Clinton Budget Looks To Long-Term Growth

By , Staff writer of The Christian Science Monitor

PORING over the fine print in President Clinton's newly released $1.52 trillion budget for 1994, analysts are examining whether his plans for taxing and spending will result in promised job opportunities, productivity gains, and enhanced competitiveness.

His Capitol Hill supporters, such as Senate majority leader George Mitchell (D) of Maine, are confident of the economic growth impact of the federal budget proposals, which detail some 200 spending cuts in domestic and defense programs along with the heftiest tax hikes ever.

Despite Clinton's promised $500 billion in deficit reductions by 1997, critics led by Senate minority leader Robert Dole (R) of Kansas blast the president for offering Americans "the biggest taxes, bigger spending, and bigger government."

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And Office of Management and Budget Director Leon Panetta, known as a deficit hawk during his years as a legislator, emphasizes the plan's big savings. He also acknowledges big investments and the big size of his book. The 1,478-page budget is the size of a major metropolitan phone directory.

Mr. Panetta's calculations bank on revenue - from higher taxes on the wealthy and corporations and an energy tax - that rises three times faster than spending, which he has clipped to a 3.2 percent rise, roughly the inflation rate.

Among the five-year allocations the White House says are geared toward "raising the productivity of American businesses and American people" and improving "long-term economic growth, incomes, and standards of living" are:

* $52 billion for highways, mass transit, environmental infrastructure, housing, conserving and developing alternate forms of energy, and technology initiatives.

* $52 billion for educational programs and reforms, aid for women and infant children, national service, and job training.

* $32 billion to expand the earned income tax credit for impoverished working families.

* $50 billion in tax incentives, including a small business investment tax credit and capital gains exclusion, the permanent extension of the research and development tax credit, and the creation of enterprise zones.

Jeff Faux, president of the labor-oriented Economic Policy Institute says the budget reflects "a long-term shift toward addressing United States competitiveness issues." He notes a "healthy increase" in funding for Labor Department training programs and a view of research and development "more through a commercial prism."

BUT the employment outlook is bleak, Mr. Faux says. "For the next five years, clearly, the administration and Congress have chosen more deficit reduction over job creation," he says.

Faux estimates that during the next calendar year "there will be half a million fewer jobs if the deficit reduction takes place, and that's assuming [implementation of] Clinton's planned [$16.3 billion] economic stimulus."

The White House has repeatedly stressed that the stimulus package will create more than 500,000 permanent jobs.

But there is considerable debate over just how much employment will be generated. Much of the increase, for example, is tied to summer youth programs. Program organizers and outside observers contend that few of these dollars will go toward placing participants in public or private sector jobs with long-term prospects. Instead, the resources will be spent on activities that keep resident youths off the streets while they are out of school.

Faux doesn't quibble with the administration's claim that the stimulus will put 500,000 people to work in the near term. What concerns him, he says, is that the deficit reduction during 1994 and beyond will offset these gains. Slashed government spending will reduce employment.

In terms of economic impact, many analysts point to big unknowns, such as the military programs the Pentagon intends to eliminate and the White House's agenda for what may be very costly health care reforms. The health industry - one of the steadiest sources of new jobs - will likely contract according to several analysts.

Clinton promises to help fill the employment vacuum by training workers for and helping to create high-skill, high-wage jobs. At a budget briefing last week, Commerce Secretary Ron Brown said greater investments in manufacturing technology were evidence of the administration's concentration on preparing the work force and advancing industrial technology.

But Clinton's budget request of $76 billion for research and development, the majority of which is for the Commerce Department, is at the same level as fiscal 1993's allocation, adjusted for inflation.

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