WASHINGTON -- With only faint wisps of economic trouble on the horizon, much of President Clinton's economic team is heading for the exits this summer, leaving White House aides with the delicate task of finding replacements who can keep the good times rolling -- at least through the 2000 election cycle.

Treasury Secretary Robert E. Rubin will be stepping down soon, as will the president's three-member Council of Economic Advisers, including its chairman, University of California economist Janet Yellen. Federal Reserve Board Vice Chairman Alice Rivlin, a Clinton appointee, has also announced her resignation.

The White House has already assembled most of the new team, though some appointments have not been made officially. The focus of its members is on global and domestic economic growth, worker productivity and the promotion of free trade. First up will be Lawrence Summers, the deputy treasury secretary who has been nominated to succeed Rubin.

At a Senate confirmation hearing yesterday, Summers pledged to stay the course charted by his predecessor, opposing large tax cuts until a long-range fix for Social Security has been enacted and recommending a veto for popular legislation that would impose steep tariffs on imported steel. Senate Finance Committee Chairman William V. Roth Jr., a Delaware Republican, said he would push for Summers' confirmation before the Senate's July 4 recess.

Administration officials insist that the economy is fundamentally strong, and that there is no reason to believe that the nine-year economic expansion -- the longest peacetime expansion in U.S. history -- will not continue through February to become the longest U.S. expansion ever.

But they are taking nothing for granted, especially as Vice President Al Gore begins his bid to succeed Clinton in the White House. Gore made that point yesterday as he campaigned in New Hampshire, proposing new tax breaks for businesses that invest in high-technology research.

"We need to avoid the false assumption that we can keep the good times going just by wishing it would be so," Gore said.

Clinton this week began the delicate political task of winning "fast track" authority to negotiate a new round of free-trade agreements, even at the risk of alienating labor union leaders and the congressional Democrats they support. And White House aides say there will be a new legislative push for worker-retraining funds, to continue pulling untrained and marginal laborers into ever-tightening labor markets.

But some aides fret that those initiatives may not be enough to stave off pessimism about an economy that appears to have nowhere to go but down. Even an expected slow-down could be interpreted as a downturn, especially in an election season when opponents will try to undercut Gore's claim to responsibility for an unprecedented run of prosperity. After three years of 4 percent national economic growth and some months when 300,000 new jobs have been created, merely good economic figures may take on a negative hue.

"Maybe we've been enjoying such rapid growth that a world in which we get 100,000 to 150,000 new jobs a month and 2 to 3 percent GDP growth would seem less than exuberant," Yellen said. "That may be how some people are thinking about the world."

Few economists are predicting a serious economic downturn in the near future, but almost all forecasters foresee a slowdown. Federal Reserve Chairman Alan Greenspan strongly hinted yesterday that the Federal Reserve would force the economy to cool down by slightly raising interest rates when its Federal Open Market Committee meets at the end of the month.

At least some of the economy's stellar performance has been driven by new workers being pulled into a tight labor market, but as the pool of potential workers continues to shrivel, pressure will mount to raise wages. That could drive up inflation, the most recognizable recession trigger.

Other clouds are beginning to form on the horizon as well, Yellen conceded. Inflation has been kept in check, in part, by falling gas prices and the plunging cost of imported goods, which have accompanied the Asian economic crisis. That is likely to change. Oil prices have already risen sharply, and as Asian economies recover, so will the cost of their goods.

Consumers -- buoyed by rising stock prices and the increasing value of their homes -- are spending more than they earn, driving national savings rates into negative territory. That trend cannot continue, and consumer spending could contract sharply if stock markets drop dramatically.

Still, economists say, those problems may slow growth rates, but they are not likely to reverse them. Donald Ratajczak, director of Georgia State University's economic forecasting center, said "pre-recessional" signals, such as a rise in the inflation rate, usually presage a downturn by 12 to 18 months, and those signals are nowhere to be found. Instead, the economy may be seeing "pre-pre-recessional" signs, he said.

"You can make a case that this thing can go on for awhile," he said, "though anyone who says we're on a sustainable growth path has to have his head examined."

With luck -- and luck has been on the Clinton administration's side -- a downturn in domestic consumption next year will be offset by a rise in exports, as foreign markets recover, and overseas consumers begin buying U.S. goods, economists say.

Still, one of the most dangerous threats to the economy is the delicate Asian financial recovery, said Robert Litan, director of economic studies at the Brookings Institution. U.S. manufacturers are counting on rising exports to Asia, but economists fear that China could devalue its currency, crashing Asian consumption.

Yellen says the rash of administration departures is a fluke, not a panic. She is returning to teaching at the University of California at Berkeley because she has grown tired of a transcontinental commute to see her husband, another Berkeley economist.

Her colleagues on the council also got offers they could not refuse. Rebecca M. Blank is leaving for the University of Michigan and Jeffrey A. Frankel is heading to Harvard University's John F. Kennedy School of Government. Rivlin said she needed to devote more time to her new post as the head of the District of Columbia financial control board.

Their expected replacements are telling. Yellen would be replaced by Martin Baily, a partner at the consulting firm of McKinsey & Company and a Gore economic adviser, who specializes in global productivity, macroeconomic growth, and the impact of shocks on the economy.

Frankel would be replaced by Robert Lawrence, a Harvard economist who specializes in free-trade promotion. And Summers is the administration's point man on global economic crises.

Pub Date: 6/18/99