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Clintonomics.

Progressive economists fear Clinton will not have enough stimuli to jump-start recovery

NEW YORK - Progressive economists say they fear that President Clinton, under heavy pressure to raise taxes and cut spending as he assembles his economic package, will not introduce enough economic stimuli to jump-start the economy and set it on a path to recovery.

Without added stimulus, "there's no engine, nothing to pull us out of a period of slow or no growth," Greg Tarpinian said recently. Tarpinian, chief economist at the Labor Research Association in New York City, pointed to persistently high unemployment and continuing mass layoffs by big firms like General Motors, IBM, Boeing, and Pratt and Whitney.

Economist John Miller characterized as "rather timid" the president's plans to focus primarily on reducing the federal budget deficit while putting only a modest federal investment of $20 billion into education and infrastructure to help stimulate the economy and put people back to work.

To the extent that the deficit numbers make his economic program less stimulative," Miller said, "Clinton will be doing what's politically expedient at the current moment, at the cost of reducing his ability to counteract economic stagnation and get himself re-elected in 1996." Miller is a contributing editor to the Boston-based magazine Dollars and Sense.

At least for now, it appears that Clinton will take the path advocated by his more conservative advisers, Treasury Secretary Lloyd Bentsen and Budget Director Leon Panetta.

But Miller, Tarpinian and other economists interviewed by NCR said they fear that, unless Clinton takes bolder action, the economy will at best continue its current "jobless recovery" and at worst slide into another recession.

Critics of the conservative cast of Clintonomics advocate immediate and substantial federal spending on projects that both create jobs immediately and improve the efficiency of the economy. And in the longer term, they call for reforms to address the economy's underlying structural problems.

"Deficit hawks," on the other hand, contend that increasing the deficit - more federal borrowing - pushes up interest rates and inhibits private firms from borrowing money to make investments in plants and equipment that create jobs.

In addition, said Bentsen in a speech to congressional Democrats Jan. 28, "next to health care, interest on the national debt is the fastest-rising element of the federal budget (and) will soon constitute 14 percent of federal outlays."

Miller responds to the charge that federal borrowing inhibits private-investment borrowing by citing a study by University of California at Riverside economist Robert Pollin, which showed that almost all the increase in corporate borrowing in the 1980s was used not for productive investment but to finance that decade's corporate takeover binge.

And raising taxes on the wealthy would at least partially offset increased interest on the deficit, say administration critics, especially if the top rate were raised from Clinton's proposed 36 percent to 47 percent, which is the world average for countries with income taxes. That alone would bring in an additional $50 billion, according to Miller.

Tarpinian, an adviser to trade union leaders, notes that while Clinton's campaign themes - Rebuild America, invest in people - seem to imply serious government spending, the impact of $20 billion in a $6 trillion economy will be negligible.

"Germany is spending $100 billion a year to rebuild East Germany, a country the size of metropolitan New York," he said.

The plans are already drawn up for many job-creating infrastructure projects, according to economist Jesuit Father James Stormes, who is on the staff of his order's Maryland province.

"The mayors have $27 billion worth of all kinds of projects on the shelf waiting for funding," he said.

Massive federal spending on infrastructure and education would lower unemployment immediately and, in the long run, increase the productivity of the U.S. economy, said Stormes, who formerly taught economics at St. Joseph's University in Philadelphia.

Improved railroads, ports, highways and electronic information networks, he said, would decrease the costs of producing goods and services, and better education would mean lower training costs for employers.

Other critics note that immediate investment will not address underlying problems in the way the U.S. economy works, however.

David Gordon, an economist at the New York City's New School for Social Research, said he was encouraged by "Clinton's insistence on talking about long-term structural problems in the economy" during the campaign. But Clinton has been silent on the major underlying maladies, said Gordon.

"We have a huge, top-heavy management structure and backward labor-management relations when contrasted with, say, Germany" and other advanced industrialized nations, he said. Those two problems, he contends, slow the growth of productivity. Productivity, a key measure of economic efficiency, is the amount of goods or services produced per unit of labor.

"The countries that do best in terms of productivity growth," said Gordon, "are those in which workers have a strong voice in workplace decisions and well-protected Tights." Why? When workers have input into the way their work is structured, they work harder and generate ideas that enhance efficiency, be said.

Empowering U.S. workers in the workplace will require a strong union movement, notes Gordon, which the government could foster by tearing down current legal obstacles to labor organizing.

Gordon notes that, despite "an incredibly hostile environment" for unions, 35 percent to 40 percent of all workers polled say they would like to join a union.

"But in this country we have this incredible charade of an unequal election procedure after workers sign union cards," be said.

"In many Canadian provinces, there's automatic certification (of a union) when 50 or 60 percent of the workers in a shop sign a union card."

None of these reforms is likely unless Clinton comes under serious pressure from some of the constituencies that elected him, said Tarpinian, adding that expectations are "enormously high."

Miller harkened back to the last Democratic president who took decisive action at a time of economic crisis. "FDR ran in 1932 on a promise to balance the budget," he notes. "Economic circumstances forced him to undertake bolder initiatives. All that stands between Clinton and FDR is about a thousand bank failures."
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Title Annotation:progressive reaction to Bill Clinton economic policy
Author:Seymour, Chris
Publication:National Catholic Reporter
Date:Feb 12, 1993
Words:1014
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