Newspaper article THE JOURNAL RECORD

Clinton's Economic Plan: Old Liberal Ideas in Designer Jeans

Newspaper article THE JOURNAL RECORD

Clinton's Economic Plan: Old Liberal Ideas in Designer Jeans

Article excerpt

Whither the infant administration? We do not have to wait for the unveiling of the Grand Master Plan for the Economy, scheduled for Wednesday, to find out. All a pundit needs is a handful of public signals, a few whispered tips and his handy-dandy divining rod.

QUESTION: Which path will the new president take _ deficit reduction or economic stimulus?


Q: But wouldn't such policy resemble the pushmipullyu, the beast with heads at both ends?

A: Not a bit; here's how it works. Pick any number from $15 billion to $30 billion (the specific figure doesn't matter; Congress will change it anyway). That's the job-creating fiscal stimulus, a combination of new federal spending ("investment") on electronic highways and computer-directed leafraking ("infrastructure").

Q: Won't such spending add to the deficit?

A: The deficit will start to be reduced, sometime next year, by an infusion of new taxes to help pay for the heavier spending in the works, pleasing liberals, with a small portion set aside for deficit reduction, pleasing conservatives.

Q: But if the economy is already making a strong comeback, why do we need the stimulus of increased spending? Won't that lead to inflation?

A: Let me let you in on a dirty little secret: No Democratic economist will ever admit this, but they don't think inflation of about 5 or 6 percent is such a bad thing. It would rescue real estate, which in turn would bail out banks and insurance companies now hung up on bad real estate loans; "reasonable" inflation would also allow government to reduce the deficit with cheaper dollars.

Q: Hold on, now _ if the Clintonites are going to raise taxes to pay for new spending, and even put a few bucks in the kitty to sop up some red ink, where's the stimulus? Won't it be a wash, and not contribute to inflation?

A: That's the theory. And the theory even steals a leaf from the supply-siders, holding that the coming boom will increase all tax revenues and reduce unemployment and welfare costs.

Q: If that's so, then why increase spending and raise taxes at all? Why not leave good enough alone, and let the pendulum swing back up to prosperity? …

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