction between his goals and the measures by which he seeks to achieve them...
...Furthermore, a deteriorating global economy, restrictive state and local government fiscal policies, pressure on consumers to reduce debt, falling wages, and higher-than-expected tax payments this spring might even throw the economy into recession...
...But it is simply not true that training and education will lead to the creation of good jobs...
...it could also reduce revenue and increase public assistance costs...
...They feared a stimulus would ignite the kind of inflation that destroyed the presidency of Jimmy Carter...
...He needs to enlist the cooperation of the major nations in a common program of economic growth...
...By depressing contrast, 1992 unemployment averaged 7.3 percent...
...The deficit is not the cause of our fiscal problems, it is the result...
...Unemployment in 1962, the year in which Kennedy first sought congressional action, averaged 5.6 percent...
...Instead, the crucial factors ROB ROGERS, reprinted by permission of UFS, Inc...
...falling defense spending that is especially hurting New England and Southern California...
...It is, I think, very much in the interests of labor, African Americans, feminists, and other progressive communities to campaign against this right-wing counterattack...
...Last year President Bush reduced withholding tax rates in order to spur consumer spending...
...One more point: the fundamental causes of our economic difficulties include a revolution in technology that has led to the loss of thousands of skilled and semiskilled jobs...
...This means a substantial increase in public spending on infrastructure, aid to state and local governments, child care, public education, housing, and renewable energy...
...During the campaign Clinton put economic growth and jobs before deficit reduction...
...The president's plan calls for income taxes to rise only for those couples with adjusted gross income over $180,000, corporate taxes to be increased, and the new energy taxes to be modest and offset for low-income taxpayers by increases in the earned income tax credit and other benefits...
...a crude spree of speculation in the Reagan-Bush years, which contributed to an insufficiency of capital investment...
...What these people want is to amputate the progressive portions of Clinton's package...
...Certainly, the United States underinvests in training and education...
...Even if one were to accept that deficit reduction is important, the best way to achieve it is to put people to work...
...While not denigrating the need for education and training, Larry Mishel and Ruy Teixeira of the Economic Policy Institute have shown (using the government's own projections) that the growth of job-skill requirements is actually projected to slow down in the future and, in the absence of a different economic policy, the higher skill requirements will coincide with decreased compensation levels...
...In contrast to Bush, who offered no solutions to economic problems (he barely recognized any), Clinton emphasized the need to create millions of high-wage jobs, provide tax relief to working families, expand training and education, and ensure affordable health care for every citizen...
...There is a problem in over-selling training...
...While this part of Clinton's plan is a very welcome reversal of Reaganomics, the one thing the plan is not is bold...
...According to the Economic Policy Institute, a stimulus twice as large as Clinton's would reduce unemployment only to the same 5.5 percent to 6 percent range that sufficed to alarm the Kennedy economists into recommending a stronger economic response...
...The current lack of any rebound in jobs, despite the "recovery," is unprecedented...
...There will be no stimulus this year because the increased spending (only about $8 billion) will not even make up for the larger tax payments due this spring...
...exports...
...This should not be considered excessive for a country emerging from a recession characterized by lost tax revenue and higher public assistance and unemployment compensation costs...
...The best part of the plan is that it provides funds for such worthy projects as improving the infrastructure, Head Start, summer jobs for youth, and an apprenticeship program for noncollegeeducated youth, and especially that it is funded by progressive changes in the tax system...
...Whatever the merits of Clinton's economic package—and parts of it have a distinct merit—it is not likely to do much to cope with these deeper problems...
...In comparison to the Kennedy-Johnson 1964 tax cut or even the Ford administration's 1975 acceptance of congressional demands for anti-recessionary action, the Clinton plan is disappointingly timid...
...and training...
...stagnant wages and faltering economies in Europe and Japan that are holding down demand for U.S...
...Clinton will not be able to revive the U.S...
...But its importance is more political than economic...
...Few seemed to realize that the higher deficit was in large part responsible for the economic growth...
...Which is not to say the deficit is unimportant...
...144 • DISSENT Clinton Proposes, We Respond turn out to be an adequate supply of highquality human resources, business strategies that emphasize quality and productivity, and a pattern of work organization that fosters both of these goals...
...A modest economic stimulus is combined with a much larger effort to reduce the deficit...
...In those innocent days, this was an unacceptable figure and the administration aimed at 4 percent "interim" unemployment and an ultimate 3 percent figure...
...a glut of empty office buildings...
...Meanwhile, as I write a week or so after Clinton announced his package, it is already clear that resistance from the right, including some Democrats, is building up in Congress...
...The economy is stuck with high business, consumer, and government debt...
...Training and education by themselves will not make up for the dramatic fall in wages for most American workers...
...Now he has reversed himself, and therein lies the problem...
...Perhaps Clinton, who is said to possess impressive tactical savvy, realized the absurdity of adopting the economic program of the candidates he defeated...
...With people needing goods, services, and jobs, and with productive capacity lying idle, there is no excuse for austerity...
...My whole view was that if we had investment tax credits, and we have other investment incentives and they were paid for by raising rates on individuals, that more individuals would invest, but the corporations would be naturally inclined to do that anyway .. . If one accepts corporate domination of the economy it is "natural" to give "incentives" to the owners of capital and hope that something will trickle down...
...A large reduction in government spending will reduce demand without increasing productive investment...
...At the end of the last recession in 1983 the deficit hit 6.3 percent of GDP (Gross Domestic Product), and it stayed at 5 percent or more until 1987...
...Getting Japan and Germany to reduce their trade surpluses by increasing their imports would be a good start...
...It also means getting central bankers to agree to a very liberal monetary policy and changing the austerity policies of the World Bank and IMF...
...state and local budget problems...
...See for example an interview Clinton gave to the Wall Street Journal (December 18, 1992): I was trying to leave as much money in the corporate sector as I could for reinvestment in the economy...
...economy is not the deficit but rather slow growth caused by the decline in productive investment (due not to a shortage of funds but to the use of financial resources for speculation), falling wages and declining living standards for the majority of Americans, and slow growth in the world economy...
...In order for Clinton to reduce the deficit in the long run it will be necessary to increase it in the short run by aggressively implementing his campaign pledge to expand public investment...
...economy without addressing the problems of the world economy...
...Kennedy-Johnson economists, moreover, started with a less unhealthy economy than does Clinton...
Vol. 40 • April 1993 • No. 2
