BOSTON -- President-elect Bill Clinton is playing conventional politics with his plan to convene a meeting in Little Rock of financial analysts and business and labor leaders to discuss the economic situation and his plans for dealing with it. But he is hamstrung by the political reality that there is no consensus for dealing with the core problem of the federal deficit.
Financial analysts and business executives are understandably uneasy about any new president and even more so about a Democrat about whom they know as little as they know about Bill Clinton. Thus, the meeting clearly is intended to offer some reassurance that this is not some wild man taking over in the White House.
Clinton also wants to send a message to the electorate at large that, in contrast to President Bush, he understands their concern with economic conditions and plans to deliver on his promise to confront it. That message, in itself, could be helpful because some increase in consumer confidence is a prerequisite to any economic recovery. Considering the fact that 70 percent of the people believe the country is "off on the wrong track," there is plenty of room for improvement.
But if you talk to financial experts and leaders of the business community, the one thing on which they are agreed -- and most dubious about -- is the necessity for some serious attack on the federal deficit. Like Bush, Clinton sailed through the election campaign sending carefully ambiguous signals about how vigorously he would attack that problem.
At this point, we know only that the new president has plans for a relatively modest program -- perhaps $20 billion -- for improvements in the infrastructure that should provide some jobs in the short term. He also intends to recommend tax incentives designed to encourage job creation in the private sector. And he will finance his early moves at least in part by raising taxes on those earning more than $200,000 a year.
If the yield of the new taxes and further reductions in defense spending don't provide enough money for his programs, Clinton says he will scale back the programs. That, too, is something the financial markets would welcome, considering how spooked they have been by the Republican charges all through the campaign that this was another "tax and spend Democrat."
But none of this has much to do, directly at least, with the deficit question. It is always possible that Clinton can stall for a few
months and realize some improvement simply through the changes in the business cycle. Most economists believe the most recent 2.7 percent rate in growth of the gross domestic product (GDP) was an inflated figure and expect fourth-quarter growth of 1 percent to 1.5 percent tops. That means that the new Democratic president will take office with nowhere to go but up.
Few of these experts believe, however, that growth in revenues from some mild recovery is going to make any serious dent in a deficit running up to $400 billion a year by some estimates.
On the contrary, there is a consensus among economic experts that no significant gains can be made without a serious attack on the spending side.
And that is where the political hamstringing occurs because such a serious attack necessarily would involve reductions in federal entitlement programs that politicians are convinced are poison at the polling place.
Nor does Clinton have the option of trying to deal with the problem by making some bipartisan deal in which each party agrees to hold the other harmless in the interests of facing reality. The Democrats now have both the White House and Congress, so it is their baby.
The problem of dealing with the deficit is not likely to be the first on the agenda for the Little Rock conference. That meeting will and should be focused on ways to stimulate the economy and provide jobs for the 10 million Americans who don't have them. And Clinton's intention is clearly to build some kind of a government-business-labor consensus on the steps that should be taken in the immediate future to achieve that stimulus.
The deficit problem is one that cannot be ignored indefinitely, without exposure to serious long-term political risk.