Legacy of Reaganomics Hovers Over Clinton
CHARGING that the current failures of the United States economy are due to "12 years of trickle-down" Reaganomics, President-elect Clinton promises a break from the Republican past.Skip to next paragraph
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But from those looking back over the Reagan and Bush White House years come sharply divided assessments. While some view it as a time when differences between rich and poor sharpened, and both consumers and businesses racked up unprecedented debts, others tout it as a period of economic revival and one of the longest peacetime expansions since World War II.
Americans can now expect a more pro-active government "that puts the country's economic vitality and technological prowess at the top of its agenda," says William Archey, senior vice president for policy at the US Chamber of Commerce.
Mr. Clinton will enlist private-sector support - through incentives and mandates - to increase the amount of investment in research and development and help build a more competitive work force, Mr. Archey says. "This election signals the death of Reaganomics and the recognition that what works is pragmatism." Hallmark of Reagan years
Many conservative analysts counter that the real radical departure from Reaganomics occurred four years ago, when President Bush abandoned Ronald Reagan's pro-growth approach and adopted instead a tax-spend-and-regulate policy that led the US economy into a dead end.
They point to the hallmark of the Reagan years: tax cuts and lower government spending as a percentage of the nation's output of goods and services, or gross domestic product (GDP). The Bush years, they say, produced the polar opposite.
Edwin Feulner Jr., president of the conservative Heritage Foundation, the favored Washington think tank of the Reagan era, laments Bush's inability to remedy the recession with tax cuts, investment incentives, and deregulation.
Despite his 1988 campaign pledge of "no new taxes," Mr. Bush went along with the plan to raise them in the 1990 budget agreement with Congress.
During Bush's acrimonious relationship with Capitol Hill, the federal deficit doubled and government spending hit an all time high.
Craig Roberts, assistant secretary for economic policy at the Treasury Department during the first Reagan term, agrees that Bush represented a dramatic departure from Reaganomics.
Instead of pursuing a course of limited government and continued low taxes, Bush signed on to the second-largest tax increase in history and added costly requirements for business. He says that while President Reagan spent more on the military, government spending grew at a much slower rate during his tenure than it did under Bush, who oversaw sizable defense cuts.
Mr. Roberts says that the only positive development Bush has to show for his years of economic management is low interest rates. And even that is troubling, he says, because low rates have taken their toll on those who rely on investment returns for their income - primarily the retired. He blames Bush for destroying the Reagan economy and pushing disgruntled voters to vote for the "devil they don't know": Bill Clinton.
Roberts joins other conservative analysts who warn that while Bush started the country back on the course of bigger government, now that Clinton has the reins, government spending will be unbridled.
Clinton's proponents dismiss the charge as just another myth about Democrats. They say the president-elect's plans for a "partnership between business, industry, and government" will greatly enhance the US ability to compete in world markets and create economic prosperity at home. All that means a greater tax base for Uncle Sam, who will shift many financing burdens to a robust private sector.
Digital Equipment Corporation would be directly affected by that new partnership. "It'll be an industrial policy by any other name," says Ray DuBois, director of the corporation's strategic plans and policy. Trying to size up just how the Arkansas Democrat will change Reagan and Bush policies, Mr. DuBois looks first to Clinton economic adviser Robert Reich, who supports a broad government role in American industry's revival.
Reagan's laissez-faire policies bore positive results, including plenty of capital for investment and high consumer confidence - two gains largely lost during the Bush years. But it's the negative products of Reagan policies - a deficit that increased faster than the tax base could hold down and the assumption of a lot of debt - that will hover over the Clinton White House, DuBois says.
He adds that while the exit polls showed that the country voted against Bush, Clinton correctly claims "a mandate from voters who want to see things done differently." Diverse advice
The Arkansan should take a tactical cue from Reagan, "whose strong personality drove home his economic ideology," DuBois says. With the diversity of economic advisers now vying for Clinton's support, it appears that "there are several, if not more than three, strong ideologies trying to move into 1600 Pennsylvania Avenue." The new administration could become mired in a conflicted policy produced by too many economic camps, DuBois warns.
Reagan stayed clear of assigning responsibilities to business - such as mandates that required business to pick up the tab for worker training, health care, and measures required to meet upgraded environmental standards.
Bush imposed a temporary moratorium on many of these mandates. In the coming months, however, Clinton is expected to fight for added business regulations.
"The engine of economic growth comes from consumer spending and employment expansion of small and medium-sized business," DuBois says. "If Clinton does anything to slow it down, he will have a four-year administration."