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Bill Clinton's 10 biggest problems

THE BALTIMORE SUN

Three days from the presidency, Bill Clinton confronts a worl already more perilous than the one that brought him victory less than 11 weeks ago. Old enemies are up to new tricks in the Middle East; the passing of the Cold War has raised a flurry of regional conflicts around the world. Meanwhile the economy continues to confound with conflicting signs of recovery and slide, and the deficit continues to grow. Mr. Clinton faces myriad challenges. But here are 10 widely viewed as the toughest, what he said about them during the campaign and the outlook for solution:

1. THE ECONOMY

Economists bicker over whether the recession has ended, but they generally agree that the biggest problem right now is jobs. Unemployment is currently about 7.3 percent, or 9.3 million people -- an improvement from the peak of nearly 10 million last spring, but significantly worse than the late 1980s when the jobless numbered about 7 million. The economy itself has not performed as badly, having grown by 3 percent last year while inflation stayed at about 3 percent.

What he has said: As a candidate, Mr. Clinton preached "investment in people" and promised to spend $20 billion a year on infrastructure development -- everything from highways to high technology development -- to create jobs and raise living standards. He spoke of forcing employers to spend 1.5 percent of their payroll on job training to improve technical skills. He has lowered his sights since then; aides now talk of halving infrastructure spending and of finding other ways to train workers. Mr. Clinton's advisers, meanwhile, continue to urge the introduction of an investment tax credit to encourage new factories and equipment purchases.

Outlook: While advisers predict an average 2.7 percent growth over the next four years, Mr. Clinton has to decide whether to make job growth a higher priority than reducing the massive federal deficit.

2. THE DEFICIT & ENTITLEMENTS

Making a dent in the deficit is increasingly dependent on the struggle to rein in the growth of medical costs, especially large entitlement programs such as Medicare and Medicaid. Most analysts believe it will also require tax increases beyond those already proposed for the wealthy. The Bush administration's recent revision of its annual deficit projections -- as much as $305 billion in 1997, nearly $70 billion more than previously predicted -- did not surprise Mr. Clinton's economic advisers, who had long accused the White House of understating the problem. Some think the new estimates are still too low.

What he has said: Mr. Clinton is using what he claims was an "unsettling revelation" to "revisit" his campaign pledges to halve the deficit by 1996 and cut middle-class taxes. "I have to put everything back on the table," Mr. Clinton said last week. His problem is how to raise revenue and stimulate growth at the same time: Tax increases or steep spending cuts could drive the economy back into recession. He is said to be considering tax increases for gasoline, tobacco and alcohol -- relatively painless revenue sources.

Outlook: His efforts will come to nought, aides say, if Mr. Clinton cannot persuade Congress to support the tough cuts and tax increases that will be needed.

3. HEALTH CARE

The challenge is to cut costs for those with health insurance and expand the net of affordable coverage for the 37 million Americans who have no health plan. The national health bill is rising far faster than inflation and currently accounts for around 13 percent of the economy, threatening to swallow up any hope of deficit reduction. Medicaid for the poor now consumes 14 percent of state budgets. Medicare for the elderly costs 7 percent of the federal budget and would consume 30 percent by 2025 at current rates of increase.

What he has said: Late in his campaign, Mr. Clinton adopted the concept of "managed competition," which would require the government to regulate insurers to ensure that everyone has access to health care at equitable prices, and would standardize care packages among approved insurers. Mr. Clinton also is proposing limits on national health spending in an effort to contain the spiraling costs of medicine and provide enough money to support coverage of the uninsured.

Outlook: The health-care industry has one of the strongest lobbies on Capitol Hill and has successfully repulsed efforts to reform it over the years. But the industry has never been in such disarray or demonstrated such a willingness to consider reform, analysts say, which may provide Mr. Clinton with the opening he needs.

4. POST-COLD WAR FERMENT

The end of the Cold War and the dissolution of the Soviet Union and the Communist bloc have lessened U.S. interest in the affairs of those far-off nations. Yet four of the 15 former Soviet republics still have nuclear weapons, and several more are unstable enough, or belligerent enough, to create major problems for the rest of Europe. While civil war in Bosnia threatens to spill into neighboring countries, ethnic violence in the former Soviet republic of Tajikistan has left thousands dead or homeless. Despots such as Iraq's Saddam Hussein are still able to draw the United States into armed confrontation in the volatile Middle East, where former adversary, Iran, is slowly rebuilding its armory, possibly with nuclear intentions.

What he has said: Mr. Clinton has not veered significantly from the Bush approach to foreign issues, although he appears to be more sympathic to Israel than his predecessor has been. He lowered the priority of U.S.-Russian relations a notch by delaying a meeting with Russian President Boris N. Yeltsin, and says foreign interests are second to domestic priorities.

Outlook: Mr. Clinton's major challenge will be to stabilize and fund democratic and economic reforms in the former Soviet bloc. His success in this endeavor, as in dealing with other flash points of the world, will depend on the willingness of other industrialized nations to help. He must take care that his pro-Israel sympathies do not undermine Washington's tenuous rapport with Arab states.

