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The economic impact of a Clinton victory.

The difference between the arts of campaigning vs. governing is the difference between rhetoric and action. President-elect Bill Clinton faces his first test in governing now, not on January 20. While Mr. Clinton is not facing the Great Depression, he is expected to not only lift the economy out of its doldrums but provide this country with a better economic future. Mr. Clinton will soon name a number of key Cabinet officials, and his choice of a Secretary of Treasury looms as his most important selection.

In a formal statement made November 4 in Little Rock, Arkansas, Mr. Clinton said: "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." A few days later, Mr. Clinton stated he would convene an economic summit of business leaders and experts to discuss economic policy and his proposal for a White House economic security council.

The new economic security council, a Clinton campaign pledge, would give higher visibility and more importance to domestic issues. By its creation, Mr. Clinton is signaling that economic issues will be as important to his administration as traditional security issues. One of Mr. Clinton's motivations behind this endeavor is that many U.S. industries and small businesses are no longer competitive with Japan and other leading industrial countries. Mr. Clinton argues that the United States has been working at a disadvantage because it does not pursue a strategy aimed at winning the competition. By establishing the new economic council, Mr. Clinton would formulate, coordinate and direct a comprehensive strategy of domestic and international competitiveness.

At this early stage of the transition, it is possible only to speculate about the impact of a Clinton administration enactment of a broad economic growth plan. However, one may envision a capital gains tax cut, an investment tax credit of some type and business investment incentives, such as accelerated depreciation--incentives aimed at encouraging businesses to invest in new plants and equipment. In fact, businesses already should be thinking about different strategies and making adjustments based on the President-elect's campaign promises, specifically outlined in his book, Putting People First.

The most optimistic industries are the ones in which Mr. Clinton has pledged to invest more federal resources. Companies having an interest in transportation--"infrastructure"; environmental technology; conversion from defense to industrial needs; and investment in communities are the industries most likely to be riding the Clinton wave. Clinton has proposed an $80 billion, four-year program to improve U.S. transportation needs, including the rebuilding of roads, bridges and rail systems.

One of the more intriguing challenges of the Clinton administration is how to finance these lagging economic areas. It would appear the economic growth plan will be financed by higher taxes on the wealthy, including the imposition of a new top income tax rate of 36% on those individuals with joint incomes in excess of $200,000. Mr. Clinton's economic strategy probably will be remarkably similar to the comprehensive urban aid and tax package President Bush vetoed after the presidential election. That package, although only viewed as a yardstick, contains many programs Mr. Clinton has endorsed, including a capital gains tax break targeted to investment in small, start-up companies.

In addition to those proposals, Mr. Clinton has put forward the idea of a surtax on income in excess of $1 million and a cap on the deduction for executive compensation in excess of $1 million. Mr. Clinton also would extend the expiring tax provisions, and he has said he would like to make some provisions permanent, including low-income housing tax credit and research and development tax credit.

The presidential election also has left a record number of seats up for grabs on the powerful House Ways and Means Committee. This committee will begin scrutinizing Mr. Clinton's economic/tax proposals. Thirteen seats of the twenty-three seats on the Committee are open, brought about by a combination of retirements, lost races and members making bids for the Senate.

However, the shake-up did not affect the most powerful members of the committee. The top-ranking members of both political parties, including the chairman and the ranking minority member, easily won their re-election bids. No significant changes occurred on the Senate Finance Committee.

When the new Congress reconvenes in January, membership on the Ways and Means Committee probably will be made with an eye to ensuring all regions of the country are represented on the committee. Thus, any open seats are likely to be filled by a member of the same state or a neighboring state as the member who previously held the seat.

House Ways & Means Chairman Dan Rostenkowski has urged the President-elect to move swiftly to win enactment of tax incentives for new business investment, a job training program and a national health care plan.

Other House and Senate Democrats are counting on being able to utilize their majority position to work with the Clinton administration in order to gain passage of tax legislation and to have it on the President's desk as soon as possible.
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Title Annotation:Capitol Corridors; Pres. Clinton
Author:Krasney, Jeffrey L.
Publication:The National Public Accountant
Date:Jan 1, 1993
Previous Article:The 1993 state legislative sessions: preparing for action.
Next Article:Current tax laws increase compliance concerns.

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