5. TRADE WARS

Trade issues will be crucial for regaining robust economic growth, particularly as exports are becoming increasingly important to the U.S. gross domestic product -- 7.4 percent in 1992 compared with 5.8 percent in 1984. But several conflicts loom. Washington's threat last month to tax French wine imports in retaliation for France's refusal to support lower European farm subsidies may signal future confrontations with Europe's gathering trading bloc and protectionist Japan. The new president can expect pressure from Capitol Hill to retaliate against countries that run large trade surpluses with the U.S. -- notably Japan, which accounted for $43 billion of the $66 billion ,, trade deficit in 1991.

What he has said: Mr. Clinton has backed the North American Free Trade Agreement, which would establish the world's largest trading bloc and virtually assure the region's dominance in the global economy. But labor and environmental concerns will make it difficult to push through Congress.

Outlook: Intense international jockeying for trade in the wake of political and social change, particularly in the East and in Europe have raised considerably the likelihood of trade wars and skirmishes.

6. EDUCATION & COMPETITIVENESS

Math and science standards in U.S. public schools are among the lowest of major industrialized nations, weakening America's ability in the long term to compete in the global community. Urban schools are, in many places, badly underfunded and plagued by violence and high dropout rates. College students are increasingly hard-pressed to come up with the money for their tuition bills.

What he has said: The President-elect stresses the links between educational achievement and economic achievement and competitiveness, and has proposed spending more on primary and high school education to place it on a par with Germany and Japan, which currently invest more in those levels of schooling. He has promised to fully fund Head Start, and has proposed a national service program that would give college students the opportunity to pay back their loans through community service.

Outlook: The poor state of the economy could hamper his plans, as could the serious differences in approach among educational groups and states.

7. DEFENSE RESTRUCTURING

In the flurry of post-Cold War conflicts, Mr. Clinton will find it hard to cut the size of the U.S. military and reduce defense spending, and still maintain an effective combat-ready force. Analysts disagree over the aggravating effect defense cuts will have on the overall economy. Some say it will be relatively minor as defense accounts for no more than 3 percent to 4 percent of the total U.S. manufacturing base. Others argue that without substantial economic growth, downsizing the military will cause severe dislocation in many parts of the country.

What he has said: Mr. Clinton has promised to reduce the active-duty military by 33 percent to 1.4 million men and women by 1997. At the same time he would pare the $1.36 trillion #F defense budget by $60 billion -- 4 percent more than the Bush administration planned to do. The new president has said he does not want to weaken the U.S. military, which he has described as a "force for stability and justice."

Outlook: Defense shrinkage is already under way; whether it will reach as far as Mr. Clinton hopes will depend on congressional support. The continued phase-out of Cold War weaponry and bases is sure to bring further outcries from Congress and communities dependent on the defense industry and would work against Mr. Clinton's commitment to create jobs.

8. THE THIRD WORLD:

With 100,000 Haitians reportedly poised to jump ship for Miami, the new president will have an instant lesson in how Third World problems can rebound on the industrialized world if allowed to ferment. The incoming president also will inherit the problem of Somalia and the question of how to extricate all of the U.S. forces supporting the famine relief operation there. Like Somalia, many Third World nations have no direct strategic significance for the U.S. Instead, the imperative here is democracy and human rights.

What he has said: Mr. Clinton, who supported U.S. intervention in Somalia, has stressed the need to act through the United Nations. He has also promised to promote democracy and make human rights a central principle of his foreign policy.

Outlook: The success or failure of Mr. Clinton's endeavors abroad will depend on each circumstance. But each commitment will carry a political load; every dollar spent abroad, his critics will say, is a dollar taken from American mouths.

9. THE CITIES

The inner cities are crumbling from neglect. Starved of cash, many cities have allowed schools, roads and housing to deteriorate while reducing services, even as residents -- usually minorities -- grow poorer and more in need of help. During the 1980s federal aid for urban programs was cut by two-thirds to less than $15 billion. The resulting decline in urban living standards has spurred crime and drug abuse. An appeal to Congress last spring by a national mayors' group for $35 billion in emergency urban aid went unfulfilled. The mayors want better law enforcement, jobs, housing and programs to attract business back to the inner cities.

What he has said: Mr. Clinton has promised to redirect an expected $60 billion in defense cuts over the next four years to the cities. This, he said, would be used to boost a $20 billion-a-year Rebuild America Fund.

Outlook: While Mr. Clinton has not suggested scrapping these proposals, he has already begun to step back from some of his social spending programs in favor of reducing the deficit.

10. LEADING A DIVIDED NATION

Elected with only 43 percent of the vote, one of Mr. Clinton's greatest challenges will be getting re-elected. To win a second term, he must hold together a coalition of voters that includes suburbanites, women and young people along with traditional sources of Democratic support: liberals, blacks and union members. He also must project a strong image of leadership, breaking the gridlock that wound up pitting the Democratic Congress against the Republican White House during the Bush administration. Equally importantly, he will have to bridge the racial, ethnic and economic divisions that have at times set the nation upon itself in violent eruptions in recent years from Los Angeles to Miami and from Washington to Detroit.

What he has said: Mr. Clinton has pledged to run an inclusive government, appealing to blacks and whites, suburbanites and city dwellers, the middle class and the poor. He also acknowledges the need to court independents who supported Texas billionaire Ross Perot.

Outlook: Mr. Clinton has his work cut out for him.

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